A recent webinar hosted by Illinois-based RJW Logistics Group addressed what so many panicked shoppers discovered at retail stores across the country this spring and summer: empty shelves and inventory shortages. If a brand was out of stock, the consumer had no choice but to buy another brand — and perhaps stockpile it.
In response to these supply chain disruptions and low in-stocks, Walmart released a memo Sept. 1 telling its suppliers that shipments must achieve 98% on-time and in-full (OTIF) arrival starting Sept. 15, with a 3% fine for noncompliance.
“The volumes that are going through retailers right now have increased because of the pandemic. Walmart holds leaner inventory and they need tighter supply chains in order to keep up with larger demand,” said Kevin Williamson, CEO of RJW Logistics Group. “They’ve got to have high performance and quality packaging to ensure goods flow through their DC network properly.”
According to Williamson, the way to help these suppliers remain compliant on OTIF requirements and address other inefficiencies that led to empty shelves is to shift from multi-node logistics to retail consolidation.
“We’re built for this,” said Williamson. “LTL carriers cannot perform at 98%. Consolidation is really the only option for suppliers to remain compliant on new OTIF requirements.”
What is retail consolidation and how does it fit into the retail logistics landscape?
The middle mile is the transport of goods from the supplier and manufacturer’s warehouse to the retailer’s distribution center. This journey may be direct or may include a stop for consolidation.
“Retail consolidation allows suppliers to combine their LTL-sized shipments with other suppliers’ LTL-sized shipments and ship full truckload into the retailer’s distribution center,” explained Greg Forbis, RJW’s senior vice president of strategy and business development. “A supplier ships a full truckload into our facility. Retailers drop their order into the consolidator. Those orders are then built out into truckload. You may have 200 to 300 suppliers on each truck on mixed pallets going full truckload into the retail facility. The retailer is now able to unload one full truckload versus multiple smaller shipments. You’ll optimize the shipping strategy, simplify the supply chain and drive on-time and in-full requirements.”
Retail consolidation can help maintain in-stocks as well as help retailers continue to drive sales and save up to 30% on supply chain costs.
“Because we’re consolidating hundreds of suppliers in truckload quantities to these retailers, we can perform at a high level,” said Williamson. “Not many will be able to deliver at [the new] threshold, but we are built to perform above the new thresholds.”
What can retailers and suppliers do to maintain and improve in-stocks should a second wave of COVID-19 occur?
Prior to COVID-19, many retailers were running lean inventories to free up capital elsewhere — a practice that made those businesses ripe for disruption.
“What you ended up seeing was massive out-of-stocks in all different channels of retail,” said Chris Sultemeier, former Walmart EVP of logistics. “One of the lessons from that was the importance of having a level of buffer or discretionary inventory. During times like these where there are massive disruptions, those retailers who have made their supply chain a point of differentiation, you are seeing a marked difference.”
A single-node logistics model like RJW’s retail consolidation, especially during a pandemic, helps centralize inventory to provide control, visibility and better performance. Additionally, this helps a retailer build down safety stock, lower inbound costs, increase response time and keep inventory fresh.
“People out there promote multi-node and say you have to be close to these retailers in order to fulfill it, but the truth of it is we have a system that is able to process orders from retailers and deliver to those retailers three to 10 days after you received those purchase orders (POs) to pack, fill, ship and deliver on time,” said Williamson.
RJW launched its single-node replenishment system in 2012 based on Harvard’s Square Root Law of Inventory Management study. Now it has six buildings and 2.5 million square feet of warehouse space. Back in March when demand spiked, to continue delivering at high levels, RJW moved to a seven-day workweek and raised wages by $2 for all frontline associates.
“One of our philosophies is to review POs from retailers on a daily basis, seven days a week,” Williamson said. “Historically, the way that 3PLs and suppliers would take POs in from retailers would be once a week. You saw the empty shelves throughout all the retailers and the grocers across the country. We had demand of about 3 million cases in a week’s time. A seven-day review on POs replenishes those goods based off of the demand on a daily, hourly basis. Once that demand hits and it produces a purchase order from that retailer, we have the ability to take that in and then replenish faster, which would fill up those empty shelves.”