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Retail at IMHX Connect

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Day two of the inaugural IMHX Connect event focused on innovation in retail logistics, with a particular look at how to respond to emerging consumer trends.

Dan Myers, Managing Director UK & Ireland at XPO Logistics, described how the pandemic has been a catalyst for various changes across people’s lives. For staff, the flexibility of home- and hybrid-working has become increasingly important, which has a fringe benefit of boosting the sustainability of a business. He highlighted that while the pandemic may have accelerated certain changes and trends, successful logisticians will recognise that change is an ongoing process.

The four fundamentals of retail sales (product, price, place, time) have had different weighting in the last year. The first two fundamentals were heavily weighted in the past, but to succeed in the present and going into the future you need to place more emphasis on the second two. The new battlefront, therefore, is the ability to reduce order lead time and make the entire consumer process as seamless as possible. Myers pointed to the statistic that 60% of consumers will abandon their online shopping basket if next-day delivery cannot be offered. He advised retailers to be outward looking but inwards facing: understand your customer needs by staying close to them, and remember that the customer doesn’t always know what they want.

One retailer that benefitted from focusing their efforts on e-commerce over the past year is Sacred Spirits. Their Managing Director, Hilary Whitney, described how her company had mainly supplied bars and restaurants prior to the coronavirus outbreak. By partnering with Diamond Logistics, Whitney pivoted to a consumer-focused model. She emphasised the several key improvements thanks to the partnership, including increased online integration, easier monitoring of stock levels and transparent delivery processes.

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Whitney described the impact Brexit has had on keeping the supply chain sustainable. Prior to leaving the EU, sharing a container with another retailer was commonplace and a cost-effective way to avoid shipping empty space. However, the amount of administrative work associated with importing and exporting means that there is a push towards having your own container – if just one party completes the new paperwork incorrectly, the entire container is held up and has a knock-on effect across the supply chain. While this process (along with the rising cost of raw materials) can affect end prices, Whitney was keen to emphasise that businesses are wise to absorb a lot of the additional cost.

James Osborn, Vice President at TGW, also talked about the failures in the supply chain that could cost customer sales. The bravest logisticians, he said, are thinking seriously about how to prevent losses, though it is difficult to attribute investment in automation specifically with a reduction in lost sales. Customers are only likely to slip up twice before they consider a competitor, and 1 in 10 new customers will only shop with a particular business once. With the acquisition of each new customer averaging £8, it is imperative that online businesses assess their strategy constantly.

Whether businesses are large or small, whether their R&D is extensive or not, they are all open. They are open about the role technology is playing today and what it needs to do to win the markets they operate in. There is an environment of urgency, however the most successful logistics operators are able to balance risk and reward. The current climate has forced risk-averse decision makers out of the status quo and encouraged them to make the right investments for the business and the customers. According to Osborn, the most effective operating boards are those who empower leaders to be bold.

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Assessing the rise of micro-fulfilment centres (MFCs), Adam Fox, Business Development Manager at Swisslog compared different types of ‘automation engines’ used in micro-fulfilment centres (MFCs). The two solutions considered most effective are AutoStore and Shuttle (Cyclone Carrier). With ceilings lower in supermarkets, AutoStore works best since there is not enough room for Shuttles. AutoStore has proven to be the most viable MFC engine for many reasons: there is no need to interrupt picking activities since replenishing can be done in parallel, the increased density of the AutoStore storage provides substantial space savings and the system flexibility can fit any facility layout or shape.

The typical retail-based MFC solution is trolley-based, which removes the need for a tote handling system. It can be expanded to implement conveyor feed and takeaway, and the Simple Flow rack consolidation provides reliable and effective segregation. The driver of any automated system is the software: Fox discussed the SynQ software used alongside Swisslog hardware. Within MFCs, the software has multiple uses such as managing loose picking, connecting to SMS servers for text notifications, and organising order consolidation before pick-up or delivery.

The day closed with David Thame, Property Editor for SHD Logistics, who discussed the influx of foreign investments into the UK logistics property market. According to data from Knight Frank, in the first half of 2021 around £6bn was invested in UK warehousing – more than double for the same period last year, and 54% higher than the same period in 2018. With yields on industrial property reaching 3-4%, it is little wonder that institutional investors are snapping up units faster than they can be built.

Thame identified that investors are focusing on warehousing because retail has fallen through the floor. The kings of real estate from the 1960s to the 1990s were those who owned shopping centres. With assets dwindling in value, the rent charged to retail tenants no longer matched their turnover. Thame pointed to Debenhams, which would regularly take on long tenancy agreements of over 60 years in the 20th Century, but since the turn of the millennium, the rents began to feel burdensome. He suggested that leases signed today could come back to haunt occupiers in the markets of the future, especially considering the logistics market operates on a high-volume, low-margin basis.

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