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Retail Value Chain 101: RVCF Spring Conference Insights - Tips for Reducing Shortages

Posted By Administration, Thursday, June 14, 2018
Updated: Thursday, June 14, 2018


by RVCF


We've often referred to shortages as the untamed animal of the retail industry. Whether they're caused by poor packing practices, a lack of discrepancy and damage reporting by a transportation provider, or a lack of communication between trading partners, shortages tend to cause chaos and confusion when not properly addressed and controlled. This chaos and confusion slows the flow of merchandise through the supply chain and eats into profits.

At the recent RVCF Spring Conference in Clearwater Beach, we had four separate sessions in which the topic of shortages was discussed in depth, including:

  1. Supplier Only Open Forum
  2. Shortages from Theft & Prevention
  3. Managing Transportation Claims & Audits from a Legal Perspective
  4. Panel Session: Controlling Shortages

These sessions produced a number of valuable insights that merchandise suppliers can implement within their own organizations, whether that means exploring a new way of doing things or improving an existing practice. Here are several of the best suggestions we heard at the RVCF Spring Conference for reducing shortages.

Scan and Pack
The number one recommendation was to use the "scan and pack" method. Scan one unit and place it in the carton – one unit at a time, one carton at a time. It sounds so simple, but deviating from this method only increases the risk of error.

For example, suppose 12 identical units are being shipped. When you scan the same unit 12 times and pack all 12 items at the same time, errors are more likely. Also, if you work with multiple cartons at the same time, there's a greater risk of the wrong unit going in the wrong carton. You could end up with an overage of one unit in one carton and a shortage of one unit in the other. That would seem like a wash, but the likely scenario is that you'll be hit with chargebacks and the retailer will get one free unit.

"Count at First Break" Agreements
The retailer often pays for freight and requires the supplier to work with a certain transportation provider, but that doesn't mean the supplier can't communicate with the carrier. In fact, the supplier can and should speak with a carrier representative about what should be done to proactively address shipment issues before the shipment goes any farther.

A "count at first break" agreement with the local carrier facility says that the carrier should report any discrepancies in carton count or damage within 24-48 hours and stop that shipment. If a carton is missing or damaged, the issue can be rectified before you run into receiving problems on the backend. These problems lead to shortages and losses that can't be recovered.

Driver Counts
Retailers are telling suppliers to put shipper load-and-counts and notations on bills of lading. Any shortages can then be blamed on the shipper load-and-counts. But the supplier can still give the driver the opportunity to count cartons. If the driver decides not to count cartons, don't let them sign shipper load-and-counts on bills of lading. If a shortage occurs, you need to be able to investigate the issue and file a claim if necessary. Carriers must understand that this is a requirement, and shipments won't be allowed to go out if proper procedures aren't followed.

Carton Tally Sheets on Dock
Procedures for verifying package count at loading should be established and enforced. When shippers stack cartons on the dock, they're stating the number of cartons against the corresponding purchase order. Loaders and supervisors should sign manifests and loading tallies and place them with the shipment when it leaves their facility. This makes it easy for both the driver and the retailer to count and agree, ensuring the shipment has been verified as complete three times.

Facility Visits
Merchandise suppliers should invite retailers to their facility and vice versa. If a 3PL or consolidation center is involved, visit their facility as well to see how shipments are moving through the supply chain. This allows you to identify areas for improvement and make sure nothing is being done by any party that could increase the risk of shortages on the backend. If issues are identified, you can sit down and talk about ways to implement improvements and follow up to see if the situation has improved.

Regular Audits
Suppliers should be doing random audits on shipments from overseas factories to make sure the number of cartons and units per carton match what the factory says is in the order. If everything matches up, cartons can continue to flow. If not, you can open more cartons to check for shortages, overages, substitutions, damage, etc. If you see a lot of errors, you can note the types of errors and frequency and address these issues with the factory. The increase in labor costs is likely to be dwarfed by the chargebacks you would receive for shortages resulting from the factory's mistakes.

Suppliers need to have a procedure in place for reporting problems to factories and charging them back when issues aren't addressed. If you need an extra level of auditing that goes beyond your own employees, bring in a third party that specializes in these types of audits.

