What is the future of supply chain?

What is the future of the supply chain? A question that follows for society: is there a future to be found in the supply chain?

The supply chain is changing. It is already using a number of new strategies and new techniques. I unravel the futures with the help of an acronym: STEEPLD. This stands for Social/Societal – Technical – Economic – Environmental – Political – Legal – Demographic.Author: Manu Steens   In this post I give my own opinion, not that of any organization.

What is the future of the supply chain?

Futures are uncertain. Two uncertainties that together outline four futures are:

  • Is the supply chain intersecting with automated vehicles or not yet?
    • For small parcels at home
    • For large deliveries to warehouses
    • For typical deliveries to stores?
  • Will the convenience store be closed in favor of department stores and malls?

I discuss this with STEEPLD.

What future worlds do we have?

Context

The supply chain is changing at a rapid pace and everyone can already see and feel it. Small parcels are delivered to your home by delivery drivers. For the price of the delivery, you cannot pick it up in a store that is located 2 km away. Are you not at home? No problem, they will try it at the neighbors or the goods will be dumped at a collection point at the end of the day. The order is now often directly via the internet, which means that much more can be tailored to the end customer. Is the order not ok or do you not like the product? No problem, you can often return it free of charge.

That world is still evolving today. And it’s going faster and faster. I choose these two uncertainties because we are already in a transitional situation on these two points, but I am not yet sure about the end of it.

First uncertainty: Is the supply chain intersecting with automated vehicles or not yet?

In an earlier article I already talked about automated transport and its gradations. (https://emannuel.eu/evolutie-van-autos-en-maatschappij-wat-vertelt-foresight-ons/) In the news reports, we sometimes hear about automated trucking, especially when something bad happened, such as an accident. But is that the only modernization that awaits us? What will happen to the world as we know it if this trend continues? Or if it doesn’t follow through? In the following, I focus more on road transport than rail, airspace or waterways. (Due to the fact that I intersect this uncertainty with the future of retail stores.) However, these other modes of transport are also not impervious to automation in the long term.

Second uncertainty: Will the convenience store be closed in favor of department stores and malls?

You sometimes hear this claim in the cities. Centralization and enlargement is an answer to survival, they say. But is this the only answer and can the convenience store survive in a world where people are increasingly shopping online and these goods are delivered to their homes?

According to some, more and more people are looking for personality. They want to have an experience in addition to shopping. In this way, they seek some pleasant meaning. Local shops can contribute to this by, for example, offering a personal service, offering unique products or creating a cozy atmosphere.

Do young people want to feel more and more connected to the companies they do business with? Local shops can contribute to this. For example, by offering a personal service. By knowing the clients by name, or by giving personal advice on suitability of products. They can also offer unique products tailored to the customer’s needs more easily than supermarkets. This is a unique and memorable added value. But in some cities we are already seeing more vacant shops. What does this evolution mean for the world as we know it?

In my opinion, they only want to have an experience when they want to make the time for it or when it is really necessary. Otherwise, online shopping, or a large store that seems to have it all, is convenient. New transport methods to deliver the goods are welcome. Or is it?

The Four Worlds

Modern Times:

Social arguments :

New generations are increasingly looking for convenience. They want to do their shopping from their home or work, and they want it to be a snap. In addition, there are more and more generations who have grown up with the internet.

In today’s society, they are more and more time-conscious, they have less and less time to shop for a long time. The internet is ideal for them. They have a laptop or smartphone, there is a huge range on the internet that they can quickly go through with keywords. That way, it’s easy for them to do their shopping that way. When they’re on the bus or train, or sharing a car, or taking a break. And any business that respects itself allows online shopping.

Technical arguments:

Drones, automated freight transport on the road, can this also be done with freight transport along the waterways and through the airspace? Technically, we have some things, others we don’t have yet. Currently, fully automated freight transport is taking its first children’s steps. Drones are being experimented with more and more in more and more forms. We are talking about the delivery of parcels, medical transport of products, organs and even patients.

These objectives demand more and more certainty from the technical side of the story. One certainty is that a whole world of technical experts is dedicating their brains to these challenges. So there is a very real chance that these transport techniques will be introduced. When is still not certain. To this end, a lot of competition within the red ocean of the vehicle markets stands in the way of even greater cooperation that could cause an exponential rate of realization of these techniques.

