Monthly Archives: June 2017

Order Fulfillment in Omni-Channel Retail – the “Last Mile Delivery” most Retailers Fail to Complete

Shoppers expect a seamless shopping experience — no matter where they are, what device they are using, or how they choose to shop. Order Fulfillment in Omni-Channel Retail – taking the right product, putting it in the right box, shipping it, and gaining the customer’s approval – is a demanding task.

It is a demanding task, because customers in the retail omni-channel demand near perfect delivery of their products. Kirby Prickett speaks of the “last mile delivery” of eCommerce: “The last mile delivery is a metaphor used to describe the movement of goods from a fulfillment center to their final destination.”

The last mile delivery is the place where business success or failure for omni-channel retailers is mostly decided. Thirumalai and Sinha 1, (2005) suggest that “it is here – in the down-and-dirty details of consumer direct order fulfillment – that the epic battles for domination of the e-commerce marketplace will ultimately be won or lost.”

Success with order fulfillment in omni-channel retail may give a retailer a sustainable competitive advantage – take the dominance of Amazon.com as an example. However, to compete with Amazon, the average retailer needs bags of money and the greatest employees in the industry.

A more realistic approach for retailers is to have a critical look at their own order fulfillment processes, the last mile delivery, and fix what is not working.

The challenge of Order Fulfillment in Omni-Channel Retail

Indeed, Order Fulfillment in Omni-Channel Retail is a huge challenge for retailers. Results from a recent survey done by Radial with the help of EKN Research showed that 37 percent of CEOs questioned cited that their inventory order and supply chain operations are not properly aligned.

Retailers with physical shops or “Bricks and Mortar” (BM) retailers that added the online channel to their business becoming “Bricks and Clicks” (BC) retailers, have additional challenges. One of the challenges is to align their traditional store-based distribution processes with the requirements of the online channel 2.

Tony Evans from GLOMACS Training & Consulting highlighted the differences in logistic processes between Bricks and Mortar retailers and online retailers (OR):

  • Order size – BM retailer’s orders are counted in cases, picking is run per shipment and picked goods are ready for dispatch without additional handling. In contrast, OR’s orders are rather small including just a few items per line.
  • Warehousing operations – the picking system suitable for BM is not efficient for OR. A common characteristic for both channels is the high labor costs.  Therefore companies need to decide whether to keep the stock for all channels in one regional distribution center (RDC) or to keep them separated to avoid confusions and inefficiencies.
  • Technology – modern retail companies (e.g. BC retailers) are investing in new technologies to optimize logistics operations to give them a competitive advantage. Warehouse Management Systems integrated with Enterprise Resource Planning Systems and Transport Management System are essential for e-commerce operations. These systems provide real time information about the inventory level and estimated delivery time that may help customers during their purchase process.
  • Order fulfillment – BM shopping gives customers the opportunity to verify the products that they have purchase before they put them into a shopping basket. In OR operations any error in order fulfillment results in returns and problems in customer retention.  Potential errors are related to wrong item picked and packed, quality issue or late delivery.
  • Transport planning – orders that OR receive are mostly small in size. Therefore one truck typically delivers parcels in a wide area to various customers. These fragmented deliveries require retailers to plan their dispatching and delivery scheduling efficiently.
  • Network design – BM retailers choose the location of regional distribution centers (RDCs) to serve as a ‘center of gravity’ for the region and for heavy vehicles to have easy access. Hence the RDCs are usually located outside urban areas.  On the other hand, having picking centers close to urban areas work better for OR retailers. That is to do timely next-day or even same-day order fulfillment.

What cause the problems in the last mile of Order Fulfillment in Omni-Channel Retail?

Arsh Sing posting on the TOOKEN site, list a number of possible causes for problems in the last mile of Order Fulfillment in Omni-Channel Retail:

  • Poor infrastructure – especially in developing countries, poor transportation infrastructure inevitably means long journeys, inefficient routes, inefficient transportation technology, etc. All of these compound and translate into woeful costs and time lags, which may be otherwise circumscribed.
  • B2B vs B2C deliveries – now if you’re transporting a huge B2B delivery, the extra costs and wasted time may still be worth it. However, as is often the case in urban areas, especially with B2C deliveries, the costs of fuel and time wastage must be borne for just one package.
  • Types of goods – occasionally, even the type of goods can make add to the challenges of last mile delivery. For instance, toxic, fragile, perishable or flammable items call for more planning.
  • Customer nuances – phenomena like incorrect address, remote locations, cramped locations, absence of the customer to receive the package, whimsical cancellations of orders, returning orders, etc. These nuances ensure that the factors affecting potential costs of the last-mile cannot be accurately anticipated.

