Retail Supply Chain Management

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Retailing refers to the activities that market products and services directly to consumers for their personal or household use. Retailing originated from a French-Italian word meaning the division of a small piece from the bulk. In the past, retail organisations have used various methods to control inventory levels, product quality, expenses, and timing. However, with the advent of supply chain management (SCM), these organisations are now able to manage their supply chains more effectively and efficiently. SCM is a holistic approach to managing the flow of goods and services from suppliers to customers. It encompasses all aspects of the supply chain, from procurement and production to warehousing and distribution.

What is Supply chain management (SCM)?

Supply chain management (SCM) is a process that many organizations use to synchronize the flow of physical goods and associated information from production line of low level component suppliers all the way to the end consumer. It generally includes managing inventory, forecasting demand, and planning production. In recent years, there has been an increased focus on SCM due to globalization and the need for companies to be more efficient and cost effective.

The significance of an effective Supply Chain Management (SCM) has long been realized in terms of its potential to reduce costs and time in the procurement process. However, recent studies have also shown that SCM can have a significant impact on reducing inventory levels, freeing up warehouse space and reducing carrying costs.

Some Definitions of Supply chain management (SCM)

Supply chain management is the integration of key business processes across the supply chain for the purpose of adding value for customers and stakeholders. (Lambert, 2008)

Supply chain management is the systematic, strategic coordination of the traditional business functions and tactics across these business functions within a particular company and across businesses within the supply chain, for the purpose of improving the long term performance of the individual companies and the supply chain as a whole. (Mentzer, 2001)

A supply chain management system provides the right quantity at the right time at the right place by integrating suppliers, factories, warehouses, and stores.

Stages of Supply chain management (SCM)

The following stages may be involved in a typical supply chain:

  • Component/raw material suppliers
  • Manufacturers
  • Wholesalers/distributers
  • Retailers
  • Customers

A firm’s success depends on its ability to design, build, plan, and operate its supply chain effectively. Facilities, inventory, transportation, and information can be a significant factor in the success of the firm if the company has an efficient strategic framework.

The importance of supply chain management to satisfy customer needs can also be seen in the fact that it ensures regular supplies at the points of purchase where the customer makes the purchase. The more a company focuses on its supply chain, the more it will be able to satisfy the needs of its customers. Another important thing is that companies should devote more time to developing the supply chain so that it will be as effective as possible.

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Development in Supply Chain Management

The evolution of supply chain management studies can be characterized by six major movements:

  • Creation
  • Integration
  • Globalization
  • Specialization Phases One and Two

Creation era

It was the assembly line that first applied the concept of supply chain management in the early 20th Century, while the word was first used by industry consultants in the U.S. in 1980. During that time, large scale operations in some countries like Japan felt the need for reengineering and cost reduction programs, as well as other developments in the industrial sector. Therefore, companies felt that they needed to develop effective supply chain management in their organization to reduce costs and improve performance.

Integration era

In 1960, electronic data interchange led to the development of the integration era, which took shape in 1990 with the introduction of enterprise resource planning (ERP) systems. The internet based collaborative system continued to develop and expand throughout the 21st century during this era.

During this era, the main theme was to integrate information and the activities that were related to each other so that they could perform better than before. This era was particularly important when materials were manufactured and supplied in large quantities.

Globalization era

In the third movement of supply chain management development, the globalization era, which was the third movement of supply chain management development, globalization had a positive effect on supply chain management as well. Supply chain management began to follow international standard mechanisms at this time. Supply chain management had broken all national boundaries and started taking the help of other countries.

The trend started around 1980 when organizations began to integrate global sources into supply chain management. It was basically done to gain competitive advantage, add value, and reduce costs.

Specialization Era Phase One

Companies began to think about the core competencies of their work during this period in order to achieve a high level of quality and low cost. A number of organizations began outsourcing their functions to organizations that had core competencies in completing them. By distributing management across specialized supply chain partnerships, supply chain management transcended the walls of the organization.

By specializing manufacturing and distribution, multiple supply chains are formed that incorporate the specific needs of products, suppliers, and customers so that a product can be manufactured, designed, distributed, marketed, sold, and serviced.

Specialization Era Phase Two

When transportation brokerage, warehouse management, and non-asset based management had reached an advanced stage of maturity, supply chain management developed after the inception in 1980. In order to improve supply chain planning, collaboration, execution, and performance management, it was necessary to improve supply chain coordination, collaboration, and execution.

