8 September 2016

Everything in real time?

The last mile and the first steps – retail logistics 4.0

How does Digitalisation change work in the logistics branch and what will future job descriptions look like? What effects does the costumers behavior have on city centers? Which regulatory Settings of the course are necessary to meet the challenges of digitalisation? Part 2 of the tradeletters' focal point will discuss these and further questions.

We have a clear vision of the future: the goods we order will be delivered to our homes essentially in real time; drones and minicopters will take care of deliveries, as will e-vehicles that will move around towns and cities almost silently around the clock. Huge, fully automated logistics centres will be restocked by convoys of self-driving trucks. These megatrucks are precisely timed data centres on four wheels that eliminate those notorious duels between trucks during overtaking manoeuvres on the motorway. At home, thinking food cupboards will do all the work for you. The Internet of Things will make everything connected. Targeted data flows will help retailers to be even more customer-oriented and to know today what customers will order tomorrow. But is this really all still such a long way off?

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Digitisation, globalisation and demographic change are resulting in upheaval and new developments in the retail and logistics sectors, the likes of which have never before been seen. In particular, increasing interconnectivity and growing e-commerce offer huge potential within many channels, while also presenting businesses with some significant challenges. But no matter what shape sales of the future take, be they multi-, cross- or omnichannel, the key to success already lies in making all processes as efficient as possible, both on- and offline. It’s also a question of always bearing the customers’ needs in mind.

Klaus-Guido Jungwirth, Chief Operating Officer of Media-Saturn Germany, recognizes that what the customers want above all is speedy delivery and maximum adherence to delivery dates. Media-Saturn intends to further improve its logistics structures in the future, to strengthen its position with the goods it offers at more than 400 stores in Germany and through its online shop. Its maxim is to be as close as possible to the customers with its goods. The stores themselves represent a logistical advantage over solely online retailers, as they also serve as mini regional warehouses.

In addition to structural changes, this solution being a success is above all dependent on the implementation of a flexible IT solution which is able to map the location and availability of goods in real time. The consumer electronics chain will therefore continue to make systematic investments in its IT in the future.

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We want to have optimised everything within five years such that we can serve our customers always on time – at the times chosen by them.

Klaus-Guido Jungwirth, Chief Operating Officer, Media-Saturn Deutschland

The METRO sales lines Real and METRO Cash & Carry, which primarily sell food, are likewise looking to optimize their logistics structures, with the aim of catering even better to the customers’ needs in terms of the availability of goods and maximum product quality and freshness. As supply chain management is optimised, logistics is also increasingly focusing on the new strategic business areas of METRO Cash & Carry and Real, namely food service distribution (FSD), smaller shop formats in inner-city locations and online business.

The reorganisation of logistics involves the construction of two new, more modern and larger logistics centres in Kirchheim and Marl, which will be complemented by various other METRO LOGISTICS warehouses and also regional FSD depots that will focus on making deliveries to METRO Cash & Carry’s food service industry customers in the future.

”The key criteria when selecting where to locate the new logistics centres included lot size, development costs, the soil condition, the owner structure and transport connections,“ explains Jeroen Janssen Lok, Group Director Strategy Logistics Germany, at METRO AG. ”The reorganisation also entails some old warehouses gradually being closed, due to their location or their outdated structural infrastructure no longer meeting the requirements made of a modern logistics structure. These new logistics centres will bring us up to the current logistics standards and will enable us to offer our employees up-to-date job opportunities,“ Janssen Lok clarifies.

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In addition to triggering changes in retail companies’ logistics structures, digitization will dominate the day-to-day activities of logistics experts in the future. Smartphones and tablets already play a part in numerous processes at logistics centres, and research and tests relating to the use of all sorts of other digital aids and technologies are currently being conducted in the retail and logistics sectors. For example, the staff at some major logistics companies are already using data glasses that allow them to view all the necessary information on the inside of the glasses, thus leaving both hands free for them to load and unload goods.

