The award for special delivery arguably goes to Santa Claus, but this holiday season delivery may also prove to be the competitive edge for retailers. In this article, I take a look at the latest moves by Walmart and Amazon to extend Santa’s supply chain with same-day delivery.
The Battle of the Brands
While brand continues to be THE foundation for retail success,the supply chain is once again shaping up to be a top weapon in the battle for the customer.
With 180 million shoppers annually,Walmart takes the No. 1 position on the Interbrand U.S. Most Valuable Retail Brands by a large margin for 2012.Yet Walmart’s brand value actually decreased over the last year as shoppers continue to spread theirspending.In response to these changing shopping behaviors and market pressures on its brand value, Walmart is doubling down on its strengths, including its well-recognized world-class supply chain mastery.
What do the Interbrand placements tell us about our favorite retailers? “One of the most compelling lessons from the list is that the best brands didn’t stand idly by, waiting for further signs of recovery. They contributed to it by anticipating their customer’s desire to return-not to shopping as usual-but to something better,” says Bruce Dybvad, CEO of Interbrand Design Forum.
Why Compete on Same-Day Delivery?
This year, Walmart and Amazon are competing head on for the holiday buying season with same-day delivery. As NBC’s Janet Shamlian recently reported,“Whoever masters same-day delivery will be the winner.”
For Walmart, it is a way to counter the e-Commerce convenience of Amazon and signal their intent to compete across all channels. “While e-commerce sales are just a sliver of the [Walmart’s] overall revenues, the distinction between online and offline shopping is becoming more and more blurred. With the retail landscape changing so rapidly, it makes sense for the firm to engage in low-risk experiments like same day delivery [for products ordered online].”
For Amazon it is a way to deliver the “instant gratification” that a traditional brick and mortar retail store provides.Amazon is trying to neutralize that advantage by offering same-day delivery for some products in a limited number of areas.
How to Deliver Same-Day?
Justas the motivation for pursuing same-day delivery is different for Walmart and Amazon, so are their respective execution approaches. Both are dependent on their positions in the marketplace and concomitant strengths. While neither Walmart nor Amazon have Santa’s special delivery abilities, they do each have unique supply chain strengths that can be leveraged.
Amazon launched same-day delivery from their warehouses in 2009 for ten cities, including Boston, Chicago, Las Vegas and Seattle, and their distribution centers will total about 60. Slate’s technology columnist offers insight into Amazon’s strategy:
“Now that [Amazon] has agreed to collect sales taxes, the company can legally set up warehouses right inside some of the largest metropolitan areas in the nation. Why would it want to do that? Because Amazon’s new goal is to get stuff to you immediately — as soon as a few hours after you hit buy. Same-day delivery has long been the holy grail of Internet retailers, something that dozens of startups have tried and failed to accomplish. But Amazon is investing billions to make next-day delivery standard, and same-day delivery an option for lots of customers. If it can pull that off, the company will permanently alter how we shop.”
As Time Business reports, “Walmart isn’t taking it lying down.”Walmart is using its extensive network of superstores as distribution centers, and shipping products to consumers via UPS. The service will initially be available in the Northern Virginia, Philadelphia,Minneapolis, San Jose and San Francisco areas.
While Walmart’s claim to fame has been supply chain mastery, it has traditionally focused on delivery to stores, not to consumers, where Amazon may well have the edge.Shipping from stores, rather than from warehouses as Amazon does, is expensive.“It can be three to four times the cost for the retailer to pick items and pack them from a store versus having a really efficient, automated process back in a distribution center,”according to Al Sambar, a retail strategist at consulting firm Kurt Salmon.
Where Can Adaptive Case Management Help?
Where does case management figure into this retail battle?As those who pursue the “perfect order” know far too well, supply chain processes can be difficult to control.Introducing a new element like same-day increases the challenge.Here are four areas where case management can help:
1. Order Management
Order management cost and coordination challenges span from the point where an order is submitted through product fulfillment to payment for goods or services received,and often to the reverse logistics of product return.These challenges and especially the associated costs are all extended and heightened -day delivery requirements. Applying business process management approaches and tools can certainly help through automation.
However in today’s multi-channel retail environment, every customer order becomes both an opportunity and a challenge, requiring collaborative tools that can aid exception handling and decision making.This is where adaptive case management can help as it has in other areas of order management to relieve supply chain stress and improve management of the financial flows.
Same-day delivery introduces new logistics and value chain partners with new (and old)systems all combining to do tasks in potentially new ways.To manage product logistics, including the ever challenging reverse logistics area, documents and decision-making must span application and organizational silos.Case management’s ability to integrate and scale across ERP systems and to coordinate logistics systems and participants, while adapting to new circumstances and market demands, is a significant value proposition.
Traditional BPMS systems can be used to track each shipment across all the different participants and legs of the journey. Straight through processing is not always possible or practical though, especially when shipments do not take the anticipated “happy path.”
With same-day, when an error occurs or a shipment fails to correctly deliver on the first attempt,many of the tasks and decisions taken may be dependent upon relatively slow and error-prone human beings in what are untamed process areas that fall between established systems and procedures. A collaborative case management implementation could allow immediate and informed decisionmaking to occur rather than automatically trying to redeliver the shipment the next day (which of course defeats the same-day delivery promise) keeping the package in play, and possibly saving significant costs per delivery.
Customer service challenges and responses are well understood and there is general consensus that this area presents a tremendous opportunity for differentiation. Here is an area where there is a multitude of existing CRM and legacy systems in place, and once again next-day will introduce new requirements.Mapping all the possible paths for automation is simply not feasible, yet organizing the work in a customer-centric wa yis of great importance.
This relatively new retail “omni-channel”environment is a natural target to apply case management, filled as it is with information silos, organization issues and non-interoperable programs that drive up costs and frustrate employees and customers alike.
With a case management approach you can combine relevant document content and intelligent workflow to create an effective customer support and decision making environment for each of the participants involved in the customer activity.The result will be an operation that meets next-day requirements and adapts as new options are introduced.
4. Executive Oversight and Insight
Optimizing operations requires visibility into the business and across the extended supply chain.Case management can enable dashboards for all levels of management, including executive views.These provide insight into the product, financial and information flows over the supply chain to better understand how the business is doing against their“perfect-order” goals.And, case management can be used to help management determine how the business is responding to new offerings like same-day delivery.
What’s Next for Same-Day?
The economics of same-day delivery are yet to be worked out.Physical supply chain issues are certainly a part of what must be mastered. For example,Amazon is opening up a lot of new shipping centers and investing in making those centers much more efficient with Kiva Systems that makes “picking robots” that improve shipping times while reducing errors.
In addition, both Amazon and Walmart and their fellow retailers will need to improve their end-to-end supply chain systems transparency and agility with cost-effective exception handling and decision making using tools like case management.
For this year, same-day delivery is really just an interesting experiment,albeit an experiment that could have significant impact on the future of retailing.For now, I think that Santa is still the delivery winner …and Santa just might already have discovered case management as his secret supply chain weapon.