Supply Chain Enabled

Opportunities for savings where supply chain meets retail

Published: October 24, 2022
Author: Lorcan Sheehan

As we enter the peak retail season for many companies, it is useful to reflect on the impact of supply chain on in-store activities.

Receiving supplier deliveries, managing purchase orders, repricing items, adding security tags, replenishing shelves, merchandising items, picking eCommerce orders and picking products for returns are just some of the supply chain activities that are routinely managed in stores.   

Product availability on the shelf is one measure of supply chain success, but how it gets there can often drive costs within store operations.

Central distribution vs. direct store deliveries

One of the important decisions is whether to manage deliveries through a central distribution centre, where suppliers deliver, product is received, segregated by store, and shipped in consolidated deliveries to a retail store network.  By adding in what is essentially an extra step in the supply chain, there is the ability to:

  • Significantly reduce supplier deliveries to the organisation – fewer receipts, fewer invoices, less transportation costs for suppliers – with the potential for reduced costs in supplier negotiations
  • Control the frequency and timing of deliveries to the store network—fewer deliveries to stores—managed in bulk and ideally timed to facilitate intake outside of peak hours
  • Remove the need for receiving checks, supplier queries and invoice reconciliation from store teams
  • Prepare inventory for direct shelf placement – correctly priced, with the addition of security tags, the removal of excess packaging, steamed and folded if required, and pre-sorted by department for efficient put away
  • Manage critical space availability in high-street locations to be optimised for customer experience
  • Reduce buffer inventory required in-store and increase the available range through more rapid replenishment from the distribution centre
  • Manage stock rotation to remove slow-moving stock for disposition through other channels
  • Efficiently manage ecommerce orders for the highest running products while managing the extended range across the retail footprint

All of this comes however, with a very definite extra step in the process, an additional set of infrastructure and resources, additional lead time to deliver, and a need for a transportation network to and from stores. 

In working with clients, there are frequently product categories for which central distribution does not make sense or where the scale of operations does not justify the additional node in the network.    

Where central distribution does exist, we would encourage retailers to be clear on the purpose of the distribution centre, the activities that it performs and how it collaborates with retail store operations.   

Collaboration is key

There are many trade-offs to be made between distribution centre and retail store efficiency.   More costs spent in the distribution centre or in how goods are delivered can result in greater savings and efficiency of resources across the retail portfolio.  Flexibility on delivery times from retail teams, including night-time access, can also result in lower transportation and delivery costs.

Only a collaborative approach between retail and supply chain teams will drive the optimal solution for the business.  As with many areas of supply chain, strong use of data can provide the roadmap to collaborative savings and more effective retail operations.    

If you have any questions on how to unlock these savings, drop us a note and we would welcome the opportunity to discuss.


Supply Chain Enabled
Supply Chain Enabled™ - Receive supply chain insights, best practices, and news
Sign up to our communications list