It’s all connected in the DC

This morning, I had two conversations that would seem to be disconnected from the every day job of receiving merchandise, putting it away into storage and filling and shipping orders in the distribution center. Or, at least how we have traditionally thought of DC activities.

The first was with Roberto Michel, one of Modern’s contributing editors. Roberto and I were talking about solving the challenge of last mile delivery to a consumer or business. Now, normally we think of delivery as a logistics problem that the DC would hand off to the transportation department – the sort of thing our colleagues at Logistics Management would worry about. But, in the age of e-commerce, with promises of next day and two-day delivery, the process from order to delivery is no longer a matter of stages but a continuum.

The second was a conversation about technicians – the guys and gals that keep materials handling equipment running - with Mike Kotecki, who was recently named senior vice president of customer service at Dematic. “A technician used to be someone who kept something running in a warehouse,” Kotecki said. “Now, the actions of a technician impact a guy sitting at home on his couch and ordering a pair of socks over the Internet.”

The larger point of both conversations: Everything we do in the DC today, from maintenance to delivery, is connected.

That point was driven home by the release today of IBM’s latest consumer study at the National Retail Federation convention. The IBM Institute for Business Value study analyzed four years of survey data from over 110,000 consumers in 19 countries. Among the big take aways, according to Lance Tyson, an IBM exec, is that there is a widening gap between customer attitudes and behaviors. For instance, while 43 percent of consumers said they prefer to shop online, only 29 percent actually made their last purchase online. And, while 42 percent of consumers see the potential of sharing social, location and mobile information with a trusted retailer, such as sharing their location via GPS, only 28 percent are willing to do so.

“There’s this sense that retailers need to dig beyond traditional data, like last week’s sales data, to get into unstructured data and start to build a roadmap on how to engage with customers to build relationships that would entice them to open up,” Tyson told me.

There are supply chain and order fulfillment ramifications from the study results, Tyson also said – remember the theme here: everything is connected.

For instance, 60 percent of consumers say that its important that they research items and in-stock positions before they go into a store to make a purchase. In addition, 46 percent said that its important that a retail associate in the store have the ability to use a mobile device to fix an out-of-stock position – that might include the ability of the associate to place an order to have an item delivered from a DC or another store to the customer’s home or for in-store pick up.

“What those suggest is that retailers need to be able to forecast activities at the store level so they’re putting the right product in the right location for their customers,” Tyson said. It also highlights the need for best-in-class inventory management processes across a retailer’s network; to not just build more DCs and depots but to better leverage inventory across the network, including stores; and to “get visibility down to the associate level on the floor,” Tyson said. “It’s have inventory accuracy so that the customer looking at inventory online, a customer service person, or an associate on the floor has confidence that the item they’re pulling off the floor won’t still be seen by another customer.”

Like the technician who keeps a system running so orders get on the back of a parcel delivery truck by the cut-off time, great route scheduling for last mile delivery or inventory accuracy from the DC to the store, it’s all connected.