Electronic Retailer - May 2011 - 42

GUEST VIEWPOINT

BY CLYDE MOUNT

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42
electronicRETAILER | May 2011

Protecting Your Brand – Logistics Behind the Buy Button
marketers re-evaluate their supply chain strategies and risks on an annual basis. And the driver of most decisions is a marketer’s judgment – about their willingness to service the customer. But there are some basic rules to follow:

Marketers are paying rapt attention to supply chain and logistics experts these days – and there is no wonder why. We need look no further than the iPad2 supply chain, in which a perfectly positioned product and a market-leading brand have been compromised by earthquakes and catastrophic radiation leaks from several of Japan’s nuclear reactors – the shutdown of five essential suppliers has caused lost revenue and profits for Apple and its retail channel. I use this example to make two major points. First, that everything that occurs behind the “buy button” can affect how the marketer’s brand performs, including top line revenue, sales conversions and bottom line costs; and second, that the primary driver of supply chain decision-making is “customer service”-related. These decisions affect product cost, inventory availability, order-to-cash cycle time, returns/refunds, merchant account reserves and a host of other issues. Given the environmental factors today, leading supply chain experts are recommending that

Customer Service IS the Driver
It’s not just about the customer service agent. The basic decision any marketer needs to make is whether to invest in the inventory required to quickly meet customer demand. If your inventory position is too lean, customers cannot get their orders quickly. Or you may be forced to ship using more costly methods and from more expensive locations when demand exceeds projections. The impacts are usually pretty severe and costly – and known as the bullwhip effect in supply chain circles, where even small changes on the retail side have enormous impacts to the marketer’s ability to deliver. What kind of impacts? Shortages and backorders can spike customer service calls – in some cases by 400 percent or more! Smart marketers pay close attention to sales forecasting and build multiple inventory replenishment models to support product lifecycles and changes in demand.

Consider Risk Factors
Risk is playing an ever more important role in supply chain and logistics decision-making. Transportation costs are on the rise, driven by scarcity of trailers, a shift in control from shippers to carriers, and federal regulatory changes that affect trucker work hours. Volatile fuel prices and even piracy are included in new supply chain models. We suggest you identify major risk factors and develop a contingency plan.

Distribution Network
Another key decision point for marketers is determining where to position inventory. Approximately 65 percent of the U.S. population is located east of the Mississippi. In most cases, positioning inventory on both coasts will allow the merchant to

The majority of marketers’ customers (approximately 65 percent) are located east of the Mississippi.

Electronic Retailer - May 2011

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