April 12, 2018

The Impact of Inaccurate Carton Contents

How to Stop Inaccurate ASNs from Stealing Sales with Out-of-Stocks and Eating Profits with Excessive Safety Stock

What are the most common and potentially costly ASN accuracy failures faced by vendors and retailers? What causes these failures and how can they be avoided? Why should you care?

What is an Advance Ship Notice (ASN) and how is it helpful to vendors and retailers?

According to Wikipedia an advance ship notice or advance shipping notice is a notification of pending deliveries, similar to a packing list. It is usually sent in an electronic format and is a common EDI document. It is important to note that ASNs in the retail environment frequently employ a GS1-128 label on every carton that is associated to the carton contents data at the item level.

Harris Says... To understand the impact on sales and inventory costs implied by blind receiving inaccurate ASN cartons, we need to answer two questions: how often do inaccurate carton contents occur and exactly how do inaccurate ASN cartons affect inventory integrity? What do you say? Click here to send us your comments

Accurate ASNs are good for both retailers and vendors, because:

• They enable the supply chain to confirm that what was ordered is what was shipped,
• They enable retailer planned receiving practices,
• They enable cross-dock receiving to speed merchandise to the stores.

Inaccurate ASNs are bad for both retailers and vendors, because:

• They create inventory errors,
• They cause the need for expensive safety stock,
• They cause inventory stock outs,
• They create lost sales.

The following subset of practices for utilizing ASNs bolster retailers’ receiving efficiency and inventory accuracy:

• Simplify the receiving process: Best practice receiving methods enable efficient receiving of shipments by scanning the GS1-128 (ASN) barcode, trusting the carton accuracy, physically receiving  the product, booking the inventory, paying the invoice, and moving to put-away, or on to the store trailer(x-dock), or onto the floor (DSD).
  
  
• Cross-Dock Merchandise (Ship To-Mark For): For accurate vendors, merchandise can be scanned in receiving and directed straight to shipping.
  
  
• Visibility to In-transit Merchandise: For merchandising, for on-line sales, and for customer support in stores.
  
  
• Support Ecommerce: Confidence in inventory accuracy enables ship-from store and endless aisle programs.

The ASN-centric practices above rely on the ASN carton contents to match the actual carton contents. This is because it is a common practice to “blind receive” ASN cartons. That is, to scan a GS1-128 barcode on the outside of the carton and then use the ASN carton content data to systemically book the carton contents into inventory.

The Impact of ASN Carton Content Errors

To understand the impact on sales and inventory costs implied by blind receiving inaccurate ASN cartons, we need to answer two questions: how often do inaccurate carton contents occur and exactly how do inaccurate ASN cartons affect inventory integrity?

Regarding the question of frequency of carton content errors we can refer to the 2017 Advance Shipping Notification and Inventory Integrity Report, authored by Dr. Brian Gibson of the Auburn University Center For Supply Chain Innovation. According to the study, these carton content error types can be expected, representing median carton errors of 8%:

Dr. Gibson’s complete study, the 2017 Advance Shipping Notification and Inventory Integrity Report, may be downloaded from www.scdigest.com/contentaccess.php?cid=14004.

Our second question: exactly how do inaccurate ASN cartons affect inventory integrity is effectively and eloquently addressed by this video, taken from the Compliance Network's YouTube pages:

To avoid the inventory problems described in the video, such as ghost inventory, out of stocks, excessive stocks and other challenges caused by blind receiving of inaccurate ASN carton contents, retailers can implement the following solutions:

• Audit ASN carton contents using a carton auditing solution that leverages ASN carton data and  supports the following basic procedure:
  
  

• Audit some of all vendor shipments and more of shipments from vendors that are known to be prone to carton content errors.
• Implement a vendor classification solution based on historical vendor performance, which can automate the process of minimizing audits for very accurate vendors and focus more audit resources on those vendors that are most likely to ship cartons whose actual contents does not match the ASN carton contents.

It has never been more important for retailers to ensure excellent supply chain execution of the retail merchandising plan. Therefore, it is essential that retailers implement solutions to enable their extended supply chains to continually improve efficiency and inventory integrity in order to effectively compete with brick-and-mortar, online markets, or hybrid business models.

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