Yet this sometimes overlooked area is only becoming more important to retail, especially when one considers the online boom, which has complicated back of house matters.
It’s clear that the days of retailers receiving stock at a central warehouse, and simply distributing that stock to stores accordingly, are officially over. Next day delivery and postal
returns are just some of the basic logistical nightmares that e-commerce is bringing to the forefront.
In the bricks and mortar world, customers are increasingly expecting chains to move stock between stores and locate lost items, or they’ll happily shop elsewhere (or online).
The question is: how does a retailer survive in this ever changing digital world without having a warehouse in a perpetual state of chaos? Inside Retail Magazine spoke to local companies in the areas of software, warehousing, and delivery, to find out what best practice logistics looks like in 2014.
The customer’s parcel comes first As with everything else in retail, the customer should ultimately come first when dealing with logistics, especially when it comes to their purchase fulfillment.
Two of the biggest problems customers are having right now are convenient online delivery and returning unwanted goods, says Adam McArthur, CEO of ParcelPoint.
At the moment, many omni- channel retailers are delivering their goods via Australia Post, but some are looking to other options as demand moves outside traditional working hours.
Many online customers work long hours so they miss their online parcel deliveries and can’t get to an Australia Post store [which mostly close at 5pm],” says McArthur.
This limitation is also affecting customers when they want to return goods, and raises the issue of who should fork out for return postage.
ParcelPoint’s solution to these problems is a private delivery service for retailers that uses neighbourhood outlets already open late at night, such as the local milk bar.
Deliveries are dropped off at the online customer’s closest participating ParcelPoint outlet for late night pickup, with any subsequent returns made at these outlets, too.
Retailers can choose to pass on the costs of ParcelPoint, however, McArthur says retailers are slowly moving away from this as the customer becomes more demanding.
“You’ve got the Asos’ of this world doing free returns back to the UK, but local retailers still see it as a big cost to business rather than a conversion driver,” says McArthur.
“The thing with returns is you have to make it hassle free. They want the credit or the refund back as soon as possible. You have to make it really easy to do.
“You have to get them back into shopping as quickly as possible by making the whole process simpler and easier with more transparency.”
Another local courier and delivery services company, Pack & Send, is looking at ways a retailer’s logistics infrastructure can be improved for better parcel delivery.
Michael Paul, CEO of Pack & Send, says an online or multi- channel retailer’s business can live or die on the efficiency and cost effectiveness of its chain.
He says retailers should be seeking out delivery logistics services that solve multiple problems at once: ordering, paying, tracking postal, and final delivery.
Retailers should also be backing up their delivery and fulfilment logistics with customer support channels, including phone and online, for customers seeking out lost packages.
Wading through packages
Along with growing customer delivery and return expectations has come the dilemma of managing the more hectic movement of stock in a retailer’s back of house.
ParcelPoint’s Adam McArthur says a lot of retailers were forced to reevaluate their logistics this year after being inundated with online returns from Christmas 2012 sales.
“In February they really started to get thinking. They had a lot of parcels coming into their warehouse that they had no idea where they came from or what they were,” he says.
ParcelPoint, which can manage the entire returns process, from receiving back stock to refunding money, is an example of retailers “taking more control” of processes.
Related to the delivery and returns side of logistics is another consideration for retailers: where to best service a customer’s online order from.
Scott Gillies, director of retail, Asia Pacific, at supply chain optimisation firm, Manhattan Associates, says this problem can be solved via warehouse management software (WMS).
In a nutshell, WMS can help by working out the complex mathematics of where an order is best fulfilled from, in terms of cost, time, and other factors.
“Let’s say you have three delivery centres across Australia in capital cities, such as Brisbane, Sydney, and Melbourne. And then an order comes up in Canberra,” he says.
“Which is the best location to service that from? You may base the decision on the cost to deliver or which facility you’re holding the most inventory at.”
Gillies says logistics software can also help with moving around stock and making tough decisions on whether to fulfill unexpected demand.
“Imagine you’re a multi-channel retailer that has a limited inventory for a SKU that’s just gone hot online. You have 100 SKUS online and 500 instore and get an order for 400 online.
“What’s the best way to source those extra items? Do you steal from your stores and how do you implement that decision? Or do you wait for your suppliers?”
Distributed order management (DOM) is also becoming important, with this notably used to implement Click & Collect, where customers buy online but pick up at their nearest store.
“Most traditional systems in supply chains aren’t able to handle thousands of people coming to pick up thousands of orders instore,” says Gillies.
“Online has basically changed the retailer’s world, especially in regards to trying to fulfill in the omni-channel environment.”
Stephen Duncan, product marketing manager, retail and SCM at Pronto Software, agrees that online has changed the game for logistics, with the company’s software update in May in part a response to this.
Some of the company’s new industry specific features include wave picking, forecasting, and increased processes to manage serial number ordering.
“Wave picking is all about taking in multiple orders in waves to allow a retailer to effectively deal with them.
“[Our software] helps retailers consolidate on the picking floor. Instead of picking out orders of, for instance, 10 SKUs, I can pick out 30.”
Duncan says there’s also an increasing need for retailers to make sure their A-class stores are always stocked up.
“You make sure that your A-class stores get a certain percentage and so forth. You want to make sure you get the right stock to the right places.”
Evaluating the chain
In recent years, supply chains have only been becoming more complex, due to the evolution of data analytics and technology capabilities.
Luckily, more complex doesn’t have to mean more overwhelming, with various solutions available to those yearning for simpler times.
On a macro level, some retailers are implementing software that allows various contractors and levels of the logistics process interact, says Tim Moylan, Asia Pacific president of Infor, a software company that works with Woolworths and Best & Less.
This option can help eliminate unnecessary crossover and information relaying, ultimately saving precious time and money for the business.
“Retailers need to take a whole supply chain view of products to ensure there are no inefficiencies at any stages,” he says.
“Crucial to this is implementing collaborative software, which all stakeholders from suppliers to freight transporters can interact with.
“Too many businesses still rely on ‘point to point’ solutions such as email or SMS, which don’t bring in all elements of the supply chain.”
On a micro level, some retailers are seeing benefits from looking at things that most wouldn’t even think about, such as the height of plastic delivery crates.
One example of this is Aldi, which overhauled its crates in August with the help of container services company, Chep.
Aldi’s new crates boast a small fold down height of 25mm, meaning 29 per cent more of them can fit into a delivery truck compared to older model crates.
This ultimately means fewer trucks, less petrol, and a one third increase in Aldi’s logistics efficiency: a win for the retailer, the environment, and data crunchers alike.
Aldi’s Gen 3 crates are also seamless: the same container can go from farm to warehouse to outlet, where it fits straight into a store’s fresh product displays.
Another supermarket, Woolworths, is also to speed up its delivery times, with part of this being achieved by demand planning, mobile technology, and other innovations.
Moylan of Infor, says cutting down supply times is a big trend for grocery right now.
“Current supply chains can take up to four days to get produce on the shelf, however, the target for supermarkets is stripping up to a day out,” says Moylan.
“A large reduction in supply chain times doesn’t come easily, and technology plays a big role in making that happen.
“With a growing appetite for Australian grown, fresh produce from consumers, the supermarket that’s able to drive the most from its supply chain will have a great competitive advantage.”
This article first appeared in Inside Retail Magazine’s October/November 2013 issue. To subscribe, click here.