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How to Increase Margins and Agility by Decreasing Inventory Touch Points in the Supply Chain

Enable Direct Shipments

A STRATEGIC IMPERATIVE FOR RETAILERS

Supply chains are growing much more complex as global sourcing and selling becomes crucial to staying competitive in the retail world. As supply chains grow longer, more touch points occur from point of origin to delivery, eroding prod-uct margins by adding cost. Retailers know that increasing direct shipments can make them more competitive, but many lack the tools to make this approach safe and cost-effective enough to have a positive impact on margins while still meet-ing volatile demand.

Impact of Poor Shipment StrategyIn complex global supply chains, eliminating touch points can be a good strategy to shorten lead times and lower risk. How-ever, many retailers are working with traditional ERP systems that don’t provide visibility into inventory as it moves along the supply chain. The result of attempting direct shipments without cloud technology to support them is often poor allocation, increased costs, and inaccurate ETAs for customers. Because of this, many retailers don’t ship directly.

When retailers must ship their goods through a high number of touch points, there are more potential points of failure. Low-value tasks at each location are done with a high cost of labor and add to lead times. The less direct shipments are, the more prone they are to a number of problems:

Increased warehouse costs

Greater supply chain risk

Lack of fl exibility due to longer lead times

Diffi culty of ensuring vendor compliance for complex supply chain programs

The Root of the ProblemRetailers have the option of eliminating touch points along the supply chain, but can’t reasonably execute unless they have cloud technology to support their efforts. When they don’t have the right technology, underlying problems cause margin erosion at each point along the supply chain.

1. Inability to accurately predict seasonal consumer demand early

Retail demand is often volatile, making it diffi cult to allocate to stores according to seasonal demand. Many times, this leads to:

Expedited mid-season orders to meet unexpected demand

Excess inventory in low-demand regions

2. Lack of inventory visibility and ability to adjust to meet demand

Often demand swings occur that are not in line with the original inventory positions. When systems aren’t equipped to track in-transit inventory, it’s diffi cult to reallocate to meet this new demand. The leads to:

Expedited air freight and inter-DC transfers that increase transportation costs

Excess inventory at each DC as a buffer, increasing inventory costs

3. Insuffi cient tools to accurately track shipments, delays, and associated updates to ETAs

Because traditional software cannot provide adequate visibility into shipments, accuracy and customer service suffer, causing:

Expensive, last-minute shipments to ensure ETAs

Lack of information needed to make direct shipments feasible

© GT Nexus, Inc.

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To maximize profi ts in a competitive market, retailers must improve their margins while meeting volatile demand.

The Challenge

Margin erosion occurs at each touch point for inventory as it moves from source to the store.

Source Store

Drop Ship

Cross Dock

Deconsolidator

Retail DCBrand DC

ConsolidatorSource Consolidator Store

Drop Ship

Consolidator

Retail DCBrand DC

Deconsolidator

Plant

Plant

NetworkConnectivity

Agility

Customers

Customer

DC / Warehouse

Plan

Actual At-Risk DelayDynamic ETA

B

A

Sense more accurately

Operate more efficiently

Respond faster

Make better decisions

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The SolutionRetailers can balance the complexity of their supply chains by enabling direct-to-store shipping where needed. This can only be done on a cloud-based network, where all of their logistics partners are on a neutral platform and have access to real-time, SKU-level data. For direct-to-store, items must be packed for delivery to a store or customer, bypassing consolidation centers and DCs.

A visibility platform that allows later allocation and fewer touch points in the supply chain.

Support for delayed allocation strategies for improved demand alignment

Global visibility to in-transit inventory at SKU level for improved on-time delivery of merchandise needed by region

Simple planning tools for store-ready packing and labeling

Scan & Pack tools for improved packing compliance (bar-code & RFID)

How to enable direct shipments:

1. Postpone store allocations until goods are ready to pack

2. Use supplier tools to accurately execute store-ready packing at source

3. Manage demand variability through increased visibility to in-transit inventory for improved inventory accuracy by region

4. Respond to early warning of possible delays by adjusting ETAs or fi nding replacement inventory

Value PropositionsBy adopting a cloud-based platform to increase visibility and collaborate with trading partners, retailers can manage demand variability and improve inven-tory accuracy without sacrifi cing profi t margins.

1. Minimize supply chain risk through fewer touch points

2. Reduce transportation and warehouse costs

Bypass retail or wholesale distribution centers

Implement cross-docking for improved speed to market at lower cost

Lower handling costs by shifting store-level packing to low-cost countries

3. Improve management of demand variability

Optimize inventory by region to better match latest demand patterns

Minimize stockouts and markdowns at retail

4. Increase supply chain agility through improved vis-ibility from origin to store

Direct Shipments and the Networked CompanyTo enable direct shipments while protecting margins, compa-nies must transform themselves from silo-based, inward-facing corporate operators to interconnected, highly agile business network orchestrators.

Instead of simply tracking products more accurately along the supply chain, some retailers can cut out the middlemen al-together – but only if they have visibility at the SKU level and can pack for the store directly.

Inventory accuracy improves the closer allocations are made to delivery.

Supplier StoreDeconsolidation3PLSupplier StoreDeconsolidationDeconsolidation

Store ReadyPacking

AllocationOpportunity

AllocationOpportunity

RetailDelivery