The Big Takeaway
These sessions and the conference as a whole were major learning opportunities for everyone involved. During the panel discussion, we noticed that even the panelists, who were selected because their organizations are so effective at minimizing shortages, were taking notes on comments from each other.

There was so much productive back-and-forth discussion that continued after each session. Peers were able to discuss how they're addressing shortages and what their success rates are, and then determine how many people in the room are doing the same thing. We're happy to provide a recap after the fact in this newsletter, but there is so much value to be gained by being at a conference and speaking directly with peers and trading partners.

To get the full benefit, you have to be there. We strongly encourage industry professionals to attend the RVCF Fall Conference, October 14-17 at the Manchester Grand Hyatt San Diego in San Diego, CA.


CLICK HERE to return to the JUNE 2018 RVCF LINK

Tags:  Shortages 

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Ask a 3PL Expert: Shortage Claims and Consolidators

Posted By Administration, Thursday, June 9, 2016
Updated: Wednesday, June 8, 2016



by Scott Weiss, Port Logistics Group


Advice on routing guide compliance, 3PL relationships, and domestic logistics topics creating supply chain challenges for your organization. If you have a question or challenge please send your questions to sweiss@portlogisticsgroup.com.

Question
We have received multiple shortage claims from one of our biggest retail customers on palletized goods that were delivered intact to a consolidator but were broken down by the consolidator and either delivered floor loaded or re-palletized with other goods? Who's liable for the shortage? Why would a consolidator do that? Should they do that? What can we do to fight these claims?
-Mary, Charlotte

This is very common question and a relatively common occurrence we see as a majority of importers and manufacturers have product that flows through a retailer consolidation center.

The goal of any retailer's global supply chain is to get product to the store at the time promised/advertised to the customer while minimizing the landed costs to get it there. Here are some of the most common ways that your product could get to the retailer's store:

  1. The retailer can take possession of the goods in Asia and manage the movement of your product in full container quantities directly to their DC's. These orders would bypass the consolidation center.
  2. The retailer can send you high volume orders that allow you to build full truckloads from your distribution center directly to their distribution center. These orders would bypass the consolidation center.
  3. The retailer can send you lower volume orders that have you ship directly from your distribution center to their stores via small parcel carrier. These orders would bypass the consolidation center.
  4. The retailer can send you orders that are big enough to fill part of a truck but not big enough to fill an entire truck. These orders are referred to as less than truckload (LTL) orders and are the order types that run through the consolidator so product from multiple vendors can be consolidated into one full truckload destined for one distribution center. This is the scenario that applies to your questions.

Many retailers have developed a distribution network that allows them to consolidate inbound LTL merchandise from their domestic suppliers for full truckload (FTL) shipments to their distribution centers. The goal of these consolidation centers is to minimize the distribution and transportation costs to store. These facilities are typically cross dock facilities with a high number of doors on both sides of the building, substantial yard space, and are strategically located to a high number of vendor distribution centers. A high percentage of these consolidation centers are managed by 3PL's.

Retailers have a number of parties that work with you, the vendor, to get your product to the store, but in reality each division does not have the same aligned goals to get it there – very often their objectives conflict. This is compounded by the fact that each party is spread throughout the country and not in the same room working together:

  • Retail Buyers are responsible for placing the order and mandate the product has to get to the store by a certain date. They do not focus on how it gets there nor do they focus on the cost to get it there. Their number one goal is to have the product there as promised (advertised) to the customer. As an example, a buyer will mandate that the supplier air freight product direct to store if a shipping window has been missed.
  • Retail Logistics Departments are focused on getting the product to the store by a certain date but are also focused on the lowest landed cost possible to get it there by that date. For example, the logistics department will move FTL's by rail vs. truck to a DC in order to minimize outbound transportation costs.
  • Consolidators, whether in-house or a 3PL, are focused on handling the product through the consolidation center with the highest productivity, lowest labor costs, and minimal number of outbound truckloads possible. For instance, a consolidator will break down pallets with multiple DC products on them and repalletize them with other goods destined for the same distribution center.
  • Routing Guides are detailed documents for all vendors that state how and when product should be shipped by the vendor, but does not take into account unique characteristics or ordering patterns of a product. So a routing guide might state that every carton needs a label. However, a heavy palletized product will not be broken down at a consolidation center and might only need one label on the pallet.
  • Vendors are responsible for following routing guides and shipping out product from their DC within the stated shipping window, but have no control over how or when their product gets to the store after it has left its facility. Look no further than your example of shortages.

