July 1, 2010, 12:00 AM

Supply Chain

Web-based services boost retailers' efficiency

Even small web retailers are competing in an increasingly complex and global e-commerce market. Retailers, especially multichannel merchants, can become more competitive by moving more supply chain operations to the web and sharing data more effectively with trading partners, says Aberdeen Group in its recent report, "State of Retail Logistics—Strengthening Cross-Channel Supply Chain Execution."

The report notes that online retailers of all sizes have substantial reasons for making their supply chain more efficient and web-based.

"The retail sector traditionally has been lagging in terms of supply chain execution," notes Aberdeen senior analyst for supply chain execution Bob Heaney. "But best-in-class retailers are focusing on cross-channel supply chain needs by addressing multi-warehouse inventory flow processes and enablers in the areas of in-bound product movements and visibility for all internal and external supply chain stakeholders."

Web-enabled supply chain systems that are tightly integrated with applications for warehouse management, order and inventory management, and transportation can help retailers reduce costs, expedite product delivery, and streamline data reporting between suppliers and vendors, says Aberdeen.

"The goal is to ensure all players are involved in a unified manner to make certain that products reach the right place at the right time, whether in a retailer's store or direct-to-consumer online," says Aberdeen research director for retail, hospitality and retail banking Sahir Anand. "The multi-enterprise and multichannel retail supply chain channel environment needs to realign itself to current realities."

How Zappos did it

In its report, Aberdeen notes that online shoes and accessories retailer Zappos.com, which was acquired by Amazon.com in July 2009 in a deal valued at almost $1 billion, has made its supply chain program more open and automated over eight years and achieved gains in cost savings and operating efficiencies as a result.

For example, in 2006 Zappos.com built a new 832,000-square-foot distribution facility to meet growing demand, but, more important, over time added new web-based systems and inventory management programs, including automated material handling systems, that delivered:

- A 50% decrease in certain labor costs.

- A decrease in the time needed to pick, pack and ship an order to 12 minutes, compared to a previous range of 48 minutes to 3.5 hours.

- Energy savings by eliminating certain lighting and climate controls.

- A reduction in training time for new warehouse employees to one-half of one business day compared to a previous orientation and training schedule of up to four days.

Web-enabled supply chains, coupled with better multichannel database integration and distribution center technology, also help retailers do a better job of 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.

"Cross-channel retailing that involves a combination of stores, web, catalog and mobile requires increased visibility because customers are no longer accepting the web site of a retailer to be different from the bricks-and-mortar operations when it comes to the order-to-delivery process," says Heaney. "New trends are dramatically changing this situation."

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