®

Supply Chain Management Summit 2013 | 8.22.2013

Distributed Supply Chain Management

Presented by Paul Brisson Senior Product Manager pbrisson@commercehub.com 518.810.0700 x3912

Grow Your Business & Improve Customer Satisfaction through a Distributed Supply Chain of Drop-Ship & Third Party Logistics

Who are we?

Strategy  /  Planning  

Informa2on  Technology   Buying/Selling  

Logis2cs  Materials  /  Produc2on  

Customer  Experience  

Why are we here today?

SCMS 2013

Learn

Connect

Grow

Learn… §  Key principles of utilizing a distributed supply chain

management program with drop-ship & third-party

logistics (3PL)

How do we accomplish it?

Connect… §  Get First Hand Knowledge on the Subject

ü  Share real life experiences

ü Discuss what has / has not worked well in the past

ü  Swap contact information & continue the

conversation

How do we accomplish it?

Grow…. §  Leave with the Confidence to Evaluate a Distributed

Supply Chain Management Program Which Works

Best for You

How do we accomplish it?

•  The  Apple  Farmer…  

       Tradi/onal  Supply  Chain  

The Local Apple Farm Stand

Grow  the  Apples  at  the  Farm  

Sell  the  Apples  at  the  Farm  

Harvest  the  Apples  at  the  Farm  

Apple Farmer at Farmers Market

Grow  the  Apples  at  the  Farm  

Sell  Apples  at  Local  Farmers  Market  

Harvest  the  Apples  at  the  Farm  

Apples at Grocery Store Chain

1.  Farmer  Grows  the  Apples  

5.  Grocery  Store  Markets  Apples  in  their  Stores  

2.  Harvest  &  Package  Apples  at  the  Farm  

3.  Farmer  Sells  Apples  to  Grocery  Chain  

4.  Grocery  Chain  Distributes  to  Stores  

6.  Customer  Purchases  Apples  

Local Apple Farm –  Farmer Owns Entire Product Life-Cycle –  No Outside Involvement –  Most Profitable Marketing Outlet for Farmer –  Limited Exposure to Customers

Apple Farmer at Farmers Market

–  Farmer Owns Product Management & Distribution –  Market & Farmer Responsible for Marketing –  Additional Overhead for Market Fees & Distribution Costs –  Limited Outside Involvement & Exposure to Customers

Apples at Grocery Store Chain

–  Farmer Owns Product Management & Wholesale Distribution –  Grocery Store Responsible for Retail Distribution & Marketing –  Decreased Profit Margin for all parties involved / Increased Customer Costs –  Extensive Outside Involvement & Exposure to Customers

Supply Chain & Control

What if...Grocery Store Chain could –  Connect with Local Farmers Across the region/country –  Sells Apples on their Website –  Routes Order to Farm Closest to Customer –  Farmer Ships to Customer –  Apples Arrive Fresh, Cost Effective, and Quickly

A New Approach…

Drop-Ship Model –  Farmer  Owns  Product  Management  &  Distribu/on  –  Grocery  Store  Chain  Responsible  for  Marke/ng  –  Well-­‐Defined  Outside  Involvement  –  NEW…Most  Profitable  Marke/ng  Outlet  for  Farmer  &  Store  –  Most  Exposure  to  Customers  

Apples Drop-Shipped to Customer

Merchant –  Markets & Sells Products to Customers

Customer –  Orders Products From Merchant

Supplier [drop-shipper]

–  Owns & Manages Inventory –  Fulfills Orders on Behalf of Merchant –  Invoices Merchant for Sale

Shipper

–  Ships Orders on Behalf of Merchant/Supplier

What is Drop-Shipping Exactly?

Merchant –  Owns Inventory –  Markets & Sells Products to Customers

Customer

–  Orders Products From Merchant

3PL Provider [drop-shipper] –  Manages Inventory –  Fulfills Orders on Behalf of Merchant –  Invoices Merchant for Services

Shipper

–  Ships Orders on Behalf of Merchant/3PL

Third-Party Logistics Model (3PL)

•  Merchant •  Supplier •  Customer

The Three Perspectives

The  Merchant  Perspec/ve  

Drop-­‐Ship  

Pros –  No Cost Product Expansion –  Focus on Customer Experience –  Limited Logistics Mgt. –  New Opportunities to Grow

Cons –  Partner Compliance Mgt. –  More Suppliers to Manage

3PL  

Pros –  Fewer Suppliers to Manage –  Focus on Customer Experience –  Limited Logistics Mgt. –  Less Expensive than

warehouses

Cons –  Upfront Inventory Costs –  Partner Compliance Mgt. –  New Challenges to Manage

The  Supplier  Perspec/ve  

Drop-­‐Ship  

Pros –  Increased Exposure to

Marketplace –  Increased Product Line Depth &

Buying Power –  Limited Marketing Management –  Many New Opportunities to Grow

Cons –  Potentially Increased Inventory

Management Costs –  Partner Compliance Programs –  Diverse Operations to Manage –  New Challenges to Manage

3PL  (Not  Applicable)  

•  When Managed Well… The Experience is Better, Faster, and Cheaper

•  When Managed Poorly… Poor Customer Experience = Bad Customer Reviews –  Cancellations Due to Out of Stock –  Returns for Poor Product Presentation –  Customer Service Complaints for Late Shipments –  Administrative Overhead for Program Outweighs Savings

The  Customer  Perspec/ve  

Drop-Ship Programs are of two varieties –  Merchant Managed

•  Merchant Connects Directly with Supplier •  Merchant Manages Entire Order Life-Cycle

–  Provider Managed

•  Merchant Connects with Supplier via Provider •  Provider Manages Information Delivery •  Provider, Merchant, & Supplier Manage Order Life-Cycle

Two Flavors of Drop-Ship Programs…

Types of Services Available –  Rela/onship  Management  –  Product  Catalog  Building  –  Inventory  Management  –  Order  Processing  –  Shipping  Rules  Management  –  Packing  Slip  Management  –  Invoicing  Management  –  Service  Level  Management  

Traditional Drop-Ship Services…

CommerceHub www.commercehub.com

–  Full Service Drop-Ship Provider

Dropship Commerce www.dropship.com

–  Product, Inventory, & Order Management Provider

VendorNet www.vendornet.com

–  Drop-Ship Management & eCommerce Solution Provider

Leading Drop-Ship Providers

Banneker Industries http://www.banneker.com/

–  Sponsors of Today’s Summit –  Footprint in 6 States & MSBE

Exel America www.exel.com

–  Global Coverage –  74,000 employees / 300 warehouses

Schenker USA www.schenkerusa.com

–  Coverage: Europe, Asia, South America, Africa, North America –  36,000 employees / 405 warehouses

Kuehne & Nagel Logistics, Inc. www.kuehne-nagel.com

–  Global Coverage –  19,000 employees / 50 warehouses

Leading 3PL Providers

Understand Your Business Goals –  Remember the Apple Farmer

Research Marketing Opportunities –  Self-Managed Retail/Wholesale –  Distributor Managed Wholesale –  Drop-Ship & 3PL

Grow –  Utilize a Distributed Supply Chain of Drop-Ship & 3PL

Key Next Steps…

Thank you for Attending

Please feel free to send any questions. pbrisson@commercehub.com

518.810.0700 x3912