I’m not normally one for last-minute gifts. But last Christmas, I found myself at my in-laws in the Cotswolds, late on the 23rd December, trawling through the internet for a site that would offer next day delivery for a couple of additional and very specific presents. I hit the jackpot with Very, and impressively by 8am on Christmas Eve my items were on the doorstep – phew.
Until recently, this impressively rapid fulfilment and delivery would have been unthinkable. But in 2022, next day, same day and even same hour delivery is commonplace right across all the consumer-facing sectors. Customer expectations are shifting, and businesses are beginning to recognise the importance of a slick fulfilment offering. Advancements in artificial intelligence, machine learning and automation have, of course, transformed the space. And while fulfilment may not be the sexiest of business units, it is becoming the home of ground-breaking innovation that is changing the way we shop, and most critically, who we shop with.
But how has the space evolved? What does the future look like? And how is this impacting the talent landscape?
According to a recent report from McKinsey, nearly a quarter of all tech investment spent by fashion businesses is in fulfilment and supply chain. In particular, we’re seeing businesses refresh their warehouse offerings to feature predictive picking, AI capabilities and increasing elements of automation to deliver speed, efficiencies, and better accuracy.
In August 2021, for example, The Very Group integrated its clothing and footwear returns site to its Skygate fulfilment centre, which is run on automated technology. The 850,000 square foot site has orders ready for dispatch within 30 minutes, compared to around four hours at Very’s previous fulfilment centres. Luckily for me, this move allowed the them to extend its next day delivery cut-off time from 7pm to 10pm.
And in May of this year, THG (formerly The Hut Group), announced plans to funnel a further £200m into its fulfilment strategy, which includes a fully automated warehouse. This warehouse is already partially operational, and houses more than 200 robots picking and packing orders for the group’s beauty websites.
Beyond automation, we’re seeing companies use AI to predict consumer trends, reduce waste, and create a more seamless fulfilment experience for colleagues. ASOS were among the first to introduce data-lead predictive picking, having key styles held and ready to go in the most popular sizes and colours. As supply chain transparency is increasingly prioritised on the corporate agenda, businesses are using AI to ensure they have sight of every link in their global supply network, and blockchain technology to enhance traceability.
“It was a bit of a lightbulb moment really, warehouse colleagues can spend up to 90% of their time walking around fulfilment centres picking up different items for an order. So, what if we could optimise the non-value-add process?” Kevin Carolan, logistics director at Otrium
I caught up with Kevin Carolan, logistics director at online fashion outlet Otrium, who reflected on the move towards technology-driven warehouses. “It was a bit of a lightbulb moment really,” he recalled. “Warehouse colleagues can spend up to 90% of their time walking around fulfilment centres picking up different items for an order. So, what if we could optimise the non-value-add process? How can we use AI to predict what customers will buy together, so we can co-locate products to trim down walking time? How can we use conveyors, robots or handling equipment to bring inventory to the picker? All of these things take significant time and cost out of the supply chain.”
Against this backdrop of innovation, it’s no surprise that there has been a big change in attitudes towards fulfilment, an increased appreciation for its significance and complexity and crucially its impact on providing a positive and memorable customer experience. This is even more critical when selling a luxury or high-ticket item.
“I think people have historically underestimated the sophistication of what it takes to get customers the products they want,” said Sojin Lee, founder and CEO of TOSHI, which works with the likes of Chanel and LVMH on curated last-mile delivery services. “But that could be changing now. Since the pandemic, and the supply chain issues we’ve been having, people are realising just how critical logistics is. We are the infrastructure that allows people to have everything they take for granted.”
In luxury, of course, things look a bit different. While customers are generally more willing to wait a few days for their item to arrive, expectations are higher around the experience of receiving a product. If a customer has invested in a high-price item, they certainly do not want it wrapped in a plastic bag and thrown haphazardly over their garden fence. After investing in customer acquisition and giving a beautiful brand experience online, the last mile element of fulfilment is critical to sealing customer delight and cherishing their purchases.
TOSHI tackles this problem head-on, providing a unique service for luxury brands. The last-mile start-up brings the dressing room experience to the customer, delivering orders in an EV and allowing them to try on multiple items, purchase products, and make instant returns from their own home. In June, TOSHI beat some fierce competition to win LVMH’s Innovation Award for its sustainable and customer-focused approach to sustainable fulfilment.
“For me,” said Sojin when I caught up with her last week, “it’s about saying: there’s a different way of doing this. We have to evolve logistics with the direction of the industry – which is experiential. It also has the advantage of reducing return rates which remains the biggest issue facing ecommerce, both from a cost and carbon emissions perspective.”
“Since the pandemic, and the supply chain issues we’ve been having, people are realising just how critical logistics is. We are the infrastructure that allows people to have everything they take for granted.” Sojin Lee, founder and CEO of TOSHI
I’m excited for what the future holds. While Kevin isn’t predicting warehouses entirely run by machines (“you’ll still need some level of human intervention, guidance and the opposable thumbs to pick it up”), we will definitely see automation streamlining fulfilment and supply chain processes, allowing for further speed, efficiency and personalisation. Likewise, customer attitudes around sustainability are demanding that packaging is reduced, whilst still protecting the product.
Most broadly, I believe that a shift in the way we think about logistics is overdue. For years, decisions around delivery partners and processes have been the domain of procurement or finance leads and ultimately has been awarded to the most competitive price. What would happen to the consumer fulfilment experience if those decisions were made by the chief marketing officer or the chief customer officer? If the delivery of a parcel is the last touchpoint in the purchase process, then surely it must be a positive experience and requires the right amount of thought and consideration?
The other elephant in the room around fulfilment is the question of sustainability and the impact that packaging, transport and an average 40% return rate has on the environment. The logistics industry recognises it must balance environmental measures with customer expectations to give options of both quick and less harmful deliveries. In fact, there is growing evidence that consumers are prepared to wait longer for a delivery if it can be delivered more sustainably and expect packaging to be minimised and able to be reused for returns. In truth, the issues around sustainability in logistics could easily fill this column on its own.
Similarly, we are seeing different talent profiles entering the space. While many fulfilment leaders have historically come up from the warehouse floor, this new chapter of tech-led operations is demanding digital and strategy experts enter the space, often moving across from management consultancy environments and are increasingly stepping into COO positions with full visibility for the end-to-end supply chain. Beyond bringing a new set of skills to the field, we hope this shift will diversify the talent pool within the function (as it stands, there are very few women or ethnic minority leaders in fulfilment and supply chain roles).
We have entered a new era of fulfilment which poses a conundrum to retailers; consumers are demanding express deliveries, but want it executed in a sustainable and highly communicative way and with a continued resistance to pay for returns. Although challenging, this creates an opportunity for brands to differentiate themselves through innovation and identifying customer priorities and building better loyalty. Most importantly, as with all areas of service, it is about reputation; build a data-driven fulfilment model that feels frictionless to the consumer, both for delivery and returns, and the consumer will vote with their wallet. How is your fulfilment model developing? Let me know.