June 29, 2009, 12:00 AM

Supply chains come into sharper focus for e-retailers

Tighter collaboration with suppliers enables retailers to satisfy shoppers and minimize inventory.

As retailers try to please customers in an increasingly competitive retail environment, they must rely more heavily on effective supply chains to get the right goods in the right quantities, and in the right place at the right time-while also keeping the cost of those goods to a minimum.

That’s how retailers keep customers as well as suppliers happy, while also selling the most goods at the highest prices and margins.

In the Aberdeen Group Inc. report, “Beyond Visibility: Driving Supply Chain Responsiveness,” analyst Viktoriya Sadlovska says retailers as well as other companies that have sound supply chain systems in place tend to have the following characteristics:

- They are 66% more likely than other companies to be re-routing in-transit shipments to stores or distribution centers supporting the highest customer demand.

- They are 74% more likely to cross-dock shipments at distribution centers, so that shipments are broken down and immediately sent to local demand points without having to get stored in inventory.

- They are 51% more likely to monitor logistics bottlenecks and adjust shipping plans to keep goods moving quickly to distribution centers and stores.

Aberdeen Group is a unit of Harte-Hanks Inc.

Evolving technology

The supply chain technology available to retailers, meanwhile, continues to evolve. More software suites and individual applications are available through Internet-hosted software-as-a-service models, under which retailers pay less up front for technology through monthly subscriptions instead of bearing the full cost of installing and maintaining licensed software. The SaaS model also enables retailers to get automated upgrades made available to all software clients.

Web-enabled supply chain systems, whether licensed or SaaS-or a mixture of both models-cover all the aspects of managing supply chains, including finding suppliers, sourcing products, tracking shipments, matching incoming supplies with customer demand, managing any interruptions in the expected flow of products, and updating inventory records. And because these systems are universally available through the web, they enable retailers to share information electronically with even the smallest and most remote suppliers.

Some applications incorporate radio frequency identification technology to track package movements at specific points throughout a supply chain, while others provide enterprise integration from front-end order management and the processing of purchase orders through the supply chain for collaboration with suppliers to better match demand with production.

Technology companies continue to work on ways to improve how retailers and suppliers collaborate in sharing demand and production information, with some technology beginning to tie production to individual product SKUs in particular stores and distribution centers.

Satisfying today’s customers

At the same time, retailers in the forefront of serving customers are operating in multichannel technology environments that enable them to accept orders from any channel and fulfill them from any source, whether it’s a distribution center, a store or a supplier who drop-ships directly to the customer. But retailers can’t effectively operate across channels unless they can get the goods to where customers want them.

Among retailers with visibility into their supply chains, 78% are able to quickly access the information they need to make decisions about managing their inventory, and 86% are able to count incoming shipments as available inventory that customers can order instead of seeing out-of-stock notices, Aberdeen says.

At a time when retailers are looking for any edge they can get in serving customers, effective supply chain systems can go a long way toward equipping warehouses and stores with the products consumers want to buy.

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