Black Friday is today one of the key challenges facing retailers and the logistics operations that support them, John Munnelly of John Lewis said, speaking at eDelivery Expo (EDX 2015) this week. He emphasised that retailers were only as strong as their weakest link, with investment needed in the “Achilles Heel” that carriers represent.
Munnelly, head of operations at John Lewis’ Magna Park national distribution centre, told his EDX audience that Black Friday 2014 took the centre close to capacity as it at times processed 2.6 orders during the peak moments of a day that saw £44m taken in orders, hitting £2m between midnight and 1am.
“We’re now only as strong as our weakest link,” said Munnelly. “No longer is this just about pushing stock into a shop and closing the door. It’s every part of your system, from a web platform being able to cope with that level of demand onwards. What I see as the Achilles Heel of this whole thing is the carriers.” He said that the fact that some were “under-utilised, under-invested in” was “something the whole ecommerce piece needs to consider going forward, about the amount of investment that goes into that.”
He said retailers must now “get good at being transparent with the capacity we all have in the engine room.” He added: “If we don’t have fuel to keep the customer promise we’ll pay for that handsomely after the event.” Planning at John Lewis was now looking towards ways of ensuring a smoother peak, from changes to the supply chain and more.
Munnelly also identified two other key challenges to retail logistics: the channel economies that come to the fore since the cost of fulfilling online business is so much more expensive. He calculates it costs three times as much to get a product to a customer than onto a shelf in the store. “With more than 30% of our business now online, there are profitability challenges,” said Munnelly. Another challenge here was the need to refine the customer-facing experience. “The new shop assistants are the pickers, packers delivery drivers and that’s something we all need to get our heads around.”
Munnelly’s comments came in the week that the IMRG put forward its recommendations for managing the logistics around peak shopping on Black Friday 2015. The organisation has described Black Friday 2014 as a delivery tsunami that hit carrier and retailer fulfilment, delaying operations for days afterwards. It says Black Friday will “almost certainly be repeated in 2015”.
These are its recommendations:
Duration and management
This will vary by retailer and it will be important to communicate detailed information about campaigns between retailers and logistics operators, as well as out to shoppers through the media.
Tactical and dynamic discounting
Black Friday can be very profitable for retailers who get it right, but discount rates will need to be rationalised and panic-discounting avoided.
Contingency and variable capacity
The increased volumes in activity affect everyone, even those that do not discount; forecasting, customer services and lead-times will need to be carefully planned to avoid frustrating customers.
Variable service promise
The delivery promise should be adapted quickly and a variable discount rate may even be employed to get the flow the fulfilment operation needs
Multiple service channels
To help avoid exposure to bottlenecks, it is probably worth looking at multi-carrier solutions; click and collect may also have a big role to play in alleviating volume issues.
Andrew Starkey, head of e-logistics at IMRG, said: “The huge surge in demand on Black Friday 2014 was unprecedented and caught everyone in the industry by surprise. The exact form of it may evolve in 2015, but at least this time we have a precedent and time to develop strategies to ensure the Christmas peak runs as efficiently as possible.
“It’s fair to say that Black Friday splits opinion, but the impact of it is so vast that it affects all retailers whether they run campaigns or not. The key points for industry to address are around how to smooth out the spike – even spreading it over a few days would make a massive difference to fulfilment operations – and managing expectation so that customers receive accurate and up-to-date information about the progress of their orders.”
Responding to the IMRG report, logistics management software business Centiro warned that retailers risk damaging customer relationships through ‘best efforts’ delivery networks. “It’s clear that many retailers haven’t optimised their delivery networks to meet the challenges presented by omnichannel retail,” said Niklas Hedin, Centiro’s chief executive. “Black Friday was a stark example of retailers struggling to meet customer delivery promises. Those retailers who are unable to scale their operation and meet customers’ delivery requirements risk damaging sales and customer loyalty.”
He added: “Today’s consumer is demanding a seamless brand interaction, so for those retailers using multiple carriers there is often a disconnect between the shopping and delivery experience. For retailers looking to regain control of their delivery networks, automating the management of multiple carriers while providing customers with delivery information under their own branding will be a pre-requisite.”
Black Friday 2015 – managing the peak can be downloaded here.
