by The word logistics is derived from the french word “loger” which means “to quarter and supply troops”. When large number of troops and their equipment move, meticulous planning is required to move volumes of goods and ammunition in that direction. From a marketing point of view, customers are satisfied when they get right product at the right place, at the right time and in the right quantity. Retail logistics system ensures smooth flow of goods to customers through efficient movement of logistics.
Meaning of retail logistics
‘Retail logistics’ is the organist process of managing the flow of merchandise from the source of supply to the customer.
Large retailers deal in a wide variety of products. This has created a need for a systematic planning of movement of numerous goods until they are delivered to the customer. Retail logistics ensures that everything is in place to offer better delivery and service at lower prices by way of efficient logistics and added value.
Functions of retail logistics system
- The increased product variety in stores has forced the retailer to follow an effective logistics system. It takes care of the
- Flow of merchandise from the producer or intermediary to the warehouse,
- Arrangement of transport to the retail units till the merchandise is sold and delivered to the customers.
- The system satisfies the customer by taking the right product to the right customer, at the right place and at the right time. This requires a planned approach right from the starting point till the point of delivery.
- Profitability of the present and future are maximized by the logistics system by means of fulfillment of orders in a cost effective way.
- It ensures the availability of infrastructure such as warehousing, transport, inventory and administration. The inter relationship that exists between these elements are effectively coordinated.
- Retail logistics system strives to add value for the customer. For this purpose, the cost elements in the supply chain are brought under the direct control of the retailer. Depending on sales volume, retailers create central or regional distribution centres. They decide on major investment in property, plant and equipment with associated overheads.
- The functions incorporated in the retail logistics are summarized.
- The physical movement of goods
- The holding of the goods in stock holding points
- The holding of goods in quantities required to meet demand from the consumers
- The management and administration of the process in modern complex distribution system.
The Future of Retail Logistics
Retailers are facing a new reality where delivery logistics once a stable part of retail business can now be the difference between success and failure. Much of the disruption in logistics can be attributed to the ‘Amazon effect’ of consumers being able to select the products they want, at competitive prices, and receive them promptly to their doorstep, office, a nearby locker or even the trunk of their car.
The network required to support this level of service requires breadth, scale and velocity. With consumer demand for same-day or next-day delivery becoming the norm, retailers must now work out how they can optimize costs in order to better serve customers.
Digital commerce is now a vital part of all retailers’ businesses, and speed is critical to their success. Walmart last year announced that it would soon begin offering free same-day shipping in New York and its surrounding areas. Other big box retailers are likely to have the infrastructure necessary to support increasing consumer shipping demands in urban areas, but they must find a way to balance the costs of doing so to succeed in the long run.
Larger retailers typically have two to three regional distribution centers (DCs) in locations chosen to optimize delivery times and costs, and can access nearly 80 percent of the United States in two days. However, many struggle with inventory and labor management. Increasing customer demand highlights the need for more nodes and sophisticated distribution networks.
Logistics companies are reshaping their core businesses to meet the industry’s needs. As major logistics companies invest in growing the breadth and depth of their networks, final mile delivery efficiency plagues their abilities to scale efficiently. This is essentially the last section of the delivery chain from where goods leave the warehouse, to where they arrive at a customer’s doorstep.
As logistics providers seek to increase efficiency and reduce costs, they will implement more strategic operations. For instance, goods will be delivered in a batched manner, once per day, rather than in separate deliveries; items will be delivered in reusable, sustainable containers; and products in some urban areas may even be delivered by automated robots.
Market forces are also creating opportunities for third-party logistics providers (3PLs), who are well positioned to support these emerging fulfillment capabilities. 3PLs can support multiple purchasing channels with multi-node networks and urban hubs; provide ‘final mile’ order delivery alternatives; and can support made-to-order and specialty packaging. They can also support AI, automation and analytics.
As retailers look to the future of fulfillment, there are three potential scenarios we expect to see evolve over the next few years:
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Free two-day standard shipping
Free two-day shipping will become the norm nationwide. Amazon Prime has already set the standard for free two-day shipping now retailers are fighting to achieve the same offering. They will ideally need two to three regional DCs in strategic locations around populated regions. Optimal locations are driven by service-level window rather than proximity to inbound freight locations.
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Next-day shipping standardization
Consumers will begin to expect next-day shipping in many urban areas, with two-day shipping in all other areas. Next-day shipping will be available in all key markets and digital commerce sales will increase as a percent of total retail sales. Retailers will require a more robust fulfillment network with more localized distribution centers. Optimal DC locations are close to urban areas where retailers will be able to fulfill both retail stores and online orders.
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Next-day-plus shipping standardization
Next-day-plus shipping will become the standard for most of the U.S., with same-day shipping available in most major metropolitan areas. For some key verticals, such as grocery and B2B home improvement, standard same-day shipping in large metropolitan areas may soon become a reality, with next-day shipping for the majority of the United States outside of major metropolitan areas. This type of wide-reaching network will require large-scale infrastructure investment from retailers, limiting the feasibility of this network for many.
A bright future for retail
The future of retail logistics is dynamic, fast, and integrated across channels and platforms. Both retailers and logistics companies will succeed in the new retail logistics marketplace by enhancing customer experience and increasing speed of delivery. To do so, they must lead with novel approaches to cost optimization and renewed investment in new services to deliver value for customers. This new mindset, called zero-based supply chain (ZBSC), drives profitability by emphasizing the future over the past, and will help retailers capture supply chain value in the rapidly changing world around them, and their customers.
