Fast Fulfillment: The Machine that Changed Retail with Sanchoy Das
Patrick Daly’s Interlinks podcast with Sanchoy Das, Professor of Mechanical and Industrial Engineering at the New Jersey Institute of Technology.
In this episode we talk to to Sanchoy Das, Professor of Mechanical and Industrial Engineering at the New Jersey Institute of Technology in the US and author of the book Fast Fulfillment: The Machine that Changed Retailing.
This is an extremely timely publication, given the way so many businesses around the world have had to embrace online retail to survive and thrive through the period of the COVID pandemic. Indeed, many have made a virtue out of the necessity that has fueled new thinking and new strategies among retailers regarding the place of online retail in their business models as they realise that it is very different in an operation and commercial sense from what they have been accustomed to up to now.
Sanchoy’s book is fascinating and takes a detailed look at the paradigm shift ongoing in retail logistics focusing on the very necessary condition of speed and how this can be achieved through physical and digital innovation. If you want to learn how, in a practical operational way, to build a fast fulfillment machine for your own business, then this book by Sanchoy Das is a must-read for you.
Transcript
Patrick:
This is Patrick Daly and welcome to Interlinks. Interlinks is a program about connections, international business, and globalization and the effects these developments have had on our life, our work, and our travel over recent decades.
Patrick:
Today on the show, we will be talking to Sanchoy Das, professor of mechanical and industrial engineering at the New Jersey Institute of Technology in the US, and author of the book, Fast Fulfillment: The Machine That Changed Retailing. This, I think, is a timely publication given the way so many businesses around the world have embraced online retail to survive and thrive through the period of the COVID pandemic. That, in many cases, has fueled new thinking and new strategies among retailers regarding the place of online retail in their business models. Welcome, Sanchoy, and thank you for being here with us today.
Sanchoy:
Patrick, I’m so excited to be with you on this talk show. It’s a really an exciting time here.
Patrick:
Excellent. Tell me, Sanchoy, maybe first to get going, about, say, your career to date and your current role and work at the New Jersey Institute of Technology.
Sanchoy:
I’m a professor at the New Jersey Institute of Technology. I’ve been there for a relatively long time. My specialty or expertise, if you will, is in the supply chain area, the logistics areas, the way goods move from across the globe, within countries, et cetera. And those are what I have been teaching and researching for several years.
Sanchoy:
And then a few years ago, I started this particular topic and now I wrote the book, I’ve been teaching it in the class, making presentations. And obviously, when the pandemic hit, this thing just took off like a rocket ship. So it’s really a timely piece, as you said.
Patrick:
So you are a professor of mechanical and industrial engineering, and yet you’re passionate about supply chain. Perhaps, on the face of it, they’re not two fields of expertise that people would naturally associate with each other. How, as an engineer, did you become interested in the supply chain and what do you see as the link or connection between engineering and supply chain?
Sanchoy:
It’s a very good question because a lot of people don’t see that connection. Very frequently, topics like supply chain are taught in a business school. So people who are in a management role, they learn about supply chain and a very common phrase is “supply chain management”. But at the end of the day, these products are moving in a mechanical or industrial world. There are warehouses, there are robots, there are trucks involved, boxes are being packaged, boxes are being opened. So without that engineering, you cannot have the supply chain. And a lot of the technology, including the IT side, is all connected to the supply chain.
Sanchoy:
So if you went to an Amazon, for example, more than half their supply chain, people are actually engineers. They’re not just managers. So a lot of them, people are in the management field, are doing supply chain contracts, they are negotiating price, et cetera. But whatever is happening in the background is engineering. I teach classes which are called supply chain engineering, [inaudible] handling in warehouses. These are all the bits and pieces which make that supply chain click along.
Patrick:
So the book you’ve written, Fast Fulfillment, what is the premise of the book? The title is Fast Fulfillment: The Machine That Changed Retail. What are the key objectives that you wished to achieve by writing it?
Sanchoy:
In the late 1990s, obviously, companies like Amazon are starting to become bigger and bigger and they are building some kind of supply chain. And supply chains have been there for many years. Since the 1980s, Walmart has been a supply chain champion and we are teaching those kinds of supply chains, models, engineering in the classroom.
Sanchoy:
But around 2013, 14, I started to visit some of these facilities with these online retailers and particularly in Amazon. I discovered that something new was going on. These things didn’t look like the ones I was teaching in the class. I was in a kind of shock. What the heck is going on here? Stuff I was teaching in the class, they were doing the opposite kind of things. And that’s when I realized that this new supply chain was forming, including the engineering aspects of it.
