financial
financial

Distribution Centers Being Skipped for Speed, Savings

Retailers and manufacturers are working to cut costs, speed deliveries and help the environment by skipping a key stop in a product's journey from overseas to shelf display — the vendor's distribution center.

financial/news
GRAPEVINE, Tex. — Retailers and manufacturers are working to cut costs, speed deliveries and help the environment by skipping a key stop in a product's journey from overseas to shelf display — the vendor's distribution center.

"Many companies want to move goods fewer miles as all of us become concerned about carbon footprint, driver supply and infrastructure," said Eric Sexauer, vice president, transportation and supply chain services at Macy's Inc. "We started looking at this in the summer of '07 — even before gas prices started rising."

Sexauer spoke about distribution center bypass last month at U-Connect '08, a technology conference at the Gaylord Texan Resort Hotel and Convention Center here. He chairs a subcommittee of a nonprofit association of retailers and manufacturers called Voluntary Interindustry Commerce Solutions, or VICS, which sets retail industry standards and was a sponsor of the four-day conference.

"Clearly, this reduces freight costs and handling costs," Sexauer said. "It reduces miles, which is green, and addresses the concern that there will be a lack of drivers when the economy picks up. It can improve speed to market — you can probably take a couple of weeks or more out of the supply chain."

Macy's tested the process with home textiles, holiday decor and some clothing last fall and this spring, and wants to enroll more vendors in the program, he said. Macy's has 14 U.S. distribution centers.

"We're starting to collaborate with key resources now — Jones Apparel Group, Liz Claiborne, Polo Ralph Lauren," Sexauer said. "We thought it would be more about sustainability and cost, and what I found surprising is I have merchants calling me and asking to do this to get the product on the floor quicker."

Cost effectiveness is major motivation.

"The savings are astonishing," said Joseph Andraski, president and chief executive officer of VICS. "It is a significant opportunity to change the way we do business."

The strategy requires tight coordination between store and supplier, particularly regarding packing and marking the cartons overseas. However, some of those tasks can be handled near the domestic port by a third party, Sexauer noted.
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