Supply Chain Visibility: a Must for Collaborative Logistics Programs
The tools of the new millennium are allowing logisticians and marketing executives to model and implement collaborative programs that reduce inventories and transportation costs while reducing order cycle time.
At present, most large retailers obtain a landed price for goods at the appointed DC or retail location across the country. While shipping truckloads of goods to centralized DC’s may be cost effective for manufactures and wholesalers, the standards of service are rapidly shifting. Most retailers are now or will soon be requiring direct-to-store shipments or individual orders palletized for cross docking with other suppliers at the customer’s or 3PL centralized DC.
Although this may seem to be efficient from a retailers perspective, there may be an increase in cost and may pose operational challenges for the shipper; the customer may not always be willing to pay extra for this service. If this sounds at all common to you than this article is of great value.
With the onset of ASP Internet supply chain tools on the market we can implement WMS (warehouse management systems) and TMS (transportation management systems) solutions that allow full visibility of multi-client inventory at DC’s and cross docks, as well as management and optimization of all modes of transportation, both domestically and internationally. Those players in the industry that do not offer such beasts to clients are scrambling to align, buy or develop this Internet visibility for their present and future customer base. This technology is in the present day, improving quality and transaction cost on an increasing quarterly basis.
There is great opportunity for manufacturers, 3PL’s, and retailers to take the lead on these initiatives program, to shrink the supply chain, therefore reducing inventory levels and transportation costs while improving order fill ratios, or “perfect order ratio’s.” The real gain is that it has nothing to do with squeezing better rates from carriers and 3PL’s providers and everything to do with using today’s tools to streamline the process using visibility tools (Internet) and common sense.
Let’s quickly walk through one such collaborative program in development today for a major retailer with more than 500 outlets and growing rapidly.
The retailer markets brand name products from eight major manufacturers across North America. The manufacturers, all global companies, sell their entire product on consignment to the retailer and receive payment at point of sale. However, the retailers predicament is that they may not always have the correct products in the store for the brand (style, size, etc.) and if the Sales Associate cannot move them to an in stock item, the result is a loss of sale.
The manufacturer may lose the sale or keep it at another retail customer, however they have no control over the process. At any rate, the manufacturer has a high cost of inventory to service accounts in a JIT environment. It involves factoring transportation expenses due to LTL and multiple stop TL moves to retail divisions instead of TL move to central DC’s.
The visibility tools available today allow the retailer and the manufacturer the opportunity to get what they want. Retailers want to have their cake and eat it too because they can, and the manufacturer wants to service the account without the logistics costs slashing their profit margin.
The answer is Collaborative Crossdock/Strategic inventory facilities, usually operated by a 3PL partner with Internet TMS and WMS solution partners. This process allows manufacturer to maintain the supply chain edge that they may have over competitors, while reducing costs.
As an alternative to picking orders and delivering two or three times a week to each store via costly LTL and small package carriers or multi-stop TL moves, the manufacture is back to delivering truckloads of consolidated orders to centralized cross docks, daily, at assigned times.
The 3PL then operates centralized cross docks (usually about 2-4) to cover the North American market. These cross docks typically have some strategic inventory of high volume SKU’s and merge the cross dock. Managing the crossdock will also allow for 3PL visibility for orders from the various manufacturers through advance shipping notices and builds truckloads. This usually means that product is cross docked the same day or, at the latest, next day.
To make this process work, the 3PL must operate, select and execute the transportation management portion as well as provide the visibility of inventory and track and trace of carriers to all parties. The 3PL needs to give the manufacturers secure access to their supply chain information as well as the retailers, stores and carriers involved.
Today these tools are available on a pay-as-you-play basis in various ASP formats that are very affordable and allow access from the most sophisticated supply chain systems down to a simple PC with a web browser. Some of these software solutions are multi-client and allow the visibility and ability to trace and invoice cost centres to multiple clients. Now the manufacturer has a variable cost operation that is collaborative with retailer and competitors, without sacrificing any supply chain advantages they may presently enjoy.