Findings of Retail Supply Chain Research (2012) - Part 2 of 4

A.    Supply Chain Challenges for immediate attention

TABLE VII
Primary internal drivers

Retail Sector	Percentage
Cost Reduction Expand Operations Improve Supplier relationship Customer experience Operational Efficiency	50% 43% 27% 25% 22%

More than 40% of the retailers, we studied, have talked about cost reduction and expanding their retail space as their primary drivers for supply chain strategy. Top 5 internal drivers for R-SCM are listed in Table VII. We have seen that these factors are more or less unique to retail industry sectors. For example, online retailers are most techno-savvy whereas Grocery stores are among the least techno-savvy companies. We have listed the supply chain drivers that are most common across the sectors.

TABLE VIII
Primary supply chain concerns for 2012-13

Retail Sector	Percentage
Inventory Management Supply Chain visibility Transportation/Freight	55% 27% 20%

Table VIII has the list of supply chain concerns of retailers that need immediate attention. Effective Inventory management is one of main concerns of the retailers and is important for everyday low prices. Medium sized retailers are concern about increasing their inventory turn and large retailers are utilizing various techniques including demand forecasting and planning and various forms of replenishment management by being in-stock in core product offerings, maintaining positive vendor relationships, and carefully planning inventory levels for seasonal and to minimize markdowns. To manage complex, multi-tiered and multi-level supply chains, retailers are moving towards Multi-Echelon Inventory Optimization (MEIO). MEIO optimizes inventory across all levels of the distribution network and reduces overall inventory while maximizing customer service levels.

A volcanic eruption in Iceland, floods in Thailand, and a tsunami in Japan... these events crippled many organizations’ supply chains. The companies that fared the best were those that had full visibility and control of their supply chains [19]. The winners were organizations that knew where their finished goods and raw materials were at the time of the incidents, and could be proactive with the customers who would be impacted; organizations that could quickly identify alternate suppliers in other parts of the world; organizations that quickly secured shipping capacity on alternate lanes [19]. Supply chain visibility has become one of the important concerns for retailers in this volatile environment.

Transport and Freight management is another important concern of the retailers. In transportation, the focus is “less about the rate and more on how to use transportation more efficiently.” Improving cube maximization, both of ocean containers and truck trailers, has been a priority. Retailers currently have limited visibility to the shipments, which led to an excessive number of more costly less-than-truckload (LTL) moves. Retailers look to lower distribution and outbound transportation expenses, including re-negotiating carrier contracts or changing carriers and expanding back haul volumes.