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Report: omni-channel approach helping retailers reduce fulfillment costs

20 July 2017

New report from LCP Consulting reveals twice the number of retailers from the previous year (34% compared to 16% in 2015), cited reduced fulfilment costs as one of the top three advantages to an integrated business model.

These findings are published in a new LCP Consulting report – Integrating the retail supply chain.

The report added that a prime example of changing operating models to reduce costs is the increasing trend towards fulfilment of Click and Collect orders from store stock.

Stuart Higgins (pictured), retail partner at LCP Consulting, said: “Of course, fulfilling from store stock requires a greater accuracy of the store stock file and real-time visibility of this stock. But, once achieved, it is far cheaper and more reliable to replenish Click and Collect orders from store, than to route them through a central Fulfilment Centre for onwards shipment to store.

“Supplier direct delivery – where suppliers deliver to the customer directly on the retailers’ behalf -  can also generate a higher overall net margin and lead to significantly less operational risk for the retailer, especially for slower moving products. However, use of this channel needs careful consideration to ensure service standards and brand values are maintained consistently.”

The focus has extended to a much deeper understanding of costs in four areas:

• Optimising stock availability

• Minimising inventory holding

• Reducing overall fulfilment costs

• Effective returns management

The report says that Inventory Deployment is the new maxim: getting the right stock in the right place at the right time to deliver stock availability and sales – while at the same time minimising fulfilment costs and the overall risk on markdown and clearance at the end of the season. This approach can often achieve a 3-5% improvement in net margin, increase sales potential, and reduce working capital.

The LCP report concludes by saying that for retailers to be successful, they will need to be acutely aware of the following five key areas:

1.    Customer expectations: the goalposts keep moving - Retailers need to respond and innovate in an increasingly tough environment, as multiple technology, demographic, economic, and social factors change customer interactions.

2.    The emerging focus on service - Even stronger than price emerges a new focus on Customer Service along with a consistent brand offering, across channels as keys to driving customers to purchase.

3.    The customer-driven supply-chain concept – This is increasingly being developed by retailers, who recognise that integration is key to putting customer needs right at the heart of their proposition.

4.    The benefits of a customer driven supply chain – Those retailers putting customers at the heart of their supply chain and have taken the time to understand them, are reaping the benefits - in sales and profitability. 

5.    Implementation challenges - The benefits of implementing a customer-driven supply chain are clear, but challenges include technology and systems implementation, cost investments, and the complexity of effective cross-functional execution.

To receive a copy of the report, contact LCP Consulting on 01442 872298, or email info@lcpconsulting.com.

Quotes from the Report

“Retailers have to be very focussed on their technology for today and into the future. Customers are increasingly demanding of the delivery to their homes. When we think of technology, we first think of what is important to our customers – now and in the future.”

Phil Clarke, COO, The White Company

“There are concerns at an industry level about fulfilment and there is concern about offering so many of these services at a loss. I doubt whether that tide can be pushed back as the base standards have risen. That’s just evolution, that’s how it is now – what is to change is to get smarter on the choices offered and to lower the cost of delivery.”

Simon Ratcliffe, infrastructure director, FatFace

“We are seeing more retailers take returns seriously. The more enlightened organisations are starting to see returns as a driver of sales. Free returns are good for traffic – 74% of customers who participated in research by Collect+ said they would be less likely to shop with a retailer who charges for Returns. Charging for returns may therefore be the single best sales prevention method in retail.”

Neil Ashworth, CEO, CollectPlus

 
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