Similarly to outsourcing manufacturing and distribution, supply chain specialization helps companies improve their overall competencies.

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Supply Chain Management Framework

There are four levels to understanding supply chain management in the framework.

Strategic

A supply chain management strategy is basically a way to understand how it can add value to customers. Supply chain management helps determine what basic and distinctive services customers require. What can supply chain management do to meet these needs? Can supply chain management capabilities be used to provide unique customer services?

Structural

It is aimed at finding out whether the organization should market its product directly to its customers or through a distribution channel. How should a supply chain management network be structured? How many warehouses should there be and where should they be located? What is the mission of each warehouse?

Functional

A supply chain management operation requires the ability to provide optimal operating functions. Decisions such as transportation management, warehousing, inventory control, material management, and forecasting all fall under this heading. To attain functional excellence in the operational stage of supply chain management, a process-oriented approach is needed.

Implementation

Planning and strategy development lead to implementation, which is the core of supply chain management. Without this head, all plans and strategies have no meaning. Here are the overall organizational structure and individual responsibilities. Supply chain management should have a measurement system that can find the function of the supply chain management.

Although these functions are independent, there are some factors that influence the structure and type of supply chain management.

These factors are:

Geographical factors: It is not possible for an organization to follow the same supply chain strategy everywhere it has supply chain operations in many countries. As a result, the supply chain management system may have to deal with uncertain transportation systems, larger inventories, and other uncertain necessities.

Cultural factors: Those involved in the process of supply chain management of any organization; if they have different cultures, they may develop friction and distrust among participants. It can make it difficult to build close ties. Depending on the country’s law and other regulations and rules, it may not be possible for the organization to adopt the same strategy as elsewhere.

Read Also: HR Policies: Meaning, Functions and Need

Importance Of Supply Chain Management in Retail Industry

The retail industry can be defined as the sector in which companies sell finished goods to end users in the general public, and the supply chain management function is to provide goods to potential customers at every possible selling location.

For retailers and for companies, supply chain management is crucial to ensuring the right products are delivered on time at the right price and profit.

Core functions of supply chain management in retail

The core functions of supply chain management in retail can be divided into the following categories:

  • Forecasting
  • Information
  • Logistics
  • Distribution network configuration
  • lnventory management

Forecasting

Forecasting is a key component of supply chain management, which refers to all strategic decisions and planning, including:

Production forecasting: scheduling, inventory and other planning.

Financial forecasting: plant or machine investment, budgetary planning.

Marketing forecasting: sales force allocation, promotions and other marketing needs.

Personnel forecasting: workforce planning, hiring.

Demand forecasting: forecasting of future demand of products.

Information technology tools such as software and other methods can make forecasting more effective, and they can play an important role in the organization’s future planning.

Information

Among the things under this head are demand signals, forecasts, inventory and transportation information. Supply chain management has become increasingly dependent on information, and with the development of information technology, it has become easier and more systematic for organizations to collect and analyze data, which is of great benefit to the organization and to the accuracy of its operations. As a result of supply chain management in the organization, information about production, inventory, and other areas of the organization is also flowed into the organization so that the organization’s operations, especially its supply chain, can be more effective and efficient.

Logistics

A logistics strategy involves managing the flow of goods, information, and other resources from the manufacturing unit to the consumer. It involves managing inventories, warehouses, and utilizing time and place.

Distribution network configuration

As part of supply chain management, warehouses and inventory will be chosen for a specific market based on this decision. It will also determine the set of warehouses and inventory at that location. The transportation cost will also play an important role in the organization’s warehouses and inventories. Furthermore, it determines what services customers receive. For an organization to survive in this competitive market, it requires an efficient distribution network, which is why supply chain management becomes increasingly important when determining these factors. Consequently, distribution network configuration determines the number and location of suppliers, distribution centers, warehouses, and production facilities.

Inventory management

A company’s inventory is essentially its working capital stored in the form of materials. The purpose of inventory is to deal with fluctuations in demand, as well as lead times. It also involves deciding on the quantity and location of raw materials, work in progress, or finished goods. As a result of inventory, the company can be sure that it has enough storage for a specific period of time under any circumstances.

It is important for a distributor to have an inventory, and it plays an important role in supply chain planning decisions. Across all industries, inventory management is of utmost importance, and the success of supply chain management is heavily dependent on its efficient use. Forecasting future demand requires an in-depth analysis and analysis.

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