Sanchoy:
The most critical part of that was fast. When you click that submit order button sitting in your pajamas at home, some magic starts to occur. Some gears are clicking somewhere so that next afternoon, there is a knock on your door and there is a package. It didn’t occur by magic. Something happened. And that what happened is the machine. That’s the machine which brings you there. So any retailer which assumes that, “Hey, we’ll put up a website, people will put in orders and we’ll take on Amazon.” Ain’t happening. You need that machine. My goal in writing the book was people will start building their own machines so that they can catch up or keep up with these technological giants which are out there.
Patrick:
And who was your principal target audience for the book and how should they use it when they buy it?
Sanchoy:
When I started writing the book, as a professor, you have really two avenues. You can write a textbook so that people are going to use it in the class and it’s going to be taught or you can write a business book that people can buy and read and hey, they get an idea and they go to the office, they go into a project team meeting and they’re innovating using some of the things I’m saying. That’s what I chose. I chose that route and it makes a big difference because this book is only $25, a textbook is $250. So your audience, just the basics, is a completely different audience. That was my goal, to get that message out quickly because you know that a lot of retailers are basically shutting because they can’t compete in that online space.
Patrick:
So you’ve described, Sanchoy, what the fulfillment machine is, but perhaps more importantly, how do you build this machine for your own business, a retailer who wants to really get involved in online fulfillment?
Sanchoy:
Excellent question again, Patrick. What happens is the fulfillment machine includes both a system which interconnects parts and parts. And in many cases, these parts are not the same as the parts from before. So for example, if you entered an Amazon fulfillment center warehouse, it doesn’t look like any other traditional warehouse. There are no large pallets moving around, et cetera. They have already opened the pallets, packages are everywhere and it’s highly IT-driven. It’s very large scale, models and information systems are controlling these warehouses. So companies have to start building similar warehouses. Either that, or they adopt a fulfilled by Amazon or some other company kind of model, one which is building that.
Sanchoy:
One of my fears is that lot of retailers are adopting what I call a store fulfillment strategy, whereas when they get an order, somebody in the store, instead of the customer, walks around, puts some stuff in a box and then they ship it out. That is just not cost effective and neither is it speed effective. Both of those are relatively short term strategies.
Sanchoy:
In the book, I talk about ideas and techniques that they can go about to build their machines. Now, there is a caution there. Some of the machines which the big guys like the Amazons have built are highly capital intensive. Require not only a lot of money, they require also a lot of talent. So you need both of those. And if you don’t have both of those, then you have to find solutions which you can do within your resources. And my hope in the book, some of the innovation pathways that I propose, they could adopt to build a solution for themselves.
Patrick:
Yeah. It’s interesting. I have clients who are retailers who have been looking to build their own machine. And one of the things that they do is they advertise themselves to other local businesses to be their fulfillment partner. Do you see in the future that we may have a number of fulfillment offerings from people who may be retailers themselves, but in effect have transformed almost into logistics service providers or fulfillment partners as a service? Do you see that happening?
Sanchoy:
I see that absolutely happening and that has to happen because the cost and talent is so high. If we can pull together multiple retailers and run some kind of common collaborative venture, that would work out and they’ll be able to distribute the cost and sort of get in with each other. Because as I said, these machines, you cannot just go to any traditional warehouse and make it into a fulfillment center. It has to be reconfigured. So now, if I reconfigure, say, a hundred thousand facilities and like you said, two or three other retailers said, “Okay, you set it up, we’ll come in, we’ll pay you some kind of subscription fee and we’ll take it.” And to put that in perspective, right now, I think it is in 2018, more than 50% of the Amazon merchandise which is sold is actually just a service, a subscription service. That these are other companies who are piggybacking on the Amazon machine. And that threshold crossed in 2015 and that is 18 and that is the year that Jeff Bezos, in the annual report, highlighted that fact.
Patrick:
It’s interesting how people don’t always realize what kind of a change online fulfillment means for their business operationally. I have been looking at the data for a client of mine who got heavily involved in online retailing during the pandemic. It saved them, in a way, but the order profile is totally different. So whereby in the past, they were picking orders to replenish main street shops, the orders were multiline orders and every line in the order had many items. Whereas now, with online retail, every order is one, maybe two lines and every line has only one, maybe two items. So therefore, the labor intensity of picking that kind of profile is totally different. Is that what you see as well?
