Where do retail supply chain executives start in their quest to influence margin performance?
While opinions will vary, most will agree the desired outcome is a more predictable and consistent supply chain. In the presence of variability, there will be safety stock to mitigate margin risk. By eliminating the variability and providing merchant teams with actual performance related information, retailers can drive down their overall safety stock and improve profitability.
SCompliance Networks Says... |
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| By systematically identifying and reducing supply chain performance related issues and variability, retailers can mitigate those events that put margin at risk. |
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The following are five steps supply chain executives can take to ensure merchandise plan execution:
(1) Focus on On-time Deliveries and Fill Rate: Improvements here will lead directly to increased sales. The velocity and cadence of promotional events in the retail industry is greater than ever before. Working to maximize orders fill rates and vendor on-time performance is critical to most merchants and fundamental to reducing margin risk.
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(2) Monitor and Shorten the Purchase Order Lifecycle: Reducing the PO lifecycle should lead to reduce inventories. As with anything, actively managing the purchase order lifecycle should lead to its improvement. A shorter purchase order lifecycle is also more responsive to demand signals, less  prone to out of stocks and requires less working capital to fund.
(3) Monitor ASN Accuracy in Detail: Poor ASN accuracy can doom inventory integrity, leading to poor merchandise plan execution. While it's important to audit vendors for accuracy, it is also important to focus valuable audit resources on the lower performing vendors versus the higher performing ones.
(4) Monitor Transportation Performance: Ensure vendors are adhering to the routing guide for transportation requirements. The selection of a wrong carrier can result in higher transport cost and possibly a longer delivery cycle. Lack of consolidation per the routing guide can lead costly multiple shipments during the same week, obviously also adding transportation expenses.
(5) Facilitate Communication with Your Vendor Trading Partners: Vendors should have 24/7 access to key performance data. Immediately alert vendors to any supply chain failures, and if possible, alert them to upcoming execution opportunities. Over communicating performance data to key trading partners will result in visibility, trust and performance improvement for all parties involved.
Summary
An excellent merchandise plan execution is critical to any retailer's margin objectives. By systematically identifying and reducing supply chain performance related issues and variability, retailers can mitigate those events that put margin at risk. In a recovering economy where working capital still remains constrained, the supply chain professional who can run a predictable and consistent supply chain, influence margin performance, and increase operating cash flow will have a bright future.
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