“Modern Supply-Chain”: “No-more a mere Support-Function” | by: Pradeep Chechani | ET Retail

Gone are the days when Supply-chain used to be Restricted to Warehousing & Logistics..However, even today, there are few Indian Retailers who continue to Restrict #SupplyChain, to its old form…In the process, they have failed to create a differentiating factor for themselves…!!

How can a #SupportFunction, such as Supply-chain create a Differentiating Factor..?? Arguably, its no longer a Support Function now….!! Lets see How Supply-chain is being able to create a #WinningFactor for a Retailer in its #NewAvatar…!!

The following are the Functions which have been put into the Supply-chain kitty in this #ModernEra :

Vendor Management: #SupplyPartner, is the mast of any Retailer-ship…Merchandise is the main reason why a customer walks into the store, converts into a purchase and repeats the process multiple times. Within this vendor evaluation is a big process. Tying up with the right kind of vendors will ensure that a retailer provides the merchandise to the customer on a continuous basis, in the right quality and at the right price. A vendor can do this seamlessly if he is involved in the strategic and tactical decisions and processes of a retailer…

Volumes can be channelized to select few vendors so it becomes mutually beneficial. All this obviously leads to cost savings mainly in the COGS (Cost of Goods Sold).. And the percentage savings in the COGS contributes directly to the bottom line. Biggest impact of savings comes from here…!!

Order Management: Supply Chain is better equipped to bring the order into the store in the right time. Close coordination with Merchandise Planning & Buying teams is required. Warehousing & Logistics and replenishment can be planned in a better way..

Quality Assurance: Entwined with the order management process, QA logically falls under the supply chain function. Product technocrats are required at Quality Control levels. A quality assured process ensures that there are minimum delays in the manufacturing cycle of a product. This works well for the suppliers as well. A scientifically implemented Supplier Relationship Management system ensures time savings topped up with cost savings as well…

Inventory Management:Traditionally, almost 30% of the working capital is invested in Inventory. Optimising inventory can reap huge benefits for a retailer in interest costs and cash flows. Auto Replenishments, Drop Shipments, VMI (Vendor Managed Inventory) are a few ways how better cash flow can be attained. For merchandise with fairly stable demand an auto replenishment model can implemented with auto orders being published on suppliers which meets the EOQ (Economic Order Quantity) and Delivery frequency. Drop Shipments are prominently used by ecommerce retailers where the vendor is issued an order once a sale is made. The inventory in this case lies with the vendor. VMI is an arrangement where inventory lies in the retailers premise but is managed by the vendor. These arrangements however are spearheaded in terms of negotiations by the merchandisers. Such kinds of push & pull supply chains are used for best utilization of inventory…

Reverse Logistics:As the volumes of modern retail is increasing, reverse logistics is becoming a big cause of concern. Retailers have started to dedicate space within their warehouses for this devil. One of the best preventive practices available here is RDDD (Revert, Divert, Dilute, Dispose) not necessarily in the same order. Where Revert stands for RTV (return to vendor), Divert is when a retailer can optimise the concerned inventory to other physical location, Dilute is where markdowns are made to sell this merchandise and Dispose when the shelf life has expired and the retailer has no other option but to dispose. However things like merchandise lifecycle, broken sizes, saleability, vendor agreements etc need to be thought through before implementation of the same…

Supply Chain for E-commerce businesses:#Ecommerce has opened a new set of challenges for modern supply chain…Supply Chain is a very critical part in this business and is still evolving to cater to Ecommerce business needs….Service which includes timeliness of delivery of the required product without any damage is one of the main factors for customer satisfaction…

Apart from the above factors the following pose a challenge to modern supply chain:

Courier: As & when the volumes on ecommerce are increasing this is becoming more & more challenging. First challenge is penetration into Tier C towns & rural India. Second challenge is reverse logistics. Almost 30% of deliveries get returned from the customers door itself. This also increases the probability to damage.

Customer Order Shipments: Ecommerce retailers require customer orders to be shipped from vendors. However this becomes difficult for a manufacturer who wants to focus on his core business that is manufacturing. As a result, consolidators are springing up who collate the inventories from various merchandise manufacturers/vendors. This gives respite to the ecommerce supply chain in terms of working capital and customer order shipments. However this increases the overall supply chain cost to some extent.

Just to summarise, there no rocket science to realise that #Modernisation, of supply-chain for a retailer can give an edge…..Coordinated #SupplyChain, will lead to timely order transmission and receiving merchandise in the right quantities & quality…. This will give a big boost to the sale…!!

Hence it is advised that due strategic importance should be given to this function….Specialists should be involved at early stages who can take supply chain and thereby the business to a different level altogether…!!

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