connecting the supply chain dots, images retailme, december 2015

40 www.imagesretailme.com ANNUAL 2015

If a customer enters a Louis Vuitton store to purchase a handbag, that particular style and colour must be

available then and there. If a customer places an order online for the latest iPhone 6S, she must receive it the very next day.

Today’s ‘always connected’ consumers are impatient and unforgiving. They want products and services to be available anytime, anywhere. Stock out is no longer an acceptable option for them.

To meet such high expectations, retailers and e-tailers must ensure seamless connection and flow between all points of the logistics chain – from inventory to transportation, packaging to delivery, storage to stocking. They must ensure seamless communication at all retail touch-points.

As e-commerce melds with brick-and-mortar retail in omnichannel, the way consumers shop and shops retail is changing. Distribution strategies demand the touch-and-feel of physical stores wedded to online delivery systems. The logistics challenge is to match customer needs with the right products at multiple online and offline locations, which turns the traditional inventory approach on its head. That was the meat and substance of the Logistics Conclave at MRF.

Connecting the supply chain dotsThe supply chain in a digital worldHow is logistics shaped in the digital world of today is a question Maartenjan de-Wit, senior industry advisor – retail & consumer industries, SAP MENA, seeks to answer.

“Businesses today endeavour to evolve fast by connecting everything to everything. We’re also seeing consumers connect to information in ways that seemed impossible a few years ago. The key to do all this is an effective supply chain,” he observes.

SAP sees advances in technology increasingly impacting the way the retail supply chain works, some examples including:■ Using sensors, RFID and Ibeacons■ Leveraging artificial intelligence, robotics & AGV’s■ Developing drones and driverless cars■ Creating a world of new opportunities with 3D printing ■ Using augmented and virtual reality■ Building new ideas with big data, cloud computing and mobility ■ Harnessing the massive potential of the Internet of Things (IoT), which simply

implies machines talking to machines without manual intervention“All the above are happening today. They aren’t things of the future. They are shaping

the way the retail supply chain functions today. It’s a two-sided process – technology on the one hand and changing consumer behaviour on the other. Technology is changing the game, but customers are changing the rules. They expect a consistent, personalised, contextual experience at every touch-point,” he concludes.

Big or small, the product must be available when asked for“In 2700BC, the Egyptians built the mighty Pyramid of Geisha, 146 metres high and six million tonnes in weight. How did they do it? They must have needed sophisticated material transport

equipment to move those massive building blocks and put them in place. Even today, we don’t have any clear answers,” says Tapan Vaidya, general manager of the restaurant division of the Bahrain-based Jawad Business Group, who moderated the conclave.

“The next big step in logistics, also

41www.imagesretailme.com ANNUAL 2015

in those ancient times, was using boats to sail across the high seas with goods for trade. Cut to the present. How is the supply chain being engineered today to meet customer demands and ensure product availability,” he asks.

“Yes, logistics was, is and will always be a fascinating aspect of commerce,” Vaidya

observes.“In the Middle East, the big concern of

most retailers is to ensure timely product availability,” points out Mark Anthony Lack, COO of Retail Arabia, which holds the franchise rights for Géant in Bahrain, Kuwait and the UAE. “At Géant, we have to track product availability across

The quicker a consumer gets what she has ordered online, the less likely she will be to cancel the order. That underlines the importance of last mile logistics. – Joy Ajlouny

If you look at the retail industry today, customers are informed and savvy, hence they have higher expectations. The supply chain plays a crucial role in meeting those expectations. – Maartenjan de-Wit

Logistics is becoming more and more important in the world we live in, with customers always looking to customise the products they purchase and demanding quick delivery. – Mahmoud Adham

LOGISTICSCONCLAVE


our returns,” he explains.Or take the case of an operation that

offers a different perspective. “We handle around 80,000 static SKUs in our fashion division. But it’s all very dynamic because we have to constantly add newness by launching seasonal fashion collections at our stores, which doesn’t allow for 100% planning. We typically place orders six-to-eight months ahead of time without knowing exactly what will sell well. Aging is a huge factor in fashion. So forecasting and planning are critical but they must go hand-in-hand with tolerance and making room for a buffer,” elaborates Mohammad Shoaib Hai, director of supply chain and logistics at Majid Al Futtaim Fashion.

Warehouse management systems ensure return on investmentSo the crucial issue is what retailers can do to ensure a seamless and effective supply chain system.

“Some years ago, we had to deal with 20,000-30,000 SKUs. We had a helper in the store who knew exactly where the TV, camera or mobile phones were kept. Life would get complicated the day he was absent. We couldn’t get through the

day,” recounts Shailen Shukla, head of the logistics division of Dubai-based Jumbo Electronics Co. Ltd.

“The day the auditors would come, demanding a stock inventory, was another difficult day for us, requiring spending at least a week in making a count,” he adds.

