Improving productivity and reducing your cost-to-serve

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 its 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.

The High Street Decline

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.

A survey from the Interactive Media in Retail Group (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.

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.

Addressing the growing challenges

Modern retailers, therefore, face many challenges that add costs to their day-to-day operations and, at times, contradict each other (such as shortage of labour and fulfilling the increased demand during peak times).

There are a range of solutions to help retailers reduce their cost to serve, while increasing productivity and enhancing the ever so-important customer experience.

1. Reduce picking times – Order picking refers to the process of identifying and collecting goods from the warehouse to fulfil customers’ orders. With less staff available, retailers may want to look at automating their storage retrieval systems to ensure their packaging operation runs as smoothly as possible, especially during busy times.

Although the initial investment may be off-putting, it will save operational costs in the long term and also comes with many other benefits. It can help reduce manual picking errors, ensure more orders are fulfilled in less time and make retailers less susceptible to fluctuations in the labour market and shortage of employees.

Short-term, minimal investment solutions such as temporary, pop-up pick bin locations will also help retailers react quickly to spikes in demand, creating a more efficient pick and pack area and improving the efficiency of their warehouse space.

2. Evaluate your Warehouse Fulfilment Area – Poor warehouse layout and practices can put additional pressures on many packaging operations, especially at periods of increased demand. It is important, therefore, to ensure that all packing benches are well-organised so that packers can satisfy their shift with little movement.

The time your packers would otherwise spend searching for, or restocking, their packing supplies, will be better used to fulfil orders. This will help reduce downtime and the associated costs, which is particularly important for retailers with staff shortages.

Bespoke packing benches with automatic delivery systems to bring packaging infill materials directly to each packer are a great solution for retailers. They are fully customisable to suit their individual needs, helping to speed up throughput and better cope with fluctuations in demand.

3. Review your packaging – There are many easily-available packaging solutions that can speed up the rate of packs per hour, improve pallet yield for storage benefits in the warehouse and improve logistics costs based on revised dimensions – all helping to reduce the cost to serve. Boxes that do not need taping, for example, can be put together in just a few seconds and could also include a self-seal strip for quick and easy sealing.

Automated tape machines will pre-cut tape to the required length, saving time and energy, but even a simple manual tape dispenser will significantly facilitate the sealing process for those not wanting, or unable, to invest in machinery.

There are many automated systems available that prepare the cushioning materials, store, and automatically refill and deliver to the pack station to further speed up the packing process and reduce packer downtime.

4. Invest in packaging automation – Automating your packaging operation is a great way to deal with staff shortages and cuts costs in many other areas that might not spring to mind at first, including material waste, storage space, packing efficiency and even customer experience.

Semi or fully automated solutions take the burden off your shoulders by doing some or all of the packing for you. This helps to guarantee consistency, saves time and frees available employees to perform other tasks, so that your entire packaging operation runs smoothly.

You can automate pretty much everything from carton erection, in-fill and sealing, through to tape dispensing, mailing bags, label application and stretch wrapping and systems can be integrated into existing operations.

Labour shortage is one of the main problems that British retailers will have to face 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://macfarlanepackaging.com/prepare-for-peak-2019/