Retail Supply & Demand Chain

Many projects completed in 2009 required minimal financial resources, but they reaped immediate and long-lasting rewards. Store operations and supply chain teams had to work together to balance service levels, costs and high value long term objectives, including sustainability and leaner growth. Some projects required capital investments in technology or stronger commitments to fully utilizing technology that retailers already owned. Below are some of the projects retailers embarked on in 2009 - consider these  a good starting point when looking for high value/low-medium cost opportunities for 2010:
1. Enhance collaboration opportunities with business process changes
      A. Store friendly shipments - store department or zone level shipments – many retailers are making an effort to pack shipments to enable the most efficient in-store unloading processes, where much effort can be wasted moving around big footprint stores.
      B. Cross dock more - eliminating more costly direct ship to store; reducing receiving labor at stores. DSD vendors require a lot of attention from store receiving, product category and store managers. Efficient cross-docking processes can reduce costs and improve in-store receiving processes.
      C. Renegotiate service levels - realizing strict adherence to the highest service levels aren't necessarily inexpensive. Retailers cited situations where warehouse overtime was previously used to meet service levels, but that in some cases, were not really justified by the resultant value to stores. Collaboration and flexibility between supply chain and store operations can result in significant cost savings.
      D. Improving timeliness of advance ship notice of store-bound shipments - providing more time for stores to schedule and plan for the receipt of the shipment.

2. Reduce empty miles – Many retailers are working with suppliers, 3PL partners and internal logistics to leverage SmartWay transportation standards and to develop retail – supplier - third-party partnerships to reduce empty miles with continuous moves. In 2009, retailer's honored by the EPA for excellence in this area included Best Buy, JCPenney, Kohl's Department Stores, Limited Brands, Inc., Lowe's, and The Home Depot..

3. Get more work done in less time – Many retailers implemented new pay/bonus for performance on standards or simply applied new labor standards to distribution and warehouse work. Some also implemented workforce management to better schedule and assign work in their facilities. Sought after partners included Kronos and RedPrairie.

4. Reengineer processes, and/or distribution center flow – FreshDirect's reengineering of it's pick, pack and ship processes is a very simple example of this. FreshDirect, a $250 million /year online "fresh" grocer,  reduced the number of boxes in customer orders, by installing additional conveyor belts, enabling a more efficient selection process to be implemented. Fewer trucks, faster delivery and a 26% reduction in boxes resulted.

5. Radically improve inventory accuracy and productivity with a new WMS - Bon-Ton stores implemented a new WMS from HighJump Software that enabled an increase in productivity of 13.6 percent. The new fully automated system coordinates movement of 85% of store merchandise from inbound dock to outbound truck within four minutes of arrival at the warehouse. The remainder of the merchandise is routed for value-added services like re-ticketing or tagging before being shipped to stores.

6. Consolidate cross-channel order management to improve customer satisfaction and gain room to grow - Cabela’s implemented Sterling Commerce Order Management to improve it's ability to orchestrates fulfillment for all channels across their entire supply chain - stores, warehouses, suppliers and partners.

7. Reduce carbon footprint and transportation costs at the same time – Retailers cited the use of transportation applications to redefine optimal routes, loads, shipment frequency, and to identify backhaul opportunities. They also accomplished consolidating and cubing loads better to make the best use of trucks.

8. Make money from refuse - Recycling more and managing the waste stream better has been cited by many retailers as an easy to implement practical process that can result in a new or more significant revenue stream.

9. Reduce maintenance costs – Take unused equipment, idle because of reduced work loads, out of circulation. Trucks and forklifts that are completely out of circulation, do not need routine inspections, reducing costs.

10. Reduce freight costs – A warehouse club retailer developed a more standard, repeatable process for carrier bidding and procurement to reduce contracted freight rates. By implementing a “carrier bid optimization” tool that automates the development of “bid packages” for automated negotiation with carriers and evaluating carrier bids by lane to minimize total transportation expense, this retailer was able to reduce overall contracted freight rates by  approximately 10%. It also used the bid process to standardize contracted accessorial and fuel surcharges.

11. Source more efficiently – Walmart announced a reorganization of private label sourcing, eliminating 5-15% of sourcing related costs by sourcing 80% of product directly, rather than through a 3rd party procurement organization. Walmart has also been making investments in retail PLM and sourcing applications in the past couple of yr ears that will certainly go to good use given this announcement.

12. Reduce cycle time with retail PLM – Retailers are implementing retail PLM to reduce the time it takes to bring quality product to market as expediently as possible. In 2009, Belk and Le Chateau chose Tradestone's MLM and Global Sourcing application and Cache and Billabong chose NGC's PLM and Global Sourcing application. 

Leslie Hand, Research Director, Global Retail Insights