Friday, November 30, 2007

Supply Chain Strategies in Retail

Retail industries involve the sale of new or used goods to end consumers for personal or household consumption. Cut-throat competition is becoming tougher in retail space with growing supply and demand. Hyper-markets and Super-stores are battling each other on every major corner while direct marketers (including catalogs and online sites) are stealing customers from stores.

Retail industries need to continuously improve on the process and leverage on the core competencies and therefore there is a need for a foundation that provides accurate information wherever and whenever required. This calls for a strategic management of supplies and inventory. A change from in-store paper based environment of registering sales in retail shops to an online shopping environment. For this there is needed an integration of the data to increase customer satisfaction and increase productivity.

Enriching category, item planning, streamlining product introductions and other business strategies alone are not sufficient to sustain and over-grow in the market place. Real-time visibility to sales and order status, in-store kiosks, and service desk enhancements and strategic technologies to track inventory have become the call of the hour to improve the customer experience and further differentiate the brand. New efficiencies in managing stock and collaborative forecasting and replenishment help ensure that the products customers want are readily available on store shelves. This can be done by employing a strategy as given in the figure:

The basic challenges handled by this are forecasting and Inventory Management for JIT replenishments of products, peak season demand handling, order management in case of retailers with multiple outlets, warehouse management in case of multiple outlets, introducing new products and handling variety of items.

These strategies for retail industry can be summed up in 4 points: -

1. Bulk-Breaking: Orders can be done in smaller lots with a good understanding with the supplier. This can be achieved by following ways: -

· Spatial Convenience: Strategically locating the outlet with distribution networks and warehouses located proximally.

· Suppliers hold inventory

2. Vendor Managed Inventory: In this case, the vendor himself is given the responsibility to handle the inventory. A space for the vendor is rented in the outlet, and he takes care of the shelves and the space. It is a 2-way agreement wherein the vendor gets the space to market his product by interacting one-to-one with the customers.

3. Point of Sale Information System: As soon as one stock keeping unit moves out of the store when purchased by a customer, the information readily flows to the supplier.

· He is given access to the inventory database.

· A re-order point can be imposed based on consumption pattern and the supplier is asked to fill the shelf upon inventory reaching the re-order point.

4. SRM - Supplier Relationship Management:

· Relationship with supplier should not be a marriage of convenience. Supplier has to act in ways more than what is required.

· By providing special offers, discounts and incentives, the supplier savors the relationship. This also serves as a promotion strategy for the outlet.

Also a relationship with the direct manufacturer can be established as in Farmer-Corporate Relationship.

With the retail sector booming its way through the country, the need of the hour for every retailer in the industry is to cut across the competitive boundary and bring in cost-effective methodologies that work out ways of providing enhanced customer service and satisfaction.

Adapted from various sources

1 comment:

aditya kavi raaj chennuru said...

short and crisp it is... probably u could cover the logistical strategies used like milk runs, cross docking etc in a future issue...

Visitor Counter by Digits