The Need for Speed
Here’s how to keep up with the rapidly changing world of commerce.
By Michael Forhez
In today’s digital world, consumers are increasingly relying on e-commerce sites and mobile apps to enable their near insatiable quest for the right product and offer delivered anytime, anywhere, usually in 24 hours or less. If consumers can’t find what they want when they want it, they’ll just move on — with your company missing out on that initial or subsequent sale.
According to Macquarie retail analyst Ben Schacter, “26 cents out of every dollar spent online in the U.S. during 2015 came through Amazon.” Demand is so great for the instant shopping experience that Schacter also predicts that “the number of American households with Amazon Prime accounts will likely double by 2020.” In a digital and mobile-enabled world, consumers now have shopping at their literal fingertips, with expectations to match.
The need for variety and speed, once a distinction for many retailers, is now considered table stakes. So how should retailers and brand owners respond to these demands? How can they fulfill orders ever more quickly, without a loss in accuracy, efficiency and efficacy? And, how will they not just stay alive, but thrive when so much more is being demanded every day?
To start, we should take a fresh look at the strategy and operating network for product information management (PIM), since this represents the bulwark and threshold for seamless transacting. By using high-quality product images linked to interesting, robust and complete information, consumers will be better served, return costs can be better managed and loyalty increased.
What’s also becoming clear is that the last interaction between the brand/retailer and the consumer – delivery – is now becoming a critical metric. The nettlesome reality, however, is that most current purchase-to-delivery models do not synch with this need. As 77 percent of U.S. e-commerce shoppers in a 2015 Delivery Matters USA survey stated, “I am more likely to shop again from an online retailer if I am happy with the delivery of my goods.”
A Step Back
For the last two decades the prevailing logistics model has been the hub and spoke, which was pioneered by Delta Airlines in the 1950s then adopted by major global courier delivery services like FedEx and UPS in the 1970s. Leading offline retailers have traditionally followed the hub-and-spoke model for their primary distribution mechanism, locating their distribution centers in less populated areas. However, to keep up with the consumer demand for two-day shipping, next day or even same day, retailers face a daunting challenge, particularly in the Internet age.
With online purchasing speeding the sales process, the urgency for rethinking and calibrating logistics models and capabilities stands at a literal and figurative crossroads with consumers forcing e-commerce retailers, big box stores, drug stores, grocers, department stores and even small and medium businesses to do better at delivery—or be gone. This will necessitate new supply chain and delivery strategies, technology and metrics for consistently improving performance not just once in a while but consistently. How will evolving retailers and their suppliers meet this demand?
The answers will come in the form of new supply chain and distribution strategies yet to be imagined, invented, tested and deployed — in fail-fast mode — replacing outdated models as quickly as possible. Strategies and real-time, sense and respond mechanisms that might deal with such obvious spikes and troughs as a holiday rush, or weather disruption are required, but many other causal factors need to be mixed into the logic of supply and demand, allowing for the opportunistic fulfillment of consumer wants and needs.
Already, leading global retailers are investing in infrastructure and technology and updating their order to delivery systems in an effort to delight and excite today’s ever-connected consumer.
Below, are a few updated distribution strategies that are being experimented with and deployed:
* Drones: We all know that Amazon is testing out delivery via drone, affording them even more control over “last mile” of delivery. While there are still quite a few technical and even some inevitable regulatory hurdles to overcome, many top futurists see this technology as all but inevitable.
* Click-and-Collect: Here’s a service that offers customers the option of ordering online for pickup in-store, via a drive-thru, at curbside or at pop-up locations as an alternative to home delivery. The trick is in improved forecasting and real-time flexibility to manage supply and satisfy demand.
* Third-party delivery options: Small and medium-sized businesses can improve delivery time, reduce costs and remain competitive too. Solutions like UberRUSH are offering “last mile” delivery options that are very cost effective. Certainly others will follow Uber making delivery, particularly when it needs to be now, a realization for companies committed to the time-sensitive or starved.
* Sortation centers: A sortation center is located much closer to customers giving the retailer better control over the “last mile” of delivery. For example, products can be moved from the distribution center to the sortation center, and then delivered via the local postal service or its equivalent best-in-class carrier.
* Robotic stock picking: As sales via online retailers steadily increase, so too does the speed with which customers want their goods delivered. Many large retailers are experimenting with robotics, computer-aided vision and machine deep-learning technologies to pick items one at a time and package them.
* Point-to-point: Albeit a possibly costly alternative, major global retailers have invested in leasing their own fleet of air cargo planes. The goal is to establish a more efficient and ultimately more cost effective means to transport large amounts of cargo across big distances.
In today’s commerce-at-the-speed of thought world, logisticians can no longer study and be satisfied with what has been done brilliantly in the past—they must learn about, invent solutions for, and be the best at serving today’s and tomorrow’s shopper in ways scarcely imagined or even possible not so many years ago.
Michael Forhez is global vice president for consumer markets at 1WorldSync, a leading multi-enterprise product information network.