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Supply Chain Insights

Thinking Big with Micro-fulfilment

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by Dez Blanchfield, Chief Data Scientist at Sociaall Inc.

As eCommerce and ‘store to door’ delivery looks set to continue well beyond the end of the pandemic, many retailers are struggling to turn a profit from online sales. The challenges of 2020 didn’t just fast-track eCommerce uptake, they also accelerated advances in technology, pushed businesses to revaluate traditional models and forced many to rethink relationships between retailers, disruptive start-ups and automation; setting the scene for a radical shake up of fulfilment strategies in 2022.  

What’s driving this new approach?

Micro-fulfilment is really about moving out of large singular distribution centres (DCs) to more local, smaller, convenient hubs. Traditionally, customers often have (depending on the size of brand and industry) one or two large, remote DCs which they would look to fulfil orders from for an entire country or region.

By expediting the fulfilment process, micro-fulfilment gives brands the opportunity to get goods to their customers more quickly; it also provides them with an additional, convenient click and collect point for consumers. It’s about taking the overall supply chain and making it more distributed, in an ongoing effort to meet customer expectations that will continue to shift and evolve well beyond the end of the pandemic.

What does micro-fulfilment mean for traditional stores?

As a result of many of the restrictions imposed by the pandemic, a lot of retailers are now looking to fulfil eCommerce orders from stores, to the point that it’s become so successful we may soon reach a point where you’re almost pushing customers or footfall into the stores as parcel collection points, rather than the traditional function of stores.

Many retailers who’ve got large numbers of physical stores now probably don’t feel that they need to keep so many and will look to reduce their high-street presence; keeping those stores that do remain (certainly in terms of fashion retail) more like showrooms, holding less costly inventory on site.

Customers will still be able to look, feel and touch products, but actually in terms of fulfilling orders that may well come from another point. This is where micro-fulfilment centres really come into their own. For example: a customer may say; yes, I like this product.

This is exactly what I want. I’ll be here shopping in the city centre for a while. Can you get it ready for me to collect within the next hour and a half, or simply deliver it to my home. Now there’s no way you could do that from a remote DC to a city centre location, but you can do it from a micro-fulfilment centre.

Three tips for making the right micro-fulfilment decision

There are three key considerations for retailers considering a potential micro-fulfilment strategy. The first is to consider what is the purpose of your micro-fulfilment centre: are you looking at it in terms of fulfilling direct consumer orders, or maybe you are looking at it in terms of a click and collect location or a hub and spoke model delivering out to stores?

Secondly, how many SKUs you decide to offer will largely determine where you locate, and finally, what type of technology will you need in the centre itself to make it function smoothly. Maybe it will require more automation or maybe it will require a specific, leaner warehouse management solution.

Micro-fulfilment centres will enable brands to deliver faster and more efficiently on brand-customer promises, but make sure you don’t sacrifice due diligence at the strategic planning stage for speed of operational roll-out.

An exciting period of supply chain innovation is here

Looking ahead to the immediate future, there are still many challenges ahead, however, we can finally begin to feel positive of the longer-term outlook for the retail market and business conditions in general.

The last two years showed us all (retailers, business leaders and consumers alike) what could be achieved with an agile, proactive, ‘can do’ mentality. Providing this approach to problem solving stays with us post-pandemic, it should herald an exciting period of supply chain innovation, as advances such as micro-fulfilment become commonplace.

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Supply Chain

bp and Uber sign Global Strategic Delivery Partnership

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  • bp and Uber sign a new global strategic convenience partnership aiming to make more than 3,000 retail locations available on Uber Eats by 2025.
  • The partnership extends current local arrangements in Australia, New Zealand, Poland, South Africa and the west coast of US, adding the UK and eastern US in 2022 and with plans to launch in other European markets from 2023.

Today, bp (NYSE: BP) and Uber Technologies, Inc. (NYSE: UBER) are announcing a new global strategic convenience delivery partnership, extending their existing local arrangements to reach more consumers across the world. Together, the partners will offer a huge range of quality convenience products, including fresh and prepared ranges, from select retail locations.

bp is the first convenience retailer to team up with Uber Eats on a global level and aims to have more than 3,000 retail locations available on the delivery platform over the next three years. The partnership supports bp’s goal of growing its access to customers and expanding its delivery footprint, in response to soaring demand for food, groceries and everyday essentials brought to the door.

The new partnership covers retail sites in Australia, New Zealand, Poland, South Africa and the west coast of US. Sites in the UK and eastern US will be added to the app for the first time this year, with plans to launch in other European markets from 2023.

“We’re thrilled to team up with Uber Eats globally giving us the opportunity to reach many more consumers online in addition to those who currently visit our retail sites. We’ve seen how the pandemic has accelerated customer demand for delivered convenience and this partnership will allow us to scale up quickly on the Uber platform. And for the first time, we will be able to offer delivery options to existing customers on our own BPme app by the end of 2023,” said Emma Delaney, executive vice president customers & products, bp.

With 20,500 bp retail sites across the world and 550 million customers living within 20 minutes of a bp retail site, the partners see enormous opportunities for growth. bp sites offer a range of products tailored to local markets which may include hot and cold drinks, food-for-now options as well as staple groceries, fresh produce and ready meals, plus wine, beer and flowers.