So what happens when the vendor follows all the rules and still gets dinged with a chargeback? It is time to get proactive. Remember with all of the above conflicting goals, you are just one of 50,000 plus vendors flowing product through a consolidation center.

Here are some steps we have followed to fight these claims:

  • Take photos of the product and maintain it in an electronic library before it leaves your dock.
  • Make sure the product is properly accounted for, that you have automated control of the inventory before it leaves your dock, and that the bill of lading is properly signed prior to leaving your dock.
  • Differentiate yourself from the other 50,000 vendors. Set up a meeting to visit a representative of the carrier that picks up your product in order to understand their pick-up schedules and delivery patterns. Be sure to check if your shipments are shipping directly from your DC to the consolidation center or if they are stopping off before they deliver to the consolidation center at other locations.
  • Set up a tour of the consolidation center that your product flows through and/or is the root of the chargebacks. Meet with the consolidation facility manager in order to better understand the flow of your product through the facility. Request a member of the retailer's logistics team be present as well. Watch how your product flows through the dock and gets loaded onto the outbound trucks.
  • Request a revised outbound load plan to mirror how your product flows through the consolidation center. For example, if product is always being broken down on pallets request that your product be floor loaded vs. palletized. This will maximize the cube of your outbound goods while ensuring your cartons can efficiently flow through the consolidation center.
  • Review your historical daily replenishment patterns by DC to determine if there are any opportunities to consolidate your outbound orders by DC. There may be opportunities to build more full pallet outbound orders for one DC so you do not have orders for multiple DC's on one pallet. Review all of your historical data on how product is flowing out by DC, identify the DC destinations where chargebacks are most common, identify which DC's have lower or higher volume, then go back to the buyer to request any revisions in your order frequency.
  • If nothing has changed and you are still getting chargebacks, you must ever so gently escalate this issue to a higher authority within both your buyer's department and the traffic/logistics department.

For past chargebacks received, without any proof or documentation to refute these claims, the retailer will most likely still find you at fault for the shortages. However, if you go back to them clearly explaining why this happened and what you have done to prevent it from happening in the future, chances are they will agree to work with you as you will have developed a more proactive plan going forward for the weeks, months, and years ahead.


Scott is a 20 year veteran of the 3PL industry and 13 year member of RVCF. Port Logistics Group is the nation's leading provider of gateway logistics services, including value-added warehousing and omni-channel distribution, transloading and cross-docking, eCommerce fulfillment, and national transportation. With 14 Distribution Centers and 5.5 million square feet of warehouse space strategically located by the Ports of LA/LB, NY/NJ, Seattle/Tacoma, and Savannah, Port Logistics Group provides the critical link between international transportation and the last-mile supply chain. He can be reached at sweiss@portlogisticsgroup.com or (562) 977-7620.

CLICK HERE to return to the JUNE 2016 RVCF LINK

Tags:  Shipment Consolidation  Shortages 

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How One Supplier Used Overseas Audits to Reduce Shipping Errors

Posted By Administration, Thursday, June 9, 2016
Updated: Wednesday, June 8, 2016


by RVCF


It's no secret that shipping errors lead to chargebacks, lower margins, slower time to market, unhappy customers, and friction in the trading partner relationship. But what do you do when the source of the problem is on the other side of the world?

This is a conversation we had with Stu Levitt, a supply chain compliance executive from a major merchandise supplier. Based on scorecarding from various retailers, it was obvious that there were serious problems with shipments received from overseas factories, especially prepacks. Anything that could go wrong did go wrong – from incorrect prepack ratios to missing units to missing tickets.

