Opinion Piece: Don’t wait for the inevitable in omni-channel retailing
Macro trends such as changes in demographics shape and impact the future of supply chains and supply chain performance. Many of these macro trends are right in front of us. But, we don’t respond to them until the pain from these shifts is woefully obvious and there is less ability to make a difference. Omni-channel retailing is one of those macro trends.
Recent findings from a study of over 150 retail executives in the US & UK by LCP Consulting indicate that, as more retailers adopt omni-channel retailing and move to a greater percentage of online business, margins will decline. At the same time, they also stated that ‘bricks and clicks’ retailers really had no choice. It’s the proverbial ‘in between a rock and hard place’.
The implicit implication behind this analysis is that retail supply chains are optimised for the store and, out of balance, are driving costs up. They must therefore dramatically change to protect operating margins and help avoid the commoditisation that on-line shopping can bring. This ‘perfect storm’ in retailing is an excellent opportunity to raise the importance of the supply chain to a retailer’s overall health and success to C-suite level.
Most importantly, it points to the sense of urgency that must be put into investing in supply chain capability now, not when the balance of revenue has shifted. Let’s face it, most retail executives don’t come out of the supply chain world and struggle with understanding supply chain investment, costs and complexities. However, they do get margin erosion and especially that the inevitable shift to more online sales that they are pushing will drive lower margins. Here’s the chance to tie the supply chain cause to one of the most important macro level issues facing retailers.
The challenge in having the omni-channel and margin discussion is not to turn it into a cost-reduction-only exercise. Yes, you need to get your supply chain costs down, but you cannot forget the need to improve service and, more importantly, use service to drive product sales and generate incremental services-based revenues. The supply chain is one of the few places in an online business where you can make a measurable difference to the customer. There are enough examples now to show that purchase price has become ‘table stakes’ and customers will pay for additional value-added services and increase their loyalty to those retailers that deliver with excellence.
For the manufacturers and distributors that supply retailers, the omni-channel phenomena should also be a wake-up call. The pressure on retailer margins will get more intense as they sell more online. The goal is not to get into the same cost reduction trap (e.g. product pricing). Instead the opportunity is to look at your own supply chain to see how you can lower the cost of the retailer’s supply chain, improve their service and help value-added services.
Supply chain flexibility, speed, retail-ready product and information visibility are key enablers for retailers as less of their sales will be delivered through traditional store channels. The ability to inject your product further into the retailer’s supply chain and directly to the customer will help retailers cut out network costs and improve delivery times. For example, next day and same day will put tremendous pressure on retailers to be more reactive, but carry as little inventory as possible. Retail-ready labelling will be critical to streamline goods through the network at any point, and information visibility critical to ensuring reliable operations and greater flexibility.
Omni-channel retailing is a global trend that is changing how retailers and their supply chains operate. Its impact on margins provides an excellent platform for taking the importance of the supply chain to the highest levels within a retailer and provide a competitive advantage for the manufacturers and distributors that can help their retailers perform better.
Written by: Chris Jones, Executive Vice President, Marketing and Services, Descartes.
FedEx is Reshaping Last Mile with Autonomous Vehicles
FedEx is embarking on an expanded test of autonomous, driver-less delivery vehicles to develop its last-mile logistics.
The US logistics firm piloted autonomous vehicles from Nuro in April this year, and the pair will now explore that further in a multi-year partnership. Cosimo Leipold, Nuro’s head of partnerships, said the collaboration "will enable innovative, industry-first product offerings that will better everyday life and help make communities safer and greener".
FedEx will explore a variety of on-road use cases for the autonomous fleet, including multi-stop and appointment-based deliveries, going beyond more traditional applications of the technology in single-route movement of goods from A-B. Exponential growth in ecommerce is spurring its broader experimentation in new autonomy solutions, Fed-Ex says, both in-warehouse and on-road.
“FedEx was built on innovation, and it continues to be an integral part of our culture and business strategy,” said Rebecca Yeung, Vice President, Advanced Technology and Innovation, FedEx Corporation. “We are excited to collaborate with an industry leader like Nuro as we continue to explore the use of autonomous technologies within our operations.”
The changing role of couriers
Unlike structured delivery networks, operating under long-term partnerships and contracts, agility is where couriers deliver true value - and their ability to deftly solve last-mile fulfilment has most acutely been felt during the pandemic. For the billions of people around the world forced to stay at home to protect themselves and their communities from the spreading COVID-19 virus, couriers have been a constant. They may have been the only knock at the door some people experienced for weeks or months at a time.
But the last-mile has been uprooted by a boom in ecommerce, a shift that has been most apparent in the UK, US, China and Japan, according to the Global Parcel Delivery Market Insight Report 2021 by Apex Insight. These are markets with dominant economies and populations used to running their lives with a tap of a screen or double-click of a mouse.
“Getting last mile delivery right has long been a challenge for retailers,” says Kees Jacobs, Vice President, Consumer Goods and Retail at Capgemini. “In 2019, 97% of retail organisations felt their last-mile delivery models were not sustainable for full-scale implementation across all locations. Despite increasing demand from customers, companies were struggling to make the last mile profitable and efficient.”
Jacobs says that the pandemic alleviated some of these stresses in the short term. With no other option, consumers were understanding and tolerant, if not entirely happy, with longer delivery times and less transparent tracking. “But, as extremely high delivery demand continues to be normal, customers will expect brands to contract their delivery times,” he adds.
Last mile's role in ESG
Demand and volume weren’t the only things that have changed during the pandemic - businesses looked closer to home and as a result became more sustainable. Bricks and mortar stores were transformed from mini-showrooms to quasi-fulfilment centres. Online retailers and other businesses sought local solutions to ship more faster. In densely populated London, UK alone, Accenture found that delivery van emissions dropped by 17%, while Chicago, USA and Sydney, Australia saw similar emissions savings.