Suppliers must prime operations - Guest Column - Tedford, Kevin - Column

DSN Retailing Today,  Feb 9, 2004  by Kevin Tedford

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Recent economic reports have given retailers a glimmer of hope. After all of the doom and gloom that dominated the economic news of summer's past, signs are pointing to an improved economy. Putting cynicism aside, adept retailers are preparing by gearing up for the economic upturn.

Financial forecasters predict 2004 U.S. economic growth will be the strongest since 2000. Primarily driven by tax cuts and low interest rates, the United States will continue to enjoy fast growth. The long-beleaguered manufacturing sector is anticipating formidable growth with factory jobs back on the rise.

Thanks to the recovering economy, most labor market indicators are decidedly upbeat and the Dow Jones has climbed past the 10,000 barrier. The Expectations Index shows consumers hold a positive future outlook. With the amplified holiday spending last year, 2004 is off to an encouraging start.

The assortment of varying economic elements and cautious consumer confidence is either the perfect mix for cyclical sales joy or cyclical distribution nightmares--depending on how prepared businesses are to respond to increased consumer demand.

Strategic operations leaders possess the ability to respond to fluctuations in demand because they have instituted a dynamic distribution operation. There is nothing worse than being saddled with a static distribution model. Having the ability to respond with flexibility, adapt with speed and distribute on demand will allow suppliers to seize market opportunities and excel in the emerging economy.

The retail outlets and big box stores hold a dominant market position because they have the golden combination of shelf space and consumers. The competitive landscape that exists among suppliers will lead to the notable success of some retailers and the utter failure of others. It is the organizations that provide products to the big box stores in the most efficient, compliant, timely and accurate manner that will win coveted shelf space and ultimately increase market share.

Those who are not prepared or have highly labor-intensive practices will find profit margins continuing to decrease. The big box stores will continue to impose more upon their suppliers, and if the processes are not up to snuff, the stores will look to other suppliers who can provide what they want, when they want it and in the manner they prefer.

So how does a company gear up their distribution operations to stay afloat and meet the inevitable myriad of demands? It's not a one-size-fits-all solution. Customary methods such as updating your software or hardware are not always the keys to immediate success. Capital spending plans improved last year, with 12% of ceos reporting an increase in their companies' capital spending plans, but spending alone will not breed operational excellence.

In order to succeed in the evolving economy, suppliers must establish a strategic plan for their distribution needs and prepare for future challenges and opportunities. This plan must be comprehensive and flexible enough to achieve performance goals as customer demands continually change.

In addition, critical issues like coordinating multiple vendors, SKU proliferation, cyclical labor, compliance, chargebacks and reverse logistics all play into the performance of a distribution operation. Companies will benefit by partnering with an outside expert capable of not only identifying the numerous facets that facilitate or prevent optimal operations, but also able to wisely implement actions for advancement.

Kevin Tedford is the vp of consulting services for Forte Industries (www.forte-industries.com), a distribution operations improvement firm, which supplies consulting and engineering services. The scope of Forte's projects range from reconfiguration, expansion and consolidation of current distribution facilities, to the development of new, fully automated facilities.

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