The e-retailer reports a $126 million net loss, stemming from a $640 million year-over-year increase in spending in the quarter on technology and content ...
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Saving inventory costs
In a study of international freight movements from suppliers to retailers, AMR Research found deliveries from Asia to California took an average of 22 to 23 days, but shipment times varied as widely as 17 to 35 days. Without the visibility into carrier movements offered by web-enabled collaboration systems, retailers usually look at the longest delivery times and take on the expense of holding extra inventory to ensure enough products on hand, Fontanella says.
“One of the biggest problems facing retailers is lead time is not well monitored or well understood,” says Greg Johnsen, co-founder and executive vice president at GT Nexus. “Now retailers can get better information about the flow of products, catch exceptions sooner, and try to take a day or more out of the cycle. They can reduce the variability in lead times and reduce the amount of inventory they have on hand.”
Web-based connectivity with multiple supply chain partners, including ocean-going steamship lines as well as truck and rail carriers, lets retailers drill down to information crucial to overall supply chain management. “It’s like searching in Google on the status of a particular item,” says Greg Kefer, director of corporate marketing at GT Nexus.
A retailer may need to access, for example, an EDI 315 form for ocean freight to get information on current location of a shipment and type of transport equipment. Knowing a carrier is transporting its goods in 10 40-foot containers instead of 20 20-foot containers and when they’re expected to arrive, for instance, enables a retailer to get a more accurate reading on final delivery costs and make adjustments to shipping or merchandising plans if costs are over what had been expected.
In addition, the retailer can make sure that once the container ship arrives in port, the 40- or 20-foot containers will have the appropriate truck or rail equipment to continue transporting them to the retailer’s distribution center.
“If you can’t run a report showing the total number of 40-foot containers going from Hong Kong to Long Beach, Calif., it’s hard to do that analysis,” Kefer says.
When a retailer first deploys an information system that supports collaboration with carriers, it establishes a set of milestones or checkpoints between suppliers and receiving points. Carriers, freight forwarders and other partners involved in transporting goods then send status updates at each designated checkpoint to the web-based transportation management system, allowing retail managers to check online status reports according to planned shipment schedules and receive alerts on disruptions via e-mail or telephone.
Many carriers already are connected to the web-based networks operated by GXS and GT Nexus through direct links from portable computing devices, calls into central offices where data is entered on the web, and radio frequency identification set-ups that automatically notify the system of a shipment passing a checkpoint. Ocean-going ships also use global positioning satellite systems to automatically relay shipment status updates.
The cost to use the GT Nexus web-enabled shipping system runs from about $100,000 to $1 million a year in subscription fees, plus a similar range for set-up fees that map a retailer’s data flow and business processes, Kefer says. Full implementation can take from nine to 12 months, though retailers usually can begin using the system within three to four months, he says.
At GXS, where implementation typically takes about 90 days, retailers pay a set-up fee ranging from $50,000 to $200,000 and a monthly subscription fee ranging from $5,000 to $20,000, depending on the volume of shipments and containers that need to be traced.
Although these prices are steep and usually handled by retailers doing at least $300 million a year in revenue, the payback in more efficient transportation management, lower inventory costs and more control over merchandising plans makes them attractive to any retailer doing a lot of international shipping, experts say. “Anyone importing goods into the U.S. can benefit from these services,” consultant Fontanella says.
But improvements in the transmission and distribution of shipment updates-thanks to higher bandwidth in Internet connections and web-based technology that can integrate this information throughout enterprisewide applications including merchandising planning systems-are making comprehensive details like color and style as well as shipment updates available directly to merchandise managers, who need such details to proceed with or change merchandising plans.
Because of systems that integrate information on multiple shipment updates and other data like original purchase orders, retailers now can check to ensure that what’s coming is what was ordered. The GT Nexus system can support hundreds of users simultaneously at a large retailer who each can access the web-enabled system and monitor customized views of data, Kefer says.
While a retailer’s logistics manager would want to view a broad summary of all shipments, for example, an accounts payable manager could focus on a more targeted view of final shipping costs against purchase orders to expedite payment processing. And a merchandise manager could view highlighted shipment status of only the particular products she ordered.
The ability to gather and combine all this information through web technology has gone a long way toward making retailers recognize the value of collaborating with shipping partners, some experts say. “It took a while to get retailers used to the delivery of real-time shipment status because advanced ship notices have notoriously been inaccurate,” Fontanella says. “Now that shipment data is more accurate, it’s becoming more believable and acceptable.”