COVID-19 accelerates digital transformation in supply chain, Walmart exec says

The COVID-19 (coronavirus) pandemic has advanced by three to five years the digital space for pickup and home delivery without almost any marketing investment, a Walmart executive said.

“This was just a demand that came about through these events,” said David Guggina, senior vice president of supply chain, product and engineering for Bentonville-based retailer Walmart. “It’s propelled us forward, it’s challenged us to move more quickly… and I think Walmart is absolutely up to the challenge. We’re responding to customers. We’re meeting their needs the way they want to be met, and we’ll continue to do that.”

In a recent webinar, Guggina; Nick Hobbs, president of Dedicated Contract Services and Final Mile Services for Lowell-based carrier J.B. Hunt Transport Services; and Brent Williams, associate dean for executive education and outreach and a professor of supply chain management at the University of Arkansas, discussed innovation in final mile delivery and how the health crisis has affected it. The webinar was hosted by the UA’s Supply Chain Management Research Center and Plug and Play, a Sunnyvale, Calif.-based venture capital firm that launched in 2019 a supply chain and logistics accelerator in Northwest Arkansas.

Hobbs said most customers who have received final mile shipments of furniture amid the pandemic prefer delivery workers to not enter the home but set it across the threshold and the customer taking it from there. However, customers who receive appliance deliveries still want the workers to enter the home, and he said those workers wear personal protective equipment, including masks, gloves and shoe booties.

“You’ve got to present yourself. You’ve got to cone off your area,” Hobbs said. “There’s a lot of requirements, extra steps that we’ve had to take to go into the home to make sure people are comfortable and doing that.”

Hobbs noted a demand for in-home delivery, and when the pandemic ends, safety, background and temperature checks will help. Also, amid the pandemic, J.B. Hunt established touchless proof of delivery as customers didn’t want to touch its app. Hobbs said this was established in about three weeks.

Williams was interested in whether the health crisis would lead to more people working from home and how that would affect the flexibility of the consumer receiving products differently, specifically from the standpoint of a delivery time window.

J.B. Hunt has worked to optimize the price and the time the consumer wants the product, Hobbs said. Everyone wants it at 8 a.m., he said, but this is very expensive. The carrier is working to determine how to provide an incentive for the delivery to come in the afternoon or early evening while reducing the number of miles per stop. Greater shipment flexibility might not be convenient for the consumer but is more efficient on price, Hobbs added.

“Each of our customers have a different trade-off, and so trying to drive innovation and giving options and predictions on that is a big focus of ours to give a great experience in home,” he said.

ROUTING CHALLENGES
About two years ago, Williams and colleagues from other universities started to research the impact of urban environments on vehicle routing decisions, and they have learned there are a lot of opportunities for technology to solve the routing challenges, especially related to the final mile. He noted about 80% of the population lives in urban areas, and one-third of those people live in the top 10 most populous cities. Each city is unique, he added, and their research was focused on the differences and how routers were setting delivery routes for those cities.

Asked about meeting consumer demand while balancing cost and shipping speed, Guggina explained Walmart is expanding the number of stores it will use for home grocery delivery. In 2019, about 1,400 stores provided the service, and this year, it is expected to rise to 2,400 stores, he said. Also, the retailer is allowing some general merchandise to be delivered with grocery items.

For J.B. Hunt, the solution varies based on the customer, Hobbs said. Bulky item customers want inventory visibility, and consumers can select their delivery window at the time of purchase, he said. The carrier provides estimates because, if the carrier is doing an installation, delivery times may vary. A dishwasher installation may take two hours, while a refrigerator with a water line might take 30 minutes to install. Hobbs said wider delivery windows increase efficiency and reduce cost but aren’t as convenient for the consumer.

The customers usually set the shipping price based on the product, Hobbs said, and a higher-quality product might require a delivery completed in a specific time window. However, some furniture shippers want the lowest cost, and those deliveries would require more flexibility in shipping time.

E-COMMERCE DEMAND SURGE
Guggina explained how Walmart has worked to adapt to consumer demand for e-commerce deliveries amidst the health crisis while meeting expectations for shipments.

“We saw a surge of demand that was really hard to rival,” Guggina said. “It was a sustained peak period, and it continues to sustain with respect to customer demand for e-commerce deliveries. It was an incredible growth.”

E-commerce sales rose 74% in the first quarter that ended April 30, from the same period in 2019.

“It forced us to innovate at a speed that I had not seen before,” Guggina said. “It also made us think about how do we not only use fulfillment centers that service customers, but how do we better utilize our (distribution centers), how do we better utilize our stores and how do we drive a truly intra-connected supply chain. How do we think about harmonizing data between all the different pieces of the supply chain, so we can continuously learn and optimize.”

This also includes improving connections with vendors that provide products or carriers that deliver them. Another consideration is when and how to best use automation rather than having a human make a decision or do the work, he noted.

Guggina also discussed artificial intelligence and the importance of shipping correct items to the customer.

“We’re partnering with a group of different companies that are making some really great advances in vision technology and utilizing deep learning to collect unstructured images, and then give us data that’s useful for us with respects to what type of item are we handling, do we need to treat it differently because it’s more fragile or it’s a Haz-Mat item, what’s the size of the item, what’s the weight of the item, giving us 3D cloud-point imaging so that we can package it better,” Guggina said. “That’s been a really interesting piece of work.”

TRUCK SIZING
Asked about the equipment used to haul final make shipments, Hobbs said J.B. Hunt operates about 600 26-foot straight trucks in the Final Mile Segment and very few tractor-trailers. The carrier also has about 1,400 contractors that operate 26-foot straight trucks. The size of the truck allows for between 12 and 17 stops in a day.

Guggina said Walmart uses crowdsourcing to complete fast deliveries, and next-day or two-day delivery would more likely be completed with Sprinter vans because they can handle the 50-120 packages needed to justify delivery of those goods on a route.

Concerning alternative fuel vehicles, such as battery-electric trucks, Guggina explained Walmart is working with several partners on its smaller vehicles and yard trucks. The over-the-road trucks are still in the works, he noted.

Walmart and J.B. Hunt ordered battery-electric tractor-trailers from Tesla after it was unveiled in 2017. Elon Musk, the company’s CEO, recently said in an employee memo “it’s time to go all out and bring the Tesla Semi to volume production.” The truck was expected to be first delivered to customers in 2019, but that has since been pushed to late 2020, according to Electrek.

For its smaller vehicle fleet, J.B. Hunt is completing “two or three” tests on electric straight trucks, Hobbs said, adding “we’re really liking what we are seeing early on some of the electric vehicles.”