For retailers, collaboration with carriers has come a long way thanks to the web
By Paul Demery
Bringing goods into retail warehouses from China and other distant lands is a mixed blessing. Retailers are eager to find low-priced overseas manufacturers of consumer electronics, apparel, toys and other goods. But they often are left with little idea as to exactly what will arrive from these manufacturers and when, making it difficult to plan for warehouse space and labor on the receiving end. And when it comes to merchandising and promotional plans that rely on the right goods arriving on time, merchandisers generally have to wait with crossed fingers.
This uncertainty is not due to the lack of systems to manage information. Users of these information systems simply have had a hard time managing an overall process that at best is difficult and unreliable.
One aspect of the process is suppliers’ advance ship notices, or ASNs. Distributed via electronic data interchange or fax, advance ship notices long have served as the main source for letting retailers know what a manufacturer is sending and when it can be expected to arrive. But advance ship notices often are unreliable and untimely, offering information that is incomplete or, even worse, inaccurate, leaving retailers to hit the phones and fax machines to get shipment status not only from suppliers but multiple freight forwarders and carriers.
“Advance ship notices have been notoriously inaccurate,” says John Fontanella, transportation and supply chain analyst at research and advisory firm AMR Research Inc. They may not accurately reflect purchase orders or shipment information because logistics managers at shippers are pressured to distribute advance ship notices as quickly as possible. “So it would be inaccurate in terms of what and when products were shipped,” Fontanella says. “This has been done in the retail industry for years, and no one seemed able to correct it.”
The traveling web
Web-enabled information systems, however, are making inroads into correcting errors and streamlining the overall process. These retail supply chain systems—from technology and services vendors including GXS Inc., GT Nexus Inc. and E2open Inc.—are helping retailers move beyond the embattled advance ship notices and into a method of receiving updates on shipment status at multiple points between a supplier’s warehouse and a retailer’s distribution center, and from carriers in all modes of transport.
Using a web-based system enables suppliers, carriers and freight forwarders to enter shipment status reports into a single, centralized system, where companies like GXS and GT Nexus synchronize data, ensuring all parties are using common product and shipping definitions and letting all parties, including retailers, access a single version of the facts. Under more conventional systems, a retailer might re-enter information from a shipper’s advance ship notice into its own shipping management application, where the information may not be the same as that kept by a carrier.
But it’s not just supply chain staff members who are benefiting from web-enabled systems. The systems—primarily used by retailers with revenue exceeding $300 million or smaller retailers heavily into importing, according to some experts—are helping push information further down into retail organizations where it can directly impact how well merchants carry out planned merchandising displays and promotions.
“It’s only in the last year and a half that we’ve seen merchandise buyers become active users of our system,” says Pradheep Sampath, product director for visibility solutions at GXS, a vendor of electronic data interchange and web-enabled supply chain communication systems that connect retailers with suppliers, carriers, freight forwarders, customs houses and others involved in moving goods through supply chains.
GXS historically has served mostly logistics and I.T. managers at retail companies, providing a relatively limited view into shipment information from suppliers. But the company now is getting more and broader participation in its web-based GXS Trading Grid system and Logistics Visibility service from carriers and suppliers as well as retailers, providing for more useful information on shipments. This information includes real-time updates of shipment status from carriers, freight forwarders and others, plus more details on products being shipped. This in turn has made information more useful to the vendor’s retail clients’ merchandise managers, Sampath says.
The added information also is making it possible for retailers and suppliers to cooperate with more flexibility in contract terms, Fontanella says. For example, retailers may agree to pay an invoice sooner through electronic payment when they feel assured of the timely delivery of expected merchandise. In turn they can win more favorable pricing from suppliers.
Value for retailers
But the innovation and value that retailers are seeing in these broader collaborative systems are keeping retail executives quiet, not wanting to share with competitors much information about use of the systems.
In recent months several retailers have taken their first steps into carrier collaboration systems. GXS, for example, says it has been working with a home improvement retailer that, within four months of switching from its in-house transportation management system to the web-based GXS Trading Grid, has increased from 60% to 95% the amount of supplier communications that have accurate and usable information for improving supply chain operations.
Under its former system, the retailer was unable to get communications on shipment updates from all parties involved, including suppliers, carriers and freight forwarders, and the information it did receive often was either inaccurate or incomplete.
GT Nexus, a vendor of an on-demand, web-enabled system that connects retailers with carriers, suppliers, freight forwarders and others, has signed up or expanded operations with several retailers in recent months, including Liz Claiborne Inc., Cost Plus Inc., Restoration Hardware Inc. and Sears, Roebuck and Co.
American Eagle Outfitters Inc., which has used GT Nexus since May 2005, connected all of its ocean and air carriers through the system, accessed via a secure web portal, in four months. Among the benefits, the retailer said in statement released by GT Nexus, were the abilities to better manage overall freight movements from suppliers and monitor the performance of transportation providers.
A key metric derived from carrier collaboration systems, experts say, is the ability to shorten the lead time between ordering products and receiving them in a distribution center. This helps retailers increase sales by getting products on the shelves in time for planned customer demand, and it saves inventory costs by letting them hold less safety stock to compensate for late-arriving goods.
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 costs
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.”
paul@verticalwebmedia.com
