Today’s consumer looks and acts nothing like the consumer of 25 years ago…
Back then, the weekly shop was often still a family outing, deliveries of goods to your home usually took several days, and a store could be forgiven for running out of fresh milk. In 2019, things have changed: the average consumer has a well-developed ‘need it now’ mentality and an expectation of convenience, driven by digital connectivity and their own fast-paced life. In this brave new world, disruption of supply is the enemy and empty shelves lead to lowered customer confidence.
It follows that today’s retailer must adapt or die; not only delivering the goods that their customers want, but also providing the convenience that they expect. Items that are ordered online must be delivered on time, supermarket shelves that hold fast moving consumer goods must be continually replenished, and customer loyalty must be secured by a consistent ability to live up to expectations.
This is a challenge that’s likely to escalate as our towns and cities become more densely populated – 45% of our UK population want to live near a major town or city – and it’s one which can only be met if retailers hold closer relationships with logistics companies, as well as a thorough overview of their supply chain.
Understanding the changing logistics infrastructure
Solving the logistical challenge of retail in the UK today will require retailers to have a fuller understanding of our changing logistics infrastructure. As it’s no longer realistic for retailers to rely on a delivery of palletised goods from a national distribution centre on a daily or weekly basis, retail logistics networks now extend across the UK and product is moved from smaller, regional distribution centres as well as the larger centralised ones. Alongside this, small fulfilment centres exist to provide the ability to pick, pack and deliver goods to consumers on the same day – and sometimes within an hour.
What makes things faster and more convenient for the consumer, and therefore profitable for the retailer, also makes things much more complex for the logistics provider. And in today’s world, there is no room for error – as any disruption to deliveries will mean increased expense, lost sales and customer dissatisfaction.
Planning and optimisation are obviously crucial in the accelerated world of logistics, but there are other practical implications to consider too. Logistics businesses now often require space in city locations to reach our increasingly urbanised population, which can be costly. There’s also the strain on our overstretched road networks to consider here, alongside the costs of transport and availability of workforce – and all of this must be negotiated within ever-tightening margins. It’s a situation which Peter Ward, Chairman of the UK Warehousing Association (UKWA) believes is unsustainable.
The UKWA lobbies government to consider logistics when approving any new housing development, as increased numbers of residents will inevitably lead to increased deliveries of food and online purchases. The UKWA have also worked to raise awareness of labour shortages in retail logistics, which it believes will be exacerbated by migrant workers needing a degree-level education after Brexit, as the Government has proposed; as a quarter of the lower skilled roles in the industry are filled by immigrant labour. The association’s recent report: Feeding London 2030 examines some of the extremes of the retail logistics problem and suggests that retailers need to have a better understanding of the true costs of logistics, of the need for a margin in a world preoccupied with driving down costs, and of how working more closely together could help both sides discover a more sustainable solution.
Logistics as the new retailers
Just as retailers need to get under the skin of their logistics partners, logistics businesses who want to ‘future-proof’ their operations might consider adopting the mindset of a retailer. After all, 75% of UK logistics activity today relates to the consumer – essentially making it a retail business. Here the ‘customer journey’ takes on new meaning and effective communication from those responsible for the transport of goods will be key to successful relationships with retailers – even if that simply means notifying them promptly if a delivery will be delayed.
While technology has increased the complexity of logistics planning, it can also provide the solution to new challenges: better systems for data handling and the ability to track transport are making supply chain management easier, and should mean that order errors can be reduced and long waiting times for deliveries can be eradicated. Unfortunately, there is much work to be done here as currently only 12% of retailers know the planned arrival time of all trucks into their warehouse, according to a recent report by Germany’s RWTH Aachen University.
Just as logistics is the vital link in any retail supply chain, the success of any logistics business is dependent on the ability of the retailers it serves to meet their own customers’ expectations. Investing in better systems and software to help with this should be a priority for any logistics provider who is struggling to provide a joined-up service. All things considered, it seems that the success of both industries will depend on them building closer relationships that can support change through the practical and financial challenges that lie ahead.
At Altius, we help retailers manage their complete supply chains efficiently and compliantly, all within one system. Whether that’s identifying the right partners for logistics, warehousing, facilities management or more, you can read more about the ways in which we support the retail sector here.
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