Sanchoy:
Absolutely. And that is what is causing the huge inefficiency in the traditional systems. The traditional systems are designed for bulk. I make a move in the warehouse, multiple items are booked up, picked up, and I’m aggregating the cost out. Now somebody orders one tube of toothpaste. Okay, that’s a problem. Now I’m going to spend more money to pick that tube of toothpaste than it costs to deliver that toothpaste. That is causing inefficiencies. That’s why I keep saying the traditional warehouses, the traditional supply chains, they just can’t make it in this new online world. We need new systems.
Patrick:
So we’re talking about automation, we’re talking about automatic storage and retrieval, conveyor systems, pick by light systems, those types of things?
Sanchoy:
Not only those type of things, a lot of IT technology.
Patrick:
I see.
Sanchoy:
So when a person is going out to pick, that’s where they do. A lot of people don’t know the history of AWS, which is the Amazon Web Services. That division was created to make all those IT models for the fulfillment machine. They did such a great job that somebody at Amazon said, “Hey, let’s start selling that too.” So they started to sell those web services to other companies. But that is what I call the talent pool. You need that sophistication to pull it out. And coming back to what you very correctly said, if we had pools of retailers together, maybe they could be more competitive because they’re pooling those intellectual and capital resources.
Patrick:
That’s interesting. How do you think the experience of the COVID pandemic over the last two years has affected the way businesses think about the online channel?
Sanchoy:
It’s an excellent question. In the past, people just looked at it as an additional channel, some additional revenue. Now they’ve realized that this is the channel. This is the main one. And if you’re not on it, it’s just going to be go away. So the physical stores are now supporting the online business, whereas in the past, it was the other way around. Without an online plan, it would be very difficult. Unless you are some kind of very special store, it’s going to go out. But even though very special store, the problem is now you are competing with a very special store 600 miles away. Now, the competitive environment is also changed. So you’re selling stuff to all kinds of people.
Patrick:
So in the future, what’s your vision of retail in the future, say in five years or further out? Where will online be and what will be, say, the role of the high street retail outlet? And do you see things being different in America, where you are versus Europe, where I am or perhaps in Asia? Will it be different in the different continents?
Sanchoy:
Obviously, there will be differences across the globe, but in general, every retailer presumably will be doing more than 50% of revenue through some online channel. And even where some of the customer experience is occurring in the store, parts of the customer experience will actually become out of the store. For example, let me just take a very simple business of somebody who is selling cakes. It’s a bakery. So obviously, we go to the bakery to pick up the cake. The first time I visit the bakery, I pick it up. I see their cakes. I taste it, I pick it up. But my sequential transaction will become more and more online. I may go to the store to actually pick up the cake, but I’ll just park in front of it. Somebody will come out, put it in the car, and I’m gone. Even though that touch experience may remain, the online experience is going to become more and more. I’m going to require speed. I’m going to require fast fulfillment. I order the cake at 12 noon, I pull up in the parking lot at two o’clock. I want to be out of there in one minute. That’s all going to affect every kind of businesses. So you have other vendors like Shopify and all, they’re actually trying to help in that part of the experience.
Patrick:
The way you see the differences between the high street shopping area, say, in an American city or a European city, or say, a city in India, they are quite different in the intensity and the busyness and the hustle and the bust is quite different. Do you see Europe and India becoming more like America in the future with those shopping areas, having fewer people and less things going on?
Sanchoy:
I like the phrase you use, “high street shopping.” High street shopping usually assumes that it is an expensive item and it’s an item that I have to try on. You were referring to India, people buy saris. Presumably, I go to the store, they drape the sari on the customer. I have 20 saris and then they select one and buy. That touch experience will remain, but the wide mode is disappearing. Increasingly, virtual tools are coming into place. People are able to get that experience even from wherever they are. Plus, I’m offering you don’t like it, no worries. Ship it back. I’ll send you another one. If you look at companies like Stitch Fix, et cetera, which ship packages of apparel to people. They select the skirts and the blouses that people will wear, the people select three, four of them. They send the rest back. So you see, all of that is occurring. Those are all things that are going to eat out the business of the high street stores. At the end, they will remain, but the online experience is going to expand without doubt.
Patrick:
Okay. Interesting. Maybe we’ll change gears a little bit. There’s a question I always like to ask my interviewees about globalization. This explosion in e-commerce, I think, is one of the manifestations of globalization that we’ve seen. We have infinite choice of high quality, affordable products available anywhere, anytime at the click of mouse without even getting up off the couch. In recent times, over the last five or six years, we’ve seen for various reasons around the world, a kind of a pushback against globalization. We’ve seen natural disasters. We’ve seen human disasters like COVID that have challenged globalization and the efficient supply chains that it depends on. Right now, I guess, we’re living through a supply chain crisis in many parts of the world in US and the UK and Europe and so on. In globalization in general, where do you think we are with the process of globalization? Is it stalled? Are we going backwards? Or maybe is it just a blip before resumption of business as usual or a change in form? What’s your take on it?
