A FLEXIBLE SUPPLY CHAIN IS THE FOUNDATION FOR FUTURE DEVELOPMENTS IN LOGISTICS, WRITES CHLOE RIGBY.
The evolution of customer-centric retailing has brought the supply chain into sharp focus. Enabling the ever more convenient delivery and collection options that shoppers now demand will require a new intensity of focus on stock, from where it is held to how it can best be delivered to the buyer.
Recent research from personalisation specialist Peerius suggests that shoppers want to see the store and online retail move ever closer in years to come – and that flexible delivery options can bridge the gap between the two. Consumers taking part in the September 2013 study showed that they valued the immediate gratification of in-store shopping (cited by 47 per cent), but that they also rated the lack of queues (42 per cent), the convenience of shopping from multiple devices (41 per cent) and the range of products (42 per cent) that online has to offer. Asked what made them more likely to shop online than in-store – or, in other words, what would effectively connect online and the store, 43 per cent pointed to flexible delivery options.
Many traders are already responding to such sentiments. Multichannel retailers such as Argos and Oasis are using their stores to deliver goods to consumers through the Shutl service within 90 minutes of receiving their orders. Click and collect is becoming a widespread option. Finally, home delivery services are becoming ever more pinpoint accurate, with services such as Asos’ real-time parcel tracking, enabled by DPD, offering 15-minute delivery slots and the chance to change the final delivery point until very close to the final moment of consignment.
In the future, however, shoppers will want to see still more convenience, with same-day delivery likely to become standard for multichannel and online-only retailers.
But to achieve such a step-change in delivery, retailers will need to move products out of the warehouse and the store. That’s just what some UK traders are now starting to do. Pureplay Ao.com, previously known as Appliances Online, has come up with its own answer to what previously appeared to be a built-in multichannel advantage. Fast deliveries seemed to be the preserve of retailers who could fulfil online orders from their local stores. But the appliances retailer is proving that logic wrong by offering same-day deliveries of household equipment of all sizes, powered by a network of 10 ‘outbases’ served from its Crewe warehouse.
John Roberts, chief executive of ao.com, described the move as “a revolution in customer service”. Unveiling the service, he said: “To commit to our customers that we can deliver same day is an enormous achievement. We like to push the boundaries at ao.com, redefining retailing by providing a better way which we believe our customers deserve.”
Pureplay giant Amazon is also developing local hubs around the UK, readying itself for the possibility of offering same-day delivery using smaller couriers. It has developed small delivery stations that act as a hub for local deliveries in a number of cities, including Birmingham, Oxford, Milton Keynes and London. The pureplay recently stated: “These stations provide more capacity and flexibility within our delivery network and will fulfil orders across all Amazon’s delivery options including free super saver delivery, express delivery, evening deliveries and Amazon Prime.” Theoretically, at least, the stations could fulfil same-day deliveries for customers who want products delivered ever more quickly.
As customer expectations of delivery times move closer to the point of order, other retailers are also likely to start to relocate stock ever closer to the final consumer. It’s necessary, says Neil Weightman of fulfilment specialists iForce, in order to enable later cut-off times for next-day deliveries. “Ordering later and later means you’ll need to be increasingly near the major carrier hubs,” he says. “If you’re driving three or four hours to get to a carrier hub you have to go earlier in the day.
“I think the real increasing pressure will be that your fulfilment centre is as close to the major carrier hubs as you can get so that you are still able to dispatch at 10pm or 11pm and can still make the hubs for a morning or lunchtime delivery.”
One alternative to relocating entire fulfilment centres is to move a small selection of stock to where it’s most likely to be required. This approach has helped Mamas and Papas sell in the competitive US market. The nursery retailer’s inventory spans both larger items such as buggies, prams and furniture, and smaller products such as clothing. Rather than shipping all items to the US for local delivery, or from the UK on more slow-moving services, Mamas and Papas’ ecommerce director Rob Jennings, speaking to Internet Retailing ahead of the Internet Retailing Conference 2013, explained how the nursery retailer has developed a hybrid solution.
“In the same basket, a customer can order a large bulky item such as a pushchair or stroller and a piece of clothing or a bedding set or something for the cot,” says Jennings. “In the background for that same basket, we’ll split the order and if it’s a large bulky item we’ve set up a distribution centre in the States, which will effectively ship that item to the buyer while the smaller items we house in the UK and we ship and fulfil that from here – because the cost of carriage is very low for us to ship smaller items from here.
“What it means is that rather than us having to invest in significant sums of stock investment held up in the States for all those lines, we can just dip into a very broad assortment of the range we hold in the UK. It’s been a good work around for us – it means we can completely open up the product range.”
