International expansion might be the stuff of e-tail dreams but it takes a dose of real-world know-how to bring it to life. For businesses thinking of going global, here’s a “must-do” guide to logistics and supply chain management.

A great product with great global demand must surely make for a great business success, right? Well, not if you fail to implement a reliable supply chain that efficiently gets your goods to customers.

For many businesses seeking national or international expansion, managing this side of the operation is a significant challenge.

Andy Powell, director of multichannel retail advisory firm Agile Commerce Consulting, has 25 years’ experience in retail services supply chains. He advises a checklist of supply chain “must-dos”.

1. Think of your supply chain as a key part of your overall offer, not just a cost of doing business, as poor fulfilment can quickly destroy customer loyalty.
2. Balance your inventory to avoid lurching from too much inventory to not enough.
3. Design your fulfilment operations from the customer’s perspective. Aim to deliver a service experience as you would if the customer was in your office, store or showroom.
4. Work with your suppliers to achieve end-to-end cost efficiency – that means giving your suppliers accurate demand forecasts.
5. Get the right measures in place and use them to support all key decisions.
6. Make sure you familiarise yourself with the following terms or get professional advice on metrics such as “inbound supplier performance”; “customer delivery in full on time” (DIFOT); item availability; inventory cover versus sales; the overall cost of supply chain operations as a percentage of sales; and functional cost per order.

Attention to detail

“Too often I have seen plain, anonymous packaging, inconvenient delivery options and lack of visibility to order status,” says Powell. “The answer is greater attention to detail in packaging, providing regular status updates on orders, finetuning delivery requirements and keeping your time commitments.”

Nikki Baird, managing partner of US retail technology specialist Retail Systems Research, says that while perennial supply chain strategies around transportation, importing and security remain important, a new challenge is testing companies. The variability of oil prices in recent years has prompted many businesses to re-evaluate their supply chains and address risk and exposure to matters such as running out of stock, higher component prices and the availability of manufacturing and transport assets.

“We are seeing companies saying, ‘well, maybe it’s better if I have flexibility because the risk that comes with absolute lowest cost can actually end up costing me more’,” says Baird.

With oil prices on the rise, companies are taking a more flexible approach to sourcing products rather than simply funnelling goods from cheap manufacturing centres in Asia. For example, in the case of a US retailer, they might engage in more “nearshoring” with a neighbour such as Mexico when transport costs are high, but then switch to cheaper Asian centres when market conditions change.

Baird adds that the rise of cross-channel shoppers who buy online and from bricks-and-mortar stores has complicated supply chain issues. While a retailer might have a strong online presence in a market, the absence of physical stores can make it more difficult to manage inventories. “It’s hard to have that online presence first and backfill the supply chain to support it,” she says.

Baird says the use of electronic radio-frequency identification (RFID) tags on merchandise is evolving, with more retailers relying on them to check inventory levels. “It’s about [wanting] to know how much I have on hand in my selling channel so that I can most effectively promise that for my customer.”

Powell stresses the point that companies must avoid “flip-flopping” between having too much and too little inventory.

To avoid this scenario, he suggests:

• implementing inventory segmentation by product velocity (that is, setting different targets for various parts of your range)
• tightening controls over who can influence purchasing decisions
• quantifying and reporting excess inventory in all categories, not just slow-moving or obsolete goods.

On the warehousing and technology front, Powell says it’s important to optimise labour costs through automated picking and putaway systems. He also favours improving space efficiency through automated slot optimisation that allocates items to positions in the warehouse based on their relative velocity while ensuring slow-moving products do not clog up the system.

“However,” he says, “it’s important that the basic supply chain measures are in place before thinking about these systems.”

The views expressed in this article are those of the author and the interviewees, and not of Australia Post.

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