Regular readers of the print edition of The Boston Globe had something of a trying start to 2016, when their Sunday papers abruptly stopped coming. Actually, The Globe’s delivery problems started a little before 2015 clicked over into 2016, and the problems stemmed from a change in The Globe’s home delivery firm.
Virtually overnight, Globe Publisher John Henry made the switch to ACI Media Group from The Globe’s main distributor, Publishers Circulation Fulfillment, also know as PCF.
ACI offered a far less expensive, more algorithmically driven routing system that promised fewer drivers and more efficiency. The expected result was more satisfied consumers, who for years have been complaining about timeliness issues with their Globe delivery.
The actual result was a full-tilt delivery service meltdown.
For almost two weeks, 6,000 Globe home subscription customers just didn’t get their papers. During stop gaps, 2,000 Globe staff members – including the Pulitzer Prize winning reporting staff – spent a Saturday night hand sorting, stacking and hand delivering the paper. Publisher John Henry ended up having to print a public mea culpa letter in his paper attempting to explain how a move to make newspaper delivery function better managed to darn near shut it down entirely.
The explanation?
In short, delivering in the Boston metro area is a task so difficult it defeated an algorithm.
“Our region is full of old houses, curvy roads, and hidden cul-de-sacs. It takes resources, people, and technology to bring a paper from our presses to you every day. That last mile relies on a team of dedicated delivery professionals who know just the spot where you like your paper placed, what your house looks like, the name of your dog,” Henry wrote. “I don’t think any of us who receive our daily newspapers think enough about what servicing such a route entails.”
And among that “any of us” would be the the team at ACI Media – whose models were insufficient to the task of finding a time and cost-efficient way to deliver “last mile” service in Boston metro.
In fairness to ACI, Boston residents have complained of the fact that traffic and road patterns locally defy logical explanation. As it turns out, they are also resistant to mathematical modeling.
After two weeks of trying to make it work and flaming out miserably, The Globe officially flew the white flag of surrender, canned ACI and rehired PCF, who may have been a little inconsistent but was more or less capable of delivering the paper to everyone who was supposed to get a daily paper.
And “luckily” for PCF, it will have fewer papers to figure out delivery for in Boston Metro going forward. The Globe has lost a reported 2,000 subscriptions in the aftermath of the whole fiasco, at a time when The Globe’s still physical medium dependent business does not need any cancellations at all.
The direct effects of the great delivery meltdown of 2016 will likely not be felt outside of Boston and its immediately surrounding towns.
But a story about an ailing but respected institution attempting to set the ship to right by upping the level of its digital game — and instead managing to blow itself even more solidly off course — should be of interest to anyone working in physical retail in the age of digital domination.
Because sometimes things that seems like no-brainers (such as “let’s make delivery faster and cheaper”) only seem that way because no one has bothered to think them through all the way or take into account the various real-time logistical challenges they might be facing.
Which Leads To Omnicommerce …
… 2016’s favorite solution for physical retail’s coming demise at the hands of online commerce.
As consumers are migrating purchases online, physical retail is “striking back,” so to speak, by upgrading its technological infrastructure and leveraging their physical presence within easy driving range of consumers to attempt to offer an experience that is either as fast or faster than their online-only competitors (particularly at Amazon). The goal, notes The Wall Street Journal, is to build a commerce experience that is seamless between buying online or in-store.
And while it is hard to argue with this goal on face — in much the same way it’s hard to argue with delivering newspapers faster and cheaper if one is in the business of selling newspapers — when one digs into the details, some issues start to emerge.
New Systems Are Added In, Not Built Up From Scratch
One of the issues of trying to “out-Amazon Amazon” with omnichannel is that Amazon has been building to be what is — a logistics company that specializes in eCommerce — since it was founded 20 years ago. Retailers now entering “omnichannel” retailing are now having to manage complex and interconnected supply chain systems — and build them on top of a mix of old and new back-office and storefront systems.
If those systems don’t play nice, disruptions ensue.
This is a lesson the team at Finish Line learned the hard way when it attempted to transition to a new warehousing system last year. The shift caused inventory to fail to ship to it 600 retail locations, and to customers who ordered online. Orders, due to poor integration aggravated by insufficiently trained warehouse staff, were left to languish in a digital dead letter office which ultimately led to cancellations.
“The customer that we have is looking for instant gratification,” said Imran Jooma, head of Finish Line’s omnichannel strategy, in an interview last fall. “We invest in the supply chain to do exactly that.”
Instead, what that investment actually netted Finish Line was a $21.8 million revenue loss in the last quarter, compared to a $2.6 million gain during the same period in 2014. Revenue for the year fell 3.5 percent to $328.1 million, and the company has readjusted its predictions for its numbers as its fiscal year wraps up in February.
And while the challenges at Finish Line clearly spun out of control somewhat, the issues they faced have come up time and time again with big name retailers throughout the year.
As retailers move to online sales, they must increase focus on warehousing and shift those warehouses’ focuses from bulk shipping to limited stores, but also to shipping directly to diverse and spread out web of individual consumers. For most retailers, the effort to adjust to online sales starts at the warehouse. Those costs, if everything goes correctly, can run into the hundreds of thousands or even millions.
And the situation only gets more complicated as stores move into the next phase of omnichannel where they are supplying or shipping directly from stores, and offering free pick up and returns.
Increasingly, chains also offer in-store pick up and free returns.
“The further down this road a retailer goes, the more its supply chain begins to resemble a spider web,” said Cara Wang, a civil-engineering professor at Rensselaer Polytechnic Institute. That offers more convenience for the customer, but raises technology and labor costs for the retailer.”
Failure Is Very Notable- But Success Is Hard To Measure
As The Journal points out, for all the hype around the promise of omnichannel, its tangible effect in boosting the bottom line for retailers is murky so far at best. Major chains that have attempted major digital overhauls in the last few years — such as Macy’s, Walmart and Target, which have seen some improvements and major boosts to their online commerce, but nothing nearly enough to stem the loss of sales they’re experiencing from declining foot traffic.
“The ground is shifting beneath us, and the dust has not settled,” said David Hauptman,vice president of product management at Geodis SA’s OHL, a third-party logistics firm that manages fulfillment centers for retailers and other customers. “Nobody’s found the answer yet.”
And it is a solution that offers no easy answers, like quickly closing more stores and focusing with competing more online, as consumers are showing an increasing tendency to browse in-store and buy online (and vice-versa) as omnichannel options become more readily available.
This creates “a complication for us in making sure that we understand just how many stores we need, [and] how far will the customer drive to try on this product once they have discovered it on their mobile device or their tablet device,” said Macy’s Chief Executive Terry Lundgren on the retailer’s latest earnings call.
And upgrades are not free — either in money spent or in time making the upgrade work. Make the wrong choice — or look insufficiently at the data before making a choice — and it’s easy to find yourself publishing a public apology about the very expensive downgrade your respected firm has just made.
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