Guest Commentary: Retailers and Manufacturers Must Rethink their Planning and Fulfillment Strategies

This is an interesting time to be a supply chain professional. We are seeing a convergence of revolutionary trends that are causing retailers and their manufacturing suppliers to truly re-think how they approach their planning and fulfillment strategies.

Here are some examples:

Multi-Channel Retailing. Not long ago, a retailer’s transportation focus was on loading trucks and shipping into distribution centers and stores. The recent increase in parcel activity due to direct consumer fulfillment is changing the modal mix for retailers, resulting in a whole new set of transportation challenges. With the influx of online ordering and mixes of fulfillment strategies, retailers must be prepared to accommodate these broadened requirements. Adopting an integrated, holistic approach to transportation processes and systems will help better position retailers to consider added volume as part of their standard supply chain policies. As a result, they will have the ability to allocate their modal strategy more evenly across the network to keep service levels high and meet consumer demand for on-time shipments.

Shelf-Connected Supply Chain. To compete and thrive in a consumer-driven environment, retailers and consumer goods manufacturers must collaborate differently than they have in the past. They must quickly and profitably respond to the choices that consumers make at the shelf and across all buying channels. This has prompted the emergence of the shelf-connected supply chain. Key to the shelf-connected supply chain is the practice of intelligent and localized assortments to provide customers with the choices they want. However, this can only be achieved with an increased focus on operational and fulfillment excellence, with the right transportation network to support it. The bottom line is that the accelerated adoption of these hyper-accurate, shelf-sensing systems leaves no room for error and increases the expectations and pressure on manufacturers to fine-tune their logistics systems so that they can deliver on-time and in-full.

Pop-Up Retail. As exemplified by the seasonal Halloween costume and holiday toy locations, pop-up retail stores have risen in popularity. This has given big-box retailers much to consider when it comes to appealing to seasonal niche markets and creating unique shopping environments that engage customers and increase brand relevance. Yet these seemingly simple-to-operate pop-up stores can have far reaching implications on the dynamics at work within their transportation network. With many pop-up stores, space is limited; making carefully-timed shipments is critical in ensuring a regular pipeline of product is headed to the store. For the many mobile pop-ups that literally disappear at the end of each day, only a small amount of stock can be stored. These conditions change the transportation network dynamic through smaller and more frequent shipments, which have the potential to increase network costs. For this reason, it is critical that retailers look at their network holistically and focus on network optimization strategies to mitigate the complexity and cost.

Unless you’ve been on vacation for the last several months or more, none of these trends should be a surprise. There has certainly been a lot of buzz created around broader supply chain strategies, but what about transportation? Clearly there is a need to be more agile, to avoid network bottlenecks and to mitigate escalating costs, putting the effectiveness of current practices in question. To adapt, retailers and manufacturers should really look to employ these strategies:

Think Holistically. Trends such as multi-channel and pop-up retailing are creating new dynamics within the transportation chain, including an influx of parcel freight and a change in network order dynamics, both of which can significantly drive up transportation costs. Taking a step back to look at how you can maximize your available network resources to mitigate cost and risk and maximize service will drive considerable value.

Optimization is not a commodity. While transportation solutions have continued to enjoy an increased adoption rate, many shippers have been opting for simpler, quicker to deploy solutions with a “good enough” approach to value. The challenge here is that the problem-solving ability of any transportation solution is what provides the majority of the value that drives the business case, meaning that significant dollars are being left on the table in lieu of simplicity. Shippers should look to measure the cost of the “wrong answer” when evaluating their existing practices.

Beyond analytics. Advanced analytics has become a key technology trend across many solution areas including transportation, but are analytics alone enough? Are there ways to bring those metrics in line into actual operational processes instead of a separate off-line activity? Shippers should look for use cases where they can leverage analytics to enable real time, execution-level decision making.

Plan incrementally and iteratively. How do you combine the desire to create economic density for effective transportation optimization with the need to be able to react to new orders and rapid changes to existing orders? The answer is having the ability to iteratively and incrementally plan your network by only releasing loads for execution that are either optimal or just have to be processed because of time limitations. The rest should be left in the pool for your solver to improve as new data becomes available.

Fabrizio Brasca is vice president, global logistics, JDA Software. He is responsible for developing innovative transportation and logistics strategies across all industry verticals.

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