scm

Supply Chain Management in Retailing :

Supply Chain Management in Retailing

Slide 2:

Supply Chain Management (SCM) encompasses the planning and management of all activities involved in sourcing and procurement, conversion and all logistics management activities. It coordinates and collaborates with all channel partners – suppliers, intermediaries, third party service providers, retailers, customers. Connects all the 5 P’s of marketing.

Supply Chain Activities in Retail:

Supply Chain Activities in Retail Demand and Supply Planning – Demand Forecasting Sourcing of Merchandise – Tendering, vendor rating & selection, ordering. Inventory Management - Location, number and size of warehouses, customer allocation. Logistics - Modes of transport, fleet size, vehicle routing, documentation. Vendor Relationship Management - Collaborations and partnerships across the supply chain.

Basic Supply Chain Process:

Basic Supply Chain Process Material Resource Planning, Production Planning & Scheduling Consumer Response-based Forecasting & Merchandise Ordering System Integration through information flows & collaboration between suppliers & customers Component supplier Distribution Centre Manufacturing Plant Retail Store Customer Logistics Logistics Logistics Logistics Logistics

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SCM in Retail can be categorised as Front End & Back End. Eg Bharti Retail & Walmart . SCM different for service and merchandise retailers, different for store based and non–store based retailers. Logistics – integral part of SCM - In-bound logistics – For procurement of inputs from vendors - Out-bound logistics – For distribution of products

Growth Drivers of SCM in Retail:

Growth Drivers of SCM in Retail Emergence of Organised Retail & Big Formats Service Orientation Fragmented Customer Demands Dismantling Trade Barriers Technological Support Need to Improve Margins

Benefits of SCM:

Benefits of SCM Efficient Replenishment of Merchandise - Avoids out of stock situations, lower inventories, synchronise demand & supply. Realistic ordering lead-times : Suppliers are not surprised by the next order. Retailers respond better to demand spikes, minimise forced markdowns and avoid obsolete-inventory costs. Averting problems : Stores easily identify potential stock-outs and request replenishment before the inventory drops to zero. Deciding to de-list or replace a product is easier. Facilitating resource planning and allocation : Product forecasts and supply schedules are easily converted to perform space planning, establish staffing needs and organise inbound/outbound shipments. Financial experts can plan cash flow and analyse margins into the future.

Benefits of SCM:

Benefits of SCM New Product Introduction – Zara – Design to Market Implementation Increased Visibility – merchandise tracking through RFID, GPS. - Monitor inventory across supply chain. - Faster customer response to product availability & order fulfillment. - Responsive supply chain allows retailer to adjust to market demands.

Benefits of SCM:

Benefits of SCM Higher Value Addition – lean SCM reduces cost by eliminating unwanted middlemen – eg farm to shelf. - Greater value addition due to international outsourcing. Cost Leadership – Minimise wastage. - Reduction of lead time - Outsourcing of key activities to third parties Expansion of Business – With supply chain capabilities able to replicate business at different places – eg Mc Donalds , Pizza Hut, Starbucks.

Benefits of SCM:

Benefits of SCM Increase in Profitability - Better efficiency in operations, increases TO, reduces per unit overhead cost like logistics - Increases customer satisfaction and encourages repeat customers. Benefits to Economy - Ensures economic development by facilitating manufacturing activities and trade - Wastage reduction – esp. farm produce – Rs 50,000 cr due to storage, cold chains & processing, etc. - Gap between demand and supply reduced and price fluctuations minimised . - Employment generation & increased tax collection.

Key Technologies Used in SCM:

Key Technologies Used in SCM Technology is key enabler for success of SCM Cos offer integrated solutions related to POS, demand measurements, merchandise decisions, vendor selection, ordering, logistics, warehousing management, store operations, etc. ERP – Enterprise Resource Planning – cross functional and enterprise wide solution oriented application software which integrates operation, production, purchase, finance, HR, inventory management.

