SUPPLY CHAIN

MANAGEMENT IN
RETAIL
MANAGEMENT
 Supply Chain: The sequence of processes involved
in the production and distribution of a commodity

Merchandising: The activity of promoting the sale

of goods, especially by their presentation in retail
outlets.

Logistics: Logistics is the management of the flow

of things between the point of origin and the point of
consumption.
Logistics of physical items usually involves the integration of information
flow, material handling, production, packaging, inventory, transportation,
warehousing, and often security.
SUPPLY CHAIN MANAGEMENT

The management of resources to supply the product

and service needs of the end consumer, encompassing
the supply chain of any physical products and the
exchange process involved.

SCM encompasses planning and management of all

activities involved in sourcing and procurement ,
conversion and all logistics management activities.
 KVIC SCM
Khadi and Village Industries Commission (KVIC) is
a good example of which have developed indigenous
supply chain capabilities and positioned Brand Khadi
in big way. In 2006-07 it has production of Rs
17,562.40 crore. Working with 3,000 NGOs, three
lac entrepreneurs and nine million weavers. KVIC
has 7,050 outlets throughout the country
 SUPPLY CHAIN ACTIVITIES
Demand and Supply Planning: Demand Forecasting

Sourcing of Merchandise: Vendor Rating and

selection

Inventory Management: Location, number and size

of warehouses, customer allocation

Logistics: Modes of Transportation, vehicle routing,

Documentation

Vendor Relations Management: Collaborations and

Partnerships across supply chain
Logistics: The part of Supply chain which plans, implements and
controls the efficient and effective movement and storage of
goods, services and related information between the point of
origin and the point of consumption in order to meet demands of
Consumers

Logistics

In Bound Out Bound

Logistics Logistics
 LOGISTICS
Inbound logistics refers to the transport, storage and
delivery of goods coming into a business

Outbound logistics refers to the same for goods

going out of a business.
SUPPLY CHAIN vs. LOGISTICS
SUPPLY CHAIN
It was first rooted in context of business
practices and is rooted in logistics.
Logistics is an integral part of supply
chain
SCM is cross firm and cross functional. It
runs through various organizations and
can not be confined to a single
organization.
It helps in strategic or competitive
positioning of organization in the long run
Logistics
The term logistics has origination in
military.
Transportation is an integral part of
Logistics
The term logistics is used in context of an
individual organization, flow of goods
within and outside it.
It mainly focuses on locational positioning
of inventory as per order
EVOLUTION OF SCM
The concept of SCM has originations in Logistics. And logistics started by
streamlining organizations internal processes.
During 1970s corporate logistics became popular (Between distribution and
retail stores)
In 1980 term supply chain was coined to add more value by integrating
logistics and other processes.
During 1990s organizations aimed at developing core competence by
focusing on key processes and outsourcing logistics. This continued through
2000s.
During this period SCM got boost from software technologies like Enterprise
Resource Planning, Oracle, internet etc.
Currently SCM has become more collaborative on the basis of real time
information sharing
In Retail, WALMART has developed its own version of Just In Time
(JIT) Inventory System for retail operations, Which needs excellent
supply chain capabilities.
 JUST IN TIME
Just-in-time (JIT) inventory management, also know
as lean manufacturing is the process of ordering and
receiving inventory for production and customer sales
only as it is needed and not before.

This means that the company does not hold safety stock and
operates with low inventory levels.

The disadvantages of just-in-time inventories If a supplier of raw

materials has a breakdown and cannot deliver the goods on time,
one supplier can shut down the entire production process A
sudden order for goods that surpasses expectations may delay
delivery of finished products to clients.
JIT CASE STUDY
 DRIVERS OF SCM
Emergence of Organized Retail and big Retail
formats: SCM is the essence of organized retail.SCM
helps to achieve economies of scale and make
operations more efficient and profitable.

Service Orientation: Customers demand extended

product i.e. basic product plus services because of
intense competition

Fragmented Consumer Demands: Niche SCM

meets customer demands at micro level.
 DRIVERS OF SCM
Dismantling of Trade Barriers: Development of
global supply chains

Technological Support: Technological solutions

(technology becoming affordable &accessible)
facilitate integration of supply chain activities within
and outside retailers organization.

