SUPPLY CHAIN MANAGEMENT

Learning Objectives
• Understand the concept of supply chain management
• Describe the significance of supply chain management in
retail
• Discuss the evolution of supply chain management
• Check the challenges in developing a supply chain
framework
• Analyse the key concepts in supply chain management
• Evaluate the concept of retail logistics
 CONCEPT OF SUPPLY CHAIN MANAGEMENT

“The supply chain—a term increasingly used by logistics professionals –

encompasses every effort involved in producing and delivering a final
product, from the supplier’s supplier to the customer’s customer.
Four basic processes - plan, source, make, deliver - broadly define these
efforts, which include
managing supply and demand, sourcing raw materials and parts,
manufacturing and assembly, warehousing and inventory tracking, order
entry and order management, distribution across all channels, and delivery
to the customer.”
Supply chain management is “an integrating philosophy to manage the total
flow of a distribution channel from supplier to ultimate customer”.

Continued...
Supply Chain Management encompasses the planning and
management of all activities involved in sourcing and
procurement, conversion and all Logistics Management
activities.
It also includes coordination and collaboration with channel
partners, which can be suppliers, intermediaries, third party
service providers and customers.
In essence, Supply Chain Management integrates supply and
demand management within and across companies.
OBJECTIVES OF A RETAIL SUPPLY CHAIN
COMPONENTS OF A SUPPLY CHAIN

Supply Chain
Management

Logistics Distribution Warehousing

SIGNIFICANCE OF SUPPLY CHAIN
MANAGEMENT
Supply chain management links demand management,
resource management and supply management; and hence
plays an important role in retailing.

Continued….
Today, retailers operate in a dynamic world. Customers’
buying habits are constantly changing, and competitors are
continually adding and improving their product offerings.
Demand changes mean a shorter life cycle for the company’s
products and inventory.
The number of suppliers to an organization may vary from a
few hundred to thousands, depending on the range of
products offered to the consumer.
Sourcing, vendor management and logistics play a major role
in getting the right product to the right place at the right time
and in the right condition.

Continued…
Customers today have multiple sources from which to choose to
satisfy demand; locating the product throughout the distribution
channel for maximum customer accessibility at a minimum cost
becomes crucial.
The reason for the shift in emphasis to the supply chain is due to
increasing pressures on the profit margins earned. Companies are
becoming aware that they need to look at the whole picture and not
at functional excellence of individual departments alone.
In today’s technology driven world, advances in technology enable
companies to know sales, inventory and production data across
various locations not only within the country, but also
internationally. Information and information technology are the key
enablers of supply chain management.
EVOLUTION OF SUPPLY CHAIN MANAGEMENT
CHALLENGES IN DEVELOPING THE SUPPLY
CHAIN FRAMEWORK
A useful framework for analysing the issues
involved in developing a supply chain can be
represented as a pyramid.
At the strategic level, the retailer can focus on
service levels required to support the unique ‘value
proposition’ that the retailer has developed.
The retailer can then evolve appropriate channels
and networks to achieve the uniqueness desired.

Continued…
AGILE SUPPLY CHAIN
Market sensitivity and responsiveness to the market
conditions and requirements of the consumers is a
key driver of developing an agile supply chain.
The agile supply chain is network based which can
also be of a virtual nature.
Complete process integration is also a prerequisite
of developing such an agile chain.

