Procurement. It’s a word that fills few people with joy; lengthy, dull, and sometimes downright painful, are perhaps more likely descriptions. But it needn’t be like that, and – more importantly – it shouldn’t. If you are embarking upon investing in any new system as part of your operations and logistics set-up, it is unlikely you’ll do it very often. Getting it right is all the more important when you take on board the pace of change (in your business, in the market, in customer behaviour) it may have to cope with post-implementation. But while the check-boxes and spreadsheets of the stereotypical procurement process have their place, you need to inject some personality into the process too. You need a great system that will flex with you, developed and supported by people – and a business – that thinks like yours does; technology and culture are both deserving of a good fit. Appreciating where delivery fits into the bigger ecommerce picture and how following the right procurement processes for you can help in this regard shouldn’t be underestimated.
The delivery driver is universally acknowledged as an important part of the brand reputation chain. From the glowing feedback DPD receives on Twitter from happy customers day-in, day-out , through to horror stories of parcels being thrown over fences, or even allegations of theft, the delivery driver is a very visible part of modern day life.
But the picker in the warehouse is the last person to touch the purchased items before packing them off to the carrier. If either of these people, not just the driver, perform at a sub-optimal level, all that hard work and money spent on SEO, mobile-friendly responsive websites, email marketing, you name it, can be undermined.
With peak 2015 only a few weeks away, will your warehouse can cope with high volumes triggered by flash sales or seasonal mega-events? Are there fail-safes built in to ensure alerts and alarms are heeded, and action taken, to stop a problem turning into a crisis? If not, your people – no matter how professional they are – won’t be able to cope. Then everyone starts to look bad.
All of this can eat into your customers’ loyalty, and that’s another thing that simply isn’t what it used to be. Like it or not, the advent of the discount supermarket as a serious rival to the likes of Tesco, Sainsbury and Asda, has ushered in a who-cares-about-loyalty-find-the-best-deal sentiment among the Great British shopping public.
Once you’ve snagged a customer you don’t want to start giving them reasons to abandon their shopping cart at the checkout stage, or rue the day they bought from you and decide they’ll never do so again. The technology and processes underpinning the operations and logistics side of retail are now more than merely cost-centres; they should be regarded as the points of inflection that make it possible for you to keep your promises to the customer. In a world where patience and forgiveness are scare commodities it’s more important than ever that you get it right.
From cost to implementation time, from user-adoption to third-party integration, these kinds of investment tend to be made infrequently. Understanding what’s required, knowing the questions to ask, having a sense of what success will look like, are fundamental as you aren’t going to be starting all over again any time soon. You’ll also need a healthy dose of empathy. You’re going to be putting a number of potential suppliers through their paces in order to find the one. It’s worth you putting in as much effort as possible and giving as much support as you can in order that your list of prospective suppliers come back with information that enables you to make the right choice.
Guy Meisl, Deckers
This is something Guy Meisl, head of European distribution at Deckers, agrees with: “If there’s one thing people don’t supply enough of during the procurement and tendering process, it’s data. If you don’t give your prospective suppliers lots of data, they can’t possible quote properly. You need to go into detail – lots of detail, really in-depth – looking at historic orders, for example, so the supplier can see what it is you need.”
Speed
For anyone reading this who sometimes finds the speed with which things change in business exhausting and stressful, the following observation is unlikely to offer a great deal of comfort. The pace of change we are currently living with is as slow as it’s ever going to be.
The last time your organisation went through a major operations procurement process, it is doubtful that watchwords like agility and flexibility figured as prominently as they ought to today. Never mind what’s happened to mobile phones – who could have seen the m-commerce phenomenon coming five short years ago? Cloud computing, although there in some form or another, was probably not as central to your IT systems as it is now, either. It would be difficult to over-play the importance of investing in systems today that are built with leading-edge technologies and methodologies like open source, scalable, adaptable, flexible.
