The right product, at the right place at the right time, at the right price and of course in the right quantity is the mantra of modern retail. While this appears to be single, it is one of the most complex aspects of retailing. We can easily see the degree of complexity by taking the example of the local department store. A typical department store has a number of departments such as apparel, gifts, cosmetics, kitchenware, appliance and say electronics. Take one such department such as apparel; this will have sections for men, women, and children. Each of these sections will have sub sections for casual wear, formal clothes, accessories etc. Further each category in each sub section will have different designs, colors, and sizes. We now see that put together it represents a very large number of items. This is further complicated by the involvement of merchandisers’ buyers, stores, finance and other functionaries in the department store.
The department store in all probability has at least a hundred suppliers. Some of these could be manufacturers, some of them agents and others distributors. The challenge of managing a continuous supply of goods from all these different entities is the challenge of managing the supply chain.
Over the past few years, the scenario has become even more complex. The opening up of global borders and the easing of trade barriers has encouraged retailers to source from competitive markets. While this is advantageous to the retailer, inability to control the costs involved in transportation warehousing and the shipping of material to the end consumer will affect the profitability of the business. The last two decades have seen the rise of a large number of operational and quality management and control initiatives like JIT (Just in Time), TQM (Total quality Management ) , ZI (Zero inventory), ECR (Efficient Consumer Response) and VMI (Vendor managed Inventory). All these have now seen integrated within the domain of the Supply chain management process.
We start this article by understanding the concept of supply chain management and the method in which it has evolved. The relevance of supply chain in retail is then looked into. This is flowed by an understanding of the various aspects of supply chain management like cold chain management and innovations that have occurred in the area. The last part focuses on the role of logistics and the emerging concept of reverse logistics.
A supply chain is a network of facilities and distribution options that perform the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these products to the customers.
The APICS Dictionary describes the supply chain as:
The process from the initial raw materials to the ultimate consumption of the finished product linking across supplier user companies and the functions within and outside a company that enables the value chain to make products and provide services to the customer.
The Supply Chain Council uses the definition: 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 tacking order entry and order management, distribution across all channels and delivery to the customer.
Quinn defines the supply chain as all of those activities associated with moving goods from the raw materials stage trough to the end user. This includes sourcing and procurement, production scheduling, order processing inventory management, transportation, warehousing and customer service. Importantly is also embodies the information systems so necessary to monitor all of those activities.
In addition to defining the supply chain, several authors have further defined the concept of supply chain management. Supply chain management is an integrating philosophy to manage the total flow of a distribution channel from supplier to ultimate customer. Integrated supply chain management is about going from the external customer and then managing all the processes that are needed to provide the customer with value in a horizontal way. They believe that supply chains, not firms, compete and that those who will the strongest competitors are those that can provide management and leadership to the fully integrated supply chain including external customer as well as prime suppliers, their suppliers’ suppliers’.
From the above mentioned definitions one can summarize that the objectives of supply chain management are to ensure the right product reaches the right place at the right time and importantly, for the right price and profit for the retailer as is illustrated infigure below:
5) Price & Profit.