Economic arguments:

These techniques and shop operations also involve economic factors. A factor that should not be underestimated in the development of these many forms of modern freight transport is the enormous employment that this will bring. The devices require raw materials, semi-finished products, specialized workers, specialized maintenance technicians, suppliers of the finished products with their points of sale (or online) or advertising locations and their administration, and the end-of-life processing cycle of the products. The developed products also provide jobs for people who have to work with them. Although it may not be driving the vehicles anymore.

This method of transport will also have to have its own safety system against abuse. I suspect that, especially in the case of automated home deliveries, there may be opportunities for abuse by terrorists. This, in turn, brings jobs in cybersecurity, modern policing and so on.

Half the practice of the supply chain is being oriented towards home deliveries rather than to the convenience stores, which have been declining sharply in this world. The malls and department stores will continue to exist, because they are increasingly located outside the cities and are therefore accessible to automated trucks. Another possible economic consequence is that webshops may boom even more.

Due to the disappearance of more and more retail stores, a large group of shop assistants will end up in unemployment, as the department stores and malls can save on shop assistants compared to shops in the city.

Environmental arguments:

Because sales outlets are more often located outside the cities, there is less air pollution with fine dust in the cities. To prove this claim, it will be necessary to track the number of deaths from fine dust over several decades across Europe. On the one hand, because this significantly increases the population of the statistics, and on the other hand, because I suspect that this effect will build up slowly. A possible additional support for this is that home orders are made with electric transport or hydrogen-based transport, and can use collection points, such as the Post Office.

Political arguments:

Politicians in the EU, and in fact everywhere where automated transport becomes a reality, will have to focus on a completely new type of legislation for this radical new technical application. Lobbying by the insurance companies in particular is to be expected. It may be impossible to make such legislation sound through politics, and either pragmatic legislation will have to be created, or politicians can demand that the human factor in automated transport should never be completely excluded. In other words, a driver must always be able to sit in a truck. The transport company that then decides not to apply this can always be held accountable by the law. After all, it is up to politicians to give the judiciary tools with which it can make judgments.

Insurance companies also have quite a few interests in the legislation and its application in case law. Due to a more complex supply chain of the hardware and software of the means of transport, this legislation will be exponentially more complex than the current traffic legislation. As a result, Artificial Intelligence may become one of the more important tools in the judiciary.

Demographic arguments:

Currently, there is a war for talent. The challenges of finding people we can train to do the specialized labor are real. Apparently, we do not find them enough in our own regions at the moment. This may mean, with an increase in the complexity of the tasks and a declining homegrown population, that resources have to be found outside the borders of the EU. But the political situation is not always opportune for this. Still, the supply chain will need to look beyond borders to fill the gaps.

An example of this is cross-border collaboration, just as a surgeon in India can already perform an operation on a patient in London, over a secure internet line. Or a helpdesk that is located in another country, with people specifically trained for that task. For example, employees abroad can take dispatch orders over the internet, provided they are provided with the right tools. Or surveillance assignments via cameras. Or even security assignments wherever an intervention does not require a physical presence. In an increasingly globalized world, there are opportunities to do so, without necessarily always requiring migration.

Quasi Modern Times:

Social arguments :

Some people don’t just want to go grocery shopping. They want to enjoy shopping. Local shops can cater to this with a friendly atmosphere or with activities. This makes shopping more fun and attractive.

A more important argument seems to me to be that more and more people are concerned with their health. For example, they want to buy fresh, healthy food, and they want to know where it comes from. Local shops are more likely to offer fresh and local (not only in terms of food) products. In addition, this can be done more smoothly because some transport options are easier to organize locally. Such as with vans from the farmer directly to the convenience store. These smaller vans maneuver more easily in a city than trucks that deliver to department stores. These products are often healthier than the imported treated products sold in supermarkets or malls.

