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How retailers can future-proof their logistics

Bots, drones and driverless cars may be grabbing the headlines, but for fashion retailers and brands, the key to future-proofing logistics will be using the right technology effectively.

With ecommerce giant Amazon trialling drone delivery and driverless cars, and US grocery chain Walmart experimenting with blockchain technology – which enables access to shared, secure, decentralised data, and powers cryptocurrencies – for retail logistics, it may feel like the future is already here.

Although these hugely significant projects are yet to hit the mainstream, fashion retailers and brands of all sizes are asking how they can exploit the latest innovations in logistics. In this commercially sensitive area – critical to both margins and profits – retailers are keeping their plans close to their chests. But it is clear that the key areas undergoing innovation are: how retailers use data; understanding the potential of developing technologies; innovating in the final mile of delivery to customers and returns.

“The future of retail logistics is all about being in the right place, at the right time and trying to predict what customers want, as well as ensuring supply chains are as short and cost effective as possible,” explains Colin Temple, managing director of footwear retailer Schuh.

Drapers examines the technology that retailers are investing in – or should be – to future-proof their logistics operations.

The systems challenge

Much of future innovation is going to centre on the integration of data from existing retail systems, as well as the development of new ones, argues Andrew Robb, chief operating officer at etailer Farfetch: “In the luxury space, the sophistication of the in-store experience and how this connects to the online experience is still in the early stages.”

He adds that the business is investing in its “Store of the Future” division, which explores technology solutions in bricks-and-mortar retail to help deliver the best possible experience to customers. The technology, which is being used at Browns East in London, includes an RFID (radio-frequency identification) rail – data is collected to ascertain which products are examined by customers and which are taken to changing rooms.

Real-time systems enable our business to manage customer expectations

Colin Temple, Schuh

Temple stresses the importance of systems being able to paint an accurate stock picture to deliver the very best customer service.

“We have real-time systems that work to within 10 seconds, which means they are as up to date as possible with stock numbers. Real-time systems enable our business to manage customer expectations. If, for instance, shoes are ordered in from another store, which then realises they are not suitable in some way, that store can quickly contact the one that ordered the product so the customer can be informed. This often means the customer is less likely to be irritated or inconvenienced by having to get a refund or substitute.”

Tony Mannix, chief executive of Clipper Logistics, argues the latest logistics technologies ensure that retailers’ inventories work harder: “Rather than having stock in ‘buckets’ for different channels, the dynamic now is that it could all be in the same place. With a single pool of stock, retailers are asking: ‘Can I make all my inventory available to all the channels?’ It is a systems challenge, as most existing systems weren’t developed that way.”

Some retailers are beginning to solve the systems challenge by using nimble technology companies to create apps that can bring all their data together, says Claire Muir, commercial director for fulfilment and contract logistics at Seko Logistics: “A massive platform can take two years to implement – and by that time the market has moved on. These agile new platforms can plug into anything, bringing together enterprise resource planning and point of sale, for example.”

One of the benefits is that such systems are fast to develop and represent a smaller investment so, if they fail, it is not catastrophic.

Integrated systems are equally important to retailers’ all-important delivery and returns proposition. Oliver Winstanley, head of omnichannel at Torque, argues that one of the conundrums for brands and retailers has been converging delivery from the multiple platforms they use – their own stores, web and mobile platforms, plus market places such as Ebay and Amazon. The issue here has been maintaining the “integrity of the stock”.

The challenge for retailers, he says, is managing the inventory when sales are being made on so many different systems, supplied by different software companies.

Artificial intelligence 

The rise of artificial intelligence could also transform retailers’ logistics. Clipper’s Mannix says the development of machine learning is key: “Imagine a machine working through a problem 24/7, optimising live data. For example, allocations could take into account the weather, what’s happening on social media and so on. Retailers are starting to wrestle with how to use it, but there’s no silver bullet at the moment.” 

Upgrading warehouses

RFID technology, which has been available for more than a decade, is only now being taken seriously in warehouses. Emile Naus, director at consultancy BearingPoint, says the cost of the tags has stopped faster development in the value and mainstream markets. “RFID can help retailers have stock accuracy, knowing what they have and where it is and if it is implemented properly, it can also help at checkout.”

The technology can also support fulfilment operations by merging stock for delivery.

Clipper’s Mannix says: “You have to look at the inventory in the widest sense, and the use of RFID means that not only do you know what the stock is, but you know where it is and if it is in a sellable condition. Visibility of the stock means that it works harder.”

Blockchain technology

Retailers are already looking at distributed ledger technology – the most notable system being blockchain, the secure system behind crypotocurrency Bitcoin – where digital data is decentralised, shared and synchronised across territories, organisations and sites.

Blockchain is already attracting the world’s biggest retailers, as it can bring more visibility to the supply chain. Walmart is trialling food traceability using this technology in association with Chinese retailer JD.com, the University of Tsinghua and several multinational food brands. JD.com also launched an accelerator programme for artificial intelligence and blockchain start-ups last month.

It is still very early stages for the development and acceptance of blockchain technology

Andrew Robb, Farfetch

Fashion specialists may not be that far behind. Retailers are experimenting with blockchain technology to remove the opacity of the supply chain, although the technology is still at the bleeding edge.

“It is still very early stages for the development and acceptance of blockchain technology by the broader consumer market,” argues Farfetch’s Robb. “And cryptocurrencies have challenges as a trading currency because of their high volatility, but, as they mature this, could become an emerging payment method that our customers ask for.”

Point’s Naus says the technology can bring transparency, improve governance and visibility to the supply chain, including of production: “The security that it can give to transactions is critical.” He cites the example of retailers at head office being able to monitor the production standards at subcontracted suppliers.

Other services using blockchain are beginning to emerge. UK tech firm Omnitude, which has raised $4.2m (£3m) to build its system, is this spring launching a service that has the potential to both personalise online orders and allow retailers to integrate existing systems into blockchain technology.

Chief executive Chris Painter says: “As a customer, I will be able to put my body measurements onto the system, and then every fashion retailer also in the system will be able to supply the correct size.” This, he says, will cut down on returns because of sizing problems.

The final mile – delivery and returns

It is in the final stages of delivery and returns that both retailers and logistics companies are looking for further innovation. Amazon is trialling drone delivery via Prime Air in the UK, and has also been namechecked by Toyota as one of its associates on the development of driverless cars.

“In terms of the future of logistics and the delivery process, I think [ride-hailing app] Uber and driverless cars are the most innovative channels,” argues Temple. “If either could pick up and deliver merchandise to customers, it would be an incredible benefit to our delivery process. The whole infrastructure for driverless cars is already there, it just needs to be adapted to ensure the most cost-effective and efficient delivery service to customers.”

Seko Logistics’ Muir predicts there will be more work around the consolidation of deliveries, especially in large cities, where bots could eventually be used to deliver products from a variety of retailers to blocks of flats. She also sees the further development of customer-facing courier apps that enable customers to track and manage their deliveries.

With at least one in every four online purchases returned, there is a real need for innovations that enable making a return as convenient as deliveries

Bots, drones and blockchain might still be some way off, but technology is already transforming logistics. Retailers must ensure they ahead of the curve in order to keep up with customer’s sky-high expectations.

Readers' comments (1)

  • Making stock work is key, there are to many retailers segregating stock for different channels. We need to maximise sales, free up cash and fulfil customer expectation.

    If your stock works harder customer orders increase and so does customer satisfaction.

    How many trading meetings have we all sat in to find out sales were down because we were out of stock, but store x and y have it, how many disappointed customers.

    Through deploying shared stock, in one year a client grew from £500k to £12m. - The power of stock...

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