Integrating Financial And Physical Supply Chains
Successful supply chain execution depends upon the efficient flow of information, product and payment. A growing opportunity for retailers is to identify how to take advantage of data associated with the movement of physical product through the supply chain to drive the flow of payments across the financial supply chain. To coordinate the flow of product and the flow of money, retailers are establishing cross-functional teams comprised of procurement, logistics and finance executives.
During the Supply Chain Summit, attendees participated in an interactive panel discussion that addressed challenges and trends associated with international trade and global finance, and specifically how to bring disparate groups together to form a cohesive team. Greg Johnsen, co-founder and executive VP of marketing and sales at GT Nexus, moderated the panel, which included Adrian Sherman, manager of supply chain operations for Williams-Sonoma, and Mo Virani, senior VP, global trade and supply chain solutions for Bank of America.
Perhaps the most notable trend is the migration away from the traditional approach to financing, the letter of credit (LC), to a more progressive open-account model. Three of the most exciting opportunities for financing, according to Johnsen, are pre-shipment, post-shipment and inventory financing. Under a pre-shipment approach to financing, the purchase order becomes, to some extent, collateral that “provides supplier liquidity in a post-LC environment,” he stated.
In a post-shipping financial model, early payment for services or product earns a discount, and in the inventory-financing scenario, in-transit inventory serves as the collateral.
The traditional LC, explained Virani, “created a comfort level for buyers and suppliers because it assured them of compliance and payment.” However, reconciling the original PO, the invoice and the LC to make sure everything was in agreement, was labor intensive.
Enter the era of automation, and an on-demand global trade and supply chain portal from GT Nexus, Alameda, Calif., that supports a cross-functional team so that procurement, logistics and finance processes can be executed on a common platform with synchronized data and trading-partner integration.
“We were struck by the knowledge gap between logistics and finance executives,” stated Johnsen. “There is a real opportunity for cross-pollination and education. Our solution is building knowledge on both sides of the fence so users can leverage the infrastructure of the supply chain.”
Williams-Sonoma’s Sherman agreed, stating, “The role of the supply chain VP has expanded and new expertise is needed for understanding financial metrics.”
He suggested that one of the first steps to a supply chain that flows both product and payments as efficiently as possible is to assemble the right people from various disciplines and reach an agreement on strategy.
“A key element of the financial supply chain is cost tracking and, although it’s not necessarily a financial play, having a real-time view of the accumulating costs along the supply chain for each SKU is critical,” continued Johnsen. “The next level of information, after tracking the movement of the physical inventory, is tracking the costs as they accumulate.”
Supply Chain Summit attendees could not have agreed more, and the challenge of defining total landed costs was broached. “Projecting landed cost is a huge challenge,” echoed Sherman. “Moving to a model of real-time understanding of total landed cost will shift business decisions because it changes margin calculations and projections.”
Although the GT Nexus portal lays the foundation for real-time understanding, there has to be extensive data sharing and visibility into production processes between trading partners.
“I’m not sure how far into the production process we can back up to,” acknowledged Sherman. “Also, we’re known for our high-end, high-quality products—would we really want to evaluate suppliers based on their abilities to share information?”
Clearly, retailers like Williams-Sonoma would not choose a supplier at the expense of product quality. However, Sherman said they will expect supply chain partners such as carriers and freight forwarders to provide that level of information—and he said they were “headed there with some suppliers as well.”
Sears Holdings ceo unhappy with 2Q
HOFFMAN ESTATES, Ill. Sears Holdings today reported net income of $176 million, or $1.17 per diluted share, for the second quarter ended Aug. 4, compared with net income of $294 million, or $1.88 per diluted share, for the second quarter ended July 29, 2006. The company attributed the decline in its second quarter results from the same quarter last year to lower operating results at both Sears Domestic and Kmart, which were partially offset by improved operating results at Sears Canada.
“We are disappointed with our second quarter results. Our gross margins came under pressure from sales declines and increased promotional activity, and as a result, our net income was significantly below last year and our expectations,” said Aylwin Lewis, Sears Holdings’ ceo and president.
Sears Domestic’s comparable-store sales declined 4.3% for the quarter, while Kmart’s comparable-store sales declined 3.8%. Total domestic comparable-store sales declined 4.1%. The company reported lower sales across most merchandise categories at both Kmart and Sears Domestic, partially offset by increased sales of women’s apparel at both Kmart and Sears Domestic, as well as within consumer electronics and footwear at Sears Domestic. For the quarter, total revenues declined $0.6 billion to $12.2 billion in fiscal 2007, as compared to $12.8 billion for the second quarter of fiscal 2006.
Lane Bryant pres. joins Christopher & Banks
MINNEAPOLIS Former Lane Bryant president Lorna Nagler will join Christopher & Banks as president and ceo effective Aug. 31. She will replace Matthew Dillon, who resigned from his position as president and ceo and as a member of the board of directors today. Nagler has also been elected as a member of Christopher & Banks’ board of directors effective Aug. 31.
Nagler most recently served as president of Lane Bryant, a division of Charming Shoppes. Before joining Charming Shoppes in April, 2002, Nagler served as a senior vp and general merchandising manager for apparel and jewelry at Kmart Corp.