Could Supply Chain Automation be the answer to the Great Resignation?
This blog is co-authored by Terence Leung, Senior Product Marketing Director; Bonnie Milam, Product Marketing Director; Michael Orr, Product Marketing Director; and Nina Seth, Product Marketing Director
The COVID-19 pandemic continues to disrupt retail. Having experienced demand and supply challenges, survived enforced lockdowns and an accelerated shift to online models, a new storm is brewing: labor.
The retail industry has traditionally been labor intensive, employing around 10% of total labor while contributing half of that to GDP, which makes it particularly exposed to a new threat, the Great Resignation. Around the globe, workers are emerging from the pandemic having re-evaluated their lives, and quitting their jobs. In North America, 4 million workers left their jobs in April. In the UK, there are currently over 1 million job vacancies, while in Europe’s biggest economy, Germany, one third of employers are reporting a scarcity of workers.
The reasons behind this are clear. In North America, a record 632,000 frontline workers left their retail jobs having been exposed to increased levels of danger while facing low levels of pay, while white collar workers got a taste for remote work and found it made their lives easier to manage. Sadly, pandemic promises of ongoing flexibility are not always being seen through. As a result, high numbers of white collar workers are leaving their safe 9-5 roles and looking for creative inspiration on their own terms.
The mass exodus among retail workers can take a toll on store operations. Running a store is complicated and often requires high staff levels to take care of everything from ordering and stocking to checkout and customer service. Traditionally, labor costs run between 20 – 35% of gross revenue, higher than any other expense including inventory. With rising wages and required training costs associated with rising turnover rates, this number will likely increase throughout 2021.
The logistics side of retail hasn’t escaped the labor shortage. Trucking firms are reporting huge shortages of drivers, with some resorting to sign on bonus to attract the labor required to keep supply chains flowing. Beyond labor, inflationary pressures caused in part by reduced supply is helping drive up wages, which could exacerbate the pressure on an economic model already suffering labor shortages. Sooner or later high staff vacancies and wage pressure will cause higher prices.
Retailers are faced with a big challenge. How can they hire and retain quality workers, keep labor costs in-line, and keep their supply chains and stores running efficiently while simultaneously delivering exceptional service? The answer is to leverage technology to automate as much as possible in order to focus resources on what’s most important – engaging employees and delighting customers. Artificial Intelligence (AI) and Machine Learning (ML) will help retailers need to automate where they can and optimize labor where they can’t. Let’s talk through the various functional areas where technology can help.
Optimized Day-to-Day Operations
Store technology can help remove waste out of every day, in-store tasks. By removing these inefficiencies, retailers can do the most with the staff they have, even when resources are tight. For example, production planning and food prep instructions help convenience stores and supermarkets be more profitable with their prepared food departments. They also help reduce grab-and-go food waste by making sure items aren’t just made properly, they’re fresh and ready at the right time to meet peak demand.
Having store systems tightly integrated with corporate planning tools also takes the pressure off store labor. All too often, these systems are siloed, which causes inaccuracies and an incomplete or non-existent feedback loop. Ultimately, you can end up with corporate priorities that cannot be executed at the store-level, which is bad for everyone. Leveraging an integrated commerce platform allows you to create store plans based on the individual constraints and unique attributes of each store. This can also boost morale to fight turnover, since employees are more satisfied at work with clear and achievable priorities.
Mobile and Empowered Employees
Nothing slows down a smooth operation faster than having to physically go to a terminal or computer to do one’s work. The inefficiency is clear, which is why 31% of retailers are investing in mobile for their managers and 24% for their store associates over the next 12 months. With a mobile-first approach to store operations, retailers can empower employees to complete all aspects of their job right from the sales floor. Streamlined, mobile operations free up employees to be more helpful and more available to serve customers. Mobile also helps attract and retain digitally-native Generation Z employees in the workforce. And, when any device can be used to perform any task, employees throughout the store can be more efficient without a huge investment in single-purpose hardware.
