Managing a Global Supply Chain in an Omnichannel World
As omnichannel and e-commerce-only stores have exploded in popularity, delivery timescales and costs have become a key differentiator for retailers. In parallel, advancements in supply chain technology created new opportunities for retailers to make more informed decisions about shipping operations to protect and increase margins.
Behind all of these changes is the consumer-driven market, where retailers must cater to shopper expectations more than ever. This demand directly impacts the full supply chain by introducing complexities for retailers who must stay on top of every touch-point — from those that trickle down to shoppers to the ones that work up to suppliers. The best way for retailers to take charge of an industry driven by the insatiable expectations of shoppers is to gain accurate visibility into the supply chain.
Many retail organizations believe they have sufficient visibility into their operations. Most retailers do this by taking a weekly look at an exception management process around cost allocation to determine where their resources are allocated. But, these weekly snapshots only provide a fraction of the information that a real-time visibility solution can.
End-to-end visibility across the supply chain — encompassing suppliers, logistics partners and the end customer — is the only way for retailers to gain a complete picture. In fact, real-time visibility can give retailers the power to make better-informed decisions, faster.
The benefits of implementing a visibility strategy include:
• Greater insight into transportation costs: Organizations are able to be much more proactive in terms of examining spend, and therefore more strategic about carrier selection. Visibility into transportation costs can also provide a competitive advantage for retailers when renegotiating rates and terms with carriers.
• More affordable carrier pricing: This is an area where retailers often inadvertently overspend and are often unaware of the variance until after an event. Visibility into the supply chain helps retailers become fully aware of the daily choices that impact their bottom line.
• Savings on operational costs: A snapshot of transportation spending can go a long way in helping retailers adjust operations to cut back on spending. This financial view of the network can then prompt an analysis of costs from an operational level, leading retailers to make adjustments and save money.
• Better understanding of shipping methods: Retailers tend to overspend on non-discounted services such as same-day couriers and next-day early morning shipments. Often, the customer is not available to sign for the item and may actually need to call for pickup. By stepping back and taking a look at shipping needs, retailers may find that the customer would be just as happy with two-day shipping, which would provide a significant cost savings.
Omnichannel has fundamentally changed the retail landscape. Retailers who take action and gain visibility into the supply chain will be well-positioned to succeed in a market where many consumers have a false sense that all retailers can now operate within the omnichannel model, leading to frustration on both sides when expectations are not met.
In essence, omnichannel fulfillment and the myriad of consumer shipping options have created a new level of complexity for retailers. Without visibility into all of the data driving the supply chain, it is difficult to make the right decision for the business. To best manage a global supply chain, retailers must not only embrace omnichannel, but gain visibility into the supply chain.
Larry Lewis is a product marketing manager at Kewill, with responsibility for Kewill's analytics and spend management products and services. Prior to Kewill, he was co-founder, CTO, and COO of PointandShip Software where he led the design and development teams for their shipping expense management software. He can be reached at [email protected].
SAP Retail Forum: Harry & David receives warehouse management gift
Having two of something is not always better than one, especially when it comes to warehouse management systems.
“We wanted to provide the quickest means to manufacture and fulfill orders in the most cost-effective manner,” said Heather Bothern, manager of SAP applications for Harry & David, during a session at the recent SAP Retail Forum in Miami. “We needed full visibility of all materials in all locations.”
As a vertically integrated retailer, Harry & David manages every step of its supply chain from source to shelf (or customer order). This includes growing its own fruit and running its own bakery. The specialty gift retailer, which was purchased by 1-800-Flowers.com in 2014, also operates across numerous channels, including catalog, mail order, call center, store and e-commerce.
To handle this complex supply chain, Harry & David had previously operated two separate warehouse management solutions, one for West Coast operations and one for East Coast operations. As an established user of an SAP enterprise platform, the retailer decided to try to simplify warehouse management by interfacing both systems to its SAP ERP solution.
