Logistics Viewpoints

A complete analysis of logistics trends, technologies, and services

Best Practices in Omni-channel Home Deliveries

Transportation | By •

Descartes, a provider of SaaS logistics software solutions, had their Global User & Partner Conference – Evolution 2013 – last week. The best presentation I saw was from Chris Jones, their Executive VP of Marketing and Services, on the topic of Omni-channel Home Delivery.

Descartes is a leading provider of routing and fleet management solutions. Two of Descartes customer’s – John Lewis in the UK and HomePlus in South Korea – are using the Descartes Route Planner solution to do the most interesting and advanced forms of home delivery I know of (John Lewis Excels at Mutichannel Retailing and Fulfillment; A Brilliant New Retail Format Supported by Last-Mile Logistics).

In the United States, Google, Amazon, Wal-Mart and others are experimenting with same day deliveries. But the most advanced market for home deliveries in the world is the UK. In the UK there is not the big push for same day delivery that we are seeing in the US. A British shopper goes online on Tuesday, to schedule a delivery for Thursday, for items they know they will need on the weekend. Many shoppers are far more organized, in terms of creating shopping lists ahead of time, than we are giving them credit for. Retailers could end up spending huge sums of money to develop same day capabilities, when they don’t need to. What customers really want are choices.

The traditional e-fulfillment home delivery process is to sell something; once the item is sold, offer fixed delivery options (we can deliver this on Wednesday from 8 am to noon, or Thursday from 1 pm to 5 pm), and then try to figure out how to deliver those goods to the customer in the most cost efficient manner.

But if you want to offer customers more choices, a far better process is to make delivery promising part of the buying process.

For example, if a John Lewis customer bought a flat screen TV, one tab would display free delivery options, over the next six days with seven hour delivery windows. Many of the windows would be grayed out. The customer would know John Lewis did not have the capacity to deliver during those slots. Some of the slots that are open carry a green Eco Delivery tag. If that slot is selected the consumer knows that John Lewis is minimizing CO2 emissions based on an efficient route (which also saves John Lewis money). According to Chris, at Ocado, a UK e-fulfillment grocer, 25 percent of customers pick Eco Delivery slots.

The John Lewis customer is also presented other choices. If they want to pay £8.50 they can have “Premium Delivery” four hour slots; £19.00 will allow them to pick from a selection of two hour slots. The customer can also select to have value added services, for example paying to have the delivery team install the TV.

Offering delivery choices has led to several benefits at John Lewis: substantial revenues associated with premium delivery options and value added services, as well as increased sales. John Lewis has steadily increased their delivery and value added services from 5 to 75 (delivery and value added services differ by product) as merchandisers have seen other product lines grow top line revenues.

Clearly, the ability to profitably steer customer delivery choices is enabled by technology. The routing solution that is integrated to the web ordering system must understand the logistics costs associated with each slot. By understanding the costs, the engine can choose not to offer certain slots at all if they are too costly or transportation assets are being fully utilized. And the engine can offer mechanisms like the Eco Delivery tag to steer customers to the least cost delivery options.

Further, at the conclusion of the purchase when the customer is slotted into a particular route, that route is not locked down until shortly before the actual delivery. An offline routing engine will continue to look at the routes and ask itself “if we swapped this stop on this route with that stop on the other route, could we save money?”

Other best practices for omni-channel deliveries include using GPS to be able to track trucks in real time; using interactive voice response systems to make sure customers are home and then to survey them afterwards on their delivery experience; and integrating the routing solution to the warehouse management system so that warehouse labor can be efficiently scheduled.

In conclusion, most retailers don’t think of themselves as supply chain companies. But if they want to offer home delivery flow paths, they need to learn these skills to protect their brand and compete profitably.

Note: Descartes is a Logistics Viewpoints sponsor.

This Week in Logistics News (November 11-15, 2013)

Regulations | By •

Lots of interesting news to discuss today, so let’s go straight to it.

