Implications for Independent Retailers

Supply chain management, integrated logistics, ECR, Quick Response and other related concepts are mandatory as well as lucrative in today's competitive retail world. Are these concepts and management jargons meant only for big retailers or can independent retailers be party to them as well? Implementation of these concepts requires a lot of investment in terms of finance, human resource and Information Technology.

The Supply Chain Management Model
Source: Bloomberg, LeMay and Hanna
Independent retailers may not have the money or expertise to research and experiment with the feasibility of these concepts in their respective businesses. So how can these retailers introduce and create efficient supply chain models and extract benefits out of it – the way large businesses do? The answer is that the one time investment and implementation of SCM is virtually impossible. In my view, they should work towards it in gradual stages. They can and should, if they have to survive and grow in this concentrated and competitive trading scenario; and they can do so by introducing the concept in the same way as large retailers do.

The key words here are ‘responsiveness', ‘reliability' and ‘relationship'. The retailer should be agile with customer centeredness, the ability to respond and act quickly and swiftly. Reliability is related to transparency in the flow of material, with its foundation based on mutual trust. SCM's effectiveness and strength lies in the quality and power of the relationship between the chain partners (all organisations within the supply chain should be termed and committed as partners).

The ‘single supplier' vision followed by some retailers has resulted in drastic and radical cost reductions and added value to the overall company's strategy. Successful supply chains are those that follow the philosophy of win-win solutions and mutual trust. ‘Better, faster and cheaper' should be the logistics vision and mission. Joint and mutual strategy development, win-win thinking, transparency and information sharing are the prerequisites in achieving this vision. At the tactical level, the focus should be to reduce order cycle time and stock levels.

The very first step towards achieving this should be introspection…

The retailer should evaluate all the product categories in terms of their respective floor productivity and share in the total sales (a step towards category management). The products with high financial benefits should be taken as the starting point for SCM. There should be a minimum stock level (in terms of SKUs, but all possible SKUs should be present in the store for customers) for these performing categories. The retailer should either aim at a single supplier or at a number lesser than the current for these products.

POS information should be communicated instantly to the supplier through EDI…

The supplier would then act to deliver the sold quantity in a Quick Response. On the other hand, categories with lower financial benefits should be supported with good stock levels (based on past experiences of sales) so that the retailer does not have to order for the same repeatedly. Moreover, the retailer can also clinch a good bargain for these categories from the supplier by increasing the order quantity and highlighting the fact that market share being low, prices need to be comparatively low too.

The Author is
Head - Business Development
River Water Retail Management & Design Pvt. Ltd.