Continued…
 APPAREL
Retail in apparel sector in India exhibits the following characteristics:
 Short Life Cycles: Many products in this sector have a short life cycle;
and mostly the product may have been created to capture the mood
of the moment, consequently, the time period in which it is saleable is
likely to be short and seasonal.
 High Volatility: Demand for these products is rarely stable or linear. It
may be influenced by the vagaries of weather, movies, TV shows or
indirectly by advertising.
 Low Predictability: Due to the volatility of demand, it is extremely
difficult to forecast with any accuracy.
 High Impulse Purchase: Many buying decisions for these products are
based on impulse and at the point of purchase.
 CRITICAL LEAD TIMES
Time-to-market: The time taken by an organization, to recognise that an
opportunity for a product or service exists in the market and the time that it
takes to actually bring the product into the market.
Time-to-serve: Retailers had to place orders on suppliers for products many
months in advance. This gives rise to the risk of obsolescence and high stock
outs as well as increased cost of inventory. The lead-time may be long, not
necessarily due to the process of manufacturing and shipping and transit
period but due to excessive documentation at each stage.
Time-to-react: This is the time span taken by the company to react to
changes in demand or changes in the market environment.
THE FOOD AND GROCERY SUPPLY CHAIN
SUPPLY CHAIN INTEGRATION
The aim of each department (demand
management, Resource management and supply
management) different and while they may
individually excel, the organization as a whole
would benefit only when they share a common
approach and information.
This creates the need for an integrated supply
chain where information is shared between
departments, suppliers and vendors.
VENDOR MANAGED INVENTORY
In Vendor Managed Inventory (VMI), the
vendor/supplier undertake the inventory
management of the stores. This is also called QRIS or
the Quick Response Inventory System.
It is the supplier who takes the inventory
replenishment decisions for the customer.
For a successful VMI process to function, a great
amount of information sharing is required and
reliability on data is required.
For a successful system to operate, it is necessary
that all parties involved in the process communicate
their expectations well.
COLLABORATIVE PLANNING
FORECASTING AND REPLENISHMENT

Collaborative Planning Forecasting and Replenishment (CPFR) aims at

aligning the forecasts of a retailer and a vendor and thereby, offering an
opportunity to increase in-stock positions, gross margins and sales, while
reducing inventory investments and stock-outs.
CPFR is based on problems, while allowing them to concentrate on further
managing forecasts and inventory levels on an exception basis, alerting
participating organizations to potential their developing their businesses.
CPFR is a business practice that reduces inventory costs while improving
product availability across the supply chain.
UNDERSTANDING RETAIL LOGISTICS
An integral part of Supply Chain Management is
Logistics Management.
The Council of Logistics Management defines
logistics as “that part of the supply chain process
that plans, implements, and controls the efficient,
effective forward and reverse flow and storage of
goods, services, and related information between
the point of origin and the point of consumption in
order to meet customers’ requirements.”
The main objective of logistics management is to
reduce inventory-holding costs and improve profits.

Continued...
Retail logistics is the organized process of
managing the flow of merchandise from the
source of supply to the customer.
It incorporates the following functions:
Physically moving the goods from one location to another,
where location may be a distribution centre, warehouse,
store or manufacturer.
Stocking the goods at the locations needed in the
quantities needed.
The management of this entire process.
LOGISTIC STRATEGY
A pull logistics strategy has orders for
merchandise being generated at the store level
on the basis of demand data captured by the
POS terminals.
A push logistics strategy has merchandise
allocated to stores based on historical demand,
the inventory position of the store and at the
warehouse.
THE INTERNATIONAL LOGISTICS
PERFORMANCE INDEX
EMERGING CONCEPTS IN LOGISTICS

THIRD PARTY FOURTH PARTY

LOGISTIC LOGISTIC

CROSS REVERSE
DOCKING LOGISTIC

Continued…
THIRD PARTY LOGISTICS
A third party logistics provider (3PL) can be defined as the
supply of logistics related operations between traders by
an independent organization.
A 3PL may provide the logistics services to companies for
part or sometimes all of their supply chain management
function.
A 3PL providers typically specialize in integrated
warehousing and transportation services that can be
scaled and customized to customer’s needs based on
market conditions and the demands and delivery service
requirements for their products and materials.

Continued…
FOURTH PARTY LOGISTICS
It refers to the evolution in logistics from suppliers
focused on warehousing and transportation (third-
party logistics providers) to suppliers offering a
more integrated solution.
It include supply chain management and solutions,
change management capabilities, and value-added
services in their offering.

Continued…
CROSS DOCKING
Cross docking is a system in which the vendors
ship merchandise to a distribution centre pre-
packed in quantities required by each store.

The DC’s are equipped with miles of laser-

guided conveyor belts, that read the UPCs on
the incoming cases and direct them to the right
truck for their onward journey.

Continued…
REVERSE LOGISTICS
The reverse logistics executive council defines
reverse logistics as “the process of planning,
implementing, and controlling the efficient, cost
effective flow of raw materials, in-process
inventory, finished goods and related
information from the point of consumption to
the point of origin for the purpose of recapturing
value or proper disposal”.