Of course, the problems went deeper than chargebacks. The supplier's relationships with its retailer customers were suffering. When your shipments consistently have major compliance issues, you can forget about asking for a waiver, a change in a shipping window, or any leeway whatsoever. If you expect to maintain a strong relationship, the least a supplier can do is ship what the retailer orders.

When shipments arrived in the U.S. from the factories, the supplier could audit the shipment, which costs time and money and disrupts the flow of goods through the supply chain. They could send the shipment along to the retailer, unaudited, and hope for the best. Obviously, neither of these solutions is viable or desirable.

The only way to fix the problem was to address it overseas at the point of origin. Only the factories have the units, the tags and anything else required to make each shipment whole and compliant.

Making the Case
The supplier's compliance department knew it would have to make a strong case to get senior management buy-in, as well as cooperation from the factories. They used retailer scorecards and feedback to determine where the majority of issues that triggered chargebacks were occurring. They came up with a priority list of factories – the worst offenders, so to speak.

This information was presented to senior management. The CIO was also involved because the initiative would involve deploying technology at home to support and monitor the overseas solution. The decision was made to bring in a service provider that had a permanent presence near the overseas factories. This meant the supplier wouldn't have to set up its own team overseas, purchase the hardware, or train factory personnel.

The factories slowly began to agree to an onsite auditing process. After all, the supplier wasn't gouging the factories – they were simply transferring the chargebacks that the factories created. The supplier's compliance and sourcing departments had to hammer home the fact that implementing a solution at the factories would reduce chargebacks. Some factories simply refused, but most of the high-priority factories agreed to move forward.

At the end of the day, everyone needed this – the supplier, the factories, and the retailers.

Implementing the Solution
One of the problems was the fact that each unit wasn't being properly reviewed before it was packed in the carton. For example, if a carton required 10 units, the factory worker would simply count 10 units and assume the stack they were given was correct. They weren't verifying proper size or color, or the presence or proper placement of a tag. The step that was added to the process was the mandatory scanning of each unit that went into a carton.

Of course, a packer can circumvent this process by simply scanning the top unit 10 times. The key is to make sure the supervisors are doing their job so the packers don't take the easy way out. The computer system will then tell you if a carton is packed with the correct units and the correct number of units. You then create a database of what is going into the carton, which can be used to create reports that prove how a carton was packed.

The implementation of the processes and technology was overseen by the supplier's sourcing personnel, while the service provider continues to monitor the process on an ongoing basis. The supplier held weekly conference calls with the factories and the service provider to discuss the progress. The IT department was also able to monitor the implementation from the U.S.

Today, several dozen factories have implemented this factory-based auditing process.

The ROI
The supplier noticed marked scorecard improvement and a consistency in lower audit failure rates within two months. The most significant progress came in shipments to large retailers. The supplier's quality control group conducted outbound audits as well. Quality control and compliance also saw obvious improvement within two months.

The supplier was able to reach out to retailers to show that investments in process improvements and technology were being made to solve the problem. Because of these efforts, retailers were willing to negotiate settlements and issue reversals on chargebacks.

The Lesson
By the time incorrect shipments from overseas factories arrive in the U.S., it's often too late to fix them cost effectively. The only way to solve the problem is to go directly to the source. Rather than passing along chargebacks to the factory or simply accepting chargebacks as a cost of doing business, RVCF encourages supplier members to collaborate with retailers. Pinpoint the cause of shipping errors and work with service providers if necessary to implement permanent solutions. This is the most effective way to reduce shipping errors and chargebacks, preserve profit margins, avoid unnecessary audits in distribution centers, delight customers, and improve trading partner relationships.

For inquiries about how this process was implemented, Stu may be contacted at stulevitt23@gmail.com.


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Tags:  Audit  Concealed Shortage  Shortages 

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Ask a 3PL Expert: Combating Shortages

Posted By Administration, Thursday, June 11, 2015
Updated: Tuesday, June 9, 2015


by Scott Weiss, Port Logistics Group


Advice on routing guide compliance, 3PL relationships, and domestic logistics topics creating supply chain challenges for your organization. If you have a question or challenge please send your questions to sweiss@portlogisticsgroup.com.

