Supply Chain Management in Retailing Business

Introduction

After the last decade of 20th century, customers started to take place in the hearth of business decisions and companies tried to develop collaborations with all members (supplier, producer, retailer, etc.) in value chain for satisfying their customers. The name of this collaboration process is called as Supply Chain Management (SCM) (Houlihan, 1985: 25). The model of control and coordination between companies is also called as SCM and used for decreasing costs and increasing quality. Supply chain management as a concept; receives increased attention as means of becoming competitive in a globally challenging environment. Supply chain is a network which supplies row materials, makes them unfinished and finished goods and then distributes them to customers (Lee and Billington, 1992: 66).

According to Kopczak (1997), the definition of supply chain is “The set of entities, including suppliers, logistics service providers, manufacturers, distributors, and resellers, through which materials, products and information flow. The term supply chain restructuring refers to significant changes in the set of supply chain entities, the distribution of inventory, or the assignment of tasks, roles and responsibilities to the entities.” Briefly SCM is managing product, money, and information between suppliers, producers, distributers, retailers and customers which take place in value chain (Ozdemir, 2004). On the other hand, retail involves the process of selling consumer goods or services to customers through multiple channels of distribution to earn a profit. Demand is identified and then satisfied through a supply chain. Retailing is also described as the activity of selling to buyers who are buying for their own ultimate consumption. Furthermore, retail has an evaluation. Three theories are commonly recognized as the primary retail evolution theories: Environmental theory, cyclical theory, and conflict theory. The basic premise of these theories is that a force (e.g., environment, conflict) causes a retail institution type to change and evolve into a new institution type or a new institution type will emerge as a result of need, conflict or other forces (Kim, 2003; Brown, 1987). Also two theories explain the present structure of the retail industry and predict the future development of current and new retail formats. The wheel of retailing and the retail life cycle are two particularly important theories.

The wheel of retailing is a well-established framework for explaining developments in retail institutions. The theory suggests that retail institutions go through cycles. The rationale is that, as low-end retailers upgrade their strategies to increase sales and profit margins, new forms of low-price (discount) retailers take their place in the market. The wheel of retailing consists of three stages (Kim, 2003; Berman/Evans 2007, pp. 129-131). The second phase is called as trading up. Retailers wishing to expand their business and attract more customers, enhance the quantity and quality of merchandise handled, provide more services, and open outlets in more convenient locations. This leads to an increase in operating costs and prices and thus offers opportunities for new competitors to enter the market with low-price strategies. The third phase is characterised by an increase in competition in services of all kinds and by a convergence in terms of the marketing mix of retailers as they mature. They become vulnerable to new competitors that enter the market with low prices (Kim, 2003).