Lots of news this week related to omni-channel fulfillment and order delivery. First, Descartes unveiled new optimization technology at its user conference that “helps retailers and distributors make deliveries the same day an order is taken.” Here are some details from the press release:

Descartes’ innovative new continuous optimization technology enables dispatchers to receive, automatically assign and execute orders throughout the day, placing pick-up or delivery orders on the routes best suited to meet the customer appointment requirements and operational cost constraints. Using real-time GPS-based fleet statuses Descartes’ same-day delivery optimization technology can more accurately predict new delivery times and drive greater delivery efficiencies.

 

Descartes’ new same-day optimization technology is part of Descartes’ Route Planner solution, which provides advanced route planning and execution in a single architecture.

In a separate press release, Descartes announced that Sears Holdings Corp. has selected its home delivery solution “to enhance its ability to serve customers and improve the efficiency of its home delivery operations.” According to Jeff Starecheski, Vice President Logistics Services at Sears Holdings, “Customer service is of paramount importance to Sears Holdings, our members and customers. We continue to make investments to remain a leader in home delivery. We chose Descartes’ home delivery solution because of its innovative approach and comprehensive capabilities from delivery appointment scheduling right through to mobile-enabled proof-of-delivery.”

Also this week, news that Amazon and the United States Postal Service (USPS) have partnered to deliver packages to customers on Sundays. The service will begin in Los Angeles and New York on November 17, with plans to expand it to Dallas, New Orleans, Houston, Phoenix, and other cities next year. You can read my commentary from earlier this week for my take on this news, which in a nutshell, is another chess move in the Amazon vs. Brick-and-Mortar match, another chapter in the omni-channel fulfillment story.

And in Women’s Wear Daily, an interesting article highlighting how the Gap is rolling out ship-from-store capabilities across its network, and introducing a new program called “Reserve” where shoppers select items online and have them held in the stores for purchase and pickup. What I found most interesting, however, was something the company developed three years ago:

The foundation [of Gap’s technology-drive strategies] was set three years ago when the company built a search engine that can locate every piece of inventory, which is instrumental in matching the demand with the assortment. That led to last year’s introduction of Gap’s “find in-store” feature on its Web site, which determines where a shopper is and, on a real-time basis, tells them the nearest store to find that item, in the color and size that they want. The Web site also gives the probability of getting the item [emphasis mine]; in other words, whether it’s a certainty, whether the store is down to a few units, or whether it’s not worth the trip since the item is probably no longer available.

What the Gap is doing underscores how mobile and BI/analytics technologies are playing an important role in omni-channel fulfillment — and how the users of inventory management systems are not just the inventory analysts at headquarters or store managers, but also millions of consumers walking around with smartphones and tablets looking to buy an item now.

Shifting gears, I was very pleased to read the news that the Robert H. Smith School of Business at the University of Maryland plans to integrate Resilinc SupplyIntel into its supply chain course curriculum “for the purpose of educating future business leaders on supply chain risk management best practices.” As I’ve written and spoken about many times this year, many companies are falling short on supply chain risk management, which is having a negative impact on their financial performance and eroding their market share. I also believe companies need to rethink supply chain risk management — that is, make thinking about supply chain risk part of their corporate DNA, where conversations about risk are as common and instinctual as conversations about cost and service. Getting these conversations started at the university level with future supply chain leaders is a great step forward.

Finally, there was a great article this week in the Wall Street Journal about Hours of Service and its impact on drivers, which echoed some of the points I raised last week in Hours of Service: The “Obamacare” of the Trucking Industry? The article profiles the experience of Manuel Hernandez, a long-haul truck driver. Here are a couple of notable quotes from the article:

“Who made up these [new HOS] rules,” he asked, shaking his head. “Did they have any experience in driving truck, and traffic and dealing with customers and your breakdowns?”

 

Mr. Hernandez is required to take 10 consecutive hours of rest to promote a circadian rhythm sleep cycle. The problem with imposing a rule like that on a trucker’s unpredictable schedule, he said, is that “sometimes when you’re not tired, you have to sleep and when you’re tired, you have to drive.”

