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Balancing Convenience and Sustainability in Retail Supply Chains
Once a major point of difference, sustainability is now a retail watchword. Thanks to increasing public interest in environmental issues, retailers have been prompted to place ethical and environmental concerns above shareholder returns.
As a result, in our work with the world’s biggest retailers, we’ve seen every aspect of their supply chain solutions being explored in an effort to reduce carbon emissions, minimise the use of resources and contribute towards cleaner air. At the same time, supply chains must continue to offer customers the convenience they’ve come to expect. While reducing operational costs and supporting sustained profitable growth.
Technology is already driving significant supply chain change. But your retail business can do more using existing technology without compromising customer convenience. As we explore in this article.
The Supply Chain Adjustments Retailers Are Making Now
Sustainability is a broad topic and one that retailers have come under increasing pressure to prioritise. A combination of press and public pressure has damaged reputations igniting – in some cases – a need for change.
Think back to the Asda, Primark and Tesco scandal in 2008 when headlines accused the companies of paying workers 7p an hour. Or the Sports Direct affair in 2016 when MPs blamed the business for failing to treat their warehouse staff humanely. Even the king of retailers, Amazon, is not immune with ongoing concerns about the business’ use of zero hours contract workers.
This kind of reputational damage plus public demands for more sustainable and ethical retail products has created sufficient commercial concern to drive change.
Retailers are no longer prioritising shareholder returns above all else.
Business now aims to be a force for good. To ensure key issues around sustainability – including carbon emissions, air pollution, deforestation, water shortages, H&S issues, child labour and modern slavery – are problems that are solved by their supply chains. Not contributed to.
To achieve this, retailers are conducting complete analyses of their entire supply chain, from field to fork and from originator to consumer. There are several steps in this process:
Step 1 – understand the current situation
Many retailers have focused on the start of the supply chain using their buying power to influence providers down the chain, creating their own sustainability programmes and operating in more sustainable ways. M&S are a good example of this kind of work. Their responsible sourcing policy looks beyond their own operations to their wider supply chain of 2,000 suppliers whose raw materials come from around 20,000 farms and 100,000 smallholders. Having technology in place that provides an end-to-end view of an organisation’s entire supply chain is indispensable at this stage.
Step 2 – assess current use of natural and human resources
An assessment of resource use at every step of the supply chain enables retailers to establish the indicators to measure success. Many analyse sustainability and report on it to make their priorities clear to customers and employees. This can improve tracking, methodology and process, and challenge employees to do better. Walmart’s 2019 sustainability report is 95 pages long and provides a publicly published, granular report on progress against sustainability goals. Other firms use data to benchmark themselves against other competitors creating the healthy competition that inspires performance.
Step 3 – adapt aspects of the supply chain retailers control
From tech that streamlines transport routes to the use of in-store or warehouse energy consumption monitors, retailers are finding ways to optimise efficiency. We’ve seen an increase in the use of IoT devices, for example in refrigeration, to regulate and optimise refrigerator unit temperatures reducing energy use. IoT devices can also identify patterns that precede failures and enable maintenance schedules to avoid breakdowns. This allows retailers to secure an engineer and carry out a repair before units fail avoiding the wasteful loss of stock and minimising customer inconvenience.
Supply Chain Opportunities – A Retail Watchlist
Despite the good work that’s already being done around sustainable retail supply chains, there are significant possibilities to further improve the health of retailers’ bottom lines and the planet. Here are the top opportunities on our retail supply chain watchlist.
Opportunity #1 – share last-mile solutions between retailers
The most expensive part of the B2C supply chain is the last mile – in terms of cost but also potentially in terms of CO2 depending on the density of the delivery among other factors. In B2B models, multiple packages tend to be dropped in a single location whereas the promise of speed and convenience has resulted in one-package-per-stop trips for consumers.
Carriers try to decrease the miles driven and time on the road while retailers aim to increase profit and please customers. Meanwhile, consumers express concerns about the environment but don’t consider the impact of their actions when ordering online. And companies aren’t explaining the problem either.
There is an alternative – and it’s something we’ve not yet seen in the marketplace. Although fast delivery was once a point of difference, it’s now less so in most sectors. Which frees retailers to become truly collaborative by sharing resources to deliver products to customers at a higher density and at a lower environmental and fiscal cost.
To achieve this retailers would need to use common platforms. Currently, everyone’s using and optimising their own platform. The next stage is to use a shared platform to optimise across groups for the benefit of customers, retailers and the environment.
By giving the consumer the option to have the product in two hours or to wait and save x amount of CO2, retailers can strike a balance between convenience and sustainability.
Opportunity #2 – Reduce Waste From Returns
An area that offers a major quick win is returns. Expensive, time consuming and particularly bad for the environment, returns occur at a much higher rate today than in the past. Placing additional pressure on the supply chain, creating more CO2 and using more human and natural resources.
For example, the most common return, clothes, need to be steam cleaned, re-pressed and re-packaged before they can be re-distributed, often to a different country.
Retailers are already using automated workflows to remove variability. And by instilling repeatable systems and consistent routines the condition of clothes can be measured faster and a predictable return process generated.
One way to enhance this process further is to create shared return locations. Retailers could collaborate with other businesses to make it easier for consumers to return items without making a special journey or requiring a van to make a specific trip to their home.
One company already doing this is delivery firm UPS. Their MyChoice programme gives customers the option to drop returns to a convenient location at a convenient time. UPS have created a network of access points including dry cleaners, delivery lockers and petrol stations.
This is particularly helpful for consumers in more rural locations as it helps make retail more viable and reduces emissions as people don’t have to make a 10-20 mile round journey to return an item.
Seamless returns between channels
Another area of opportunity for retailers is to make the returns process between online and bricks and mortar a seamless experience. Some brands make it impossible for consumers to return an item bought online to a physical store. Despite having done the legwork, the customer’s return is refused in-store and a van is dispatched to collect the item from the individual’s home. Amending these kinds of processes relies on integrating systems to ensure a seamless experience.
Opportunity #3 – Electric Vehicles
Transport is the biggest contributor to the UK’s carbon emissions. With electric cars steadily becoming a feature on UK roads, it’s time for supply chains to start thinking about the use of alternative energy sources to power their deliveries.
One firm that’s ahead of the game is DHL. The company has invested in an electric van fleet with ten vans introduced in 2019 to serve customers from its service centres in and around London. With a target of zero logistics-related emissions by 2025, DHL intends to roll out 400 vans to its UK electric fleet by 2025.
Working with carriers who invest in these technologies could offer a way for retailers to reduce their footprint by proxy. And, with electric HGVs still a way off, alternatives are being explored.
The Department for Transport and Highways Englandl are sponsoring a research project called HelmUK which is looking into the feasibility of heavy goods vehicle platoons on UK roads.
The aim is to see whether three trucks could be operated by one driver in control of acceleration, steering and braking from the front truck. This would improve real-world fuel efficiency and reduce CO2 emissions by reducing aerodynamic drag due to the proximity of the vehicles. On-road trials are due in 2020 with a view to reporting the project’s findings in 2021.