Niklas Hedin, Centiro
Niklas Hedin, CEO of Centiro: “Retailers now need to be in a constant agile state, both to capitalise on new opportunities as they emerge and continually meet changing customer expectations. With customer demands changing by the day, you need to be working with a supplier focused on innovation. In an age of omnichannel commerce, retailers must be able to respond to customer demands quicker than ever before. There is a clear advantage in working with a supplier that delivers its service via the cloud, since they are better placed to change at the same rate as the market is changing. Technology partners need a good view of what’s happening in the current market as well as be prepared to meet the challenges of the future.”
Visibility
Consider whether a prospective supplier help you meet the demands of your customers and serve the particular needs of your business. Delivery management systems, for example, require clear visibility into the supply chain to be effective and offer the flexibility to integrate new carriers quickly to meet increased periods of demand. They need to cut through complexity and allow for precise deliveries that accurately meet customer expectations. Missed expectations equate to broken promises, which will not help your sales or your brand reputation.
But better visibility can also create efficiencies and reduce costs. For example, having greater insight into where inventory resides, and the flexibility to deliver to a variety of different locations, means retailers can both offer delivery options that suit the customer and reduce unnecessary transport costs. When speaking to suppliers you should make sure any system you are looking to purchase can meet these needs.
In the case of parcel carriers, you need to look at whether they use technology that allows them to have complete visibility of the status of their entire collection and delivery process. Does that technology deliver real-time reports which enable operations managers to spot potential issues and resolve them before they impact on customers?
You want your parcel carrier partners to provide accurate tracking and tracing of parcels throughout the delivery journey. Carriers can then pass this information on to customers, giving them control around where and when deliveries are to be made not just in the last mile, but right up to the very final stages of a delivery.
Control
The information that should be communicated to your customers is the not simply the standard reference number and tracking link, but pre-delivery alerts, whether that’s the day before a delivery is due to be made, or the morning of a delivery, with a time window specified and an update within one hour of delivery. But you need to go further than broadcasting alerts – you’re going to have to be able to listen to your customers and react in-flight.
Katie Kinraid, Blackbay
Katie Kinraid, global product manager at Blackbay: “You need to know if the parcel carrier has the ability to conduct two-way communication (SMS or email depending on the customer’s preference) to deliver information around the progress of a delivery.
“At every stage your customer should have the ability to change their delivery preferences, to reschedule, to change a time window, to leave the parcel in a safe place, to leave with a neighbour or pick-up point. In the case of a failed delivery, then customers should have the ability to reschedule. Two-way communication puts customers in control of their delivery.”
Services are already launching in response to that demand for greater control, as seen with the likes of On the dot, the consumer offering from same-day service provider CitySprint.
Patrick Gallagher, CEO of CitySprint: “Many of the current generation of shoppers are digital natives who are more likely to grow impatient with out-dated fulfilment methods and missed deliveries. To prevent this, delivery systems should be guided by data to make the process as convenient and efficient as possible. Every variable, from time of delivery to suggested alternative drop-off, can inform retailers that are willing to collate and analyse this data. Improved completion rates save on costs and are better for the environment by reducing the miles travelled by each parcel, which also appeals to millennial consumers.”
Disruption
If you don’t shake up the way you work, there’s a chance someone else will come along and do it to you. Disruption is one of those words reinvented by the business and marketing world and made to sound dynamic and positive. But it’s only positive when you’re the one doing the disrupting.
In the short term, expect to see more partnering take place. DPD has launched its own network of collection points and Doddle has formed part of that network. DHL, Amazon, Volvo and Audi all have trials going on to deliver parcels to the boot of your car. None of which would be possible without a partnering outlook.
In the longer term, the growing use of data will lead to its use for predictive analysis and the development of artificial intelligence systems in retail logistics.
If the systems you are currently working with aren’t going to facilitate partnering with external service providers, you’re going to get out of that particular activity. No matter how badly you might want to, from a commercial point of view, no one will want to tango with you if your systems have the equivalent of two left feet.
The very same applies when it comes to the ability to interrogate your data and feed it into predictive analytics tools. In a world where Amazon half-jokes that it can ship a product before the customer has completed the order, you need to stay on your toes.
Interoperability, flexibility, visibility – these are your watch words. Some other watch words might well be ‘what would Amazon do?’
