Module 4- SCM

8/12/2019 Module 4- SCM

1/24

SUPPLY CHAIN MANAGEMENT

8/12/2019 Module 4- SCM

2/24

Agenda

Advantages through supply chain management

Flow of information

Logistics distribution center

Quick Response Delivery Systems

E-tailing

Outsourcing

8/12/2019 Module 4- SCM

3/24

Supply Chain Management (SCM)

Supply Chain Management (SCM) is the integration of business

processes from end user through original suppliers that

provides products, services, and information that add value for

customers.

Retailers may be the most important link in the supply chain.

They connect customers with the vendors who provide the

merchandise.

8/12/2019 Module 4- SCM

4/24

Improved Product Availability

An efficient supply chain has two benefits for customers:

1. Fewer stock outs, and,

2. Assortments of merchandise that customers want, where theywant it.

These benefits translate into greater sales, higher inventory

turns, and lower mark- downs for retailers.

8/12/2019 Module 4- SCM

5/24

One measure of retailing performance is the ability to generatea target return on investment (ROI).

An efficient supply chain and information system can increase

net profit and net sales, while at the same time reducing totalassets.

Net sales can increase by providing customers with better

assortments.

Improved ROI

8/12/2019 Module 4- SCM

6/24

The Flow of Information

The flow of information is complex in a retail environment.

We will explore how retailers store information in datawarehouses and how the information is transmitted to vendors

through EDI (Electronic Data Interchange)

Data Warehousing: Purchase data collected at the point ofsale goes into a huge database known as a datawarehouse.

A data warehouse is the co- ordinated and periodic copying of

data from various sources, both inside and outside the

enterprise, into an environment ready for analytical and

informational processing.

8/12/2019 Module 4- SCM

7/24

The information stored in the data warehouse isaccessible on several dimensions and levels.

Electronic Data Interchange (EDI):is thecomputer- to- computer exchange of business

documents from retailer to vendor, and back.

In addition to sales data, purchase orders,invoices, and data about returned merchandise

are transmitted from retailer to vendor.

8/12/2019 Module 4- SCM

8/24

,

Retailers now require vendors to provide notification of deliveriesbefore they take place

An advanced shipping notice (ASN) is an electronic document

received by the retailers computer from a supplier in advance of a

shipment.

Proprietary EDI Systems: are data exchange systems that aredeveloped primarily by large retailers for the purpose of exchanging

data with their vendors. Wal-Mart , for instance, has spent millions of

dollars and several years developing one of the most advanced EDI

systems in retailing.

The Flow of Information

8/12/2019 Module 4- SCM

9/24

Intranets:Also available over the Internet areintranets, which are secure communication

systems that take place within one company.

Extranets: Increasingly, EDI data are transmitted

over the Internet through extranets

An extranet is a collaborative network that usesInternet technology to link businesses with their

suppliers, customers or other businesses.

8/12/2019 Module 4- SCM

10/24

Security

Successful multichannel retailers must build security into theirbusiness processes so that their customers will be assured that their

personal information will be private and secure

The Internet has heightened security problems

To help control this changing information environment, retailers need

to develop a corporate security policy

A security policy is a set of rules that apply to activities in the

computer and communications resources that belong to an

organization

8/12/2019 Module 4- SCM

11/24

Security

The security policy should meet the following objectives:

Authentication: The system should be able to assure or verify that

the person or computer at the other end of the session really is what it

claims to be.

Authorization: The system should be able to assure that the person

or computer at the other end of the session has permission to carry

out the request.

Integrity: The system should be able to assure that the arriving

information is the same as that sent. This means that the data are

protected from unauthorized change sor tampering (data integrity).

8/12/2019 Module 4- SCM

12/24

Logistics is that part of the supply chain process that plans,implements, and controls the efficient, effective flow and storage of

goods, services

It also deals with related information from the point of origin to thepoint of consumption in order to meet customers requirements.

Supply Chain Management includes logistics,but it is a more

comprehensive and strategic concept that includes Customer

Relationship Management (CRM), Inventory Management and

Vendor Relations.

Logistics

8/12/2019 Module 4- SCM

13/24

The Physical Flow of Merchandise- Logistics

The different merchandise flows are:

1. Merchandise flows from vendor to distribution center

2. Merchandise then goes from distribution center to stores

3. Alternatively, merchandise can also go from vendor directly to store

8/12/2019 Module 4- SCM

14/24

Sometimes merchandise is temporarily stored at the distributioncenter; other times its immediately prepared to be shipped to

individual stores.

This preparation may include breaking shipping cartons into smallerquantities that can be more readily utilized by the individual stores

(breaking bulk),

tagging merchandise with price tags or stickers,UPC Codes, and the

stores label.

A UPC Code is the black- and- white bar code printed on the

package of most products

UPC stands for Universal Product Code

The Physical Flow of Merchandise- Logistics

8/12/2019 Module 4- SCM

15/24

The Distribution Center (DC):performs several functions:

Management of Inbound Transportation: Merchandise flows from

vendor to distribution center.