“Life became less complicated the day we graduated to the warehouse management system using RFID,” he continues. “We can now measure stock, items with expiry dates and identical items like mobile phones models in different colours sitting at our desks. We can also evaluate the performance of our store staff – how many lines they manage and how many units they sell. And best of all, we can provide our customers whatever they want at the right time.”

“Of course, this required investment. But the first year’s saving on inventory shrinkage alone gave us the payback money we invested on racks, scanners, Wi-Fi, software and staff training. Today, we can’t imagine operating without technology. It’s a mental transition from man-to-goods to goods-to-man,” Shukla avers.

“Dubai Duty Free is one of the finest

three countries, 45 stores and around 40,000 product lines on a daily basis. That involves tracking half a million data points in 12 different dimensions just to ensure each product is available on the shelf when a customer wants it. That’s not all. We also monitor potential out-of-stock situations and calculate how much money we lose because of out-of-stock scenarios. That’s how crucial product availability is to us.”

Big or small, the size of the retail business or the scale of its operations does not diminish the role of logistics. Complementing Lack is Mahmoud Adham, founder of the newly launched, online healthy snacks concept Munchbox. “We’re a young business that deals with only 44 SKUs and distributes to 42 outlets. Irrespective of size, after operating in a market for a while, it’s crucial for any retailer to predict stock availability. To do that in our kind of business, we have to develop an understanding of what kind of snacks which outlets consume and why. For example, at cinemas, more chocolatey snacks are consumed while protein rich snacks are preferred in gyms. This kind of understanding of the consumption pattern helps us plan our logistics better, minimising mismatches and maximising

Logistics and ensuring product availability is a topic that fascinates me. Logistics and supply chain are inputs that ensure meaningful output. – Mark Anthony Lack

Forecasting and planning play a critical role for retailers, especially those dealing in fashion, but they will also have to make room for buffer and tolerance. – Mohammad Shoaib Hai

You have to up the game with logistics, technology, services and products. You have to treat your staff right, pay them well, train them right and make them your brand ambassadors.– Nisha Varman Shetty


examples of automation. Of course, every business hasn’t reached that stage yet but the warehouse management system and RFID offer great advantages to any retailer today,” he believes.

Timely delivery is what ensures customer delightDelivery is another crucial factor in the success of any retail business. Today, it means delivering the ordered product at the right time to the right customer at the right location.

In the Middle East, India and Brazil, retail is on a roll while it stagnates in developed economies like the US and Europe. There’s a strong hunger for new products in these markets, which has seen the number of malls in these regions increasing. That strong growth has not dampened the simultaneous growth of e-commerce.

“It may all sound very sophisticated, but e-commerce is really nothing more than logistics,” observes Joy Ajlouny, co-founder and director of business development/partnership, Fetchr. “The crux of the matter is how quickly and seamlessly you can reach a product to a customer and how quickly it can be returned in case there are issues.”

Logistics is a key focal area for a young and small e-commerce business like ours. It’s the only way we can delight our customers. – Rohan Bhardwaj

Food plays a key role in every geography and society. It’s an integral part of our daily lives. If the supply chain in food breaks down, it can wreak havoc. So producers, manufacturers and retailers must work together to safeguard the supply chain. That’s why logistics is crucial for the food service network in retail. – Sajan Alex

Today, product differentiation is steadily eroding, with retailers selling similar stuff. In such a situation, logistics acts as a huge differentiator for any retailer. – Shailen Shukla

You cannot neglect reverse logistics todayReverse logistics is a process of returning materials or products from their point of consumption to the point of origin to recapture value or ensure proper disposal. It’s a relatively neglected aspect of logistics, feels Shailen Shukla.

“We need to take reverse logistics as seriously as forward logistics. We should first make the effort to deliver every product correctly and then put proper systems and processes in place to track what can be recycled or disposed of in a proper, compliant manner,” he elaborates.

In the narrower context of retail, reverse logistics would refer to a consumer returning a product to a retailer for whatever reason. “Businesses rarely track the cost of returns. Last year, the cost of failed deliveries in the UK totalled £971 million. That’s huge. Consumers in the US returned $200 billion worth of goods, the return rate averaging 8.12% of total sales. It was lower in the European Union at 6.3%,” Shukla points out.

“In the Middle East it isn’t easy to return a product. It should be made easier. Even if you’ve bought something online, you should be able to return it to a store. That’s how you build customer loyalty,” suggests Ajlouny. “But this region doesn’t really understand the true meaning of customer service. We build our employees on servitude, not service. Along with retail logistics, retailers must upgrade their customer service.”


But there’s a hitch. “The Middle East is a region where addresses are a bit of a problem so ensuring timely delivery is a big challenge. That’s why last mile logistics is an issue here. It’s a wrinkle we’re working on addressing,” she confirms.

“Research indicates that 92% of online purchasers avail cash-on-delivery, making it important to find the customer as easily and quickly as possible. Our company has developed a new Fetchr app that allows phone numbers to be used as physical addresses, improving delivery rates for e-commerce firms and offering a more reliable service for consumers,” Ajlouny elaborates.

