A new study from the National Retail Federation, prepared in conjunction with consulting firm BearingPoint, revealed that the majority of retailers cite supply chain optimization as a priority initiative for getting closer to the customer.
"Retail Horizons: Benchmarks for 2004, Forecasts for 2005," a survey of more than 300 retailers from an assortment of department, specialty, apparel, grocery and home center stores, with as few as a single store to more than 2,000 locations, showed the following:
- Almost 25 percent of retailers plan for half of their merchandise assortments to be private label;
- In the next 12 months, more than half of retailers (57 percent) plan to replace or upgrade their point-of-sale systems;
- While 38 percent of retailers will focus on domestic expansion, 17 percent will focus on international expansion;
- This year, 33 percent of retailers will focus on redesign and relocation of stores; and,
- More than one in five retailers (21 percent) list outsourcing as a priority for 2005.
"Retailers realize that in order to improve their businesses, it is important for them to reinvest in new technologies and programs," said NRF President and CEO Tracy Mullin. "Consumers are rewarding retailers who utilize resources to feature new merchandise, new technology and new ideas."
Source: National Retail Federation, 2005
More than 60 percent of companies use overly simplistic inventory management methods, such as ABCD inventory policies or simple weeks-of-supply rules for products, and these companies frequently have 15 to 30 percent more inventory than they need and lower service levels, according to "The Supply Chain Inventory Strategies Benchmark Report," a recent AberdeenGroup report.
Only 5 percent of manufacturers and distributors surveyed use multi-echelon inventory optimization that takes into account multiple types of demand and supply variability.
Companies that reported using new optimization methods that manage inventory holistically across multiple stages in the supply chain, including suppliers and downstream partners, commonly drove 20 to 30 percent reductions in on-hand inventory and 10 to 20 percent improvements in time to market.
The Aberdeen study also found that nearly half of respondents have shifted away from purchase orders or release notices for some suppliers, setting a minimum and maximum inventory target level for an item at a plant or other company location, and then asking the supplier to take responsibility for ensuring that inventory is maintained within that range. This has led to dramatic inventory reductions, sometimes over 30 percent, while reducing stockouts.
- Companies that reported using new optimization methods commonly drove 20 to 30 percent reductions in on-hand inventory and 10 to 20 percent improvements in time to market.
Source: Aberdeen Group, 2005
For more information on the current state of the sourcing and procurement markets, see the articles "The Analyst Corner: Sourcing" in the June/July 2004 issue of Supply & Demand Chain Executive, and "The Analyst Corner: Procurement" in the August/September 2004 issue of the magazine.
For more information on the latest trends in the fulfillment and logistics space, see the article "The Analyst Corner: Fulfillment & Logistics" in the October/November 2004 issue of Supply & Demand Chain Executive.