Sunday 25th Sep 2016 - Logistics Manager

Satisfying the flex-shopper

The growth of online shopping is changing the face of the high street. And that is having an impact of the way logistics systems work, says Alex Whiteman.

First published in Logistics Manager, April 2015.

First published in Logistics Manager, April 2015.

Consumer shopping habits have altered significantly in the last two decades. The impact of this has been felt right across the board, from retailers all the way down the supply chain. Empowered with more information than ever, consumers are becoming the dominant force. Venkatakrishna Velugubanti, global practice leader for retail at ITC Infotech, describes the current epoch as the “consumer era”.

For retailers, the big change has been the rise in e-commerce and the trailing off of traditional shopping.

“We have seen a rise in pound stores and other discount retailers,” says Velugubanti. “But traditional supermarkets are under immense stress. High streets have to reconfigure to suit this new paradigm.”

Automation is playing an important role. Knapp is currently installing automated systems for two major retailers: Marks & Spencer and Staples. To date it has delivered more than 15,000 of its OSR Shuttles in more than 200 systems worldwide including John Lewis, Boots.com and Clarks in the UK. John Lewis at Magna Park in Milton Keynes is currently extending its automated handling systems. In fact, not only is Magna Park 2 well under way for John Lewis, it recently announced that it will open a third facility in Milton Keynes to support the growth of its omni-channel business in both shops and online. The new 638,000 sq ft warehouse will be responsible for large furniture and electricals, as well as home furnishings.

The need to adapt has resulted in a significant change in supply chain management, according to Anita Donohoe, retail operations director of Ceva Logistics UK.

“Ceva is finding retailers are exercising more control over their supply chains, operating with lower stock levels, and reacting more closely to customer demand, producing a move to ‘pull’ rather than ‘push’ models,” she says. “This has a tendency to create volume spikes which, from a logistics perspective, mean we have to be more agile and adaptable to respond. The increase in promotional activity also impacts the way stock moves into store, again creating high level demand in small periods of time.”

A core example of this promotional activity was the stir around 2014’s Black Friday and Cyber Monday promotions. Patrick Gallagher, CitySprint CEO, says: “During peaks like last November’s Black Friday, retailers struggled to process massive order volumes, leading to delays in delivery and reputational damage. At these peak trading times, retailers and their carriers need to work together to communicate to consumers that these volumes cannot be processed according to the same ‘one-size-fits-all’ approach retailers traditionally promise in online delivery. This could require a cap on peak delivery volumes, an extension of delivery times around peak activity or even an earlier cut off point.”

Consumers dislike taking time off work to receive a parcel and they certainly don’t want to spend hours of their weekend waiting for a delivery, says Gallagher.

“Retail customers are starting to vote with their clicks, and online retailers increasingly need to offer deliveries to customers at a time of their own choosing,” he says. “Logistics companies can help with this by offering a range of delivery times and methods to increase convenience.”

Gallagher believes that retailers and carriers that do not move with the times and make consumer convenience central to their offer are likely to get left behind.

Patrick Turner, head of business development at DSV Solutions, thinks that 3PLs need to improve flexibility, with rigidity an impediment to reacting to any sudden bursts of activity. This flexibility extends to better understanding clients, and the consumer profiles of their clients.

“The increasing focus on e-commerce can lead to huge shifts in order profile moving to single item picks versus traditional carton picking with greater pressure on cut off times for next day delivery,” says Turner.

Donohoe also notes the increase in reverse logistics, which she says has been driven by the increase in e-commerce and the reduction in overall inventory.

“The reliance on speed and accuracy of turnaround of reverse flow product is increasing, particularly with highly-seasonal product or consumer technology lines, due to their shorter overall lifespan,” she says.

For those on the high street, existing physical infrastructures can hamper their ability to meet these evolving requirements. National transport support manager for The Co-Op, Justin Kirkhope, describes a large percentage of his stores as “legacy stores”.

“These shop fronts have access akin to a horse and cart,” says Kirkhope. “Which makes delivery particularly difficult. We are, however, looking to tackle this.”

And while the retailer sizes up its options in this respect, it has use technologies to develop and improve other sectors of the business.

“We have introduced new routing technologies,” says Kirkhope. “These have delivered significant mileage savings, automating the way schedules are produced.”

For smaller retailers, city logistics also presents an opportunity to further cut costs and improve efficiency. Andy Robson, supply chain solutions manager for GS1 sees city logistics as an opportunity to provide better service to consumers by having a range of fulfilment channels in urban areas that meet consumers’ expectations and needs.

“The challenge is to diversify the channels of supply – from click and collect at a store, locker, tube station pick-up, and other pick-up and drop-off locations, to home delivery),” says Robson. “This requires an accurate and real time information flow of the product and its movements along the supply chain. It is still shipping and receiving, but in smaller quantities to different locations. The same information standards apply.”

