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The business activities involved in selling goods and services to consumers for their
personal or household use comes under the sector called retail.
Retailer add value to product by making it easier for manufactures to sell and for
consumers to buy.
Role of a Retailer
Providing Assortments.
Breaking Bulk.
Providing Services.
Holding Inventory.
Providing Assortments
Retailer also provide services which makes the customers shopping experience a
comfortable and convenient one.
Many retailers have sales people available at the store to demonstrate about the
qualities and advantages on purchase of the product.
Holding Inventory
There are several retails that exist today. Among the more common ones are
Ownership
Store-based
Services Vs Goods
Non-store
Ownership Retail Format
Retailers are classified based on their ownership of the store. Ownership can be
different types like
Independent Stores
Chain Stores
Franchise Stores
Consumer Cooperative
Chain Stores
Retail chain stores would have number of stores under its banner.
Leased departments are areas in a retail outlet, where they are rented or leased to
another retailer.
The retail store takes a percentage of profit as a charge for the space provided.
In a vertical marketing system, the entities in the distribution chain lay dual roles
and act as a unified system.
For example Adidas and Apple are manufacturers and retailers as they have of
their own retail outlets.
Consumer Cooperative
Customers have a share in the ownership and profits of the store, through
reductions or dividends.
Amway , Herbal life are well known consumer cooperatives.
Store Based Retail Format
Retail stores here are categorized into two main types of stores
Food Retailers.
Food store retailers focus mainly on food products such as ready to eat products
and food preparation items. Some food retailers are
Convenience Store
Conventional Supermarket
Combined store
Warehouse Store
Convenience Store
Convenience stores are those stores that are located in towns, cities or suburban
locations.
Supermarkets are large self service stores that have a complete line of food
products.
Here the customer gets a view and choice of different food product of different
range of price.
In other words it can be referred to as one stop shop for all food products.
Combined store
Combined stores have a combination of foods and another product like medicine
etc.
Box stores are large stores that dominate just one area of merchandise like toys,
bicycles etc.
Warehouse store:
Warehouse stores are large scale members only stores which combine cash and
carry wholesaling with discount retailing.
General Merchandise Retailers
General merchandise retail stores are stores which sell a variety of merchandise
such as apparel and accessories, furniture and home furnishings, small wares and
hard wares, and food.
General Merchandise Retailers (Contd..)
Variety store : These stores sell a variety of merchandise in low and discounted
price ranges.
General Merchandise Retailers (Contd..)
Traditional Department Store : These stores are large stores that are divided into
different departments. They offer a large variety of products from clothing to
accessories.
Off-Price Chain Retailers : These retailers are retailers that find exceptional deals
on well known brand name clothing and resell them at low prices.
Factory Outlet : These stores are company owned through which merchandises are
sold at low prices than at a regular store.
General Merchandise Retailers (Contd..)
Membership Club : These are part of a store where the customer possess a
membership card which entitles him to discounts, loyalty points etc.
Flea Market : These stores that are placed in flea market (Mostly Asian Markets)
are also considered as retailers and are generally temporary.
Services And Goods
Retail businesses also include services providers, like hotels, hair salons, etc.
Transactions take place between the service providers and the customer where the
customer does not purchase or acquire ownership of a tangible product.
Services And Goods (Contd..)
Rented Goods Services : This area of service retailing is provided when consumers
lease and use goods for specified period of time.
Owned Goods Services : Here goods owned by consumers are repaired, improved
or maintained by service retailer.
Non-Goods Services : when intangible services other than goods are offered to
consumers leading to them experiencing a service is known as non-goods services.
Non-Store Retailing
Vending Machines : Here products are sold through vending machines as in the
case of Pepsi, Coca-Cola, Nescafe etc.
Web Based Retailing : Here products are retailed out to customers by online
shopping through the world wide web. For example Amazon. com is popular site
for online shopping.
The retailer sits in between the vendor and the customer and adds value to the
product manufactured by the vendor in order attract the customer to buy the
product.
A supply chain is a network of facilities and distribution options that performs the
functions of procurement of materials, transformation of these materials,
transformation of these materials into intermediate and finished products and the
distribution of these finished products to the customers.
