Retail Supply Chain Management Trends: Past, Present and Future

Retail Supply Chain Management Trends: Past, Present and Future

Kumari Smriti (IIMB, India)
DOI: 10.4018/978-1-4666-9894-9.ch001
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Abstract

Improving the organization's performance and securing competitive advantage over others greatly depends on the supply chain management as it is seen that the competition is no longer between the organizations, rather they are amongst supply chains. This study is based on collecting the information and data about the supply chain management from 60 retail organizations. This study will show the aspects of supply chain management in the retail domain highlighting the challenges, capabilities and the priorities for the next 2-3 years. As retailers choose to concentrate either on product leadership private-label or high touch customer intimacy or on cost leadership strategies, their supply chain priorities and investment decisions are tailored to the specific requirements. While retail is extremely diverse, but retailers across the globe share many priorities — balance the availability of the inventory; control the costs and customer service in order to maintain the retail strategy. Our effort has been to explore how retailers are managing these priorities and getting ready for future.
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Introduction

One of the main drivers of the global economy is the retail industry. The supply chain for the retail industry has become of the importance subject of study because it provides the retailers with competitive advantage. The main challenge in studying the retail supply chain (R-SCM) is that it tends to change every year. This study was conducted to understand how R-SCM has changed over last couple of years and how it will be in the near future. Study was conducted to study the factors affecting R-SCM for next 2-3 years and the challenges affecting the retailers in near future. Study doesn’t talk about too far in future as the purpose of the study is to understand and report immediate challenges of the retailers. Study has been conducted around challenges, capabilities and priorities of the retailers. The impact of recession is clearly seen on the industry. Chief executives are concerned about the economic recovery that is speeding up, and are pursuing strategies to undergo the economic challenges while grabbing the opportunities to increase efficiencies.

Data from Figure 1 shows that during 2001 to 2010, the global organized retailing space has increased by 225% with population growth of just 11%. During same time, sales from organized retail per capita have almost doubled and Internet access has grown by 500%. It’s clear from the above data that retail is growing leaps and bounds in developing markets and these developing markets has emerged to become the driving forces fueling global growth in retail sales. Hence it’s not surprising that the retailing companies are looking to expand their base in developing countries but with care. It’s important that the companies pick the right countries for their future growth. Not all developing countries offer same amount of return and most of the global retailing companies have learnt hard way. Retailing companies will have to identify the market poised for a big leap. Early country outside developed countries league to generate interest was China. Many global retailers focused their developing market expansion aspirations on China, which gained acceptance among business world because of its recognition by the World Trade Organization (WTO) in 2001. Many other countries like Southeast Asia and other BRIC nations (Brazil, Russia, India and China). With their friendly foreign policies attracted global retailers. Retailers are also exploring options in other countries like the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Rumania, Slovenia and Slovakia following their joining the European Union (EU) in 2004.

Figure 1.

Growth areas in developing markets - 2001 vs 2010 comparison

Coming back to Retail-Supply Chain Management (R-SCM), it is critical to retail success, more so in unknown territories and in global scenario of conducting business. Ultimately, it’s the supply chain that determines end consumer cost, and has a significant impact on shareholder value. One retailer shows retailer’s stock prices fell an average of 9% on the day a supply chain problem was disclosed, with an additional 9% drop recorded over 90 days.

This research, based on the retailers of every revenue size and different geographical areas, shows that the retailers had turned up to the supply chain professionals in order to experience further growth. The supply chain professionals take up the challenge as the essential role in the organization’s success. The data collected is a combination of Companies’ views expressed in their annual report and other disclosures and practical observations being carried out in the retail domain. The research goal is to be able to recognize the essential role that the supply chain management plays in the success of the retail organization in the coming 2-3 years. Our result will show the current capabilities, immediate challenges, and supply chain priorities for retail centric organizations. The retail domain faced plenty of challenges in the past years which were because of the increasing competition and the customer’s choice in low spending. The retail chain executives are finding it difficult to cope up with the high levels of service and low costs as the businesses face more global pressure. The purpose of this study is to explore the critical role SCM plays in the retail industry and study the changing landscape of R-SCM. The study addresses three key research questions:

Important components of the supply chain are (they also form part of our research study):

Key Terms in this Chapter

Chain Store: One of a number of retail stores under the same ownership and dealing in the same merchandise.

Category Killer: A large retail chain store that is dominant in its product category. This type of store generally offers an extensive selection of merchandise at prices so low that smaller stores cannot compete.

Action Alley: The sales area of a store located immediately after entering.

CO-OP: An advertising allowance offered by a vendor, payable upon proof of an ad having been run.

Cash Flow: The movement of money in and out of a business and the resulting availability of cash.

Big Box Stores: Large stand-alone store with varying market niches.

Inventory: Inventory is the merchandise a retail store has on hand. The term also refers to the act of counting, itemizing and recording in-stock merchandise or supplies.

CRM: Customer Relationship Management: Customer relationship management (CRM) is a business strategy designed to reduce costs and increase profitability by strengthening customer loyalty.

Private Label: Products that are generally manufactured or provided by one company under another company’s brand.

Comp Sales: Comparable-store sales are a measurement of productivity in revenue used to compare sales of retail stores that have been open for a year or more. Historical sales data allows retailers to compare this year’s sales in their store to the same period last year.

Ad Slick: Ad slicks refer to the final, camera-ready advertisement. It gets its name from the glossy paper on which it is printed.

E-Retailers: Retailers who operate their business solely on the internet.

SKU: The stock keeping unit (SKU) is a number assigned to a product by a retailer to identify the price, product options and manufacturer.

Drones: Drones are generally defined as unmanned aircraft. They come in all shapes, sizes and prices, from $100 toys the size of a baseball to multi-million dollar military machines the size of a vehicle.

Softlines: A store department or product line primarily consisting of merchandise such as clothing, footwear, jewelry, linens and towels.

Last Mile Delivery: Last mile is a term used in supply chain management and transportation planning to describe the movement of people and goods from a transportation hub to a final destination in the area. The term “last mile” was originally used in the telecommunications field but has since been applied to supply chain management. Transporting goods via freight rail networks and container ships is often the most efficient and cost-effective manner of shipping. However, when goods arrive at a high-capacity freight station or port, they must then be transported to their final destination. This last leg of the supply chain is often less efficient, comprising up to 28% of the total cost to move goods. This has become known as the “last mile problem.”

Specialty Stores: Retailers that concentrate on a limited number of complementary merchandise categories and provide a high level of customer service in an area typically less than 8000 square feet.

Plan-o-Gram: Visual description, diagram or drawing of a store’s layout that includes placement of particular products and product categories.

Visual Merchandising: Visual merchandising is the art of implementing effective design ideas to increase in-store traffic and sales volume.

Working Capital: Liquid assets available to build and grow a retail business. It is measured by current assets minus current liabilities. A positive working capital is needed until the retailer can produce a profit.

Coupon: A promotional tool in the form of a document that can be redeemed for a discount when purchasing goods or services. Coupons feature specific savings amount or other special offer to persuade consumers to purchase specific goods or services or to purchase from specific retailers.

Anchor Store: A major retail store used to drive business to smaller retailers that physically surround it. These larger department stores or grocery stores are generally part of a retail chain and are the prominent business in a shopping mall.

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