To cater for the growing trend for city logistics, Ceva has adapted the model it uses in the automotive sector – unattended night deliveries. Add to this the growing number of smaller discount and convenience stores that will require much smaller deliveries, with smaller packages, and possibly more frequently since they are not physically big enough to storage big stock.

“Delivering predominantly into city centre locations through the night, Ceva drivers have the necessary access to fulfil the delivery; we can even place stock in pre-requested store locations,” says Donohoe. “This avoids our vehicles being held up in day time traffic, and assists the retail stores, as they don’t have to spend valuable time during trading hours, overseeing the delivery.”

 

Omni-channel strategies are key

Tobias Hartman, vice president enterprise services & international at eBay Enterprise, says the changes having the greatest impact on retail are the result of omni-channel strategies extending the customer experience across platforms, while in-store fulfilment is leading a revolution in how high street stores are used – John Lewis reported online click and collect outstripped home delivery for the first time this Christmas. This increase in collection is caused by a demand for convenience rather than a rejection of delivery, and this is an opportunity for logistics companies.”

Hartman notes that click and collect proved popular over the Christmas period, claiming that on Black Friday, the service outstripped home delivery.

“Retailers can look to bring this convenience to their fulfilment options by introducing services such as timed delivery or ultra-fast, as well as offering alternative destination options like locker delivery and secondary pick-up points,” he adds.

Robson says it’s important to define omni-channel, which for him equates to “I can buy any product from anywhere to anywhere – with fully integrated links between physical stores and online channels selling products to consumers”.

To use omni-channel to accurately fulfil what the consumer wishes to purchase, retailers need to have a single view of stock – total inventory visibility. “You need to have the same accurate view of what stock is available wherever is going to be shipped from – a store, warehouse (including dark store) or direct from supplier,” says Robson. “Retailers need the same level of visibility for each of those.”

For Turner, omni-channel has become a word used to describe a challenge that perhaps is not so new.

“The digital platform has just amplified the point and made it stand out,” he says. “A retailer’s store is now perhaps not considered as the ‘flagship’ of the omni-channel offering.”

Companies are shifting focus online to their web shop and their social media marketing. Rather than writing a letter of complaint to a store manager one public comment on Social Media can expose a flaw to thousands of other like-minded consumers, argues Turner.

“We’ve seen increasing moves to make the e-commerce stock the priority sales channel among omni-channel retailers – extending your online ‘stock room’ to show products that are sat physically in a retail store stockroom and can be called back to the main warehouse is a key advantage,” he adds “Social Media promotions and offers can cause a storm of orders in a matter of minutes so retailers and therefore logistics service providers must be innovative in their handling of the online channel.”

UPS’s UPS Pulse of the Online Shopper survey found that British consumers want a convenient shopping experience, no matter what channel they are using. This convenience equates to flexibility. Flexibility in how they shop – whether in store, online via a computer, or online via a mobile or tablet. The choice made to suit their needs at the time of purchase.

Matt Guffey of UPS, describes this new breed of consumer as the “flex-shopper”.

“The flex-shopper wants options, with convenience driving what channels they use to make their purchase,” he says. “In this highly competitive environment, logistics is instrumental in driving a positive retail customer experience, with 78 per cent of British online shoppers basing their recommendations of an online retailer on issues around shipping and delivery.”

Despite its clear impact on consumers, Donohoe contends that the impact of omni-channel on retailers’ traditional business from logistics perspective has been mute.

“Perhaps with the exception of returns, when customers can sometimes return product originally purchased online to a physical store,” she says. “In this situation, there has to be a process for returning product back up the chain for sortation and reintroduction.”

Whatever the case, Hartman says that as volumes continue to increase, the holy grail of omni-channel retail is an efficient, responsive and data-driven delivery cycle.
 What retailers do next

Shops as showrooms, this seems to be the strategic thought from everyone involved. Increasingly consumers are looking to buy online where products are cheaper. But retailers still have to contend with what to do with their high street presence.

Click and collect firms believe these spaces offer the perfect collection point for their services. And once in store, shoppers may find themselves interested in additional purchases with storefronts offering that secondary sales platform.

A recent study by UPS – UPS Pulse of the Online Shopper – found that 26 per cent of British online shoppers said they would prefer their online order be delivered to locations other than their home.

Peter Louden, chief operating officer of Doddle, believes click and collect is getting shoppers back into the high street rather than turning them away.

“Customers want convenience. Longer working hours is just one of the aspects altering consumer behaviour,” says Louden. “Shopping habits have become fragmented. This is particularly noticeable with grocery shopping with which the big weekly shop has been replaced with erratic convenience shopping and then a mass online order, maybe once a month.”

This trend is towards mobile shopping is resulting in the physical shopping outlets becoming smaller with more emphasis on discounting and convenience. This has a huge impact on the logistics of servicing these retail channels, says Andy Robson, supply chain solutions manager at GS1.

