Integration Of Supply Chain In Retailing

Supply Chain Management (SCM) is a network ofeliminated thus achieving just-in-time inventory
facilities that procure raw materials, transform themmanagement. EDI is done with the help of the
into intermediate goods and then final products toorganization's ERP package that interacts with the
customers through a distribution system.Previously,vendors' systems.
individual activities of the SCM process wereWarehouse Management The retail warehouse or the
warehousing, distribution, transportation etc. donedistribution centre receives the ordered stocks;
separately. Later, the process moved on to logisticschecks for the right quality, quantity and price; stores
where every activity was carried out in a logicaland tags the merchandise with both the MRP and
sequence following a specific timetable. Now, ansecurity tags; prepares the merchandise; transports
information backbone supporting the SCM processthe merchandise; receives goods returned from retail
has helped retailers in greatly reducing cycle timesstores, if any; and sends returned merchandise
and attaining efficiency.‘to vendors back as returns..
SCM MANAGEMENT DECISIONSA Goods Received Note (GRN) is prepared when the
There are three levels of decisions-strategic,merchandise received at the warehouse from
tactical   and operational. The strategic levelsuppliers is checked and matched with the relevant
decisions are long-term decisions about location,purchase order after certifying all the elements of
production, inventory and transportation. Locationquality, quantity, etc. The GRN is then automatically
decisions include size, number geographic location ofrecognized by the system after authorization for
supply chain entities. Production decisions determinepayment to the vendor by the accounts department.
what to produce, where to produce, which suppliersThe merchandise is then docked and tagged with bar
to use etc. Inventory decisions decide the way ofcodes and price tags if applicable.
managing inventories throughout. Transport decisionsInter-Transfer Note (ITN) When the prepared and
decide the mode of transport. Tactical level decisionsreadied merchandise is supplied to the retail stores
are medium term decisions such as weekly demandITN is prepared. The reverse ITN (ITN out) is
forecasts, distribution planning production planning,prepared when goods are sent back to the
material procurement planning. The operational levelwarehouse by the retail store. Goods that are
decisions are of short-term decisions concerned withreturned to the warehouse are then sent back to
day to day operationsthe suppliers and vendors. The system recognizes
Efficient Inventory Planning: Efficient inventorythe same and raises a debit note to the vendors.
planning enables the retail organization to achieve itsTransportation is done according to timely delivery
strategies and benchmarked standards of customerschedules so that replenishments are delivered as per
deliveries and thereby reducing supply chainthe plan. Cost efficiency and reduction in delivery
expenses. Forward planning is done by forecastingtime are critical success factors in transportation.
sales and Beginning of Month (BOM) and End ofEfficient docking with a plan ensures the best
Month (EOM) inventories for specific periods, andutilization of space. Docking ensures that the First in
preparing the OTB (Open to Buy) plans. EfficientFirst out (FIFO) delivery plan is followed so that
inventory planning optimizes purchasing controlsageing of merchandise in the warehouse is kept to
through OTB so that the planned stock turns arethe minimum.
achieved for the store with just-in-time inventoriesMaterial Handling Equipment in the warehouse should
for freshness and achieving customer satisfactionbe tailored for specific varieties of merchandise. At a
through the seven 'rights' of merchandising –rightmicro level of handling, most of the time garments
product, right place, right quantity, right quality, rightare delivered by hangers and sometimes by the
price, right mix and right time.browser itself in a ready-to-sell state.
Pre-Purchase Order (PPO) and Purchase Order (PO):Value Chain The entire SCM process is a value chain
The PPO is an instrument through which thewhere bottlenecks, value-adding factors and liability
tentative plan of order placement to the vendor isfactors are identified and addressed, thus enabling
done for the whole season as soon as the inventorythe retail organization to have an efficient supply
planning is completed. The Purchase Order is thechain. The entire process needs to be audited to
confirmed order for supply.meet timelines, and may be reengineered to achieve
INTEGRATION OF SUPPLY CHAINcost efficiencies and reduce cycle times.
The end-to-end integration of all supply chainEfficient Consumer Response (ECR) This is a
elements and functions are achieved by applyingreplenishment system designed to link all parties in
interlinked packages. The integrated supply chainthe logistics channel to create a massive flow-through
starts from the design stage at the vendor level todistribution network. Replenishment depends upon
the time when there is consumer response at theconsumer demand and point of sale information. In a
retail stage. The benefits of having an integratedretail organization, an integrated supply chain —
supply chain are best delivery performance, reducedwith the right application of packages enabling the
inventory, faster cycle time, accurate forecasts,free flow of information and consequently
lower supply chain costs, improvement in overallmerchandise and services elicits the greatest
productivity, improvement in capacity utilization, andresponse from consumers since it addresses their
so on.needs appropriately.
Vendor Management: Efficient vendor managementPROBLEMS OF INVENTORY IN SCM
involves selecting the right vendors capable of givingWhile oversized inventories are a costly inventory
the right quality of merchandise and to deliver themanagement strategy; low fill rates are also costly.
right quantities to get the right 'hit ratio'. The right hitTherefore the company’s interest to balance
ratio measures the gap between delivery andinventories holding cost and the cost of imperfect
purchase orders and helps eliminate backlog insatisfaction. The main pitfalls in inventory
deliveries. In a chain store scenario, vendors’management are:
direct delivery to stores is an important element in-Inappropriate information system
attaining good supply chain efficiency.-Incorrect delivery dates
The vendors directly manage inventories in a few-Organizational barrier
retail organizations. Vendor Managed Inventory (VMI)-Incomplete supply chain
is ideal for retail organizations as it totally eliminates-Failure to account uncertainties.
inventory-carrying costs. The vendors manage theRETAIL AUTOMATION AND SUPPLY CHAIN
inventory at every store, monitoring the flow ofMANAGEMENT
information and ensuring just-in-time deliveries. TheThe challenges that a retail organization include huge
vendors are able to take back slow-selling andstock-keeping units (SKUs), seasonal variations of
non-moving merchandise, thus reducing the scope forproduct lines necessitating the introduction of new
mark-down losses for the store.SKUs, complex tax structures, the sheer geographic
Electronic Data Interchange (EDI) helps in establishingspread of the country, changing consumer demands,
an efficient information flow on stock movement,etc. A retail organization has to plan perfectly to
and the vendors can know sales and inventoriessatisfy the needs of every customer. Automation
instantaneously. Reorder supplies are immediatelythrough the implementation of ERP systems has
planned and executed by the vendors. The timehelped many organizations improve their efficiency
taken to exchange documents for placing orders isand helped them grow.