Key Technologies Used in SCM:

Key Technologies Used in SCM RFID Bar Codes Internet – Dell Data Mining & Warehousing

Important Concepts in Logistics & SCM:

Important Concepts in Logistics & SCM Modes of transportation Road – short distances & transportation at specific retail locations. Air – High value and low volume. Perishable products like flowers and life saving drugs. Water – Long distance and bulky products where lead time is high. Rail – Bulk items like iron, oil, fertilizers. Innovative modes - Pipelines – Gas – LPG. Bicycles – Mc Donalds in Chandni Chowk

Important Concepts in Logistics & SCM:

Important Concepts in Logistics & SCM Bill of Loading - Basic document for purchasing transport services. - Only party mentioned is authorised to receive goods. - Mentions terms & conditions . FOB - Free On Board – indicates who pays loading & transportation costs. - FOB means seller pays for transportation to the port of shipment plus cost of loading. Buyer pays frieght , insurance, unloading and transportation from arrival port to final destination. - FOB Shipping – means buyer pays the cost of transportation - FOB destination – means seller pays the cost of transportation Third Party Logistics Service Provider

Important Concepts in Logistics & SCM:

Important Concepts in Logistics & SCM Unitisation & Containerisation Warehousing Inventory Velocity Reverse Logistics Vendor Relationship Management (Order fill rate, Lead times, Vendor Managed Inventories)

Logistics – Indian Scenario:

Logistics – Indian Scenario Logistics cost 14-15% of GDP. Much higher compared to developed countries. Saving of even 2-3% will result in saving $20-30 billions. Investments being made to develop infrastructure. Eg Golden Quadrilateral (linking major cities across India), Mumbai Pune Highway. Government trying to link villages to towns to cities. Rural customer more reachable. Better logistics can reduce wastage. Need good storage, cold chains, refrigeration systems, etc. Greater PPP required. 75% of expenditure to truck industry, which is highly fragmented. Unified system required to tackle isssues like multiple check points, tolls. Will avoid unnecessary delays and costs.

Four `Rs' :

Four `Rs' Follow the 4 `R's of SCM — Right time, Right place, Right price, Right quantity — to reap the advantages of: - Sustained inventory reduction by as much as 60 per cent for both the buyer and seller. - Improved forecast accuracy by as much as 30 per cent. - Enhanced store shelf stock rates by as much as 8 per cent. - Increased sales by as much as 20 per cent. - Reduced logistics costs by as much as 4 per cent.

Retail Example:

Retail Example

McDonald’s Supply Chain:

McDonald’s Supply Chain In a year McDonald consumes a minimum of 4.6 crore buns, 17 lakh bottles of sauce, 1200 tonnes of iceberg lettuce, 6 crore patties and hundreds of tonnes of dairy products & other ingredients. Monthly about 800 tonnes of 250 ingredients from 50 suppliers

McDonald’s Supply Chain:

McDonald’s Supply Chain Building the supply chain started 4 years before starting the 1 st outlet opened in 1996. Identified farmers for different products and also helping them in manufacturing as per MD’s specifications. Invested Rs 400cr + in building the supply chain. Few suppliers so that volumes could be increased and cost could be cut. Radhakrishna Foodland Ltd. handles the logistics. Two distribution centers – Thane & Noida Trucks from these 2 centers carry wet & dry ingredients, pre-frozen products, raw vegetables, cheese, ketch-up, ice-cream mixes, etc. to the warehouses then to specific outlets.

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These trucks are hi-tech multi temperature vans, having 3 levels of refrigeration. As ingredients move from farm to outlets Quality inspection Program carries out checks at over 20 points in the cold chain. In 1996 the DC had 35 days of inventory; Now it is down to 11 days. Focus is on meeting their expectations of ‘cold, clean and on time delivery’. MD constantly pushes its suppliers & DC’s to keep reinventing to reduce costs and speed up responses. McDonald’s Supply Chain….

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