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SCM in retailing is the total process of planning, implementing & processing all the activities required for movement of merchandise from manufacturer to retailer to customer in the timeliest, most effective & cost efficient manner possible. It is not simply a tool for reducing cost, but also a tool for increasing sales and generating higher levels of value faster and better than the competition.
Throughout the supply chain of any business operation, there are three basic types of flows, which require well-defined business processes for support. These basic types of flows are as follows:
Products or services: The movement of the final physical product or service throughout the entire Supply Chain of any business.
Information regarding the product or service: Information flows across the various players involved in the business to ensure that the final physical product or service delivers the maximum value to the business organization
Financial transactions relating to the product or service: In addition to the above types of flows, there is also flow of financial matter in the form of money or credit to support and control the above types of flows.
The end user buys the required merchandise from a retail store. Therefore, the supply chain of a Retail organization starts from a Supplier and ends once the merchandise reaches the retail stores. These activities are planned and controlled at the organizational level but some of them are executed at the retail store level as well.
In a typical retail organization, there are hundreds or thousands of different product lines that make up the merchandise. This entire product line obviously is procured from hundreds of suppliers located in disperse locations and are sold to the final customer through number of stores spread across a country or even few countries. As explained above, most of the buying of merchandise is centralized at retail head office for operational efficiency and uniformity reasons.
Each of the retail stores carry huge quantities of merchandise which locks up valuable money and space resources of the organization. Hence carrying the optimum levels of merchandise becomes one of the most important operational activities of a retailer.
The major activities involved in this supply chain management are explained in this section.
Demand Analysis is done for the entire merchandise over periodic intervals by the organization. Here, the demand of the merchandise is analyzed on a store to store basis through the study of buying and demand patterns, new trends, local socio-economic developments, etc. Quite often an outside third party firm is hired and publicly available sources of information on any factor that might change local demands are used for this activity. For an extremely large retail organization, there are often large teams working full time to do demand analysis on an ongoing basis.
Once the demand from the local stores is collected and analyzed at the local level, the overall data is then compiled to study middle and long term trends that may affect the business. This activity of aggregating demand on a regional as well as national basis for further analysis is called demand aggregation. Many software and statistical tools are usually used throughout this activity.
Once the aggregate and localized demand levels have been calculated, the final forecasting of demand down to the regional level and area level is done. This activity also involves extensive use of mathematical and statistical methods in addition to Market decision-making tools. The organizational buying department to plan the entire organizational buying activities for the future then extensively uses this forecast.
