OC transformation of logistics operational capabilities
| Category | Definition | Code | Example |
|---|---|---|---|
| Omnichannel strategic development | This category describes the strategic development on an organization-wide level | Development of omnichannel strategy The cases differ when it comes to how far they have come with omnichannel strategy work | “It (the investment) has forced the lines to get information and make decisions for how Epsilon should work in the future” (Epsilon_PM) Gamma “[…] may not necessarily have been faster in decision-making but faster in terms of execution” (Gamma_Dig) “From the perspective of Beta logistics, I see a need to really address the omnichannel offer from a strategic perspective” (Beta_ToP) |
| Top management involvement For all cases, top management support for online channel was crucial for the strategic work | “We have a good board as well, which gives us room to venture new opportunities. At Epsilon, we have a majority owner, which decides most at the board. Then, you can get this continuity and maybe dare to make more bold decisions because the owner is a little more long-term” (Epsilon_PM) “I believe that we are the grocery retailer that has the most left right now (in the omnichannel transformation). It's not because we were a slow starter; we started early, we had the leader Jersey. We gave away the leader Jersey for many years, and then, based on strategic decisions, we have now gained new momentum. The reason for losing the leader Jersey had to do with the board's focus and management in previous years. There has been a lot to prioritize at Beta, to act on and invest in, which may have meant that online has been left behind for many years. But once the strategic decision was made, then it took off” (Beta_HoO) | ||
| The role of logistics The cases differ in the strategic role logistics play for omnichannel development | “Logistics is somewhere both the big enabler and, right now at Gamma, the big challenge. The logistics perspective is therefore taken into account a lot already in the strategy development” (Gamma_Strat) “Online has gone from being an incubator to becoming a sub-business, to now becoming something that must be integrated into basically everything that Gamma does” (Gamma_Dig) “We can hardly take a step without logistics, that I can say. We get nowhere without them, with the phase we are in of growth and upscaling […] so I would say that they are almost always with us ” (Epsilon_Dig) | ||
| Strategic focus for online logistics | This category focuses on strategic focus of online logistics and how it has developed | Phase 1: Growth and market share before cost focus All cases describe this first phase, meeting customer requirements above for example costs. The cases described the previous online strategy as more entrepreneurial | “There has also been a shift where the online organization has gone from being able to do almost anything without affecting the bottom line for all of Gamma, but now that the share of online increases, it is no longer so” (Gamma_Strat) “A person with an idea could go down to the warehouse and say to three people ‘can you fix this'?” (Beta_ToP) |
| Phase 2: Scale-up In this phase, all cases work with operationalization of online logistics and setting the logistics conditions for future expansion and potential profit | “Epsilon focuses on setting the necessary logistics conditions for expansion and growth” (Epsilon_Dig) “Due to the rapid volume growth, a real operationalization of online logistics is now taking place” (Gamma_Dig) “Gamma must now balance efficient logistics with ensuring solutions adapted to a wide range of different customer needs (Gamma_Strat) “If you want to take responsibility for a business and run efficient processes and if you are going to industrialize something and start creating a stable foundation, then you want to go through a few different process steps, and these do not currently really exist” (Beta_ToP) | ||
| Phase 3: Reach profitability In the future, the cases argue that the main strategic focus will be on reaching profitability and there logistics will play a key role | Beta_ToP's task is to “rationalize and streamline existing online operations” “If we are to make money from it, we must at some point rationalize and streamline our processes” (Beta_ToP) “There is a big difference between shopping in a store and online. In the store, store personnel packs up products, and then the consumer himself comes and picks, packs and drives the order home. In online, Epsilon takes over some of that work and must find a way to be able to charge for the service in a reasonable way” (Epsilon_Log) | ||
| Organization of online logistics | This category presents how the different cases organizes their respective online channel in relations to the existing organization | Integrated or separated The cases have moved from having online as a separate unit to more and more integrate it in the established organization | “When new customer offerings or new concepts are developed, logistics has historically been involved too little and arrives too late to be able to add value. Logistics gets a concept and makes it happen. But this is getting better, and right now, Beta is on a journey to handle these questions differently” (Beta_ToP) “Online was not previously integrated into established logistics but was allowed to do its own thing on the side. There has to some extent, been a mindset in online that ‘you know nothing about this’ even though you are part of the same organization” (Epsilon_ODC) |
