Last Mile Delivery Challenges

How is a warehouse for a traditional retailer like Marks and Spencer structured?

In terms how it's actually structured, in either end of the process, you've got the customer at the front, and then, if you go full circle, you've got the people who want to choose what the customer is going to buy or guess what they're going to want to buy.

Everything else in between is a matter of administration, ordering, manufacturing. It's the supply chain. This is really the supply chain point, until it arrives into the nearest territory or the most logical place to actually have a warehouse. If you look at the traditional retailer such as M&S, it's a very supply-chain-led retailer. The warehouses in question, because of the density of stores, they will have multiple warehouses clustered around the country.

You do see this in big retailers anywhere in the world. If there's enough volume, they will have multiple warehouses to try and keep as much stock as possible, close to where it needs to be.

In terms of the actual ownership and structure of those warehouses, it only happens in one of three ways. You normally buy-in to a campus-type facility, usually offered by a 3PL or even a 4PL. The other one is you have a very specific retail model, and you choose to subcontract that entirely out to a 3PL who will build your warehouses for you, and operate them. Or you do it in-house.

There are different hybrids. You can have a bit of an overlap between the three of those as we know, but those are the main high-level types of operation that you can have there.

When the inventory comes in, obviously, Amazon came to pioneer the chaotic inventory storage system in terms of categories that are stored together. How are the traditional retailers storing their inventory?

Depending on how much inventory they've got. They normally stored it by product type. All right? Which sounds like the logical thing to do. You keep shoes with shoes and food with food.

And you do get into hygiene factors when you get into perishables where you can only store certain things in the same temperature bracket. And then there's products that you can't mix so you're really looking for exceptions. For instance, I can't put bleach next to fresh poultry because that could be bad for humans. So there's those sorts of criteria.

How do those metrics compare to the likes of Amazon?

Quite a lot actually. The thing is, well, Amazon have the same issue. All right? Regardless of whatever happens in your warehouse, there's always products that you can't put next to each other. In fact, I probably won't pick on Amazon, pick on Zappos, they're probably the best example of chaotic storage.

What they do is they have brands of trainers. Most shoe boxes are the same size, so rather than have a section of the warehouse for Nike, another one for Under Armour, Kickers, or Skechers, or something, they just basically take any inventory and put it into any available space. They have a smart system that knows specifically which product in which size is in which space. It's not grouped by brands, they're not even grouped by size. It is literally, you fill the space, and the products will know where it is.

When we say chaotic, it's not necessarily chaotic. It actually makes sense. You just put in the best piece of the jigsaw in the most likely available space.

Why don't traditional retailers do this?

Traditional retailers are usually legacy retailers. They were around when your store manager was a guy who had a back office or back storeroom, and he would know which products were where. It's all done passively within the brain. Of course, if these retailers were a lot bigger, they ended up building supply chains. They've done this long before the advent of really good supply chain technology.

Realistically, it's a legacy thing. It's just managing growth. It's a lot harder than managing contraction. If you were to start again, you'd do it very differently, right? It's just an expansion of how things were traditionally done.

What is the actual process from their hand picking to actually finally shipping the product?

Again, there's a number of methods to doing this. Typically, what will always happen is there is an order. There's a request. There is a requirement or something. There is a message that says, "I need to take X out and take it there." It's as simple as that. You then come to the pick stage, which is knowing where the stock is. It's retrieval of stock and making sure that you've fulfilled that. It's very much a checking things off as you go along process.

Once you've done that, you build a consignment. For instance, you're putting something in an envelope, like a lipstick that's going to a customer, or you've got a handrail to go to a store, et cetera, et cetera. Then you select your mode of transport, and then you pass that to whichever mode of transport you're taking, and then complete your delivery. There may be further additions in there. You may have some rework process that says that all of these need the prices removed or something else, or something else.

As a typical process, that's what happens. Message to order, pick to message, check there's no discrepancies or take action for discrepancies, prepare for mode of transport, transport, complete.