Speed and convenience are watchwords for 21st century logistics. Technology holds the key to getting it right first time
The days when shoppers were content to wait days, if not weeks, for their mail order purchases to arrive are long gone. Time-poor consumers now eagerly take up next-day and emerging same-day delivery services.
Retailers face a continued challenge over just how to get their goods into shoppers’ hands quickly and conveniently
Where delivery happens matters too. The fact that many do not want to wait in at home to receive urgent deliveries has driven the fast expansion of both click-and-collect services and third-party collection points to be found in locations as diverse as the London Underground, train stations and local convenience stores.
The evidence is that retailers who make delivery options convenient for customers see results. When fashion retailer Next [IRDX RNXT] introduced free next-day delivery to stores for shoppers ordering before 10pm, it found behaviour changed fast. Soon 45 per cent of orders made from home were delivered to store, up from 30 per cent previously.
Venda research [IRDX VVEN], published in July 2014, found 76 per cent of consumers would rather use click-and-collect services to get their orders on the same day, rather than waiting two or three days for standard delivery to home. Demand for such ‘alternative’ delivery services as collection points and locker pick-up is likely to climb, the study suggested, since 25 per cent of the 2,340 respondents, surveyed through polling company YouGov, were not aware of these options before they took part in the survey. Overall, 73 per cent had yet to use such services – but 45 per cent felt all online retailers should make them available to customers. The customer appetite, it seems, is there.
“Given that speed and convenience of delivery is a prevalent concern for online shoppers, it’s not surprising that many are keen to try out these new services that promise to be faster and easier,” said Eric Abensur, group chief executive of Venda, commenting on the research. “It’s thanks to the rise of the ‘I want it now’ consumers that pureplay ecommerce brands and multichannel high street retailers alike face a continued challenge over just how to get their goods into shoppers’ hands quickly and conveniently.” He counselled, therefore, that retailers make fulfilment a priority, warning that, “without a fast and efficient way to get purchases into consumers’ hands they could end up losing revenue.”
There’s no one size fits all in ecommerce – something that’s as true for logistics as any part of the business. A grocery business has one set of pressures as it looks to deliver a wide variety of food and general merchandising products within small and specific time slots, while a fast-fashion retailer may have relatively limited stock pools in any given place, from its stores to a central warehouse.
David Hogg, commerce solutions lead, Europe at IBM [IRDX VIBM], says it’s important for all traders to start by planning their strategy, working out how they can profitably offer the delivery options their customers want before redesigning the warehousing and store environment to enable them. Supermarkets, for example, have introduced dark stores capable of holding a wider variety of products and which enable more efficient picking for online sales, while other companies may pick for the store and web from a combined warehouse. In the USA, one large DIY retailer is using its stores as mini-warehouses, redesigning the back-office environment to do picking and shipping.
At the same time, retailers must consider how the returns process will enable items to be returned to stock and refunds to be issued promptly.
It’s only at at the end of this strategic rethink, says Hogg, that retailers can identify the technology that will most effectively underpin systems. “Each subsector of retail has different challenges,” says Hogg. “I think the very best of each of those sectors are still going through a process now of reengineering their supply chains to try and come up with the differential service that seems right for their overall brand.” Fast-fashion companies, thus, are trying to improve the accuracy of in-store inventory, as seen through stock management systems, so that they can pick and pack in store for click and collect. Meanwhile, department stores are selling from virtual inventories that cover the warehouse, stores and third-party supplier, while honing fulfilment mechanisms that enable same-day click and collect.
Speaking from experience
“Ecommerce sellers going through next level of maturity, with those that are looking to differentiate service levels now looking to internal logistics to raise the challenge and say how do we do this? With the network of warehouse facilities they operate that’s not a trivial thing to do and it almost requires an entire remodeling of the warehousing approach, with a multi-year plan on how to deliver that to a specific geography. It’s really fascinating: this to
me is what real omnichannel is: it’s unpicking decades-old supply chain technologies trying to make them catch up with all the interfaces that have seen lots of investment.”
David Hogg, commerce solutions lead, Europe, IBM
“I think that consumer power will rule, and I think we have to consider them more and target the consumer more in the next couple of years.”
Becky Clarke, chief executive, NetDespatch
Focus on profit
“Retailers need to ensure that profitability is something that they are addressing first and foremost, giving their customers what they want, when and how they want it. But the longer orders continue to be fulfilled unprofitably, the more difficult the situation will be to rectify.”
Craig Sears-Black, managing director, UK, Manhattan Associates [IRDX VMAN]
Underlying any advanced delivery and fulfilment options are the critical order management systems (OMS). These, depending on the commerce platform chosen, may already be integrated or need to be added separately. The OMS handles the order as it’s placed by the customer, aligning with warehouse management systems (WMS) that hold stock levels, and which integrate in turn to delivery management software to organise the final delivery service.