How can retailers improve the last mile of Order Fulfillment?

According to Jim Tompkins, Chief Executive Officer, Tompkins International, the correct approach for retailers to get the last mile of delivery right is to focus first on strategy, then on structure, followed up by implementing the systems you need. However, Melicia Morris and Dan Rottenberg writing for Retail Law Advisor have a pragmatic approach to help solve challenges in last mile of delivery:

  1. Creating a fulfillment center – a fulfillment center allows customers, who place online orders, the ability to pick up their items at a nearby physical location. Along with decreasing the shipping costs, the benefits include faster delivery of merchandise and the leveraging of existing store personnel.
  2. Constructing brick-and-mortar buildings – where customers familiar with their products and service can both shop and receive their deliveries.
  3. Implement automated locker systems – to address customer deliveries.
  4. Using drones – to deliver packages via parachute, though the method presents issues of both safety and efficiency.

Concluding

Online shoppers want to receive their goods as soon as possible. Parcel delivery has become a very powerful marketing leverage for your e-commerce. According to Mélanie Vaast from ECN about 37% of online shoppers who face a poor delivery experience blame the online seller itself and never shop again on its website. The concept of last kilometer represents a daily challenge for online stores owner in a very competitive market.

Notes

1 Thirumalai, S. and Sinha, K.K. 2005. Customer satisfaction with order fulfillment in retail supply chains: implications of product type in electronic B2C transactions, Journal of Operations Management, 23(3):291-303.

2 Ishfaq, R. and Raja, U. 2017. Evaluation of Order Fulfillment Options in Retail Supply Chains, Decision Sciences.

Image

Pixabay

 

3D Printing Technology for Retailers – An Opportunity or a Waste of Money?

3D printing technology for retailers is now emerging as an outcome for small localized retailers that are facing closure. However, as it is with most disruptive technologies, the advantages that 3D printing offer for retailers should be weighed against its potential pitfalls.

Although the 3D printing technology has been used for a number of years, it has been mostly on an industrial scale. Meanwhile, the price of desktop 3D printers has started to come down resulting in an average annually growth rate of 170% since 2008 1. The door is now starting to open for innovative retailers to include 3D printing technology into their business models. As a result, brave small retail store owners have already started using in store 3D printing.

3D printing is a game changer in retailing, according to Richard Kestenbaum, contributing for Forbes. Richard writes: “Last week Ministry of Supply installed a machine in its Boston store that can make a garment on demand in 90 minutes (with finishing done offline after the garment is created). The machine can be set to make garments all day and night or it can be instructed to make a garment to a specific customer’s design, allowing customers to customize the colors they want in the garment.”

Let’s have a look how 3D printing works…

How does 3D printing works?

3D printing, also known as additive manufacturing (AM), refers to processes used to create a three-dimensional object in which layers of material are formed under computer control  (Wikipedia). According to Berman (2012), 3D printers work in a manner similar to traditional laser or inkjet printers. Rather than using multi-colored inks, the 3D printer uses powder that is slowly built into an image on a layer-by-layer basis. All 3D printers also use 3D CAD software that measures thousands of cross-sections of each product to determine exactly how each layer is to be constructed 2.

3D printing uses such raw materials as plastics; resins; super alloys, such as nickel-based chromium and cobalt chromium; stainless steel; titanium; polymers; and ceramics. Examples of products that are manufactured by 3D printing includes artwork, automotive parts, ductwork for a mobile hospital, sand cores for automotive engine block castings, architectural models, dental bridges, jewellery, ball bearing assemblies, and gear assemblies 4. But how can retailers use 3D printers to their advantage?

3D Printing technology for retailers – a 3D-printed product out of a desktop printer

What are the opportunities of 3D printing technology for retailers?