“15 years ago all logistics was about running big depots to deliver goods in bulk to very big stores,” he says. “Now what you find is consumers ordering directly their goods at item level which is then fulfilled as shopper ‘baskets’.

Robson notes that this leaves retailers will something of dilemma in terms of larger stores and warehouses.

“Retailers have a legacy of very big warehouses that need to be replaced,” he says. “That is why we see now the so-called “dark stores” formats, small warehouses used for online home shopping fulfilment – new facilities that are more like agile shops than warehouses.”

 

Advanced shipping notifications help Dairy Crest boost volumes

Dairy Crest delivers over a quarter of a million cases a week to Tesco. To distribute these high volumes and meet a requirement to deliver orders within 18 hours, Dairy Crest implemented a range of improvements to its supply chain processes. One of the most significant changes was the introduction of advanced shipping notifications (ASNs) with Tesco, which provide better visibility and validation.

With the help of ASNs and electronic proof of delivery, Dairy Crest has managed to reduce claims queries, improve cash flow and help improve the goods-in process at Tesco. The key is the use of GS1 standards, which provide a common language between Dairy Crest and Tesco.

The majority of Dairy Crest’s produce is distributed through its Warwickshire NDC.

The opening of its NDC was the first in a series of improvements that Dairy Crest made to its supply chain processes to meet a forecasted growth in business and new requirements from customers. Dairy Crest’s ambition was to increase the level of automation in its supply chain. The project team decided to focus on improving accuracy and flow of information connected to the delivery of goods to Tesco’s regional DCs.

Tesco places its orders with Dairy Crest using electronic data interchange technology. Consignments are assembled within Dairy Crest’s NDC and each pallet is identified with a logistics label, which contains a serial shipping container code (SSCC), a unique GS1 number (represented by a bar-code) that also identifies the goods when they arrive at Tesco’s regional distribution centre. As the pallets in the consignment are loaded onto the delivery lorry, they are scanned which then triggers Dairy Crest’s WMS to issue an ASN message, which is sent to Tesco’s receiving facility.

The ASN received by Tesco provides information about the consignment before it arrives. Tesco knows in advance whether there are discrepancies between what it ordered and what it will receive, which means it can prepare for the arrival of goods and authorise payment to Dairy Crest without delay. When a consignment arrives at Tesco’s warehouse, goods-in can scan the SSCC on each pallet, which enables them to verify it against the ASN. This means Tesco can identify discrepancies between goods that left the NDC and those that arrived.

Dairy Crest can now fulfil a key part of Tesco’s requirements to deliver within tight timeframes and provide information in advance of deliveries being made. The company has managed to achieve a delivery accuracy of 99.5 per cent.

 

Rail at the heart of grocery distribution

Rail is an important part of operations at Tesco’s NDC at the Daventry International Rail Freight Terminal and is calculated some 14 million road miles a year.

Tesco grocery distribution centre’s strategic rail application has shown benefits with

Tesco operates an 840,000-sq ft national distribution centre at the Daventry International Rail Freight Terminal (DIRFT) in Northampton and Tesco Grocery is the latest development of this continually expanding facility. Stobart’s trains move around 56 per cent of warehouse goods from the Tesco Grocery site. This saves approximately 14 million road miles per year, leading to savings of some 253 tonnes of CO2 per week.

Rail operations are managed by Eddie Stobart Rail Freight and at the core of this operation are two heavy duty Konecranes reach stackers from Cooper Handling Group, which load and unload three trains per day which link to Mossend, Cardiff and Tilbury where the goods are taken to regional facilities to be sorted before being delivered to Tesco stores.

David Cooper, managing director of Cooper Handling, says: “This is a fascinating and very unique application with very specific requirements. The rail terminal is only 250 meters long and rather narrow, so it was quite a challenge to determine the right machines that could handle the 30 tonne containers with the most effective turning circle.”

The Konecranes machines allow them to lift and manoeuvre containers from a second rail. The masts can extend over the first train and handle the containers from a second train with the added weight of support jacks fitted between the two front wheels.

The machines perform around 1,500 container movements per week loading and unloading trains that can carry up to 38 containers. Each year Stobart trains are saving around 13,000 tonnes of CO2 and in 2012 Tesco reported a 17 per cent reduction in its fuel consumption.

Ian Wilson, Eddie Stobart Rail’s operation manager, says: “This is the first rail operation of its kind for us and to help Tesco reduce as much CO2 as possible we were very thorough in finding a handling partner who could ensure the machines would remain working as efficiently as possible.”

The Tesco Grocery operation can peak and trough and during a week in July three million cases of products, equivalent to 600 containers were moved by rail due to the summer heights as there had been a huge surge in demand for soft drinks. Usually the average is around two million cases per week.