Did your
Giant Eagle ever run out of Bread? Probably never! Did Walmart run out of
mattress? Probably yes!
Retailers have to spend a lot of resources to manage their
inventory. If they don’t have an optimized inventory management system, they
lose both customers and sales.
How do companies combat this?
Walmart removed its barriers to sharing forecast
information. This information is available to the suppliers over cloud and now
the ‘Bull-whip’ effects can be avoided [1].
To manage the uncertainties in supply chain Walmart is using
following strategies
1)
Direct sourcing from manufacturers, bypassing
all intermediate links
2)
Understanding cost structures of the vendors by
conducting meetings
3)
Internal transportation through its company
owned 3500 trucks
4)
Using bar code systems making information like stock
and cost quickly available.
Tesco, the largest retailer in UK, developed an automated
store ordering (ASO) system based on Electronic Point of Sale (EPOS)
technology. These systems automatically generate orders when the supply marks a
lower pre-decided point. Before this, in many retailers the process involved
some human intervention in the decision-making process, both centrally and at
each individual store. This system reduced the inventory turnover period thus,
reducing losses due to damage or stale inventory.
The ASO system could cope with this increased complexity and
maintain customer service levels. As Jones and Clark (2002) note, ‘98.5%
availability for each product gives, across a basket of 40 products, a
probability of complete fulfilment of only 55%’.
Target, a major US retail chain also ensures product quality
and on-time delivery to stores. It has developed a comprehensive system to
manage its supplier relationships. The system includes strict requirements for
suppliers and overseas factories it uses to manufacture store-brand products. This
system and its global quality program promote and protect Target’s brand.
Now let us look at how Amazon deals with these issues. The
diagram above illustrates the total supply networks of the global retail giant
Amazon:
Step 1 as seen is when the customer places an order in
wherever location he may be. The order is then assigned to the closest of the
seven major distribution centers in the US. The next step is, as shown in the diagram,
the shelf area shows a red light indicating that the product placed in the
shelf has been ordered. It then creates ride conveyors through the DC, and in
the end the items are sorted out by a bar code. The crates arrive at the
central point and bar codes of the products are matched with orders, the items
sorted and get assigned automatically into one of the many boxes. As shown in the
diagram the bar code identifies a customer’s order and then the customer order
is packed taped and weighed. The taped and weighed boxes are shipped by the
United Parcel Services and sent to customer within seven days.
Thus, we see how these big retails chains have invested
millions of dollars to efficiently handle their inventories. Such organizations
are investing more and more to complete automate the process and reduce the
time to delivery for the customers and have an effective inventory management
system.
References:
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.