Comment: Robotics and automation entering retail supply chain

Last year was tough for the majority of retailers, with many seeing increased pressure on costs and margins. At the same time the industry was also trying to deliver the much-vaunted multichannel shopping experience by transforming business models and supply chain capabilities, as well as investing heavily in merchandise, demand planning and warehouse systems.

In the last quarter of 2014, retailers' supply chain capabilities were again put to the test as many more participated in new trading events, such as Black Friday and Cyber Monday, than in 2013.  These events are now well established in the retail trading calendar, with savvy shoppers keen to grab heavily discounted electrical and non-food bargains ahead of Christmas.

However, not all went as planned. Many retailers failed to cope with demand peaks, especially on Black Friday. Performance was so badly affected that some retailers did not fully recover in time for Christmas, despite lower demand than normally expected at that time of year.

Many retailers did not fully anticipate the success of Black Friday and Cyber Monday marketing campaigns. The disruption was compounded further by the fact that online sales continue to grow steadily, outpacing growth in physical store sales. 

The Christmas period saw website crashes, crowd control issues in stores, delivery delays, poor order visibility issues, and in one or two extreme cases, companies folding into administration under the combined weight of current trading pressures.

Many commentators have claimed that extensive discounting seen on Black Friday has disrupted the timing and rhythm of Christmas spending. This has created a new peak for trading, which was the highest sales peak seen during the golden quarter for some retailers.

For John Lewis, Black Friday was the biggest ever week for sales in the department store’s 150 year history. Online sales broke records on the day itself and during the early hours of trading it was reported there was a 300% increase in traffic to their website.

Our research also shows that more consumers used next day delivery this year (15%) compared to last year (11%) and volumes peaked at a higher rate and earlier than retailers had planned for.

As a result consumers were left waiting longer than promised to receive their goods and in some cases did not receive them in time for Christmas. Social media was awash with complaints as consumers rushed online to vent their frustrations.

So what went wrong? And what do those retailers affected this year need to do to avoid a similar situation next Christmas?

Here is our view on the areas that retailers should focus on during 2015:

Plan early - Preparation for this year's events should already be taking place.  Information from 2014 is still fresh.  Some of the mitigations may require long lead time planning in order to put effective systems and processes in place.

Collaborate more openly with logistics partners – In some cases last year capacities were being exceeded by more than 150%, which would test even the most flexible supply chains. Improving information sharing will help pinpoint weaknesses and development a more holistic understanding of likely trading patterns and volumes.

Improve agile delivery – Pressures on deliveries this year reiterated the importance of spreading risk. Retailers with multiple partners were able to divert pressure at the first sign of trouble, in some cases waiting to the point of processing (and not when demand was recorded) to assign a logistics route / partner. 

Consider your service proposition – Do heavily discounted bargains really need to be delivered on an expedited/next day service? Are your supply chain systems and those of your delivery partners geared up to provide accurate and regular delivery status information to customers? 

This year will see many retailers revisit the topic of supply chain agility and resilience.  Emphasis will be on using the lessons from last year, harnessing the wealth of data generated to deliver a more reliable and consistent customer experience. 

We predict 2015 will see interest in labour saving initiatives such as automation, use of robotics and better predictive analytical capabilities to model future events. We also think there will be more focus on developing delivery networks that consider near time information to aggregate delivery volumes and assign delivery methods at the point of consumption, instead of using predetermined rules.

Will retail have a successful Black Friday this year? Or will some customers still see red?

Toby Paxton is multichannel supply chain lead partner at Deloitte. Marlow Truman is a senior manager. Deloitte provides a regular Essential Retail column on supply chain technology.

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