Question
We have been receiving chargebacks claiming short shipments. What systems can we put in place to get these reversed in the future?
- Julice, San Francisco, California

Carriers pick up product from thousands of vendors on a daily basis; it is absolutely critical for them to keep product moving. Equally important is the need for retailers to receive the right product at the right time and have the product in stores as promised. Many years ago, when nearly all shipments were shipper load, driver count, combating shortages was much easier. In those days, the driver for the retailer's designated carrier was required to count each carton, sign for the piece count, and be responsible for making sure that the signed piece count was delivered to the retailer's DC.

However, in a world where driver turnaround time is key, the majority of outbound loads these days are shipper load and count. As described in a RVCF's June 2012 interview with transportation attorney Gerard Smith, "In shortage cases, the principal difficulty arises in shipments in which the quantity of goods cannot be visually ascertained at the time of tender to the carrier, either because of the method of packaging (shrink-wrapped pallets, etc.) or because the shipper loads the container or trailer in the absence of the carrier's personnel. In such cases, carriers will often refuse to acknowledge the shipper's count and will use qualifying notations on the bill of lading such as 'said to contain,' 'shipper's load and count,' etc."1

For this reason, shippers must be careful to maintain accurate records in order to have any hope of reversing these types of chargebacks. Here are some suggestions of information that should be kept:

Signed bills of lading/EDI confirmation library – The signed bill of lading is the foundation for starting your chargeback reversal research. If you utilize a 3PL, you should ask them to automate the sending of bills of lading and EDI 945 documents (outbound shipped order) directly into your ERP.

Trailer manifest documentation – Hard copies should be scanned into your system; this is a close second to the signed of bills of lading.

Picking lists – It is critical to maintain detailed documentation of the original pick ticket, who picked the order, and when.

Detailed documentation of outbound auditing program – Any DC should have demonstrated SOP's in place to make sure the outbound order is shipped out accurately. For example, a leading 3PL has a program called "no pallet left behind." This program makes sure that a bill of lading cannot be generated and outbound load cannot be closed until all product has been scanned in the system.

Scanning documentation – RF based DC's have the advantage of recording and furnishing an automated report showing the time and person that scanned a carton into the outbound trailer load.

Photos of outbound load – If you are continually receiving shortage claims, it is well worth the cost to maintain a photo library of the specific outbound loads, which will allow you to show what the load looked like prior to departure from your DC and to drill down on the product inside the trailer prior to departure.

Records of who loaded outbound product – This can be manual or electronic, but the bottom line is that you are maintaining detailed documentation and SOP's of who loaded and what was loaded.

Records of who signed for the outbound load – Again, this can be manual or electronic; the key is to maintain detailed documentation of who picked up the load and when.

Constant communication with the retailer's traffic department – You need to make sure that you develop a relationship and are proactively managing the relationship with any of the retailers that you are receiving these charges from; this might include weekly calls or e-mails, quarterly face-to-face visits, meetings with the carriers, and visits to the retailers' DC's.

Key performance indicator (KPI) tracking – Regardless of whether you do it yourself or outsource, outbound accuracy should be captured in the management of your DC. Examples of KPI's include perfect order percentage and overages, shortages and damages (OS&D) percentage.

By maintaining detailed documentation of shipment processes, identifying operational issues or disputing chargebacks will be a streamlined process and reduce the time, cost, and labor associated with received chargebacks as well as the prevention of chargebacks that would have otherwise occurred had such documentation not been kept.

[1] http://www.rvcf.com/page/VCF_Report_12_06_1


As Vice President, Business Development, Scott Weiss works closely with apparel, footwear, and housewares manufacturers of all sizes to ensure compliance with retailer routing guide requirements.  Port Logistics Group is a market leader in gateway port logistics services, operating over 5 million square feet of warehouse space.  Services include port drayage, import deconsolidation, warehousing and distribution, retail compliance, local transportation, and store delivery in key port locations of Los Angeles/Long Beach, New York/New Jersey, Seattle, and Savannah.  Scott may be reached at sweiss@portlogisticsgroup.com or (562) 977-7620.

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Tags:  Shortages 

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"SL&C" – Fact or Fiction?

