The Modern Retailer - As the Conductor of Supply Chain Management

Retailing in the Western world is mature, saturated and subjected to intense competition. Growth and survival in today's retail world totally depends on sustainable competitive advantage. And developing a sustainable competitive advantage requires serious commitment and a customer orientation attitude.

On the basis of market research and intelligence, retailers have to understand customer needs as well as consumer buying behaviour so that they are equipped to delight their customers. Customer delight is possible if and only if retailers are able to satisfy specific and special needs with a personal touch – by offering excellent price/quality ratio. Moreover, there is a need to share this commitment and attitude with retail partners, such as suppliers, manufacturers and wholesalers.

Retailers need to share information with their suppliers relating to customer buying behaviours in an instant and consistent format. Sharing of information needs a foundation of mutual trust and long terms partnership and a vision of one goal – satisfying the customers needs at low cost. This kind of orientation and strategy is nothing but a step towards ‘managing a smooth supply chain'.

Supply chain management has evolved over the years. At every stage of evolution the concept has taken a step forward and now it has become a strategic and value added function in retailing. Despite an evolution having taken place, it has coincided with confusion in the true understanding and implementation of the concept. The concept, however, is crystal clear to those who have experienced real life implementation or researched on related cases.

A simple and effective supply chain management model (as depicted in the figure below) highlights the importance of various business processes and their co-ordination.

Supply Chain Management or SCM begins with 'bargaining' with suppliers and long-term relationships. Marketing departments analyse customer needs and demands for specific products, which insures the right negotiations with suppliers. Supply management aims at the procurement and purchasing of specific products, based on partnerships with suppliers. Logistics refers to the actual movement or delivery of products. It includes movements of goods into the retail distribution centre, movements within the centre and movements out of the centre and into the retail stores. Operations are the activities involved in converting the products supplied by the supplier into products sold to the retail customer.

The main objective and intention behind a smooth SCM operation is to stimulate buying the right things at the right time at the right price – reducing the order cycle and ensuring flexibility. Large retail chains, such as

Wal-Mart, Safeway and The Gap, have strategically implemented SCM and have grown because of that.

Proper and committed implementation of SCM can result in sustainable competitive advantages. Supply chain management leads to fewer stock outs and to the availability of merchandise and assortments that customers want. This implies a high-perceived value of the retail store in the minds of the customer. In financial terms, SCM can result in better sales and lower markdowns for retailers.