Overcoming e-commerce supply chain challenges - how Co-op plans to provide 100% fulfilment to its online customers

Nobody could accuse Co-op of making life easy for itself of late. As well as rolling out a vastly expanded online offering, the UK retailer has also been undergoing a major back end systems overhaul, as E-commerce Director Chris Conway explained at the recent Accelerating Ecommerce Week event.

The starting point was a recognition of what Conway called “a seismic change in our business”

We've got thousands of stores across the country being serviced by tens of depots and that is very difficult to do in a realtime, everyday way...the increase in online demand has made it increasingly more difficult. You have to face into that. We had to invest the time and resource and energy to make sure that we could fix it and tackle it. Once we recognized that and put the right people in place to do that, it made a massive difference. We couldn't just let it continue how it was.

At the same time, there has been that huge system change internally, he added:

We've  been migrating to SAP. So as well as having this change in customer dynamic and demand for products, we've had to change all our forecasting systems, supply systems and ordering systems.

All of that sounds like a complicated balancing act to pull off. To make life simpler, Co-op took a decision to only pick from its UK-wide network of local stores rather than build out dedicated fulfilment centers or try to run the e-commerce offering from a centralized operation. Conway said:

We thought it was the right thing to do to utilize our current physical estate. So by centering it on the same stores that our customers are using, it actually made it slightly more easy.

The company has also elected to partner with other e-commerce and delivery firms to extend its reach, he added:

Not only have we got our own core commerce platform, from which we successfully pick from 1600 stores now, we also work on marketplaces. We work with over 1000 stores with Deliveroo. We also work with a number of stores with our Amazon partners, as well as a couple of other smaller partners. So there are some stores actually that as well as having physical footfall, customers coming in through the front door buying products, potentially they've got three or four different online platforms requesting products and picking products at the same time.

API action 

Running on so many platforms had an impact in terms of how the firm needed to rework its traditional forecasting models and its sales assumptions, as well as in-store range and space allocation. The company has also invested time and resource in realtime inventory APIs, said Conway:

What that effectively means is, no matter what platform you're shopping The Co-op on, whether that be our own platform, our Deliveroo platform, our Amazon shop, you'll see realtime stock availability in that store. That's only been the case for probably about four or five months. What that means is, if we haven't got the product in the store, on that day or in that time or in that hour, you're not able to order it from that online platform. That's made a huge difference to our customers, but also it's made a huge difference to the way that we forecast our demand.

The immediate benefit is customers can't order anything that we haven't got. So they get what they order, which is brilliant and exactly what we wanted to do. The secondary benefit is we're able to monitor what the customers actually wanted in the first place. So if they were looking at a product and we haven't got it, we're able to capture that information and feed that back to our supply chains and logistics teams. So rather than generate sales of the product they ordered instead or generate supply of the product they ordered instead, actually we should be generating supply of the product they really wanted in the first place.

It’s impressive stuff, but only a beginning, he says:

These API's are step one -  they give us realtime availability information, by store, in thousands of locations, on multiple platforms, which is brilliant. What we're not doing yet is taking account of future forecasting for all our platforms. So we're still potentially showing product that might be out of stock in two hours or three hours or 45 minutes, even when you're going to get the product or when we're going to pick the product. So there's a stage two and three of that implementation this year, and also into next year as well. We do realize we've got more work to do, but I think we've come a long way in a short space of time. But our ultimate aim is to give 100% fulfilment to all our online customers and we believe that's within touching distance.

Delivering on delivery

Once an online order is successfully placed, the next step is of course to get it to the customer. Co-op has actually opened over 1000 stores over the past years, which Conway said has meant having to think creatively about the ‘last mile’ aspect of e-commerce. Partnerships again kick in here, he said, such as using Amazon to deliver parts of the country where the ‘last mile’ cost can be better dealt with by a third party:

They can do it in a more efficient way. I think that's an important part of the mix and and we've done that eyes wide open as a way of spreading the risk, if you like, and making sure that we're we're doing it in a responsible way. But also we're utilizing partners to deliver our own orders as well. So where customers order from the Co-op platform, we've got a mixture of people delivering those orders. We've got a selection of orders being delivered by Co-op vans and drivers and where that makes sense then we will absolutely do that. Generally that's in the more rural locations or Scotland and the islands things like that.

We've also got strategic partners that we utilize in different parts of the country, depending on the locality, who are experts in their local area, perhaps are already doing lots of orders so they're able to pick up orders from The Co-op and deliver them to customers in a really efficient way. That's good for Co-op because we've got no fixed costs. We've got no large capital investment in in launching these services.

It’s also good for local businesses who already have a fleet in the area, he added:

I think it's really important that we keep all these deliveries really local and close to the local community as much as we can and try and avoid adding any diesel vans on the road. So in terms of cost, we try to balance the opportunity of reaching as many customers as possible with the kind of responsible way of making sure that we only offer the service where it makes sense from an efficiency perspective.

The Co-op is also working with Bring, a last mile technology provider, Conway explained:

What they do is they take every order from the Co-op platform and, in realtime, assign it to the right partner. So that might be a courier partner or it might be a Co-op colleague. That will be done based on business rules that we've set up as an organization. Maybe we want the partner who's got the best customer satisfaction to deliver this particular order? Maybe we want the partner who's got a different type of vehicle? Or maybe we want to just go for the cheapest option? They're all configurable and we can set those parameters based on what's right for the local store or the local community.

It’s vital to be able to pick orders in a timely fashion, he added, and tech plays a core role here as well:

The way we've approached e-commerce from a cart perspective is it's much more real time. Generally we're delivering orders within the hour, if not [then] within two hours, so that means we need to pick it in realtime in the store really, really quickly. We developed the picking application to make sure that we can take feeds from different platforms, measure that task in terms of how long it takes a colleague [to complete], what colleague does it, make sure the the right stores get the right allocation of hours.

When we started this we were giving stores a certain amount of minutes per order when actually some stores were getting really small orders, some stores were getting really big orders. We've been able to adapt that approach to an item-based model, which means you get the right amount of time to service the right amount of customers.

As the technology has been introduced and enhanced, benefits have been realized, such as improving the way that the ‘pick walk’ is sequenced in-store. All of this has bottom line impact, concluded Conway:

It means we've been able to drive those costs down, as well as making sure that you're optimizing the days of the week and the slots that people are utilizing and trying to drive customers into the less popular slots so we can try and spread that demand down. We do all those things that people have been doing for a long time, but I think the way that AI in realtime technology has improved over the last few years has given us the extra edge to make sure that we can expand as quickly as we have.