© GT Nexus, Inc.

How to Meet Fluctuating Consumer Demand through Dynamic Allocation and In-transit Visibility

Deliver Supply Chain Agility

A STRATEGIC IMPERATIVE FOR RETAILERS

Retail consumer behavior is not easy to predict, especially in new or emerging markets. Global companies that source from regions around the world and sell to just as many must fi nd a way to balance a longer, more complex supply chain with the volatile consumer demand for their products. While there is a way to ensure product availability with legacy software systems, it usually includes large amounts of buffer stock and expensive air freight to move shipments to the customer in time.

In today’s competitive retail environment, this strategy is no longer acceptable. Too many costs due to inventory obsoles-cence and high freight rates deplete the bottom line, allowing more agile retailers to step in and take the sale.

Retailers can only compete when they have the agility to look at current demand and make allocation decisions on the fl y as trends change.

Impact of Low Supply Chain AgilityWhen retailers don’t have the systems in place to bring all of their supply chain data to a single platform, they miss crucial information on inventory location and availability across regions and channels. When an unexpected demand change occurs, they fail to get the desired product to the customer and experience:

Lost sales due to stockouts or wrong product entirely

High inventory costs from holding buffer stock

Inaccurate buys based on forecasts from past sales but not real-time demand from stores and customers

Increased admin costs due to manual inventory tracking

The Root of the ProblemMany retailers are not equipped to quickly adjust to new consumer demand. Traditional ERP systems track inventory to shipment, but fail to shine light on in-transit products as they pass through the supply chain. This leaves retailers to make allocation decisions solely on forecasts from past sales.

1. Sourcing and inventory allocation decisions are made 90 to 180 days ahead of consumption

Sales forecasting leaves much room for error when there’s a high level of supply chain volatility. When demand requires an updated selling strategy and retailers aren’t agile enough to react, it leads to:

Lost sales and too many markdowns

Inventory obsolescence

2. Supply chain fl ows are rigid and infl exible

Often demand swings occur that are not in line with the original inventory positions. When systems aren’t equipped to track in-transit inventory, it’s diffi cult to reallocate to meet this new demand. This leads to:

Expedited air freight and inter-DC transfers that increase transportation costs

Excess inventory at each DC as a buffer, increasing inventory costs

© GT Nexus, Inc.

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While global sourcing can reduce the fi rst cost of products, it also increases costs along the supply chain as retailers try to meet volatile demand.

The Challenge

Holding excess inventory at DCs gets the product to the customer, but at a cost.

Origin VendorOrigin Customer 1Customer 1

Customer 2Customer 2

DC AllocationDecision

2. DC Transfer: Increased Cost, Reduced Inventory Velocity

1. Volatile Demand

Origin VendorOrigin

DestinationDC/XD

Destination

DestinationDC/XD

Increased Cost, Reduced Inventory Velocity

Destination

Plant

Plant

NetworkConnectivity

Agility

Customers

Customer

DC / Warehouse

Plan

Actual At-Risk DelayDynamic ETA

B

A

Sense more accurately

Operate more efficiently

Respond faster

Make better decisions

3

The SolutionA supply chain network in the cloud allows for what traditional software does not: tracking demand changes and dynamically allocating product to meet them. Inventory can be sent to stores or regions where customers are unexpectedly buying heavily. Seasonal buys in apparel can be made in larger quantities with the option to dye fabric and cut patterns later in the supply chain. When changes like these can be made after the initial buy, retailers are able to serve more customers, more quickly. This has a huge impact on both revenue and costs — more products are bought, and fewer go to waste in warehouses and clearances in low-demand regions.

Adopt a fl exible, multi-leg visibility solution to meet demand swings.

Combine order, shipment, and event data to provide accurate view of inbound fl ows and dynamic ETAs

Access complex, multi-leg intercontinental fl ows (origin consols, destination transloads, domestic moves)

Enable DSD and DC bypass programs with factory carton labeling

How to use an agility solution:

1. Adapt to demand and seasonal trend changes on the fl y by dynamically allocating in-transit inventory

2. Analyze data from transportation providers, inventory plan-ners, merchandisers, and supply chain partners

3. Make better buying decisions by postponing allocation to a later date

4. Listen to system’s early-warning signals and alert appropri-ate parties of potential delays

Value PropositionsBy adopting a supply chain agility solution, retailers can increase revenues and lower supply chain costs by quickly meeting chang-ing demand. With a cloud-based platform, they are able to:

1. Create a supply chain that can easily adapt to its environment

Start managing by exception, with everything else automated

Capitalize on opportunities for selling across the globe

Perfect advanced delivery techniques — cross-docking, direct-to-store or customer, and in-transit allocation

2. Increase profi ts through greater revenue from sales

Avoid lost sales by stocking product where customers want to buy it

Lock down repeat customers who depend on accurate delivery dates and availability

3. Increase scalability of the business

Use dynamic allocation to reach customers in wider regions and volatile emerging markets

Take advantage of new selling channels (mobile, online) through established inventory routes

Supply Chain Agility and the Networked CompanyTo make supply chains agile, companies must transform them-selves from silo-based, inward-facing corporate operators to interconnected, highly agile business network orchestrators.

In retail, trends and demand changes can make or break a brand. Those that can identify selling opportunities and physi-cally get their product to the customer in time will come out the winners.

1. Volatile Demand

2. No DC Transfer; Increased Agility

Origin VendorOrigin Customer 1Customer 1

Customer 2Customer 2Origin VendorOrigin

DestinationDC/XD

Destination

DC AllocationDecision

Product is allocated dynamically as demand changes.