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Retail Marketing Chapter 10

Why is efficient supply chain management so important to retailers?
Strategic Advantage
Lower Operating Expenses
Improved product availability
Higher return on investment
Strategic Advantage
Difficult for competitors to duplicate; retailer can take advantage of special buying opportunities and reduce costs – thus improve margin.
Lower operating expenses
By reducing transportation costs and carry less back up stock-higher turnover.
Benefits of efficient supply chain management to customers:
-Reduced stockouts – merchandise will be available when the customer wants them
-Tailoring assortments: the right merchandise is available at the right store
Data Warehousing
Data warehousing is the coordinated and periodic copying of data from various sources, both inside and outside the enterprise, into an environment ready for analytical and informational processing.
Electronic Data Interchange
EDI is the computer-to-computer exchange of business documents between retailers and vendors
EDI Security
Authentication – system assures person on other end of session is who it claims to be
Authorization – that person has permission to carry out request
Integrity – info arriving is the same that was sent
The physical flow of merchandise – logistics
The aspect of supply chain that refers to the planning, implementation, and control of the efficient flow and storage of goods, services, and related information from the point of origin to the point of consumption to meet customers’ requirements.
Activities performed by distribution center
-Managing inboud transportation
-Receiving and checking merchandise
-Storing or cross docking merchandise
-Getting merchandise floor ready (Ticketing and marketing/putting on hangers)
-Preparing to ship merchandise to a store
-Managing outbound transportation
Advantages of using a distribution center
-More accurate sales forecasts are possible when retailers combine forecasts for many stores serviced by one distributor
-Enables retailers to carry less merchandise in the store
-Easier to avoid running out of stock
-Retail store space is more expensive than space at the distribution center
Outsourcing logistics
Retailers consider outsourcing logistical functions if those functions can be performed better or less expensively by third-party logistics companies
-Transportation
-Warehousing
-Freight forwarders
-Integrated Third-Party Logistics Services
Push Supply chain
Merchandise is allocated to stores on the basis of forecasted demand
Pull Supply Chain
Orders for merchandise are generated at the store level on the basis of POS sales data
Advantages of direct store delivery
-gets merchandise faster, and thus is used for perishable goods (meat and produce)
-Helps the retailer’s image of being the first to sell the latest product (video games) or fads
-Some vendors provide direct store delivery for retailers to ensure that their products are on the store’s shelves, properly displayed, and fresh.
Reverse logistics
-The process of moving returned goods from their customer destination for the purpose of capturing value and proper disposal
-Retailers recover loss through on-line auctions
-Reverse logistics systems are challenging
-Items may be damaged or require special handling
-Transportation costs are high
Drop shoping
Consumer direct fulfillment is a system in which retailers receiver orders from customers and relay these orders to vendors and then the vendors ship the merchandise ordered directly to the customer.
-Drop shipping has been used for years by companies that sell bulky products such as lumber, iron, and petroleum, as well as catalog and mail-order companies.
Bullwhip Effect
The build up inventory in an uncoordinated channel where retailers and vendors do not coordinate their supply chain activities.
What causes a bullwhip effect?
-Delays in transmitting ordres and receiving merchandise
-Overreacting to shortages
-Ordering in batches rather than generating a number of small orders
Four approaches for coordinating supply chain activities to reduce the level of inventory in the chain and the number of stock-outs
-Use EDI
-Share information to reduce for backup inventory, improve sales forecasts and production efficiency
-Vendor manage inventory (VMI)
-Collaborative planning, forecasting and replacement (CPFR)
Radio Frequency Identification (RFID)
-Allows an object or a person to be indentified at a distance using radio waves.
-Reduces warehouse and distribution labor costs
-Reduces point of sale labor costs
-Inventory savings by reducing inventory errors
-Reduces theft – products can be tracked
-Reduces out of stock conditions
Impediments to the Adoption of RFID
-Expensive, the return on investment is low
-It still only makes sense to put tags on pallets, cartons, expensive merchandise or high theft items
-RFID generates more data than what can be currently processed
-Consumers worry about privacy invasion

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