Positioning inventory strategically

By: | at 08:00 PM | Channel(s): Logistics  

Suppliers of big box retailers gain competitive advantage by placing smaller levels of stock at a greater number of key locations.By Peter A. Buxbaum, AJOTSuppliers of big box retailers like Wal-Mart and Target live in a competitive environment. It is to their advantage to be as responsive as they can to their customers’ needs to stock their shelves.
Price and product continue to play their roles in purchasing decisions, but getting products into the hands of their customers on time, and ahead of the competition, is increasingly becoming a focus for achieving a competitive edge. If merchandise arrives late or the wrong shipment is delivered, suppliers often have to pay a penalty. Worse, still, they could lose the customer.
That is why increasing numbers of these suppliers, manufacturers or suppliers of goods typically imported from China, are keeping smaller levels of inventories closer to their customers’ locations, rather than keeping a large central repository of stock.
“Suppliers of big retailers have many requirements they have to abide by such as delivering during specific time windows and ensuring that there are no stock-outs,” and Matthew Parrott, director of operations for A.N. Deringer Inc.’s eastern and western border offices and the company’s director of logistics. “If the inventory is located very close to the customer, it makes it easier to comply with these massive requirements.
“Many of our clients want to be able to get their goods to their retailing customers in one or two days,” he added. “They don’t want five or six days transit time to their customers.”
Parrott’s position as director of logistics gives him oversight of A.N. Deringer’s warehousing and distribution services. He is also executive vice president of US Brokers for the Association of International Customs and Border Agencies (AICBA) and is an executive board member of the Canadian American Border Trade Alliance (CAN-AM BTA).
The large retailers are thought of as massive importers in the popular mind. “But they also buy a lot of goods landed to their facilities,” said Parrott. “That means that the manufacturer is responsible to import the goods and deliver them to the store or distribution center. Wal-Mart does a ton of importing but also purchases a ton landed. It probably has to do with pricing structures and other factors such as the complexity of the importation.”
The phenomenon of positioning inventories closer to retailing customers has been ongoing for eight to ten years, Parrott noted, but has caught on more recently with suppliers to the larger retailers, who want to keep smaller inventories and get products on shelves quicker. The current economic climate also plays into the strategy.
“It has come more to forefront now,” Parrott said. “You don’t want to pay any more than you have to for inventory.”
In order to accommodate the needs of these customers, A.N. Deringer, which is headquartered in St. Albans, Vt., has set up a network of strategically located distribution centers.
The company, a privately held customs brokers and logistics provider with 500 employees, helps importers and exporters manage their supply chains more efficiently. Deringer owns and operates distribution centers at major ports of entry such as Atlanta; Blaine, WA, which is between Vancouver and Seattle; Detroit; Hartford; Highgate, VT; Los Angeles; Houston; Chicago; Miami; Cincinnati; and Buffalo, Champlain, Ogdensburg, and Alexandria Bay, NY Deringer’s business lines also include logistics, US customs compliance consulting, customs brokerage, international freight forwarding, warehousing and distribution, cargo insurance, and US Department of Agriculture meat inspection.
In order to help its supplier customers with their inventory placement, logistics, and distribution needs, it first goes to lengths in order to understand the needs and wants of its customers. “Once we understand that, we build a program accordingly,” said Parrott. “This doesn’t work for everybody. We try to provide

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Peter Buxbaum has been writing about international trade and transportation, as well as security, defense, technology, and foreign policy, for over 20 years. Besides contributing to the AJOT, Buxbaum's work has appeared in such leading publications as [em]Fortune, Forbes, Chief Executive, Computerworld, and Jane's Defence Weekly[/em]. He was educated at Columbia University.