As retailers continue to invest in omnichannel technologies with the end goal of creating a seamless shopping experience for the consumer, figuring out the fulfillment and supply chain piece of the puzzle can be daunting.
Retailers — large and small — are grappling with the logistical challenges that arise from a supply chain model that was never really designed to serve a channel-less retail model. Here, Sundip Naik, vice president of supply chain, innovation and digital services at Capgemini, discusses why companies need to reexamine their supply chains in a way that ensures a positive experience for the consumer, which includes paying close attention to the so-called “last mile” of fulfillment.
WWD: Can you briefly describe what is meant by “the last mile” in the supply chain, and why is it critical?
Sundip Naik: “The last mile” is the span of services that represent the end-stage logistics involved in getting ordered goods to the consumer — whether at home, in store or via some other convenient drop-off point — and (if they are being returned) picked up again. This is critical since, if these logistics go well, they create satisfied customers and repeat business. If these last mile logistics go badly, then it can lead to a noisy backlash, such as poor reviews on social media, which can then affect future sales and brand value.
WWD: From a retail planning perspective, how has the supply chain changed in the past decade? And what’s driving that change?
S.N.: Many retailers who started as traditional bricks-and-mortar retailers have ventured into the omniworld recently. The challenge they often face is that their supply chains were never architected or redesigned from an end-to-end perspective (i.e., involving people/process/technology) to accommodate the shift to a “channel-less” world, including the critical last mile perspective. Last mile is an expensive proposition if not planned and solutioned well. Consumer expectations today are driving same-day — or even same-hour — deliveries. Planning these orders as well as their returns from a demand-planning, replenishment-planning and store-localization perspective adds further complexity — especially when historical data is sparse (in the case of a new channel).
WWD: How can retailers leverage data to inform the planning process?
S.N.: A good place for retailers to start leveraging data to inform the planning process is to implement social listening programs and invest in unstructured text mining, so that they hear the customer’s voice. It is ironic that technologies, to listen to digital customer sentiment, have never been so capable and full of opportunity, yet only a small percentage of companies are investing in these systems.
Today, creating and maintaining a customer-centric supply chain is possible, but it requires the investment in listening technologies and building cross-functional teams to use the data. Data can also be leveraged in multiple facets to inform the planning process. Below are some key areas retailers should consider where data can be leveraged to help planning and process:
- Merchandising Planning: Analytics around customer behavior, market basket analysis, shopping cart analysis, cohort analysis and local purchase behavior analysis
- Assortment Planning: Consumes additional analytics around social listening, CRM and location in conjunction with merchandising and forecasting data
- Forecasting: Utilizes analytics around social, e-commerce, POS and market segmentation; Forecasting analytics can also provide early warning on products that are selling too fast and can provide obsolescence visibility
- Replenishment: Employs data to inform loss sales, percentage of orders fulfilled on time and real-time visibility of in-transit inventory using technologies such as GPS/RFID
WWD: What role does visibility have in implementing a supply chain strategy and why is it important?
S.N.: Visibility plays a central role in creating a seamless and engaging experience for customers. This includes ensuring there is visibility around inventory from a pre-purchase perspective (what is available in store, what is in transit, what is available for direct to consumer, online, etc.). Visibility is also essential for retailers to stay informed about when an order is arriving a day late or a day early in advance, after a purchase has been made and is being sent to the customer, as well as providing a consumer with multiple return options.
Understanding visibility capabilities at these consumer journeys/touch points is critical in designing the strategies and detailed capabilities, both functional and technical, that are required to enable true end-to-end visibility. This is true not only for consumer-facing areas, but for many areas within a company, including finance, customer service, store operations, warehouse operations, planning and more.
WWD: What are some other trends you are seeing in the market?
S.N.: We are seeing wider spectrum of services being piloted and deployed outside of home delivery and pick up from store. This includes services such as drive-through pick-up, external pick-up locations such as convenience stores and automatic subscription ordering. These are especially popular with the younger consumers.
Other trends and innovations we’re seeing combine traditional delivery (such as DHL) coupled with an e-commerce platform (such as Amazon), which are then tied to connected devices through the Internet of Things (e.g. an Audi car), to enable items to be delivered to customers’ cars.
Lastly, there are numerous start-ups who are chipping away at the last mile provider market by supplying differentiated services such as guaranteed personal deliveries, doorman delivery addresses so consumers can avoid missed home deliveries and others that target professional office workers, such as midnight delivery options.