Posted By Administration, Thursday, March 12, 2015
Updated: Tuesday, March 10, 2015

by William J. Augello, Esq.


This article was authored by my partner Bill Augello in 2005.1 Bill practiced transportation and administrative law for 52 years. After "retiring" from the firm of Augello, Pezold and Hirschmann of Huntington, New York (now Pezold, Smith Hirschmann and Selvaggio), he continued to consult with and present expert testimony for the transportation industry and members of the bar from his office in Tucson, Arizona. Bill remained active until his final days. At the time of his passing he was an Adjunct Professor at the James E. Rogers College of Law at the University of Arizona. The article is still pertinent today.

Gerard F Smith
Pezold, Smith, Hirschmann & Selvaggio LLC


In the course of researching for my next publication, I discovered cases where carriers and their injured drivers raised "shippers load and count," either as a defense to damaged loads or to personal injury to the driver while unloading a shipment. These cases raise questions as to whether "SL&C" notations are proper based on the facts and the legal effect of such notations.

One court defined SL&C as follows: "The legend 'SL&C' refers to 'shipper's load and count' and indicates the shipper, but not the carrier, attests to the accuracy of the quantity of goods loaded on board the carrier's vehicle." In the personal injury case, the driver sought damages for injuries suffered when he was struck by boxes that fell out when he opened the trailer doors at destination. The driver contended that the notation "SL&C" on the bill of lading relieved him of any duty to observe the loading of his trailer.

The facts are that the driver was present while the shipper loaded the load with a forklift, but he was sitting in his truck "doing paperwork" and "perhaps napping, during the loading process." When the trailer was fully loaded, the driver visually examined the rear end of the load from the ground and then climbed into the trailer to check the load bars that the shipper had installed. He then sealed the load and delivered it intact to destination.

The court ruled that under 49 C.F.R. 393.9, the driver had a duty to exercise reasonable care for his own safety in conformity with "common sense federal regulations requiring that before starting on his journey he 'assured himself…that the…commercial motor vehicle's cargo is properly distributed and adequately secured.'"

It held that the "SL&C" notation did not excuse the driver from the duty to exercise reasonable care for his own safety. His own failure to examine the load bars sufficiently to confirm that they were adequately secure, coupled with his act of standing within the zone of danger while opening the doors, was held to constitute "contributory negligence," and therefore, the shipper was held not to be liable for his injuries. Hardesty v. American Seating Co., 194 F. Supp. 2d 447 (D. Md. 2002).

The same type of defense is raised by motor carriers when damage is discovered in a load at destination shipped under a "SL&C" notation. The problem is that carriers treat this notation as an absolute defense to anything that happens in transit, and for any type of claim, without investigating what actually happened in transit.

For shortages at destination, it is understandable why a carrier should feel that it is not liable since it was not present when the load was counted and loaded. Shippers should understand that they generally cannot hold carriers liable for shortages when they loaded a vehicle without giving the driver an opportunity to count and the trailer is delivered with an intact seal.

For damage claims, however, the question is who and what caused the damage. The mere fact that the shipper loaded the goods does not necessarily relieve the carrier of liability for damage discovered at destination. The question is "What happened in transit to the cause this damage?" If the shipper sustains its burden of proving that the goods were in good condition at origin and damaged at destination, the burden shifts to the carrier to prove, not merely allege, that it was caused by one of the five bill of lading exceptions and that it was not negligent. The fact that the shipper loaded the goods is not proof that the carrier was not negligent. The truck might have been in an accident in transit that resulted in the damage to the goods or the truck may have been defective, etc.

Another question is "Was this a valid 'SL&C' shipment?" The only true SL&C shipment is one for which both parties agree to handle the shipment without the driver being present or without being responsible for inspecting or counting the load. In many instances, the driver is present in the shipper's facility at the time of loading, but not paying attention to the loading process. He then writes "SL&C" on his copy of the bill of lading after leaving. In these instances, the notation is improper and therefore, unenforceable.

Furthermore, no agreement between the shipper and the carrier can relieve the driver of the regulatory obligation under 49 C.F.R. 393.9 to inspect the load before leaving the shipper's premises. The only exception is when the driver has been given a sealed load with instructions not to break the seal! It follows, therefore, that drivers must inspect every load before leaving origin and inspect for patent defects unless the shipper instructs them not to break the seal.

