Todays supply chains are complex networks of interdependent elements. Whilst each element must be optimised, nothing contributes more to supply chain excellence than good communication between all parties.
Everything must work in concert, requiring not only harmonisation of technology and process but a common culture supported by the best communications infrastructure.
Retailers can put distance between themselves and their peers in an increasingly competitive market by good supply chain management. This can optimise product sourcing, manufacture, storage and distribution, thereby reducing operating costs and contributing to customer satisfaction.
Whilst sound supply chain management can deliver efficiencies and cost-effectiveness, it also ranks amongst a retailers greatest challenges. This is due to constant change and the complexity of the elements that need to be managed and integrated. It is therefore best to regard supply chain excellence as a journey, not a destination.
One of the greatest contributions to supply chain excellence comes from improving communication with supply partners. That means extending internal collaboration to include manufacturers, involving all those upon whom the supply chain depends, and ensuring visibility of all activities.
Todays communications are developing fast with broadband connections to stores now commonplace. For the first time, technology can be actively used to support collaboration for new supply chain efficiencies.
Extranets or video-conference over IT links between retailer and supplier enhance the processes of ordering and tracking stock. In the case of international supply, say from the Far East, real margin can be gained by improving and speeding up the communication process.
With ADSL links from head office into their stores, retailers are always connected and can push or pull data which directly helps the business and the consumer experience. Within stores, there is also scope to for improvement. A broadband connection can give a real-time view of stock held in the warehouse or in networked stores. In short, with the tools now available, much more is possible than is being done today and few retailers are optimising their communication potential.
Processes, people and products
The supply chain is often only seen in terms of physical elements and stock flow, but its also about information flow. Far from the strong, integral structure from which it takes its name, a supply chain is more commonly a loose amalgam of processes, people and products whose interaction constantly evolves and demands improvement. Too often, one part of the chain is focussed upon to the detriment of others.
Many recent supply chain improvements have been in planning, enhancing systems and the means by which data is passed to the buyers. There is much to be gained from including supplier management within the planning workflow, taking it from sourcing to storefront, although much of this activity is still paper-based and far from interactive.
The supply chain is too often thought of as warehousing and undue attention is focussed here. With new technologies such as RFID for scanning and tracking, and robotics for picking, sortation and despatch, warehouse management can be automated, producing operational efficiencies, cost savings and increased throughput.
Distribution and logistics
Slick warehousing notwithstanding, when it comes to transportation of goods from supplier to warehouse and from warehouse to the point-of-sale or directly to the customer, there is little more to be done to overcome the physical limitations of transport logistics.
Todays retailer has to have the right stock in the right place or available on very short cycle times to protect profit margins and to please customers. Whilst most retailers can do more to reduce inventory levels and improve replenishment timing and accuracy, forecasting and matching of supply to demand is a constant challenge.
Multi-channel retailing adds its own complexities to the supply chain. The strong trading performance reported by many retailers over the recent Christmas period was largely due to record numbers of online purchases, proving that multi-channels can increase choice and reinforce brand loyalty. However, the need to support customer self-service puts an additional strain on the supply chain.
Many retailers embarked upon online trading without getting the logistics right and without forecasting return rates. Some bought stock specifically for the online channel, often outsourcing its management, which added to their problems. Lessons have now been learnt and many retailers are bringing processes back in house, holding and managing a single stock source themselves and making it available to service multi-channel supply chain.
Each part of the supply chain should be optimised but there are certain elements which offer little scope for further improvement. Where significant gains can come from is a more savvy use of communications technology.
One final thought. There is no better starting point than putting the customer at the heart of the supply chain, so perhaps the term supply chain excellence should be replaced with sales fulfilment excellence?
About the author:
Alan Morris is Managing Director of retail IT outsourcing company, Retail Assist, and can be contacted at firstname.lastname@example.org