Additionally, ship-from-store systems, built on distributed order management and RFID technology, enable retailers to fulfil online orders from stock inventory. This approach, found business advisor Kurt Salmon [IRDX VKSA] in its 2013 study, Winning the Ship-from-Store Battle, helped American Apparel [IRDX RAME] increase online sales by 30 per cent by using stores as backup fulfilment centres. By fulfilling online from stores that have large stock quantities or have lines that aren’t selling, retailers can avoid discounting stock at the end of the season. However, warns the Kurt Salmon paper, the cost of shipping from store can be up to five times higher, so “the order management engines driving these decisions must be able to determine the least expensive option after looking at margin and service levels”.
Consumers will choose the way they get their parcels delivered
Many retailers are well advanced in building the single view of the customer that enables seamless customer experience across channels. But if that experience is to end with a fulfilment service that works, there has to be a single view of products as well. Systems that provide retailers with the knowledge of where any given product is, from the shop to the warehouse or even in transit, enable retailers to fulfil order in ever more sophisticated ways, says Craig Sears-Black, managing director, UK, of Manhattan Associates. “With the meteoric rise of click and collect over the last year, retailers are starting to use inventory from stores and right across the supply chain – not just from the warehouse – to fulfil ecommerce orders, allowing customers to receive their goods more quickly and making it more profitable for the business.”
Like Hogg, Sears-Black also emphasises the need for fulfilment to be profitable. “Most retailers still have no idea how much it costs to fulfil an online order and this will lead to their downfall,” says Sears-Black. “Profitability can be achieved through having a single view of all inventory and fulfilling orders from a location which ensures a profit on that sale.” That, he says, is often the bricks-and-mortar store, giving an in-built advantage to the multichannel retailer.
It’s technically relatively straightforward for retailers to offer the variety of final mile delivery services that customers require. Logistics providers and delivery management platform providers have driven technological development in order to make it easy for retailers to use their services.
Retailers can integrate their own platforms directly with their chosen logistics provider, or through a third-party delivery management provider. MetaPack [IRDX VMEP], for example, recently integrated InPost’s automated parcel delivery service that serves a network of more than 1,000 collection points into its dynamic delivery options platform. As a result, retailers using the platform can automatically offer customers choosing delivery options on the website the most relevant delivery option based on location and the time of day the customers are placing the order. That might include an InPost locker in the London Underground or at a third-party retail premises, home delivery from another logistics supplier, or a range of other options.
Meanwhile, NetDespatch, which organises deliveries on behalf of its carrier and postal service clients through a hosted, managed platform that integrates to warehouse systems, offers home delivery and click-and-collect services as well as international delivery. It’s always important when planning logistics services, says chief executive Becky Clarke to remember the needs of the consumer. She says: “We’ve seen very large parcel companies still live in a B2B world without a means of talking to the customer. We help communicate to say when the parcel will be there.
CollectPlus [IRDX VCPL], for example, uses emails and texts to say that an item has been delivered, and to get feedback. It’s changing the way the world works in that the consumer is the absolute object of that operation and consumers will choose the way they get their parcels delivered.” Certainly, the logistics industry has responded along with retailers to the way the customer wants to buy and take delivery of goods. Clarke envisages further innovation coming up.
In the not too distant future, she predicts carded deliveries will disappear. Instead of saying that the item is at the depot, couriers may instead be able to report that the item is at a nearby collection point – something that already happens more informally through delivery to a neighbour. Such a development would be, says Clarke, a “massive benefit for the carrier, but also for the consumer to get the item when they want it”.
Customers, already used to a growing flexibility in the logistics industry as it responds to the evolution of online and multichannel commerce, will no doubt respond eagerly to such innovations that remove inconvenience. As delivery improves, driven by factors including ever-more sophisticated technology, still more sales are likely to take place online, increasing the importance of flexible fulfilment.
Customers’ expectations of fulfilment continue to grow just as the number and variety of delivery and collection options widen. Sunday, same day and collection from train and underground stations are among the alternatives that have become available just in recent months. Meeting those expectations, however, is a complex process that will inevitably require time and planning to achieve.
Mentioned in this piece…
Manhattan Associates is a best-in-class global solutions provider for Supply Chain Commerce leaders—organisations intent on creating enduring market advantages by leveraging their supply chains. We help our customers successfully manage accelerating and fluctuating market demands, as well as master the increasing complexity and volatility of their local and global supply chains. (more…)
Collect+ is an innovative parcel delivery and returns service that offers consumers greater freedom and convenience when shopping online. We are the trusted partner of over 100 Retail Brands and are growing fast – in 2011 we doubled our volumes taking us to over 4 million returns and deliveries a year. (more…)