Retailing is a huge industry (40% of the U.S. economy and the largest employer) that has consistently been an incubator for new business concepts. The retailing business, in today’s world is focussed on the customer’s buying experience. Focus on customer experience and understanding their needs can solve many retailers’ chronic problems such as stock outs and markdowns.
While the retail sector has always been very competitive, customers too have become more exacting, demanding ever-increasing levels of service. It is critical for retailers to understand their customers. The buying patterns those are critical to determining which products to stock and which to remove from the inventory. Visibility into how consumers buy items, how and when they bundle products can help retailers to forecast and plan. It also helps to improve customer satisfaction level. Retailers can respond by increasing the variety of their products, becoming more prices competitive, striving towards higher service levels, and utilizing advances in computing capabilities and information technologies to improve their supply chain efficiency.
This is my second research paper, where we have evaluated the performance on following major themes: assortment and inventory planning, markdown and store execution of retailer and their strategies for next 2 years. SKU rationalization determining the proper depth & breadth of an assortment and forecasting within an assortment plan are immediate priorities for retailers. In today’s Omni-channel world it’s important for retailer to enhance customer experience, be it in brick and motor store or online or any other store format. We present the strategies retailers are planning to adopt in next 2 years for these four themes.
In the 80’s and early 90’s Wal-mart pioneered new approaches to supply chain management and human resource management, and also influenced major established firms like P & G to change their approach to supply chain management. Dell has revolutionized the supply chain for PCs and prompted many firms to consider the direct model. Amazon.com, more than any other firm, has been credited with transforming the internet from being an academic toy to the primary technology influencing business today . On the other side, we also see that most retailers have struggled to maintain profitability. Customer demographics vary by retailer and can be different within a retail segment. For example, while women buy more clothing and beauty products, men spend more on latest technology . Demographic trends do affect retailer strategy and marketing. In today’s economic environment, companies cannot afford to carry large inventory. Theme of retailing has moved to satisfying customer with minimum inventory and thus increasing sales. This is the theme of our paper. We have focussed our study on such store specific parameters.This research, based on the retailers of every revenue size and geographical areas, shows that retailers are investing in their assortment planning, optimizing Stock Keeping Unit (SKU) at store level, implementing pricing and promotions and focus on store execution. Our inferences are based on the data collected from Companies’ views expressed in their annual report and other disclosures, case studies published by the companies or by their vendors and practical observations being carried out in the retail domain. The research goal is to be able to understand what retailers are doing to enhance their customers’ experience at a store and in the process deliver a higher customer satisfaction, more shopping visits and increase its profitability.
The retail domain has faced plenty of challenges in the past mainly because of the increasing competition and the customer’s choice in low spending. The retail chain executives are finding it difficult to cope up with the high levels of service and low costs, as the businesses face more global pressure.The purpose of this study is to explore what retailers are doing to enhance the customer experience at a store and new trends emerging in the process and the challenges they are facing in doing so. We studied about 38 companies and their data present in public domain. The study was focussed on following four major themes:·
Planning the assortment of products: Customer demand at every store is different. We will cover the strategies leading retailers are adopting for item and assortment planning so as to meet customer demand.·
Optimizing the inventory carried for each SKU at every store: It’s important to have lean inventory. We will look at strategies leading retailers are adopting to optimise inventory at store level.·
Pricing, especially during the product end-of-life markdown period: We will look at strategies leading retailers are adopting to improve execution of promotions especially during the markdown period to increase sales.·
Store execution: We look at the brick and motor as well as online in-store strategies which leading retailers are planning to adopt.
The findings of the quantitative and the qualitative data show that the supply chain management can overcome the lesser customer spending and help retailers to lower costs. The trends and practices followed by the retail supply chain shows how to position the supply chain for the upcoming years. We believe that the findings from this research will provide insight into the new trends emerging from the way retailers are shaping their business to attract more customers and gain larger wallet share. We have talked about recent developments which companies are looking to implement in immediate future. We believe our study will help all those who want to track the latest developments in retail fields.
A. Supply Chain Challenges for immediate attention
TABLE VII: Primary internal drivers
Improve Supplier relationship
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
Supply Chain visibility
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 . 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 . 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.
Changing face of R-SCMElements of competitive advantage has become cause of concerns: We found that elements such as Enhanced visibility across the supply chain and rigorous inventory management, which were considered to be competitive advantage by the retailers just two years back, has become important for retailers to survive. Companies are now talking about multi-echelon inventory management.While cost control costs remained important in 2010, the strategic focus discussion shifted toward to a more balanced perspective . Companies are focusing to maximize the cost-service-customer demand equation. Investment in multi channel retailing to improve cross-channel selling and global sourcing with localized assortments are moves by retailers in that direction.Retailers are now focusing on buying experience for the customers. Customer Experience Management is a strategy that focuses the operations and processes of a business around the needs of the individual customer .
II. ConclusionThe supply chain executives are keen to look into the above discussed issues for further planning and are preparing to deal with the issues. The long range planning of the supply chain for the retail domain includes the sustainability and the related costs, the fuel issues and their impacts, the government regulation and technology enhancement.To succeed in the ever changing retail landscape, companies are adopting to many forward-thinking strategies like Multi Channel retailing, Green Supply Chain, Multi echelon inventory optimization, International growth, expanding private label brands, etc in which the supply chain. Management executives have aligned their supply chain strategies with companies’ business strategies in order to establish stronger corporate strategy links, scalable supply chain networks, infrastructure flexibility and streamline flows. The goal of the strategic approach of the supply chain management is to accept the challenges and provide a solution for the increasing coordination of the organization’s success with the supply chain management.The future strategies can be set by educating the management on the process and the synergies of the supply chain that can be used to enhance the new strategic approach. Thus, the future supply chain strategies include the expression of the future business models and the desired results in the overall business revenue. Furthermore, any impression that the business does not cope up with the supply chain management will influence on the strategies of the business and need to be focused to evaluate the capabilities and the possibilities.However, supply chain management has continued to be the core spot for the retailers currently and in the coming years. Thus, despite the challenges supply chain management is moving forward with the help of the top managers to meet the planned goals.
Today’s retail environment has changed a lot compared to what it was five years ago. Today customers look for best combination of product features, price and service which led to change in virtually every aspect of the way retailers conduct business. Retailers operate on razor thin margin and still have to innovate and provide high service level. Connected consumers — armed with laptops, tablets and smart phones — are transforming the traditional retail experience based on their unprecedented access to information. Whether they are checking prices at the brick-and-mortar stores or at an online store or turning to the Web for reviews and opinions — in essence, the omni-channel consumer is more connected and better informed than ever. There is almost no second chance for a retailer if it fails to live up to a product, service or price promise, as consumers have several alternative purchasing options to consider — and a plethora of ways to share their negative experiences with extended communities of potential buyers. This also means that retailers have a real opportunity to differentiate themselves and present their customers with the products they want at the right price irrespective of the channel.Retailers need to focus on improving customer experiences. Delivering a customer experience not only builds loyalty, but is profitable too. With the advancement in technology, retailers do have lot of information about customers, their buying history which should be used to improve customer experience.Moving forward, one of the key strategies for retailers will be increasing their level of collaboration and information sharing between internal departments and external agencies. Retailers are looking for integrating solution that addresses retailers delivering of goods to customers, and also gives visibility into real-time supply processes and the supply chain alignment required to effectively supply those goods.