The Role Of SCM In The Retail Of Today

With the retail market booming, retailers across the nation put on their thinking caps to make the best of the opportunities at hand. Supply chain management, also coined as SCM plays an integral role in the entire process. We took a trip down this retail road to see the latest in the views on supply chain management, the changes that should be implemented, the fast changing trends of the consumer, and the improvisations to keep retail on an all-time high.

With an all-round boom in the retail sector, the fundamental functioning of retail is said to revolutionize in the coming years. Even the mentality of the consumers is rapidly evolving. In comparison to the older version of consumer personality that was highly skeptical, the consumer of today is more open to price points. Consumers today, know what they like, go for what they want, and expect flawless service while they are at it. This evolution has caused the top management of companies to come up with ways to reduce cost of operation without hampering the quality of product, time management and keeping up with the latest trends of the generation.

In such an age of growing competition, there is a need for retailers to excel in not only providing the right product, but also providing it at the right time. Management of the transition of products from manufacturing to the point-of-sales is key. Achieving this by itself would ensure the smooth function of any retail organization. Supply Chain Management encompasses the same. From the planning of inventory, transition of products and the point of sales, SCM deals with the proper control of it all. A slight shift for the bad to any of the processes in the supply chain could cause dissatisfaction of the consumers and further lead to major risks in business.

The Retailers Uphill Climb

The RAI (Retailers Association of India) has played a major role in fostering conversation and better solutions for the same. In their recent survey, they reveal that some of the biggest challenges CEO’s of today face, other than that of the mobile commerce revolutions, is Omni-Channel retail. Although statistically making its mark, there are still some that argue against it. It is estimated that approximately 34 percent of CEO’s consider the omni-channel retail to be merely an external threat, while on 22 percent say it has a direct reaction to their organization.

Indian retail is still said to be in the developing stage. There are a host of issues that need addressing, namely – lack of major 3PL’s, poor infrastructure etc. Until these core issues are fixed, the supply chain management will still be affected due to these problems.

Transporters are of a fragmented nature. This is mainly because of poor infrastructural development and it can cause high lead times, a loss of long term relationships and even a hike in transportation costs. Another high cause of attention is the unfavorable conditions at both the supply base and at a large number of intermediaries. By default this increases the costs of production and causes a decrease in the margins at the retail point of sales.

The retail industry lacks majorly in being able to forecast the requirements of the inventory. This is caused mainly because there is no historical data available at the time of need, which leads us back to the lack of proper IT implementation. In the cases where the data is available, there still isn’t the technological competence to back up and analyze the data at hand and get any meaningful insight.

Omni Channel Supply Chains and Their Effect

It is key for retailers to come up with new strategies and re-evaluate with their supply chain and modes of distribution. This will help them keep up with the purchasing trends. “The importance of new SCM strategies can be understood by the fact that the logistics management cost component in India is as high as 7 per cent – 10 per cent against the global average of 4 per cent – 5 per cent of the total retail price. Therefore, the margins in the retail sector can be improved by 3 per cent to 5 per cent by just improving the supply chain and logistics management,” says Akash Bansal, Business Head, Om Logistics Ltd.

The plus point of implementing and Omni Channel supply chain is an increase in the quality of infrastructure. With this in place, the retailer is able to monetize on new and upcoming trends with a faster pace and avoid the other risks usually faced.

Making The Best Of Warehousing and Stock

A plus point for retailers is that they have an added advantage of space. They have key performance metrics like sales per foot. These play a big role in being able to achieve an increase in sales for apparel brands. If they have a logistics system that works wonders in place, the retail reduces stock outs, hold down inventories and improves customer service. Hence customized services are one of the major contributors to a smooth running.

Bansal has also said “We have more than 450+ centres pan-India which in turn allow us to deliver anywhere in India. We have all logistics and supply chain management services from air freight, train freight, surface and pipeline etc. By improving our technologies, best men for work, correct mode of transportation, right and fastest routes etc we can deliver any volume, any size and any type of consignments anywhere,” in regard to ensuring and effective supply chain.

“Traditional supply chain tools cannot keep pace with the modern age. And they certainly can’t keep retail competitive. Technology is the core platform on which an Omni-channel business can be built. Traditional retail ERP, supply chain systems and store management systems are too outdated to achieve any significant benefits. One of the fundamental requirements of an Omni-channel strategy is to have a single view of customers, inventory and orders,” he says.

Getting Down To Business:

A typical supply chain goes in the order of Sourcing, Intermediaries, Distributors, Retailers and finally the Consumers. This process varies in different circumstances. Some may handle the retailing and outsource the rest to the 3PL’s or carry out one of the above operations and take the decision to backward integrate.

In order to revolutionize the processes there are a few steps retailers can take. To start of with IT implementation in the right manner can work wonders. It is essential to maintain inventory well so that storage of stock at warehouses can be avoided at all costs. Production should be scheduled in such a way that it almost perfectly meets with the demand.

There should be sufficient mechanism to link all the different processes of the supply chain together. In order to excel in what lies at hand, parts of the supply chain should be outsourced to the 3PL’s so that the retailer can concentrate on the critical areas and maybe look into backward integration.

Supply Chains in the developed parts of the world are much more advanced. Most strategies are tried and tested and they have certain frameworks put in place. There is always room for learning and Indian retailers should take a look at these best practices and adopt the one that suits them best.

Overall there are a number of factors like, intrinsic or extrinsic changes, slow or fast changes in the demand and supply. These may also be faced by the technology at hand. It is essential to formulate a supply chain that is impermeable and can deal with these factors on a faster pace. We look forward to a revamped SCM mode for India.

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