Supply Chain Management (SCM)

Supply Chain Management (SCM) is the integration of business processes from end user through original suppliers that provides products, services, and information that add value for customers. Retailers may be the most important link in the supply chain. They connect customers with the vendors who provide the merchandise.

Improved Product Availability

An efficient supply chain has two benefits for customers: 1. Fewer stock outs, and, 2. Assortments of merchandise that customers want, where they want it. These benefits translate into greater sales, higher inventory turns, and lower mark- downs for retailers.

Improved ROI
One measure of retailing performance is the ability to generate a target return on investment (ROI). An efficient supply chain and information system can increase net profit and net sales, while at the same time reducing total assets. Net sales can increase by providing customers with better assortments.

The Flow of Information

The flow of information is complex in a retail environment.

retailers store information in data warehouses and this information is transmitted to vendors through EDI (Electronic Data Interchange)
Data Warehousing: Purchase data collected at the POS goes into a huge database known as a data warehouse. A data warehouse is the co- ordinated and periodic copying of data from various sources, both inside and outside the enterprise, into an environment ready for analytical and informational processing. The information stored in the data warehouse is accessible on several dimensions and levels.

Electronic Data Interchange (EDI):

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is the computer- to- computer exchange of business

documents from retailer to vendor, and back. In addition to sales data, purchase orders, invoices, and data about returned merchandise are transmitted from retailer to vendor

Many Retailers now require vendors to provide

notification of deliveries before they take place. An advanced shipping notice (ASN) is an electronic document received by the retailers computer from a supplier in advance of a shipment.

The Flow of Information

Proprietary EDI Systems: are data exchange systems that are developed primarily by large retailers for the purpose of exchanging data with their vendors. Wal-Mart , for instance, has spent millions of dollars and several years developing one of the most advanced EDI systems in retailing. Intranets: Also available over the Internet are intranets, which are secure communication systems that take place within one company. Extranets: Increasingly, EDI data are transmitted over the Internet through extranets. An extranet is a collaborative network that uses Internet technology to link businesses with their suppliers, customers or other businesses. ,

Logistics Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of consumption in order to meet customers requirements.
Supply Chain Management includes logistics, but it is a more comprehensive and strategic concept that includes Customer Relationship Management (CRM), Inventory Management and Vendor Relations.

Christ University, Bangalore

The Physical Flow of MerchandiseLogistics The different merchandise flows are:

1. Merchandise flows from vendor to distribution center 2. Merchandise then goes from distribution center to stores 3. Alternatively, merchandise can also go from vendor directly to stores Refer Exhibit 10- 5 on Page 320 of Levy and Weitz Text

The Physical Flow of MerchandiseLogistics Sometimes merchandise is temporarily stored at the distribution center; other times its immediately prepared to be shipped to individual stores. This preparation may include breaking shipping cartons into smaller quantities that can be more readily utilized by the individual stores (breaking bulk), as well as tagging merchandise with price tags or stickers, UPC Codes, and the stores label. A UPC Code is the black- and- white bar code printed on the package of most products UPC stands for Universal Product Code

The Physical Flow of MerchandiseLogistics The Distribution Center (DC): performs several functions: Management of Inbound Transportation: Merchandise flows from vendor to distribution center. The dispatcher is the person who coordinates deliveries to the distribution center Receiving and Checking: Receiving refers to the process of recording the receipt of merchandise as it arrives at a distribution center. Checking is the process of going through the goods upon receipt to make sure they arrived undamaged and that the merchandise ordered was the merchandise received. Storing and Cross docking: There are three types of DCs: a traditional, a cross docking, and a combination of the two.

