Why is e-commerce unable to deliver on time?

“I didn’t think I would ever say this. Paradoxically, we are trying to slow down our online business,” said the Director of a specialised retailer. From Europe to the U.S., Global Retail News heard the same astonishing opinion from retailers in the gardening, toys, sporting goods and D.I.Y. sectors. For these businesses, the reason is clear. Online sales are won at a cost rather than revenue. No retailers would increase volumes if this means increased financial losses. 

Brutal acceleration of online demand. Customers made a clear choice for e-commerce, but the situation was very different for retailers. Traditional retailers knew for some time that demand for e-commerce was growing, but did not anticipate such consequences from an unprecedented demand: increased traffic, risk of server congestion (simultaneous orders), creation of digital queues on their sites (as for Black Friday), etc. 

“We are now in the 4^th week of lockdown. Order volumes are insane”, explained Romain Roy, Managing Director of Greenweez (Carrefour), a pure player of organic products with a turnover in 2017 that reached €35 million (the Group has not released any other figures). These are more than double that of the same period last year… and we have taken a number of measures to carefully control our capacity to deliver. Customer now cannot buy more than 30 kilos and we do not deliver for orders of less than €39. Without these limits, we would record an even higher number of orders!”

Unexpected operational issues emerged for retailers. Sectors have experienced significant demand shocks, which disrupted supply chain flows. “There is no problem of product availability, but flow problems arise from very high levels of precautionary (panic buying) purchases”, explains Gilles Baulard, Sales Director of the company Exotec Solutions. The Exotec firm manufactures robots as part of dedicated warehouse order preparation systems operated for clients such as Carrefour, Cdiscount or Uniqlo (in Japan). These sudden jolts have struck many categories including food. This has affected ambient groceries such as rice and pasta to hygiene products sold by chemists. At L’Oréal, hair colour product sales are far above average at supermarkets since hair salons are closed. For toy retailers, sales of hobby games and board games are exploding. In the D.I.Y. category, “there is a very high demand for paint and varnishing treatments,” said an industry executive. The Greenweez web site received single orders for more than 600 kilos of pasta. “With such jolts of extreme volume, it is critical that we allow sufficient time for the supply chain to catch up. The replacement merchandise must arrive at the warehouse, enter the information system and be available for repeat orders” added Mr. Roy.

Web orders picking reaches its limits. For Web order preparation, several retailers are already at operational limits. It does not matter if warehouses are fully automated with robots, operated by humans for manual ‘picking’, or a mixture of the two. “For several customers, Web volumes have been multiplied by 3 or by 4, which are very important ratios of uplift”, added Mr. Baulard. “It is critical to understand that retailer tools are configured for a limited number of operations. When equipment output is built to represent 5% or 10% of turnover, logistics simply cannot follow such an aggressive order pace. Before the lockdown crisis, we saw peak capacity levels perhaps 2 to 3 times a week, where activity was around 30% above average. Our systems are now running at maximum capacity at all times.”

A major challenge is for retailers to quickly increase picking dimensions for even more orders. Retailers have extended operational hours to increase order capacity. Tesco, Ocado, Walmart, Picnic and Carrefour have added night shifts for order processing. “Right now, we’re working 20 hours a day,” continued Gilles Baulard. “Previously, warehouse robots prepared grocery orders from 06.00 to 20.00 in our warehouses. Now, they all run continually from 02.00 to 22.00. This means that we only have 4 hours to complete equipment maintenance in a warehouse, restock all the shelves and re-sort products at the end of sales dates. 4 hours is very, very short to complete all these critical tasks.”

An ancillary challenge is how to expand a workforce. Hiring more staff is not an easily adjusted variable during such a period of social distancing. “Productivity in warehouses is declining rather than rising right now”, concluded Gilles Baulard. “It’s not possible to add staff to work in preparation aisles. It is necessary to stand 2 meters apart and apply essential safety gestures. It is more difficult to find temporary staff except students, who are deployed in the main for click-and-collect jobs. With schools closed, retailer warehouses are recording more staff absenteeism due to childcare challenges. This in turn creates issues for our staffing levels”.