The Dorchester Breakfast. Snowdon Tate Supply Chain Event
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1 The Dorchester Breakfast Snowdon Tate Supply Chain Event Speakers Transcripts London October 2014
2 Neil Ashworth, CEO of Collect+ and Chair of the Chartered Institute of Logistics & Transport In any discussion or debate around omnichannel retail and the implications for the supply chain it is wise to start by considering the customer. The customer now has firmly taken the upper hand in the retailer-customer dynamic and there is absolutely no turning back the hands of time in this regard. The customer has taken control of the purchasing dynamic, and is now progressing to take control of the fulfilment experience. The strength of the customer has been driven by a dramatic increase in access to information whether that be through social media, interactions instore, web search, or price comparison. This has provided the customer with power a power to read across the previous limitations of a channel oriented retail environment. We are blessed with a four-star UK environment which facilitates excellence in multichannel retail: High broadband penetration High credit/debit card usage A very competitive retail market and, significantly, An efficient logistics infrastructure which makes a range of delivery solutions a real possibility The consumer is therefore connected, informed and empowered to act. From the retailer s perspective, the customer is now a less loyal shopper than even ten years ago. Most importantly, with the myriad options available to them, they can be lost at the press of a button. Recent research from both Accenture and Experian describes a series of needs and demands from the customer in this evolved environment and these have significant implications for the supply chain: Recognise me: the customer needs to know that the retailer or service provider knows who she is and, importantly, what she wants. The fulfilment provider therefore needs to understand the recent purchase history, and the fulfilment options that were selected by the individual customer are noted for tailoring of the current requirement. Therefore data collation of preferred fulfilment options, packing needs, guidance notes, delivery timings and delivery locations will become of increasing importance Treat me as an individual: the customer wants increasingly personalized content, messaging and offers. There is therefore a need to focus on the things that she cares about to help her to understand the benefits in the context of her lifestyle. So organisations should note subtleties such as not offering home delivery promotions if the customer is a habitual click and collector and if the customer has a superb purchasing history then her complete order-to-delivery process should be simple and wherever possible, free. This should also equally refer to returns and associated refunds in similar measure. Make it easy for me: retailers and service providers need to allow the customer to use her preferred channels to shop, to return, to communicate and they must be equally responsive across all of these. It is increasingly clear that loyalty is so 2000 s and the new measure that creates a bond between seller and customer is ease and simplicity. BT are now actively measuring their NES net easy score
3 as a means of sustained customer engagement. This ease of interaction needs to be extended throughout the order to delivery process including recognizing the valuable role of the delivery driver as a key recipient of feedback on the total experience. So retailers/service providers should focus on total solutions rather than just products and provide fulfilment in a way that builds the solution for the customer. The retailer/service provider also needs to allow and encourage the consumer to socialize the experience. Logistics must be for the customer s sake, not for the logistician s. Anticipate my needs: the consumer demands convenience, so we should let her have the flexibility to configure her product or service bundles, and payment options. From a supply chain perspective, this indicates that postponement techniques including fabbing, finishing, and product personalization are key elements of any new offer. The provider also must be ahead of the customer being aware of her current and future needs. We are an ageing population, but one that is working longer there are both enormous supply chain challenges and opportunities contained within this phrase alone. Give me a voice: We need to increasingly value the customer s honest opinions and perspectives good or bad and be prepared to share them. We need to reward the customer for the depth of the relationship that we have with her, and for the impact and influence that she can have on other consumers. Traditionally, organisations have placed the contact centre at the edge of the organization. The time for centralization of such capabilities is upon us the customer can self-serve many aspects of the purchase and service experience, and so the contact centre becomes the home of the most complex, and telling, queries and issues. The hour of the call centre is upon us. Much of the data that provides insight into these key interactions in the omnichannel age typically is in the hands of the Marketing, IT or Legal functions within retail of service organisations but it is the supply chain teams that have the ability to realize the opportunities that lie within. It is therefore time for the logistics, purchasing, transport and warehousing executives to engage in these governance processes and to move front and central for the customer. Neil Ashworth CEO of Collect+ and Chair of the Chartered Institute of Logistics & Transport References: Meeting omni-channel consumer demands; Experian Marketing Services, May 2014 Digital customer: it s time to play to win and stop playing not to lose; Accenture 2013
4 Mark Hewitt, former CEO of iforce Without a doubt, it is becoming harder to differentiate yourself through either price or product range alone. Rather, the real point of differentiation is now centred around customer experience. It s about personalisation; about seamless service across channels; about the ease of experience. Everything needs to be customer centric, being ever mindful that the customer does not, nor ever really did, think in terms of different retail channels. The challenge is to provide this customer centric approach and level of convenience in a cost effective manner. As a result of this, supply chains, rather than simply being an unseen backroom function, have to be able to deliver on the proposition and promise, placing themselves at the heart of success. In this regard, I will highlight 3 areas of demand that this challenge will place on the supply chain, amongst so many others! These are: The need for a single view of stock The need to offer same day delivery The need for an efficient returns proposition. A single view of stock The time is coming when it will no longer be viable, either economically or from a service point of view, to keep different silo s of stock for different channels. The move into an omnichannel world will require a single view of all stock within the estate and supply chain. Such an ability will allow a dynamic order management system to decide the most cost efficient location of each item of stock to fulfil customers expectations and demands. This by very nature will need to include stock held by suppliers destined for drop shipping. The challenge is that this requires an accurate, real time picture of stock that is both in-store as well as elsewhere in the supply chain. In this regard, of accurate in-store stock data, UK retail generally has some way to go. Interestingly the USA is more advanced in this regard. This has been driven by the need to fulfil orders quickly across a vast geography requiring local fulfilment from stores. Such up to date and accurate information has also provided other follow on benefits and enabled US retail to become more service orientated. A good example of this is Bloomingdale s idea of smart changing rooms. In these, the changing room will have an ipad on which the customer can search for similar items in the store, (be it different sizes, colours or similar products) which can then be brought to the shopper in the changing room by an assistant at the touch of button, thereby negating the need for the customer to get dressed, search for the item themselves and then return to the changing room to try it on, and begin the process again!
