Executive Briefings

The Retail Industry's Supply Chain Continues Its Transformation

Analyst Insight: Over the last three years the retail industry has seen a great many changes, helping to streamline retail supply chains and create more cost savings for retailers. This efficiency-driven approach was in large part a response to the "great recession," and it has sustained the industry through these challenging times, putting them in a greater position for success as we look ahead to the future. So where do we go from here? - Casey Chroust, executive vice president, Retail Industry Leaders Association

In terms of sourcing, many companies are exploring near-sourcing opportunities for time-saving benefits as prices in China continue to rise.

On the trade front, after being mired in political debate for years, retailers welcomed 2011's passage of the three Free Trade Agreements with Panama, Colombia and South Korea - the most significant trade action since the North America Free Trade Agreement in 1994.

The greatest benefit of 2011's activity on trade is that it clears the way for additional job-creating trade agreements, most importantly the Trans-Pacific Partnership (TPP). The TPP agreement is an Asia-Pacific regional trade agreement currently being negotiated among the United States and eight other partners - Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam. The TPP partners include some of the fastest-growing markets for U.S. exports and U.S.-branded apparel products, and U.S. yarns, textiles, and other components - increasing U.S. employment opportunities.

The TPP holds a lot of potential for the future of all participating countries and could result in new market access for U.S. exports of industrial goods, services and agricultural products. It also means strong intellectual property rights and investor protections from the other TPP nations. In particular, retailers want meaningful rules and elimination of tariffs on apparel and footwear - which would not only provide U.S. consumers with fashionable apparel at more affordable prices, but would also facilitate business partnerships that support U.S. jobs via global value chains that rely on trade.

On the environmental front, retailers will continue to work with drayage truckers, independent owner operators, and licensed motor carriers at the ports to implement cleaner trucks. They will continue to expand empty-miles programs, and to partner with EPA SmartWay programs - encouraging carriers to embrace the operational practices and efficiencies of the program. Sustainability continues to be a big theme moving forward. Retailers will continue to partner with carriers to develop innovations for the benefit of the environment, operational costs and service levels.

Legislatively speaking, implementation of the hours of service rule - which retailers have been opposed to - will be front and center. The new rule will increase both highway congestion and the cost of moving goods via trucks. Additional capacity needed to transport the same amount of products will place more trucks on the road at the highest volume of traveling periods. The impact: damage to the economy and the environment.  Changing the way business has been done for more than a decade guarantees litigation on this issue in 2012.  Retailers will be watching carefully.

Finally, retailers will seek implementation of surface transportation legislation in 2012 and funding for much-needed national and regional freight projects.

                                        The Outlook

2012 will be a growth year. Recovery will take time given the challenges in the global economy, so retailer forecasts will have to be tempered in order to ensure success.

Process improvements made in 2012 will have a great many retailers and shippers primed for profit and growth as the economy improves. Long-term retailers will look to sustain 2012 gains, anticipating a balance in capacity between shippers and carriers so that forecasts can be made with certainty, then realized.


Keywords: Retail; Legal, Govt. & Regulatory Issues, Business Strategy Alignment, Supply Chain Analysis & Consulting, Global Supply Chain Management, Free Trade Agreements, Trans-Pacific Partnership, EPA SmartWay, Apparel, Tariffs

In terms of sourcing, many companies are exploring near-sourcing opportunities for time-saving benefits as prices in China continue to rise.

On the trade front, after being mired in political debate for years, retailers welcomed 2011's passage of the three Free Trade Agreements with Panama, Colombia and South Korea - the most significant trade action since the North America Free Trade Agreement in 1994.

The greatest benefit of 2011's activity on trade is that it clears the way for additional job-creating trade agreements, most importantly the Trans-Pacific Partnership (TPP). The TPP agreement is an Asia-Pacific regional trade agreement currently being negotiated among the United States and eight other partners - Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam. The TPP partners include some of the fastest-growing markets for U.S. exports and U.S.-branded apparel products, and U.S. yarns, textiles, and other components - increasing U.S. employment opportunities.

The TPP holds a lot of potential for the future of all participating countries and could result in new market access for U.S. exports of industrial goods, services and agricultural products. It also means strong intellectual property rights and investor protections from the other TPP nations. In particular, retailers want meaningful rules and elimination of tariffs on apparel and footwear - which would not only provide U.S. consumers with fashionable apparel at more affordable prices, but would also facilitate business partnerships that support U.S. jobs via global value chains that rely on trade.

On the environmental front, retailers will continue to work with drayage truckers, independent owner operators, and licensed motor carriers at the ports to implement cleaner trucks. They will continue to expand empty-miles programs, and to partner with EPA SmartWay programs - encouraging carriers to embrace the operational practices and efficiencies of the program. Sustainability continues to be a big theme moving forward. Retailers will continue to partner with carriers to develop innovations for the benefit of the environment, operational costs and service levels.

Legislatively speaking, implementation of the hours of service rule - which retailers have been opposed to - will be front and center. The new rule will increase both highway congestion and the cost of moving goods via trucks. Additional capacity needed to transport the same amount of products will place more trucks on the road at the highest volume of traveling periods. The impact: damage to the economy and the environment.  Changing the way business has been done for more than a decade guarantees litigation on this issue in 2012.  Retailers will be watching carefully.

Finally, retailers will seek implementation of surface transportation legislation in 2012 and funding for much-needed national and regional freight projects.

                                        The Outlook

2012 will be a growth year. Recovery will take time given the challenges in the global economy, so retailer forecasts will have to be tempered in order to ensure success.

Process improvements made in 2012 will have a great many retailers and shippers primed for profit and growth as the economy improves. Long-term retailers will look to sustain 2012 gains, anticipating a balance in capacity between shippers and carriers so that forecasts can be made with certainty, then realized.


Keywords: Retail; Legal, Govt. & Regulatory Issues, Business Strategy Alignment, Supply Chain Analysis & Consulting, Global Supply Chain Management, Free Trade Agreements, Trans-Pacific Partnership, EPA SmartWay, Apparel, Tariffs