Minimum order thresholds create fickle customers
Nearly a third (31 percent) of UK online shoppers shopped elsewhere as a result of encountering minimum order thresholds, according to the JDA/Centiro Customer Pulse 2016 Report conducted by YouGov.
Of those people who had ever bought an item online, 33 percent chose an alternative delivery/collection option (even if it was less convenient / took longer). However, 29 percent bought more items to exceed the minimum order threshold. These findings follow separate JDA/PwC research earlier in the year, which revealed that 39 percent of global retail CEOs planned to raise the minimum order value for free home delivery and 31 percent said they would charge for Click & Collect.
‘Last-mile’ issues continue to be a major pain point
The Customer Pulse Report 2016 reveals that there has been an increase in UK adults experiencing problems with online orders; 53 percent said they had experienced a problem with an online order during the last 12 months compared with 47 percent in 2015. Of those respondents who had experienced a problem, late deliveries (42 percent) and missed deliveries (36 percent) continued to be the biggest issues.
Worryingly, there was an increase in those respondents who had received incorrect (21 percent - up from 15 percent in 2015) or damaged items (26 percent - up from 22 percent in 2015). Indeed, respondents are displaying a continued intolerance of service issues; on average 73 percent of UK adults stating that as a result of a poor online home delivery (80 percent) or Click & Collect experience (66 percent) they would be likely to switch to an alternative retailer when next shopping for products online - this is an increase from 71 percent in 2015.
“Raising minimum order values and charging for Click & Collect orders is a big consideration for retailers as they look to boost the profitability of their online operations. However, as our research findings show, retailers must recognise that different customers are reacting differently when such restrictions are thrust upon them. This split in reactions suggests retailers need to segment their customers in order to tailor services offered to them,” said Jason Shorrock, vice president, retail strategy EMEA at JDA.
“Last-mile delivery and collection issues continue to be major pain point for many retailers, and solving these problems is both an economic and operational challenge. Retailers are making considerable investments in their delivery and collection offerings, yet at the same time the majority of customers still expect the fulfillment of online orders to be free of charge.”
Who is responsible for resolving delivery problems?
When asked, 60 percent of UK adults online thought that the retailer should be responsible for resolving delivery problems, compared to only 33 percent who believed it should be the delivery company. When it came to consumers’ experience of getting the issue resolved, 66 percent of those respondents who had encountered an issue said they had received a good experience. However, there was still a substantial 26 percent that said they had a poor experience.
“Retailers need to be more confident in their last-mile capabilities, otherwise these issues will continue to reflect poorly on the overall brand experience customers receive. This is one of the reasons we have seen the likes of Amazon bring more of its delivery function in house over the last 12 months,” said Niklas Hedin, CEO of Centiro.
“Today there are greater pressures on retailers’ delivery capabilities than ever before and if customers’ expectations aren’t met, they will simply shop elsewhere in the future. Through improved visibility into delivery networks retailers can help ensure that customer promises are kept. In the future, predictive analytics will also help retailers and delivery companies pre-empt problems before they happen, taking the customer experience to the next level.”
Click & Collect continues on an upwards curve
Click & Collect continues to be increasingly popular among online shoppers, with 54 percent of respondents stating they had used it over the past 12 months, representing an increase from 49 percent in 2015. Of those that have used Click & Collect, avoiding delivery charges (59 percent) remained the most common reason for doing so, followed by it being more convenient than home delivery (54 percent).
Despite the popularity of Click & Collect, 45 percent of UK adults who had used the service had encountered an issue (a slight reduction from 47 percent in 2015). Of those who have encountered issues, the most commonly cited were long waiting times dues to a lack of staff (35 percent), staff being unable to locate items in-store (32 percent) and no dedicated Click & Collect area in-store (17 percent).
Dealing with ‘serial returners’
Nearly two-thirds (63 percent) of UK adults online stated that the ease of being able to return items factors into which retailers they shop online with. However, the research also revealed that there is differing customer behaviour around returns. For non-grocery items, 36 percent of respondents stated they don’t return any items in an average year, 32 percent return up to two items, and a further 23 percent return three or more items.
Of those respondents who had returned items purchased online, 42 percent said they had done so as it was not what they were expecting. A further 34 percent stated the item was faulty, while 19 percent admitted they had ordered several alternatives with the intention of returning the items they did not want.
“Returns continue to put stress on retailers, both from an operation and margin perspective. Successfully managing their return levels continues to represent a challenge for them. Retailers need to especially understand those ‘serial returners’ that buy multiple items with the intention of returning the goods they do not want. This is very expensive, so these shoppers need to be encouraged to come into store more often or only be offered a limited number of free returns,” continued Shorrock.
“Retailers are increasingly offering alternative fulfillment options to better serve customers, but they do have to take care to manage this increased operational complexity in a profitable manner.
"The successful and profitable retailers will be those that segment their customers and align this insight with their supply chains, to help deliver a better and more cost efficient service to customers.”
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”