Over the past 15-20 years, retailers have dealt with more disruptive changes than came in the half century prior to that. The emergence of online shopping and customers’ sky-high (and climbing) expectations have put a tremendous burden on retailers’ supply chains.
Three retail supply chain thought-leaders from disparate industries came together to discuss these challenges and the solutions they have found during a panel at NRF 2018 Retail’s BIG Show in New York earlier this year. This article recaps the panel discussion, breaking it down by a few prominent themes including a customer-first mindset, same-day shipping, inventory visibility and the battle between brick-and-mortar stores and internet retail.
Building Everything Around the Customer
Tim Lowe, president of regional grocery chain Lowes Foods, has one fundamental belief when evaluating any technology for his business: does this provide the customer something he or she is asking for? Lowe sees that customer-first mindset as critical at a time when it is easy to chase the latest, greatest software without a clear end goal. Furthermore, any technology you invest in must work hand-in-hand with your existing systems to support your business not just a year or two down the road but 5 or 10 years into the future.
An increasing number of online orders justified the need for HighJump’s in-store fulfillment solution. Lowes Foods wanted to provide an outstanding customer experience regardless of how shoppers interacted with the brand, whether picking up orders in-store or opting for home delivery.
Michael Wacht works at a company with a much different business model but agrees with Lowe’s philosophy. Wacht is the executive vice president of marketing and operations for Helm Inc., a provider of third-party fulfillment and branded merchandise for high-profile clients like FCA, Ford and Domino’s Pizza. Helm pushes out 90-plus percent of its orders same-day to serve over 30,000 franchisees and one million consumers, so when the business adds a new piece of technology, there must be a convincing case for it. He also notes that integrating all these tools is essential to giving his customers what they want.
Helm replaced its homegrown warehouse management system (WMS) with HighJump’s WMS because it could offer a higher level of service to the company’s fortune 1000 clientele. Inventory accuracy needed to be as close to 100 percent as possible and time-to-ship times shorter to keep pace with client needs.
Similarly, Michael Luckett, a third-party consultant to national retailer Conn’s HomePlus, sees supply chain execution solutions as the enabler for filling any gaps. Conn’s needed to deliver appliances, furniture and electronics to customers more quickly and move inventory faster. A new warehouse management system would help the retailer – currently utilizing a hub-and-spoke model with large DCs, cross-docks and stores – work toward those goals, which is why it implemented HighJump WMS in the Cloud.
The end goal for all three businesses – a grocer, distributor and large retailer – is to innovate in a way that provides a better customer experience and ultimately a differentiator from the competition.
Finding Creative Ways to Drive Speed and Efficiency
Seventy percent of Helm’s business is B2B, however, customers expect Helm to offer the same experience a consumer would enjoy shopping on big box retailer, Amazon, or Walmart.com. Wacht’s customers want orders shipped same-day, delivered rapidly, and damage-free.
Wacht has seen order accuracy surpass 99.99 percent and 90-plus percent of its orders ship the same day they are received, the result of continuous supply chain optimization. Helm’s order management system takes snapshots of current inventory every 15 minutes, then compares that to sales forecasts to see what products could potentially sell through to avoid an out-of-stock scenario. Warehouse associates perform physical inventories and re-slot items for any flagged items to ensure correct inventory counts and achieve maximize pick efficiency.
One of Helm’s most consistent sellers are vehicle owner’s manuals, warranty guides and entertainment guides. Data showed that these orders averaged only 1.2 lines, and the 3PF ships 300-500 of these orders per day. Wacht and his team developed a process they call “slapper labels” – shipping labels are printed, scanned by the picker to provide details on item location and quantity and the manuals are picked straight into the shipping envelope. Just like that, it is ready to go on a FedEx truck. This approach more than doubled the number of orders fulfilled per hour.
Conn’s needed to improve inventory accuracy to offer better customer service. With that goal in mind, the retailer developed a process for third-party delivery drivers to request a replacement piece at the warehouse if the first one picked is damaged. The driver notifies a warehouse leader of the damage and then the damaged piece is scanned, which triggers a request for the warehouse associate to grab a new one and routes the faulty product to an area of the warehouse for damaged pieces. That keeps inventory numbers accurate across the board.
