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Supply Chain Insights

The road towards a greener retail supply chain

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By Raghav Sibal, Managing Director, ANZ, Manhattan Associates

The importance of sustainability in the retail industry is now more prevalent than ever, and it’s within the industry’s supply chain that the most fundamental aspects of sustainability reside. Today, consumers expect the ability to choose sustainable delivery options, and retailers must work to accommodate these modern expectations.

From quick delivery to split shipments, the current eCommerce boom has put supply chains to the ultimate test – but it comes at a great cost to the environment. To combat this, technology will always be a useful tool to innovate retail operations for the better, and for the greener. However, on top of this, new customer expectations for sustainability are proving that today’s consumers care more about sustainable delivery than retailers may think.

The fast-shipping ultimatum

With the eCommerce boom now fuelling the retail industry, quick delivery and shipping has become the biggest force against supply chain sustainability. The emergence of two-day shipping for “free” became mainstream in 2005, and with the release of Amazon Prime, and it has since started a chain reaction. For these major players, customers who paid an annual membership would be guaranteed two-day delivery for every order at no cost. This removal of shipping costs inadvertently hid the impact of the change in delivery timeframes from the customer, and as a result, behaviour began to change, as did expectations.

Fast forward about 10 years, and the delivery expectations jumped to one-day delivery and included free returns, still without any real impact felt by the consumer. Today, half of all consumers expect not to be charged for “standard” two-day delivery, and 62% say free delivery is their top consideration, according to new research conducted by Manhattan Associates. However, in that same survey, 70% said they are prepared to pay extra for speed and convenience, such as one-hour, same day or Sunday delivery.

During this shift towards quick delivery, the impact behind the scenes on the supply chain and on the planet has been staggering. Global parcel shipments have grown from 44 billion in 2014 to 132 billion in 2020 and are projected to approach 316 billion in 2026.

Then there is the resource capacity crunch — there simply are not enough trucks and drivers to deliver all of these packages and get them where they need to be on time. In fact, industry professionals rate the issue as the biggest challenge for supply chains in 2019. This has led to the rise of the gig economy, leveraging services like Uber and other courier-on-demand businesses, to fill the gap. But filling the need for capacity causes even more vehicles to be on the road, which leads to more traffic and more idling and even more carbon emissions.

Greener delivery options for consumers

Another impact of expedited shipments is the inability to consolidate at the distribution centre. When we place a two-day order for five items and all five are not available in the same warehouse, the retailer must source those items from multiple places around the country, creating multiple packaging, distribution, and delivery events for a single order, without having the time to optimally consolidate those items along the way.

Likewise, as online shopping rates remain high due to the impacts of COVID-19, sustainability is more important to Australian consumers than ever before, with 63% stating they would pay extra for a delivery service that was more environmentally-friendly. New research from Manhattan Associates, Shippit and Greener also revealed 60% of Australian consumers are open to receiving a delivery at a later date if it meant that it was delivered more sustainably.

Due to the ongoing impacts of the pandemic and its convenience, home delivery is now the preferred delivery option for 69% of Australian online shoppers. However, consumers are not prepared to just accept the convenience of delivery at the cost of the environment, and they are increasingly aware of the growing impact the eCommerce sector is having on CO2 emissions.

Importantly, our research has also revealed that over half (60%) of Australian consumers indicated they often receive their online order in multiple shipments, and 81% of them said that they think this is an inefficient and unsustainable way of delivering goods. In fact, the same number (81%) also said they would prefer to receive their order at a later date if it meant that it would arrive in one consolidated delivery. A further 64% of consumers stated that they would be even more motivated to accept a longer delivery wait time – with all purchases consolidated into one package – if the delivery fee was free or discounted.

Demonstrating the efforts Australian consumers are already making to be more environmentally conscious, over 45% of consumers said that after placing an order online, they would usually check to see if the retailer offered a sustainable delivery option, such as carbon offset or order consolidation services.

As online shopping delivery rates and the corresponding impact on the environment continue to rise, while at the same time the issue of sustainability continues to move to the forefront of consumer’s minds, retailers and 3PLs will need to make sustainability a bigger priority. Those retailers who don’t make sustainability a core part of their business will likely find that down the track they lose out on this potential competitive advantage and drive environmentally aware consumers to other retailers who are taking steps to make their delivery services greener.

Sustainability in the retail supply chain

Today, consumers expect the ability to choose sustainable delivery options and retailers must work to meet shopper demands. However, in order to provide both continual improvements to operational efficiencies and insights so consumers have what they need to make an educated decision, supply chains need to become more unified. For this to happen, we need more intelligence, more flexibility and more insight injected into the retail supply chain.

In the distribution centre, intelligent warehouse management systems are needed to improve the speed of workflows, which subsequently reduces the need to expedite shipping, optimise carton sizing to maximise vehicle holding capacity, and orchestrate inbound and outbound trailer flow to minimise idle time and backlogs.

On the road, transportation management systems with machine learning are needed to load vehicles more efficiently, optimise routes to drive fewer miles, and model optimal consolidation and backhaul opportunities to reduce the number of vehicles travelling.

Likewise, Order Management Systems (OMS) are critical to helping minimise split shipments and intelligently source from all inventories. This includes alternate store pickup locations like lockers to minimise travel distances, while inventory optimisation technology ensures that supply is more accurately placed where the demand will be, to reduce the amount of store transfers or unexpected replenishments. With innovations like advanced OMS, retailers are also able to navigate disruptions caused by COVID-19 by reviewing the rules of stock allocation, temporarily giving priority to in-store stock over warehouse stock, thus, freeing up any trapped inventory confined within closed stores. This is a great advantage for retailers whose physical stores have closed for lockdowns or have their business operations disrupted for other reasons.

Optimising order sourcing allows retailers to use the stock available in their entire network, wherever it is located. A smart OMS allows retailers to use the ‘pool’ of physical stores in large urban areas to consolidate group orders to offer more efficient and sustainable delivery options, compared to sending individual items from disparate locations. This increased delivery efficiency will also help build a stronger connection and more favourable brand perception amongst consumers. In addition to using store level inventory to ship orders to a customer’s home, it can also be deployed for click-and-collect purchases. With new fulfilment options enabled by the store, consumers can click, collect, and return goods at their own convenience, eliminating courier runs and lessening CO2 in the supply chain.

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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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