Three critical transportation strategies for retailers in 2011

By Fabrizio Brasca,
Every season retailers launch aggressive holiday promotions to help lure shoppers, and in 2010 the offer of free shipping was a crucial one. With retailers advertising free shipping with no minimum purchase along with complimentary ship-to-store and home-shipping deals, consumers turned to laptops and mobile devices for their gift buying, driving online sales to record double-digit growth. Yet, the increase in parcel activity due to direct consumer fulfillment has resulted in new transportation challenges -- and margin pressures -- for multichannel retailers already dealing with dynamic supply chain and environmental constraints.

From more accurately forecasting projected seasonal volumes to better negotiating rates, service deals and capacities, retailers need a closed-loop approach that seamlessly ties their procurement processes into execution. The following three transportation strategies have proven effective in helping retailers drive efficiency and service levels all year-round:

1.    Multichannel retailing establishes the need for cross-modal optimization. Not too long ago a retailer’s mode of transportation was all about 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 and 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 the 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.

2.    Greater control of inbound processes both domestically and internationally. There is a continuing trend among retailers to take ownership of inbound transportation processes. By gaining greater control of both the domestic and international movement of goods into their own network, retailers can take advantage of scale to save money and better maintain optimum stocking levels. The handling of international inbound processes, in particular, presents added complexities such as weakened visibility and longer lead times. Transportation management systems (TMS) cannot address these issues alone. Retailers need to link their TMS to vendor collaboration portals that provide improved visibility on a multi-modal set of movements and increased collaboration with vendors on what’s available to ship. With this knowledge, retailers can more effectively plan transport and have greater flexibility to dynamically re-route or re-plan in response to any changes in demand or allocation.

3.    Focus on sustainability creates a need for increased utilization: Another growing requirement for retailers is adopting a transportation sustainability strategy in order to minimize their environmental impact. Reducing the overall need for transportation means retailers must adopt a holistic approach across multiple modes to fully leverage their network assets and drive network utilization. Emerging technologies such as containerization, for example, enable retail shippers to optimize three-dimensional spaces. Rather than focusing on filling a truck from a routing perspective, retailers are using containerization capabilities to plan from a pure volume perspective. By consolidating loads and more intelligently routing their assets, retailers will use fewer containers and trucks to help increase utilization and contribute to the company’s overall environmental goals.

Fabrizio Brasca, VP, Global Logistics, JDA Software.

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