Technical arguments:

In the first instance, relatively more easily maneuverable automated vans will have to be used. After all, a manned truck now often contains goods for more stores and they are delivered correctly by the driver. For the time being, that driver can also maneuver better in small streets. But never underestimate the ingenuity of man, one day the algorithms will win out over the educated man. Then the monitoring of the goods in the truck during delivery remains an issue. A van can hold less, but it is more maneuverable in narrower streets, and is less dangerous to bystanders. It can be closed more easily upon delivery, which promotes security against theft. Developing surveillance robots could be an option. In the long term, it would also be easier to make custom deliveries with drones at some stores, such as pharmacies. Furthermore, technical challenges are similar to the ‘Modern Times’ case

Economic arguments:

In addition to more dispatching for the many trips, employment that will be added may also include remote monitoring of the goods with cameras. By using such technical developments as in the case ‘Modern Times’ on a massive scale for retail in the cities, confidence in the private use of fully automated means of transport will also grow. As a result, the price will go down in the long run. Due to the fact that the microenvironment in the cities is improving due to fewer deaths from fine dust, a small increase in economic activity will also be observed after a few decades.

Due to more retail stores in the cities, the demand for shop assistants will also be and remain high.

Environmental arguments:

By keeping shops in the cities optimally, and allowing fewer and fewer cars in the city, the city dweller will have to exercise more for the sake of shopping. As a result, the general health of the city’s residents will improve. This, in turn, affects the (non) economic activities in the cities.

By keeping shops in the cities, chance contacts between people will increase. People are going to be able to meet each other. This is good for the social fabric in the cities. But there can also be more friction between people, although this is probably a minority.

Provided that strict speed rules are introduced in the cities, especially for automated transport, the city will become much more livable. This is likely to be a transitional phenomenon of people who drive non-fully automated transport and tend not to play by the rules.

Political arguments:

By keeping shops in the cities, this entails adapted legislation. The legislator may have to review the powers of the local government, in order to tackle the situations tailored to the city and its citizens.

What if… Something goes wrong? A van burns out and causes a fire in a street? Or there is an accident, with or without injured people? Are insurers going to pay for the damage quickly, or are they going to drag it out? An investigation is needed in such cases, the question is by whom? Here, too, new types of judicial expertise may develop.

Demographic arguments:

In this world, too, the war for talent is  realistic. One facet that occurs more often is the search for shop assistants. This and other employment opportunities can attract young people to the city. Or increase commuting.

Further demographic arguments are possible in the sense of the case ‘Modern Times’.

The Mall outside the city:

Social arguments :

A Mall outside the city has a number of social consequences. These include better access for private cars, the creation of multi-level jobs and an economic incentive in the surrounding area, and a reduction in traffic congestion in the city as shopping is carried out outside the city. But there is also the loss of shopping opportunities in the city (which is useful for seniors in the city) and the overall increase in overall greenhouse gas emissions from car exhaust, albeit outside the city. A Mall is also more difficult to reach for an elderly public by public transport or by bicycle, unless public transport is doing its best exceptionally.

Technical arguments:

Technical transport developments are not forthcoming. Automation of transport is dying a quiet death or developing much slower than expected. Technical and political problems can slow down technical developments. (See below.)

Economic arguments:

People shop in centers that are organized for optimal sales. Marketing will focus on that. Since the Malls will be located outside the cities, the transport will be twofold: private transport and public transport. Private transportation will be expensive, but it allows people to make large purchases. This saves time, because it is needed less often. Public transport almost obliges seniors to make smaller purchases, but with a higher frequency. As a result, it can be useful to accommodate drinking or dining establishments in the Malls.

Environmental arguments:

On a windless but busy shopping day, the air quality in the car parks outside the cities will be less good due to more particulate matter. That is why open-air car parks are recommended. Due to weather conditions, it will be opportune to allow public transport to continue to the vicinity of the Malls.

Political arguments:

Politicians can tackle automated transport as a danger in the context of terrorism: terrorism can also make extensive use of this, provided that the control of the vehicle can be done remotely. This can reduce the number of suicide bombings, but significantly increase the number of attacks. This is an incentive to only partially automate transport. On the other hand, politics can also require that a means of transport can be brought to a safe stop by authorized parties at critical points in the interest of the citizens, the city or the country.

There are also legal reasons not to want fully automated transport. Due to the complexity of the division of responsibilities, it is virtually impossible to adjudicate in the event of an accident in which one party is at fault. Moreover, transport in cities is more complex than outside them, and vehicle automation is still in its infancy. But also legislation in this area is still in its infancy. This makes opting against automated transport a valid option in the short term.

