“Enter the Supply Chain Service Provider”

Editor’s Note: Tom Hickey, vice president, eastern region for Encompass Global Logistics, is a seasoned logistics and supply chain management executive with extensive experience in ocean and air freight, as well as consolidation and de-consolidation services. This is the second of a two-part series.

Most, if not all, retailers deploy a “three prong” strategy in creating consumer demand for their products.  This multi-channel retailing approach, which consists of the retail store, the catalogue, and an e-commerce solution all need to be marketed in unison – all need to have the exact look, price point and feel,  and complement each other. 

Furthermore, retailers must have product on hand at the retail store, or in their fulfillment center to meet customer demand.  In essence, stores become showrooms and catalogues become the demand creation vehicle which drives people into stores.

As a result, many challenges can arise with this multi-channel retailing approach.  In order to meet these challenges, created by the various demand creation initiatives, logistics’ departments become the support mechanism for merchandisers who have to get their product onto a shelf and into a shopping bag, or via small parcel, in a cost effective manner, overlaid by the timeliness to market.   

The keys to success in meeting these challenges are fairly straight forward and start with keeping lead times at a manageable level, perhaps 90 to 100 days or so.  Combined with clear, consistent communication, and visibility throughout the supply chain, the retailer’s logistics department becomes the conduit between merchandising and the logistics provider.

From the outset of product design and subsequent issuance of a purchase order, the end goal of any retailer is one thing – how do I get my product off the shelf and in a consumer’s shopping bag, before it has to be marked down?

Merchandisers and marketers begin to assemble various demand creation initiatives, in concert with marketing plans, to get the consumer to shop in the virtual or real world.  The more successful a product launch, the more reliant they become on the supply chain.   

Time to market is critical and after the purchase order has been cut, the entire supply chain process starts with the vendor.  The retailers’ logistics partner must employ a robust vendor management program to insure goods are being produced and shipped within the shipping window, that product is packaged correctly, and that any inefficiencies in the supply chain are kept to an absolute minimum, let alone eliminated. 

As merchandisers seek to build the external demand chain, by making product available to consumers through a three pronged strategy, an ever increasing reliance on setting expectations and establishing sound communication with the people who run logistics will insure that the efficient supply chain will meet the revenue producing demand chain. 

Whereas it made little sense to airfreight late production cargo over the past few years, which would sit on the shelf in many instances awaiting mark down, airfreight volume has begun to increase dramatically in 2012.  Had the retailer mentioned earlier been able to forecast more effectively and knew where their demand chain met their supply chain, it is highly likely that the order of 3 would have been fulfilled as part of their three pronged strategy in moving product.     

Multi channel retailing is here to stay and will become even more prevalent with increases in social media where one post or tweet can significantly alter demand, positively or negatively.  The retailer who stays ahead of the curve and knows exactly where their supply chain and their demand chain intersect will be positioned for far greater success than the retailer who is just “not set up to do that.”  .