It is becoming increasingly important for shippers, receivers and carriers to understand the legal consequences of bill of lading notations in the current litigious society. Parties to transportation arrangements would be well advised to reexamine their practices and contractual arrangements in light of these lessons.

[1] TRANSDIGEST - Volume X, Issue No. 83, January 2005


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Tags:  Damage  Loss  Shipper Load & Count  Shortages 

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A Retailer's Perspective on Omni-channel Trends

Posted By Administration, Thursday, January 15, 2015
Updated: Wednesday, January 14, 2015

by Steven Lahr, Lahr Consulting LLC


Retailers face some of the biggest challenges and stiffest competition doing business in today's omni-channel environment. Inventory integrity – having the right product in the right place at the right time – is paramount in competing for and maintaining customer loyalty. Suppliers still struggle with the concept of a "perfect order" as well as what constitutes a shortage and how to improve inventory integrity.

Over the past fifteen years, retail supply chain teams have been working on systemic solutions to speed the flow of product and reduce the costs within retailers' distribution centers. With the implementation of warehouse management systems (WMS), utilization of the advance ship notice (ASN), leveraging GS1-128 barcodes, value-added services (VAS) performed by the suppliers, etc., the end goal became moving inventory through the supply chain quickly, efficiently, and accurately to prevent out-of-stocks and ensure goods were available for purchase by the consumer.

Retail supply chains benefited from all of the capital spent on technology. Cross-dock percentages prior to the technology implementations were in the mid 40% to the low 50% range; after, percentages increased to the 60% plus range with significant operating cost reduction and the ability to reallocate vacated space to additional store capacity, pushing off the need for capital expense to build new DC's. These DC's and systems were designed for speed and efficiencies – product moving directly to the outbound doors and to the stores.

However, in many cases auditing remained a manual process and inconsistent with no systemic methodology regarding the way a shipment was audited or if it flowed through. Shortage chargebacks have gone down as the cross-dock percentages have gone up; this has created a false sense that the problem was getting better. Simply stated, the retailers' facilities haven't had a sustainable process or technology to perform audits.

Retailers are presently focused on omni-channel strategies as senior leadership has a high level concern regarding inventory integrity and inventory reliability in the network and in the stores. Supply chain teams are challenged to implement technology that can manage and direct shipments for auditing based on each supplier's inventory integrity scores. Retailers are focused on improving inventory integrity issues such as overages, shortages, substitutions, and incorrect UPC's in order to establish a confidence level with their customers. Capture of the carton contents went from a manual review to a systematic scan of each individual item in the carton. Industry standards for auditing run at 3% of the total volume coming through the distribution centers. Suppliers struggling with shipment integrity are prorated at a higher percentage and are audited at a higher percentage, delaying the delivery of goods to the store floor.

This trend is only going to accelerate. Retailers are taking aggressive inventory positions and tightening the amount of inventory they are carrying. Where there was once a "need for speed" through cross-docking, retailers are now writing more orders as bulk to gain a better allocation, closer to the sale. This means that these goods will be going through VAS areas in the DC's prior to distribution to the stores. As previously mentioned, there will be an increase in shortage detection as carton contents are being distributed through break pack or backstock for post allocation. This combination of shortages, overages, and substitutions can be daunting if not understood and managed. If you are not auditing a percentage of cartons leaving the distribution center you are setting yourself up for a bad score on inventory integrity and an increased risk for compliance charges.

Another shift in addition to inventory integrity is having multi-channel flexibility. This capability will assume a larger role in retail. The expectation will be that the suppliers adapt and have the flexibility to handle different order types – direct-to-store, direct-to-consumer, bulk, replenishment, and mark-for-store. Each order type has an expectation of performance through the supply chain. The need to quickly service the stores, and ultimately the customer, is going to drive an increase or decrease in business between retailers and suppliers. Retailers and suppliers need to grow their supply chain relationships as integration of the chains and flow path strategies become the expectation from company leadership. Sustainable workflows need to be created so that there are fixed times for purchase order entry, allocation and packing at the supplier's DC as well as fixed pick-up and deliver through the retailer's DC. This model has proven to take 7 to 10 days out of the supply chain.

