Magazine Article | March 1, 2002

Supply Chain Offers Savings

Source: Innovative Retail Technologies

While looking for enterprise-wide cost savings, don't forget the supply chain. There you will find many processes that, when automated, can save time and money.

Integrated Solutions For Retailers, March 2002

In today's retail marketplace, retailers need to look for cost savings wherever possible. One place that tangible results can be realized and measured is in supply chain fulfillment. The multichannel environment has expanded fulfillment to include shipping directly to consumers through drop shipment or in-house, as well as bulk shipments to retail stores. Now retailers are taking another look at what makes their supply chains tick, and vendors suggest that automating many manual processes can decrease fulfillment costs. "Even among the most sophisticated retailers, we find that there is at least $400,000 to $800,000 in savings for every $100 million in order volume," said Michael Farello, senior VP of sales and marketing at Escalate, Inc. (Redwood Shores, CA). "And the good news is that tangible cost savings can be realized without major changes to a retailer's business processes."

Knock Down Database Silos
Separate databases of information have plagued retailers since the multichannel concept emerged. Donny Askin, founder and CEO at CommercialWare, Inc. (Natick, MA), said retailers should look at their internal and external strategies as crosschannel rather than multichannel. "Retailers need to leverage the strengths of each channel in order to drive business across all channels. They can use the Web to drive store sales or their catalogs to drive the Web. But the primary importance is to have consistent shopping experiences and analysis across all the channels," Askin said. Once retailers capture customer information into one consistent database, they can use OLAP (online analytical processing) tools to easily and selectively extract and view the data. "Retailers can access this data to create reports and view the key business drivers at a high level with strong drill down capabilities," Askin said.

Eventually, retailers should begin to look into their enterprise-wide systems with better visibility and more timely access to information. This can be accomplished by adding a central application that can capture all order and shipping information in one repository. This way when a customer places an order online, for example, any number of players in the supply chain could access the same information. "A vendor might need to know the order's fulfillment requirements, customer service needs to handle shipping inquiries, and finance needs to reconcile the invoices," Farello said. "The system that provides this visibility is known as an order visibility and execution application and should operate more as a workflow engine rather than an integration framework." The needs are the same for both bulk shipments for your stores and drop shipments for online and catalog channels.

Check On Your Suppliers
Outsourcing or drop shipping as well as increased competition for a diverse product assortment in the stores has left retailers working with more suppliers than ever before. "As a retailer's vendor base becomes more diverse, it starts to span large and small suppliers with vastly different communication capabilities ranging from faxed shipment notices to Internet EDI (electronic data interchange) transactions," Farello said. "Without the necessary supply chain visibility to track orders, the retailer is forced to rely on manual checks and balances." One area that retailers can automate is in the area of charge backs, which are fees that are paid to retailers by suppliers if shipments are not fulfilled according to their agreements. Many times retailers don't have enough supply chain visibility, especially if the fulfillment is outsourced, to see whether orders were fulfilled on time or complete. Consequently, retailers put many manual hours into tracking orders or else the charge backs go uncollected. Once a retailer can gain visibility over its supply chain, exception management software can alert a retailer of fulfillment difficulties. "This way whenever information is captured about an order, such as acknowledgement that an order has been shipped or received, a retailer knows its status. This helps to give some control back to the retailer," Farello said.