Between March and April 2010, Aberdeen, a Harte-Hanks Company, surveyed 128 retailers to reveal that 50% of retailers identify the need to respond to demand and reducing current inventory levels in stores, channels, and warehouses as the top two pressures impacting retail supply chain distribution, transportation, warehouse, and overall logistics strategy. In fact, both of these pressures are directly tied to the third highest pressure which is the need to reduce elevated total landed cost that retailers must curtail to ensure a profitable 2010. There is an increasing need to reduce distribution, transportation, and order reconciliation costs in the retail supply chain. The fourth highest pressure facing almost a quarter of the retailers (23%) relates to the channel expansion strategies of retailers. "Data shows that retailers are enabling direct-to-store drop shipments (51%) and direct-to-consumer deliveries (47%), which is a clear indication that the retail logistics landscape is seeing rapid structural changes in the areas of distribution, fulfillment, and transportation due to growth in multi-channel retailing," says co-author of the retail logistics report, Sahir Anand, Research Director, Retail, Hospitality, and Retail Banking Research.
According to report co-author, Bob Heaney, Senior Analyst, Supply Chain, over a third of leading retailers are adopting several retail logistics strategies to address the issue of high total landed costs and lead time. "Aberdeen's data denotes that according to 37% of leading retailers compared to 33% of all other retailers, the top retail logistics strategy revolves is to use automated systems for enabling labor efficiencies in the upstream and downstream logistics operations. Retailers must focus on standards for labor and task management based on seasonal and non-seasonal demand in the operations (DC or store or other)," says Heaney.
Secondly, as Wal-Mart has shown recently, more than a third (37%) of leading retailers compared to 27% of all other retailers using SKU rationalization and optimization or cost-to-serve initiatives as one of the top strategic drivers for successful short-term and long-term supply chain and store operations. "This strategy not only facilitates the overall balance between profitable and non-profitable SKUs but also lessens the burden on an already stretched supply chain logistics framework, from a labor, inventory investment, and network utilization standpoint," says Anand. Aberdeen's upcoming Retail Summit will address some key challenges within current retail logistics models.
The third strategy that retailers are currently implementing is improving direct-to-consumer replenishment and fulfillment. This strategy covers all processes right from demand sensing, warehousing, labor optimization, order fulfillment, transportation, and delivery from the retailer's warehouse to the store or direct-to-customer.
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About Aberdeen Group, a Harte-Hanks Company
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