So what is the cause and effect of not addressing or reacting to inventory integrity and omni-channel trends. The obvious is suppliers will continue to get hit with chargebacks and, with the implementation of auto-detection systems in the retailers' DC's, the charges could go up dramatically. The bigger picture is that inventory integrity and multi-channel flexibility is going to be the priority for retailers and supply chain teams.

These shifts have resulted in the retailers accelerating omni-channel strategies. Engagement is critical. Suppliers need to collaborate with their retail partners in order to optimize performance and implement sustainable solutions. Not addressing these trends will drive profitability losses and have a negative effect on sales and turn.

These trends and practices are not going away – they will only intensify over the next couple of years. It is imperative for the suppliers to act now. The next generation of compliance systems is built around auto-detection and accuracy issues will start with the receipt of the ASN. These systems will automatically send back the ASN to be fixed and retransmitted creating additional rules that the retailers will establish to improve inventory integrity and supply chain excellence.


Steven Lahr, Lahr Consulting LLC, is a 30-year senior supply chain and operations executive who specializes in developing supply chain improvements through operational compliance, vendor integration and flow path strategies. For the past 14 years, Steven was Director of Vendor Integration and Compliance for Dick's Sporting Goods, where he designed and implemented the company's compliance program. Steven developed and led the vendor integration team for Dick's Sporting Goods and was responsible for improving purchase order writing, implementing sustainable flow paths that accelerated flow of product, and developing operational efficiencies that helped to reduce product lead times and replenishment inventories. Steven has also held a variety of leadership positions with Bradlees and Federated Logistics, contributing the supply chain optimization of both companies

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Tags:  Inventory Integrity  Omni-Channel  Shortages 

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In-Transit Cargo Crime Impacting The Retail Supply Chain

Posted By Administration, Thursday, July 10, 2014
Updated: Wednesday, July 9, 2014

by John Tabor, All States Locate


A recent survey of retail security directors showed that almost half of those polled had been the victims of a supply-chain disruption directly related to cargo theft in the past year. This is a significant increase from just five years ago.

Envision the following scenario. You are at home around 8:15 at night watching television with your wife or kids when the phone rings. The caller is one of your regional LP managers in the Southeast. He tells you that you just had a tractor load of high-end apparel worth $2,000,000 stolen in Florida while parked at a truck stop. The driver had gone in to use the facilities, and when he came out ten minutes later his tractor and trailer were gone. While no one ever wants to receive a call like this, you can be prepared for it.

In order to fully understand the issue of cargo theft, you need to know why it exists, who is perpetrating it, how you can reduce your risk, and ultimately how to react to a loss. Most of those reading this have had some level of store- or logistics-security exposure. Good loss prevention programs involve some form of a "layered" approach. Based on the exposure, some, if not all, of the following countermeasures may be employed—surveillance cameras, alarms, locks, lighting, EAS, safes, employee awareness training, and others. Loss prevention professionals would be remiss in their duties if they did not explore all of these attributes to secure their stores.

That said, remember that virtually 100 percent of the merchandise in retail stores is delivered by truck. In many cases the only two preventative measures put in place to secure that same merchandise in transit is a key to the tractor and a seal on the rear doors.

On any given night there are hundreds of thousands of loads of merchandise parked in unsecured locations around the country. This is a well-known fact to various criminal elements, from organized Cuban and Eastern European cargo-theft crews to local gangs like MS-13.

To read more, download the white paper here.


John Tabor is the principal of All States Locate, a supply chain security and logistics consulting firm based in the New York metropolitan area, providing risk mitigation strategies to retailers, shippers, and transportation companies as well as conducting cargo theft investigations and training seminars. Tabor has 25 years of experience in loss prevention, most recently as the senior security executive for a national transportation and warehousing company. He can be reached at (201) 294-6866 or jtabor@allstatesupplychain.com

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Tags:  Cargo Theft  Carton Shortages  Damage  Loss  Shortages 

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