SOURCE: CommerceHub

CommerceHub

February 23, 2009 09:01 ET

CommerceHub Reports on Supplier-Direct Fulfillment Strategy to Manage the High Cost of Inventory

ALBANY, NY--(Marketwire - February 23, 2009) - As the US government rushes to implement its economic stimulus package and the economy continues to slow, merchants need a strategy to manage the high cost of carrying inventory and control its impact on operating costs. CommerceHub, the Supply-on-Demand platform for supply chain integration and fulfillment solutions, has developed an industry report, "Managing the High Cost of Inventory in Today's Challenging Economy," on implementing or expanding a Supplier-Direct Fulfillment (SDF) strategy to control the high cost of inventory and logistics.

With funding markets locked up and lending rates high, many merchants are in a crunch to finance inventory capital. Many multi-channel merchants are using a SDF strategy to reduce inventory and associated expenses. In SDF, orders are sent directly to suppliers, manufacturers and distributors, who fulfill and ship merchandise directly to customers. The merchant never holds inventory on their balance sheet and typically only purchases it after receiving payment from the customer.

"The cost of inventory is often the largest asset on a merchant's balance sheet," said Steve Hamlin, CEO of CommerceHub. "Carefully managed inventory is a key metric to profitability in the best of times, in the current down economy, the impact is critical."

SDF offers multi-channel merchants the opportunity to maintain and increase product SKUs while reducing the levels of inventory held. Many are using SDF to control expenses, expand operational capacity and drive incremental growth across all channels. The CommerceHub industry report details multi-channel opportunities:

--  eCommerce, where customers place orders online and expect the product
    to be shipped to them. In a process transparent to the customer, orders
    placed online are fulfilled by drop-shippers who deliver the merchandise
    with packing slips and packaging bearing the merchant's name and logo.
--  Direct sales for large products that customers expect to be delivered
    anyway, such as furniture, appliances and big-screen TVs. Merchants carry
    floor models only, eliminating inventory carrying costs and reducing
    staffing requirements by having SDF for these large product SKUs.
--  Retail distribution, SDF allows stores to bypass distribution centers,
    directly ordering exactly what they need in a just-in-time supply model,
    reducing cycle time and staff and warehouse space for very high-turn in
    store inventory that literally flows through the channel, like jewelry, CDs
    and DVDs.
    

"The eCommerce channel has proven to be effective for creating virtual warehouses by using Supplier-Direct Fulfillment instead of buying, storing, and shipping product to customers," Hamlin noted. "A Supplier-Direct Fulfillment strategy is an effective way for any multi-channel merchant to reduce operating costs."

Whether managed internally, or outsourced to a third party, the benefits of SDF are enticing: ability to offer products without additional inventory cost risk, zero warehouse and carrying costs, and direct impact on net income and the balance sheet.

The CommerceHub Supply-On-Demand platform rapidly integrates new trading partners or connections to the more than 5,000 drop-shippers, manufacturers and carriers currently in network. It provides comprehensive tools to manage order processing, drop-ship fulfillment, supply chain visibility, branding, trading partner performance, inventory synchronization, returns processing, carrier tracking, and reverse logistics.

About CommerceHub

CommerceHub is the industry's leading provider of fulfillment and integration solutions for retailers and wholesale distribution companies. With more than a decade of experience working with Top 25 retailers, distribution supply chains and a wide array of major brand name suppliers, CommerceHub manages more than $6 billion in goods annually on behalf of such industry leaders as Costco, QVC, Staples, drugstore.com, Ty's Toy Box, Kmart, Sears, MSC Industrial Direct, Kohl's, The Home Depot, Best Buy, Meijer, Toys "R" Us, Walgreens, Overstock, Bon-Ton, Dell, Toshiba, Sanyo, Minolta, Gateway and Little Tikes.

For information on the CommerceHub Supply-on-Demand platform, Universal Connection Hub and Drop Ship Master visit www.commercehub.com.

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