Need to improve margins: For reducing cost and

improving efficiencies, streamlining SCM is best way
out in present scenario
 FEATURES OF SCM
Demand Driven: Flexible supply chain is required to
meet customer demands on regular bases.
With application of RFID at point of sales, there is a better idea
about changing customer demands
Technology Driven: Technology is the key enabler
of supply chain
Strategic Focus: Developing SCM needs strategic
focus
The development of infrastructure like warehousing, cold storage
facilities, vendor development, development of technological
capabilities needs lot of investment and thus needs strategic vision
Partnership among channel members: Joint
ventures or outsourcing, developing local suppliers
SCM - FRAMEWORK
PUSH vs. PULL SCM
 RETAIL LOGISTICS
Storage Facilities: Warehouses or stock rooms

Inventory: Amount of stock or inventory to be

maintained

Transportation: Retailers therefore have to manage

a transport operation that might involve different
forms of transport, different sizes of containers and
vehicles and the scheduling and availability of drivers
and vehicles.
 RETAIL LOGISTICS
Unitization and Packaging: Retailers are concerned
to develop products that are easy to handle in logistics
terms, do not cost too much to package or handle, yet
retain their selling ability on the shelves.

Communications: Retailers have to capture data at

appropriate points in the system and to use that
information to have a more efficient and effective
logistics operation
CONTINUOUS REPLENISHMENT
PROGRAM (CRP)
Vendor managed inventory (VMI) arrangement in
which either the vendor continuously monitors a
customer's inventory or customer supplies current
inventory data, so that the vendor can make timely
shipments to maintain the customer's inventory at
agreed upon levels.
 GOALS OF CRP
Increase inventory turns
Reduce inventory levels
Decrease stock-outs
Improve customer service levels
Boost warehouse efficiency
Enhance trading partners perception of value
 ADVANTAGES OF CRP
Cost saving because of the decreased number of
employees required in the supply chain. Employees
who are responsible to maintain the inventory level
and place the purchase order will no longer be
required.

Delivery quality also improves because of lesser

hindrances and middlemen in the supply chain.

It enhances the relationship between the supplier and

the customer and helps in the long-term.
CRP
 BENEFITS OF SCM
Consumer responsive techniques in retailing require
efficient and effective supply chain mechanism in place.
such as :-
Category Management
Collaborative Planning, Forecasting and Replenishment
(CPFR)
Efficient Consumer Response (ECR)
 BENEFITS OF SCM
Efficient replenishment of merchandise: SCM is
primarily important for food items and consumer
goods where regular replenishment is required

New product introduction: The success rate of new

product is higher because of integrated supply chain.

Increased visibility of inventory

Higher value addition: Elimination of Middlemen

 BENEFITS OF SCM
Cost leadership: Minimizing wastage

Expansion of business

Increase in profitability: More efficiency in

operations

Benefits to Economy

Improvement in operational performance

TECHNOLOGIES USED IN SCM
Enterprise Resource Planning: ERP is a cross
functional and enterprise wide solution oriented
application software which integrates operations,
finance, accounting, human resources, inventory
management.

Internet and Internet based Technologies: It

improves response time.

Data mining : Data mining is the process of

analyzing data from different perspectives.
TECHNOLOGIES USED IN SCM
Radio Frequency Identification Code: The concept
is to fix a computer readable tag to each product at
the store.
Tag can be a sticker or built in the packaging of a product. Tag
consists of a silicon chip and antenna. Chips are programmed to
store the information. The antenna enables the chip to transmit
Identification information to the reader. The reader converts the
radio waves into digital information that is displayed on computer
screen.

Bar Codes: It performs same function as RFID

Data Warehousing: Integrating various databases

into a centralized system.
 VENDOR RELATIONSHIP
MANAGEMENT
Vendor Managed Inventory (VMI): Retailer
forward the orders to the vendors and then make
deliveries directly to customers.

