The Future of Store Delivery Optimization: 6 Trends + 1 Bonus Insight for 2024

Discover the future of store delivery optimization in this insightful interview with George Ninikas, Industry Director Retail & Wholesale at ORTEC.

Explore the six essential trends reshaping the retail landscape, along with a bonus insight, to enhance operational efficiency and sustainability.

1. Urbanization - The Changing Retail Landscape
2. Digital Offerings - The Surge of Online Shopping
3. Predictive Planning - Navigating Volatility
4. Collaboration with 3PLs (Third Parties) - Striking a Balance
5. Sustainability - Meeting Environmental Responsibilities
6. Labor Shortages - Optimizing Workforce
7. Bonus Insight: Continuous Improvement - Learning from Practice

George begins by addressing a fundamental shift in consumer demographics and preferences. Traditionally, large retailers were designed to handle substantial volumes of products, catering to families with extensive grocery needs. However, the demographic landscape has evolved, especially in urban areas where large families are becoming less common.

Cities are expanding, and suburban areas are shrinking. As a result, consumers are no longer equipped with giant shopping baskets. Retailers have been compelled to adapt by establishing smaller format stores, often referred to as convenience stores. These stores offer a smaller product assortment and serve a different shopping dynamic (e.g., preference towards ready-to-eat products, meal kits, etc.).

From a transportation perspective, this shift necessitates more frequent and responsive deliveries. The traditional model of delivering massive quantities to large stores is no longer sufficient. Smaller, more agile deliveries, sometimes with multiple stops per trip, have become the norm. Retailers now engage in what George describes as "streamlined distribution," optimizing delivery routes and schedules to meet the changing needs of these smaller-format stores.

He emphasizes the role of ORTEC in assisting retailers in adapting to this new reality. The company provides tools and solutions that empower retailers to optimize their store visit schemes and delivery processes, particularly in the context of frequent store visits and varied delivery stops.

The second insight delves into the surge of online shopping, a trend further accelerated by the COVID-19 pandemic. Retailers now operate a combination of central fulfillment centers and brick-and-mortar stores to fulfill online orders efficiently. This blend of online and offline shopping, often referred to as omni-channel retailing, introduces complexities not only in inventory management and order fulfillment, but also on the replenishment frequency of the store itself.

One significant challenge is determining whether to fulfill online orders from a physical store or a central fulfillment center (often referred also to as a dark store). The decision also extends to incorporating click-and-collect services, where customers order online and pick up their purchases at the store (either via curbside pickup or self-collection or lockers).

This multi-faceted approach to retail requires careful coordination and efficient logistics. ORTEC offers dedicated solutions for home delivery and last-mile delivery management, complete with time slot booking capabilities, to streamline the process and enhance customer satisfaction.

In today's retail environment, volatility has become the new norm. Demand fluctuates significantly, with certain days experiencing a surge while others see a decline in orders. On top of that, holidays, seasons, promotions, and local events significantly affect what and how much customers buy. Predictive planning emerges as a critical strategy to tackle this challenge.

George explains that predictive planning is not confined to specific timeframes like tactical or strategic planning. Instead, it focuses on creating flexible plans based on predictions for the future. Retailers must anticipate demand fluctuations and have the tools to adapt swiftly.

To illustrate this, he mentions very ordinary scenarios such as midweek drops in demand compared to Mondays. Retailers must plan their fleet and resources based on these varying scenarios. Unforeseen events like weather conditions, strikes, or traffic congestion further complicate the planning process.

ORTEC provides retailers with tools to anticipate and prepare for these scenarios. These solutions enable retailers to generate capacity plans based on multiple scenarios, ensuring they can respond effectively to changing conditions and maintain service levels.

The fourth insight explores the trend of retailers partnering up with third-party logistics (3PL) companies for transportation activities. While outsourcing can be beneficial, maintaining control over planning and execution is essential.

Retailers seek ways to align their planning with the execution performed by 3PLs. It's crucial to ensure that the planned routes and schedules align with the actual execution. George raises a valid concern - when 3PLs are compensated based on factors like distance traveled or hours worked, they may be incentivized to deviate from the plan.

To mitigate this issue, George suggests establishing transparent communication and appropriate incentives between retailers and 3PLs. This approach ensures that both parties work toward the same objectives, whether it's minimizing kilometers traveled, optimizing working hours, or enhancing customer service.

ORTEC provides tools and capabilities that promote transparency among all stakeholders involved in the planning and execution process. By monitoring key performance indicators (KPIs), retailers can maintain control and alignment with their 3PL partners.

Sustainability is a global imperative, and the retail industry is no exception. Customers, particularly the younger generation, are increasingly environmentally conscious. Some e-commerce companies now label delivery slots as "green," allowing customers to choose eco-friendly options, even if they involve longer delivery windows.

However, George highlights the challenge that retailers face when balancing operational efficiency with environmental responsibility. Transitioning to zero-emission or alternative-fuel vehicles, such as electric or hydrogen-powered ones, is one way to reduce the carbon footprint of delivery fleets.

Yet, this transition is not without its challenges. Electric vehicles (EVs) have limited range and require periodic recharging, making route planning and scheduling even more complex. Additionally, emission-free zones in city centers may necessitate using EVs exclusively.

ORTEC's expertise lies in helping retailers navigate these challenges. Their solutions cater to the intricacies of EV-specific routing and address the complexities of environmentally responsible delivery operations.

Labor shortages represent a pressing issue, impacting both skilled workers in warehouses and delivery drivers. In large warehouses, departments often operate in isolation, leading to inefficiencies in labor allocation.

George suggests that this siloed approach to labor allocation could be due to a lack of cooperation between departments or even a scarcity of specific skills within the workforce. On the other hand, the shortage of delivery drivers is a global problem, with factors like the demanding nature of the job contributing to the challenge.

ORTEC offers workforce management solutions designed to ensure that the right people, with the right skills, are in the right place at the right time for the right tasks. Furthermore, the company emphasizes employee engagement through self-rostering and self-service options, promoting employee satisfaction and retention.

The interview concludes with a bonus insight – continuous improvement. George stresses the importance of bridging the gap between planned operations and actual outcomes. He acknowledges that unforeseen factors can disrupt plans, but one controllable aspect is the accuracy of key planning parameters.

Parameters like stop times (the time spent during deliveries), and drive times play pivotal roles in planning and execution. However, the challenge lies in specifying and calculating these parameters accurately, especially when considering various factors like regions and vehicle types.

George advocates for the use of artificial intelligence (AI) and machine learning to continuously learn from practice and dynamically calculate these key parameters based on real-world data. This approach enables retailers to predict and plan for future operations more accurately, reducing the disparity between plans and realities.

In George's words, "Continuous improvement is about ensuring that you're also looking in the right direction for your business." ORTEC's commitment to building solutions around continuous improvement aligns with the industry's pursuit of efficiency, productivity, and control.