| Re-organization The re-organization of integrating with established logistics is viewed as important step by the cases | “I never think about logistics details, but I think about things that affect logistics. I definitely think about our position in the last mile, but I do not think about what type of truck we should have or if such aspects are affected” (Gamma_Dig) “After the reorganization, online logistics belongs to the established logistics organization. Online logistics works closely with established logistics for incoming deliveries. Online logistics is highly involved in how dark store is supplied from the internal network's main terminals. Online logistics has a basic set for deliveries to the dark store. Online logistics follows established processes when they need more and/or earlier deliveries etc. in the same way as store logistics” (Beta_OLog) | ||
| Local or central Beta and Gamma highlighted the struggle of balancing a central online channel with the strength of local stores | “[…] to balance between utilizing the scale and the efficiency with having a central online channel, but at the same time be able to use the strength of the local retailers” (Gamma_Strat) “Online is still new, and today there are different views on whether/how to run online from a store perspective or a central perspective. We have to go back and think about how the organization as a whole wants to operate online” (Beta_OLog) | ||
| Online material handling | In this category it is described how the three cases manage online order fulfillment | In-store picking In-store picking has been and still is an important function for online material handling. The cases highlighted the risk of relying too much on this when volumes are growing | “Today, no click-and-collect is picked in the dark stores, but these orders are picked in a store as we have that the marginal cost of picking in a store is lower than picking at another location and then driving to the store. The stores already do many processes; there are already incoming flows, infrastructures, staff who work with goods receipt, etc. in the stores. In the long run, it is not sustainable to work like this; if the volume grows, a store cannot continue to pick all orders. It has to stop somewhere because otherwise, consumers will not go into the store anymore because it will just go around people with carts in the stores all day. So if volumes increase, which they have done by now, you will notice that the stores have a capacity cap to handle it all” (Epsilon_Log) “Suppose you talk from a slightly longer perspective. In that case, there is no capacity in Beta's physical stores to act in that way (picking online orders) based on the expectations on future online volumes” (Beta_HoO) “If you think about the difference between today versus in the future, the majority of our online orders are currently picked in-store, and that is definitely not how it will look like 2025. It is a pretty big shift” (Gamma_Strat) |
| Setting up alternative MH-nodes All cases has set up at least one manual OFC serving urban regions Improving efficiency and service levels | The picking process should “[…] be optimized as a conveyor belt instead of traditional customer pick route because that will improve efficiency” (Gamma_Dig) “How it will be in the future, I think the front-end offer will determine a lot. And the volumes, because if they do not grow, it is probably smart to try to use the ODC as much as possible. If the ODC instead reaches its capacity limit early on, then maybe it is good to facilitate shorter lead times by using the stores and pick orders with a little longer lead time in the DC. We can control that. The advantage of how we have built it, and it has nothing to do with the ODC, but with the online platform, is that we can do both and that we can quickly change. It's nice to have basically” (Epsilon_Log) | ||
| IT/technical capabilities | This category presents the different IT/technical capabilities that the cases have developed in relations to online logistics | Manual vs automated The cases highlight how building capabilities connected to automaton will be crucial for the transformation | “We wanted an automation that would help us to be more efficient, it was about quality, and that there should be a trust in that this will work. The robustness of the system and the fact that it was proven to work were also important. Because you can imagine in a situation like this that you might want to be extremely at the forefront, that is, get something that almost does not exist yet, but that may be good. But that is not really what we were looking for, we want to create a platform where we become much more qualitative and efficient than we are today by operating warehouses manually” (Epsilon_Log) “Early on, it was most profitable to pick in a store. At a given time, an OFC was required to increase the ability to deliver. Then at a later time, automation comes in and creates a superior efficiency in picking” (Gamma_Dig) |
| IT-platform All cases have invested in new IT-capabilities to support the transformation | “From a system perspective, Beta has worked in silos for so many years that it requires quite large investments to be able to use collected data cross-functionally” (Beta_HoO) “Epsilon has organization, system support, and a platform with stores and can therefore quite quickly switch between picking in the dark store and picking in the store, and in that way also meet the consumer based on requirements and needs” (Epsilon_Log) | ||