The issue of interconnectivity is also being developed at smart warehouses, with beacons and special apps assisting with the digital logging of pallets. Other programs improve stock control or determine precisely the right transport and loading vehicles for the volume of goods to be shipped. Cloud computing and the Internet of Things, which could enable the shelves and stocks to communicate with one another in the near future for better warehousing, will further advance automation. ”The work of a traditional order picker or warehouse worker is becoming more complex. IT-knowledge and a deep understanding of processes will be among the basic skills. The handling of multiple interfaces to other functional areas as well as to new smart devices will characterise their work in the future,“ confirms Dr Christian Schwede of the Fraunhofer Institute for Material Flow and Logistics.

As the process of digitisation continues, the job profiles of the staff in the stores and at the logistics centres are increasingly aligning: more than 40 per cent of the store employee’s time is already taken up by store logistics tasks. Meanwhile, the staff at logistics centres is increasingly taking on planning, administrative and advisory duties. Clear demarcation of these duties, as currently still happens on the basis of separate collective agreements for the retail and logistics sectors, is becoming increasingly anachronistic. The retail sector, the trade unions and politicians therefore need to consider modern wage models that meet the changes in the employees’ job requirements and profiles.

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Retail companies are increasingly seeing goods transport and its efficient organization as another core line of business, in addition to the traditional selling of goods. They are therefore establishing logistics structures in particular for the so-called last mile – the final leg of the journey to the end consumer. Home delivery services are booming and demand is rising, as demonstrated by the increasing number of shopping delivery services on offer in cities. But regardless of whether it’s a supermarket, a pizza chain or a flower delivery service, they all face what is possibly the biggest challenge created by this new, individualized consumer behaviour – gridlocked roads, a lack of parking spaces, excessive exhaust fumes and also legal restrictions, especially in inner-city traffic.

With its ‘Freight Transport and Logistics Action Plan‘, Germany’s Federal Ministry of Transport has presented a strategic concept that includes concrete measures for city centres, with a view to creating sustainable and efficient structures for the logistics of tomorrow. In particular, the action plan’s ‘Initiative for logistics in urban areas’ aims to make freight more environmentally friendly and also flow better over the last mile in towns, cities and conurbations. In order to achieve this, there are now so-called freight centres in 35 towns and cities, such as in Berlin Westhafen and Cologne Eifeltor. What makes these logistics hubs special is that the goods can be pooled in the direct vicinity of towns, cities and conurbations because they feature at least two modes of transport – usually road and rail.

Developed by Effizienzcluster Logistik- Ruhr, which METRO AG is part of together with other retail and logistics industry players, the idea of ‘urban hubs’ goes in a similar direction. Goods flows for numerous companies and product ranges are pooled at the hubs and various urban delivery points are then served together. This increases the capacity utilization of the individual trucks, thereby reducing the number of trips made over the last mile. METRO AG’s logistics services and competence centre METRO LOGISTICS has been handling procurement logistics for the various sales lines in accordance with this principle for years, and has as a result boosted the efficiency of its delivery processes.

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Politicians are not only focusing on achieving optimum organisation of the traffic flows over the last mile. More broadly speaking, it’s a question of how cities, in particular inner-city areas, are changing as online retail becomes more and more widespread. The mayor of Paris, Anne Hidalgo, has already endeavoured to protect local retail structures by limiting the inner-city delivery services provided by international online retailers. In Germany, the ‘Dialogplattform Einzelhandel’ (Retail Dialogue Platform) created by the Federal Ministry for Economic Affairs and Energy is currently focusing heavily on the issues of structural change in city centres. Additionally, a study entitled Smart Cities commissioned by the Feeral Ministry for the Environment and the German Retail Federation is in particular examining the possible impact of online retail on space in inner-city settings, districts and town centres.

The results of these studies and dialogue forums will indicate the direction in which the city of the future can and should develop – numerous ideas such as that of urban hubs and alternative autonomous delivery vehicles are already on the table. It remains to be seen who will drive these changes in which intensity. The political world in particular needs to make its mind up as to whether it wants to shape our cities’ future structures on the basis of boldness and innovation or whether it will leave this to other stakeholders. Either way, the inner city of the future will not be achieved with at least some degree of regulatory guidance.

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