The article also shed light on an important fact that sometimes gets overlooked: shippers have a big influence on driver productivity too. “On a recent trip from East Rutherford, N.J., to Dallas,” the article reports, “[Mr. Hernandez] could only stand by helplessly and watch as it took eight hours for workers to unload mattress foam by hand from his truck.” And Anne Ferro, FMCSA’s administrator, questioned whether it’s time to rethink the industry’s pricing model: “When you’re getting paid piecework by the mile and the load, you’re incented to drive as much as you can. Are those the incentives we want for somebody who’s driving an 80,000 pound load 60 miles an hour?”

What do you think? Post a comment and share your perspective.

And with that, have a happy weekend!

Song of the Week: “Bleed Out” by Blue October



Note: Descartes is a Logistics Viewpoints sponsor.

This Week in Logistics News (October 14-18, 2013)

Replenishment | By •

Several years ago, I interviewed CIOs and IT executives from leading third party logistics (3PL) companies, and one of the most interesting findings was that their teams spent a majority of their time fixing and cleansing data. I’m sure if I conducted those interviews again today, the story would still be the same. Therefore, I wasn’t surprised by an article in today’s Wall Street Journal about how faulty data is hindering the HealthCare.gov rollout. Here’s a quote from the article:

“There are some missing data elements that are requiring a lot of research on our part,” said Allan Einboden, [Scott & White Health Plan’s] chief executive. “If we’d received 5,000 [applications] and they all had to be worked, that’s a lot of extra administrative costs,” said Mr. Einboden, who said he expects the problems to be fixed.

Sounds like a typical day in supply chain and logistics to me.

In other news…

The spotlight is starting to shine on home delivery, as retailers and others look for ways to execute on their omni-channel fulfillment and same-day delivery strategies. This week, Descartes Systems Group announced the launch of its updated home delivery solution, which includes Descartes Reservations™ for delivery appointment scheduling; Descartes Route Planner™ for route optimization, dispatch and tracking; Descartes Mobile™ for wireless communications and mobile applications; and Descartes Notifications™ for automated call-outs. According to the press release:

Descartes Route Planner is unique in that it supports same- and next-day delivery, tight delivery time windows and “white glove” services planning for consumers, while offering retailers “profitable choice” home delivery options. “Profitable choice” allows retailers to increase their revenue through premium delivery windows and value-added services, while reducing costs by offering delivery options that reduce delivery route mileage. The solution includes real-time delivery appointment scheduling, route optimization and execution, mobile applications and notification services, and is available in cloud-based or on-premise configurations.

The press release mentions Restoration Hardware as a customer. Another customer is John Lewis Partnership, which is featured in a case study video. The main challenge with home delivery is doing it profitably (see Webvan), while providing customers with delivery options at the point of sale that are reasonable and reliable — unlike the option I was given recently by a delivery company: “We’ll be there on Tuesday between 8:00 am and 5:00 pm,” and when I asked if the driver could call me on Tuesday when he had a better sense of when he would arrive, the answer was no. What are the odds I’ll use them again?

Years from now, when we look back at 2013, we might say this was the year where logistics truly became a strategic weapon for companies. Earlier this week, for example, I commented on the partnership between Amazon and P&G, where Amazon has set up operations inside P&G warehouses to fulfill online orders. And Steve Banker commented on Amazon and Walmart from an omni-channel fulfillment perspective. Also this week, The Detroit News and others reported that “Wal-Mart Stores plans to open more small stores as it links them to its supercenters, which will serve as mini-warehouses for their smaller cousins [emphasis mine].”

Simply put, retailers and others are taking a fresh look at their supply chain networks (and those of their partners) to better balance inventory and transportation costs with service levels that are becoming more stringent. As a result, the answers to “What is a warehouse?” and “What is a transportation provider?” are changing — and if you’re not asking those questions, you’ll likely get left behind.

