White Paper Two Options for Your Retail Supply Chain Evolve or Die.
The bar has never been higher for the Retail Customer Experience. 2 While we re still a few years away from orders being delivered within 30 minutes via automated drone, things are not going to get any easier or simpler for retailers. Today s consumers have instant access to more information than ever before, and loyalty has never been lower. As a result, customers demand an easy buying experience with multiple options for placing/ receiving orders and making payment, access to realtime information for order and shipping status, lightning quick fulfillment (preferably from a nearby DC), 24/7 customer support, and a painless returns process. Of course, retailers need to provide all of this while still offering the lowest overall price, including shipping. Oh, and if you can t do all of the above, your competitors can, and they re lining up to take that customer away from you. So how does any retailer go about meeting the relentless pressure of a constantly raising bar, and provide the shopping experience that your customers demand, all while controlling costs? It begins with your Supply Chain, and the type of information that you have available to provide to your customers and/or for making future decisions. Following are five points that every retailer needs to consider.
Five points to think about ONE 3 Demand Planning / Visibility: Whether you have a push or pull methodology for getting merchandise to your store locations, having the appropriate information and tools to place accurate and timely orders, manage inbound shipments and make good decisions as shipments arrive to your DC locations is critical. If your merchandisers can spot regional trends in product demand based on consumption information by location, they can make better decisions about how they allocate incoming product in their never-ending struggle to minimize carrying cost without leaving potential sales on the table. Visibility to inbound shipments prior to arrival can allow your Merchandising team to make proactive allocations, which can significantly reduce costs in your DC by allowing the orders to be crossdocked as they arrive. Remember that inventory sitting in stores represents potential and opportunity, while inventory sitting in your DC represents cost and risk.
Five points to think about TWO 4 Network Optimization: Having the right balance of distribution locations with the right mix of inventory in each is crucial to customer service. Optimizing your network is all about balancing hard costs like operating costs, infrastructure, labor, carrying costs and transportation costs with soft costs such as time in transit for shipments to your store locations or directly to your customers and more options for fulfilling orders or receiving returns. Included in any network optimization scenario should be a detailed look at each existing or potential DC location. You need to consider and model variables such as the level of automation inside the DC, staffing levels, what SKU s are going to be stored/distributed from that location, which retail locations will be served from that DC, and how much space will each scenario require. This process is far more complex than pins in a map. Network optimization analysis and strategy yielded 20% increase in shipped volume, reduction of 3 distribution centers, 60% reduction of inbound freight expenses, 57% reduction in capital investment on unnecessary expansion, and maintained next-day service standards.
Five points to think about THREE 5 Supply Chain Balance: A huge advantage that retailers often overlook is the fact that your DC s and the locations of the majority of outbound shipments coming from those DC s are on the same team. In other words, you re shipping to yourself and, unlike most other Supply Chain scenarios, you can choose to create efficiencies anywhere in the process. It s quite common for Retail DC locations to spend extra time and effort and DC labor generating store friendly shipments, with inventory split up by department or even store aisle. While store labor cost is typically lower than labor cost at the DC, employee turnover at the store locations may be higher, and you may determine that the store labor is better spent interacting with customers rather than stocking shelves with inbound product. Regardless of what balance is right for your Retail Supply Chain, it s your decision to make. Own it. Manage it. Get the information you need and make a decision based on what you determine to be in the best overall interest of the organization.
Five points to think about FOUR 6 Omni-channel / Leveraging Store Locations The term omni-channel has become an industry buzzword that can mean many different things. A basic definition for omni-channel would be the ability to use real-time information to provide yourself and your customers with multiple options for fulfillment. Some examples of omni-channel retailing could include: A customer places an online order, and prior to checkout, in real time, your system is able to determine that the product the customer wants is in stock in a retail store location within a few miles of their home. Based on that, the website offers the customer the normal shipping option, or the ability to pick their order up in 30 minutes at the store location and save the shipping charges. Obviously, using your online presence to drive traffic to a retail location is the holy grail, and your customer would certainly appreciate that option whether or not they take advantage of it. If your customer chooses to have the above order shipped, then you could have the option to ship it directly from the local store, saving time and shipping costs.
Five points to think about FOUR 7 Omni-channel / Leveraging Store Locations (continued) A store customer wants to buy an apparel item, but the store doesn t have their size in stock. The store clerk has visibility to inventory both at the DC and at other store locations, and is able to take the order and fulfill it from another location. An online customer wants to place an order, but the DC is out of stock. The system has visibility to inventory at store locations, and is able to take the order and fulfill it from a store location. An online customer is dissatisfied with their purchase, and rather than ship it back to the DC, they are able to easily return it to the nearest store location for an immediate refund. As you can see, an Omni-Channel program needs to start by defining what you want the customer experience to be, and then defining the system requirements and processes from there. Along with creating a much improved "Customer Experience", the direct benefits include reduced stock-outs and less discounting of product. Distribution Center operations and facilities analysis yielded a scalable, retrofit design that was economically justified, found value in shared operations in a single facility, leveraged existing assets across the channels, improved operational efficiencies, improved customer service capabilities, and increased Customer Satisfaction with right product, in the right place, at the right time.
Five points to think about FIVE 8 E-Fulfillment / Reverse Logistics: Every retailer is seeing a sharp spike in e-fulfillment or product shipped directly to consumers from their DC. This presents a huge challenge in terms of being able to fulfill one or two-line orders while keeping your cost per unit of throughput reasonable. This trend is only going to increase, so you can t fulfill these orders as an afterthought forever. You ll need to look at automation and setting up a part of your operation geared to efficiently picking and shipping smaller orders. The first step will be to do the analysis to determine at what point (typically volume) this investment will make sense. With an increase in e-fulfillment, comes a matching spike in returns. We ve all seen the customer who orders the same item in three different sizes or colors. Even if everything is handled perfectly at the DC, two of those SKU s are coming back. This is another area where you need to have a plan to improve your efficiency in processing returns and understand at what point it makes financial sense to implement your plan. Conclusion As outlined in this paper, the demand on every retailer s Supply Chain is only going to increase. Whether you want to thrive or simply survive, your Supply Chain will need to evolve so that you can stay competitive. Peach State provides end-to-end supply chain consulting, engineering and systems integration solutions that increase productivity, reduce cost, mitigate risks and improve customer service for clients that manufacture and distribute their products across the globe. Peach State Integrated Technologies 3005 Business Park Drive Norcross, GA, 30071 P 678.327.2000 800.998.6517 peachstate.com