This purchase order may at times be based on the forecasting of demand for
products.
Based on the longevity of the goods, they can be broadly classified into two types:
Perishable Goods
Non-Perishable Goods
Perishable Goods
These goods or products generally have very short life time or in other words these
products are needed to sold out in short duration of time after being supplied by
the vendor.
The retailers main target is to sell these products as soon as possible to the end
user.
These goods or products generally have longer life time and can be stored in the
depots for a longer time before it is supplied to the store.
These products have a time limit known as shelf life by which the retailer knows the
time limit within which he has to sell the product to the end customer.
Depot or Warehouse
After the vendor supplies the goods according to the purchase order the goods are
placed in a temporary storage house known as depot or warehouse by the
retailer before sending it to the store to sell it to the end user (customer).
There are different types of depots owned by vendors, retailers and private
personnel.
Types of Depots
There are various kinds of depots but some generally used are listed below
Regional Distribution Center (RDC) : These depots are owned by retailers in order
to stock the merchandise, categorize it and ship it to its final destination (store).
These are located geographically to supply goods to stores within its range.
Hub : These are privately owned depots. They collect goods from different vendors
and supply goods on demand of a specific retailer. The hub plays an intermediary
role between small scale vendors and retailers. In other words hub owners are
retailers for retailers.
That was a brief explanation
about the components of retail
business
Terminologies with respect to Wareho
General Layout of a Warehouse
From
Vendors Reception
Reserve / Storage Area
Area
Trucks
Shipping
Area Picking Area
To
Customers
Area
A part of the Warehouse Will have a Name
Identified by the type of function carried out there
Contains Aisles
Aisle
Long rows of Locations
Can be subdivided into Bays, Slots, Levels & then Locations
Location
A place where the Cartons / Materials are stored
Full Palette, Half Palette, Mono-carton etc
A typical Aisle
Details of an Aisle
Le A Aisle
B Bay
S Slots
Le Levels
Loc - Location
S
S S
S
Some Warehouses
B may not use the
Loc Slots at all. i.e., One
Bay = One Slot
A The Aisle shown in
the picture is a
Static Aisle
A Dynamic Aisle
A range is divided into modules. Commodities in a range are ranked first based on
sales performance and then sub-divided into modules.
Core Module - contains the commodities that every store would carry if space were
available.
Contingency space - some space reserved for future activity. This could be used
later to add more non-core or any new lines. Contingency space is normally
allocated as a percentage of line number of a department along with minimum and
maximum limit or it can also be set as a whole line no. It can be set either by Dept
or by Profile or by Store. The contingency space by Store would override
contingency space by Dept or by Profile
Demand Forecasting
Once the vendor get finalized for procuring the merchandise, Purchase Orders are
raised to the required vendors to procure the items
Once the purchase order has been sent, it is usually acknowledged by the
vendor in some form.
On the basis of Supply Chain and Logistics involved, they can be classified as:
Direct to Store PO (DTS) For this PO, a vendor sends a merchandise requested
by the retailer directly to the store location specified on the PO
ASN number should be unique and can be created against single or multiple
purchase orders.
ASN Contd..
Order information
Product description
Physical characteristics
Type of packaging
Marking
Carrier information
Configuration of goods within the transportation equipment.
Invoice
The purpose of the Invoice transaction set is to provide for customary and established
business and industry practices relative to the billing for goods and services provided.
Item
Quantity
WMS is a system which help business systems to efficiently track and mange
inventory in a warehouse.
Moving the right product to the market at the right time, with low stocking costs, is
the key to success in retail business.
Warehouse Management System
warehouse
Send to
vendor WMS
Stores
Ship Products
Warehouse Management System (Contd.)..
Warehouse operations :
Receiving
Picking
Inventory control
Shipping
Receiving & Stocking
Receiving is done against a Purchase Order. When a trailer arrives at the warehouse,
the receiving clerical assigns a dock door in the system, associates a PO with that
trailer and starts receiving the cartons.
PO contains the SKU (Stock Keeping Unit It is the smallest measure of item in
inventory) and number of units expected for each of the SKU.This is also supported by
the ASN (Advance Shipment Notification) sent by the vendor.
