When supply chain directors were asked what their specific logistics priorities were, cost efficiency features prominently, with agility, efficiency, lead times and speed to market the other recurring watch words.
As published in Retail Week & DWF Supply Chain: Trends and Innovations in Retail 2014-15 report
Automation and Technology
The news that within the next five years Amazon believes it might be using unmanned drone helicopters for customer deliveries underlines the role that automation and technology play in modern retail logistics.
As discussed in the opening chapter of this report, there is much admiration for Amazon among the retailers interviewed. However, those who commented on this innovation remain un-convinced about the online retailer’s drones.
While there is always scope for revolutionary thinking, a supply chain director at a major national retail group emphasises the need to take a pragmatic view towards logistics automation. “Automation for automation’s sake is not the agenda, whereas automation that will drive commercial benefits is,” he says. The same applies to Radio Frequency Identification (RFID), he suggests. “We wouldn’t be looking at RFID because it is too expensive.”
Other retailers interviewed for this report had similar reservations about RFID. “I’ve investigated it [RFID] twice over the past five years but for us it is still cost prohibitive,” says a distribution director of a department store operator.
While the logistics director of an online retailer believes the technology offers benefits, he says these benefits currently do not justify the investment. “When people start to get RFID and use it properly that will improve efficiency,” he says, but adds: “Scale-wise we could really use it but it would be competing against a system that is already very efficient. I would love to introduce RFID but I would have to have a compelling case as to how it is going to help me operationally.”
“In my view, RFID will never replace the barcode, but I think something will,” says a distribution director of a department store operator.
There is far greater consensus around the benefits of warehouse automation. For example, a distribution director at a department store operator says automation in picking “drives down costs”, and “gives us a level of accuracy that you don’t get from manual warehouse solution”.
Warehouse automation carries advantages from “a cost and efficiency point of view”, says the logistics director of a fashion retailer, but the challenge is to keep automation working. “Maintenance costs are high and when it does go wrong it is very difficult to recover.”
Innovation in collaboration
Innovation of course is by no means restricted to technological advances. When the supply chain directors interviewed for this report were asked where they feel there will be the greatest innovation in supply chain, the responses naturally reflected the importance of multi/omnichannel evolution. Multichannel was chosen from among the list of ten areas by 40% of the sample. Interestingly, however, just as many of the respondents nominated collaboration as an area where they expected the greatest innovation to be going forward, including collaboration in logistics.
“There is definitely scope for collaboration,” says the distribution director of a fashion retailer, adding that his company had already made some progress on this and would be looking to do more.
“Competitors could share back-office activities in order to improve costs and efficiencies. They could share our delivery resources. It doesn’t have to be competitors either but it has to be compatible traffic that you can merge with your own fleet.”
With regard to collaboration between retailers, a distribution director at a high street operator adds: “We are not seeing a huge amount of collaboration at the moment between retailers but I think we will in future. Retail collaboration is something that really excites me.”
A specific collaborative challenge highlighted by a supply chain director at a major specialist is for retailers to work together on moving more freight on to the rail network.
Watch out for our next blog post which will look at the key priorities for sourcing and supplier relationships.
If you have any questions or would like more information, please contact Hilary Ross Partner & Head of Retail, Food & Hospitality sector.This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.