A unique aspect of Conn’s business model is that customers can pick up their appliances or furniture at warehouses. Luckett’s team configured the WMS to push any customer pick-up orders to the top of the warehouse queue. That cut average fulfillment time for these pick-ups in half. In addition, Conn’s now offers customer pick-up at its numerous cross-docks, making this a viable option for more shoppers who do not live near a main warehouse.
Online orders account for about twice the percentage of Lowes Foods’ total orders compared to other grocers. The in-store fulfillment solution guides Lowes’ “personal shoppers” on the most efficient pick path based on that individual store layout and ensures the order is ready when the appropriate window arrives. The system also pushes out updates to customers so they know the status of their order and manages substitutions. Inventory must be completely accurate for this system to be effective.
Lowes reduced picking times, increasing margins as online orders account for an increasing portion of revenue. And most importantly, the software facilitates a positive experience for the customer that will encourage many more return visits.
What Does the Future Hold?
In Lowe’s eyes, the modern retail environment is not a battle between physical stores and eCommerce. He thinks Amazon’s purchase of Whole Foods last summer shows that even the retailer everyone is looking up to sees great value in brick-and-mortar stores. The problem is not the store itself, but the lack of focus on making these stores an appealing place to visit. “The customer is king” cannot merely be a tagline – it must shape retailers’ strategies when they design stores.
“If you look at the retail environment that we live in today, it’s not that the retail store is dying. It’s that the retail stores are apathetic,” Lowe said. “And what they’re not doing is they’re not focusing back on the other attributes, what is it actually going to take to go and grow?
“You hear it time and time again, people say ‘our customer, our guest is the first and foremost focus point and that’s what we’re really focused on.’ But at the end of the day, what do they talk about at all their meetings? They talk about the competition and what’s the competition doing and what’s happening there? You got to keep your eye on the competition, but if you don’t know where the consumer’s going and you don’t know what’s most important to them, then you’re going to lose.”
Additionally, Lowe thinks “dark stores” will become more prevalent as online grocery grows in popularity. These dark stores would exist solely for employees to fulfill online orders so items can be laid out and orders consolidated in a way that maximizes efficiency. Not to mention, the space for these stores would be exponentially cheaper than retail space.
Luckett, the Conn’s consultant, thinks every aspect of the supply chain must become part of a feedback loop that keeps the customer front and center. This further drives home the theme of consumer satisfaction where any change should be executed with the ultimate goal of keeping consumers happy.
“Any time something goes wrong for the consumer,” Luckett said, “it should spark action within the organization to prevent the problem from spiraling into a bigger issue. Ignoring issues will hurt long-term loyalty and open the door to an ever-growing list of competitors.”
In the future, Wacht stated that Helm is working to enhance its omnichannel strategy so its products are available in all places, all the time. For example, Helm now sends branded merchandise to Jeep dealerships as another sales point. That provides a solution to a customer who wants to buy a hat or t-shirt of their favorite brand while waiting for service or purchasing a vehicle.
In the same vein, Wacht sees a need for greater supply chain transparency for consumers. They need to know where the desired product is available so they can purchase it as quickly as possible, with as little hassle as possible. People have busy lives and convenience is king today. An endless supply of tools and the emergence of the Internet of Things will allow 3PFs like Helm, retailers and other business to meet these customer demands.
“I’m excited about the future, I really like the way things are going,” Wacht said. “We have more tools at our disposal than we have at any time. You walk through a show like we did here the last three days and you can’t walk fast enough to see all the opportunities in front of you. So trying to pick the right investment and apply it at the right time so it can at least serve you for a couple years, get some ROI and get some experience behind you, is critical.”
Retail has already undergone a total transformation and it will continue to change. But all three NRF panelists, each of whom have decades of experience, share the belief that your supply chain must be built and revised with the customers’ best interest in mind. That should be something you take to heart as you build a strategy for today and tomorrow.