As a packaging expert, I am closely monitoring the developments in the disruptive e-fulfilling. Recently, Intertoys made the interesting choice to stop delivering from one central distribution centre in Volendam, but to deliver customer orders straight from the stores. The stores will be getting a storage function to guarantee a quick delivery within a one or two-hour time slot. External delivery men will be delivering the parcels straight to your door. This is an interesting counter-movement in an era where centralization is the norm.
What challenges do we face?
The biggest challenge is controlling the supplies. It is important to use the expensive square metres in your store for showroom purposes and not as a warehouse. And how do you get the right number of products to satisfy both your online and offline customers? Preferably without investing too much in your stock. If your stock is too low, your delivery may be compromised as the nearest store may not have enough supplies. Or the shipping costs from different locations or priority delivery become too high.
Another challenge can be found in the last mile. This is the costliest part of the logistic process. Distribution centres ship relatively large volumes to both customers and stores. These are stacked on pallets or on roller containers for transport purposes and there is only one, or a limited number of stops per delivery route. Logistically speaking, it is more risky to deliver one parcel to just one address at a time. You have more stops, transport mixed goods and if things go wrong, it will often be during the loading and offloading. You cannot deliver on a pallet or roller container as this is not what the customer wants. Besides, the total volume is too low. So, we need alternative packaging solutions. Think about crates, boxes or bags, for instance.
Restocking is also more complex. Intertoys delivers directly from its stores but stocks these stores from a central warehouse. Consumer behaviour follows an unpredictable pattern, especially when this is analysed per store. Restocking is always about mixed goods in ever changing quantities. This is an interesting logistic challenge.
It is also prone to error. Not only when delivering (more stops, changing delivery addresses, mixed goods), but also when order picking. Is the staff ready to handle these logistic tasks? The stores do not have logistic processes, so this has to be built up from scratch. You will be needing specialised staff like order pickers and couriers.
Returns are the biggest obstacle in e-fulfilling. These particular chains are costly, especially if it needs to be addressed at a regional level. Sending returns straight to the distribution centre may be an interesting alternative, though it involves extra transport costs too as the returns need to be send back to the stores eventually.
An uncontrolled growth in packaging material is definitely something that has to be prevented. It would be highly undesirable, if each store had to handle the packaging themselves. They would be required to have a supply of packaging materials for every single possible product combination. Expensive storage room in the store is best used differently.
What opportunities do we have?
I have to be honest, this new strategy caught me by surprise. A distribution centre has its advantages. It allows you to keep an overview and it centralises your stock management. And the shipping costs for parcels are currently so low, that it is hard to best those rates. Yet, I see plenty of opportunities. This approach allows Intertoys to clearly distinguish itself from its competitors. Even major parties like Bol.com are still unable to guarantee a super-fast delivery at the moment. With 230 stores in Holland, an Intertoys is always close by. At the same time, Intertoys is able to service the offline customer as well. Other retail chains are increasingly focussing on online services. Intertoys offers the possibility to check the product in store, or to come and ask for some advice. A good supply will guarantee product availability to the customer, who does not run the risk to go home empty-handed. This is a wonderful example of both online and offline customer retention.
And although the last mile is more expensive, it offers plenty of opportunities to promote brands. You bring the product to the customer and offer services until it is delivered to their door. You are in complete control of the branding process
This strategy has the biggest chance to succeed, if Intertoys manages to create a good functioning stock management at a coordinated regional store level. This is the way to guarantee same-day-delivery, all in your own branded delivery van, or an e-bike if you like. You are always near. In my opinion, this strengthens your position against the big online players like Bol.com and Amazon.com. As the store needs to maintain a limited supply, it will mainly get a distribution function. The distribution centre continuously stocks the store, which is collecting the orders and will be delivering them to the customer within a few hours after ordering.
You need start thinking like a pizza delivery man when deciding upon the right consolidation times. Do you decide to deliver each order individually? Or would you rather wait until you are able to combine a few orders? What would be the optimum? You want to be able to deliver as many combined orders as you can, as fast as you can. This may create some tension between efficiency and reliability. The delivery numbers are usually small with a large number of stops on the route. And every single day you are dealing with different delivery addresses and new products.
My advice: start delivering without postage packaging
In this concept, I would advise to collect all orders in a sustainable crate when taking them out for delivery. This saves you the hassle of having an extensive packaging range. Online stores need to have cardboard postal boxes for every new order. But you will be able to combine orders in a sustainable crate. Boxes or bags are not sustainable, which is why I advise the use of a crate that can be used many times over. In a closed circuit, this crate always returns to the store and can be reused over and over again. A customer can bring returns back to the store or hand them in at the post office.
Make smart use of software solutions by FPC beyond packaging
In order to make this new strategy successful, insight and real-time predictability is a necessity. An intelligent ICT-solution that helps to create a sophisticated and viable logistic concept. This creates a real-time match between the order and the actual supply in store. FPC developed StackAssist, an ICT solution capable of optimising the supply chain in multiple ways.
StackAssist makes a precise calculation of the optimum timeslot to deliver all the collected orders. The program calculates the load factor based on incoming orders and helps to find the perfect balance between efficiency and reliability. You will know exactly which orders can be combined and when to start delivering. It even tells you the optimum loading capacity. This is the perfect solution for customer delivery and for stocking your stores. You maximally use your expensive loading capacity.
Finally, StackAssist can be used to calculate the remaining space when loading the crate. With this, you can offer real time custom services to your customer and give him commercially interesting offers to fill up the remaining space in the crate.
We help to gain control over your supply chain
FPC Beyond Packaging helps you to analyse and improve the packaging process in your supply chain. In addition, we offer software solutions for packaging, loading and shipping. Are you interested to hear what we can do for you organisation? My colleagues and I are happy to be of assistance.
Would you like to know more about StackAssist and our way of working? Bart van Dijck can tell you all about it.
Bart van Dijck
Project Manager FPC