As the holiday season heats up, some interesting findings related to free shipping and mobile commerce from Shop.org’s eHoliday survey conducted by Prosper Insights & Analytics. Here are some excerpts from the press release:

16.3 percent of retailers will offer their first holiday free shipping offer by the week of October 28; more than one-third (34.9%) say they already offer year-round free shipping, compared to 23.1 percent last year.

 

Knowing that consumers increasingly use their smartphones and tablets to research and purchase products, retailers have prepared accordingly. More than half (57.4%) have invested in optimizing their mobile websites, nearly four in 10 (38.3%) have invested heavily in the smartphone user experience, and one-quarter (25.5%) say they invested in mobile commerce apps for smartphones.

It’s no secret that many of our roads and bridges are in disrepair, but what impact is that having on your transportation budget? An article in the Wall Street Journal this week provides some insight:

Trucks ship the bulk of the country’s goods. But trucking companies and their customers complain those shipments are being rerouted—sometimes by hundreds of miles—or traveling at lower speeds over deteriorating or traffic-clogged highways. That causes higher costs for fuel, maintenance and other expenses, including drivers.

 

Donald Maier, senior vice president of global operations for Lancaster, Pa.-based Armstrong World Industries, which makes floor and ceiling tiles… said fully loaded truck trailers traveling to or from its Marietta, Pa., ceiling tile plant will have to use a 25-mile detour, mostly to avoid a two-lane state highway bridge over a tributary of the Susquehanna River that will no longer be rated to accommodate fully loaded heavy-duty trucks. Armstrong projects the additional miles will add about $200,000 to $300,000 a year to the Marietta plant’s transportation costs [emphasis mine].

And these costs will ultimately trickle down to you and me — on top of the increased maintenance and repair costs we’re incurring on our own cars.

Finally, if you’re attending the CSCMP Annual Global Conference in Denver next week, please stop by the sessions I am participating in and say hello. It should be a great week of learning and networking.

Have a happy weekend!

Song of the Week: “If I Can Dream” by Elvis

Note: Descartes and HighJump Software are Logistics Viewpoints sponsors.

Guest Commentary: The Logistics Story for 2012 and Beyond

Guest Commentary | By •

The lasting image of the supply chain in 2012 is one of a consumer with a smartphone engrossed in making an online purchase. The story that goes with that image is all about the rapid changes that this new “connected consumer” has injected into our industry in 2012. So let’s take a deeper look at this evolution and some key things to watch for in 2013.

Historically, transportation has been treated as an ancillary function, but due to its importance in providing value to customers, organizations are increasingly taking a holistic view of the entire chain. They are looking for ways to reduce cost, retain service levels, and create agility and resiliency. In the past, businesses spent more time focusing on up-front challenges such as the customer’s web experience, while leaving transportation as an afterthought. Now, organizations need to look at the impact and opportunity that the connected consumer brings to the supply chain.

Up until this past year, the key topics facing the transportation industry have centered around the long standing cyclical areas of fuel costs, network capacity and the health of the economy. I believe that 2012 marked a major turning point or “cementing” of the attitudes and expectations of the connected consumer. Consumers have now grown firmly entrenched in the “fast and free” home delivery offered by Amazon and other online retailers, as well as other flexible options for taking delivery of goods.

To meet the expectations of this emerging demographic, many companies are finding that their traditional transportation solutions are simply not built to serve the demands of the connected consumer. This is driving the rapid adoption of transportation analytics – the integration of external and internal data gathered from the user experience, enabling more effective responses.

By using this data, companies can better provide the low prices and high service that are needed to win in a highly competitive marketplace. This combination of price and service will allow retailers and their manufacturing partners to succeed, both in the short-term sale and in longer-term customer loyalty.

As we leave 2012 behind, we have a world of new data to analyze and a fresh set of challenges to meet.