5 So the UK needs to catch up in terms of having real time in store stock data. This will most likely require upgrades to, or changes in, existing systems and may lead to an increased use of RFID tagging to track any item s location in the supply chain or store. When this is achieved, though, it should be possible to make a significant reduction in overall stock levels and ensure that stock is located and directed towards areas where it is actually needed. Moreover, once store colleagues are proficient in picking and despatching from store then this will also most likely lead to improved efficiency and reduced waste. Such success and transformation will require investment, which may be sizeable in nature, but if the aim is to have a successful retail proposition of having any item available at any time from any place, then it is an investment that cannot be avoided. Same day delivery In relation to providing a desirable customer experience, the element of delivery options and their costs are big factors in driving customers to return. Indeed a recent survey by Forrester Research listed low or free shipping as the biggest factor to get customers to return to shop again, a viewpoint based on over 1,500 interviews in each of the UK, France and Germany. So the question of delivery remains both a key tool and challenge in delivering a successful and attractive omnichannel proposition. In this regard, the next battleground for differentiation will be to offer same day delivery. Admittedly, for those who offer it today, it is a minute percentage of what they despatch. But it will increase. Indeed, the fact that Amazon have announced a deal with Smiths News to offer such a facility shows the likely trajectory of this as a customer proposition. So it is coming and what currently feels like a logistical nightmare will swiftly become an expected delivery option, particularly as we see complimentary services such as Uber on the increase. The question once more is as to how this can be offered and carried out efficiently. Clearly there are many ways to skin this cat. Argos announced a transition to a spoke and hub model that will allow this. Others will move to local fulfilment, from smaller warehouse locations, either with 3PL s or owned, as has been mooted in regards to Amazon. Others with wider store coverage will have to move to fulfilment from store. In regard to the latter, the USA is once again ahead of most UK retailers. Interestingly, it was Macy s chief stores officer, Peter Sachse, who said "we've spent the last 153 years building warehouses. We just called them stores" when discussing fulfilment from store. The challenge in offering same day delivery that does not become crushingly expensive to the operation is twofold: first, you need an accurate single view of all stock, including store, as previously stated. Secondly, you need dynamic order management system with sophisticated algorithms to best decide from where to pick each order to meet the demand. These two will drive success and efficiency.
6 So, same day delivery is coming and will become as expected an offering as click & collect is now. An efficient returns proposition In the drive to be a successful omnichannel retailer you simply cannot ignore the question of returns. You need to have a returns proposition that is customer centric and hassle free. It really is as simple as that, and from a customer point of view, non-negotiable. In customer surveys on this issue, one showed that 58% of those interviewed had stopped shopping with retailers due to their poor returns proposition; whilst in another, over 70% said the need to pay for returns would stop them shopping with a new retailer. After years of successfully focusing on outbound, it is now vital that returns are sorted. The obvious thing to strive to achieve is the avoidance of returns in the first place. We see this happening now: improved, simpler instructions; technical helplines; online chat to assist; installation (such as with Halfords) and the like are all tools being used to reduce the level of returns. Indeed, in my experience, the majority of items returned had no fault found when they were examined, so avoidance makes sense and is an easy win. But returns will always be a factor and based on my experience at iforce, there are 6 key steps to a successful returns proposition: 1. Displaying the returns policy clearly at point of purchase. This is both in store and on-line. Do not make customers search for it. 2. Being agnostic as to the location and manner in which returns are made. Customers do not think in, or perceive, retail channels 3. Ensuring returns are at no cost to the customer 4. Include any required returns information and paperwork clearly with direct sales. 5. Keeping customers fully informed of the progress of their return s claim Retailers are so very good on informing of order progress and delivery, yet returns is a black hole by comparison. 6. Enabling swift and accurate refund of payments. Once you have such a proposition in place and working smoothly, the key to success is then dealing with the returns generated in an efficient manner. In this regard: The only reason to touch a return is that by doing so you push its worth back up the value chain. If you are not doing this, do not touch it more than once. Speed and efficiency are vital.
7 Your process needs to be systemically driven and data led. You cannot leave important decisions about disposition routes to a warehouse colleague, who may even be from an agency. Set the rules and let systems drive the process. The whole process must have senior accountability and widespread buy in by all colleagues. Too many retailers still fail to have one senior person (ideally a Board member) accountable for returns, in total juxtaposition to the situation with stores, merchandising, buying and other functions. The fact is that returns are here to stay and their numbers will rise as the percentage of sales from non-store touch points continue to rise. When dealt with correctly, though, returns are an easy way to increase customer satisfaction, enhance the omnichannel experience and increase customer loyalty and advocacy, and all of this whilst at the same time improving overall margins. Mark A. Hewitt former CEO of iforce Contact us We are already planning our next event and we seek to constantly improve the calibre of the debates we hold. If you would like to find out more about us please contact one of the Managing Partners - Alastair Paton, David Sneesby, or Beth Cauldwell on +44 (0) or +44 (0)
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