Importance of Supply Chain Management

If it’s not in store you can’t show it. If you can’t show it you can’t sell it.

Presented By-
Amit Garg-Retail Business Consultant
Email-amit@hand2handsolutions.in
Contact Me-09818995422
Discussion Flow

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What is Retailing?

 Retailing – a set of business activities that adds value to the products and
services sold to consumers for their personal or family use.
How Retailers Add Value
 Breaking Bulk
-Buy it in quantities customers want
 Holding Inventory
-Buy it at a convenient place when you want it
 Providing Assortment
-Buy other products at the same time
 Offering Services
-See it before you buy, get credit, layaway
Retail Functional Areas

Indian Retail Sector

Buying &
Merchandising

Food Retailers Operations &

Human Resource
Loss
Management & Prevention
Home Furniture &
Admin
Household Goods
Logistics &
SCM
Health & Beauty Management
Products
Store
Durable Goods Design & Information
Planning Management

Sales &
Clothing & Marketing
Footwear

Leisure &
Personal Goods

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 Stock Outs Cause Walkouts

VAILABILITY IS AN INCREASINGLY IMPORTANT COMPETITIVE DIMENSIO

Supply Chain

• Why sudden interest ?

 Demanding customers
 Shrinking product life cycles
 Proliferating product offerings
 Growing retailer power in some cases
 Doctrine of core competency
 Emergence of specialized logistics providers
 Globalization
 Information technology
What is a supply chain?
A supply chain consists of all stages involved, directly or indirectly, in
fulfilling a customer request.

Example: A detergent supply chain:

Manufacturer Reliance Retail Reliance Fresh

Customer
(P&G) DC Store

Chemical Plastic Tenneco

Manufacturer Producer Packaging

Oil Timber Paper

Industry Industry Manufacturer
Supply Chain Structure

SUPPLIER FACTORY DC RDC RETAILER

Raw Materials
Finished Goods

Information Flow
Basic elements of a retailing supply chain

INSTITUTION OTHER ACTIVITIES

ACTIVITY

Materials supplier Warehousing, transport to

Sourcing materials
producer

Producer Design, warehousing, selling

Producing the product
through agents, transport to
wholesaler
Wholesale distribution Wholesaler
Warehousing, transport to
retailer, cash and carry
Retail distribution Retailer
Regional and local distribution
centres, transport to store/
home
Consumer
What is Supply Chain Management
Supply chain management is a set of approaches utilized to efficiently integrate
suppliers, manufacturers, warehouses, and stores, so that merchandise is
produced and distributed at the right quantities, to the right locations, and at the
right time, in order to minimize system wide costs while satisfying service level
requirements.

Management beyond the borders of an organization

Upstream
The upstream business partners are the external organizations
that supply products or services to an organization.    

Downstream
The downstream supply chain is the organizations external
distribution channels, processes, and functions that the product
passes through on its way to the end customer.
What is Supply Chain Management
What is Supply Chain Management
Elements of the Internal Supply Chain

SCM includes the management of organization’s internal components in the supply

chain:

Product
Design

Production Order
Scheduling Management

Internal
Distribution SCM Purchase
Management Management

Inventory Logistics
Management Management
Example of a Simplified Supply Chain

Source: Levy and Weitz

Supply chain Flow

 Material/merchandise flows

 Information flows

 Financial flows

 Supply chain management is the

management of flows between and
among supply chain stages to
maximize total supply chain
profitability
Merchandise Flow

Source: Levy and Weitz

Information Flow
Information and Merchandise Flows

Customer

Sales info

Buyer Stores

Distribution
Vendor center

- - - - Merchandise flow Information flow

Supply Chain Planning Processes

Demand Forecasting
Material Requirement Planning Demand Planning

Raw Material Production

Requirement Plan

Supplier Plant Warehouse Logistics Retailer

Order Management
Supply Chain Planning Decisions

STRATEGIC

TACTICAL

OPERATIONAL

Procurement Manufacturing Distribution Logistics

Supply Chain Planning Decisions
• Supply Chain Design
Strategic • Resource Acquisition
• Long Term Planning (1 Year ++)

• Production/ Distribution Planning/Demand Forecasting

• Resource Allocation
Tactical
• Medium Term Planning (Qtrly,Monthly)

• Shipment Scheduling
Operational • Resource Scheduling
• Short Term Planning (Weekly,Daily)
Supply Chain Planning Decisions

• Supplier •Location, Number,

Selection Capacity of Plants • Mode of
•Location, Number,
•Allocation of •What Products to Shipment
Size of Warehouses
Suppliers to the Produce
Plants •Which Plants to • Port Selection
Produce them
•Warehouse
Allocation
• Customer • Vehicle Routing
• Procurement • Inventory
Allocation
Policy Decisions
• Distribution Policy • Fleet Size
• Manufacturing
Policy
• Production
Schedule
•Scheduling on • Finished Goods
• Vehicle Routing
Machines Inventory
• Workload
Balancing
Strategic importance of supply chain
SCM Across the Organization

SCM changes the way companies do business.

