Time to ditch free delivery, Millar tells Omni-Channel delegates

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Delivery options, returns and dealing with Black Friday were key discussion points at the Omni-Channel Conference in London in September.

Supply chain author Mark Millar challenged the use of free delivery in online shopping, when he opened the Omni-Channel conference in London. And he went on to describe the free returns process as “insanity”.

Logistics & Supply Chain

This article first appeared in Logistics & Supply Chain, Autumn 2015.

In his new book, Millar has developed the concept of supply chain eco-systems – to describe the process of moving beyond the linear chain to a supply chain that is global, complex, and interconnected. And he has looked hard at the development of e-commerce globally.

Last mile delivery is really hurting – either the retailer or logistics provider or both, Millar told delegates.

Free delivery did not make economic sense and that needed to change. He highlighted the fact that in the US, Toys-R-Us recently reduced minimum order value for free delivery from $49 to $19 as it geared up for Christmas.

“This is going in the wrong direction in my view. It is not economically sustainable in the long term,” he said, going on to highlight the importance of a good delivery experience. “Last mile delivery is only the direct contact with customers,” he pointed out. However, Millar said click and collect has an element of salvation about it – it’s efficient, effective and consumers like it.

Millar was even more critical of the way returns work. “Returns – this is just insanity.” He highlighted the fashion sector where customer can order multiple colours and sizes and return those items that they don’t want, detailing the costs associated with reprocessing those returns and putting them back into stock. “We have got to find a way to draw back,” he argued.

Peter Ward, CEO of the UK Warehousing Association, who spoke alongside Millar, highlighted the importance of maintaining supply chain efficiency. He examined how the development of global supply chains had reduced prices to consumers. Supply chain is a global business and growing, bridging the gap between production and consumption. Global sourcing continues as a central strategy to optimise gross margin. And it is vitally important that in-market logistics doesn’t erode margin benefits of global sourcing, said Ward.

Looking at ‘Keeping pace with the customer experience”, Ian Irving, strategy director of Breed Creative, looked at the changes in retail as the physical and digital battle for consumers rages.

The gap between the live environment and the digital environment is becoming more and more blurred, he said, and a lot of people are going into the store to look at the product but going away and buying somewhere else.

“If you do not have an multi-platform sales strategy, you don’t have a sales strategy,” he said.

And he highlighted some of the trends in the way people make buying decisions which are having an impact on the supply chain – in particular, the growing importance of social media to retailers and brand owners. Shoppers were increasingly using social media to consult family and friends on what product to buy. Not only that, there were a growing number of bloggers talking about specific product groups that were attracting huge followings, he said, giving as examples, blogs on Marmite and Kinder eggs Irvine also pointed out that some retailers were now paying people to blog about their products.

Conference chair, Janet Godsell, professor of operations and supply chain strategy at Warwick University, argued that omni-channel was recreating the high street in a different way.

She highlighted the development of transport hubs such as railway stations and motorway service stations as not only shopping centres but also as delivery points.

The demands of the omni-channel environment are increasing the pressure on the staff in supply chain operations. Training to meet these challenges is vital, but often overlooked. Companies are increasingly looking to automation to provide the speed in the warehouse that they need to meet the demands of multi-channel and omni-channel operations.

Shane Faulkner, sales manager at Dematic, highlighted the value of continuous flow picking – a wave-less process that allows increased efficiency.

And he explained how its Rapid Put automated system provides a modular, configurable and flexible system that addresses the demands of e-commerce. At the heart of the system is Dematic’s IQ performance optimising software. Under the continuous flow picking system, the pickers’ workloads are dynamically assigned for maximum efficiency. By comparison, in a wave system the faster pickers will be idle until the next wave release. The wave system might also need buffers to manage the flow.

Paula Gould, supply chain training and programme manager at Vertu, told delegates how it was using modern apprenticeships to empower its staff to succeed in the new environment. Vertu makes luxury mobile phones – every phone is hand made using top end materials such as titanium and sapphire. To support its training plan it tapped into government funding for modern apprenticeships, said Gould. It brought in a training provider to help develop the programme. However, Vertu had ensured that its own templates and processes were embedded in the programme.

In total 68 supply chain people started the programme – and they all passed all the modules. The benefits to the business were clear, she said. More employee confidence. All the employees on the programme got a qualification. Employee satisfaction improved by 20 per cent. And all the projects resulting from it has a financial benefit.

The benefits of voice picking are well known – moving from a paper based system users can expect significant improvements in accuracy and speed. Simon Burnett, business development manager at Honeywell Vocollect Solutions, highlighted the experience of Kruitbosch in the Netherlands, which has experienced a 30 per cent increase in productivity and 50 per cent decrease in error rates after moving to a voice picking system.

There were also improvements to be had in comparison to using standard hand-held barcode readers. While voice is well established in order picking, Burnett pointed out that it was increasingly being taken up to improve efficiency in the returns process.




Picking: Think smarter, says consultant


Companies need to think smarter, work harder in terms of pick lanes and productivity, supply chain consultant Darren Hall told delegates when he opened the second day of the conference.

Hall challenged delegates to consider their methodology in line picking to ensure maximum efficiency, especially in today’s world of Omni-channel.

Comparing the chill supply chain to retail, Hall said that the processes employed in a time critical business such as perishable goods vary enormously from a retail business still getting to grips with fulfilling both store-based and e-commerce chains.

He advocated looking closely at the location of the distribution centre, especially in terms of customer location and courier hub. Looking closely at these can heavily influence where you locate you distribution centre and your delivery offering.

A fundamental issue to be considered was warehouse layout and the need for maximum efficiency. He cited best practice as not having stock more than six feet above the ground or using mezzanine aisles, which slow picking down.

Once layout was deliberated, it was then time to look at how stock was positioned to make picking faster and more efficient. Hall discussed looking at not only trends for the specific business but general trends too. He cited women’s retail where the general view is that fast sellers are often sizes 8-10 (and more recently, 12) so putting these at easy pick heights would increase the productivity. Trolley design and use is also key.

Hall told delegates that as trolley design has evolved, it can make picking for single and multi-orders more efficient.


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