Bringing the store experience to fulfillment…close…but still long way to go.

I finally broke down and recently decided to upgrade for my iPhone. Side note, a few years ago, when the newest generation of iPhone was available it was treated like Christmas morning by some of us Apple fans. Some of us would literally wait online until the magic hour when you could pre-order the new version. Today, it is a non event. I will upgrade when I get to it, type event. For me, I finally broke down and upgraded after seeing the new phone at the Apple store, demonstrates the importance of a brick and mortar presence! Granted that pushed me to action, but I wasn’t as excited about it as in the past. But this post isn’t about the changes in behavior with getting a new iPhone. What this latest saga of upgrading my phone has provided an example of trying to bring greater experience to the fulfillment process. And how much we still have to learn.

Dreaming of the pacific…

Let’s set up the situation. My carrier is AT&T, I went through their portal to upgrade my phone. I went through the configuration – I went with the Pacific Blue option with 256 GB of memory. I selected my payment plan and then was told item could be delivered later in the week. Perfect. At least I thought. What happened next is a good effort by AT&T…but falls a little short. I was told that a customer representative would show up between 2-4 on Thursday, and spend 30 minutes with me. Hmmmm. Their tag line “we are bringing the store to you.” Makes perfect sense. I have been preaching the importance of making fulfillment a key part of the experience. Looking to replicate the in store experience at the last mile is a great example of this. However when it comes to the execution there remains much to be desired. While I appreciated the service, all I wanted was for the phone to be delivered to my address. I did not need to have a 30 minute tutorial on how to switch my phone. I realize I am not a millennial or a Gen Zer, but I can still switch my phone on my own, thank you very much. Additionally, I was told I would have to show ID and credit card…really? Are they delivering the Excelsior diamond to me? Finally they showed up, I was in the middle of all day meetings, couldn’t reach me and didn’t deliver the phone (mind you there is a perfectly safe location where packages are delivered every day). This started a cacophony of emails and messages from AT&T and their delivery service to try and reschedule the delivery. I also called AT&T customer service (the chatbot wasn’t working). Through all this communications gymnastics, I still don’t know when the phone will be delivered.

So what are some lessons from this awkward dance I am having with AT&T?

• Figure out how to bring added value to fulfillment: Clearly AT&T is trying to add value to the last mile fulfillment. But it is not one size fits all experience – some customers might want to be walked through the process of switching phones, others, like me, do not require this service. Make it an option. What about other value added services such as taking an old phone and recycling it? Could AT&T even offer to take back other small electronics for recycling or refurbishing? Headphones, chargers, tablets or even laptops that have accumulated in our homes. I appreciate the effort to add value added services to the delivery, but you must make sure that each customer truly desires and sees value in what you are offering. It cannot be a one size fits all.
• Communication is crucial: Like with many things in life, being able to communicate clearly is paramount. I appreciate AT&T and their efforts to communicate, however it has been disjointed and confusing. Between text messages from the delivery service, emails from AT&T, emails from the third party and a telegraph from Alexander Graham Bell, it has been clear as mud with regards to what next steps are. Even on the web site there is no clarity as to when delivery will be made. Have one central location to communicate – a centralized web location – so customers have a visual source of the truth. Any email or text message can always refer back to the location. If Fedex and UPS can do this, why can’t AT&T?
• Provide customers options…at the point of commerce: I realize that the goal is to simplify and reduce friction at the point of sale, so suggesting you ask for more decisions to be made might be counter intuitive. However, when it comes to decisions on delivery times and value added services at delivery, these are crucial variables that consumers will see value in. More importantly they impact the overall experience and need to be properly offered and accepted by the retailer before the “buy” button is pressed. I had no idea that I was getting a 30 minute session with delivery. I also did not realize having this service impacted delivery times. These need to be clearly explained and offered before the purchase is made. I am all for providing value added services tied to fulfillment, but you need to make sure your customer is aware of the offering, understands the value and is allowed to make a choice as to whether or not to leverage these options.