| Separated vs integrated logistics platforms Gamma and Epsilon have chosen to invest in two different types of platforms and discusses pros and cons | “Store and online are so different, so by separating them you can optimize based on their specific requirements, the advantage is that you can optimize both logistics networks. Gamma's assessment is also that it is more profitable from a holistic perspective” (Gamma_Dig) “We believe that since we are building an omnichannel DC, where we will have all the goods in one place, we will be able to get higher delivery quality, a higher level of freshness and reduce lead times” (Epsilon_PM) |
| Category | Definition | Code | Example |
|---|---|---|---|
| Omnichannel strategic development | This category describes the strategic development on an organization-wide level | Development of omnichannel strategy | “It (the investment) has forced the lines to get information and make decisions for how Epsilon should work in the future” (Epsilon_PM) |
| Top management involvement | “We have a good board as well, which gives us room to venture new opportunities. At Epsilon, we have a majority owner, which decides most at the board. Then, you can get this continuity and maybe dare to make more bold decisions because the owner is a little more long-term” (Epsilon_PM) | ||
| The role of logistics | “Logistics is somewhere both the big enabler and, right now at Gamma, the big challenge. The logistics perspective is therefore taken into account a lot already in the strategy development” (Gamma_Strat) | ||
| Strategic focus for online logistics | This category focuses on strategic focus of online logistics and how it has developed | Phase 1: Growth and market share before cost focus | “There has also been a shift where the online organization has gone from being able to do almost anything without affecting the bottom line for all of Gamma, but now that the share of online increases, it is no longer so” (Gamma_Strat) |
| Phase 2: Scale-up | “Epsilon focuses on setting the necessary logistics conditions for expansion and growth” (Epsilon_Dig) | ||
| Phase 3: Reach profitability | Beta_ToP's task is to “rationalize and streamline existing online operations” | ||
| Organization of online logistics | This category presents how the different cases organizes their respective online channel in relations to the existing organization | Integrated or separated | “When new customer offerings or new concepts are developed, logistics has historically been involved too little and arrives too late to be able to add value. Logistics gets a concept and makes it happen. But this is getting better, and right now, Beta is on a journey to handle these questions differently” (Beta_ToP) |
| Re-organization | “I never think about logistics details, but I think about things that affect logistics. I definitely think about our position in the last mile, but I do not think about what type of truck we should have or if such aspects are affected” (Gamma_Dig) | ||
| Local or central | “[…] to balance between utilizing the scale and the efficiency with having a central online channel, but at the same time be able to use the strength of the local retailers” (Gamma_Strat) | ||
| Online material handling | In this category it is described how the three cases manage online order fulfillment | In-store picking | “Today, no click-and-collect is picked in the dark stores, but these orders are picked in a store as we have that the marginal cost of picking in a store is lower than picking at another location and then driving to the store. The stores already do many processes; there are already incoming flows, infrastructures, staff who work with goods receipt, etc. in the stores. In the long run, it is not sustainable to work like this; if the volume grows, a store cannot continue to pick all orders. It has to stop somewhere because otherwise, consumers will not go into the store anymore because it will just go around people with carts in the stores all day. So if volumes increase, which they have done by now, you will notice that the stores have a capacity cap to handle it all” (Epsilon_Log) |
| Setting up alternative MH-nodes | The picking process should “[…] be optimized as a conveyor belt instead of traditional customer pick route because that will improve efficiency” (Gamma_Dig) | ||
| IT/technical capabilities | This category presents the different IT/technical capabilities that the cases have developed in relations to online logistics | Manual vs automated | “We wanted an automation that would help us to be more efficient, it was about quality, and that there should be a trust in that this will work. The robustness of the system and the fact that it was proven to work were also important. Because you can imagine in a situation like this that you might want to be extremely at the forefront, that is, get something that almost does not exist yet, but that may be good. But that is not really what we were looking for, we want to create a platform where we become much more qualitative and efficient than we are today by operating warehouses manually” (Epsilon_Log) |
| IT-platform | “From a system perspective, Beta has worked in silos for so many years that it requires quite large investments to be able to use collected data cross-functionally” (Beta_HoO) | ||
| Separated vs integrated logistics platforms | “Store and online are so different, so by separating them you can optimize based on their specific requirements, the advantage is that you can optimize both logistics networks. Gamma's assessment is also that it is more profitable from a holistic perspective” (Gamma_Dig) |
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