Cremona, et al. (2016) identified the following points on how 3D printing may influence a firm’s strategy:

  • Process innovation:
    • Delivery time of the product: the time to market is extremely reduced, to the extreme that it might become real time.
    • Product development process: is optimized because adjustments are made in a faster and less costly way.
    • Quality and flexibility: is under the control of the retailer with 3D printing.
    • Satisfaction of the single customer demand: personalized products are added to the platform.
  • Customer’s value:
    • Brand awareness: a close collaborative relationship is established between the retailer and the customers thanks to usability testing.
    • Customer’s loyalty: offering customized, personalized products may help clients to feel special.
  • Product platform enhancement:
    • Pushing the limits of traditional manufacturing machines: now new products can be developed also in a different approach and materials are added instead of subtracted.
    • Personalized modules: products can be designed and delivered exactly how the customers want them.
  • Sustainable competitive advantage:
    • Differentiation strategy: carrying out projects on demand makes the retailer to perform a differentiation strategy. It aims at delivering the most technologically advanced product, which is a unique solution with a unique design for each customer.
    • High specialized production know-how: allow companies to actually integrate 3D printing in the product life cycle. In doing so, an additional service is provided.

The most important strategic advantages that 3D printing offer small local retailers are customization, personalization and control over the supply chain. But what are the pitfalls of 3D printing?

What are the pitfalls of 3D printing technology for retailers?

3D printing is in the introduction phase of its life-cycle in the retail industry. Subsequently there will be a lot of surprises (good and bad) as the technology gets adopted more widely.

Shaleen recently blogged in inkjetwholesale.com.au the following of disadvantages of 3D printing:

  1. Scale and size limitations – you can’t print multiple objects of the same type at the same time.
  2. The absence of economies of scale – because every object or product is printed individually.
  3. Cost of buying and setting up a 3D printer – the initial cost still remains something of a roadblock for most businesses and individuals.
  4. 3D printed objects may require heavy duty post processing – it isn’t only the lack of polish that is the problem but also the possible dimensional inaccuracy.
  5. Large scale adoption of 3D printing will result in significant job losses – every new invention ends up taking away jobs amongst the masses.

According to Beck and Jacobson (2017), legal implications may include what is exactly a product, who is the manufacturer, what is the marketplace, and who should be potentially liable for a defective 3D-printed product (once “product” is defined).

At the end of the day, the most important aspect of 3D Printing technology for retailers is whether the customers will accept or reject it.

What do customers think of 3D printing technology in retail stores?

Retail Customer Experience recently reported results of a survey by self-service solutions company Interactions on what shoppers want from retail technology. The study, “What Shoppers Want from Retail Technology,” surveyed more than 1,000 adult shoppers. Of those polled, 84 percent expect retailers to successfully use tech features and functionality to boost the shopping experience and 62 percent are motivated to shop after an initial human greeting when entering a store. Importantly is what the respondents said about 3D printing in shops…

“According to the survey, 95% of shoppers said they were eager to buy products that were 3D printed, and 79% said that they would even spend more money at a store that offered product customization through 3D printing.”

Wow, really? I think we should end (or start) here…

Concluding

Lastly, 3D printing technology for retailers is a genuine disruptive digital technology that may (or will) turn the retail industry upside down. There are many recent examples of disruptive technologies that changed the rules of the retail game. As the costs of buying and setting up 3D printing technology are getting less, more retailers will adopt the technology. Indeed, if you invest now in the technology, you’ll be an early adopter and enjoy (localized) market leadership. Consequently, you’ll have to battle through the growing pains of the technology. On the other hand, by waiting a bit longer, laggard retailers my get 3D printers for a bargain, but at that time, probably, the customers will already be with the pioneers.

Video: The 3D printing process

Notes

1 Li, Y., Linke, B.S., Voet, H., Falk, B., Schmitt, R. and Lam, M. 2017. Cost, sustainability and surface roughness quality – A comprehensive analysis of products made with personal 3D printers, CIRP Journal of Manufacturing Science and Technology, 16:1-11.

2 Berman, B. 2012. 3-D printing: The new industrial revolution, Business horizons, 55(2):155-162.

3 Cremona, L., Mezzenzana, M., Ravarini, A. and Buonanno, G. 2016. How additive manufacturing adoption would influence a company strategy and business model, MIBES Transactions, 10(2):23-34.

4 Conner, B.P., Manogharan, G.P., Martof, A.N., Rodomsky, L.M., Rodomsky, C.M., Jordan, D.C. and Limperos, J.W. 2014. Making sense of 3-D printing: Creating a map of additive manufacturing products and services, Additive Manufacturing, 1:64-76.

5 Beck, J.M. and Jacobson, M.D. 2017. 3D Printing: What Could Happen to Products Liability When Users (and Everyone Else in Between) Become Manufacturers, Minn. JL Sci. & Tech., 18:143.

Images and video

  1. Commons.wikimedia.com; https://commons.wikimedia.org/wiki/File:3D_print_in_process_(9437659715).jpg
  2. Proto3000