A Package Deal
When it comes to transportation and logistics management considerations, the retail industry is a completely different beast. From strict deadlines and razor thin margins to challenges dealing with “reverse logistics,” complex dynamics exist between retailers, manufacturers/suppliers and transportation carriers that present unique challenges for getting inventory from Point A to Point B (and sometimes back again).
The costs and consequences associated with retail transportation and logistics can be significant. Consequently, it is critical to optimize supply chain and logistics efficiencies to reduce wasted resources and save time and money. That process begins with acquiring a clear understanding of the logistical, financial and operational dynamics at play, and requires an appreciation for the challenges and opportunities for retail organizations at both ends of the supply chain.
One of the industry-specific challenges that must be accounted for is mandating extremely tight and very specific delivery windows. Missing a precise delivery window can be a significant disruption and a costly mistake. A scheduled shipment might get bumped back days or as long as a week. Not only is having a loaded trailer potentially out of commission for an extended period of time enormously disruptive and expensive, but some retailers will levy additional financial penalties. The upshot is that reliable, on-time deliveries are more than just a convenience; they are a crucial part of efficient supply chain management. Retailers also tend to be extremely vigilant about overage, shortage and damaged inventory, adding precise tracking, as well as safe and secure transport to the list of priorities.
Another retail industry consideration is “reverse logistics:” the handling, storage and transportation of items returned by consumers. How to deal with those items remains a challenge. Shipping items back is an expensive proposition — one that can end up costing more than the newly diminished value of the product. However, some brands and retailers do not want the brand value of the product tarnished, and will resist any solution that may result in the product finding its way to a secondhand outlet. In some cases, destroying or disposing of the item may be the most budget-conscious decision. Regardless, reverse logistics is a significant and underappreciated element that factors heavily in retail transportation and logistics planning.
Out of area shipping also presents a logistical and financial complication for retail suppliers. With inventory spread across multiple regional distribution centers, getting the right product mix at each facility is important. A simple mistake or miscalculation can incur enormous costs.
The retail industry is characterized by some structural complexities with regard to transportation responsibilities and contractual dynamics. The question of who is going to pay for the freight or transportation costs is a critical one. During negotiations between brands/manufacturers and retail outlets, all parties need to be aware of the stakes, and should understand not only who bears those costs, but also exactly what those costs will be. Carrier/retailer relationships can complicate price calculations for suppliers, and motivated sales representatives promising to “take care of” transportation costs in order to close a deal is another factor that can increase the “transportation burden.”
In an industry where the transportation costs can represent 10% or more of the overall costs of a product — a number that can exceed the original margin on that product — getting the most out of your transportation and logistics dollars is vital. More and more retail decision makers are focusing on transportation and logistics best practices.
Dig into the details
Achieving an intimate understanding of your transportation costs is essential. Some transportation management systems are so sophisticated that they can analyze and record the transportation burden of every piece of inventory as it comes down the line in a shipping hub or sorting center. Some retailers are subsequently able to access daily reports that break things down on a granular level and include a remarkable amount of shipping detail. That information helps identify inefficiencies to analyze any variance between what was budgeted and what the actual transportation costs were.
Detailed information is particularly important when it comes to addressing reverse logistics costs. Do not neglect that portion of your supply chain. Remember: these tend to be smaller, more expensive and less efficient shipments. Understanding your exposure in this arena makes it possible to make smart decisions about what, where, how and even if to ship certain items.
Sort it out
While drilling down and tracking individual items on a SKU level makes it possible to assign a specific transportation cost to each item (an exercise that can provide retailers with an eye-opening level of visibility), it is what you do with that information that matters most. Be absolutely committed to resolving everything from late shipments to debit memos — including thorough follow-through that identifies and addresses the root cause of the issue. Whatever the problem — poor packing, poor scheduling, etc. — making strategic changes to ensure that it does not happen again is key to developing an efficient transportation and logistics planning program.
Another question is how to deal with the inherent complexities of import/export shipping. From workforce strikes to the seasonal nature of overseas shipping, understanding how these issues impact your supply chain is crucial. A firm grasp of the costs and obligations of logistics needs to be had in order to answer questions like “Does it make sense to ship earlier and get a better rate, or will the storage costs or the tradeoff of having assets tied up ultimately offset that advantage?” Import/export transportation and scheduling and storage questions are often multidimensional.
Prioritize expertise
Logistical challenges and industry dynamics make the retail transportation equation particularly complex. Leveraging the expertise of a proven third party logistics professional not only provides you with the guidance and insight of experts in logistics and supply chain management — from the boardroom to the shipping doc — but also unlocks access to the kind of powerful and sophisticated transportation management systems that can do things like deliver real-time reporting and detailed operational and administrative support.
Precise data on incremental costs and detailed predictive analyses of inventory placement across multiple distribution centers can help optimize inventory and minimize out-of-route shipping costs.
The right customized logistics solution can ultimately help you do more for less, and make it possible to achieve a level of strategic and analytical rigor to your transportation planning and supply chain logistics that is extremely difficult to reach when managing those functions internally. Depending on the circumstances, strategic improvements in transportation and logistics planning and support can reduce costs by up to 30%.
Brandon Stallard is CEO of TPS Logistics (www.tpslogistics.com), a non-asset based, full service logistics management provider, where he oversees the company’s leadership team while maintaining a strategic focus on establishing and maintaining key relationships through the company, community and industry.