1. Cox School of Business/SMU
Retailing
MKTG 3346
Retail Supply Chain
Professor Edward Fox
Cox School of Business/SMU

2. What is Supply Chain Management?
The integration of business processes from the end consumer back to original suppliers, providing products, services, and information that add value for customers
Source: Levy and Weitz

3. Why Focus on Supply Chain Management?
Improve return on investment
Improve product availability
Reduce Costs! Increase Efficiency!
Net profit = Net profit x Net sales
Total assets Net sales Total assets
Adapted from Levy and Weitz

4. Example of a Simplified Supply Chain
Source: Levy and Weitz

5. Information and Merchandise Flows
Merchandise flow Information flow
Buyer
Vendor
Stores
Distribution center
Customer
Sales info
Source: Levy and Weitz

6. Information and Merchandise Flows TECHNOLOGY
Bar coding
Computing
Databases and data warehouses
Electronic Data Interchange (EDI)
POS Scanning
Radio frequency identification (RFID)
Modern supply chain management is enabled by the application of technology

7. Information Flow
Source: Levy and Weitz

8. Information Flow ELECTRONIC DATA INTERCHANGE (EDI)
EDI is the computer-to-computer exchange of business documents from retailer to vendor, and back.
Advanced shipping notice (ASN) is an electronic document received by the retailer’s computer from a supplier in advance of a shipment.
Source: Levy and Weitz

9. Information Flow EDI METHODS OF TRANSMITTING DATA
Source: Levy and Weitz

10. Merchandise Flow
Source: Levy and Weitz

11. Merchandise Flow ASRS
Unlike a traditional distribution center in which merchandise is handled manually when it enters and is removed from storage, Automatic Storage and Retrieval Systems (ASRS) ensure that merchandise that is received is stored and drawn from storage automatically. This ensures first-in-first-out selection and reduces “shrink.”

12. Merchandise Flow CROSSDOCKING
Unlike a traditional distribution center that stores merchandise, in this crossdocking distribution center, merchandise is received from vendors’ trucks on one side of the building, moved to the other side of the building, aggregated with merchandise from other vendors, and shipped off to stores - all in a matter of hours.
Source: Levy and Weitz

13. Direct Store Delivery (DSD)
…Some product manufacturers deliver product to stores, rather than to retailers’ warehouses
Examples
Frito-Lay
Coca-Cola
Nabisco
Advantages
Control of distribution
Setting the shelf
Disadvantage
Cost
Clutter

14. How to Distribute?
The retailer must decide whether to run its own distribution operations, or purchase from wholesalers, brokers, jobbers or other intermediaries

15. How to Distribute? RELY ON INTERMEDIARIES IF…
The retailer has only a few outlets
Many outlets are concentrated in metro areas
Rapid replenishment is critical (e.g., convenience stores)
Vendor pays freight charges
Adapted from Levy and Weitz

16. How to Distribute? SELF-DISTRIBUTE IF…
Demand fluctuates greatly
Stores require frequent replenishment
Retailer carries a relatively large number of items in less than full-case quantities
The retailers has a large number of outlets that aren’t geographically concentrated in a metro area
Adapted from Levy and Weitz

17. How to Distribute? BENEFITS OF SELF DISTRIBUTION
More accurate sales forecasts
Less merchandise in the individual store, thus a lower inventory investment system-wide
Less out-of-stock
More cost effective
Self distribution is backward integration – it offers the retailer more control!
Source: Levy and Weitz

18. How to Distribute? THIRD PARTY LOGISTICS COMPANIES
Firms sometimes outsource logistics operations
These firms facilitate the movement of merchandise from manufacturer to retailer, but are independently owned
Transportation
Warehousing
Freight forwarders
Integrated third-party logistics services
Adapted from Levy and Weitz

19. Quick Response
General merchandise retailers pioneered the “Quick Response” initiative in the 1980s
QR delivery systems are inventory management systems designed to reduce the retailer’s lead time for receiving merchandise, thereby lowering inventory, improving customer service levels, and reducing logistics expenses
Adapted from Levy and Weitz

20. Quick Response PROS AND CONS
Reduces lead time
Increases product availability
Lowers inventory investment
Cons
Smaller orders with greater - more expensive to transport and more difficult to coordinate
Computer hardware and software must be purchased by both parties
Both retailers and vendors must invest, or neither receives the benefits
Adapted from Levy and Weitz

21. Efficient Consumer Response
In response to the benefits that discount retailers realized from Quick Response, he grocery industry initiated Efficient Consumer Response (ECR) in the 1990s
Tenets of ECR
Efficient Assortment
Efficient Replenishment
Efficient New Product Development
Efficient Promotion

22. Efficient Consumer Response
ECR was not as successful as Quick Response
Vendors were larger and more powerful
Reluctance to make large investments

23. Quick Response & ECR Consumer Retailer Manufacturer Information
EDI
Electronic Ordering
Electronic Funds Transfer
Point-of Sale Data
Affinity Card Data
Forecasting
Information
Consumer
Retailer
Manufacturer
Cross Docking
Computer Controlled Material Handling
Flow Through Distribution
Barcoding
Vendor Managed Inventory
Just-in-Time Manufacturing
Product