Picking
Host system downloads the allocation to the warehouse, and picking is done against
this Allocation or Sales order.
Accuracy
Lot of factors such as accuracy in operations, attitude, process definition, affect the
inventory figures. One of the ways to keep inventory accurate is, periodic counting
process.
WMS system can control the counting process, schedule locations for counting, and
generate count jobs when there is a discrepancy in what system thinks and what
physically is.
Shipping
Cartons with outbound labels are delivered at the shipping location. A trailer is setup at
the shipping dock, for a matching in-store date (the date of arrival at store) and pool
(logical grouping of stores).
Once the trailer is fully loaded, it is closed, and a Bill of Loading (BOL) is generated.
ASN is sent to the host describing the contents of the trailer. BOL will have carton
information grouped by store. It will have the carton count, the contents and the qty for
each store. Tracking of a carton within WMS ends here.
Transport Planning
After the retailer determines the products/quantity to be supplied to each store comes
the need for transport planning.
Routes decided so that the optimum utilization of transport facility can be made.
Store 2
Store 1
DEPO
Store 4 Store 3
Transport Planning
Various parameters are taken into account while planning. They Include :
Transport plans are generally generated by an application that optimizes all the
parameters.
Transport Planning
Once the transport plan is generated all the stores and depots are informed.
The stores now know the details of products that they will receive and when.
Transhipment : When the depot does not stock a particular item ordered.
Inter depot Transfer: When the depot does not have sufficient quantity of an
ordered item
Store Delivery
Once the store realizes that it needs a certain product it sends the requirement to
the retailer.
The retailer then based on his own forecast and availability allots the product to
the store.
The retailer also informs the store when to expect the product.
Definition
Its functions are to consolidate product, to realize economies of scale and to provide
value added processing.
Many warehouses act as virtual stores where orders are taken either thru internet,
phone, mail or fax and picked, packed and shipped from a warehouse directly to
customers.
Warehouse (Contd..)
Why are they required?
The storage and shipment of goods is a vital part for the growth of any retailer/state
economy. The following are the importance of warehousing:
Small Firms: The use of warehouse facilities gives small firms the opportunity
to grow without large capital investments and one warehouse can service
many small firms.
For the effective use of the warehouses, Warehouse Management Systems (WMS) is used.
Warehouse Management
The primary purpose of a WMS is to control the movement and storage of materials
within an operation and process the associated transactions.
The detailed setup and processing within a WMS can vary significantly from one
software vendor to another, however the basic logic will use a combination of item,
location, quantity, unit of measure, and order information to determine where to
stock, where to pick, and in what sequence to perform these operations.
Warehouse Management (Contd..)
All warehouse processes are divided into inbound processes and outbound
processes. Inbound processes include the receiving and putting away of goods,
quality checking and approval and the outbound processes include
order processing, picking, replenishment and shipping.
Warehouse Management (Contd..)
Receiving
It begins with the arrival of advance shipment notification ( ASN), which is sent by
the vendor to the host informing the detailed shipment information in advance of
delivery, designating the contents and nature of the shipment.
Receipt and uploading at carrier docks( A platform where trucks or trains can be
loaded or unloaded).
The goods are unloaded at the docks and are kept in cases. A case is a portable
container for carrying several objects.
The cases are generally unloaded into the pallets. A pallet is a flat transport
structure made of wood or plastic (and in a few cases metal) which can support a
variety of goods in a stable fashion while being lifted by any mobile forklift device.
The goods are placed on top of the pallet, and can be secured to it by straps or
stretch-wrapped plastic film.
An important point here is the existence of a proper flow path among the carriers,
buffer/staging and storage areas. High congestion or idleness are not favorable
conditions as they reduce the efficiency which in turn increases the operating cost.
Warehouse Management (Contd..)
Receiving( Cont.)
Quality Audit
The arrived goods are audited for quality, labeling and other parameters.
Various industries have their own standards defined for quality.
Apart from the quality, the retailer must check the conditions of receivables like
check for damaged merchandise, wrong merchandise, merchandise being shipped
to wrong location etc so that no expenses related to mistake of vendor/carrier are
borne by warehouse.