Demographic arguments:

With Malls out of town, it’s especially convenient for non-city dwellers to go shopping there. In contrast to city dwellers, they may have a greater need for private transport. This also applies to seniors from outside the cities. This means that Malls outside the cities have a good chance of developing and growing because of them. Partly because of this, there may be a contraction of the traditional markets in the cities. These are becoming more difficult to reach for non-city dwellers due to a growing problem of the accessibility of cities for cars.

Static Quo:

Social arguments:

In Europe, more and more people are living in urban areas. This means that when it comes to shopping, they spend less time getting back home quickly. Local shops are therefore ideal for them.

Europe is increasingly aware of its ecological footprint. Although some will argue that the numbers explain otherwise. Nevertheless, they want to drive fewer miles and use less packaging material. Some stores respond to this by keeping their location in the city, stocking up on locally produced goods and selling these goods with less or no packaging. Or by using reusable packaging.

People want more personal contact with their retailers. Department stores and malls are often massive and impersonal in their approach. But this goes against the idea that people want to participate in the local community. They want to shop at businesses that are committed to their neighborhood. For example, by sponsoring local events to make the neighborhood more lively and to support local entrepreneurs. Furthermore, volunteering in the neighborhood is an opportunity to show that the company is committed to the community.

These trends mean that local shops are playing an increasingly important role in the retail sector.

Technical arguments:

By not developing automated transport, there will be no shift from older types of jobs to newer types of jobs. As a result, a lot of innovation that could have been there is blocked, with all the consequences that entails: more air pollution in cities will remain an issue for some time until electric cars and hydrogen-powered cars have made a better breakthrough. A lot of cyber problems won’t occur. Neither do a lot of technical possibilities.

Economic arguments:

More innovative cities and countries will be eye-catching in this area for the West, and for that reason alone will attract a lot of tourism and workers to their areas. War for talent is becoming more acute due to a lack of innovation.

Due to better wages in Eastern European countries, there are fewer drivers available in the West. As a result, the profession of truck transport driver is in the spotlight. But in the meantime, there are delivery problems in the smaller stores.

Environmental arguments:

The status quo keeps people behind the wheel, allowing trucks to continue delivering to stores in the city. After all, the drivers are used to maneuvering in the cities. This will also cause traffic disruption. This can increase the psychological pressure on the population.

Political arguments:

Due to the possible higher traffic nuisance caused by trucks and vans, it may be necessary for local authorities to make deliveries mandatory during off-peak traffic hours. So very early or very late. This means that drivers will not have normal working hours in the cities, which creates psychological pressure for them, which continues in their private lives.

Legally, there seems to be a standstill, but compared to other regions and countries, where the status quo is not being implemented, and where change is already well advanced, there is a backlog. For inspiration, the legislator can look over walls to get inspiration.

Demographic arguments:

There will be cities where the young residents migrate back out of the city. Where transport does not cause any problems. In the long run, this will create more opportunities for department stores and malls that are located outside the cities.

Conclusion:

Convenience stores:

There are challenges for the convenience stores. They have to compete with the lower prices against more and more department stores and malls. To do so, they need to distinguish themselves. For example, by focusing on local products, offering a personal service or offering tailor-made products. Or by focusing on convenience, health, experience, sustainability or social engagement.

All in all, convenience stores are well-positioned to grow in the future. They appear to have a number of options that are becoming more important, but that the department stores and malls do not have.

Automated transport:

In my opinion, it is doubtful whether automated transport will be introduced quickly. There are clear challenges there too, and above all, people are more likely to feel safe when they feel in control of the vehicle. Let alone any other vehicle where there is no human behind the wheel.

It is precisely because of this doubt and challenge that there is a lot of work in the field of automated transport for its development and then maintenance.

Is there a future to be found in the supply chain?

This question was not answered explicitly, but implicitly: in each of the four worlds there are possibilities to get started, albeit in different functions or with different tools than is currently customary.

Manu Steens

Manu works at the Flemish Government in risk management and Business Continuity Management. On this website, he shares his own opinions regarding these and related fields. Since 2012, he has been working at the Crisis Centre of the Flemish Government (CCVO), where he has progressed in BCM, risk management, and crisis management. Since August 2021, he has been a knowledge worker for the CCVO. As of January 2024, he works at the Department of Chancellery and Foreign Affairs of the Flemish Government. Here, he combines BCM, risk management, and crisis management to create a tailored form of resilience management to meet the needs of the Flemish Government.

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