Online transactions, heading for 40-50 per cent of total sales in many sectors, are driving major transformation of retail supply chains – as well as significant changes to workforce and task management systems.
As Tony Stockil, CEO of consultants, Javelin Group, said in his presentation at last month’s Retail Business Technology Expo, retailers are having to think “..50/50 when it comes to online and in-store transaction levels and that requires significant reorganisation of distribution, digital connectivity and resources”.
Not least, as this column has pointed out before, it also demands a better understanding of the true “cost to serve” if the expenses of home delivery or “fulfil from store” are not to erode margins irrevocably.
In the past year systems to calculate the total cost of delivery and allocate the order to the optimum choice – be that drop ship, warehouse despatch, store fulfilment, inter-branch transfer or whatever – have become more widely available from the likes of IBM, Manhattan and JDA.
But choosing the most cost- effective means for delivering the goods is only part of the solution.
Click and collect
The growing popularity of “click and collect” may be cutting delivery costs – and possibly reducing returns and increasing add-on sales as well – but as many start to approach Stockil’s “50 per cent” online figure, there may well be times when collection customers outnumber store shoppers, placing significant new demands on store staffing levels.
Having quickly and efficiently placed an online order it will, after all, prove rather frustrating for customers if there is a long queue to collect the goods or, worse still, a vital component in the order is out of stock at the chosen store location: problems that will only be made worse as “same-day” or even “ninety-minute” collection models proliferate.
Small wonder then that the, as yet nameless, retailer currently installing JDA’s fully integrated “Distribution Centric Supply Chain” system, complete with
links to workforce management tools to ensure that the staff are available to streamline collection, is in the DIY sector.
It has “a mix of retail and wholesale business” and a “need to ensure all the components [for a project] are available, otherwise they’d lose the entire order,” as Andrew Kirkwood, GVP EMEA at JDA, puts it – and no prizes for guessing who it may be.
“The software was developed for manufacturing build to order,” he adds, “and now we’re making it available to retailers – it’s just applying science to the retail supply chain.”
As supply chain specialists with users in both retail and manufacturing sectors, JDA is applying the tactics of just-in- time manufacturing to meet the new distribution needs of omni- channel retailers.
“Store fulfilment gives the opportunity for add-on sales,” says Kirkwood, “and in fashion can reduce the tendency for multiple-size orders as shoppers can try the garments before they collect so there is no need to order three and return the two which don’t fit.
But it does mean that staffing levels and task management have to be integrated into the distribution model so that staff can be made available to match the collection demands.”
While real-time inventory visibility is already on the agenda for most retailers and many are looking at fulfilment from store, adding staffing levels is perhaps less common; but if the entire fulfilment operation is to be cost- ffective then collection times and volumes also need to be factored into the equation.
JDA’s “role-based user interface” is designed to meet this need by matching in-store labour requirements – be they working on order collection, staffing the tills or whatever – with predicted demand from the supply chain and forecasting tools.
Thanks to the current trend for zero-hour contracts, it also means that managers can call in extra staff to work on the collection counter at times of peak demand to help streamline the experience for shoppers. Once on site the role-based dashboard allocates tasks to these part-timers ensuring that the collection desk is staffed, the orders packed and sorted, and queues kept to a minimum.
As Tony Stockil said, stores are “in transition” and many commentators already talk of retailers “managing the decline” as they reduce store numbers to match falling customer footfall, especially in secondary shopping areas.
Stores will certainly remain an important component of the shopping experience, even as their numbers continue to decline, but they are also important fulfilment centres for multi-channel businesses.
Collection points are now common fixtures in many stores: in some they are cunningly positioned among tempting impulse buys, while in others customer convenience comes first and they are drive-through or else by the main entrance. Where visible they frequently seem to be staffed by a bored- looking assistant with nothing much to do: even on the minimum wage that can be an extravagant use of resources. With continuing pressure on retail margins fulfilment clearly has to become rather more cost- effective if many of these outlets are to survive.
* RBTE 2014 was held at Earl’s Court on 11-12 March.
Originally appeared in Supply Chain Standard, April 2014