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How should companies deal with peaks?

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What does research into customer experience tell us about how companies should deal with peaks? Dave Berridge, secretary of the Automated Material Handling Systems Association (AMHSA), takes a look.

According to recent research from the US, customer experience (CX) is growing in importance in terms of differentiating brands. The report – from the Council of Supply Chain Management Professionals in association with BluJay Solutions and Adelante SCM – surveyed over 400 supply chain professionals across manufacturing, retail and logistics service providers. It found that 61% ‘agreed’ or ‘strongly agreed’ that customer experience will overtake price and product as the leading brand differentiator in the next five years. Only 22% ‘disagreed’ or ‘strongly disagreed’, with the remainder being neutral.

CX driving innovation

In fact, the survey found that delivering an enhanced customer experience was the top factor driving supply chain innovation (receiving 30% of top-factor votes), followed by reducing costs (29%) and creating competitive advantage (20%). In the same survey last year, reducing costs and delivering an enhanced CX tied for top spot with 31% each.

This year’s survey respondents cited real-time visibility as the most important supply chain capability for delivering an enhanced CX. The research also found that the top three barriers to logistics innovation were siloed systems or processes (21%), outdated IT systems (18%) and lack of support from senior management for resources (14%). All this does not mean that cost management no longer matters, but it does mean that cost reduction alone is not sufficient for companies to remain competitive.

14_Dave Berridge.jpgDealing with peaks

What is the significance of this research when it comes to dealing with supply chain peaks such as Black Friday, Singles Day and Christmas? Although Black Friday and Singles Day are relatively new phenomena – beginning in the 1950s and 1990s respectively – they have grown in impact. Sales on Black Friday, which takes place the day after Thanksgiving, are dwarfed by those on Singles Day, which takes place on 11 November (11 March in the UK) and originated in China as a celebration for single people (with the date of 11.11 representing the singletons). Consumers purchased over £34 billion worth of goods and services globally in a 24-hour period for Singles Day in 2018. Neither Singles Day nor Black Friday are as big in the UK as in China and the US but, along with Christmas, they nevertheless present peaks that are problematic for the supply chain. Although a revenue spike is on offer, if companies are unable to fulfil customer expectations, the result can be long-term brand damage.

Planning and automation

How should retailers deal with this risk? Part of the answer is to plan meticulously for peaks. Many companies find that a balance of fully automated and semi-automated processes allows them to scale operations up quickly by adding seasonal labour when required. Achieving next-day delivery in peak periods may require a unified order management system (OMS), to fulfil each order in the most cost-effective way; for example, an order placed in a rural location may be best shipped from a nearby store rather than from the main warehouse.

Delaying delivery

Another part of the solution is for companies to rethink their offer for peak periods. Do consumers really expect next-day delivery during discount events? Recent research suggests that they do not, which could give retailers vital breathing space. PFS, the e-commerce 3PL, surveyed 2000 UK consumers and found that 77% were willing to wait up to five days for delivery.

Research by IMRG, the UK’s online retailer association, backs this up. It found that speed of delivery is decreasing in importance for online shoppers, with only 25% citing slow delivery as a problem in 2019, compared to 35% in 2018. Retailers can also consider offering next-day delivery during peaks but charging for it. Then consumers can decide to pay the premium if speed of delivery is important to them, but retailers benefit from reduced pressure because most orders can be shipped with standard delivery.

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