( This article is excerpted from the complimentary report
Optimizing the Customer Experience with Exceptional Home Delivery,
available for download here. )
In part two of this series, we looked at how continuous optimization can improve the way home delivery choices are presented to customers. Here we look at three more areas of opportunity: integrating logistics and commerce platforms; broadening, integrating, and optimizing mode selection; and integrating inbound and outbound logistics.
Integrate Logistics with Commerce
The implication of the information and technological changes we are suggesting is that a logistics network becomes blended or integrated into the retailers’ own commerce systems. With today’s web development and systems standards, web services,1 and cloud integration, this type of blending of retail and logistics systems is possible.
This integration embraces the total customer experience. Rather than treating logistics as a hand-off, the order is both product and service and positioned as part of the choices customers make, much like any merchandise choice: for example, a computer with or without speakers, and with or without home installation. Web development tools today can enable this kind of integration.
In the background, the continuous optimization process is reviewing existing plans and options and can dynamically offer service and delivery choices based on a reality — not static assumptions. This provides the customer with choices and provides the retailer with the opportunity to offer up services that are more cost effective or revenue generating.
Integrating the ‘home delivery’ software to commerce may include information from CRM, customer history, or loyalty data. Premium customers are recognized and the retailer can provide services to those most valued customers, even when this order may not hit the price threshold for reduced rates.
Most importantly, it integrates logistics in a way that allows for the consumer analytics and evaluating commonly done in web commerce. For example, retailers can see what prospects are searching for, dwelling on, and so on, for logistics services. Today only a few retailers have this capability2 to take analytics such as customers’ sentiments and preferences, apply them to services, and update offerings and polices accordingly.
Make the Logistics Network Central
Besides changing ordering processes to include this real-time, continuous model, there is the use of a logistics network. The network is central to widening that decision space to seek out and take advantage of other available options.
Within their own fleets, retailers or carriers can broaden then own assumptions and mode shift. Though we often think of parcels being carried on vans, the reality is that there are often opportunities to ‘hitch a ride’ with a larger truck, leveraging an existing route. For carriers who are now providing these broader services from long haul, LTL, parcel, and courier, this can easily become an option. The network, though, provides a method to leverage the whole marketplace as well as the private fleet. There are often carriers who service that route better/cheaper than one’s own fleet (especially if this is the occasional route).3 In a network, for hire options can easily be considered.4
Mode shifting and widening the decision space allows shippers to constantly evaluate the best rates, carriers, and so on. For example, retailers can leverage existing carriers who have a route to their customer’s locale. Rather than incurring that $8 parcel carrier’s charge, a small parcel could likely get on board an LTL carrier who goes to that location often and who will charge half that. For large items — home appliances, furniture and so on — rather than using their private fleet, a retailer may leverage an LTL who has a daily route and can provide faster services. The retailer not only gains faster shipping services, but does so at a significantly reduced price.
Retailers often have policies about where they ship to and what services they provide in certain territories. Carriers derive their pricing and policies based on capabilities (drivers, inventory, vehicles, and so on) in that locale. However, on the web, customers can come from anywhere. And if they are comparing (and they are) delivery terms, retailers may want to get services and pricing in line with the local market, when possible.
Retailers’ and wholesalers’ year-end financial reports showed a dramatic and consistent growth in online business. So they need to think more broadly about how they can support and sustain that growth. Retailers should be evaluating the density of business in a locale and then developing the capabilities to service it. This takes retailers beyond just a merchandise promotional mindset to one that encompasses the broader definition of their business model.5 The investments can be large, but can often be offset by partnerships with suppliers, 3PLs, and carriers. This may seem obvious, but those who rely on parcel carriers alone, or for larger items have their own private dedicated fleets, may be missing opportunities to broaden their customer base. Networks allow for the evaluation of many carriers and their capabilities for broader services — dynamically or strategically. Retailers can scan the network, leverage the players, and make decisions.
From the service provider’s perspective, it’s a great time to think about how to acquire additional customers, gain additional revenue in existing routes or leverage empty miles or warehouse space. An entrepreneurial carrier within a network can offer a service in a locale that they know a retailer’s fleet may be loath to service.
As we have described, managing the Omni-world with a network provides a panorama of more opportunities — more business — for many players.
Integrate Inbound and Outbound
In Retail logistics, inbound and outbound are managed as completely distinct activities. But with Omni-channel, retailers are not just rethinking their DC and warehouses; they are spending millions on new warehouses, equipment, technologies, and new systems.
