Multichannel Retailing Lynda Gamans Poloian
Copyright ©2009 Fairchild Books All rights reserved. No part of this presentation covered by the copyright hereon may be reproduced or used in any form or by any means–graphic, electronic, or mechanical, including photocopying, recording, taping, or information storage and retrieval systems–without written permission of the publisher. ISBN: GST R
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 3 Chapter 9 Synchronizing the Supply Chain
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 4 Supply Chain Membership and Function Supply chain: manufacturers, suppliers, distributors, and retailers All members are expected to meet demand and return a profit All actions revolve around meeting the needs of the customer
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 5 Functional Areas and Participants Production Distribution Customer Interface
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 6 Production Includes manufacturing, contracting, product sourcing Manufacturers produce finished goods Product sourcing—identification of resources used in the production of finished goods
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 7 Distribution All activities involved in the movement of goods from source to final consumers Represents the “P” of Place in the 4-P’s of marketing Physical Distribution Involves all activities involving transport of goods Operations include receiving, processing, storing, picking, packing, shipping, and replenishment
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 8 Distribution Warehousing Housing goods during the physical distribution process Most large retailers maintain several convenient to their trading areas Distribution Centers Huge, full-automated facilities Depend on automated storage and retrieval (ASR) systems to run efficiently Cross-docking capable Robotics becoming common
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 9 Distribution Robotic units in a distribution center
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 10 Customer Interface Problems with cross-channel integration caused by: –Channel inflexibility –Inability to replace old systems –Lack of customer management tools –Absence of process management capabilities
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 11 Supply Chain Goals High levels of automation and flow of goods Efficient, complete, and accurate shipment of goods Good communication across channels Synchronized physical distribution across channels and globally Controlled costs and customer satisfaction
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 12 Collaborative Planning, Forecasting and Replenishment (CPFR) Helps develop distribution efficiencies throughout the supply chain Saves money and time Helps develop optimum number of distribution centers Increases sales
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 13 Supply Chain Synergy
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 14 Supply Chain Synergy Fulfillment Collaborative Transportation Decisions Inventory Control Inventory Tracking Methods
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 15 Fulfillment Issues Nondelivery or late delivery of merchandise Merchandise not available Distribution center inefficiency Long lead times—period of time between ordering and receiving goods
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 16 Customer Service Standards Efficient distribution means customer satisfaction Push and pull systems are used Retailers strive for short turnaround times and speedy fill rates –Turnaround time—time between action and response –Fill rate—ability to ship all goods ordered
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 17 Effect on Inventory Turnover Turnover is measured by all retailers The number of times inventory turns into sales annually is called turnover Efficient logistics contribute to timely distribution and reduced inventory levels Faster turnover and cost savings are desired outcomes
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 18 Strategic Partnerships To provide better fulfillment, retailers and vendors share information Production schedules, timing, and in-stock information are shared Not all retailers are willing to share financial data
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 19 Collaborative Transportation Decisions Summary of Major Modes Land Transportation Railroads and trucking Freight forwarders consolidate small loads into larger ones to save costs Sea Transportation Main carriers for overseas transport More cost effective than air but much slower Container ships whole vast quantities of goods
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 20 Summary of Major Modes Air Transport Most expensive but fastest mode of transport Cost effective for small, lightweight goods Least utilized by retailers Intermodal Carriers Companies that integrate land, sea and air transportation Necessary for global retail shipping
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 21 Inventory Control Key support function in all retail companies Several challenges face inventory management: –Increased supply chain costs –Need to improve ROI –Pressure to improve service levels
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 22 Inventory Management Applications Expedite planning, distribution, and replenishment Indicate fast and slow sellers; initiate markdowns Generate SKU, classification, and department reports Manage cross-channel distribution and customer databases
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 23 Inventory Tracking Methods Real-time capabilities to monitor in-stock goods and those in transit Two basic forms: periodic and perpetual Globalization puts additional pressures on inventory systems Accuracy is the goal
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 24 Inventory Tracking Methods
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 25 Periodic and Perpetual Inventory Systems Periodic Physical count of all merchandise Taken annually or semi-annually Helps document shrinkage Used as baseline for perpetual systems Perpetual Ongoing measurement of stock Most systems offer real- time access Benefits include accuracy, faster turn, better in-stock position, fewer markdowns
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 26 Advanced Shipping Notification Declaration of impending shipments sent to retailers by vendors are called advanced shipping notices (ASN) Originally sent via electronic data interchange (EDI) Contemporary systems are Web-based Better access to information throughout the supply chain
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 27 Supply Chain Technology Initiatives Retailers historically used two basic technologies: Universal product codes (UPC)—product identification encoded in a series of printed stripes located on most products Electronic data interchange (EDI)— communications network used by supply chain members for the transfer of data
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 28 Radio Frequency Identification (RFID) Technology Now in development, RFID technology is expected to surpass other modes Able to locate goods at any point in the supply chain Based on auto ID wireless technology that is used to capture and identify information
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 29 How Does RFID Work? Uses electronic product code (ePC), the RFID version of the UPC Products containing an RFID tag are passed in front of a sensor The tag uses radio waves to transmit ePC code to a reader
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 30 Two Types of RFID Tags Passive RFID Tags Small microchips attached to a paper-like antenna Scanned from pallet, case, or individually Reader converts code to data regarding producer, manufacturer, location, and unique number Active RFID Tags Larger tags needing a power source Have longer range and are more expensive Used for speed-pass devices
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 31 Common Business Applications Eliminating stock-outs –Merchandise is easily distinguished –Used in “smart shelf” applications Controlling shrinkage –Can determine where and when products are removed from shelves –Alerts retailers to possible theft Integrating the supply chain –Total cross-channel reporting possible
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 32 Benefits of RFID Over Bar Codes Provides 360-degree capture of information Distinct information recognition; discerns different items in shopping cart simultaneously Increases distribution efficiency Reduces waste, spoilage, labor costs Can rewrite, reuse, or destroy tags
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 33 Challenges to RFID Adoption High cost of implementation Consumer privacy issues Lack of standardization Environmental restraints
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 34 Present and Future Retail Applications Walmart has initiated RFID research along with many other retailers and vendors Walmart and Metro AG of Germany are considered leaders in implementation Use of RFID in the apparel sector is growing; used by Levi Strauss & Company Vast potential for retailers; like RFID enabled manikins
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 35 Present and Future Retail Applications
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 36 Merchandise Management Advent of multichannel retailing has created new challenges and opportunities in merchandise management Web analytics influence merchandise planning New technology provides more accurate forecasting requiring lower inventories
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 37 Strategic Partnerships and Direction Online retail exchanges—opportunities for retailers to build relationships with trading partners and share information worldwide Disintermediation—occurs when manufacturers sell directly to customers online –Conflicting views regarding affects on retailers –Some manufacturers have opened online stores
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 38 Web-Based Private-Label Management Many new product development and design initiatives are occurring online Technology enables private-label development product specification processes to be conducted over the Internet Capabilities reduce time-to-market for many products
L. Poloian Chapter 9 ©2009 Fairchild Books, A Division of Condé Nast Publications. 39 Summary Strategic partnerships throughout the supply chain are necessary for efficient movement of goods to customers worldwide Technology keeps pace with demands of retailers