Magazine Article | August 20, 2008

Plan For A Better Supply Chain

Source: Innovative Retail Technologies

Improvements in inventory and order management yield an increase in speed to market and a decrease in waste and shrink.

Integrated Solutions For Retailers, September 2008

Industry experts agree that the road to an efficient supply chain is paved with proper inventory and order management techniques at the store and warehouse levels. Retailers have to make intelligent forecasting decisions about inventory and product demand to strengthen and streamline the supply chain. When store-level decisions and increased warehouse productivity drive the entire supply chain, speed to market increases while shrink and waste decrease.

Leverage Customer Demand To Increase Inventory Visibility
Relaying demand data garnered from analytics engines and algorithms from the store level through the supply chain to make appropriate purchasing decisions can drastically improve visibility. "Inventory visibility and flexibility are essential within a global supply chain," says Jim Bengier, global retail industry executive for Sterling Commerce. The company's connectivity integration and application solutions are built to increase speed to market. "Retailers are now able to embed customer intelligence and insight into the decisions that are impacting the supply chain itself all the way down to the store level," explains Gladys Lau, senior director for retail at Oracle. Christine Fotteler, VP for trading industry solution management at SAP agrees. "Retailers prefer a supply chain driven by end consumer demand," she says.

Better Planning Equals Better Speed To Market
Proper inventory planning plays a large role in ensuring speed to market. "What we're seeing in the retail landscape is streamlined planning through purchase order automation," says Richard Gaetano, COO at Island Pacific. Increasingly, retailers are using their planning systems as more than just financial diagrams. They're using these systems to drive not only the assortment of the products they intend to buy, but also how they are going to buy them and when they will allocate them. "Proper planning is about taking the customer's insight and using it throughout the supply chain to increase efficiency and speed to market," explains Richard Murray, VP of strategy and solution marketing for trading industries at SAP.

Like store-level inventory, warehouse inventory and order management remain pressing issues in today's retail supply chain. Effective warehouse management aids in the supply chain's speed to market by increasing productivity. For instance, voice-based applications used in conjunction with inventory applications increase efficiency with picking, put away, loading, and receiving. "Voice-based applications lead to efficient warehouse management because employees don't have to write anything down or punch in numbers," explains Scott Yetter, CEO and president of Voxware. "Their hands are free, and more importantly, their eyes are free, which results in increased productivity and fewer errors."

Reduce Waste Through Order Accuracy
When retailers buy products based on customer demand, which in turn affects what actually comes into the supply chain, waste reduction is automatic. "Forecast analytics is such a fundamental part of making the right purchasing decision," explains Lau. "The more we tailor these purchasing decisions, less waste will exist." If you don't over-order, you will save on energy costs by avoiding shifting goods back and forth from the store to the vendor. You should aim to touch the product only once. Fotteler cites demand insight as a key component in eliminating supply chain waste and shrink. "Retailers must plan accurately for waste and shrink through demand insight and visibility," she states. "For example, fresh produce typically has a high amount of waste and shrink. To avoid this, consider shelf life during the planning process and throughout all levels of the supply chain."

Is Technology The Answer?
Look to technology to increase supply chain efficiency and reduce waste. "One way to make the warehouse more productive and efficient is to provide people with a technology that they didn't have before," states Yetter. Technology can help reduce overtime and staff numbers. As technology increases efficiency, it alleviates costs associated with correcting problems. Bengier states, "By having integrated and connected systems, you increase the execution and the customer experience and reduce the waste and shrink within the supply chain." Note this example regarding inventory. "Retailers focus on the carrying cost of capital and their inventory," explains Bengier. "If they cannot execute their inventory information in a timely manner, the order will be cancelled, thereby increasing inventory, which in turn increases shrink and markdowns."

Another way to leverage technology to reduce shrink and waste is to tighten integration between systems. "Today's retailers are complex," explains Gaetano. "There's not one single system that will meet their needs — it's usually a collection of systems that will deliver their ultimate solution." The speed at which retailers need to deliver features to their users to drive product doesn't always allow them to integrate seamlessly between systems. So, tightening integration framework to maximize your solutions will result in increased productivity and decreased waste.

Save Time And Money, Maximize Truckloads 
As it pertains to order management, shrink, and waste, truckload management is a serious concern for retailers. "Truckload management covers everything from shipping to carton sizes to properly packed trailers," says Gaetano. "It's part of the business that needs to be reviewed as retailers start to tighten their wallets." Retailers recently have begun to take a strategic and proactive look at truckload management. "As a truck moves from one distribution center to the next, retailers must ensure that the goods are packed in the trucks in the order in which they are being dropped off," explains Lau. Truckload management eliminates a lot of cost while also being environmentally friendly. "Optimizing transport according to environmental criteria is already in place, and energy efficient warehouse strategies are something we support," Murray states.

Be mindful of the purchasing decisions made at the store level. Orders exceeding consumer demand will lead to costly waste and shrink in the form of revenue loss, shipping costs, carton costs, and more. Coupled with increased warehouse productivity, store-level inventory optimization can render a profitable streamlined supply chain.