Things to watch in 2013:

  • Alternative Delivery: This year we can expect to see a push from the large providers to consider alternatives to at-home delivery. Before, shippers would deliver something to you and try a few times if they couldn’t find you, but this is no longer the case. Locker services and centralized pick-up locations are on the horizon. Traditional brick-and-mortar retailers with e-commerce websites may create temporary local “pop-up” stores where products can be picked up by online shoppers during periods of high seasonal demand.
  • Cost Awareness and Reduction: Retailers are going to have to look at cost reduction within their transportation chain, without sacrificing service. Businesses are recognizing the cost of delivery to their bottom line and are looking at ways to reduce it.
  • End-to-End Approach: This year, companies should strive to plan dynamically. In doing so, companies will enter a new era of building and maintaining resiliency. This end-to-end approach will allow companies to make more sophisticated changes on the fly, such as re-planning remaining delivery legs as goods are in transit.
  • Partner Approach: Moving forward, one of the key strategies for retailers and manufacturers will be increasing their level of collaboration and information sharing. Advanced technology solutions will help analyze demand and identify patterns that retailers and their suppliers can respond to more proactively. In responding to this data, manufacturers have a real opportunity to differentiate themselves and demonstrate their value to their retail partners by helping them manage the challenges presented by the connected consumer.
  • Speed and Agility: Both manufacturers and retailers will increase their overall supply chain flexibility and responsiveness to meet the increasingly impatient and fickle demands of consumers. In terms of transportation, this means relying on more flexible schemes and multiple modes that might include private fleets, third-party truckload carriers and parcel carriers — and even mixing modes in new and creative ways.
  • Innovation: Perhaps the most critical imperative for both retailers and manufacturers is to focus on true innovation as they rethink the most basic tenets of how they deliver their products to consumers around the world. With today’s delivery addresses spread over a large geographical area, the advent of many small and low-cost packages, and the frequent need to repeat deliveries when consumers are not home, it’s clear that direct-to-home delivery will not remain a profitable option if online shopping continues to grow at its current pace. Manufacturers and retailers simply will not be able to absorb the associated parcel shipping costs, even as their leverage with shippers grows.

So what are the lasting images from 2012 for you and your organization? And what is top-of-mind for you in 2013 and beyond?

Fabrizio Brasca is vice president, global logistics, JDA Software. He is responsible for developing innovative transportation and logistics strategies across all industry verticals.

John Lewis Excels at Mutichannel Retailing and Fulfillment

Retail | By •

John Lewis is a leading retailer in the United Kingdom. The chain includes 29 full-line department stores, 8 At Homes (small format stores), and an online/catalogue business. The company differentiates itself on customer service. When a customer orders a bed and a washing machine, for example, John Lewis not only delivers the items, it also offers to take away and dispose the old bed and washing machine.

A customer can order items in a store and then decide to take some items home and have the others delivered. Or a customer can order items online, pick up some of the items at a local John Lewis or Waitrose shop, and have the other items delivered.

To enable this seamless customer experience John Lewis added a “dynamic booking system” (DBS) to its ecommerce site. Andy Gay, a systems manager at John Lewis, was kind enough to speak to me about this project.

The dynamic booking system has some interesting characteristics. The delivery options are based on a real time, constraint-based, continuous routing optimization engine from Descartes (an ARC client). This engine runs behind the scenes and gives customers feasible schedule options within 7-15 seconds. If the customer wants the delivery sometime in the next week, and the goods they bought cost more than 30 pounds, and the customer is willing to take delivery in a six-hour time slot, then the delivery is free. If they want a four-hour time slot, they can elect to pay more. If they prefer a two- hour slot, then the price is higher. And if they want a two hour slot on a Saturday, a very desirable time slot, then they would pay even more. And the highest price is for an expedited delivery that would occur within the next two days.

Ecommerce Site Delivery Options are Powered by Descartes Routing Application

In short, the DBS gives customers delivery options, provides an additional revenue stream for John Lewis, and improves John Lewis’s on-time delivery metrics. The routing engine also has reduced the average miles traveled per delivery, as measured from the company’s outbound service center to the customer’s home, from 7.6 to 6.7 miles.

