Friday, September 16, 2011

Supply Chain Drivers in Retail

Now that we have seen the Cost driving components in the previous article let us look at the main drivers of the Supply chain.

Supply chain drivers primarily are divided into four elements.

1. Facilities
The facilities include all those areas where materials are stored, assembled, produced and sold. Significant factors considered while setting up a facility are the geographical reach of the location and access to various suppliers, customers and end consumers, Flexibility in terms capacity of the location to produce and the operations and warehousing methodology used in the facility whether it is product based or function based.


2. Inventory
Inventory in supplychain consists of raw material inventory, work in progress and finished goods inventory. Any change in inventory levels can have a dramatic effect on the effectiveness and responsiveness on the supplychain. Few vital points considered in determining inventory levels are the Ordering cost, Holding costs, Cycle inventory, Lot size, Service levels, Reorder points and Safety Stock.

3. Transportation
The role played by transportation in a company's competitive strategy comes into effect prominently when the company considers the targetted customers demand. The company should be able to strike a balance between the speed of delivery and cost of transportation to increase its efficiency. The key challenges for the retail company in designing a transportation strategy would be
a. Deciding on the mode of transport
b. Selection of routes and networks
c. Whether to own transport inhouse or outsource to outside transporters.

4. Information
Information as a driver has much importance in the era of e-commerce and online retailing as information sharing and co-ordination between various stages of value chain helps increase profitability. The information tools available to retailers are EDI, Enterprise Planners, CRM and SCM Softwares and Internet.


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