From a logistics perspective, this opens the decision space — and the physical space — to potentially include LTLs who are delivering to a desired facility. For example, the next stop on their route may be to the retailer’s customer locale. This could be a win/win for both parties and the costs would reflect that. Within a network, this broader perspective is possible. So physical logistics flows, pooling/consolidation or new DC models should consider these options as well.
Conclusion: We Have to Find a Better Way!
For retailers to become profitable at home delivery, logistics services should enhance the value of the order in the eyes of the customer and thus deliver more revenue to the retailer. To do that, the system has to offer the customer more choice by redefining the order as both product and delivery.
It won’t be easy. To do that we can’t subject consumers to the way transportation and logistics departments work today. Those complex, convoluted, multi-stage, multi-systems that embed long time delays in planning, booking, tending and calculating fees won’t work for consumers. It is amazing that the industry has put up with that for so long. The TMS market has grown up to be a very complex world, but that mode won’t work in the consumer world. Though system messes are often hidden from consumers, the results are not hidden at all: the late or faulty deliveries which irk customers or unprofitable routes with expedited shipping which lose money for retailers. This has to change if everyone in the process is to win.
In home delivery, systems have to be consumer friendly in order to succeed. Today, the market often uses the phrase the consumerization of IT. This is surely a goal that retailers should strive for. We can see Omni-channel/home delivery as a catalyst — a wake-up call — to streamline logistics and improve the information infrastructure in order to address the changing demographics and customer preferences.
Besides logistics networks with many thousands of members, organizations can acquire business process extensions that easily build workflows and integrations between trading partners. Rather than forcing businesses to use technical language for API and EDI jargon, these extensions are presented in business language whereby users easily define the work tasks or processes they want to enable, as well as the end-points — customers, partners and destinations systems. This approach is a welcome addition to the complex multi-threaded world of retail logistics in which so many players have to be connected and their tasks executed to ensure success. This is a click and connect paradigm that a new generation of users expects. It has just the kind of simplicity in presentation yet thoroughness in technology that is needed as so many more partners require more from one another.
For service providers, Omni-channel can be a breakout moment. Many have been searching for new services they can provide to differentiate themselves from the pack and gain new revenue streams. Service providers need to ask, what is the portfolio of services that can be offered to customers? To do that they not only need to understand the retailer’s business, but also the consumer market. In this way, they can assess the real demand for these services and create a methodology to profitably partner with the retailer to create a winning strategy for both the retailer and themselves.
It’s time to grab the mantle of the Omni-leader in logistics and do it now since retailers will want to know: Who’s best at this? Who can contribute to our strategy and help meet the consumers’ increasing performance expectations? Who can quickly integrate their services into our processes?
For the retailer, the fundamental question is who will define retailing for the next generation? Omni-channel is a competitive threat and, if done well, a way to differentiate oneself from the competition. Disruptive merchandising ideas are taking hold and attracting a new generation of customers. Retail business models depend on more dynamic service models. If customers consider service to be as important as merchandise, then retailers’ delivery methods can’t be an afterthought. Delivery has to be purposefully designed in, just like stores and merchandise.
Now that the genie is out of the bottle, there will be more changes as the digital transformation of society becomes all encompassing. For retailers, home delivery is a pivotal element of this generational change. Retailers need to not only develop processes that are in step with what consumers desire, but do them profitably. The alternatives are — well, there are no alternatives. The retailers’ own survival depends upon it.
1 HTTP, SOAP, REST Architectures, and so on — Return to article text above
2 John Lewis, in the UK, is such an example. In 2015, John Lewis, a ubiquitous brick and mortar retailer, reported that 40% of all their sales are now online. — Return to article text above
3 In addition, the private fleet may already be exceeding capacity or is being routed to other locales. — Return to article text above
4 For more about private fleet or for hire read: Unifying the Private Fleet with Purchased Transportation. — Return to article text above
5 Services should be evaluated in a manner similar to the way in which retailers make decisions to locate stores — based on demand, store size, store format, and so on. Here, the merchandise demand — or potential demand — is coupled with the kind of services that should be offered with it. After determining who the competitors are in a territory and what they offer, these answers and other elements can help determine further investments. Pilots are frequently done to determine the viability of these plans. — Return to article text above
To view other articles from this issue of the brief, click here.