Covid-19 News

Chasing the pandemic purchaser’s £: the effect on DCs – Part 1

Why retailers chasing the pandemic purchaser’s pound cannot simply “scale up” their distribution centres through automation…

The lurch by consumers towards shopping online during the pandemic has been pronounced. And, eager to compete for the pandemic purchaser’s pound, retailers have been piling their hats into the online ring.

Those retailers already with a good foothold in the virtual world are planning for expansion, whilst others are rapidly accelerating their plans to do more online, perhaps making up for lost time and seeking to grab their share of the retail riches that are on offer.

Distribution centres and fulfilment centres are seeing significant levels of investment, often at the expense of their high street colleagues. And the specific need to rapidly increase capacity as well as the general trend to drive down costs is pointing many retailers firmly towards increased automation.

However, technology in and of itself is not the answer. Having great kit will not necessarily provide a great customer journey, any more than me borrowing Rory McIlroy’s clubs and caddy for the day will see me shoot under par at Wentworth! It is not just the quality of the technology that matters. It is the skilful use of it. And in some cases retailers need to be wary about putting blind faith in automation…

For example, many distribution and fulfilment centres are protected by gatehouses, barriers and manned entry points. A simple way to get rid of expense is automation across all sites. However, when you consider that some large sites are receiving one lorry every minute, it is easy to imagine how even the slightest delay in access can lead to traffic jams – first on the site, then the industrial estate, pretty soon down the slip road of the nearby motorway and before you know it you have an unofficial Operation Stack to dismantle!

So any distribution centre looking to automate entry/exit has to have consistency on a national basis between the gatehouse, reception, yard marshalling and transport. Failing to do so inevitably leads to a slowing down of vehicles in terms of entry and exit, or getting to the correct loading bay to drop their loads and pick up.

It is vital that the right vehicle is in the right place for each transit load. Some vehicles are more economical on motorways than others. Some negotiate hills and mountainous terrain more economically than others. Local inputs need to be taken into account for vehicles; everything from restricted delivery hours to electric vehicles only. And when it comes to cool chain management, even more variations and considerations present themselves in order to optimise the speed of delivery, and cost and condition in which goods are received. It simply is not an option to have vehicles in the wrong place in a busy yard or you can easily create significant shrink, such as the £1M of beef that should have been kept cold whilst in transit!

Consideration should be given to whether reception and the gatehouse should have separate entrances. What if there is an automated reception. How do you make sure that casual visitors to a site are correctly directed. Do you want a lost visitor holding up 10 lorries whilst they try to speak with the right person and get directions to park their cars!

Once a lorry has arrived, working in the “new normal” has created a number of additional challenges. For example, what happens when a lorry from Eastern Europe arrives to be unloaded. Is the vehicle to be decontaminated before being unloaded. How do you search that vehicle for either illegal immigrants or contamination. How do you identify the driver. Do you test him or her for Covid. Should he/she have a recent Covid test report. Do you log his/her arrival and how do you search them if part of “normal” procedure.

Where paperwork is involved should that not be digitised to reduce the need to handle papers that have gone through many pairs of hands and the risk now attached to such handling. How do you guard against the illicit alteration or creation of inaccurate manifests and despatch notes.

Similarly the goods themselves need to be quickly offloaded, but what is the situation about checking them for Covid. And do the goods need to be quarantined and if so for how long and where. Should all involved be wearing gloves. Does that make a difference in practice, and what PPE should drivers be expected to wear.

When designing distribution centres, focus is often on optimisation of processing time and return on investment. It has been said that the customer is the boss and he or she can fire anyone in the organisation, from the CEO downwards, simply by placing their business elsewhere! If you want to deliver a consistently outstanding customer journey a key consideration often overlooked is “fall over capacity.”

Perhaps you need engineering support that sits on standby should anything mechanical go wrong, together with a store of parts. But that is a cost sitting idle. However, in the event of a breakdown you need the site up and running. That is fall over capacity.

Some infrastructure design features are built in anticipation of unexpected breakdowns. So the fall over contingency planning allows for that. Take the use of conveyor belts in modern DCs. If a belt breaks then the line stops and that could prevent the picking and shipping of thousands of orders by the time it is resolved – thousands of disappointed customers and poor customer journeys. However, if a single belt consists of multiple belts then when one breaks the line will continue to work whilst an appropriate opportunity is found for the broken belt to be replaced – a bit like a suspension bridge with many wires forming the support for the bridge structure.

Other retailers have dark facilities that are on standby ready to assist. Running with minimal security when not in use, fall over plans are in place and well-rehearsed in the case of volume growth and seasonal change. Where demand suddenly grows these dark centres have their security ramped up and can be ready to take up the slack very quickly indeed.

One area that seems to almost be overlooked by some retailers is returns. It is well documented that some retailers are experiencing returns equal to 50% of total sales. That is a massive amount of items that have to be received, checked, repackaged and put back into stock. And apart for the accounting function there is also the issue of stock reconciliation and its impact on the customer journey…

Recently I purchased a tent from a leading retailer for £600. It turned out that the tent had a rip in it. So I returned the item and instead upgraded to an £850 tent, which I was told would be delivered in the next 10 days. Three days to go and the delivery was confirmed to be on “Tuesday.” Then 24 hours later, on Sunday night, I received a text to say that they were unfortunately out of stock of this item. What a terrible customer journey! The delivery was confirmed by the store and then reconfirmed by the DC only for me to be disappointed the next day with just 48 hours to go. Plus, I am still out of pocket to the tune of almost £1K for two weeks. And, I would hazard a guess that my ripped tent went straight back into stock! When your online business stands and falls by the customer journey, stock has to be correctly reconciled and included returns.

The pandemic has added the further complexity of what do you do when items are returned. How are they received. What PPE should DC operatives have and how do you alleviate the concomitant issues of discomfort and need for increased rest breaks. What happens to the inspection of the goods. Are they cleaned, repaired or renewed upon receipt or put straight into quarantine, thereby delaying customer credits and creating customer frustration. How will such a large variety of items be adequately checked so that they do to go back into stock defective. How do you record the arrival of the item before, say quarantining. And how do you keep a track of each item so that it does not go off balance sheet and so create shrink… because unallocated stock is an invitation to organised crime.

These are just some of the concerns that retailers need to address when ramping up their online operations. And there are many, many more… (to be continued)

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