A STRATEGIC IMPERATIVE FOR RETAILERS

Enable Direct ShipmentsHow to Increase Margins and Agility by Decreasing Inventory Touch Points in the Supply Chain

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 product 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 meeting

volatile demand.

Source Store

Drop Ship

Cross Dock

Deconsolidator

Retail DCBrand DC

Consolidator

Margin erosion occurs at each touch point for inventory as it moves

from source to the store.

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. However, 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 flexibility due to longer lead times

• Difficulty 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 difficult 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

difficult 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. Insufficient 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

The Challenge

To maximize profits in a competitive market, retailers must improve their margins while meeting volatile demand.

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 StoreDeconsolidation3PL

Store ReadyPacking

AllocationOpportunity

AllocationOpportunity

RetailDelivery

Inventory accuracy improves the closer allocations are

made to 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

(barcode & 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 finding 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 inventory

accuracy without sacrificing profit 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

visibility from origin to store

Direct Shipments and the Networked Company

To enable direct shipments while protecting margins,

companies must transform themselves from silo-based,

inward-facing corporate operators to interconnected,

highly agile business network orchestrators.

NetworkConnectivity

Agility

B

A

Sense more accurately

Operate more e�ciently

Respond faster

Make better decisions

The Solution Instead of simply tracking products

more accurately along the supply chain,

some retailers can cut out the middle-

men altogether – but only if they have

visibility at the SKU level and can pack

for the store directly.

GT Nexus provides the cloud-based collaboration platform that leaders in nearly

every sector rely on to automate hundreds of supply chain processes on a global

scale, across entire trade communities.

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