By Pas Tomasiello, senior director of integrated systems at Dematicx, ANZ
COVID-19 has rapidly and fundamentally changed how consumers interact with retailers, and this has brought on a complete shift in the retail landscape as we know it. Checkout lines have been replaced with home delivery and curb side pickup alternatives, grocery lists are required to have pre-empted replacement options, and face-to-face workplace communication has moved to chat boxes and digital platforms.
In the early days of the pandemic, shoppers, out of fear of the unknown, cleaned out store shelves to stock up on essentials. This unexpected demand on consumer goods left many store shelves barren, shining a bright spotlight on the major gaps and inefficiencies within the global supply chain. Simply put, nobody — not suppliers, nor manufacturers, nor retailers — was ready for the unprecedented spike in demand brought forth by COVID-19. Nonetheless, as isolation and lockdown initiatives took effect, online orders began to surge drastically. In Australia and New Zealand, eCommerce spending grew by more than 80% in the eight weeks after the pandemic was declared, and by the end of 2020, online spending is expected to hold a 15% share of the total retail market.
While online shopping was on a growth trajectory well before the pandemic surfaced, the speed at which the pandemic has accelerated out-of-store purchasing has left even the biggest retailers – the ones with genuine omnichannel distribution strategies – challenged to effectively supply what was in demand. Subsequently, it was clear that a re-think of business innovation and strategy was the key to staying ahead of the game. The solution – investing in automation technology that arms retailers with the resilience and flexibility to sustain current and future spikes in consumer demand.
DEFINING THE RETAIL FULFILMENT CHALLENGE
For many retailers, online order fulfilment has become a challenge ever since consumer behaviour shifted from in-store purchasing to online shopping. Even some of the largest retailers lack a fully optimised infrastructure to deliver goods in the timeframe that consumers expect them.
Today, the most business-critical challenges retailers are facing to meet consumer demand, are related to online delivery through a third-party delivery service, relying on traditional distribution strategies, and disruptions to fulfilment operations.
Firstly, managing online delivery via a third-party delivery service has erupted a range of challenges for retailers. As social distancing guidelines forced brick-and-mortar stores to limit opening hours or shut down completely, online shopping became the central channel for consumers to buy essential goods. In fact, from February to March 2020, online grocery sales in ANZ surged by more than 45%. To fulfil these online orders, many retailers turned to in-store inventory and third-party services for picking and delivering. However, these same businesses quickly learned that many third-party services didn’t have the flexibility to meet the increased demand, especially during peak ordering periods. The third-party service providers were dealing with the same challenges as the retailers. Subsequently, consumers were regularly faced with long delivery times, and even a lack of delivery windows, resulting in many customers cancelling orders and turning to competitors for a better service experience.
Secondly, relying on traditional distribution and fulfilment strategies, such as housing large volumes of inventory in one central location, greatly reduces the flexibility to fulfil goods quickly. If the pandemic has taught retailers anything, it’s that they can’t always predict demand levels. To ensure a quick response in the future, retailers need a more flexible distribution model.
Finally, disruptions to fulfilment operations. Retailers have historically relied on manual labour as a temporary solution to address peak demand in fulfilment centres. During the pandemic, companies deemed essential, such as grocery, delivery, and retail, hired thousands of positions to address peak online order fulfilment. When distribution was halted, the availability of certain products became limited, and while consumers understood the reasons for delays during the crisis, the reality is that they did not hesitate to jump to another retailer once they found the same product. This has proved, again, that supply chains remain rigid and unable to handle unanticipated surges in orders.
As retailers and their supply chains face the rising pressures of ever-increasing demand, the implementation of automation is now not only just seen as a cost-saving investment, but as an innovation to allow the flexibility and efficiency needed to survive and flourish during times of unprecedented demand.
MICRO-FULFILMENT AND DC AUTOMATION SOLUTIONS TO ADDRESS UNPRECEDENTED DEMAND
Automation in stores – Micro-fulfilment – and distribution centres provides retailers with the flexibility to identify and adjust to rapid changes in customer traffic and buying patterns, both in-store and online. Moreover, automation keeps the fulfilment process running despite any disruptions. Most importantly, automation helps to minimise the risks associated with employees working on the fulfilment frontline. So, what are the solutions that can work to overcome these challenges and allow retailers to future-proof their business?
Micro-fulfilment, the latest automation innovation in online order fulfilment, is paving the way for better efficiency in the retail supply chain. To avoid a bad customer experience, retailers can take ownership of the speed at which customers receive their online orders by shortening the fulfilment process. Micro-fulfilment solutions – compact, high performance automated systems – can be implemented close to consumers in footprints as small as 1,000 sq. mts., such as in the back of a retail store or in a nearby dark store or urban fulfilment centre for optimised click & collect and last-mile home delivery fulfilment. Retailers are no longer left to rely on in-aisle fulfilment for online orders. Additionally, they can be configured to allow retailers to react to spikes in demand quickly and efficiently by shifting between online and in-store fulfilment. Some of the world’s leading retailers are already piloting and implementing Dematic Micro-fulfilment systems in their store operations.
Automated Guided Vehicles (AGVs) have become an increasingly adopted innovation within warehouses and distribution centres; used to move and transport goods without manual intervention, to ensure that products are available and in the right place when they are needed. AGVs work to enhance workplace safety by automating processes completely, such as receiving, storing and delivering products, to ensure operations are always up and running. AGVs also help to improve shipping speed and accuracy with automated product movement from storage to shipping, and they are also flexible enough to be added to any existing delivery and storage systems in place.
Warehouse management software (WMS) can be used when consumer traffic shifts from in-store to online. This advanced software becomes even more critical for retailers to make intelligent, data-based decisions to improve their omnichannel distribution and fulfilment processes. Dematic’s Dematic iQ WMS works to connect fulfilment, general operations, maintenance and analytics into one comprehensive ecosystem. It manages all warehouse hardware across manufacturing sites, warehouses and distribution centres to optimise the end-to-end supply chain, which helps retailers to respond to spikes in online orders quickly and effectively while also maintaining critical employee safety measures.
CRITICAL FACTORS TO CONSIDER WHEN AUTOMATING
While automation can help retailers remain competitive, what’s even more important is choosing the right partner. With all that goes into automation implementation, deployment, and management, due diligence is now more important than ever.
The most important question to ask when considering an automation partner, is their local consulting and project implementation capabilities, and if they scale across regions. It is also important to know if you can contact local customer services whenever you need to. And, you need to attain an evaluation of success, such as a proven track record or testimonial.
With the right solution and adequate insight – as well as a commitment from your partner to support, deploy, and strive for the best level of success and return on investment (ROI) – the retail industry can go a long way to sustaining a concrete position in the market and streamlining industry operations for the better now, during COVID-19, and well beyond.