In the post-Black Friday world of mass online shopping, warehouse operations need to more agile and flexible than ever to meet customer demand. Drapers asks the experts what they are doing to fine-tune logistics
In 2015 daily demand from consumers for fresh product and the latest trends is putting pressure on retailers to provide a better service proposition on a quicker turnaround. Furthermore, the explosive growth of click-and-collect and the demands of serving international export markets are putting retailers under serious pressure to deliver.
At a time when online and mobile shopping are often the most popular purchase methods, consumers are demanding more agility from the supply chain, meaning retailers need to be operationally astute in order to react fast.
Fulfilment from store, which requires instantaneous stockroom knowledge, is encouraging retailers to change the way they think about their inventory. While some are investing in new warehouse management systems or distribution hubs to serve growing international markets, others are rethinking staffing levels to accommodate the season’s peaks and troughs.
Major players are continuing to invest in their warehouse estate. In order to cope with ongoing growth, Boohoo.com spent £10m in November to extend its Heasandford Industrial Estate warehouse in Burnley, Lancashire, from 140,000 sq ft to 820,000 sq ft. Boohoo is also looking to grow its warehouse staff from 300 to about 1,000 over the next three years.
While Debenhams is in the process of developing a new 726,000 sq ft logistics hub in Peterborough, John Lewis opted for a 675,000 sq ft distribution centre in Milton Keynes (Magna Park 2), set to be fully operational by 2016. A third 638,000 sq ft super-warehouse adjacent to Magna Park will handle the retailer’s furniture and electrical orders.
Marks & Spencer’s 900,000 sq ft fully automated distribution hub in Castle Donington, Leicestershire, completed in 2013 to process online orders, is the size of 11 football pitches and employs about 1,200 staff. The centre has the capacity to hold 16 million products and is capable of processing a million items a day.
Next is another major player willing to invest. The high street retailer splashed £68.5m on a 700,000 sq ft distribution hub at West Moor Park in Doncaster. Next’s third unit on the site is scheduled to open in early 2016.
The level of these investments shows that retailers are taking logistics seriously. They are putting warehouses at the heart of their business so they are fit for growth in 2016 and beyond.
Mark Moody, business development manager at international freight, warehouse and distribution specialist Core Management Logistics, headquartered in Lutterworth, Leicestershire
Third-party logistics companies (3PLs) are waking up to the fact that if they want to attract and retain new retail business, as well as continue to stand out in an increasingly competitive marketplace, they must remain at the forefront of innovation.
Shopping habits are continuing to evolve and customers expect to be able to shop at any given time of the day, which is driving demand among retailers for 3PLs to handle their ecommerce requirements.
Retailers should look to partner with a 3PL that can offer a 24-hour ecommerce fulfilment service, ensuring that customers can order in the late evening and still receive their purchases by the next morning.
Logistics specialists should also be able to offer a quality returns process, particularly when it comes to dealing with the fashion sector, which traditionally sees high rates of return. At CML our returns processes are designed to be quick and efficient, enabling quick appraisal of the returned product so it can swiftly re-enter the supply chain and the customer will be refunded.
Furthermore, our processes are designed to integrate with our clients’ existing systems, which promotes the sharing of data and allows quick return transactions.
It’s also important for logistics providers to be flexible enough to manage busy shopping periods, such as Black Friday and Christmas. It is essential to have a multi-skilled workforce that can hit the ground running in every area of the warehouse so that, when necessary, they can be moved into the areas most in demand.
A close relationship with temporary employment agencies is also crucial. Agencies should understand the business’s requirements in terms of necessary employee skills and shift patterns. At CML we have an agency representative based within our warehouse who is in daily contact with our operational management. This working relationship ensures that when needed they can recruit the right people based on the required demand.
It’s also vital that 3PLs integrate fully with retailers so that they have knowledge and understanding about when their peak periods are likely to occur, working collaboratively to plan for those peak periods rather than just react to them.
Ben Dreyer, operations and IT director at Boden
The main issue facing the industry as a whole is the need for efficient multichannel operations. You can waste a lot of money if you’re not careful. For online and catalogue players such as Boden, the big issue is how to make international trade work, balancing customer service, the cost in shipping goods and arranging easy returns. Our main markets are Germany and the US, which are worth $100m (£65.6m) to Boden and so are big enough to justify bespoke solutions.
Efficiency and seeking to drive continuous change is our real mantra. There are occasionally opportunities for major innovation, but most of the time this is done by small steps, which can still achieve significant change when you add them all up. Within the warehouse, you need to look at every touchpoint, whether it is return packaging or waste. Every time you cut out a ‘touch’ you are cutting out cost.
