In every great business there is someone making sure the logistics tick along smoothly. At John Lewis, that man is Dino Rocos.
With a seemingly endless number of daily reports flooding in celebrating the stellar growth being experienced in ecommerce, via newer channels such a mobile, or demand for in-store options such as click-and-collect, there’s little doubt that multichannel, or indeed omnichannel, has become the buzz-word du jour. However, those products aren’t getting from a to b as if by magic. Behind the glossy front-end of that story lies a slick, well-oiled machine, engineered to make the whole thing run like clockwork.
Funnily enough, engineer is exactly the word John Lewis’s operations director, Dino Rocos, uses to describe himself as we sit down at the retailer’s headquarters on a rainy day in Victoria, London. “I often describe John Lewis as a business populated with artists and engineers. I think the logistics function within the business is much more about engineering, and the front-of-house, the selling, or ‘theatre’ if you like, is more for those who have an artistic leaning. Some 10 years in I realised what my calling was,” he says.
It was on a similarly rainy day in 1976 when by chance Rocos sought shelter in the Peter Jones department store on King’s Road. He was so taken with the welcoming environment, that an initial six-week Christmas temporary contract subsequently spiralled into 36 years at the business, 25 of them on the supply chain side. Today he finds himself at the helm of one of the country’s leading multichannel businesses, charged with making sure the back-of-house machine runs smoothly, the shelves are stocked, the deliveries are on time, and customers get the goods where and when they expect them, nigh on 24 hours a day.
Rocos is honest about the scale of the challenge, though, saying that the rise of multichannel has completely changed the operations side of the business. “25 years ago the logistics function replenished a shelf on the selling floor. Now we do that to much tighter lead times than we ever have done before, and we service the customer directly in their home, in a way that just didn’t feature in times gone by.”
He adds: “The challenge for us is not to run two supply chains – one for the branch and one for the customer – but to move beyond that to a single supply chain which does service the customer’s need, however it’s represented to us. It’s just much, much more complex than anything we ever imagined it could be.”
With online sales set to top £900m this year and high customer expectations based on the retailer’s strong reputation for customer service, efficiency is vital. As early as 2003 John Lewis began looking at ways to support potential multichannel success, and considering options such as automisation to improve efficiency and save costs and facilitate faster service. John Lewis subsequently opened a semi-automated NDC at Magna Park in Milton Keynes in 2009. With about 50,000 orders a day moving out of the site, it is now spread over some 820,000 sq ft, and approaching an investment of £100m. “That investment is really serving the whole business. And it’s doing it with a degree of efficiency that justifies the investment and allows us to deliver the sort of speed that customers expect.”
With greater numbers of consumers demanding speedy delivery, John Lewis experienced a ‘tipping point’ in the middle of last year, with 50% of its online business falling into the premium order category, which is more costly to provide and up against time constraints. “We’ve been able to achieve it because we’ve been growing each year, but it does mean it’s a very different, and very uncompromising environment. So when it goes wrong, do we hear directly from customers, late at night, early in the morning? Absolutely we do.”
Rocos estimates that the John Lewis’s online sales will top £1.2bn next year, and the business is already looking at ways to drive further efficiencies.
Dean Wyatt, vice-president business development for Retail at logistics firm DHL, says meeting this demand can be a challenge, and multichannel retailers will need to “keep the flow of products flowing. Stock holding will be the key issue as stocks could be depleted very quickly or left if not sold”.
Another director of a logistics firm warns that the major problem facing multichannel retailers is the unpredictability of online orders. “If a retailer traditionally had 80% of their deliveries to store and 20% for online, they pretty much knew how that 80% played out. It would be a big peak in October as they got stores ready, another one in November and a bit of topping up in December maybe. Now for 50% of your output you’ve got no idea what pattern it’s going to take that year.”
Critics have warned that the current online model is “unsustainable”, and that prices will need to increase. Rocos challenges this and says carriers should focus on investing in improving efficiencies, and retailers should be helping them do it. “If we could align ourselves to say ‘actually, we will interface with carriers in a given way’, we could help them avoid having different solutions for each retailer and deliver efficiency that we would all gain from.”
Perhaps one of the key challenges facing multichannel retailers is how to maintain brand integrity via third-party deliveries that are out of their control, and ensure that the customer’s purchase experience is on brand and still feels ‘special’ upon receipt of delivery. John Lewis works also with logistics providers Clipper and iForce, and Rocos says retailers need to ensure service providers know what their proposition is, and find a way to differentiate their service. “One of our differentiators is the fact that we will – irrespective of the product type – make every attempt to consolidate to a single delivery, so we don’t inconvenience our customers.”
Rocos doesn’t rule out the idea of adopting one man parcel deliveries as part of the John Lewis fleet as the business grows, but says this has to be balanced against cost.
John Lewis’s click-and-collect service has been a runaway success, and is now approaching 40% of all online sales, something the business could scarcely have imagined two years ago. Rocos says this is where the business is focusing its efforts, rather than launching a Shutl-style 90-minute service, for the moment at least. “One of the most interesting things is that process of distilling what the customer expectation is and what their preferences are moving forward. So do I think at some stage sourcing directly from branches with a 90-minute service is a possibility? Yeah, absolutely.”
Going forward he says agility is going to be key. Rocos has been reviewing John Lewis’s supply chain to identify opportunities to improve operational efficiency, and says the business will invest further to this end. With a knowing smile he declines to reveal the details or scale of that investment.
Summarising, he says the rise of multichannel has transformed logistics and supply chain from being a necessary evil to being critical to the success of any retailer, before adding: “It is much more complex, much less compromising than it ever has been. It’s fair to say less sleep at night on most nights of the year, but rewarding when you get it right. There’s nothing like doing something difficult well.”