How to Increase Compliance with Shipment Consolidation
It’s a sobering statistic: North American retailers lose $158.5 billion annually to supplier issues.
Out of stocks cause 4.1 percent in lost revenue, according to retailwire.com; just as troubling, overstocks result in 3.2 percent in lost revenue for the average retailer. Retailers continue to refine their compliance programs to strike the right balance of inventory and meeting higher consumer service standards.
This is scant comfort to the suppliers who transport less than truckload (LTL), partial, or underutilized truckload shipments to retailers, and who may struggle with noncompliance and significant chargebacks. Without an effective retail strategy, it may be difficult for suppliers to cope with the variations among several retail programs. Failure to meet retailers’ expectations results in chargeback fees; if noncompliance continues, the supplier may lose its retail customers altogether.
Yet, even as suppliers struggle, there is an effective solution. Implementing a retail consolidation program can bring consistent transit times, reduce chargebacks for noncompliance, improve cash-to-cash cycles, and strengthen retailer relationships.
The Need for a Retail Strategy
Finding the solution that satisfies the requests of multiple retailers requires consistency, flexibility, and strategic planning.
Today the Retail Value Chain Federation estimates that 96 percent of its members have retail compliance programs. These programs achieve overall efficiency in product flow by reducing the number of days between order and delivery, as well as keeping less inventory on hand, reducing capital requirements, and increasing return on invested capital.
In addition to having better technology to track inventory, retailers that utilize retail consolidation programs have access to more robust sales data than at any time in history. This enables them to identify and request product quantities that will best entice customers to buy. For the supplier, this can result in SKU proliferation as the same product being configured into various packaging, labeling, and palletization scenarios to meet each specific retailer’s needs.
A retailer’s single purchase order may require deliveries to multiple retail distribution centers (DCs). With smaller shipment sizes, suppliers can end up using less than optimal transportation methods to meet required delivery dates.
How Strategic Logistics Consolidation Programs Work
An experienced consolidator can help suppliers begin a retail consolidation program. These consolidators know the compliance requirements; some pre-schedule regular appointments with the retailers, either because they are a core carrier for the retailer or have large freight volumes. Some also provide global technology to help the supplier simplify transportation, reduce dock congestion, and increase visibility into their products in transit.
Retail consolidators provide flexibility and consistency by combining drop trailers with live loading. This allows the supplier to ship according to the schedule that works best for them. For example, if the supplier’s dock space is limited, the consolidator’s regular schedule eliminates the need to accommodate pickups of small order quantities from multiple transportation providers. LTL or partial truckload shipments can be sent on different days, depending on consolidation delivery schedules, or can be held and combined into full truckloads. The consolidator takes the product directly to a consolidation center, where it is optimized with deliveries from other shippers and delivered to retailers in time to meet tight delivery windows.
A supplier strategy that includes LTL can be successful if the supplier controls all their cross-functional variables to provide adequate lead time. If the supplier can't control these variables and attempts to use LTL strategy without sufficient lead time, noncompliance can result. LTL carriers typically perform to their quoted transit times, but those transit times may not meet the retailer's compliance requirements. Done right, a strategic retail delivery program can provide the consistency and efficiency necessary to build strong vendor/retailer relationships and preserve future sales opportunities.
While retail consolidation programs may improve the speed of delivery, that is not their only benefit. Many suppliers initially turn to retail consolidation as a cost-saving initiative. Most quickly discover another major benefit: reduction in total lead time, which reduces inventory carrying costs. There are other ways retail consolidation programs can save companies time and money:
• Retail compliance programs help minimize retailer chargebacks and penalties, reduce out of stock items, and improve retailer satisfaction. With suppliers adhering to strict receiver requirements, retailers gain the efficiencies they seek in supply chain management.
• Transportation efficiency comes from reducing touch points, damage, and shortages, as well as carbon emissions, allowing each supplier to reduce time and their carbon footprint.
• Companies can utilize a strategic central location to combine freight and optimize transportation. Shipments can be moved directly from production or manufacturing to the consolidation center when possible for flexible delivery to retailers.
• Simplified processes allow companies to save on LTL linear foot charges and cubic capacity rules, allowing for lower costs and reduced inventory.
Bottom Line Savings
For companies to succeed, products must be in front of customers’ minds and in their proverbial shopping carts. A consistent, reliable retail compliance program can make all the difference in speed to market—a critical component to helping companies accelerate growth—even as it simplifies standard LTL processes and helps suppliers remain compliant.
Greg West is VP of LTL at C.H. Robinson, a global provider of multimodal logistics services, fresh produce sourcing, and information services to approximately 110,000 customers through a network of more than 280 offices and over 13,000 employees around the world. The company works with over 68,000 transportation providers worldwide