Managing Inventory and Customer Expectations Can Lead to Fewer Charge-Backs and Happy Customers
February 11th, 2010 by Joe_EDI
Retailers are focused on balancing tight inventory management and high levels of customer service. They want to avoid stock outs so as not to lose sales revenue while also avoiding holding too much inventory that is later heavily discounted to move the excess inventory. Wal-Mart, who is always searching for opportunities to gain efficiencies in their supply chain, recently announced that US vendors shipping to distribution centers must deliver within a four day window leading up to the must-arrive-by-date (MABD).
Vendors that do not deliver 90% of shipments per month within the MABD delivery window will be charged a penalty (charge-back) of 3% of Cost Of Goods Sold, but only for orders valued at more than $1,000. Wal-Mart is flat out raising their expectations for vendor delivery performance to ensure superior supply chain performance. Wal-Mart is putting more pressure on their vendors to meet delivery deadlines in hopes of providing consistent and predictable inbound deliveries of products from their vendors.
What does this mean for retail vendors? Vendors must evaluate their supply chain operations to ensure they are optimized to meet the new delivery requirements consistently. All supply chain functions including EDI capabilities, demand planning, sourcing, production, fulfillment, and shipping must be evaluated to ensure delivering within delivery windows can be maintained consistently.
Here are some specifics that should be on your EDI, Warehouse, and Shipping check-list
Make sure the “must-arrive-by-date” submitted on the EDI 850 purchase order is mapped into your ERP system to the sales order and interpreted appropriately to meet the delivery window.
Ensure adequate lead times are configured for each Distribution Center that allow some cushion for the unknowns that manifest from variations in supply and demand.
Make sure your Warehouse Management System and shipping system is tuned to monitor and factor delivery windows when staging orders. A rudimentary exercise that may help your organization is building a simple flow chart of your supply chain which includes partners, steps, and decision points.
Search for problem areas and opportunities to tune supply chain functions to optimize your operations and ensure consistent on time deliveries.
