June 2005 | Commentary | Checking In

Following the Retail Trail

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Where consumer demand goes, retailers follow. They've progressed in tune and in time with customer needs—from the general stores of the Old West, to turn-of-the-century catalogers, to urban centers and department stores, to suburban shopping malls, and now to web retailing. As the fight for customers grows increasingly more competitive, retailers seek any logistics advantage they can find.

Some retailers are finding competitive edge in rural areas, for example, locating distribution centers where land is relatively cheap and logistics labor is abundant. Other smart retailers are locating DCs away from congested ports to get access to a larger driver pool.

To keep costs competitive, retailers are evolving in other ways, scouting out low-cost manufacturing locations and taking greater control of inbound product flows. While the Asia-West Coast trade corridor bears the lion's share of import volume, supplying many retail and wholesale outlets around the country, U.S. retailers are increasingly forced to consider alternate sourcing options.

Some are turning to East and Gulf Coast ports to gain access to cheaper labor, proximity to major East Coast markets, more advanced logistics infrastructure, a more pro-business political climate, land availability, and contingency planning for supply chain meltdowns.

"Retailers are big customers for inbound container services and they have realized distribution economies by locating close to alternate ports of entry," says Ed Bee, founder and president of Taimerica, an economic development consultancy based in Mandeville, La.

Carriers used to call the shots port-wise, but retailers now take control in more and more instances. As you'll see in East Side Story: Ocean's New Direction, retailers are interested in all East Coast ports are doing to enhance service by allocating capital for terminal improvement projects to accommodate greater container throughput.

Corner-office involvement in logistics is another way retailers stay competitive. In companies where upper management "gets" logistics—such as Borders and The Limited—line managers are able to quickly drive change, and stay responsive to customer demands. You'll find several examples in Logistics at the C-Level: Are We There Yet?

Nowadays, we consider the Targets and the Wal-Marts of the world supply chain management and logistics leaders. We marvel at their visionary approaches to RFID and lean inventory processes, and their ability to drive costs down when warehousing, transportation, and real estate prices continue to rise.

Retailers understand what demand-driven logistics is all about. They will continue to evolve, following the trail of consumer demand and doing whatever it takes to best serve their customers.

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