The Physical Flow of MerchandiseLogistics The first, a traditional distribution center is a warehouse in which merchandise is unloaded from trucks and placed on racks or shelves for storage. When the merchandise is needed in the stores, a person goes to the rack, picks up the item, and places it in a bin. The merchandise is transported via a conveyor system or other material handling equipment to a staging area where it is consolidated and made ready for shipment to stores. The second type of DC, called a cross docking distribution center. Is one in which vendors ship merchandise prepackaged in the quantity required for each store. The merchandise already contains price tags and theft detection tags, and in the case of some apparel, it is on hangers. Since the merchandise is ready for sale, it goes to a staging area rather than into storage. When all the merchandise going to a particular store is in the staging area, it is loaded onto a truck and away it goes. Cross docking distribution centers are less costly than

The Physical Flow of MerchandiseLogistics traditional centers because there is little or no storage required, processing at the distribution center is minimal, and the centers can be much smaller than traditional centers. Getting Merchandise Floor- Ready: Floor- ready merchandise is merchandise thats ready to be placed on the selling floor. Getting merchandise floor- ready entails ticketing, marking, and, in the case of apparel, placing garments on hangers. Ticketing and marking refers to making price and identification labels and placing them on the merchandise. It is more efficient for a retailer to perform these activities at a DC than in the stores because they are time- consuming and messy. Getting merchandise floor- ready in stores can clog aisles and divert sales peoples attention from their customers. Shipping Merchandise to Stores: Point- of- sale terminals in a store record each purchase. Data are transmitted to buyers and their staffs so they may formulate replenishment orders for all items in the store.

The Physical Flow of MerchandiseLogistics The order for the store is transmitted computer- to- computer to the distribution center. The computer at the distribution center creates a pick ticket, a document that tells the order filler how much of each item to get from the storage area. The pick ticket is printed in warehouse location sequence so the order fillers dont waste time crisscrossing the distribution center looking for merchandise. The computer knows which items are out of stock so it doesnt even print them on the pick ticket. Order fillers put the merchandise on conveyers that take the merchandise to a staging area where an electronic sorter routes the merchandise to the bay with the truck going to the store. We have just described what is known as pull logistics strategy, in which orders for merchandise are generated at the store level on the basis of demand data captured by point- of- sale terminals.

The Physical Flow of MerchandiseLogistics An alternative and less sophisticated strategy is known as a push logistics strategy, in which merchandise is allocated to stores on the bases of historical demand, the inventory position at the distribution center, and the stores need.

The Physical Flow of MerchandiseLogistics Management of Outbound Transportation: The management of outbound transportation from distribution center to stores has become increasingly complex as chain stores expand. Reverse Logistics: is a flow back of merchandise through the channel, from the customer to the store, distribution center, and vendor, for customer returns. Reverse logistics can be a serious problem. It can be very complicated and expensive. The items may be damaged, and without the original shipping carton, thus causing special handling needs. Transportation costs can be high because items are shipped back in small quantities.

The Physical Flow of MerchandiseLogistics Quick Response (QR) Delivery Systems: are inventory management systems designed to reduce the retailers lead time (the amount of time between the recognition that an order needs to be placed and its arrival in the store, ready for sale.) for receiving merchandise, thereby lowering inventory investment, improving customer service levels, and reducing logistics expenses. QR is the integrating link between the information and the merchandise flows. Benefits of a QR System 1. Reduces Lead Time 2. Increases Product Availability and Lowers Inventory Investment 3. Reduces Logistics Expenses

The Logistics of E- tailing

Fulfilling Internet orders from customers is very different than distributing merchandise to stores Some, like Staples, have a fully integrated information system, whereby distribution to stores and to customers ordering through a website or catalog is handled by the same information system. Yet they use different DCs to service stores and Internet and catalog customers Staples makes deliveries by trucks or UPS

Outsourcing
To streamline their operations and make more productive use of their assets and personnel, retailers are constantly looking to outsource logistical functions if those functions can be performed better or less expensively by third- party logistics companies. Third- Party Logistics Companies: These are firms that facilitate the movement of merchandise from manufacturer to retailer but are independently owned. Specifically, they provide transportation, warehousing, consolidation f orders, and documentation.

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