So I will see when this Pacific Blue iPhone arrives. Maybe 5 years ago I would have been more worked up about the delay and not having my new toy….errrrr…device as soon as possible. Today I just focus on the break down in the delivery and the effort by AT&T to make this a more valued experience. A for effort, no grade yet for execution.

Micro-fulfillment! Get your micro-fulfillment here!!

If you are supply chain nerd like myself, or are in the grocery or general retail space, micro-fulfillment has been the all the rage for the past few months. The end of 2020 saw an interesting upswing when it came to discussion of this trend. Not surprisingly, this coincided with the Covid 19 fueled e-commerce boom of last year. So what is this new buzz word? Basically this is all about getting inventory closer to the consumer, in smaller footprint distribution nodes to be able to fulfill our orders at a faster and more efficient pace. But you might ask yourself, “wait, isn’t Amazon already doing 2 day, same day or 2 hour fulfillment?” Yes. However, don’t dig into the amount of money it is costing them to do this. Micro-fulfillment is giving retailers, direct to consumer and other companies a path to meeting these ever shrinking windows of fulfillment that consumers believe they need. So what is really happening?

Micro-fulfillment, is the natural continuation of what we have been seeing in the supply chain space for years now. We have moved from a traditional linear model of moving product: source it, make it, ship it, store it, sell it, to a more complex networked approach. We can drop ship items from the factory floor direct to consumer, we do distribution center (DC) by passing, we ship directly from DC to consumer, we have an increased number of nodes where consumers can access their inventory (lockers, 3rd party locations even the trunk of your car). What this has done for supply chains is exploded the number of nodes we need to service with regards to “last mile” fulfillment. Emerging from this is revisiting of our overall warehouse strategy. Do we need millions of square feet of warehousing space…yes…but we also need more flexible space. This is where micro-fulfillment comes in. When we look at micro-fulfillment we need to consider the following:

• How time sensitive is my product for delivery? If you are fulfilling a perishable product, think groceries, then time is of the essence. Getting someone their Ben & Jerry’s ice cream and fresh shrimp is time sensitive. Having that inventory closer to the consumer means you have a greater chance to meet those requirements than if you are fulfilling from a large DC that is not in a central location.
• Is there critical mass in the areas I want to put a micro-fulfillment center? No surprise that Amazon’s first foray into micro-fulfillment took place in Manhattan. There is a natural density of customers, within a tight radius to warrant investing in such a center. This is why most of these models are being looked at in more densely populated urban settings.
• What other resources can I leverage? Going down the path of micro-fulfillment does not mean building or renting more physical space. Do you have the existing physical stores that could serve the micro-fulfillment needs? Many grocers are looking to leverage their existing stores to pack orders that will be sent out for fulfillment – basically using their existing real estate for both in store and micro-fulfillment needs.
• Do I have the right technology in place to properly manage these nodes? I have said this many times, so I apologize for sounding like a broken record, technology is a tool not a panacea! But you absolutely need the right tools to properly manage micro-fulfillment. You will need rich data on your product, demand, density of demand and fulfillment orchestration. Not an easy task. To properly manage these companies will need to have a holistic view of inventory and demand, but be able to drill down to the local level when it comes to fulfillment.
• How flexible can your network be? In the future, micro-fulfillment sites will also offer the “pop up” site capability. All one has to do is look around to idle mall space the month leading up to Halloween. You find a number of pop up Halloween themed stores. The same will come to fulfillment. Our micro-fulfillment nodes will have to be flexible, as demand and delivery patterns change, so might the locations of these centers. Is your node capable of being moved to different locations based on demand patterns?

I am sure we will keep hearing about these micro-fulfillment centers. At least once all the buzz around Gamestop dies down. We should not view this as a radical new idea when it comes to fulfillment but really a continuation of the drive to make fulfillment more in line with the demands consumers are placing on our networks. Each supply chain must determine what their overall fulfillment strategy will look like, how it will evolve and what other capabilities are required. It will certainly not be one size fits all. Rather a collection of strategies that best fit your product, customer and time frames required.

