INDUSTRIAL ENGINEERING APPLICATIONS IN RETAILING:THE FUTURE FOR SUPPLY CHAIN MANAGEMENT

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THE FUTURE FOR SUPPLY CHAIN MANAGEMENT

The logic of supply chain management is compelling. Its benefits are well understood. The trend toward supply chain management is clear. Companies are excelling in parts of the equation.

As retailing moves into the 21st century, more retailers will be adopting the following lessons from supply chain management as we see it today:

• Advances in and use of IT to drive supply chain decisions. Large integrated stock-replenishment systems will control the storage and movement of large numbers of different goods into the stores.

• A restructuring of existing distribution facilities and strategic placement and development of new distribution facilities to reduce inventory and move the inventory more efficiently.

• Greater and more effective adoption of quick response. More frequent delivery of less. Greater use of cross-docking so that merchandise hits the docks of the distribution centers and is im- mediately loaded into destination trucks. EDI and POS electronics will track what is selling and transmit directly to distribution center to plan shipment.

• Greater diffusion of efficient consumer response, defining a process of close collaboration of retailer and manufacturer / supplier to coordinate activities to achieve maximal efficiency and better service levels for the ultimate customer.

Conclusions

It is easy to see how retailing will need to improve the front-end selling and merchandising function through stores, catalogs, television, and the Internet. What is not so clear to an outsider is that the real difference to retail success and bottom-line earnings and profits will not be in the store or on the Internet but in the middle. The invisible chain between manufacturer and consumer will be where the most significant competitive advantages will take place.

According to Gattorna (1998), the major improvements in the supply chain, over the next 10 years will include:

• Whole industries will rethink their sales and marketing channels, and these new channels to customers will require newly reengineered processes and technologies, in turn demanding sig- nificant changes at all levels.

• Leading companies will recognize the close relationship between customer relationship man- agement and the supply chain; taken together, these two will open up new avenues for shaping trading terms from both supplier and reseller / customer perspectives.

• A much more aggressive search for additional organization design options for supply chains in particular industries will eliminate polarized thinking in terms of insourcing or outsourcing, opening the way to new solutions and combinations along this continuum.

• The best supply chains will have fully integrated enterprise systems and indeed will go beyond transactional information and decision-support systems to knowledge management. In turn, this will affect organization design and lead to improved coordination (rather than ‘‘control’’).

• Companies looking to embrace supply chain regimes at the global level will require a much better understanding of country cultures as a necessary ingredient for success.

• Strategic sourcing approaches at the supply end, and mass customization approaches at the consumption end, are likely to be fertile areas for relatively quick large-scale benefits.

• Reverse logistics will loom large on the agenda, with issues such as extending product usage life cycles, product-recovery processes, and bidirectional logistics channels coming to the fore in the search for new competitive dimensions.

• Organizations other than product companies will begin to recognize the huge untapped potential that the application of logistics and supply chain principles to their businesses will release, such as telecommunications, utilities, health care, education, entertainment, and financial services.

On the one hand, supply chain management is not hard. Any business can get anything to stores. Any store or e-retailer can get merchandise to consumers. What is hard is achieving an efficiency and effectiveness that maximizes a retailer’s competitive advantage in the marketplace. Until we develop the Star Trek process of transportation, where we can dematerialize and materialize objects at command (now that’s a one to one deliver system of the future), supply chain issues will be a leading-edge practice for the company and the driver for corporate strategy. Collaborative planning forecasting replenishing (CPFR) will be the strategy of the next decade in retailing. The bottom line is, of course, profits and shareholder value (Anderson and Lee 1999; Quinn 1999). Incremental improvements in the supply chain have a greater impact on profits than incremental improvements in other areas. Technology and the Web will be driving the most innovative changes and applications in retail supply chain management in the next 10 years, and this will drive retail performance and excellence.

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