Managing Risk
The economic crisis prompted most retail companies to adopt an aggressively conservative approach to inventory management. Rather than providing abundant selection of every size, color and style, retailers have opted to limit selection preferring to lose a few sales instead of lose revenue via excessive markdowns.
Mac Nadel, national retail/wholesale industry practice leader at Marsh Risk Consulting, explained that scaling back the number of SKUs on store shelves and carrying less replenishment inventory in the distribution centers also has led to a consolidation of vendors.
“By intensifying their dependency on select vendors, retailers have put more stress on their supply chains,” Nadel said.
Characteristic of the classic risks associated with putting all your eggs in one basket, retailers should consider the repercussions if a vendor fails to deliver seasonal product on time, and there are no other vendors in play to cover the slack.
“Since most retailers are sourcing overseas, they also have to be concerned with all the points and providers along the supply chain,” Nadel added. “They need to have contingency plans in place that will cover all the choke points along the supply chain, particularly those where there is the greatest potential for disruption.”
One way that retailers have addressed risk management and exceptions management in the supply chain is to increase the virtual surveillance and communications with global trading partners.
As a result, demand for pay-as-you-play Web-based portals grew dramatically. For example, ocean and transportation spending managed through the Trade and Logistics Portal developed by GT Nexus surpassed $10 billion in 2009, up from $3.5 billion just three years earlier.
This substantial increase was even more noteworthy, according to GT Nexus director of corporate marketing Greg Kefer, because the overall volume of trade declined in 2009, and the rates for transportation and services were also down.
However, many new companies signed up for the software-as-a-service (SaaS) model, and existing participants increased their usage, largely because it is a more cost-efficient way to manage the use of technology.
Charming Shoppes, the Bensalem, Pa.-based specialty apparel retailer, was one longtime retail customer of the GT Nexus import operating platform that not only renewed but increased its commitment to use the service in 2009. For the past few years, the retailer has relied on the system to provide the visibility and control necessary to manage its import operations.
“We have a great foundation in place, which we plan to build out and leverage further across our operation, including expansion of capabilities into automated freight audit and actual landed cost calculations,” said Laurie Everill, director of international trade, logistics and compliance at Charming Shoppes, in a corporate statement.
Charming Shoppes, which has more than 2,300 stores in 48 states, has the capability of instantly locating the status of any SKU by size, color, style, purchase order or bill of lading.
In addition to this item-level visibility, the Web-based platform used by the chain facilitates document creation for U.S. Customs, ocean and air-freight contracting, as well as analytics and reporting of import performance.
Charming Shoppes also manages its global air and ocean freight spend on GT Nexus. The platform automates the bidding process and serves as the central contract rate repository. The future extension into freight audit will allow the retailer to match the actual contracted rate information with electronic freight bills to deliver a true comparison between the rates in the contract and what was executed.