Chris Petersen explains why, from AI to predictive inventory, logistics isn’t what it used to be.
I recently had an opportunity to deliver a keynote address at the RVCF 2018 Fall Conference. In listening to the speakers and attendees, one theme became crystal clear — logistics has become an imperative essential in today’s “physgital” world.
Yesterday’s supply chain from supplier to retail stores has morphed into a complex web of services designed to meet rising customer expectations. In many ways, logistics is now the sexy side of retail, or at least the engine that makes the sexy part of retail happen. Yet, the latest iterations of last mile delivery solutions are not sexy drones, but harken back to pedal power of the last century.
Why this is important: Retail is finally waking up to the reality and value of logistics. Delivery to home, lockers, or click and collect at kiosks requires increasing precision and speed. Logistics is what makes it all happen overnight, and even within hours.
Historically a one-way supply chain was only designed to move products
In the age of the 4 Ps, retail was Products, Price, Promotion and Place. While marketers drove the masses to places called stores, operations was essentially charged with managing the supply chain to move boxes in sufficient quantities to the right places.
For decades, the retail supply chain was one way: from brands to distributors, to distribution centers, to stores. In this age of product centricity, the focus was on efficiency of moving boxes at the lowest cost. In my career, I can remember supply chain metrics based upon FTL (Full Truck Loads), pallet quantities, and master cartons. While quantity shipments are still required for distribution centers, the evolution of the omnichannel customer now requires shipments of a single product to a single customer, at many places, which are not stores.
Customers’ requirements have transformed both retail and logistics
With the age of digital and online commerce, customers no longer require a “place” to purchase. In fact, consumers have become the “Point of Sale”. They not only choose when, where and how to shop, they also choose how, when and where to take delivery.
What has made logistics the sexy side of retail is the shift from selling products, to an era of customer focused value. The 4 Ps have become the customer’s 4 Cs: Choice, Custom, Convenience and Connected. To remain relevant and create value, retailers must do more than deliver products … they must do so in ways customers choose. In a given week, customers might purchase in store, online, or purchase by phone for click and collect pickup in store or at a locker. Logistics is what makes all of that possible, and seamless.
Bottom line: With poor logistics you lose the sale and the customer
The challenge for today’s brands and retailers is that customers do not recognize “channels.” Today’s customer consider online and stores as everyday commerce options. They expect a seamless experience across where ever they shop. Even more important, they expect choice and convenience of where they take delivery, whether it be click and collect at the store, home delivery, or purchase from the shelf.
Today’s customers are so demanding that they even expect to be able to change the delivery location once the product has shipped. In addition, they also expect to be able to track progress every step of the way! Yesterday’s one way supply chains were not designed to handle the real time inventory, tracking and approvals required for:
• Virtual shelf purchase options in store, and from anywhere in the world.
• BOPIS – Click and collect orders within hours or minutes.
• BORIS – Purchase online with returns in store, even in places that didn’t sell it.
Customers are no longer just buying a product at a price. They are looking for retailers who best create personal value for them through the 4 Cs. Customers return to purchase from retailers who provide the best seamless experience. The 4 Cs are impossible without logistics.
Future trends: Sexy logistics also requires some mundane solutions
The headlines already predict many of the sexy side of logistics — drones, droids, and complete redesign of malls with drive through click and collect centers. One of the interesting questions will be how retailers can sell logistics as “sexy” in order to recruit the “geeks” required for integrated logistics to sell and ship everywhere.
Yet, as sexy as all of the technology is, the last mile still requires cost effective solutions for the customer, wherever they are. In my keynote, I highlighted how the grocery and meal delivery services are returning to pedal power, like the bicycles commonly used in India for decades.
UPS literally started third party logistics a century ago in Seattle as a courier service with bicycle delivery. History does repeat itself. UPS just launched a new electric assist cargo bikes in urban Seattle. If you look at my photo from India on the bottom, you will see quickly see the similarity and utility of cargo bikes for urban logistics. There is one big difference — I am sure the deliverymen in India would appreciate the electric assist and windscreen of the UPS cargo bike on top!
The future holds an increasing need for logistics partnerships. Both retailers and brands do not have the infrastructure, talent and resources to be able to do it all themselves. New logistic partners like Instacart are rapidly emerging to fill the void for real time delivery convenience in a customer centric marketplace.
Even the world’s largest retailers are increasingly turning to partnerships to expand their logistics capabilities required for the choice and convenience today’s customers demand. We will see if logistics can meet the customer demand for choice this omnichannel holiday season!