The pace of change in today’s retail environment is faster than ever. E-commerce and shifting, more demanding consumer behaviors have led retailers to tighten requirements for shippers across the board. Penalties for late or partial shipments are steep and can make or break a shipper’s relationship with a retailer. Shippers can mitigate this challenge with a retail consolidation program. So what is a retail consolidation program? How does it work? And what are the benefits to shippers? Those are the main questions I discussed with Linus Kalenze, Vice President of North American Surface Transportation, Consolidation at C.H. Robinson, in a recent episode of Talking Logistics.
The new retail customer shopping experience
No industry is going through as much turmoil and change as retail, with the possible exception of the logistics industry that must serve the ever more demanding retail requirements. I therefore began our discussion be asking Linus to share his thoughts on the retail logistics scene.
Linus comments that, “It’s no secret that ecommerce and online shopping have disrupted the retail environment like no one could have imagined. As brick-and-mortar retailers are looking to stay relevant, their focus has been on omnichannel operations and how they can leverage their DCs as well as their store footprints to provide new services such as curbside and in-store pickup, or home delivery of store merchandise. It’s all centered around creating a better customer shopping experience, and a big part of that is having inventory on the shelves when customers want to buy it. This requires managing upstream inventory in very different ways than previously. This has included smaller order sizes with greater velocity and narrower delivery windows. For providers, this means delivering on-time, in-full accurately at least 90-95 percent of the time.”
Retail consolidation programs
With all of these logistics issues facing retail, one potential solution is implementing a retail consolidation program. I asked Linus to explain what that is. Linus notes, “There are various types of consolidation in general. One is vertical-based, such as consumer food items that are temperature controlled or produce where you have to be sure you are consolidating like items. Other examples are for automotive or building materials where you are servicing the needs of a particular vertical. The other type is market-based where you are consolidating across a given market area.
“Retail consolidation is somewhat different in that it is centered on the requirements of a specific retailer,” continues Linus. “It requires knowing the compliance standards for that retailer and building the consolidation around the vendors going into that channel. You want to get the freight from those vendors into one distribution center and deliver it as one load to the retailer.”
Critical components for success
My next question for Linus was how to get all of the vendors working together in a consolidation process. Linus says, “You have to synchronize the whole process with multiple vendors, multiple inbound and outbound cross-docks and varying carrier schedules. This requires enough volume to have critical mass for consolidation. It requires sufficient talent with subject matter experts at various levels such as solutions design and analytics teams to analyze the data in order to design the right solution for all parties, and account managers who really understand both the retail industry and all of the issues we discussed previously, as well as understand all of the shipper and carrier issues. Finally, it takes an operations staff to plan the loads, make the appointments and generally make things happen.
“The next critical component is the technology to handle all of the complexity. In our platform we built capabilities to enable end-to-end visibility at an order level to all parties in the supply chain, including status updates to adjust plans. We also built in efficient processing to free up talent to deal with exceptions and customer issues. We are also rolling out new optimization capabilities such as predictive analytics that improve optimization effectiveness. And finally, you need to partner with a good base of carriers with the capacity to execute the planned moves. This collaboration and alignment is critical for success. And you have to continuously rebalance as things change.”
Getting started and defining the benefits
How do you know if your company is a good fit for retail consolidation? What are the likely benefits? Where can you go to get more information on retail consolidation? Watch the full episode for Linus’s insights and advice on those questions and more. Then post a comment and share your perspective on this topic!