OPERATIONS & LOGISTICS | Retail Logistics 2.0

Powering the omni channel shopping experience

By Stuart Pearson

Advances in mobile commerce and point of sale technology fueled by a growing consumer demand for access to retail “anywhere” present both significant opportunities and significant challenges for retailers of all sizes.

New technology required

Today’s customers expect real-time access to information whether that means checking inventory at store locations in relative proximity to one’s current location, the ability to place an online order to reserve in-store inventory for pick-up or the ability to save a sale by allowing store associates to ship product from another store or distribution centre directly to a client location, a significant gap exists today in the sense that most retailers point of sale and back end systems aren’t designed to provide such services.

For small retailers migrating from a legacy system to a platform that can provide these capabilities may seem like a complicated and costly change while for large retailers the complexity and cost is far greater. Thankfully innovative software solutions are being developed to specifically overcome these challenges by a number of organizations including leading Canadian providers such as Tulip Retail and well known multi-nationals such as IBM.   In addition to taming the issues of inventory visibility and order processing, such solutions also provide additional benefits given their ability to provide the retailer with valuable customer profile information aggregated through a customers’ interactions online and in-store.

As if that wasn’t significant enough today’s better omni-channel platforms can provide consumers and sales associates alike with consistent, rich and relevant product information in real-time whether it be information accessed directly by the customer over the internet or by a store associate using a tablet in order to better explain and compare product features to an in-store client.

Balancing return on assets with fulfillment efficiency and in store customer engagement

Obviously another benefit of omni-channel retail is its’ ability to capture sales for store (or distribution centre) inventory which may not have been otherwise visible or accessible to a prospective customer.  In a country as large and sparsely populated as Canada is, being able to sell and ship even the last unit of a SKU from a location where it might not otherwise have sold in a timely manner is a huge benefit as is the ability to ship large or heavy items from a location closer to the customer than they might otherwise have originated from. While these benefits can lead to a better return on assets it’s important to ensure that the soft-costs of such activities are fully considered.  Asking retail associates to pick, pack and ship orders means they aren’t on the sales floor engaging customers who took the time to come specifically to your store.

Additionally from an ecommerce fulfillment perspective there is a large delta in order processing efficiency between an order fulfilled in-store without automation, the benefit of scale and given potential associate inexperience vs. orders fulfilled by a dedicated direct to consumer fulfillment centre.

Reinventing the supply chain

From a retail supply chain perspective, historically technology, cost and the need for a one-size fits all solution have meant that retail supply chains have been designed for efficiency (i.e. goods are moved in bulk from their point of manufacture e.g. in Ocean containers or ship and or train or via truck in full carton quantities in order to minimize supply chain costs as a percentage of sales).  For businesses that required faster and more responsive supply chain facets such as air freight and smaller, more frequent “just-in-time” orders were the key to increasing responsiveness, nearly always at the expense of cost.  While arguably any retailer operating in nearly any country would benefit from a supply chain solution that could merge these two very desperate supply chain concepts successfully, retailers in Canada are especially well positioned to benefit from recent advances in robotic logistics solutions which effectively enable such a hybrid (efficient/responsive) supply chain (in addition to driving speed and efficiency within a retailers in-sourced or outsourced direct to consumer fulfillment center.)

By virtue of their design these robotic systems bring the storage location that a product is to be received into or picked from to an associate receiving or shipping an order.  In fulfillment centres handling less than case quantities of goods shipping to store or consumer the direct labour costs in such a facility are typically 40-60% of total fulfillment centre operating costs and of that 40-60% of that cost is typically consumed by the actual walk time of an associate putting away received inventory or each picking outbound orders.  By using a robotic fulfillment system this net cost which often equates to 20-30% of total fulfillment cost can be eliminated as the payback on such systems can occur in as little as two years.

Additionally these new found cost savings and the flexibility of these systems present opportunities to create solutions that provide not only rapid, direct to store, less than case quantity replenishment and cost effective direct to consumer fulfillment but also the unique opportunity to merge goods ordered just-in-time from a distributor or other such drop ship vendor with stocked inventory which can greatly reduce outbound direct to consumer shipping costs while increasing customer satisfaction through increased “single box, complete order” deliveries for end customers.

Retailers such as Walgreens, Staples and The Gap among others have all seen significant improvement in both customer satisfaction and key operating metrics as a result of their investment in robotic less than case pick technology and its ability to deliver cost effective just in time results.

By nature, omni-channel retail reinforces the importance of delivering a unified brand experience to each customer regardless of how or where they choose to interact with your company.  Implementing a robust and cohesive Omni-channel retail experience can be done cost effectively leveraging technology available today.  By virtue of their open framework design an investment in an omni-channel solution not only allows you to easily integrate legacy internal systems but it also allows you to seamlessly integrate with third party systems whether those parties are product vendors or distributors or third-party logistics service providers.  Additionally their open framework means these platforms are designed to support integration with future systems as advances in solutions such as customer relationship management and retail commerce continue to provide retailers with additional capabilities.

 

Stuart Pearson is Vice President, Contract Logistics at Vaughan-based Think Logistics Inc. He can be reached at spearson@thinklogistics.com. For more information on the company visit www.thinklogistics.com

 

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