Order Fill Rate: Ratio of number of items delivered

by the supplier to total no. of items ordered by
customer.
If a customer places order for 100 items and if only 95 items can
be delivered, then fill rate is .95 or 95%

Lead Time: Time elapsed between placing an order

and delivery of goods.
RETAIL SUPPLY CHAIN
RETAIL SUPPLY CHAIN
RETAIL SUPPLY CHAIN
RETAIL SUPPLY CHAIN
 INVENTORY MANAGEMENT
Inventory management is all about having the right
inventory at the right quantity, in the right place, at
the right time, and at the right cost

Inventory management includes aspects such as

controlling and overseeing ordering inventory,
storage of inventory, and controlling the amount of
product for sale.
 MOTIVES FOR HOLDING
INVENTORY
Transactionary Motive: To carry out transactions of
business in an uninterrupted manner.

Precautionary Motive: To tide over supply side

constraints, especially in case of imported products

Speculative Motive: To hold inventory of stock

(onion, potatoes) whose prices are likely to increase
during off season
 RIGHT AMOUNT OF
INVENTORY
Previous Trend

Inventory Forecasting Software

Excel Formulas

Carrying Cost, ordering cost, stock out cost

 RIGHT PRICE OF
INVENTORY
Carrying Costs attached to your products. The more
stock you have on hand, the more youll have to
spend on storage facilities, while increasing your risk
of having products going out-of-date. This is where
the Economic Order Quantity (EOQ) formula comes
in.

Economic Order Quantity is a formula that calculates

the number of units your business should be adding to
inventory order.
Aimed at reducing the total costs of inventory
management including factors like order costs,
holding costs, and shortage costs.
 REORDER POINT FOR
INVENTORY
When it comes to calculating your reorder point, you
need to account for:
The time it takes to get your items picked
The time it takes to get your items packed
The time it takes to get your items to be shipped (lead time)
 SAFETY STOCK
Safety stock is the emergency stock you need to
endure unexpected occurrences - like seasonal acts of
nature
 INVENTORY CONTROL IN
RETAIL
Visual control

Tickler Control

ABC analysis (A cat.- should never be out of stock,

B cat.- can occasionally be out of stock, C cat.-
should be deleted from stock selection)
 INTERNET & DIRECT
DISTRIBUTION SYSTEMS
Visibility on the Internet to Anyone, Anytime and
Anywhere, 24/7
Seamless connectivity to thousands of travel websites
with inventory availability
Offers presented to the consumer in to different
languages
Increase ROI and revenue by direct sales to travelers
Receive payment instantly
Reduce support staff
Decrease administration costs
Manage "last minute" bookings effectively
Capture reviews and important marketing statistics
 Importance of
Information
Technology and Ethics
in Retailing
 INFORMATION TECHNOLOGY
Information technology (IT) is the application of
computers to store, study, retrieve, transmit, and
manipulate data, or information, often in the context
of a business or other enterprise.

It requires Software( The instructions that control the way hardware accepts
data input, and then processes, stores and communicates that data ) and
Hardware (Equipment which handles data)

IT is considered a subset of information and communications technology

(ICT)
RETAIL IT SYSTEM
COMPETITIVE ADVANTAGE
OF IT IN RETAIL
Automating Processes: It reduces costs, increases accuracy,
reduces processing times, enables quick decision and speeds up
customer service.
Collecting data about the customers: Purchase details of
customers are collected and analyzed. e.g. customer loyalty
Feedback and marketing Decisions: Analysis of POS data helps
retailer in knowing effect of promotion, prices, new products, etc
Communication: For effective communication such as purchase
orders, stock and sales information
For Planning: Plan, budget and forecast, choose the most
successful location, etc
Adding value to retail Transaction: ATMs are used at any time
adding value to transaction
 LIMITATIONS OF USING IT
IN RETAIL
Expenditure for installation of IT equipments

Limited knowledge about Computes (specialized

people required)

Complex system to handle large no of product lines

Retailers devote small amount of budget for IT

ROLE OF IT IN RETAIL
 DATABASE MARKETING
Database: A structured set of data held in a
computer, especially one that is accessible in various
ways

Database marketing is a form of direct marketing

using databases of customers or potential customers
to generate personalized communications in order to
promote a product or service for marketing purposes.
 DATABASE MARKETING
Data Warehouse: a large store of data accumulated
from a wide range of sources within a company and
used to guide management decisions.

