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8/12/2019 Module 4- SCM
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SUPPLY CHAIN MANAGEMENT
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Agenda
Advantages through supply chain management
Flow of information
Logistics distribution center
Quick Response Delivery Systems
E-tailing
Outsourcing
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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.
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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.
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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
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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.
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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.
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,
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
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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.
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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
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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).
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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
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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
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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
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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
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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.
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. 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
Logistics distribution centre
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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- of- sale 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.
Logistics distribution centre
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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.
Logistics distribution centre
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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.
Logistics distribution centre
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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.
Logistics distribution centre
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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
Logistics distribution centre
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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
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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.