Retail suppliers are not only exposed to the risk of fines associated with a tightened delivery window, but also need to be aware of the increase in manufacturer inventory carrying costs (ICC) to support these requirements. With a two day reduction in the delivery window, suppliers are now forced to absorb the buffer costs for inventory. Even early deliveries are fined because retailers, such as Walmart and Kroger, understandably, refuse to receive the products early which would start the payables clock ticking and also increase their ICC.
Procter & Gamble has been on the forefront of investing in processes and technology to meet or beat retailers’ expectations. My company, Retail Velocity, had the honor of participating in one of these projects over 15 years ago (case study overview below). To this day, I am still impressed with P&G's retail execution foresight and commitment to excellence. The processes they deployed through our VELOCITY® technology are still very relevant today for any retail supplier.
P&G understands the financial and partnership value in placing the right product, in the right place, at the right time. That may sound cliché and not difficult to those who haven’t walked the walk in the supply chain world, but in this WSJ journal article, Acosta’s CEO Steve Matthesen affirmed, “shipping complete orders on-time is a completely reasonable request, but turns out it is much harder than it sounds.” Supply chain practitioners can likely recite hundreds of reasons why a shipment may not arrive within a two-day delivery window, and those reasons could flow back all the way through to the forecasting and procurement of raw materials. Those CPGs, that are able to see all the way back in their supply chain and then forward to all their retailers’ DCs and stores, will have a greater chance of success at meeting these delivery window requirements and reducing their risk of exposure to fines and increased ICC.