The online retail revolution – view from the inside

Neil Adcock was there in the early days of online retail when sales were small and most operations treated online as another ‘store’. But when things started to move, they developed rapidly.

Neil explains: “We were saying ‘let’s start this thing and see where it goes’. Very quickly we started to see exponential volume growth, and we saw consumer behaviour rapidly change. Initially next day delivery was a luxury for those prepared to pay for it, but fast and free delivery began to grow into an expectation, which further fuelled growth.”

For those in the logistics centres tasked with meeting this need, it was a hectic time, as they ran to keep up with this unexpected demand.

Neil says: “It was pretty exciting stuff for us, because we were thinking ‘how do we manage this?’ For example, we took on a facility for one retailer that was built to reach capacity within five years. By Year 3 it was full, so we had to be agile, installing mezzanine floors, for example.”

The market was also less used to the ramifications of sales. Spikes were a lot more pronounced and logistics had to run to keep up and sweat the assets.

“What was also exciting from an operations perspective was watching boundaries fall,” Neil enthuses. “As critical mass was achieved, we had he opportunity to get more sophisticated to improve productivity – revamping pick regimes and packing differently, for example.”

Over time, the approach began to shift from reacting to keep up, to understanding the trends better and being more proactive.

“In the face of this historic growth, we had to put the infrastructure in place to cope with projected volumes, thinking about Year four and five as well as Year one.”

Another important point to make is how growth varied from time to time and retailer to retailer. It’s not just about volumes, it’s also about range of SKUs, product sizes, consolidation of orders. These things, as well as growing volumes per se, all have an impact on logistics processes and the types of storage and handling equipment you need.

Neil explains: “You need to ask probing questions, so retailers understand the ramifications of their plans. 

“Extending this further, you need to look upstream in terms of how they procure. You’ll start to see trends such as, many retailers responding to offering broader ranges online by storing fewer items, to avoid stock levels mushrooming.

“This then moves towards an Omnichannel approach with a single view of stock, which requires very robust IT systems with strong visibility, and well thought out processes that work out which orders have priority and when.”

Automation

As well as looking more intelligently at managing retail stock, this growth has also led to renewed focus on productivity, with the UK starting to catch up with mainland Europe in terms of mechanisation and automated solutions.

The use of carton erectors, auto-bagging machinery, putwalls and conveyor runs can positively affect the cost per single being processed.

“The payback isn’t quick but if retailers are prepared to make long term investments, it can pay back well. The key to long term investment in systems, is to build as much flexibility into the solution as possible to cope with changes that will occur.”

See the boxout for some extra tips from Neil on the pitfalls to avoid when installing automation.

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The rise of online retail has also shifted the emphasis in terms of skills needed in the supply chain, with more roles focused on obtaining a holistic view and making sound strategic decisions.

“As well as pushing efficiencies in the operations, which is absolutely essential, you need someone who can take a step back and take a helicopter view, considering how the business might change in the future and how best to prepare for it.

“Sometimes that's where we get involved. The day-to-day staff will have detailed and valid tactical menus of cost savings they're delivering but we can provide insight into what's happening elsewhere in the market and how operations tie into the upstream world of supply chain and inventory.”

As for the future, Neil does not see constraints in eCommerce in terms on what logistics can deliver.

“With the Omnichannel approach, the really good retailers are blurring the distinction between online and store with Click & Collect and making the store more of a destination. I see the future of eCommerce being shaped by consumer demand.”

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