John Lewis takes its corporate social responsibility seriously. The company has committed itself to reduce carbon emissions by 15 percent within ten years. This project helps the company meet that commitment; in fact, the desire to be “green” was one of the project drivers.

The project was completed last year and it has been a smashing success. Service revenues associated with assembling products at a customer’s home have increased significantly over those pre-DBS. One reason for this is that in the past if in-store shoppers wanted a service associated with a home delivery, it was a burdensome paper-based process. With the online DBS delivery engine, coordinating home deliveries with services is much easier.

The ability to accomplish this, however, did not come easily. DBS was a multiyear project. The routing engine is based on complex optimization, and yet the solution had to scale to provide quick delivery options to large numbers of customers. The routing engine also needed to be integrated to several applications.

But perhaps even tougher, John Lewis needed to custom build an “administration” layer with logic to support the routing. While the routing engine can do the delivery optimization, the admin subsystem needed the cube of every product so that the routing engine would know what could fit on a truck. The company needed to know whether a product could be carried by one man or would require two, whether an installer would be needed as part of the delivery, and if so, what kind of installer.

The company also had to do stopwatch studies. To give feasible schedules, the company needed to know not just how long it would take the truck to get to a customer’s home, but a whole series of other time standard driven parameters. Was this a delivery to a house or the seventh floor of an apartment building? How long should it take to get a washing machine to the seventh floor? What should the time standard be for installing a washing machine? How long should it take to tote away an old washing machine? I’ve written about using time standards in a warehouse. That is tough enough. What John Lewis did was an order of magnitude more difficult.

Finally, the company’s delivery team needed to transition into being more than drivers, but rather serve as an extension of the retail selling team and view themselves as critical to delighting the customer. That, obviously, is a very big change in culture.

In conclusion, John Lewis can provide a much more unified and seamless experience across retail channels then the vast majority of retailers. But getting there was not easy.

A Brilliant New Retail Format Supported by Last-Mile Logistics

Retail | By •

In South Korea, Tesco has a chain called Home plus that has become the second largest retail chain in the nation. The 115-store chain consists of big discount hypermarkets similar to Walmart in merchandise, but also similar to mini-malls in that they feature numerous independently-operated smaller stores like travel agencies, fast food, and bookstores that lease the space from Tesco.

What caught my attention, however, is Home plus’s e-commerce initiative. Weekly grocery shopping is a burden for many urban-living, hard-working South Koreans. Also, what busy consumer would not value spending waiting time, such as waiting for a subway in a station, in productive ways?

The solution? Create virtual stores in the subways, as the video below shows.

These stores are currently located in Seoul’s subway stations. Seoul is South Korea’s largest city. The subway station has pictures of shelves stocked with food and other consumer goods customers would typically see in an actual store. Shoppers point their smartphones at the QR codes, click, and add items to their online shopping basket. Their goods are delivered after they get home. The Home plus online store is now the number one e-commerce site for groceries in South Korea.

Of course, supporting a virtual store requires a home delivery supply chain. The video says the e-commerce initiative allows Home plus to gain market share without building stores. But in crowded metropolitan areas, last-mile logistics is a challenge; it also requires an infrastructure, including pickers, trucks, and drivers.

I don’t know how Tesco has structured its logistics operations to support this model – whether it is picking in stores, in backrooms, or special e-commerce warehouses. And I don’t know what kind of IT the company is using. But Tesco’s capabilities would certainly be enhanced if it were using routing software (preplanned and dynamic), GPS tracking, and mobile devices for payment and signature capture.

This is the most innovative idea in retailing I’ve seen in a long time. You have a captured audience, and the virtual storefront also serves as a form of advertising. But the back-end logistics needed to support this, while not innovative, is very challenging. South Korea is a perfect launching pad for this type of operation. South Korea has more than 10 million smartphone users in a population of less than 50 million people; it has a dense metropolitan area supported by subways; and its people are time constrained. Nevertheless, this brilliant new format will almost certainly be copied by retailers in Europe and North America in the not too distant future.

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