The real trick to deal with exceptionally busy periods like Black Friday or Christmas is to have a flexible workforce, which we swap around our 150,000 sq ft Leicestershire warehouse facility to meet the peaks in different areas. Our peak order times are March and September. Whereas on average we dispatch 300,000 garments a week, this rises to 500,000 at peak periods.
In terms of warehouse management systems, we use the Matflo supply chain system from IT solutions specialist DAI. It works well for mail order, although other systems are more suited to retail.
We offer quite a late cut-off point for next-day delivery at 7pm, although we’ve found this option is declining in popularity compared to our standard two-to-three-day service. Click-and-collect is particularly important for multichannel operators, several of whom have a 50% click-and-collect take-up. We’re about to introduce click-and-collect with courier service Hermes. I think demand will be reasonable, but it will not be at the 50% level you get with Next or John Lewis. This is because they’re offering the full multichannel experience.
Paul Wheeler, senior logistics and distribution manager at Topman
Many of the challenges at the moment in logistics are on the outbound operation and delivering service to a global network. There is also the need to meet customer expectations, achieve synergies and maintain service levels across all channels.
Outside this, changes to inbound schedules, timelines and routes present pressures and challenges.
Arcadia is opening a hub in Singapore in autumn 2015, which will mean our stock is moving around in a more cost- and time-efficient way. This will hopefully help us to match our global customers’ expectations in terms of speed to market. The new hub will streamline costs at the supply chain end, whereas at the front end costs naturally go up as a result of international expansion. It also frees up space across our 490,000 sq ft of UK warehousing network.
We believe Black Friday still has more room to grow. Christmas is much more store-focused and we do a lot of planning on when stock is dispatched to ensure our transport network is set up to get it into stores and maximise sales over the festive period. For Topshop and Topman the peak order time is pre-Christmas and we think Black Friday 2015 could be the biggest ever. The next biggest day for orders is Boxing Day.
The maximum online orders we would dispatch in a peak week is 350,000 units, although an average would be closer to 150,000 units. Our current cut-off for next-day delivery is 5pm, although this service is not as popular as people might think. Click-and-collect from store is constantly growing, I think because it gives the customer more freedom to choose how they shop online.
Our returns are managed solely through our distribution centre and come back into stock to be re-allocated to the best place at the time.
We are currently implementing a new warehouse management system across all our channels that should change the way we work. As well as discussions around implementing new systems, we’re currently looking at taking stock from the retail pipeline to fulfil orders, although no firm decision has been made yet.
Jay Permanand, logistics and distribution manager at Blue Inc
The shortage of drivers following the introduction of the Driver Certificate of Professional Competence in September last year is a big issue for logistics at the moment. There is a cost to the driver or the haulage company to get this qualification. Also, a lot of the current drivers are older and so have not bothered to take the course, coupled with a lack of young drivers coming through. Many of the hauliers I speak to, as well as other people working in logistics, are aware of this issue, as obviously moving product from A to B efficiently is what we all strive for.
Efficiency is a key factor in a successful logistics operation, so I continually endeavour to make small changes, which add up to something more significant over a period of time. I believe fine-tuning and making smaller adjustments can achieve better results without a large amount of upheaval. A small change could be rotating staff to ensure your best employees are working on the busiest departments, which we do at our hub in Walthamstow, northeast London.
I begin to plan for our peak from January 1, which for Blue Inc actually starts to spike in September and continues into November. As the weeks go by, the replenishment of stock increases, so by the time November comes you have a heavy intake and heavy replenishment. It’s all about debriefing the last peak, looking at the wins and, more importantly, the weaker areas and planning over the next nine months to make those weaknesses stronger.
A weakness could be the need to supplement my full-time permanent staff with agency workers. It really is a process of trial and error to find the right calibre of staff, committed to the intensity of the peak working period. However, this can work out well as in January I often cherry-pick from the agency staff to offer them full- time permanent work.
So when Black Friday comes the team are fully aware of what is required. A brief review after Black Friday enables us to iron out any issues, so we can avoid them for Christmas. During peak we will distribute 10,000 boxes a week to our stores, which can be quite challenging.
Having a strong reliable team is essential. The warehouse team is currently 50-strong, peaking at 70 to 75 employees at busy periods. I spend time training them and making them understand the processes and why we need to do certain things, which creates a more rounded understanding of both the business and their individual roles.