Data Mart: The data mart is a subset of the data

warehouse and is usually oriented to a specific
business line or team.
 DRIVERS OF DATABASE
MARKETING
Changing role of direct marketing
The move to relationship marketing for competitive advantage.
The decline in the effectiveness of traditional media.
The overcrowding and myopia of existing sales channels.
Changing cost structures
The decline in electronic processing costs.
The increase in marketing costs.
Changing technology
The development of economical methods for differentiating
customer communication.
Changing market conditions
The desire to measure the impact of marketing efforts.
The fragmentation of consumer and business markets.
SOURCES OF DATA
DATABASE MARKETING
TECHNIQUES
RFM (Recency, Frequency, Monetary Analysis) is a highly
successful way of predicting which customers will respond to
promotions.
Website Cookies
Email
Caller ID: Caller ID linked to a customer marketing database
permits customer service to get a customers complete record up on
the screen before taking a call. As a result, the CSR can speak to
the customer as if she knew her, bonding with her and building
close rapport.
Analytical Software: Analytical software's are linked to the
databases so that each analyst can do any type of standard or ad hoc
report -before, during and after a campaign, with the results printed
on his PC printer.
 DATA MINING
Data mining: The extraction of hidden predictive
information from large databases, is a powerful new
technology with great potential to help companies
focus on the most important information in their data
warehouses.

Data mining tools predict future trends and

behaviors, allowing businesses to make proactive,
knowledge-driven decisions
 DATA MINING TASKS
Anomaly detection (Outlier/change/deviation detection) The identification of unusual
data records, that might be interesting or data errors that require further investigation.

Association rule learning (Dependency modelling) Searches for relationships between

variables. For example, a supermarket might gather data on customer purchasing habits.
Using association rule learning, the supermarket can determine which products are
frequently bought together and use this information for marketing purposes. This is
sometimes referred to as market basket analysis.

Clustering is the task of discovering groups and structures in the data that are in some
way or another "similar", without using known structures in the data.

Classification is the task of generalizing known structure to apply to new data. For
example, an e-mail program might attempt to classify an e-mail as "legitimate" or as
"spam".

Regression attempts to find a function which models the data with the least error.

Summarization providing a more compact representation of the data set, including

visualization and report generation.
 BUSINESS INTELLIGENCE
Business intelligence (BI) is a technology-driven
process for analyzing data and presenting actionable
information to help corporate executives, business
managers and other end users make more informed
business decisions

The potential benefits of business intelligence

programs include accelerating and improving
decision making; optimizing internal business
processes; increasing operational efficiency; driving
new revenues; and gaining competitive advantages
over business rivals
BUSINESS INTELLIGENCE
Measurement Program that creates a hierarchy of performance metrics and
benchmarking that informs business leaders about progress towards business
goals

Analytics program that builds quantitative processes for a business to arrive

at optimal decisions and to perform business knowledge discovery

Reporting/enterprise reporting Program that builds infrastructure for strategic

reporting to serve the strategic management of a business, not operational
reporting. Frequently involves data visualization, executive information system
and OLAP.

Collaboration/collaboration platform program that gets different areas) to

work together through data sharing and electronic data interchange.

Knowledge management program to make the company data-driven through

strategies and practices to identify, create, represent, distribute, and enable
adoption of insights and experiences that are true business knowledge
 E-COMMERCE & DATA
COMMUNICATIONS
E-commerce is a transaction of buying or selling
online.

Electronic commerce draws on technologies such as:

Mobile commerce
Electronic funds transfer
Supply chain management
Internet marketing
Online transaction processing
Electronic data interchange(EDI)
Inventory management systems
Automated data collection systems.
TYPES OF E-COMMERCE
Business-to-Business (B2B): Producers and
wholesalers

Business-to-Consumer (B2C): company websites

Consumer-to-Consumer (C2C): Olx

Consumer-to-Business (C2B): sites where

designers present several proposals for a company
logo and where only one of them is selected and
effectively purchased
 E-RETAILING
Electronic retailing is the sale of goods and services
through the internet. Electronic retailing, or e-tailing, can
include business-to-business (B2B) and business-to-
consumer (B2C) sales of products

E-Retailing stores sell online promotion only for goods

that can be sold easily online

The online retailing require lots of displays and

specification of products to make the viewers have a
personal feel of the product and its quality as he gets
while physically present in a shop.
 E-RETAILING SYSTEMS
Passive systems: Non interactive one way media
where retailer can decide upon content and timing of
messages. e.g. shopping pages, televisions

