E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
Web-enabled information systems are aiding retailer-carrier collaboration and helping correct errors and streamline processes.
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.