Thursday 8th Dec 2016 - Logistics Manager

Retail revolution under scrutiny

Retail supply chains are having to cope with the rise of multiple sales channels. Increasingly, the focus is on an omni-channel approach – a supply chain capable of supplying a single customer as efficiently as a store. How to do that was what drew leading retailers to the Omni-Channel conference in Birmingham last month.

The impact that omni-channel is having on retail supply chains was highlighted by Dino Rocos, operations director of John Lewis, when he opened the Omni-Channel conference in Birmingham.

Retailing is changing fundamentally. A hundred years ago the retail environment was very personal to the individual. By the 1950s the market was moving to mass retailing.

But now the market is moving to the next stage: “mass personalisation”, he said.

Historically, bricks and mortar worked well for John Lewis for 140 years. But 12-15 years ago the market changed with the rise of internet shopping creating new sales channels.

However, said Rocos, “we shouldn’t be segmenting customers into the channels.”

He pointed out that a customer today might examine a product in-store, buy it online, and the collect it from a store.

“Omni-Channel is about a seamless experience for our customers,” he said, pointing out that when you get it right and customers spend more across the channels.

Rocos highlighted the importance of stitching together the difference elements. “We started with click and collect and today 55 per cent of our internet business is click and collect. Only 45 per cent delivered to customer.”

The one thing that hasn’t changed for John Lewis is the fundamental base of business: value, assortment, service, trust. The retailer’s business falls into three equal segments: fashion, home and electricals.

Getting staff to buy into the process was also critical, he said. One way has been to allocate online sales to individual branches so that internal perceptions don’t get in the way. John Lewis has been investing some £400 million in its supply chain to meet the demands of omni-channel. Its change programme, entitled Programme Q has four key elements:

  1. Getting the right stock in right place at right time
  2. And agile supply chain that exploits scale to drive efficiency
  3. Empowering partners driving operational excellence – more comprehensive package of training to give staff skills.
  4. Fulfilment beyond customer expectations

Rocos went on to analyse some of the challenges facing retailers. The first was moving from a “mass” retail proposition to “mass personalisation”. “Do you have clarity over proposition? You need to understand the customers and where they are on their journey.”

There is also a financial challenge to align financial reporting to the Omni-Channel world.

And in supply chain, there are challenges of speed, synchronisation and agility on end to end basis.

Focus firmly on click and collect

The focus was firmly on the changing nature of retail delivery and returns, at the conference with panellists and speakers noting the rise of click and collect services, and how they can be used to improve efficiency and help drive growth.

Thirty per cent of retailers are expected to be making use of click and collect by 2018, according to a September poll by Barclays. And while only 20 per cent of the 2,000 consumers surveyed claimed to have made use of click and collect in the last year, over 50 per cent of items bought from Asda Direct are collected via the service, according to the supermarket.

Speaking at the conference, Michael Kos, Asda Click and Collect, said that shoppers on the Asda Direct site use the service as it is “convenient, fast and free”.

The supermarket has been leading the way in terms of click and collect, first launching the service in 2008. Since its inauguration it has enhanced the service dramatically, reducing the initial two to four day lead time to a next day service, providing the order is placed before 7pm, and making it available 364 days a year.

“Our logistics network will continue to support Asda’s growing click and collect service,” said Kos.

He added that further developments are to be rolled out over the proceeding years. Notable of which is growing the number of UK drive-through sites.

“We expect these to double from the existing 200 sites over the next few years,” said Kos. “The UK is heavily advanced in click and collect, and Asda’s US parent firm, Walmart, has been looking to us to improve the services in the US, where in some areas lead times are as long as 10 days.”

Guy Meisl, head of warehousing and logistics at Deckers noted during a panel discussion that click and collect has huge advantages for all parties involved in the supply chain.

Travis Perkins’ head of transport development, Richard Horton, acknowledged the benefits the service offered some industries but noted that at Travis Perkins it is of minimal use.

“With the exception of our Wickes business, we are not offering click and collect,” he said. “In the builders business, you get the price you negotiate with the man behind the desk.”

Kos said that click and collect services run out of branches brought customer footfall into the store, and as with offering an in-store returns service for goods purchased online, it provided the potential for further custom.

Ian Towell, head of general merchandise multi-channel returns at Tesco, said 80 per cent of Tesco’s returns come through one of the supermarket’s 2,500 high street click and collect stores.

He noted, however, that the service was not fully integrated with other Tesco systems.

“Our systems don’t fully support click and collect and as such it is resulting in stock loss,” he said. “With 75 per cent of returns the result of customers seeking a replacement for a faulty product, it is important that the store knows it is not just meant to be handing over the replacement but also receiving the return.”

According to Towell, from a poll conducted by the supermarket, 37 per cent of respondents stated that ease of returns and exchanges were a major factor in their retail experience. Speaking further on the role of returns, Towell said that supermarkets needn’t have a returns policy that runs counter to the necessity to cut costs.

“I think it’s possible to do both,” Towell said. “You can provide a great customer experience and break even.”

However, he said, the changing nature of retail has been presenting hurdles to over. He added that customers are more likely to discuss a negative retail experience than they are to discuss a positive experience. As a result, he believes that providing customers with a “great returns experience” equates to stronger customer advocacy and loyalty.


 

Argos aligns imports with sales strategy

Argos has set itself the target of becoming the digital retail leader, said Lasith Perera, who has been head of imports since September 2011. The role covers all aspects of Argos imports business, operations, development, strategy and Duty compliance.

Efficiency and effectiveness of imports business is one of many key deliverables, he said. Aim to step-change many aspects of imports business to that of leading edge.

The first step was a comprehensive market benchmark to assess levels of maturity in key areas. That was followed by an outline of strategic priorities and assembly of a dedicated and skilled resource to drive agenda.

A key task has been to leverage long term relationships with our key suppliers and partners

The plan started by focusing on a handful of suppliers to understand how to work better with those suppliers. Having a good understanding of the supplier base enables a clear base line position to start building, he said.

Some 40 per cent of the goods that Argos sells are imported and order quality is far more important today that in the past. Argos had to understand the value chain map of our suppliers to make an impact, he said and that required skill sets that traditionally the retailer had not had.

Another challenge was the scale and complexity of operation. Volumes are increasing year on year increasing complexity. Vital to success was a strong team performance with high focus on “what and the how”, he said.


Technology to support sales strategy

Retailers are increasingly turning to technology to help them manage the growth of omni-channel. John Lewis has been one of the leaders in this. For the past five years John Munnelly has been the senior project manager responsible for the design, build and implementation of John Lewis’ new semi-automated national distribution centre at Magna Park, Milton Keynes.

He gave delegates an overview of the development of the operation from first moves to persuade the board that automation was the way to go in 2006 right through to today.

John Lewis picked a Gazeley site at Milton Keynes for the facility, and started installation and commissioning in 2008 using Knapp automation. However, he said, by then the recession was hitting and serious consideration was given to mothballing the site.

However, the project went ahead and the site went live with branch replenishment in 2009. By 2011, John Lewis was looking at extending the site as sales growth, from online particularly, had be dramatically faster than expected.

Munnelly pointed out that planning for online growth was difficult. Work is now underway on a new building next to the existing facility at Magna Park. This will handle hanging garments.

The advantage of these approach is that it will result in less working capital tied up in stock and its gives the retailer a single pool of stock – there is no confusion over where goods can be bought from.

Of course, there are challenges with such an approach, he said, notably in ensuring the resilience of the operation. Strong relationships with partners, which include Knapp, Clipper and iForce, is very important to resilience, he said.

 Originally printed in Logistics Manager 11/2014