Companies looking to provide customers with an omni-channel retail experience have to have their house in order – and that means fulfilment and distribution operations must be up to scratch. Honeywell Scanning & Mobility industry marketing director, Bruce Stubbs, spoke to Inside SAP recently about how the move towards omni-channel is impacting the supply chain environment in the Asia-Pacific region, and how technology can be leveraged to overcome some of the common problems distribution centres are facing.
FP: Why is omni-channel challenging for distribution centre (DC) operators?
BS: There has always been a direct to consumer model in retail – once it was catalogues and mail order, now it’s e-tailing – just as there has been a store fulfilment model. But for a long time, they were separate entities. Many of these large retailers not only have store fulfilment processes they have to manage, they also have to do their online retail, and a lot of the problems arise because they are not set up to do that.
Very large retailers are able to invest capital and say, we are still going to pull retail stores out of regional DCs, but we are going to build a specialised DC that handles direct to consumer business. Those that don’t have that type of capital to invest are trying to do it from the same DC, but from a facility and layout standpoint, they are not set up to handle that. They also sometimes don’t have the systems in place, or the expertise in-house, and so those infrastructure issues are problems for them.
FP: How are these issues helping drive growth for 3PLs?
BS: A lot of the people that aren’t comfortable doing this on their own or haven’t been successful with it are looking to 3PLs. Our research has shown that 33 per cent of the people who are now starting to embrace omni-channel fulfilment are looking to 3PLs to do their direct to consumer business for them. In Asia-Pacific, 3PLs are predicted to grow at 16 per cent year-over-year for the next few years.
FP: How do you think this will evolve in the coming years in the region?
BS: I think the growth of online commerce is only beginning. In some of the regions of APAC, the internet is still growing in prevalence, and once that happens, e-tailing is going to spoke. What we also see is, for instance, in India, one of the large e-tailers does more than 50 per cent of their business in Tier 2, 3 and 4 cities, versus the Tier 1 cities, because people in Tier 1 cities still have the option of going to the store. People in some of the more remote areas of China, India and other areas of the Asia-Pacific really don’t have the density of retail stores to be able to get the variety they want. The only way they can do that is through online.
FP: Any other interesting developments that you are observing in the retail distribution market?
BS: From a transportation and logistics standpoint, with online retailing we saw an initial push for same-day delivery. That comes with such a high cost, and people are backing away from that now. What people are more interested in is accuracy of delivery windows. Consumers don’t want a delivery window of eight to four, because time is money to them, and they don’t want to be home from eight to four, so they want those windows narrowed down. The consumer is actually driving the process, and having more say as to when, where and how their goods are being delivered. So we see that as another major trend in the omnichannel fulfilment cycle.
FP: How are you seeing technology being deployed to help manage some of these changes in the market?
BS: In different regions of the world, there are different challenges. In more developed regions, embracing technology is a way to improve their operations… [to] do more business with the same amount of people. They could take on a new line, or add more SKUs.
In some of the high growth regions such as Asia-Pacific, it’s difficult to introduce technology because they can throw more personnel at some of the problems. But in the long run, if you think of the total cost of ownership, it’s not creating efficiencies through accuracy and productivity. Particularly in e-commerce, even with more people, can they handle the volumes? If I am not picking accurately and sending the wrong things to customers, eventually that’s going to have a negative impact. So we try to help people to understand the value of the technology as well.
What we have to be cognisant of as a technology provider when we go into these region that are just now looking into technology, is they don’t want to have a very large cost to get up and running. We have to provide something with fewer bells and whistles – basic scanning, for example. They can still take advantage of the accuracy and productivity of barcode scanning, but they don’t have to purchase something that they may not need in their operations for years to come.
FP: What type of efficiencies could they generate, by moving up the ladder to more sophisticated systems?
BS: Paper is obviously the most inaccurate and unproductive way of fulfilling operations. If they are starting with paper, and we move them into RF, you can typically gain efficiency of 15 to 20 per cent. If you take them from paper and move them into voice picking solutions, those gains can be upwards of 40 to 50 per cent. If you take them from RF to voice, you can typically gain another 20 to 25 per cent.
Although we are a technology company, we believe that just adding technology to bad work processes just makes it an expensive process. So we will walk through our customers’ operations with them, see what they are currently doing, and we marry that up to where they say they want to be as far as their strategy and how they want to operate according to their business model. Then we come back with some recommendations to implement this type of technology and workflow, together with this type of best practice process.
FP: How can voice picking solutions also assist with workforce diversity issues?
BS: Typically in DCs, when work assignments are produced on paper, they are only in one language. A lot of the DCs we are working with now are very multicultural and multilingual, and sometimes whatever language they are printed in or reproduced through RF isn’t the first or native language of the workers. That tends to slow things down, and impacts accuracy as well as productivity. The beauty of voice is that because it’s available in so many languages, it allows the worker to perform the task in their language. We then typically see larger spikes in productivity and accuracy in those situations, than we do when implementing this in the US or Western Europe.