April 2011 - Malnor

Import
Challenging
supply
tradition
Traditionally, disparate elements governed the supply
chain: funding came from one source and tended to
take a one-size-fits-all approach, while managing
logistics came from another. The common thread
was the importing company’s lack of control.
That approach is outdated in today’s business world and
managing the import process and associated finance
component effectively within the overall supply chain cycle
is now even more critical in a global market.
“ . . . far more retailers will start looking at
If the acquisition of 51% of Massmart by global retail giant
Walmart is approved by the Competition Tribunal many local
retailers will be forced to relook their traditional financing
models and supply chain processes. This is the view of
Adam Orlin, CEO of Blue Strata, an imports solutions
and finance provider.
Orlins says from the outset Doug McMillon, President and
CEO of Walmart International, has said it is Walmart’s
mission to save people money and the group’s ability to
source products internationally coupled with its bulk buying
power will ensure a highly competitive pricing structure for
Massmart. For local retailers pressure to become more
price competitive will place additional strain both on gross
margins, which are already relatively low, and traditional
sourcing models.
Orlin says now, more than ever, retailers need to integrate
their financial and physical supply chain onto a single
platform so they can better manage the order management,
forex management, logistics and product costing in order to
manage these risks.
Orlin anticipates that far more retailers will start looking at
direct imports. “One of the challenges of importing goods
has traditionally been the retailer’s lack of warehousing
capacity, or the associated cost of stockholding to hold
extended stock ranges or large quantities or stock for an
extended period. This has driven their preference for the
18
direct imports . . . ”
CEO of Blue Strata, Adam Orlin
flexibility of utilising a local holding supplier. But, with
increased price competition, retailers are now being forced
to rethink their sourcing and funding strategies.”
In order to better manage costs and stock levels, large
retailers are turning to centralised planning models but
trying to integrate large numbers of vendors is proving
problematic. “This is where a company like Blue Strata
can step in, to help manage timelines and to provide
feedback to help manage inventory relative to the
sell-through rate to help avoid potential losses from mark
downs or loss of revenue by having the incorrect supply
for demand.
“And,” explains Orlin, “if you add the funding component to
the value-added services and access to economies of scale,
savings can be passed through to customers to improve
working capital cycles and reduce the quantum of working
capital tied up in the import transaction. In turn, by freeing
up working capital and increasing stock turn, we are
effectively giving clients up to 40% more money to fund
expansion and growth and the real ability to compete
competitively on price.”
Orlin says the company recently introduced a replenishment
model for the retailers’ own imports which compares the
costs and timelines associated with both a direct versus a
local supply model, and then combines the best of both
worlds. “In a direct model, the stock holding period is
generally limited which places restrictions on monthly Open
to Buy (OTB) positions and limits flexibility. In contrast, in a
local timeline, stockholding is generally not an issue but
there is a premium to pay for the service.” He adds that by
Blue Strata facilitating direct imports as a local supplier, the
combination of this off-balance sheet stock holding and
increased stock holding period provides importers with
the required increase in quantity and variety of stock to
trade competitively.
The bottom line is that a fully integrated model like this
allows importers to mitigate their risks and release much
needed working capital, providing them with the ability
to either increase or retain margins relative to maintaining
competitive selling prices,” concludes Orlin. ◆
EXPORT & IMPORT SA // APRIL 2011