The Financial Times has reported that the first real estate investment trust to focus on logistics will float on the London stock exchange, in the hope of raising £200m to invest in a ‘new breed’ of e-commerce warehouses.

Beddis-headshotTritax Big Bix Reit plc will invest in “automated logistics facilities” in order to serve e-commerce companies such as Amazon.

Investment in high-capacity logistics facilities is nothing new; Amazon has been doing it for years and continues to do so. However, the sheer size of the listing does demonstrate the significance of logistics in modern retail, and how the supply chain and effective utilisation of warehouses is vital to a good customer experience. Be it multichannel, online or brick-and-mortar retailers (or a combination), the importance of the warehouse goes far beyond holding physical goods.

Marks & Spencer recently announced the opening of a fully automated 900,000sq ft warehouse in the UK. The retailer, which sells 15% of its clothing and homeware online, compared with about 35% at major rival Next, admitted that its current systems were ageing and inefficient. As a result of the deployment, the company is promising vast improvements to the way it serves online customers.

And, with the exponential rise of e-commerce and multi-national retailers like ASOS (which is opening a new warehouse in Europe and expanding its warehouse in Barnsley) the need for more efficient and ever-larger warehouses is more important than ever to the viability and success of retail companies. ASOS is far from alone in its focus on the supply chain. Amazon, according to Bloomberg, has spent $13.9billion since 2010 on fulfilment expenses – this includes the construction of 50 new facilities. Amazon is undoubtedly popular with customers because of its quick delivery, and the result is increased sales and customer loyalty. Amazon’s investment in the supply chain can be directly correlated to its popularity with consumers.

Customers expect the products they buy online to be delivered within the time stated, and to be kept informed about every stage along the way.

The abandonment rate of online purchases is staggeringly high and has the potential to be hugely damaging to online retailers – and yet this situation is easily avoided. By focusing greater attention on making the supply chain more efficient, businesses could offer more delivery options and consequently reduce the abandonment of online orders.

Given the importance of the supply chain to the profitability of retailers, the need to optimise business and IT systems is paramount.

Morrisons, for instance, operates a different business model to other supermarkets, by manufacturing, sorting, grading and packing its own produce. Morrisons’ approach to its operations means that agile IT is a crucial requirement, with multiple systems being responsible for keeping distinct parts of the supply chain connected.

As such, the importance of retailers having a supply chain that is coherent from the point of sale through to the delivery of products (either to store or the customer’s address) is significant. Even more important is relying on a system or platform that can tie together various facets that keep the retail operation tick over. While specialised products from technology vendors may deliver a certain task, few are intuitive enough to connect the dots and make sense of competing technologies.

For example, by relying on one system to transfer point-of-sale data from stores and a different system to execute core batch processes in a merchandising system, there is a risk of processing incorrect or incomplete data. If these systems aren’t effectively integrated the retailer may be unable to fulfil orders or not order the stock it needs to be able to fulfil future orders in a timely fashion, or in the case of a physical shop – to stock the shelves.

The competitive retail landscape, increased expectations of customers and the rise of online orders has made the need for automated and efficient end-to-end business systems all the more important. All retailers, from those with a traditional focus through to those with an online focus need to be proactively updating and improving their supply chains in order to maintain, or if done well, improve their profits. The danger for companies that fail to innovate and automate the supply chain really cannot be overstated. Those companies risk becoming uncompetitive and in the modern hyper-competitive retail environment that is not an option for a company that wants to survive.

Automic Software Ltd

Tel: 0203 440 7695

www.automic.com

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