Supply Chain Discipline

As the economy slows, retailers are racing to be on trend and first to market. But they also are striving to be on budget, which can be compromised by escalating fuel costs and a growing list of government mandates regarding international production and product movement. Solutions involve creating shorter cycle times and greater supply chain visibility. But the international supply chain is a long and complex animal. In addition to retailers, ocean freight companies and factories, it involves forwarders, brokers, insurance providers, lenders and many other entities. Their sphere of influence can criss-cross continents several times over.

"Given these critical logistics considerations and their related expenses, even some large, well-known retailers don't know the actual overall 'delivered' cost of bringing overseas items to shelf," says Dwight Klappich, a research vice president specializing in supply chain execution at Gartner Group. "Retailers that will really nail global supply chain performance are ones whose sophisticated logistics systems deliver the most visibility, agility and speed and that can best synchronize outbound and inbound shipments to facilitate flow-through."

By implementing new technology tools -- and finding creative uses for some older ones -- retailers are addressing crucial areas, including supply chain visibility, cost, speed to market and inventory monitoring.

For example, The Children's Place interfaced existing internal supply systems with TradeStone's Sourcing and Global Order Management tools to "provide visibility earlier in the supply chain cycle, which helps protect sales, preserve margins and leverage shelf life," says Frank Loewen, senior director of global logistics, The Children's Place Retail Stores Inc. "With 320 million units to manage annually, we place a lot of pressure on our supply chain."

The order management system unites domestic and import orders into a single solution and removes weeks from the order placement and collaborative confirmation process.

For The Children's Place, it is critical to move freight quickly through U.S. ports. "The post 9/11 environment introduced significant penalties for containers sitting too long at port. We source from many remote destinations, with varying transit times. If products arrive early, we may face penalties if we are not quick," says Loewen. "The TradeStone functionality provides visibility into our domestic and import orders. It allows our production team to manage and update our purchase orders by like items, ports of origin and attributes.

A paperless approach helps the company electronically conform to U.S. Custom's validation process and its upcoming "10 + 2" initiative. This initiative requires retailers to electronically submit data relating to containers loaded onto overseas vessels destined for U.S. ports.

"At Food Lion, transportation distribution is one of four major supply chain areas where the retailer has taken a "big leap" in automation and visibility," says Pete Bonneau, vice president of efficiency and productivity at Food Lion.

A new yard management system from Retalix optimizes service levels by automating and controlling multiple yard locations, truck arrivals/departures, load movement, trailer readiness and other dock issues in a fully on-line, centralized environment. The system is live at one distribution center and will begin to roll out to others. "We now know where any load is at any given time and better manage drops and pick-ups to optimize inventory levels," says Bonneau.

A new transportation management system (TMS) from RedPrairie (which is also being installed at Hannaford Brothers, Food Lion's sister company) improves load consolidation and fleet management. Gartner's Klappich notes that while load consolidation is not especially innovative, it is a hot area within supply chain execution due to skyrocketing fuel and transportation costs, driver and equipment constraints, routing issues and carrier regulations.

"If I reduce transportation requirements by one million miles, I've significantly reduced my carbon footprint and associated freight costs," adds Klappich.

Cost avoidance is driving innovation in cross-docking, line reduction and multi-SKU case movement at West Marine. The retailer has reduced lines and eliminated put-aways and reselection with an advanced cross-docking solution. This product is an internally written add-on to JDA's WMS and E3 automatic replenishment suite.

Larry Smith, senior vice president of planning and replenishment for West Marine, says that sophisticated use of cross-docking, along with the JDA modules, should reduce lines by 12 percent in 2008. With an additional 20 percent cut by multi-SKU orders automatically generated by the E3 system, "we anticipate a total line reduction of 32 percent due to cross-docking and the significant re-engineering of how we ship product," he adds.

Smith says a new partnership process at West Marine requires all cross-dock vendors to be compliant with EDI. All data will be leveraged in the cross-dock flow. A pilot phase was completed in February, with large orders already moving through the supply chain from four compliant vendors.

Smith admits that while some of the strategies that West Marine is employing within its business are not new, "neither is RFID. Within retail, full EDI compliance within supply chains is innovative for this industry."