Online retail’s hidden costs
Raghav Sibal, Australia-New Zealand managing director of global supply chain technology company Manhattan Associates, tells a poignant story of the wasteful practices happening in the supply chain that could be avoided.
“One of my colleagues ordered balloons online for a children’s party. But because the retailer didn’t have inventory visibility the order was delivered in five different packages, over several days. The company advertised they used recyclable material for the packaging, but shipping four more packages than necessary they were missing the big environmental picture.”
Online shopping has exploded since the pandemic. According to the Pitney Bowes Parcel Shipping Index, which measures the volume of parcels shipped between 13 nations, more than 131 billion parcels were dispatched globally in 2020, up 27 per cent compared to 2019.
These figures reflect our insatiable appetite for online shopping and “I want it yesterday” delivery expectations.
We’ve all received a massive box for a very small product, filled with polystyrene or other filler, that’s a waste of packaging materials and space in delivery vehicles. These practices have serious environmental and financial consequences.
According to the Sustainability in the retail supply chain report, which surveyed 500 Australian consumers, 60 per cent of us often receive online orders in multiple shipments.
More vehicles on the road leads to more traffic, more idling and more carbon emissions, says the report, which was published by Manhattan Associates, Shippit and Greener
For the report, ecommerce shipping experts, Shippit collected data from deliveries spanning more than 2.2 billion kilometres across Australia to measure how much carbon is generated by its courier partners from the moment a parcel is picked up to when it’s delivered.
These deliveries contribute approximately four thousand tonnes of carbon emissions, equivalent to the emissions produced by about 1600 cars on the road, according to Greener, an app launching next year that provides recommendations to consumers about firms for which sustainable business practices are a priority.
The report’s alarming findings for retailers show how important it is for warehouse, fulfilment and logistics infrastructure to innovate to keep up with the increase in consumer demand for online shopping without increasing waste.
The good news is, there are lots of benefits for firms that can harness more sustainable logistics practices. For instance, Manhattan Associates’ research shows 63 per cent of Australian consumers would pay extra for an environmentally friendly delivery service.
Nevertheless, changing consumer expectations and the status quo when it comes to deliveries is neither straightforward nor easy.
“The vast majority of consumers still want orders delivered quickly,” says Sibal.
“But more retailers are giving consumers a choice. Some people may still want their orders delivered right away.
“Others might make different choices about how their goods are delivered if they are informed of the hidden cost in carbon emissions involved in choosing fast delivery options.”
Technology is the key to a more sustainable supply chain, including systems that give businesses visibility over their inventory to make more efficient deliveries. This includes orders dispatched in a single delivery, rather than in multiple deliveries because reducing unnecessary shipments will in turn reduce transportation operating costs, packaging costs, labour costs and most importantly, environmental costs.
Super Retail Group (SRG) is a business that has introduced more environmentally friendly practices across its supply chain and reaped rewards.
Thanks to new systems including an order management system from Manhattan Associates SRG was able to reduce fulfilment costs by double digits. Online sales grew by 87 per cent in six months and split-order shipments dropped by 24 per cent within 12 months.
Commenting on the trend for a more sustainable supply chain, National Retail Association CEO Dominique Lamb said consumers are beginning to flex their wallet muscles, using their power at the checkout to effect positive environmental outcomes.
“They want to see their values reflected in the brands with which they engage, including brands’ views on sustainability,” says Lamb.
“It’s not just about how much plastic our products are packaged in, it’s about what they are doing with their supply chain. So, for retailers, this is a no-brainer.”
She says consumers often spend 40 per cent more when they feel their values are reflected in a brand.
“We also know that when a brand gets it wrong and fails to apologise, a consumer will stop shopping with a brand for a period of six months,” she says.
”This has become an essential decision for our retailers. Having their values reflected in a brand’s approach to sustainability is now essential.”
Original article: here