Happy New Year! On to 2021…bold predictions for a better or simply a “normal” year!

Happy first week of 2021! I hope you all had a safe, happy and most importantly healthy holiday season. While the latest trip around the sun has challenged us many ways, there is a light at the end of the tunnel and hopefully better times ahead. Better, simply meaning more normal times! But let’s look at some BOLD predictions for what 2021 might hold in store for us.

Blanket prediction, with multiple Covid 19 vaccines having been approved and now getting into arms, the globe will move towards controlling the virus and allowing the world to put this pandemic behind us. Let’s hope this comes to fruition sooner rather than later. But what else can we expect?

• Stores are not dead…they’re continuing to evolve. Okay I might sound like a broken record, and yes this trend is not unique to 2021. But what is going to be different is the impact Covid 19 had on retail as a whole and stores in particular. It has been well documented of how the lock downs adversely impacted physical stores, restaurants, bars and a plethora of service business that could not be done over Zoom, Teams or Google meet. From a retailer perspective, 2020 accelerated a number of store shuttering, by some accounts doubling the closures from 2019. While brands like GNC, Pier 1 and Chico’s are closing stores, you still see other players such as Amazon, Warby Parker, Bonobos, Indochino and Peleton opening physical locations. We are not seeing the end of the store, we are seeing the accelerated evolution of how the physical store is being leveraged. Yes it will continue to be used to attract and drive traffic to come in and acquire inventory. But will take on an ever growing role – service center (think Apple genius bar), a return center (look at Kohl’s and what they have done with Amazon) or a micro fulfillment node (look for grocers to push this usage). As we emerge from the lockdowns, savvy brands and retailers will continue to rethink and retool how stores fit into their overall strategy. They will not be blindly shuttering those assets.
• Sustainability and the circular economy drives consumer behavior. There is no doubt that what we saw in 2020 was a massive acceleration when it came to ecommerce. And with those mountains of online ordering creating a tsunami of goods being delivered to our front doors, this will invariably lead to a return tidal wave of coming the other way. The amount of returns and how retailers and brands will handle this volume is potentially more than a headache for the industry. Forward thinking retailers will see this as part of a larger theme – sustainability. Returns are a part of the circular economy that has been growing. It is not only the amount of product coming back into the supply chain, but also how retailers will strategically address this as their overall go to market. How do retailers and brands ensure that sustainability is not an afterthought but is integrated throughout the business? Consumers’ sustainability awareness, are deciding factors in how they spend their money. Retailers and brands need to keep this in mind with regards to how they approach all aspects of their businesses – from sourcing to returns.
• Automation gets closer to the consumer. Yes I know, the robots have been here for a while now. But we will automation start getting closer to the end consumer. Granted robotics have already made their way into our homes – see the Roomba. When it comes to our supply chains, automation has been a presence for decades. Starting on the manufacturing floor and now pushing into the sourcing, warehousing and distribution parts of the supply chain. Look for automation to push into consumer spaces in 2021. From sanitization robots keeping public spaces hygienic, robots focusing on security and automation that will function amongst the public to complete order picking or store replenishment. We will also see more usage of automation in the last mile fulfillment, from Kroger to DHL, companies will seek to leverage autonomous robots and drones, to get our stuff to us when and where we want it. Look for automation to become a greater part of our lives, from our homes, to how we get products delivered to our doors and when we are out in public. Hopefully this is not the start of Skynet…
• Not your parents’ point of sale. My first prediction is the store is not going away it is changing…same can be said about point of sale (POS). The days of static, fixed cash registers has long been eclipsed by mobile and cloud based POS. But even this is evolving. POS will become untethered. Only requiring an internet connection and digital interface, modern POS will occur almost anywhere these two tools are present. You might say, so what, we already knew this…but this will expand into social media. We are already seeing a surge into Facebook, Instagram and TikTok to allow for transactions to occur on these platforms. We are finally seeing it come to content via your television (I remember working on a report in 1998 while at Forrester talking about this possibility). We are not far from science fiction shopping where QR codes and other scannable objects will be sprinkled through out our physical world allowing us to interact and shop almost anywhere. Advertisement on a billboard, scan the QR code to purchase. Walking through a park and there is a nice flower arrangement in a planter, take a picture via the PictureThis app and connect with local florists that can sell you the arrangement or individual plants. Our “limitations” to participate in commerce will continue to crumble, as POS becomes omni present. Retailers and brands need to be prepared to service demand anywhere and anytime…in locations not imaginable a few years ago.