Last year taught us all how important our retail workers are to our daily lives. It’s time for retailers to invest in the technologies to make these jobs easier and more fulfilling. These investments will ultimately lead to lower operating costs along with more productive employees. With the right innovations, store employees can focus more on providing differentiated customer experiences, which is a win-win for retailers, employees and customers alike.
The Store Re-designed
In just a year, the percent of major retailers offering curbside pickup jumped from 6.9% to 43.7%. Now that it’s clear that these new fulfillment methods are here to stay, it’s time for retailers to take a fresh look at the purpose of the physical store and how to optimize store space to accommodate all customer shopping experiences.
Self-checkout adoption is steadily increasing as a way retailers can redirect associates away from repetitive tasks. This approach frees up both labor and space, giving retailers the flexibility to reallocate associates and redesign their store footprint to focus on omni-channel. A significant portion of in-store operations now centers around supporting store fulfillment activities such as buy-online-pickup-in-store (BOPIS), curbside pick-up, ship from/to store, and same-day delivery/last mile. But these operations can be expensive without the right tools – in fact, most grocers lost money with curbside last year. With the persona-based Luminate™ Order Fulfillment mobile application, store managers can prioritize and manage store fulfillment and staff can easily pick, pack and ship/delivery products. With store employees free from the checkout and more space at the front of the store, retailers can focus on truly exceptional customer service.
The Rise of E-commerce
In 2020, due to the COVID-19 pandemic, ten years of e-commerce growth took place in just three months according to McKinsey. And the growth in e-commerce has continued into 2021 with Amazon surpassing Walmart as the largest retailer outside of China. Over the past year, 40% of Americans tried a new shopping method, and nearly three-quarters of people who have tried curbside pickup, BOPIS, or delivery plan to continue using these services after the pandemic ends.
The rising popularity of e-commerce has forced traditional retailers to assess how they serve customers and the technologies they need to support the rise in new shopping and fulfillment channels. But simply providing speed and convenience options to customers isn’t enough. It needs to be done with an eye on the bottom line with customers at the heart of the engagement. Modern order management systems (OMS) provide a
single source of truth for all order transactions and provide visibility at each step of the order lifecycle to ensure order and fulfillment accuracy. This results in fewer customer service calls when customers get conflicting messages around orders.
With Blue Yonder’s Commits solution, retailers can accurately tell customers from the beginning of the shopping journey when products will be delivered or available for pickup. Accurate fulfillment dates reduce “where is my order (WISMO)” calls? And, with Luminate Order Fulfillment mobile application, store managers can effectively prioritize orders and manage store fulfillment operations, while staff can more efficiently pick, pack and ship/delivery products to accurately fulfill customer orders.
Blue Yonder’s e-commerce microservices give retailers the opportunity to offer more delightful experiences for online shoppers. From real-time product availability from the search page, to accurate fulfillment dates, to streamlined order execution, to optimized store fulfillment, retailers now have the tools they need to optimize labor while delivering on the promise to customers.
Smarter Inventory Management
All types of retailers must optimize their inventory to maintain profits and grow sales. Automated ordering that’s based on accurate AI/ML demand forecasts takes the guess work (and manual tasks) out of placing store orders. Not only is this a labor savings, IHL found that during the pandemic, retailers that used automated ordering achieved 9 – 18% higher sales than those without. With intelligent ordering and accurate forecasting, retailers can identify demand changes sooner and can proactively focus their attention on exceptions to prevent out-of-stocks and overstocks. Retailers using Luminate Store Execution have seen an annual 1 – 4% sales lift by reducing out-of-stocks.
Having the right inventory isn’t just about ordering smarter, it’s about knowing exactly how much inventory is on-hand, how much is on the way, how much is sold, and how much is promised. Without the right systems, this requires a lot of counting. Inventory counting is both labor-intensive and error-prone. Not to mention, tedious work that nobody really enjoys. With advanced inventory management, you can let the system track all the ins and outs of inventory movement and be alerted when things don’t add up. This means you can react before a stock-out occurs and gain more control to prevent shrink. By automating these things, inventory counts, which are disruptive to employees and customers alike, can become a thing of the past and staff can be focused on more meaningful work.
