A STRATEGIC IMPERATIVE FOR RETAILERS
Enable Direct ShipmentsHow to Increase Margins and Agility by Decreasing Inventory Touch Points in the Supply Chain
Supply chains are growing much more complex as
global sourcing and selling becomes crucial to staying
competitive in the retail world. As supply chains grow
longer, more touch points occur from point of origin to
delivery, eroding product margins by adding cost.
Retailers know that increasing direct shipments can
make them more competitive, but many lack the tools
to make this approach safe and cost-effective enough
to have a positive impact on margins while still meeting
volatile demand.
Source Store
Drop Ship
Cross Dock
Deconsolidator
Retail DCBrand DC
Consolidator
Margin erosion occurs at each touch point for inventory as it moves
from source to the store.
Impact of Poor Shipment Strategy
In complex global supply chains, eliminating touch
points can be a good strategy to shorten lead times
and lower risk. However, many retailers are working
with traditional ERP systems that don’t provide visibility
into inventory as it moves along the supply chain.
The result of attempting direct shipments without cloud
technology to support them is often poor allocation,
increased costs, and inaccurate ETAs for customers.
Because of this, many retailers don’t ship directly.
When retailers must ship their goods through a high
number of touch points, there are more potential
points of failure. Low-value tasks at each location are
done with a high cost of labor and add to lead times.
The less direct shipments are, the more prone they
are to a number of problems:
• Increased warehouse costs
• Greater supply chain risk
• Lack of flexibility due to longer lead times
• Difficulty of ensuring vendor compliance for complex
supply chain programs
The Root of the Problem
Retailers have the option of eliminating touch points
along the supply chain, but can’t reasonably execute
unless they have cloud technology to support their
efforts. When they don’t have the right technology,
underlying problems cause margin erosion at each
point along the supply chain.
1. Inability to accurately predict seasonal consumer
demand early
Retail demand is often volatile, making it difficult to
allocate to stores according to seasonal demand.
Many times, this leads to:
• Expedited mid-season orders to meet
unexpected demand
• Excess inventory in low-demand regions
2. Lack of inventory visibility and ability to adjust to
meet demand
Often demand swings occur that are not in line
with the original inventory positions. When systems
aren’t equipped to track in-transit inventory, it’s
difficult to reallocate to meet this new demand.
The leads to:
• Expedited air freight and inter-DC transfers that
increase transportation costs
• Excess inventory at each DC as a buffer,
increasing inventory costs
3. Insufficient tools to accurately track shipments,
delays, and associated updates to ETAs
Because traditional software cannot provide
adequate visibility into shipments, accuracy and
customer service suffer, causing:
• Expensive, last-minute shipments to ensure ETAs
• Lack of information needed to make direct
shipments feasible
The Challenge
To maximize profits in a competitive market, retailers must improve their margins while meeting volatile demand.
Retailers can balance the complexity of their supply
chains by enabling direct-to-store shipping where
needed. This can only be done on a cloud-based
network, where all of their logistics partners are on
a neutral platform and have access to real-time,
SKU-level data. For direct-to-store, items must be
packed for delivery to a store or customer, bypassing
consolidation centers and DCs.
Supplier StoreDeconsolidation3PL
Store ReadyPacking
AllocationOpportunity
AllocationOpportunity
RetailDelivery
Inventory accuracy improves the closer allocations are
made to delivery.
A visibility platform that allows later allocation and
fewer touch points in the supply chain.
• Support for delayed allocation strategies for
improved demand alignment
• Global visibility to in-transit inventory at SKU level
for improved on-time delivery of merchandise
needed by region
• Simple planning tools for store-ready packing
and labeling
• Scan & Pack tools for improved packing compliance
(barcode & RFID)
How to enable direct shipments:
1. Postpone store allocations until goods are ready
to pack
2. Use supplier tools to accurately execute store-
ready packing at source
3. Manage demand variability through increased visibility
to in-transit inventory for improved inventory accuracy
by region
4. Respond to early warning of possible delays by
adjusting ETAs or finding replacement inventory
Value Propositions
By adopting a cloud-based platform to increase visibility
and collaborate with trading partners, retailers can
manage demand variability and improve inventory
accuracy without sacrificing profit margins.
1. Minimize supply chain risk through fewer
touch points
2. Reduce transportation and warehouse costs
• Bypass retail or wholesale distribution centers
• Implement cross-docking for improved speed to
market at lower cost
• Lower handling costs by shifting store-level packing
to low-cost countries
3. Improve management of demand variability
• Optimize inventory by region to better match latest
demand patterns
• Minimize stockouts and markdowns at retail
4. Increase supply chain agility through improved
visibility from origin to store
Direct Shipments and the Networked Company
To enable direct shipments while protecting margins,
companies must transform themselves from silo-based,
inward-facing corporate operators to interconnected,
highly agile business network orchestrators.
NetworkConnectivity
Agility
B
A
Sense more accurately
Operate more e�ciently
Respond faster
Make better decisions
The Solution Instead of simply tracking products
more accurately along the supply chain,
some retailers can cut out the middle-
men altogether – but only if they have
visibility at the SKU level and can pack
for the store directly.
GT Nexus provides the cloud-based collaboration platform that leaders in nearly
every sector rely on to automate hundreds of supply chain processes on a global
scale, across entire trade communities.
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