Let’s hope that 2021 proves to be all that we hope for. Especially with regards to a wide spread vaccine. Captain obvious comment – but the ability to spread the vaccine globally will be a massive driver to getting the Covid 19 nightmare behind us. Fingers crossed this continues to march towards reality in the first half of 2021. What we did learn from 2020 was the major shock to our system accelerated the thinning of the herd. It also will reveal with brands, retailers and supply chains are best prepared for 2021 and beyond.

Happy New Year to everyone. Here is to a boring and normal 2021.

Coupa acquires LLamasoft…didn’t see that one coming.

News came out this morning that procurement solution provider Coupa was acquiring LLamasoft. Interesting and unexpected news to say the least.

Over the past few years, Coupa has enjoyed some impressive growth, doubling revenues from 2017 to 2018. Coupa and Jaggaer were two of the fast growing supply chain vendors, both focused on procurement. LLamasoft has long been the lone champion of the world of supply chain simulation (granted they expanded their offerings.) I have always wondered when they would be acquired or merged to offer a large supply chain offering. That day has finally arrived!

Some initial thoughts:

• Reaching into a new addressable market – I had a conversation about this merger with the comment, “Why would a procurement department need supply chain network optimization?” 100% agree. But if the merger is done properly this will expand the reach of Coupa, get away from the procurement department and into a wider addressable market. Coupa seems motivated to fill out their offerings via acquisitions, could this just be the beginning of other such moves to expand deeper into the supply chain planning and execution space?
• It’s the data stupid – We are all digital businesses now. I remember Jeff Immelt hammering away on this during a General Electric event. He was right. Whether you are a sneaker company like Nike buying Celect or Koch acquiring Infor, the name of the game now is expanding your data footprint. Coupa knows and works on the procurement side of the street, lots of data around costs that impact our supply chains. Now add a powerful analytics engine to the mix. Trying to do some advanced supply chain network optimization, wouldn’t it be nice to have some rich data about costs added to that mix?
• Procurement pays the bills but…to truly help drive business growth you need to bring some planning or execution know how. There is no doubt that supply chains always need to keep an eye on their direct and indirect spend. Savings on that side of the ledger frees up opportunities elsewhere. But these same companies need to have sophisticated tools to ensure they can identify and capture new market opportunities. Look for procurement focused solution providers to continue to look towards planning and execution providers to expand their portfolio.

It will be interesting to see how Coupa leverages Llamasoft moving forward. Will this be the beginning of a shopping spree from Coupa? E2open did something similar a few years ago, granted they were private and were able to make aggressive moves without too much scrutiny from the public markets. Keep an eye on Coupa to see if they continue to push into the planning and potentially execution space.

Congrats to Razat for navigating a great deal for LLamasoft!

Amazon fulfillment center coming to a mall near you. Not as bad as you think.

There has been some recent reporting that Amazon is in talks with mall management companies to take over some of the space from anchor tenants. Click here for a recent piece in the WSJ. Legacy tenants such as Sears and JCPenney. Legacy names that have fallen on hard times and faded away from the mainstream retail conversation. Many are fretting that this would be a terrible move for malls, letting the very player that has put these malls under duress come right into their house! Set up a fulfillment center, and just crush whatever life there is left for these malls. Not so fast!

