Dynamic routing is a significant and emerging trend in the consumer goods industry. It enables retailers to gain important transportation-related cost savings by optimizing and consolidating shipments from suppliers. However, as more and more retailers adopt dynamic routing, their suppliers need to educate themselves and migrate from traditional static routing guides to new, dynamic-routing shipping procedures.
Suppliers must understand how these dynamic-routing mandates will impact their distribution center operations, and they need to realize why adaptation is so critical to remaining competitive. In sharp contrast with static-routing guides—published by retailers in order to outline shipping instructions, based on quantity, weight, volume, and other specifications—dynamic routing requires that suppliers send expected shipment information to retailers in advance so that retailers can determine the optimal method for inbound transportation.
Suppliers send routing requests to the retailer either through an electronic data information (EDI) transaction or via the Internet. After validating the routing request against the purchase order, the retailer replies with customized routing instructions, in the same manner in which the routing request was received. The routing response typically includes information about the ship-to location, carrier/service level, load ID, and load sequence.
With dynamic routing technology, retailers can more effectively manage the single largest and most controllable cost in the retail supply chain: transportation. Dynamic routing reduces the number of inbound shipments across several suppliers by strategically combining shipments. This enables retailers to bypass segments in their distribution network, improve efficiencies, reduce transportation costs, and lower replenishment and travel time from supplier to store, getting products to store shelves faster.
Because dynamic routing forces suppliers to provide expected shipment information in advance, changes to a supplier's planning, picking/packing, and shipping processes may be necessary. To handle the requirements of dynamic routing, suppliers need a robust warehouse management system (WMS) that has planning functionality, cartonization logic, real-time visibility, and the ability to integrate with material handling equipment. Further, as dynamic routing evolves, it will be even more critical to have a WMS with a clear upgrade path and a proactive strategy for helping suppliers meet retailers' demands.
Despite the challenges that transitioning to this system presents, implementing dynamic routing helps suppliers achieve their number one goal of satisfying their customers' compliance requirements. It can also ensure that they are shipping in the proper time-frame, to the right destination, via the correct carrier, thus reducing routing- and shipping-related charge-backs.
Finally, as mentioned above, replenishing product and getting it on store shelves faster is something that benefits both retailers and suppliers by minimizing stock-outs and increasing inventory turns. For instance, in my experience working with Gold Toe, a leading manufacturer and supplier of hosiery in Burlington, NC, adhering to dynamic routing initiatives led to improvements in accuracy of their shipment planning, a more streamlined order fulfillment process, and increased efficiency and productivity on the DC floor. These are real benefits that every supplier can certainly use.
Bob Robertson is manager, Retail Compliance, at Manhattan Associates inc (Atlanta, GA), a provider of extended supply chain execution solutions
