Retailers are under more pressure than ever to minimize inventory costs and meet volatile customer demand, and they’re leaning on their suppliers and transportation providers to cut transit times and provide additional visibility.
Increasingly strict retail compliance programs, which demand on-time and in-full (OTIF) fulfillment according to complex formulas, are driving closer collaboration between retailers’ suppliers and third-party logistics (3PL) partners.
This year Walmart increased its requirements and made them more complex by separating out on-time from in-full, truckload from less-than-truckload (LTL), and prepaid shipments from collect shipments. Walmart requires 70 percent of LTL shipments to be on-time, up from 50 percent last year, and now defines on-time compliance for full truckload shipments as arriving within the delivery window 87 percent of the time, up from 85 percent last year.
C.H. Robinson (NASDAQ: CHRW), North America’s largest 3PL, hosted a webinar to discuss how to meet and exceed retailer expectations. On the call were Mac Pinkerton, president of North American Surface Transportation (or NAST, C.H. Robinson’s truckload brokerage), Linus Kalenze, vice president of consolidation, and Rob Kinsella, retail group manager.
“If you’re not experiencing some form of disruption in your supply chain today, you likely soon will,” Pinkerton said. “Customers want help in three main areas,” Pinkerton continued, listing speed, greater visibility and reduced costs.
Speed doesn’t just mean faster delivery times, Pinkerton explained – ‘speed’ includes speed of execution, experimentation, learning and applying what you’ve learned. As suppliers reengineer their supply chains to better meet retailer and customer expectations, they need the agility to try new things, quickly figure out what works and then implement it across their operations.
Kinsella said that retail compliance programs vary and are all unique to the particular retailer that created them, but all try to accomplish the same thing – they’re intended to ensure the right product is at the right place at the right time to meet customer expectations. Retail compliance programs have been used for years to standardize labeling, packaging and universal product codes, but shipping and transportation have received renewed emphasis.
“Most retailers operate on very thin margins,” Kinsella said. “Retailers need to cut out operational expenses and manage inventory accurately. They have to leverage the supplier community to meet these goals, otherwise they fail to meet customer expectations.”
Retail compliance is complicated. Many suppliers – especially those that serve multiple retail customers – are unable to keep up with annual changes, analyze chargebacks to discover underlying problems, or even understand exactly what’s required of them and how best to make their shipments compliant. That’s where partnering with a large, experienced 3PL can be invaluable, Robinson executives said.
“The supplier has to truly understand the intent of the program along with the specific details of what the retailer is trying to accomplish,” Kinsella said. “Many times we engage the supplier and we find out they haven’t seen the documents and they don’t understand [the retail compliance program].”
Communication and collaboration are necessary to successfully navigate stricter retail compliance requirements.
“Stay really close to your retail partners and work with them around seasonal adjustments and upstream demand,” Kinsella advised.
Kalenze emphasized the importance of developing a multi-modal strategy with an experienced logistics partner that can create customized solutions. C.H. Robinson, of course, offers ocean, air, intermodal and less-than-truckload services in addition to full truckload.
“It’s our investment in technology beyond freight matching to encompass the complexities of today and tomorrow’s supply chains, really having the scale to handle unplanned shipments and meet OTIF requirements,” Kalenze said.
During the Q&A period, one listener asked about broader trends impacting retail supply chains beyond retail compliance. Robinson executives said that now among retailers supply chain is a first thought, rather than a second thought, and instead of supply chain investments being a necessary evil, they’re seen as a point of differentiation and a way to perform better for the consumer.
In response to a question about the future of retail compliance programs, Kinsella said that he expected them to become even more strict in the future, with heightened requirements. He also reiterated the importance of partnering with a 3PL that could help adjust modal strategy, inventory location, shipping and delivery schedules to meet changing inventories and match products with consumer demand.
Pinkerton closed the webinar by outlining how C.H. Robinson’s vast scale allows it to collect enormous amounts of supply chain data, which in turn creates an information advantage for its more than 200,000 customers, driving better outcomes.
“It’s our unmatched experience and scale that sets us apart from the competition,” Pinkerton concluded.