Urbanisation across the globe is increasing, especially as millennials and younger employees aim to reduce their commuting time and costs. This rapid change is affecting how we, as consumers, shop which in turn is affecting how those goods are delivered directly to our doors. Is this a case of out with the old and in with the new?
The increasing rate of urbanisation
Urbanisation is measured by two metrics: urban population, which is the number of people living in urban areas, and the rate of urbanisation, which is the rate of change in urban population. Table 1 presents these two metrics, along with country population for a set of indicative countries. While developed countries such as the UK, France, Germany, Greece, USA, Australia, and Spain have a high percentage of their population living in urban areas, developing countries such as China, India, and Nigeria entertain high rates of urbanisation. This means the percentage of people living in urban areas in these countries is increasing at a rate much faster than it is in developed countries.
Table 1 Urbanisation Levels of Indicative Countries
|
Country
|
Population
|
Urban Population Percentage
|
Rate of Urbanisation
|
|
United Kingdom
|
65,761,117
|
83.90%
|
0.89%
|
|
China
|
1,394,015,977
|
61.40%
|
2.42%
|
|
India
|
1,326,093,247
|
34.90%
|
2.37%
|
|
Nigeria
|
214,028,302
|
52.00%
|
4.23%
|
|
France
|
67,848,156
|
81.00%
|
0.72%
|
|
Germany
|
80,159,662
|
77.50%
|
0.27%
|
|
Greece
|
10,607,051
|
79.70%
|
0.22%
|
|
USA
|
332,639,102
|
82.70%
|
0.95%
|
|
Australia
|
25,466,459
|
86.20%
|
1.43%
|
|
Spain
|
50,015,792
|
80.80%
|
0.33%
|
Source: CIA World Factbook, date retrieved: 9 March 2020
What does that mean for supply chains?
An increased urban population necessitates urgent attention on the infrastructure and the supply chains that enable access to education, healthcare, transport, and services. Supply chains constitute an integral part of a smooth-functioning city life; especially making products and services available where and when they are needed by consumers.
In the meantime, increasing prevalence of the Internet in consumers’ lives has paved the way for online shopping, which is now conveniently made available by many consumer-facing companies, irrespective of the company size.
Coupled with urbanisation, another megatrend is the rapid digitalisation of supply chains, building on the technological advances of the Industry 4.0: big data analytics facilitating supply chain visibility, robotics and automation transforming not only manufacturing but also warehouse operations, and drones and autonomous robots with many application areas, not least for the last mile of e-commerce orders.
A time of change
Previously supply chain professionals focused on improving efficiency, but now these professionals are reorganising their companies’ operations to deal with concepts such as ‘batch size one’.
For example, Nike’s “Air Zoom Pegasus 36 by you” running shoes has 12 options for the consumer to customise the shoes- not only involving the customer in the design and specification of a product but also indicating consumer preferences almost in a real-time manner. In a similar way,it is now possible to continuously monitor the temperature in real-time - not only in vehicles but also in warehouses thanks to sensors connected through the Internet of Things and the analytics supporting the data flow from thousands of different points.
The last mile
One of the key challenges of urbanisation is the last mile delivery. This is because:
- Increased urbanisation and increased online shopping leads to delivery vehicles wandering about residential areas.
- Deliveries are slow due to increased traffic in cities.
- Deliveries are inefficient too due to high first-call misses (customer not being available to receive their delivery at the address).
An exciting, ongoing trial in Milton Keynes is with Starship Robots. The autonomous robots deliver not only groceries that have been purchased online but also parcels bought from Amazon or similar online retailers. They use pedestrian paths, which are empty 90% of the time, therefore eliminating vehicles from roads, and ensuring first-call success in the last mile, owing to increased visibility of the arrival time of a parcel.
These innovative, Industry 4.0 technologies have immense potential to improve and transform supply chains as well as to address challenges related to fundamental supply chain processes. However, supply chain professionals are going to have to adapt and invest in these technologies to ensure they and their organisations don’t get left behind.
Authors:
Professor Michael Bourlakis, Director of Research and Director of the Centre for Logistics, Procurement & Supply Chain Management.
Professor Emel Aktas, Professor of Supply Chain Analytics.