Contributed by Tom Kozenski

It’s been nearly 25 years since Dire Straits produced the lover’s lament So Far Away. And while you can debate the relevance of the music, or even the band itself these days, the lyrics definitely relate to what’s happening at the store level in the supply chain: the stock of inventory needed to replenish the shelves in big city stores is often very far away from making it onto the shelves themselves.

There are a couple of reasons for that. One is that retail space in big cities is always tight.  Most major retailers with stores downtown and even in suburban malls don’t want to waste that expensive floor space on a stockroom.

Today, that means some retailers are starting to co-locate stockrooms not in the store, but in far-flung regional distribution centers (RDCs) – some of them more than 200 miles away from the stores.

Managing the supply chain in that environment creates the need for more retail-focused, best-of-breed productivity platforms to enhance store inventory management, sales tracking, and automated replenishment. Since virtually all of the store space is dedicated to selling and the nearest replenishment source is as far as 2 days away, it is critical that store managers know exactly what is on the shelves and available in the remote stock room so they can meet the expected demand in the days to come.

Another replenishment challenge for big city stores is that local traffic regulations may prohibit large delivery trucks in the downtown area during the day, meaning shipments often have to be delivered overnight. Those kinds of prohibitive regulations can have a significant impact on out-of-stock levels, as stores can see delays between the time they place orders and the time they receive their replenishment shipments.  So even if the needed inventory is just a few miles down the road, it might as well be in the next state. So far away.

To meet these challenges head-on, major retailers in metropolitan areas need more sophisticated capabilities than their traditional ERP (Enterprise Resource Planning) systems can offer. Instead, they are relying on best-of-breed supply chain solutions that enable them to better manage the timing of daily replenishment triggers and gain maximum product visibility – with a focus on local flexibility – when it comes to product selection and timing.

Retailers are using best-of-breed inventory management capabilities to track precisely what inventory is on the shelves, what the planogram says should be there, and what the fixture quantities are as compared to capacity. With that information, stores can maximize shelf fixture capacity while providing the best possible product assortment based on product availability within the supply chain.

The store and supply chain solutions take that information and combine it with store sales detail obtained from the Point of Sale (POS) system to calculate replenishment needs by item and/or stock-keeping unit (SKU). They also factor in new product introductions as well as products that have been discontinued.

These solutions can also take inventory detail and automatically generate suggested replenishment orders for store managers, who can review, change and approve the orders before they are sent electronically to the remote stockroom (RSR) co-located miles away at the Regional Distribution Center (RDC).

But that’s just half the battle. By leveraging the warehouse management capabilities, the RSRs can receive inventory from the RDC to hold pending replenishment requests from the store.  Pre-bought or promotional inventory with on-sale dates can flow through to the stores as well.

Then, based on the daily replenishment request, the merchandise that has been ordered by the store is picked and loaded onto trucks for delivery that night, where it is placed immediately on the fixtures in the stores before the doors open the next day.

Besides being fast, accurate and efficient, the best-of-breed approach provides the retailers with a single real-time view across the entire supply chain.

Retail space in large metro areas is always going to be tight. The innovative retailers who can leverage best-of-breed solutions to better manage their supply chains are going to have a decided competitive advantage in today’s tight economy. And they’ll find the Dire Straits tune they’re humming changes from So Far Away to Money for Nothing. 

About The Author:  Tom Kozenski is Vice President of Product Strategy at RedPrairie.  RedPrairie delivers productivity solutions to help companies around the world in three categories – inventory, transportation and workforce.  Tom can be reached at tom.kozenski@redprairie.com or www.redprairie.com.

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