The retail industry is in the midst of a cataclysmic shift with new channels and aggressive competition. In just over two decades of ecommerce activity, Amazon has become a $136 billion beast that forever changed consumers' shopping habits. In contrast, venerable names in retailing have struggled to remain relevant to shoppers with some going out of business and others forced to shrink their store networks.
Many experts talk about speed to market as the means to combat online competitors. Speed is important but there is an even more important factor to consider - accuracy. Without accuracy, prioritizing speed can generate errors that become returns, shortages that inhibit sales, and dissatisfaction that drives customer defection.
Compliance Networks Says... |
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| The good news from our analysis is that ASN use and accuracy levels are improving and perfection is no longer a fantasy. |
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To profitably serve the buy anywhere-fulfill anywhere-deliver anywhere demands of today's consumer, a retailer needs a precise read on stock levels at every location in its network. For example, the buy online, pickup in store and fulfill from store strategies only work if there is visibility to inventory levels and correct information.
Despite heavy investment in technology and process improvement to improve inventory accuracy and visibility, problems remain. Many retailers have in-store inventory accuracy levels hovering around the 80% level or lower at the item level. These mismatches between in-store physical inventory counts and system-based virtual inventory quantities generate fulfillment problems and customer service failures.
One tried-and-true method for improving inventory accuracy and flow is the use of advanced shipping notifications (ASNs). These timely, cost-effective messages transmit detailed shipment information to a customer or consignee in advance of delivery, designating the contents and nature of the shipment. Having the right information from the start allows retailers to manage their supply chains in a proactive, knowledge-driven fashion.
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 To gain insight into ASN use by retailers and their product suppliers, Auburn University's Center for Supply Chain Innovation has partnered with Compliance Networks, Retail Value Chain Federation, and Supply Chain Digest on a multi-year study. Since 2010, we have periodically looked at ASN deployment, accuracy levels, and benefits. In our most recent 2016 study, we added carton content integrity metrics and the perspective of suppliers to the analysis.
The good news from our analysis is that ASN use and accuracy levels are improving and perfection is no longer a fantasy. In 2011, 78% of survey participants indicated that they used ASNs. That percentage rose to 83% in the 2016 study. ASN compliance also improved, with a higher percentage of retailers indicating that supplier ASNs are appropriately documented, transmitted in a usable format, and shared in a timely fashion.
Importantly, our retailer case study continued to trend in a positive direction. Audits performed by this retailer showed that the overall carton content integrity level achieved reached 98.6% in 2016. Perfect supplier performance also improved. The percentage of suppliers achieving 100% accuracy in ASN versus carton contents audits increased from 11% in 2011 to 20% in 2016. While there is a long way to go, this increase is very encouraging.
These improvements in ASN information availability and inventory integrity facilitate speed to market. Suppliers' goods can be cross-docked with minimal delay for inspection, creating rapid distribution center flow-through. Accurate suppliers also encounter far fewer chargebacks for shortages, incorrect merchandise, and paperwork errors.
Retailers also garner tangible benefits. ASN availability facilitates faster receiving processes with less time spent on audits. These fulfillment delay reductions and carton content integrity promotes greater on-shelf availability and in-store accuracy levels. Having an exact read on stock at every location allows retailers to ship orders from stores with larger inventory pools. This avoids markdowns and minimizes stockouts at low inventory locations.
Exactly how are retailers and suppliers achieving these performance improvements and benefits? In the next monthly update, we will discuss practical solutions and future directions for ASN accuracy and carton content integrity.
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