Vendor Audit
Is used to decide how much percentage of merchandise got from vendor should be
audited. For new vendors this might be as high as 100% and in long run helps in
determining the vendor reliability and performance.
Warehouse Management (Contd..)
Put Away
This is done based on a put away rule which determines if a certain product has
to be stored at a certain temperature or if a package can be put on a conveyor
belt etc.
SKU (Stock Keeping unit) profile should be considered while creating a put away
plan. Its basically done for the easy access.
Warehouse Management (Contd..)
Replenishment
Any item which is not present in the active location can result in delay of shipment
of order which in turn has direct customer impact thus resulting in financial loss of
the retailer.
Warehouse Management (Contd..)
Replenishment( Cont.)
Fill-to-full replenishment
It ensures that all items currently stocked at active locations in warehouse will be
stocked to their maximum capacity before start of first picking cycle on any given
day and hence reduces the chances of an item not being present at its location.
On-demand replenishment
As the name suggest, the replenishment is done as and when there is demand for
that particular good. It is also known as Stock pulls. It takes care of the earlier
replenishment method when a situation can arise due to heavy volumes for any
particular item on a given day.
Warehouse Management (Contd..)
Flow through
Unlike the non-perishable goods, which are stacked and stored in the reserve or the
active locations, the same process is not performed for perishable merchandize. All
perishable goods have a small life time and hence they need to be sent to the stores as
soon as they arrive at the depot. Perishable goods are not stored in the depots . After
the goods arrive and the value added operations like adding price tags, best before etc
have been performed, they are sent for shipment to the various stores.
Warehouse Management (Contd..)
Picking
Picking is based on pick list, which list the stock-keeping units to be picked, in what
amount and where they are to be found.
The SKUs are listed in which order they will normally be encountered as the picker
moves through the warehouse.
Batch Picking
Refers to picking where in multiple orders are grouped in small batches and
each picker goes around with his cart/tote and picks one batch at a time.
Usually the WMS must run the waves so that orders containing similar
items are grouped together in one batch and hence increase
efficiency.
Examples :Pallet Picking, Multi Order pick to sorter
Warehouse Management (Contd..)
Picking (Cont.)
Robotic Picking
Mainly used in pharmacies where filling up of bottles according to prescription
is done by robots.
Pick cars
Carousels.
Are shelves that move and the rotor, which is picking, stays at one place and can
pick up different items as per requirement.
Conveyors/ Scanners.
Warehouse Management (Contd..)
Picking (Cont.)
Shipping help warehouse to save a lot of money since based on volumes shipping
charges can be negotiated with carriers that can result in huge savings.
Warehouse Management (Contd..)
Inter Depot Transfer
Inter Depot Transfer is the process in which one depot orders the stock from other
depot as it might not have sufficient quantity and if it cannot meet the demand
immediately through the vendor. Here the depot stores the stock to fulfill its future
requirements.
Transhipment
Transhipment is a process in which if one depot does not stock a type or certain types
of goods then that depot fulfills the demands of the store / stores under it by getting
That particular good from another depot which stocks that product. Here the stocks are
merely stored by the depot instead it acts as a channel for the movement of the goods .
Warehouse Management (Contd..)
Invoicing
Invoicing is issued by the vendor to the retailer upon the receipt of the merchandize.
Invoice dating is the period allowed by vendors for the payment of bills.
Warehouse Management (Contd..)
The various kinds of value added operations that takes place are:
Ticketing
Refurbishment of damaged goods.
Kitting
Handling return merchandise
Final configuration.
Warehouse Management (Contd..)
Warehouse Management (Contd..)
Current Trends
Cross Docking
It is a distribution system in which merchandise arriving at a manufacturing
plant is delivered to the customer little or no storage in between. It reduces
handling and storage overheads.
Both the above involves the source planning within a warehouse which is
connected to labour planning and productivity.
Warehouse Management (Contd..)
The information and images in this document has been compiled after
referring/extracting relevant material from the following sources:
Sparsh -> KSHOP -> Search Knowledge Assets -> Application Domain / Industry
Verticals ->Retail & Distribution
Thank YOU