Not only does such an approach cut the time taken to deliver goods, thus meeting customer expectations and allowing the retailer to compete effectively with those trading out of the local market, it also reduces the investment in stock that’s required and the potential cost of delivering those pricey larger items to far-flung destinations.
PAYING THE PRICE
The conundrum of the cost of delivery is something that Mamas and Papas has considered in depth. “We’ve focused on getting products to customers in a more cost-effective way that is flexible for the customer as well,” says Jennings. “We’ve rewritten our whole delivery logic. Effectively we’re trying to make as many premium options as possible and market them strongly – next day, pre-noon, same-day delivery, all those options to try and make it relevant for a mum who needs to know they are going to get that item delivered. But 80 per cent will opt for the free delivery one if we have free standard delivery. We’re addressing that by trying to make our click and collect proposition as strong as possible.”
Denise Oakley, international marketing director at supply chain integration specialist GXS, believes that consumers will in time become more amenable to paying delivery charges. She points to the example of the online grocery model, which has led many developments in the multichannel industry. There, she says, the cost of delivery is now becoming “more realistic”. Where food retailers used to deliver for free, now they’ve introduced a sophisticated array of delivery charges, from prices that vary by the time of day a delivery is made, to delivery subscriptions. Other industries will also change over time, she believes. “In a way the consumer is driving the decision and you as a retailer make the call as to whether this is a profitable business line for you,” says Oakley.
CLICK AND COLLECT
As Mamas and Papas has found, it’s usually cheaper to deliver stock to the store through click-and-collect services rather than to the home – and it’s also proving popular with customers. Under the pressure of customer demand, times for delivery to the store are getting shorter. Schuh, for example, now promises customers they will have click-and-collect orders ready for collection within an hour – it fulfils such orders from the store. Asda has launched same-day collection for online grocery orders.
Meanwhile Tesco is taking its click-and-collect service off its premises and into the community. A trial underway in York means the supermarket is now taking online orders to locations as diverse as a school park and a park and ride for collection.
At the time of launch, Simon Belsham, managing director of Tesco.com, said: “We think customers are really going to like the extension to the service because it makes things even more convenient for them and it means they can fit their shopping in around their lifestyles.”
Different ways of delivering are also speeding up the process. GXS’s Oakley points to the rise in the use of the advanced shipping notice (ASN) to give retailers better visibility of incoming goods, which helps to clear them through distribution centres faster on their way to the sales floor. They can also be used to keep retailers informed about items that are being delivered direct, whether to the customer as a dropshipped item (see the merchandising feature on page 12 for more on dropshipping), or direct to their stores. ASNs mean you’ve got the ability to know exactly what’s arriving and when,” says Oakley. “It means you’re better able to keep an accurate nlevel of stock, thanks to real-time visibility. That’s really important because it helps in terms of customer service.”
Looking further to the future, products could soon be speaking up for themselves in the fulfilment process, thanks to a new warehouse ordering system that’s under development at the University of Cambridge. Professor Duncan MacFarlane is leading research into the concept of product intelligence, which sees computer models enabling products and orders in the warehouse to think for themselves, a project being undertaken in partnership with James and James Fulfillment.
Researchers are working towards combining product intelligence with cloud-based warehouse and delivery systems to let consumers interact with their order up to the point of delivery.
“Currently, once an order is placed it’s generally very hard for a customer to amend it,” says James Hyde, operations director at James and James Fulfillment. “The team at Cambridge University are now looking at the possibility you could choose the final delivery address while the parcel is in transit, perhaps as late as the morning of its delivery.”
As such visions of the future get closer to being a reality, stock control is set to move from the warehouse to being very much front of mind for retailers and strategic planners. It all makes for a revolution in the way products are supplied, bringing the age of instantaneous gratification
SPEAKING FROM EXPERIENCE
“Immediate delivery or timed delivery with a half-hour delivery slot is going to become much more popular as more and more people offer it. That will reset expectations about delivery performance and options.”
Neil Weightman, sales director, iForce
“A new trend that’s emerging is the use of cloud. If you’ve spent a lot of money on a legacy system that does the job you don’t want to pull it out – that can be exceptionally complex work. So I think cloud/SaaS and apps overlaying some of these things just to take the information from the systems and provide it where needed is a trend that
Denise Oakley, international marketing director, GXS
“A successful multichannel logistics strategy is about understanding the demand for certain products across all channels and ensuring everyone along the entire supply chain is aware of the demand. There is a movement towards not only identifying what inventory is currently in-stock or available but how much inventory is ‘in-transit’ or, in the case of retailer/manufacturer, how much inventory is ‘in-progress’.”
Michael Turcsanyi, president, OrderDynamics