Sunday, July 4, 2010

Retail Logistics - Challenges in Supply Chain

The consideration of the changes and challenges in retail logistics allows us to summarize the key issues in retail logistics and supply chains. There are a number of changes in modern retail supply chains that are direct responses to the changing demands of consumers.

If nothing else, the modern consumer is more demanding and less patient than before. As a consequence, retailers, particularly in fashion goods, cannot afford to take a long time to develop, manufacture and then deliver the product. Speed or pace is vital. The concept of ‘fast fashion’, as developed by Zara and Hennes & Mauritz amongst others, shortens the product lifecycle in clothing from months and years to weeks and months. Development and manufacture time is slashed and demand response time is also shortened dramatically. The pace of the supply chain has also increased. This is not to say that speed in supply
chains is the key priority: supply chains need to be fast on occasions but, more importantly, they have to accurately and reliably deliver the right products at the right time.

Retailers are also now far more global in their outlook. As a consequence, they have to manage supply chains that span the globe. They are searching for low-cost production, but link this to an ability to distribute the product effectively from far-spread points of production to multiple locations for purchase and then consumption. There is little point in moving production points to faraway but low-cost sites if the cost and time of distribution and supply outweigh these production benefits. Retailers now talk about global supply rather than global production and are increasingly aware of the need to manage this business globally.

To meet the needs of ever more demanding consumers, retailers are increasingly more concerned about availability of products in store. Whereas increasing pace in supply chains and broadening spans of production would seem to be contradictory pressures on availability, both in fact can assist in enhancing broad supply chain availability. In part, this arises from the need to control supply chains more directly. But general availability is not what consumers require; consumers need specific onshelf availability in front of them as they shop. Much attention has therefore been paid by retailers to ensure that the products are moved onto shelves more efficiently, rather than ‘resting’ in stock rooms. Any development that speeds up and simplifies this process (the so-called last 50 metres) is thus of importance. Concepts such as shelf-ready merchandise, retail-ready packaging or one-touch systems have found ready markets. Products have to be designed not only with their customer profile in mind, but with their supply and handling requirements identified as well. Badly designed products and packaging from a supply chain viewpoint add cost and time to handling and reduce availability.

Perhaps the critical element in retail supply chain change has been the ability to collect, disseminate and use data throughout the supply chain and the supply chain partners. Data collection on product levels and movements has allowed visibility in the supply chain (both vertically and horizontally) and has enabled stronger control of logistics and supply chain operations. By focusing on data and information, supply chain managers can increase the pace and accuracy of supply chains, allow a broader scope or span and focus on ensuring availability improvements. Data have become the lifeblood of retail supply chains. There can be difficulties in managing data on occasions and there is potential data overload if appropriate systems are not put in place. Similarly, technology systems introduction does not always go smoothly and can be highly disruptive to existing business practices. Nevertheless, the ability to collect, store and use greater amounts of data at more detailed levels and to transform these data into management information has undoubtedly enhanced retail supply systems, reducing stock levels and aiding appropriate and rapid response to consumer demand.


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