Quick delivery is what Adham is concerned about as well. “When we started Munchbox a year ago, we promised delivery after two days. We reduced it to one day, eventually coming down to same-day delivery within a couple of hours. We found our orders increasing. People want what they order to reach them as quickly as possible. If you can assure them prompt delivery, you’ve got the formula right. The trick is to figure how quickly you can deliver the product from the warehouse to the customer’s doorstep,” he reveals.

Mini Exchange, a company founded by Sarah Jones operates a little differently. “We follow the drop ship model, a fulfilment model that allows you to buy products individually from a wholesaler

and ship them directly to your customer. We offer retailers dealing in mother and baby products a marketplace to sell their products without having to invest in logistics, an e-commerce platform and a digital marketing team, helping them reach their customers in a short time-frame. So logistics is a key component of our business. We train our distributors to pack the right products to be sent to customers quickly,” she explains.

“Logistics is a key focus area for us too. It’s the only way we can delight our customers,” adds Rohan Bhardwaj, partner & general manager of Radix Wear, a newly launched online business dealing in fashion and leather goods, sharing a real-life experience to show how things can go awry. “One morning, we faced an order cancellation because our product, which was present on another e-commerce site, didn’t reach the customer even after six days.”

Multiple options and exploring social media can open new doorsAn established player like Jumbo, which launched its online portal last year, also devotes a lot of its time and energy to logistics. “We decided to do next-day delivery within the UAE instead of the normal two-to-three days so we could differentiate Jumbo from any other e-commerce sites in the region. We also

Dealing in a marketplace for mothers and kids, our model directly connects suppliers with buyers, with our tech platform facilitating communication. Logistics is crucial for us to get that communication right, ensuring the right product reaches the right customer at the right time. – Sarah Jones


Logistics is, was and always will be a fascinating aspect of commerce. It’s something that can make or break a business. – Tapan Vaidya

offered credit card payment along with cash-on-delivery. In addition, we gave customers a click-and-collect option in which they could collect their order from any of our mall locations closest to them. Logistics thus played a significant role in creating synergy between online and offline,” explains Shukla.

Again, for a small, home-grown furniture and furnishing concept like The Urban Yogi, which sources ethically and sustainably from all over the world, logistics is equally crucial. “The push towards social media and e-commerce is very important for any small business like us,” opines founder Nisha Varman Shetty. “We sell on Instagram and have 40,000 followers sending requests from places like the UK and Brazil. The question in such cases is: how can I make that sale possible? I look for the right logistics partner who can deliver a vintage chair or an upcycled table to any corner of the globe. But the issue then is the cost of delivery is often much higher than the product cost. If I could solve this problem, my business would be more profitable,” she reveals.

Fetchr’s business is also exploding with retailers selling products on social media, says Ajlouny. “It’s unbelievable, which is why we’re in the process of creating a link that will enable socially active small businesses like The Urban Yogi to directly click a button on social media that will throw up possible shipping options,” she adds.

It’s not just giving to the world, but receiving from every corner as wellThe logistics of food service is what occupies the attention of Sajan Alex, general manager of Tablez Food Company, the F&B arm of the Abu Dhabi-based retail conglomerate Lulu Group International. “As much as 75% of the UAE population eats out at least once every weekend and 66% eats at least one meal outside the home in a week. The population is forecast to grow to 10.8 million by 2018 from the current 9.2 million. That’s a lot of people to feed. The UAE currently boasts 11,500 restaurants, a figure that will touch the 14,000-mark by 2020,” he points out

But Alex makes another important observation about an integral part of the region’s logistics. “The UAE is a country where 1% of the GDP is grown locally and over 85% of the products are imported from other parts of the world. Almost every product is available here although very little is grown or produced locally. That’s why the restaurant business does well here. You find cuisines from every part of the world. However, integrity is a concern of the supply chain in the food service industry because you wouldn’t expect Michelin star chefs to cook if their preferred truffle or extra virgin olive oil aren’t available. They get every ingredient they want here without any difficulty,

which speaks volumes about the region’s sophisticated logistics and supply chains. The ease of bringing products into the country is commendable and will evolve further,” he elaborates.

That integrity is something Vaidya can vouch for, considering his experience in overseeing Jamie’s Italian, a Jamie Oliver restaurant where the Michelin star chef is very particular about getting every ingredient fresh. “Why just Jamie’s Italian,” he adds. “Papa John’s Pizza gets its sauces from a particular farm in California harvested twice a year because of the soil and weather. The tomatoes go from the vine to cans in less than six hours before finally coming to our restaurants. All these highly specific requirements from the principals heighten the role of logistics.”

“The food service industry is much less forgiving than any other industry,” emphasises Adham. “For one, a customer won’t wait seven days for a pizza to be delivered, although he’ll wait that long or more for the latest iPhone 6S. In food, the produce date is critical, as are storage conditions and transport. So logistics is critical for the food service industry.” ■

connecting the supply chain dots, images retailme, december 2015

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