Three critical transportation strategies for retailers in 2011
By Fabrizio Brasca, [email protected]
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. [email protected]
Economy and weather little help at Big 5
EL SEGUNDO, Calif. — The weak sales and profits reported Wednesday by West Coast sporting goods retailer Big 5 weren’t a surprise, as the company had warned Wall Street more than a month ago that financial results would be below expectations.
For example, same-stores sales for the 13-week fourth quarter of 2010 declined 0.7% when compared with the comparable period the prior years. However, total sales and profit comparisons were challenged by the fact that Big 5’s most recent fourth quarter compared a 13-week period to a 14-week period the prior year. As a result, sales declined to $227 million from $238 million, and net income declined to $4 million, or 18 cents per diluted share, compared with net income of $6.4 million, or 29 cents per diluted share, for prior year. The fourth-quarter earnings per share figure were negatively affected by seven cents due to a charge related to settlement of a lawsuit.
“Our business continues to be challenged by the economy in many of our markets, which, along with extreme variances in weather patterns, has created inconsistency in our recent sales trends,” said Steven Miller, Big 5’s chairman, president and CEO. “While we achieved same-store sales in the positive low-single-digit range for October and positive mid-single-digit range for November, which included the Black Friday weekend, these gains were offset as our sales turned negative over the key three-week gift shopping period preceding Christmas.”
Miller noted that after the holidays positive sales trends resumed and continued until mid-January as the company’s markets experienced favorable winter weather conditions. Big 5 operates nearly 400 small format stores in 12 Western states with the majority located in California.
Elaborating further on the sales climate in Big 5’s markets, Miller noted, “Sales weakened considerably between mid-January and mid-February, as unseasonably warm and dry weather conditions reduced demand for winter products in many of our markets. Our same-store sales are currently running down in the low-single-digit range for the quarter to date, compared to a mid-single-digit same-store sales increase during the same time period last year.”
As for the future, Miller talked about enhancing shareholder value and Big 5’s solid financial condition, but qualified his outlook for potential weakness in first-quarter sales by referencing challenging economic conditions.
“Although continued uncertainty in the economy and a lack of visibility as to the timing and degree of a recovery has made it difficult to predict consumer demand, we continue to believe that our proven business strategy will positively impact sales, earnings and cash flow, and over the long-term will deliver a solid performance for our shareholders,” Miller said.
The company is forecasting comps will either increase or decrease in the low single digits and isn’t backing away from growth plans for the current year. After expanding its store count last year by 14 units to end its fiscal year with 398 stores, the company’s current plans call for the addition of 10 to 15 new stores averaging around 11,000-sq.-ft. However, first quarter profits forecast in a range of 15 to 22 cents a share are expected to be below the prior-year level of 23 cents.
Fresh & Easy officially opened in NoCal
SAN JOSE, Calif. — Fresh & Easy Neighborhood Market has entered Northern California with the opening of its first store in San Jose. The grocer also opened another Bay Area store in Danville today.
"I’d like to thank Fresh & Easy for opening their first Northern California store here in San Jose," said San Jose Mayor Chuck Reed. "It’s been a pleasure working with Tim Mason and his team over the past two years and we look forward to helping them open many more new stores throughout the city. We appreciate their investments in San Jose and their commitment to providing fresh and affordable food for our residents."
Fresh & Easy said it plans to open a dozen Fresh & Easy stores this year in Northern California, which will create more than 300 jobs with great pay and benefits.