The dispatcher is the person who coordinates deliveries to thedistribution center

Receiving and Checking: Receiving refers to the process of

recording the receipt of merchandise as it arrives at a distributioncenter

Logistics distribution centre

8/12/2019 Module 4- SCM

16/24

Checking is the process of going through thegoods upon receipt to make sure they arrived

undamaged and that the merchandise ordered

was the merchandise received.

Storing and Cross docking: There are three

types of DCs:a traditional, a cross docking,

and a combination of the two.

The first, a traditional distribution center is a

warehouse in which merchandise is unloaded

from trucks and placed on racks or shelves for

storage.

8/12/2019 Module 4- SCM

17/24

. When the merchandise is needed in the stores, a person goes to therack, picks up the item, and places it in a bin. The merchandise is

transported via a conveyor system or other material handling

equipment to a staging area where it is consolidated and made ready

for shipment to stores.

The second type of DC, called a cross docking distribution center. Isone in which vendors ship merchandise prepackaged in the quantity

required for each store. The merchandise already contains price tags

and theft detection tags, and in the case of some apparel, it is on

hangers. Since the merchandise is ready for sale, it goes to a stagingarea rather than into storage. When all the merchandise going to a

particular store is in the staging area, it is loaded onto a truck and

away it goes. Cross docking distribution centers are less costly than


8/12/2019 Module 4- SCM

18/24

traditional centers because there is little or no storage required,processing at the distribution center is minimal, and the centers can be

much smaller than traditional centers.

Getting Merchandise Floor- Ready: Floor- ready merchandise is

merchandise thats ready to be placed on the selling floor. Getting

merchandise floor- ready entails ticketing, marking, and, in the case ofapparel, placing garments on hangers. Ticketing and marking refers

to making price and identification labels and placing them on the

merchandise. It is more efficient for a retailer to perform these

activities at a DC than in the stores because they are time- consumingand messy. Getting merchandise floor- ready in stores can clog aisles

and divert sales peoples attention from their customers.

Shipping Merchandise to Stores: Point- ofsale terminals in a store

record each purchase. Data are transmitted to buyers and their staffs

so they may formulate replenishment orders for all items in the store.


8/12/2019 Module 4- SCM

19/24

The order for the store is transmitted computer- to- computer to thedistribution center. The computer at the distribution center creates a pick

ticket, a document that tells the order filler how much of each item to get

from the storage area. The pick ticket is printed in warehouse location

sequence so the order fillers dont waste time crisscrossing the

distribution center looking for merchandise. The computer knows whichitems are out of stock so it doesnt even print them on the pick ticket.

Order fillers put the merchandise on conveyers that take the merchandise

to a staging area where an electronic sorter routes the merchandise to the

bay with the truck going to the store.

We have just described what is known as pull logistics strategy, in

which orders for merchandise are generated at the store level on the

basis of demand data captured by point- of- sale terminals.


8/12/2019 Module 4- SCM

20/24

An alternative and less sophisticated strategy is known as a push

logistics strategy, in which merchandise is allocated to stores on the

bases of historical demand, the inventory position at the distribution

center, and the stores need.


8/12/2019 Module 4- SCM

21/24

Management of Outbound Transportation: The management of

outbound transportation from distribution center to stores has become

increasingly complex as chain stores expand.

Reverse Logistics: is a flow back of merchandise through the channel,from the customer to the store, distribution center, and vendor, for

customer returns. Reverse logistics can be a serious problem. It can be

very complicated and expensive. The items may be damaged, and

without the original shipping carton, thus causing special handlingneeds. Transportation costs can be high because items are shipped

back in small quantities.


8/12/2019 Module 4- SCM

22/24

Quick Response (QR) Delivery Systems: are inventory managementsystems designed to reduce the retailers lead time(the amount of

time between the recognition that an order needs to be placed and its

arrival in the store, ready for sale.) for receiving merchandise, thereby

lowering inventory investment, improving customer service levels,

and reducing logistics expenses. QR is the integrating link betweenthe information and the merchandise flows.

Benefits of a QR System

1. Reduces Lead Time

2. Increases Product Availability and Lowers Inventory Investment

3. Reduces Logistics Expenses


8/12/2019 Module 4- SCM

23/24

The Logistics of E- tailing

Fulfilling Internet orders from customers is very different than

distributing merchandise to stores

Some, like Staples, have a fully integrated information system,

whereby distribution to stores and to customers ordering through awebsite or catalog is handled by the same information system.

Yet they use different DCs to service stores and Internet and catalog

customers

Staples makes deliveries by trucks or UPS

8/12/2019 Module 4- SCM

24/24

Outsourcing

To streamline their operations and make more productive use of their

assets and personnel, retailers are constantly looking to outsource

logistical functions if those functions can be performed better or less

expensively by third- party logistics companies.

Third- Party Logistics Companies: These are firms that facilitate the

movement of merchandise from manufacturer to retailer but are

independently owned. Specifically, they provide transportation,

warehousing, consolidation f orders, and documentation.

Documents

Module 4- SCM