How to Increase Margins and Agility by Decreasing Inventory Touch Points in the Supply Chain

1. © GT Nexus, Inc.
A STRATEGIC IMPERATIVE FOR RETAILERS
Enable Direct Shipments
How to Increase Margins and Agility by Decreasing Inventory Touch
Points in the Supply Chain

2. The Challenge
Supply chains are growing much more complex as global
sourcing and selling becomes crucial to staying competitive
in the retail world. As supply chains grow longer, more touch
points occur from point of origin to delivery, eroding prod-uct
margins by adding cost. Retailers know that increasing
direct shipments can make them more competitive, but many
lack the tools to make this approach safe and cost-effective
enough to have a positive impact on margins while still meet-ing
volatile demand.
Drop Ship
Cross Dock
Source Store
Deconsolidator
Consolidator
Brand DC Retail DC
Impact of Poor Shipment Strategy
In complex global supply chains, eliminating touch points can
be a good strategy to shorten lead times and lower risk. How-ever,
many retailers are working with traditional ERP systems
that don’t provide visibility into inventory as it moves along the
supply chain. The result of attempting direct shipments without
cloud technology to support them is often poor allocation,
increased costs, and inaccurate ETAs for customers. Because of
this, many retailers don’t ship directly.
When retailers must ship their goods through a high number
of touch points, there are more potential points of failure. Low-value
tasks at each location are done with a high cost of labor
and add to lead times. The less direct shipments are, the more
prone they are to a number of problems:
Increased warehouse costs
Greater supply chain risk
Lack of fl exibility due to longer lead times
Diffi culty of ensuring vendor compliance for complex supply
chain programs
The Root of the Problem
Retailers have the option of eliminating touch points along the
supply chain, but can’t reasonably execute unless they have
cloud technology to support their efforts. When they don’t
have the right technology, underlying problems cause margin
erosion at each point along the supply chain.
1. Inability to accurately predict seasonal consumer
demand early
Retail demand is often volatile, making it diffi cult to allocate
to stores according to seasonal demand. Many times, this
leads to:
Expedited mid-season orders to meet unexpected demand
Excess inventory in low-demand regions
2. Lack of inventory visibility and ability to adjust to
meet demand
Often demand swings occur that are not in line with the
original inventory positions. When systems aren’t equipped
to track in-transit inventory, it’s diffi cult to reallocate to
meet this new demand. The leads to:
Expedited air freight and inter-DC transfers that increase
transportation costs
Excess inventory at each DC as a buffer, increasing
inventory costs
3. Insuffi cient tools to accurately track shipments, delays,
and associated updates to ETAs
Because traditional software cannot provide adequate
visibility into shipments, accuracy and customer service
suffer, causing:
Expensive, last-minute shipments to ensure ETAs
Lack of information needed to make direct shipments
feasible
© GT Nexus, Inc.
2
To maximize profi ts in a competitive market, retailers must improve their margins
while meeting volatile demand.
Margin erosion occurs at each touch point for inventory as it moves from
source to the store.

3. Plant
Plant
Network
Connectivity
Agility
Instead of simply tracking
products more accurately along
the supply chain, some retailers
can cut out the middlemen al-together
– but only if they have
visibility at the SKU level and
can pack for the store directly.
Customers
Customer
DC / Warehouse
Plan
Actual At-Risk Delay
Dynamic ETA
B
A
Sense more accurately
Operate more efficiently
Respond faster
Make better decisions
3
The Solution
Retailers can balance the complexity of their supply chains by
enabling direct-to-store shipping where needed. This can only
be done on a cloud-based network, where all of their logistics
partners are on a neutral platform and have access to real-time,
SKU-level data. For direct-to-store, items must be packed
for delivery to a store or customer, bypassing consolidation
centers and DCs.
Supplier 3PL Deconsolidation Store
Store Ready
Packing
Allocation
Opportunity
Allocation
Opportunity
Retail
Delivery
A visibility platform that allows later allocation and
fewer touch points in the supply chain.
Support for delayed allocation strategies for improved
demand alignment
Global visibility to in-transit inventory at SKU level for
improved on-time delivery of merchandise needed by region
Simple planning tools for store-ready packing and labeling
Scan & Pack tools for improved packing compliance (bar-code
& RFID)
How to enable direct shipments:
1. Postpone store allocations until goods are ready to pack
2. Use supplier tools to accurately execute store-ready packing
at source
3. Manage demand variability through increased visibility
to in-transit inventory for improved inventory accuracy
by region
4. Respond to early warning of possible delays by adjusting
ETAs or fi nding replacement inventory
Value Propositions
By adopting a cloud-based
platform to increase visibility and
collaborate with trading partners,
retailers can manage demand
variability and improve inven-tory
accuracy without sacrifi cing
profi t margins.
1. Minimize supply chain risk through fewer touch points
2. Reduce transportation and warehouse costs
Bypass retail or wholesale distribution centers
Implement cross-docking for improved speed to market
at lower cost
Lower handling costs by shifting store-level packing to
low-cost countries
3. Improve management of demand variability
Optimize inventory by region to better match latest
demand patterns
Minimize stockouts and markdowns at retail
4. Increase supply chain agility through improved vis-ibility
from origin to store
Direct Shipments and the Networked Company
To enable direct shipments while protecting margins, compa-nies
must transform themselves from silo-based, inward-facing
corporate operators to interconnected, highly agile business
network orchestrators.
Inventory accuracy improves the closer allocations are made to delivery.