Supply Chain Best Practices in the Internet Retail Industry
The advancement of technology has redefined the paradigms of the accessibility to information. People are now more aware of their needs and the specific sources to fulfill those needs. There is an ever increasing demand for anything and everything and the way the retail sector is booming, the supply chain and logistics have assumed an importance never felt before. With the IT coming into this industry, it has completely changed the scenario as to how business is done. Effectiveness of Logistics and Supply Chain enables an organized retailer to move or store products more effectively. Efficient logistics management not only prevents needless movement of goods back and forth; but also frees up storage space for more productive use. So what are the best practices that are happening in the supply chain and logistics? Retail Industry Supply Chain – An Overview The retail industry is generally defined as a composition of companies that sell merchandise to customers and suppliers. In retail supply chains, the network consists of many suppliers that serve multiple retailers, and the retailers, in turn are served by multiple suppliers. The wholesalers and other intermediaries are usually present between the suppliers and the retailers, thus providing for a link between retailers and suppliers. There have been constant changes in the dynamics of the relationship between these three key players in the supply chain due to the continuous evolution of fourth major player that drives these changes, the retail customers. Through their spending habits, retail consumers have driven up the level of customer service that is expected. Consumer spending patterns keep changing with time and due to this, the focus in the retail supply chain has been shifting from handling customer demands through inventory levels to handling customer demand through changes in the trading partner relationship and the use of technology in their supply chain. Over the decades, suppliers and retailers have become partners in combating the changes in demand variability. The impact of the bullwhip effect has helped facilitate collaborative efforts to better respond to demand fluctuations. These initiatives1 are aimed at reducing costs for both the retailer and supplier, few of which are: Quick Response: It enables suppliers to forecast what a retailer is going to order before the order is actually made. QR changes the relationship between the supplier and retailer by integrating technology into the processes. Point of sale data and electronic data interchange:
1. Logistics: The Key to e-Retail Success. By Maltz, A., Rabinovich E., & Sinha R. (2004
Point of sale data is becoming increasingly important, allowing suppliers to know the actual consumer demand patterns, which enables suppliers to prepare for the next order before the retailer actually starts the process of ordering. Collaborative planning, forecasting, and replenishment (CPFR): CPFR provides knowledge of demand to both
Internet Retail Industry
The internet retail industry is a subset of the overall retail industry. The industry consists of click-and-mortar companies (existing retailers with physical stores that also sell products over the internet), and pure-play companies (companies that do not operate retail stores and utilize only a website to sell products to customers). There are many players who sell their products through online channel utilizing their websites as their storefront. The lack of retail stores in pure-play environments requires a supply chain that can service the needs of customers through a combination of shipping from distribution centers and sourcing from partners. The adage ‘once bitten twice shy’ could very aptly be used to describe the dot.com companies. In the aftermath of the dot-com bust, only those internet based companies...