It is no surprise that when the discussion turns to innovation in supply chain, the prospect of Amazon making deliveries using drone helicopters provokes some interesting remarks from the supply chain professionals interviewed for this report. That Amazon has been “piloting” unmanned helicopters as a possible delivery option already suggests something of a subeditor’s paradise, and it would appear that supply chain directors also cannot resist a pun.
As published in Retail Week & DWF Supply Chain: Trends and Innovations in Retail 2014-15 report
“A lot of people are talking about drones as being the great future innovation but I can’t see it. I can’t see that getting off the ground,” says a supply chain director at a department store operator. “Amazon are just flying a kite on that one. It will never be cost effective,” the distribution director of a fashion chain adds.
A supply chain director at another major national retailer also remains unconvinced. “Amazon have created a great talking point with drones and got themselves a lot of publicity but I don’t think something like that will be mass adopted until it becomes very cheap,” he says. “On the other hand driverless motorbikes and vans might be an answer.” The fashion retailer disagrees. “Driverless cars and motorbikes are hokum too”.
In spite of some consensus that drones will not be cost-effective, history suggests ‘never say never’ when it comes to cost effectiveness and technological advance. Virtually without exception technology becomes cheaper over time and it is quite possible that something prohibitively costly today will be affordable and cost-efficient in relatively short order.
The retailers interviewed for this report were asked where they expect the greatest innovation with regard to supply chain to take place going forward. The responses reflect the dynamic areas of supply chain development identified in the preceding five chapters.
Customer top of mind
Not surprisingly, multichannel was identified as an innovation hot spot by a third of the executives, while online fulfilment and expanding fulfilment choices was also singled out by a third of the retailers as an area likely to attract most innovation. The two areas overlap considerably, as this comment from the supply chain director at a supermarket operator suggests: “Most of the innovation will be in multichannel and omnichannel and it will be around services to the customer. The customer proposition is at the front of all retailers’ minds.”
The same link is stressed by the logistics director of an online retailer. “The fact that most retailers are all about customer focus and speed to market will mean it will be the multichannel option that will attract the investment in innovation,” he says.
“Personalisation” is a term increasingly used when describing the broadening of fulfilment options for consumers, as well as product development. “Customer expectations are extreme,” says the supply chain director of a fashion retail group. “And there is a limit to how fast retailers can evolve and change. I’m thinking in terms of product range and things like that. But innovation in personalisation will happen fast, whether it’s on the product itself or whether it’s about the service.”
A supply chain director at a department store operator adds: “I think the greatest innovations will be customer focused innovations, the tracking side of things and the ability to deliver to customers wherever the customer is. I think in future customers will be able to have goods delivered to their office or a restaurant or wherever the customer chooses. There will be greater variability and flexibility. The customer will have more authority and will demand much more.”
A department store distribution director goes further. “Home delivery will largely disappear,” he suggests, “because retailers will see where their customer is on an app, and if she is in Starbucks they will deliver it there.”
The degree to which home delivery may be replaced by anywhere-delivery is open to question. However, the supply chain director of a fashion retailer believes wherever the product might be going, it will be the retailer picking up the tab. “I think the consumer will eventually refuse to pay for delivery,” he says.
Grappling with big data
The significance of automation and technology was also reflected in the responses, with 34% of the retailers identifying either technology systems or data management as areas where innovation will be seen.
One consequence of the development of technology systems is the growing amount of data retailers collect. “Most large retailers have a large amount of information but not many know how to make the best use of it,” says the logistics director of an online retailer.
A supply chain director at a major national retail group says the proliferation of data means retailers are having to “rewrite the rules about how analysis is done”. With so much data available, the danger is “analysis paralysis”, he adds.
For one supply chain director at a major retail group, addressing effectively the challenges big data poses will be one of the factors separating the winners from the losers going forward. “The impact of data is massive,” he says. “How we translate that data is crucial to managing our supply chains effectively. The speed with which we can get information and interpret it is key. It will determine which retailers are going to win on this playing-field.”
Watch out for our next blog post which will look at innovation and collaboration in supply chain development.
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.