Intelligent and Automated Planning
In the head office, Blue Yonder’s intelligent supply chain can improve the work experience by using AI/ML to reduce unnecessary manual tasks while enhancing the high value tasks that drew people to retail careers originally. Supply chain planners can greatly reduce the amount of time spent tuning parameters and manually adjusting demand forecasts and orders by moving into strategic and collaborative roles supported by AI, while increasing the speed, accuracy and resilience of their decisions.
Category managers and merchandisers can gain greater assortment and control of pricing by using AI/ML to better understand the customer, freeing time to interact with suppliers and colleagues to improve their brand’s value proposition.
In the new automated and optimized retail world, machines will take care of the mundane while people focus on better outcomes, working remotely if they chose to, while collaborating with others because they have additional capacity to focus on continual improvement.
Pent-up demand for goods and a growing economy has led to significant retail growth. This has put enormous pressure on supply chains and the people who support them. But labor shortages in transportation and warehouse operations doesn’t necessarily mean poor customer services levels or slower delivery times. Logistics executives are expressing a desire in the 2021 Logistics Executive Survey to enhance warehouse and transportation management by investing in the next wave of digital transformation, a shift to the cloud and invest in AI/ML.
Unifying the management of transportation, warehouse, labor, and order fulfillment in the retail supply chain, as well as utilizing prescriptive exception management via AI/ML to better handle disruptions, will help to continuously optimize the use of logistics labor and advance the digital transformation journey.
In the warehouse, it’s important to clearly understand overall labor performance, efficiency, and productivity to accurately forecast labor requirements. This leads to accurate labor forecast, incentive plans, optimized labor schedules that precisely align available workers with tasks needing to be accomplished while providing employees with the flexibility they value. To better handle the more dynamic order and resource picture in this new era, resource orchestration – human and robotics – is helping warehouse operations to meet daily scheduling/tasking objectives consistently across operations.
When it comes to transportation, common goals to improve sustainability and optimize labor requirements lead to initiatives to reduce empty miles and overall miles driven. This can be achieved through advanced routing optimization, freight capacity planning, load building, in-transit visibility and control, and constraint-based network modeling. Leveraging a digitally enabled ecosystem can expand agility with capacity and reduce manual efforts and errors through using highly automating rate negotiations, identifying opportunities for freight consolidation, and streamlining logistics network communication processes.
But it’s not all about efficiency. To keep and retain quality workers, you need a plan. With the right workforce systems, such as Blue Yonder’s Labor Management, you can identify at-risk resources and enable policy changes that promote retention. You can also identify cross-training opportunities to grow associates and design and track the effectiveness of performance-based incentives to recognize top performers.
Strategic Workforce Planning
Across the supply chain, it’s important to make the most of the labor resources you have. This begins with optimized schedules aligned with labor needs and accurate time and attendance but requires a lot more. To appeal to today’s workforce, it’s important to let employees manage their own schedules and preferences. This flexibility can have an impact on reducing turnover, as 73% of blue-collar workers would trade a $1/hour raise for a more flexible work schedule. It’s equally important for managers to have the ability to easily adjust schedules mid-week if demand changes, to avoid unnecessary overtime or gaps in shift coverage.
Leveraging technology to predict 12-month labor forecasts can also help identify ways to optimize staffing for the long term. Taking this strategic approach helps operators identify cross-training opportunities as well as recruitment recommendations. Helping employees understand what’s required to get ahead and putting them on a path towards future growth is one key to fighting the Great Resignation. An integrated workforce management platform can help keep good employees and nurture them into great employees, whether in the warehouse, in-store, or anywhere in-between.
Investing in the right technology could be the strategic answer for many of retail’s current labor problems, whether automating the mundane or re-energizing weary colleagues. With over 20 years’ experience gained building retail supply chain point solutions, we have a unique – and highly recognized – end-to-end perspective on how to manage supply chain disruptions, like the Great Resignation, packaged as a smart and connected platform. The kind of technology that might just make your associates more likely to stick around.