I’m not convinced. First, what choice do malls have? The days of having mega retailers act as the anchor tenant have gone. The internet made sure of that. The advent of the World Wide Web meant that the mega shopping malls, were just a click away. I remember working at Forrester in the late 1990s, I had a large mall owner as a client. We had a conversation that went something like this:

Mall owner: “We are really excited about the web. We want to create a portal, where the brands and retailers that are in our mall could be part of our portal. Customers can then access our site and get to their pages.”

Response: “The internet is that portal. Why would you need to go through a secondary portal when I can get to those brands and retailers directly?”

Needless to say the silence after that conversation was deafening. This was retail thinking driven by a brick and mortar only mentality.

So fast forward 20+ years. Malls are taking it on the chin. They are scrambling to figure out how to get foot traffic into their physical locations. Many have turned to more experiential type tenants – restaurants, salons, gyms, medical offices or amusement park style operators (visit the Mall of America in Minnesota for a true experience). Some have looked to add residential inventory as well – or built around a larger attraction such as a sports venue. The Atlanta Braves’ new baseball park, Truist Park, is built with an outdoor mall and residential space – the Battery.

But many malls are still stuck with massive anchor footprints, a reminder of the Jurassic time in retail. Some are looking to bring grocers into those spaces. A local mall in the Boston region added a Wegmans a few years ago, hoping to attract foot traffic. And now, some mall owners are considering bringing in their biggest nemesis of all – Amazon – into that space. Here is why that might not be as bad as some believe:

• Create some buzz – want to bring your property some buzz? Let Amazon put up a distribution center. The local media will certainly pick up on it. There will be news reports on the automation that Amazon will be using to fulfill orders, clips of the boxes zipping around the conveyors and on Kiva Robots. There will be talk of how many employees the fulfillment center will now employ.
• Amazon employed foot traffic – maybe a small victory, but any mall should be happy to have bump in terms of having “guaranteed” foot traffic as Amazon employees will be present through out the day. There is the potential for these employees to become patrons of the other services within the mall. Maybe that is fool’s gold. But at least there is some opportunity to have a pseudo captured audience.
• Incentivize Amazon to do more than simply deliver – Malls who look to Amazon to take some fo the real estate space, should work with Amazon to not simply use the space to do last mile order fulfillment, but also BOPAC (buy online pick up at curb). Think of it. What do malls have other than a lot of physical store space? Lots of parking and are usually located in convenient geographic locations. Amazon could offer customers the ability to come and pick up their orders as well. Create designated curb side pick up spots, create spots where patrons can pick up merchandise but also park for a period of time in case they want to also go into the mall to pick up something. Could Amazon take some of the real estate and create seasonal stores – small footprint stores with the high demand merchandise and other Amazon products. Much like what they already do with their pop up and other physical stores now. Finally leverage this footprint to process returns. Maybe once the patrons return items, they might also stop at the food court or see what is going on in the mall.
• Leverage the Amazon fulfillment know how – This might be a stretch, but what if the Amazon fulfillment anchor tenants, also took on last mile fulfillment for the other tenants on the property. Amazon is already working on becoming a 3PL, delivering and fulfilling for other brands and retailers. Imagine if as an anchor tenant, Amazon worked with the other tenants to deliver merchandise from the stores. Either last mile fulfillment or BOPAC. Of course they would make their money in the services they offered. While the tenants would be able to take advantage of the fulfillment infrastructure and knowledge of Amazon. This may feel like giving up even more to Amazon, but sometimes if you can’t beat them, join them.

While I am sure that mall owners would prefer that their anchor tenants were not named Amazon and that they could still draw the foot traffic needed to make the property profitable, those times are in the rear view mirror. Mall owners need to face today’s reality. Having an anchor tenant such as Amazon, using the real estate to fulfill eCommerce orders, might be one of the few ways to get someone to pay for that space. But if you can work with them to offer other services such as BOPAC or become a returns hub, you now have new ways to getting people into the mall.

Yes Amazon will continue to eat at some of the mall’s core business, but might as well try to profit from their physical presence. It isn’t a pretty relationship, but it might just give malls some extended life.