 Accounting shares SCM benefits due to inventory level decreases

 Marketing benefits by improved customer service levels

 Information systems are critical for information sharing through PSO

data, EDI, RFID, the Internet, intranet, and extranets
 Purchasing is responsible for sourcing materials

 Operations use timely demand information to more effectively plan

production schedules
Importance Of Supply Chain Management?

 Improve return on investment

Reduce Costs! Increase Efficiency!

Net profit = Net profit x Net sales

Total assets Net sales Total assets

 Improve product availability

 Supply Chain Measurements
 Measuring supply chain performance

 Traditional measures include:

 Return on investment

 Profitability

 Market share

 Revenue growth

 Additional measures

 Customer service levels

 Inventory turns

 Weeks of supply

 Inventory obsolescence
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Benefits of SCM

Streamlined inventories and

reduced costs
Cost and Financial Reduced errors and redundant
labor
Increased visibility of all business
Retailers transaction
Improvements Improved return on inventory
investment
Manufacturers Optimized transportation costs,
routes, and load times
Increase cost savings from
Distributors outsourcing for low cost materials

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Benefits of SCM

Improved forecast accuracy

Processes as well as resource and
distribution planning
Improved manufacturing and
 Manufacturers replenishment cycle time
Enhanced manufacturing
Improvements scheduling
Increased effectiveness of
planning and decision making
Improved overall efficiency in
production
Enhanced a seamless multi-
channel shopping
Reduced supplier base

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Benefits of SCM

Reduced out-of-stock
Services situations

Improved order fill rates

 Retailers
Increased ship-complete
Improvements and on-time percentages

E.g. Wal-Mart uses the

replenish model to keep
their shelves full and
penalize their suppliers for
late shipment.

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Benefit of SCM to Wal-Mart

Retail Link system

 More than 10,000 Wal-Mart suppliers use Retail Link to
monitor sales of their goods at the store level and
replenish inventories as needed.
 Integrates into one of the largest data warehouses
around, with more than 100 terabytes of information.
 Make daily transactions details (more than 10 million
daily) available to every Wal-Mart store by 4 a.m. the next
day.
Today, over 7,000 suppliers access Retail Link and get answers to any
question at any time. Averages 120,000 of these complex trend analysis
questions each week.

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Benefit of SCM to Wal-Mart

Through Retail Link, suppliers/vendors can retrieve:

 Purchase Orders
 Sales performance data
 Determine how many of their products were sold at Wal-Mart the
previous day
 Examine the effects of markdowns or returns on their inventory
 Access reports on sales over a period of up to two years, as well as
sales forecasts for their products for up to one year

 Inventory levels
 Invoice status

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Benefit of SCM to Wal-Mart

Increasing visibility into all business transaction on a timely basis

 Streamlining the physical pick pack process leading to reduced
errors and redundant labor
 Eliminating charge backs and fines by retailer compliance and
permitting access to all data from EDI through shipping
 Keeps inventory costs down
 Quickly and effectively predict the needs of customers in
different areas and from different backgrounds

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Best of Breed Practice

Wal-Mart's Best of Breed practice on SCM

 Relevant information is available to its partner.
This information will help its partner make a production planning according to current trend. This
relationship is based on a trust that partner will not release these information to competitors.

 The system is dynamic and adjust quantity of orders according to

current situation.
Bottled water, gasoline container was almost emptied from Wal-Mart's shelves on September 11
and flags sold out on September 12. Wal-Mart's system was able to detect change in buying
pattern and trigger orders to restock accordingly.

 Wal-Mart must be able to get most up-to-date information out of the

system to do be able to do proper prediction.
It keeps looking for a better way to track its inventory. (RFID)

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Best of Breed Practice

Wal-Mart's Best of Breed Practice on SCM

 Always Low Prices concept. All items must be at lowest price possible.
 The goal is to reduce costs in various ways:

 Wal-Mart uses technology to manage its inventory and

replenishment system.
 Relevant information is available to everyone which greatly helps
suppliers and Wal-Mart do various planning. Wal-Mart itself can
use pricing knowledge to make a bargain with supplier. On the other
hand, supplier knows how well its product sells and able to plan the
production accordingly.

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