Interactive systems: Retailing systems allowing two

way interaction. e.g. Internet, Kiosks
 RETAILERS USING E
COMMERCE
Virtual Retailers: No physical presence. e.g.
Amazon

Two Channel Retailers: Established retailers with e

retailing

Multi Channel Retailers: service customer needs in

no. of ways including shops, telephone ordering,
internet, catalogues, TV
 GREEN ISSUES
Products designed to minimize negative effects on the
physical environment or to improve the environment

General Electric energy-efficient CFL flood lights are

good for the environ- ment. The promotion theme is
Long life for hard to reach places. GE is selling
conve- nience because the floodlight doesnt need
replacing as often
 SOCIETAL MARKETING
The societal marketing is a marketing concept that
holds that a company should make marketing
decisions by considering consumers' wants, the
company's requirements, and society's long-term
interests.
Society (Human Welfare)
Consumers (Satisfaction)
Company (Profits)
EXAMPLE
 BENEFITS OF SOCIETAL
MARKETING
It helps to build a better image of the company.

Gives a competitive advantage over the competitors.

Useful in customer retention and long term

relationships.

Increases the sales and market share.

Facilitate expansion and growth in long term.

 Corporate Social Responsibility: Businesss concern for
societys welfare.

 AGAINST CSR
Skeptics often claim that businesses should
focus on profits and let the government or
nonprofit organizations deal with social
and environmental issues.
If managers are concentrating on social
responsibilities, they are not performing
their primary duties for the company at full they should use them to do so
capacity.
Being socially responsible damage a
company in the global marketplace. cost
will be passed on to the consumer through
the final prices of the product or service
FOR CSR
Societys problems have been created by
corporations such as pollution and
poverty-level wages. It is the ethical
responsibility of business to correct these
wrongs.
Businesses have many of the resources
needed for solving societys problems and
If businesses are not, then the government
will create new regulations and establish
fines against corporations. This has
especially been the case for the pollution
issue.
It can be a great way for a company to
build positive public relations and attract
top talent in the industry.
 UNIT-VI
IMPENDING TRENDS
IN RETAILING
INTERNATIONAL RETAILING
The management of retail operations in market which
are different from each other in their regulation,
economic development, social conditions, cultural
environment and retail structures.

Sectoral Expansion
New Market
Combined Strategy
 DRIVING FORCES OF
INTERNATIONALIZATION
 DIRECTION OF EXPANSION
Factors determining direction of international retail
expansion:-

Cultural Proximity: Similar business and consumer

culture

Geographical Proximity: Spatially close

Stage of Development of retail market: in less developed

market for having competitive advantage
STAGES OF INTERNATIONAL
RETAIL DEVELOPMENT
Stage 1: Reluctant: To follow high risk and cost
strategy

Stage 2: Caution: Less cautious

Stage 3: Ambitious: Inclined to seek expansion

 MARKET ENTRY METHODS
Acquisition: taking over a retail company already
established in market

Joint Venture: Establishing a company with a partner

Organic Growth: Opening new outlets using

existing brand or creating a new brand
 MARKET ENTRY METHODS
Shareholding: Acquiring shares of a retailer already
operating in chosen market

Franchise: Allowing entrepreneurs to open outlets

under a single brand which are operated under a
certain controlled conditions. E.g. KFC, McD
MARKET ENTRY METHODS
 TYPOLOGIES OF
INTERNATIONAL EXPANSION
Investment: Attaining share in foreign company or
acquisition of entire company

Global: Replication of concept (same store design,

assortment, advertising)

Multinational: Marketing mix adapted to suit chosen

market
 RETAILERS MANUFACTURERS

Ability to communicate directly with Specialist manufacturing

customers

Full control of retail marketing mix Use of media communications & advertising
to influence customers

Timely and accurate feedback and Use of market research to understand

information consumer needs

Ability to be efficient with new product Advantage of image for quality

introduction & to reinforce store image

Advantage of habitual, low interest Can develop a whole range with great deal
purchases occurring & therefore brand of variety which provides for a sense of
acceptability is not difficult choice

Sales are more likely to occur Sales can occur through different channels