  • In the UK, customers will be able to access a range of Wild Bean Café, and other branded food and products via Uber Eats – with the first 120 sites due live on the platform by the end of June.
  • In the US, the offer will be made available to bp’s network of independently owned retail locations to support the growth of their businesses. The goal is to make it easy for these partners to sign up to the Uber Eats platform and access benefits based on bp’s scale.

bp will benefit from Uber’s global brand and operations footprint, best-in-class technology for dispatching orders, and more than 4.4 million drivers and couriers on the platform worldwide.

As part of the agreement, Uber Eats and bp will work to introduce delivery options onto bp’s own app, BPme – initially planned to be available in the UK, US and Australia by the end of 2023 – powered by Uber Direct. This new offer will allow bp to directly connect its customers to delivery riders, making Uber Eats the trusted partner in fulfilling these orders. Since 2019, bp has seen a three-fold increase in users of the BPme app, with 16 million active loyalty users worldwide.

“With more than 20,500 locations around the world, bp’s reach is enormous—making them critical partners as we pursue our ambitions of helping consumers across the world get what they need delivered to their doorsteps,” said Pierre Dimitri Gore-Coty, Uber’s SVP of Global Delivery. “We are proud to support this next phase of the company’s convenience growth through this delivery partnership and look forward to deeper collaboration in the future.”

bp and Uber already work together in mobility with bp providing electric vehicle charging for Uber’s ride-hail drivers. The companies will explore other areas for future cooperation in convenience, including opportunities to utilize low carbon delivery methods to fulfill orders from bp sites.

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Supply Chain Insights

Officeworks to own and control Distribution Network.

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Officeworks invests in supply chain capabilities, will own and run it’s distribution centre.

Officeworks has changed its supply chain strategy in the wake of COVID-19 issues, with a view to owning and controlling a network of distribution centres across the country.

“When I joined we had a different strategy around our supply chain,” Officeworks managing director Sarah Hunter told The Australian, referring to the company’s previous outsourcing strategy.

“So we’ve worked really hard now to build our supply chain capability. We were in the process of outsourcing it, we are now in the process of building that capability.

Officeworks recently opened Australia’s first solar-powered robotic distribution centre in Derrimut, Victoria.

“We started in Victoria, and we have had approval to build, now board approval to invest, and we are building a new, similar (distribution centre) operation in Western Australia. That’s exciting,” she said.

“Looking at our capital expenditure three, four, or five years ago it’s a material step up in our investment in our supply chain.

“Most importantly for us as a business is that every team member who worked at the old facility has been completely retrained,” she said. “We have 120 team members who are now fully trained in how to work in an automated state-of-the-art environment.”

The need to control its own distribution became clear during the pandemic.

By December, Officeworks saw 46 per cent of its business come from online, including click and collect. Now it needs to move to retain this growth at a cost effective scale.

“We have created a facility that’s not only more productive, it’s going to enable our online business to grow in Victoria and into NSW at the rate that we expect our online business will grow.

“So now we have the capacity, the cost per pick is materially lower because it’s much more productive. It’s a win-win scenario for us. We’ve kept everyone employed with really great job security. We’ve scaled them up to work in the supply chain of the future.

“And on top of that, we now have the capacity for growth in Victoria that frankly we were struggling with through COVID.”

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Business Continuity

Skills shortage puts SAP projects on hold

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Business demand creates double whammy on recruitment pressure

Skills-related issues have hit a quarter of SAP users, in some cases putting projects on hold, according to a survey of companies in the Americas.

Research released by the Americas’ SAP Users’ Group (ASUG) shows that 26 per cent of organisations see skills in supporting, developing, and upgrading SAP systems as their number one challenge in working with the technology.

A quarter of users loyal to the German vendor said skills problems were holding up projects.

Geoff Scott, ASUG CEO, told a webinar last week that the combination of skills shortages in businesses and their technology teams created a vicious cycle of driving the demand for new tools and technologies.

“Business functions come and say, ‘Hey, I need to have all these things done.’ And technology teams say, ‘Well, I don’t have the same skills I used to have.’ And I think it creates a major disruption inside many of our member companies,” he said.

Skills were also a major issue for SAP users looking either to migrate to or support S/4HANA, the latest version of the tech giant’s ERP software based on an in-memory database.

“We are going to feel the pinch of that skill gap. My word of caution is that as you think about moving to S/4 if you have not already, the ability for you to plan that migration may hit some turbulence related to skill gaps with your external partners. That’s something that you absolutely positively should consider,” he said.

While technology issues were the greatest concern in the research overall, broken down, only integration problems were more cited than staff turnover and maintaining knowledgeable staff.

Of those with integration problems, 28 per cent said they were causing data errors to spread, 17 per cent said they were affecting the compatibility between SAP and other applications, and 17 per cent said it meant they were unable to keep up with new technologies.

One respondent said: “Changes made in SAP and Salesforce that do not get reflected in the other system are causing data inconsistencies.”

Overall, the majority of SAP users were increasing their spending on the technology. Fifty-two per cent said they were increasing spending, up from 46 per cent last year.

However, the proportion of users saying they were cutting spending on SAP also rose from 5 per cent last year to 8 per cent in 2022. The number of organisations making the same level of investment fell, according to the ASUG research.

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