Sanchoy:
I think, obviously, globalization will be there and how much further it will grow, probably we are reaching at some kind of capacity. One of the interesting things about online retail fast fulfillment is globalization made it very difficult for local supply chains actually to survive because they were competing with mass-produced stuff, which there was large economies of scale, products being shipped across the globe. Now what happens is a small supplier, who is maybe based literally a hundred miles from where I am, is able to quite efficiently market product to me. They’re able to ship product to me. And so, as a result, they’re able to take on the global suppliers.
Sanchoy:
Again, going back to the bakery example, a small baker is now able to compete better with a larger, more established bakery chain because now they’re able to market their product. They’re able to ship their products within a small zone more efficiently. And then I guess people are also becoming socially conscious of local supply chains. They want to help out the local economy. They’re willing to pay maybe a few percentage points more to get that product. So we may see, and actually we are seeing, a rebirth sort of in a lot of local supply chains.
Patrick:
Maybe we change direction again as we come to the end and maybe just ask you a few questions about yourself. What kind of things do you like to do in your spare time when you’re not working and not writing books about the fulfillment machine?
Sanchoy:
Obviously, I like a lot of stuff. Fine foods and fine wine are sort of my pet peeves. Two years ago, I took a sabbatical. I was in the Lombardi region and I was researching actually artisanal supply chains. And it’s a completely different thing. People who are making cheese and wine. That was the best research project in my life, because not only was I enjoying the product, I was understanding what they were doing. And actually, I was trying to tell those people that there’s a small cheese producer who selling maximum within a 50 mile radius that the internet allows them to take on the Barilla makers and the big pasta makers. That is what I love to do. So those are some of my hobbies that I do in the food and wine industry, both the supply chain and the consumption side.
Patrick:
Apart from your own book, are you reading anything at the moment that is inspiring to you that you would recommend to listeners or any audio books or podcasts that you find inspiring at the moment?
Sanchoy:
Yeah, the book that I completed just a few months ago and I liked. Scott Galloway wrote a book called The Four, in which he talks about Amazon, Google, Facebook, et cetera. And he says how these companies are changing the social and economic behavior and this has become more relevant because nowadays, people are a little worried that some companies have become way too big and they control everything in our lives. He talked both about the social aspects and the technology aspects in that book.
Patrick:
So this is The Four, by Scott Galloway?
Sanchoy:
Scott Galloway. Yeah.
Patrick:
Scott Galloway, thank you very much. How can listeners find you or contact you or find out more about you and your work? And where, importantly, can they purchase your book, Fast Fulfillment and maybe access your blog also?
Sanchoy:
Okay. The book is available in Amazon, obviously. So Fast Fulfillment, if you type it in, it’ll come up. To support the book, I created a website. It’s called fastfulfill.org. That has blogs, it has some articles. I also create templates or spreadsheets that people can use to back up their innovation efforts, et cetera. I can download those kinds of things. And they can always send me an email at sdas@fastfulfill.org and it’ll reach me.
Patrick:
Excellent. And how do you spell “fulfill”? You know there are different ways to spell it?
Sanchoy:
Yeah. Excellent. Because whenever I was writing the book, I used to keep getting different spelling. I spell it F-U-L-F-I-L-L.
Patrick:
Okay. So one L and two Ls.
Sanchoy:
One L and two L, that’s the model. But different dictionaries have it different ways.
Patrick:
That’s right. I think it’s probably different in America as in Europe as in the UK, maybe.
Sanchoy:
Absolutely.
Patrick:
Thank you, Sanchoy. It’s been an absolute pleasure talking to you today, and I wish you every success personally and professionally in the future.
Sanchoy:
And thank you, Patrick. I loved your questions and it’s a great show that you have going. Thank you.
Patrick:
Many thanks, Sanchoy. And thanks to listeners for tuning in. Remember, any comments or questions, just drop me a line on pdaly@albalogistics.com. That’s P-D-A-L-Y at Albalogistics, A-L-B-A logistics, all one word, .com. Keep well and stay safe until next time.
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Patrick Daly Interlinks Podcast
Interlinks is a programme about the connections, relationships and supply chains, that underpin the globalisation of our modern world.
In each programme, we interview people from around the world including entrepreneurs, executives, academics, diplomats and politicians to get their unique perspective on globalisation as it has affected them both personally and professionally.
There is a little bit of history, a dash of economics, a sprinkling of business and an overlay of personal experience both from me and from my interviewees from around the world.
