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How to improve productivity and reduce your cost-to-serve

By Macfarlane Packaging

In times of increased demand, retailers may experience issues with resources, delivery and packing capabilities, which may affect their productivity.

This is more worrying now than ever before, as the country faces warnings over labour shortfalls. The British Chambers of Commerce (BCC) has said that the shortage of skilled workers in the UK is reaching “critical levels”, even though unemployment remains at its lowest in more than 40 years. 

With this in mind, retailers may need to do more to retain existing employees and recruit new staff in the future.

Online giant Amazon has recently announced plans to increase the minimum wage for its 40,000 UK employees from £8 to £9.50 an hour (£10.50 in London), raising speculation that other retailers may follow suit.

However, moves like this could make labour even more expensive, and it already accounts for 46% of all operational costs in retail as it stands

Peak Demand

Sainsbury’s and Argos have recently announced plans to employ an extra 11,500 temporary workers this holiday season, and will also be offering additional shifts for existing members of staff.

However, the current shortage of labour may make it difficult for retailers to fill additional vacancies this year, and it is likely to be even more challenging for 2019. This could prompt retailers to look for alternative solutions to help them reduce their “cost to serve” in years to come.  

As demand increases, retailers should think of ways to automate areas in their business that may be slowing them down. Where SKUs increase during peak, automating a picking process, for example, could help to ensure the operation runs as smoothly as possible.

Automated picking systems can improve productivity by up to 400% and save 85% in floor space. Consumers are challenging retailers to ensure items arrive faster and these systems could help to fulfil more orders in less time, limiting manual picking errors and reducing the impact of labour fluctuations.

Well-organised packing stations are also very important in times of peak demand as packers can satisfy their shift with little movement. The time packers would otherwise spend searching for, or restocking, their packing supplies will be better used to fulfil orders, which helps reduce downtime and the associated costs.

The Shift to Online Shopping

The latest data from the British Retail Consortium (BRC) suggests that Black Friday 2018 has moved online with a third of retail sales (33.8%) taking place electronically in November. This is a rise from 32.6% recorded a year earlier.

Last year, British customers spent an astonishing £1.4bn online on Black Friday, which is 11.7% more than in 2016. At the same time, high street sales dropped by 3.6%, according to Springboard.

The figures for this year’s Black Friday haven’t been published yet but it is predicted to see even greater online spend, topping 2017’s record-breaking number of £1.8m worth of online sales per minute! The forecasts are less optimistic for the British high street that has been experiencing problems for some time.

The BBC has recently reported that shop closures are likely to affect nearly 22,000 jobs in the UK this year. Earlier this year, companies such as Toys R Us, Maplin and Poundland went into administration and many others have announced plans to close stores nationwide.

Customer Experience

With the growth of eCommerce, customer expectations are on the rise.

survey from IMRG and BluJay Solutions shows that shoppers do not want to pay extra for delivery, with 68.2% of respondents giving shipping costs as the main reason for cart abandonment.

32.9% would not complete their purchase due to lack of convenient delivery options, whereas 29.1% thought that delivery slots were “too vague” for them to place an order.

But the list of customer expectations does not end there… 77.9% of respondents in the IMRG / BluJay Solutions research said they valued retailers that were able to offer late order acceptance times, and 37% would still expect their “late” order to qualify for next day delivery.

In another study, 55% of customers admitted that they expected one-hour delivery in urban areas, which only increases the pressures that retailers will face during peak periods. With all of the additional demands from consumers, operations can become more costly and some retailers may struggle to understand their true ‘cost to serve’.

A better Unboxing Experience

Recent unboxing research from Macfarlane Packaging has also revealed that nearly a quarter of customers think retailers use too much packaging, whereas 29% believe packaging does not reflect the value of the brand.

Improving the overall unboxing experience will help make customers happy and encourage them to place more orders in the future. Packaging that is easy to open and can be re-used for returns is always a good start as it saves customers time and hassle, making the situation a little less annoying if things do go wrong.

Sustainability

The environment is a hot topic for many consumers, and consumers are now evaluating the packs they receive based on how environmentally friendly they are. Retailers should pay particular attention to ensure they are only using as much packaging as is needed to protect the items. By preventing overpacking, retailers can reduce overall material costs, storage costs, waste and ultimately improve customer experience.

It is evident that labour shortages will be a key challenge for British retailers in 2019. The decreasing number of employees coming from the EU member states combined with the widening skills gap may make it difficult to meet ever growing customer expectations, especially during peak demand.

While labour shortage may generate additional expense for retailers, various studies indicate that customers are not willing to take them on. Instead they expect faster, easier and free delivery and returns, which all adds to the retailers’ cost to serve.

It’s more important now than ever before to ensure that retailers look at their entire fulfilment operation to understand ways in which they can make savings and increase business profitability in 2019 and in the years to come.

Macfarlane Packaging will be running a ‘Prepare for Peak 2019’ event in February 2019, which focusses on ways retailers can improve productivity and truly understand, identify and reduce their overall cost-to-serve, whilst protecting and enhancing the customer experience.

To find out more about the event and register your interest please visit https://www.macfarlanepackaging.com/prepare-for-peak-2019/

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