Europe
There are currently two major European considerations that need to be taken into account during the procurement and provision of operations systems.
The first relates to the Single European Digital Economy, the proposals for which were laid out in a white paper issued in May. This has some potentially significant implications for the retail industry. It promises to provide better options for consumers of digital goods and services and remove regional barriers for online retailers. However, retailers need to make sure that the systems they invest in enable them to scale their delivery networks to meet this potential increase in demand, as well as break into new markets ahead of the competition.
The other European question that needs addressing is that of the UK’s future therein. With a referendum due to decide the UK’s role in Europe, and the Prime Minister’s current efforts to secure some sort of Treaty renegotiation, talk to your potential suppliers about Britain’s possible exit from Europe. If it happened what impact would that have on them and their system’s operations? They might not have all the answers, but if they don’t have any answer at all your alarm bells should start ringing.
Instinct
The old rules of engagement no longer apply. The last mile is inextricably linked to the first, and your customers are judging you far more harshly on the basis of your ability to keep your fulfillment promises than anyone could have imagined only five or 10 years ago.
Nowhere is that thrown more starkly into relief than the business of assessing the return on your operations systems investments. Spending on your operations systems isn’t just about the ability to track, pack and ship your products to your customers. It’s about joining the dots and completing the customer journey.
The carelessly packed item, the slipshod delivery, the returned item that got left to gather dust with thousands of others… they have the potential to be your undoing. So don’t let them. Factor into your purchasing process the importance of delighting your customers and turning them into brand advocates, then find a partner that shares your belief in the role of operational systems to do this.
Don’t choose your supplier on price alone. Don’t compare them all exclusively on a grid. Yes, you need to do an element of that, but only to sort the wheat from the chaff. After that, you need to find someone who instinctively gets what you are trying to achieve and feels every bit as motivated as you to do so.
Top 10 Top Tips
Two retailers give us their tips for issues to look out for and how to deal with them: Guy Meisl, head of European distribution at Deckers, and Maxim Romain, general manager of Wayfair UK.
1 Packaging
Packaging is as much a physical operation as it is a service. So ask potential suppliers to provide samples of their packaging so that you can decide if it is good enough to be shipped with small parcels, and with one-man or two-man carriers. It’s a small consideration until it goes wrong, then it has the potential to damage both the items being delivered and your reputation.
2 EDI
Are potential suppliers able to receive orders, send invoices or send stock feeds via EDI (ideally), through a VPN/VAN and what platforms are they using? You need to know to the extent to which you will be able to automate your processes (the more the better, obviously).
3 Quality control
If you are in a drop-shipping environment, what processes are in place to ensure quality control? If you aren’t able to directly control the quality of the products before they’re sent to customers, you really need to ensure there are solid controls in place.
4 Customer Service
Is there a customer service team available to answer to questions from your customers in real-time (via your own customer service team, in all likelihood) if needed? What is the SLA for requests on order status?
5 Management
Clarify the structure of the organisation to know who to talk to according to if you have issues with things like finance, or logistics. Generally speaking you want suppliers who have clear responsibilities defined within their teams. Otherwise, it can become complicated trying to get issues resolved in a timely manner.
6 Onboarding
One of the most important things to consider is the onboarding process for new suppliers and ensuring you have strict performance monitoring from Day One, which enables you to immediately react in case of sub-par performance from supplier.
7 References
Use your network of contacts to get a rounded view. Don’t just talk to other operations people to find out what they think of a suppler. But get hold of the sales director. Find out if they are getting a good service.
8 SWOT
Conduct a SWOT analysis on a supplier and send it to them – give them a chance to explain things line by line, if necessary. That can help if there have been any misunderstandings, and if you iron out any areas of potential concern that way, you could even have them written into the subsequent agreement.
9 Workshops
Spend at least a day doing workshop sessions with your potential new partner. You need to know you aren’t basing your decisions on any assumptions.
10 Personality
You don’t just want someone who can meet their contractual obligations, so ask awkward questions. How many contracts have they had go into dispute, and why? If a supplier has some great stories to tell about how it responded to unusual circumstances it gives you reassurance that you might be dealing with the right organisation.