“We built 40 to 50 interfaces between the warehouse management systems and the ERP system,” explained Bothern.
Harry & David found this patchwork system did not provide sought-after benefits in areas such as inventory transfers and batch controls. Further complicating matters was the extremely seasonal nature of the retailer’s business.
“Seventy percent of our revenue comes during three weeks in the holiday season,” said Bothern. “We send 400,000-plus Federal Express packages a day for those three weeks. We add four to five extra distribution centers to our two main distribution centers and add about 10,000 seasonal workers to our 1,100 full-time distribution employees.”
Harry & David decided to implement an SAP enterprise warehouse management solution. Initially, the retailer intended to go live in July 2012, but determined the business users didn’t yet fully understand the new system. Live implementation was delayed to October 2012, and then to February 2013 to avoid interference with the all-important 2012 holiday season.
“It was a smooth implementation,” said Bothern. “We shut down on Thursday night and were up and running by Sunday. We didn’t miss a customer cut-off and there were no lost shipments.”
However, it took a longer-than-expected three months to stabilize operations on the new warehouse management system, and during the 2013 holiday season inventory accuracy decreased from its normal 99%-plus mark to 88%.
Harry & David analyzed the situation in 2014 to ensure inventory accuracy would return to normal in time for the 2014 holiday season. Bothern said the retailer made some key discoveries.
“Best practices do not always work in a real-world warehouse situation,” she said. “Look at what your workforce is capable of. We needed systems that were quick and easy to use.”
By eliminating arbitrary best practices that did not fit its specific business needs and generally simplifying and streamlining warehouse management technology and processes, Harry & David was able to return to 99% or higher inventory accuracy for the 2014 holiday season.
“I didn’t have to sleep at the office,” she said. “I consider that a success.”
Staples founder Tom Stemberg dies
One of the retail industry’s true innovators, Staples co-founder Tom Stemberg, passed away on Friday at the age of 66.
Stemberg, who died at home after a two-year battle with gastric cancer, was considered the father of the office superstore format. With the backing of Bain Capital and its co-founder, Mitt Romney, he co-founded Staples in 1986, and went on to lead the company through a period of rapid growth to dominate the office products industry.
“Stemberg was “an extraordinarily creative and dynamic visionary,” Romney told the Boston Globe. “Tom is one of the great business leaders of our state and our nation. He was not only the founder, but someone who grew the company to a multibillion-dollar enterprise. He built an industry that employs thousands and thousands of people.”
After leaving Staples, Stemberg joined the venture capital firm of Highland Capital Partners in 2005, where he served as a general partner. According to his Highland profile, he was serving on the boards of CarMax, CitySports, DavidsTea, Guiltar Center, lululemon athletica and Pharmcac among others.
Staples chairman and CEO Ron Sargent issued the following statement:
“Tom was a visionary who invented the office products superstore and turned it into a global industry. He had great energy, determination, and an incredible passion for our business. His entrepreneurial spirit and legacy will live on through the many people he inspired and the company he created. On a personal note, I’ll remember Tom for his great sense of humor, and most of all, his caring nature.”
Stemberg began his retail career with the Jewel Company’s Star Markets, where he served as a VP of sales and merchandising.
Stemberg was born in Newark, New Jersey, the only child of Austrian immigrants Erika and Oscar Stemberg. He received an academic scholarship to Harvard College in 1967 to study organic chemistry.
After graduating in 1971, Stemberg attended Harvard Business School, where he received a master’s in business administration. Throughout his life, he was a devoted fan of the university’s basketball team, and established an endowment to fund the position of basketball coach Tommy Amaker.
“While he will be rightfully remembered as a brilliant leader and adviser to a number of wildly successful organizations that employ so many, to me he will always be the man who was there for Harvard basketball, supporting the dreams of young athletes who are better people for his generous devotion to the school and to the game,” Massachusetts Governor Charlie Baker, who played basketball at Harvard, said in a statement.
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