Opinions expressed on this blog reflect the writer’s views and not the position of the Capgemini Group

Every DC will have a drone pad; where is multi-channel logistics heading?

The nature of retail logistics continues to change every year with online sales breaking the £100 billion barrier in 2014.
Additionally, estimates that online sales represent 24% of the total retail market may have had more impact on retail companies whose logistics have historically been focused on store fulfilment rather than the headline total sales across all channels.
And for logistics infrastructures originally set up to handle store deliveries, the challenge of handling the much steeper volume peaks seen in fulfilment of online sales could be getting even harder.  “Black Friday” 2014 was estimated to be the biggest ever day for UK online sales.
Add to changing volumes an ever increasing number of delivery channels and service levels; multiple home delivery service levels, click and collect, lockers, collect+, etc.
And new delivery methods: Wal-Mart is among those looking to tap into shoppers who are already in their stores to deliver products to customers who ordered online, Amazon has hit the headlines by testing drones for faster delivery of goods (which may be limited looking at the US FAA’s draft regulations that the drone must be in the pilot’s sight at all times) and Uber’s US UberRush service (which for the time being will likely remain the preserve of high end luxury retailers).
So the nature and requirements of retail logistics will continue to change - and we should add to the list above that as online revenues increase so will pressure to increase margins by reducing cost to serve (and/or increase the threshold for free delivery as Amazon has done recently in the UK for non-book purchases).
This uncertainty will likely have contributed to the low proportion of organisations who rate themselves as high performing in multi-channel [2% rate themselves as high performing and 10% as efficient]

What’s going to change ?

What’s going to change depends heavily on the retail sector and the retailer. Multi-channel grocery has very different demands to general merchandise and fashion, a luxury retailer different multi-channel requirements and objectives to a value one.
Short term changes can be focussed on optimising existing infrastructures – streamlining processes, better aligning capacity to sales volume peaks - but longer term infrastructures will need to be re-platformed, again in many instances.
In the case of DCs re-platforming may focus on physical infrastructures, dedicated online fulfilment centres or multi-channel DCs to serve both store and online channels; or a mix given smaller stores could potentially be more effectively fulfilled using an online model rather than one designed to support large out of town outlets. The deadline to make these changes will be dependant on the success of the drive by many retailers to fulfil online orders from store [certain retailers have been very successful but in the 2015 Third-Party Logistics Study respondents said that in spite of the benefits, most companies don’t have the space to run a pick-and-pack operation from the store].
For transport re-platforming may focus on IT infrastructures in order to deliver the information sharing and automated decision making necessary to reduce last mile costs.  Be that combining and synchronising deliveries – and return collections - across all ‘nodes’ in a retailer’s multi-channel network (e.g. DC to store or locker, store to home, etc), including partnerships with other retailers/shippers. Or consider the IT changes needed to deliver the Amazon, DHL and Audi car boot delivery trial in Germany.
And the drone pad? As Shanton Wilcox has already posted the only real value documented so far has been the opportunity to use drones to deliver medicines to remote locations. And regulatory restrictions are likely to constrain their use, so probably not in the near future.

The sponsor for Retail Operations Technology at Capgemini UK is Simon Butler, Principal. Connect with Simon via his LinkedIn profile here.


About the author

Adrian Paton
Adrian Paton
Adrian is a Managing Consultant in the Retail capability of Capgemini Consulting UK. He has deep experience in multi-channel retail consulting and operations with clothing, homeware and general merchandise retailers in the UK and Internationally.

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