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

Transcript of Enable Direct Shipments

  • 1. GT Nexus, Inc.A STRATEGIC IMPERATIVE FOR RETAILERSEnable Direct ShipmentsHow to Increase Margins and Agility by Decreasing Inventory TouchPoints in the Supply Chain

2. The ChallengeSupply chains are growing much more complex as globalsourcing and selling becomes crucial to staying competitivein the retail world. As supply chains grow longer, more touchpoints occur from point of origin to delivery, eroding prod-uctmargins by adding cost. Retailers know that increasingdirect shipments can make them more competitive, but manylack the tools to make this approach safe and cost-effectiveenough to have a positive impact on margins while still meet-ingvolatile demand.Drop ShipCross DockSource StoreDeconsolidatorConsolidatorBrand DC Retail DCImpact of Poor Shipment StrategyIn complex global supply chains, eliminating touch points canbe a good strategy to shorten lead times and lower risk. How-ever,many retailers are working with traditional ERP systemsthat dont provide visibility into inventory as it moves along thesupply chain. The result of attempting direct shipments withoutcloud technology to support them is often poor allocation,increased costs, and inaccurate ETAs for customers. Because ofthis, many retailers dont ship directly.When retailers must ship their goods through a high numberof touch points, there are more potential points of failure. Low-valuetasks at each location are done with a high cost of laborand add to lead times. The less direct shipments are, the moreprone they are to a number of problems:Increased warehouse costsGreater supply chain riskLack of fl exibility due to longer lead timesDiffi culty of ensuring vendor compliance for complex supplychain programsThe Root of the ProblemRetailers have the option of eliminating touch points along thesupply chain, but cant reasonably execute unless they havecloud technology to support their efforts. When they donthave the right technology, underlying problems cause marginerosion at each point along the supply chain.1. Inability to accurately predict seasonal consumerdemand earlyRetail demand is often volatile, making it diffi cult to allocateto stores according to seasonal demand. Many times, thisleads to:Expedited mid-season orders to meet unexpected demandExcess inventory in low-demand regions2. Lack of inventory visibility and ability to adjust tomeet demandOften demand swings occur that are not in line with theoriginal inventory positions. When systems arent equippedto track in-transit inventory, its diffi cult to reallocate tomeet this new demand. The leads to:Expedited air freight and inter-DC transfers that increasetransportation costsExcess inventory at each DC as a buffer, increasinginventory costs3. Insuffi cient tools to accurately track shipments, delays,and associated updates to ETAsBecause traditional software cannot provide adequatevisibility into shipments, accuracy and customer servicesuffer, causing:Expensive, last-minute shipments to ensure ETAsLack of information needed to make direct shipmentsfeasible GT Nexus, Inc.2To maximize profi ts in a competitive market, retailers must improve their marginswhile meeting volatile demand.Margin erosion occurs at each touch point for inventory as it moves fromsource to the store. 3. PlantPlantNetworkConnectivityAgilityInstead of simply trackingproducts more accurately alongthe supply chain, some retailerscan cut out the middlemen al-together but only if they havevisibility at the SKU level andcan pack for the store directly.CustomersCustomerDC / WarehousePlanActual At-Risk DelayDynamic ETABASense more accuratelyOperate more efficientlyRespond fasterMake better decisions3The SolutionRetailers can balance the complexity of their supply chains byenabling direct-to-store shipping where needed. This can onlybe done on a cloud-based network, where all of their logisticspartners are on a neutral platform and have access to real-time,SKU-level data. For direct-to-store, items must be packedfor delivery to a store or customer, bypassing consolidationcenters and DCs.Supplier 3PL Deconsolidation StoreStore ReadyPackingAllocationOpportunityAllocationOpportunityRetailDeliveryA visibility platform that allows later allocation andfewer touch points in the supply chain.Support for delayed allocation strategies for improveddemand alignmentGlobal visibility to in-transit inventory at SKU level forimproved on-time delivery of merchandise needed by regionSimple planning tools for store-ready packing and labelingScan & Pack tools for improved packing compliance (bar-code& RFID)How to enable direct shipments:1. Postpone store allocations until goods are ready to pack2. Use supplier tools to accurately execute store-ready packingat source3. Manage demand variability through increased visibilityto in-transit inventory for improved inventory accuracyby region4. Respond to early warning of possible delays by adjustingETAs or fi nding replacement inventoryValue PropositionsBy adopting a cloud-basedplatform to increase visibility andcollaborate with trading partners,retailers can manage demandvariability and improve inven-toryaccuracy without sacrifi cingprofi t margins.1. Minimize supply chain risk through fewer touch points2. Reduce transportation and warehouse costsBypass retail or wholesale distribution centersImplement cross-docking for improved speed to marketat lower costLower handling costs by shifting store-level packing tolow-cost countries3. Improve management of demand variabilityOptimize inventory by region to better match latestdemand patternsMinimize stockouts and markdowns at retail4. Increase supply chain agility through improved vis-ibilityfrom origin to storeDirect Shipments and the Networked CompanyTo enable direct shipments while protecting margins, compa-niesmust transform themselves from silo-based, inward-facingcorporate operators to interconnected, highly agile businessnetwork orchestrators.Inventory accuracy improves the closer allocations are made to delivery.