The retail year, with distinct seasons and four or five major inventory turns, is a thing of the past for apparel retailers and brands.
“Fast” fashion and what it means for the supply chain.
The desire for high velocity and high turnover is forcing manufacturers and retailers to adapt by rethinking their supply chains, particularly in transportation and order fulfillment.
Per unit cost to ship a product is generally lower when you have more time for delivery and more overall volume of product. But fast fashion robs retailers of the time and scale they have traditionally used to control their shipping costs. In fast fashion, shipments typically are smaller and more frequent, and they often contain more SKUs.
For retailers sourcing goods in main manufacturing locations — China, Bangladesh, India, Vietnam, Thailand, Sri Lanka, Pakistan and other parts of Asia — the cheapest shipping method is Full Container Load (FCL) ocean freight. Depending on the port and carrier — say a main port in China to a main port on the U.S. West Coast — it would cost $1,500 to $2,000 to move a 40-foot container these days. Rates for cargo heading to Europe aren’t much different.
FCL shipments are relatively easy to plan and manage for high-volume garments – white, men’s t-shirts would be a good example. They are a staple sold year round and produced by a small number of manufacturers.
However, for fashionable specialty items typically made in smaller, regular-repeat batches by a broader range of manufacturers, FCL doesn’t represent as neat a solution because the frequency and location of the orders tied together for consolidating into an FCL is much more complex to manage in order to optimize cost.
Less than Container Load (LCL) shipping is often a seen as an alternative in these situations, but realistically it’s too pricey. Buyers are paying for space by the “cube” or loading meter – 60 cubes per 40-foot container. They have to pay the documentation, customs clearance, carriage to port and other fees as they would for a full container. It’s simply not efficient.
The answer is cargo consolidation
Companies with sophisticated logistics operations look to consolidators who can help them optimize their origin-end supply chains and use container freight stations to combine, book and move shipments in as few containers as possible.
Look for a consolidator with:
- A network enabling it to draw sufficient volume from a particular origin port, and moving to particular local destinations to your business. Most of the major freight forwarders can offer this, but look for fit around your business locations. Otherwise you will pay the transportation by road at either end.
- Strong systems that enable consolidators to track a client’s Purchase Orders, and manage them with what is arriving from their manufacturers. Consolidators use these Purchase Order management systems to manage vendors, optimize shipments and operating windows, and adjust the fill of containers. That’s how they manage schedules and overall optimization of end-to-end movements.
- A container freight station (CFS) or warehouse conveniently located near the port or catchment area for export cargo (not one for inland domestic cargo). The closer to port, the more you can minimize “drayage” – short-haul trucking time, distance and cost to get from the station to port.
- Longer hours. Typically, your CFS locations need a long work day, anywhere from 12 to 18 hours with enough staff to sort cargo, stuff containers and arrange moves efficiently day after day. That’s especially true during peak seasons when fast fashion is trying to meet busy holiday period shopping demands.
The real savings with consolidation aren’t in shipping costs. Using a consolidator allows a retailer to buy stock drip-feed style, replenishing with smaller orders rather than placing large orders for goods that go into warehouses as stationary inventory. In other words, consolidation allows for a more careful match between ordering and selling, so inventory levels overall come down.
Smart use of consolidation leans the supply chain. Retailers and brands tie up less working capital in purchasing, inventory and warehousing, which is a saving significantly larger in value than that achieved by squeezing freight rates indefinitely.
What to do and what to ask when you’re looking for a consolidator
- Be ready with clear, fact-based information. What volumes are you moving? Do you have a profile of your Purchase Orders over a prior period and the shipment profile that they generated?
- Know the key pain points that you have experienced, in terms of costs or operational failures during that period.
- Look for providers who can develop some what-if scenarios. Review your orders, cargo volumes, shipping regularity, vendor locations. Ask yourself if you can juggle consolidation locations and run your cargo through an amended network more cheaply?
- Ask your buying team if they are flexible enough to change ports and container freight stations? What would they need to be able to make changes?
- Find out what pricing advantages your vendors have at certain locations? Have you calculated the trade-offs of adjusting your vendors’ pricing in order to ship to a port and container freight station that might offer savings and better service?
For more information about Agility’s retail logistics services click here