Supply Chain is a concept that encompasses the entire process of distributing a particular product or service, from the extraction of the raw material for its manufacture to delivery to the final customer.
However, this movement is not unidirectional, that is, it is not enough to just cause the product to leave the factory and reach the consumer. There is also a counterflow of data, which is the information on the customer’s demand.
Supply Chain Management aims to manage these relationships and integrate the links that are formed along this chain.
But what are the difficulties of this management in retail and what tools can be used to optimize the processes? Let’s understand further!
Supply Chain Management and Fulfillment Processes in retail
The supply chain by itself already brings some difficulties. It turns out that this scheme is not as linear as it seems. In addition to needing to anticipate the demand of the consumer market, the supply chains are formed by several companies that are related to multilateral flows.
This complexity is even greater in retail since in this marketing model there is a continuous cycle of buying and replacing goods. This process needs to be nimble, supplying the stores with the right goods.
The idea is that everything the store was able to sell in one day, is already restored the next day. Therefore, it is important to have tools that allow real-time counting of sales and demands so that the new order get made to the supplier.
There are two models of supply: the own distribution centers and the direct purchase from suppliers.
Own distribution center
It is very common in large retail chains. In this model, the retailers themselves buy the merchandise and make the replacement in their stores.
This scheme brings some benefits, such as ensuring deadlines and greater bargaining power, since it is possible to make high volume purchases.
Despite these advantages, retailers that have their own distribution centers need to have private transportation, and this can also raise costs.
Therefore, one must evaluate whether adhering to this model is economically feasible, according to the size of the company, and whether the business really is capable of making the entire logistics operation work.
Direct purchase with supplier/distributor
Retailers that do not have their own distribution center carry out the purchase directly from the distributor or supplier. In this case, the chance of problems with goods delays is greater.
Typically, larger networks adopt their own distribution center, and smaller ones rely on multiple vendors, from which they become hostage to the delivery and service provided.
Ultimately, retailers that have their own distribution centers end up achieving a better level of service. They become less dependent and are able to optimize supply chain processes, but they need to have a considerable volume of goods.
Know Dropshipping Order Process
Dropshipping is a unique and particular service, this does not work exactly like the other similar services.
1. The order is placed in the store
The customer will order the product they need through the store, once this is done the store and the customer will receive the confirmation of the order through their email, this is automatically generated by the store system. You will wait for the client’s payment to end and fall directly to the bank account of the store.
2. The store places the order
Once the customer’s money is in the bank account of the store, they will place the product order to the suppliers.
3. The order is sent
Once the order is placed and assuming that it is in stock, the wholesaler can charge the cost of its product to the store. The drop shipper in charge will pack the order and send it to the customer. The package data will be from the store where the customer made the purchase. Once sent, the store will receive all the package information.
4. The store communicates to the customer
Once the store has all the package and shipping information, it will notify the customer by email and it will receive all the tracking information of its product until it arrives at the destination.
The profit of the store will be the result of the payment made by the client and the one made to the supplier for the order.
Alignment with business strategy
Years ago, logistical strategies were only operational in order to streamline and facilitate services and reduce costs.
Since the last decade, however, companies have sought to align supply chain management with overall business strategy with the goal of gaining a competitive advantage over their competitors.
This alignment is based on choices between suppliers and buyers in order to allow an efficient flow of information and materials.
The goal here is to meet customer demand by formulating business strategies and performance objectives for its operations.
However, this performance is related to results from partner companies. It is therefore important that other organizations in this chain operate on the same goals, aligning their strategies to achieve a common goal.
Once you have defined what is going to be done to improve supply chain efficiency, you need to conduct long-term planning so that the industry’s actions are compatible with the company’s strategy.
The optimization tools will be very useful right now. So, understand how some of the work.
Optimization Tools
- Inventory automation: Investing in electronic inventory management tools will be critical to improving supply chain management. This software are capable of automatically performing the processing of:
- Electronic orders: Considers the best time for a given supplier or according to the need of inventory, performs the ordering schedule, and allows the automatic capture of the electronic invoice;
- Automatic relocation of excess merchandise between stores: Helps in optimizing the supply chain processes between stores, analyzing the information about product re-management and suggesting transfers, replacements, distribution changes and solutions to spawn stocks;
- Receipt of merchandise: Identifies the invoice, which is imported automatically by a robot, able to read the notes that arrive by email and detect differences between the physical logistics and what is included in the invoice – and already makes the electronic order of correction.
- Automation through an integrated management system, or ERP, will enable standardization of processes and give the manager a broader view of the entire supply chain.
Cloud Software
The current dynamic of the retail market, with consumers with unpredictable behavior and long distribution chains, makes it increasingly difficult to strategically align between the two ends of the chain.
Therefore, deploying cloud applications becomes essential as they enable the exchange of information on demands and inventories in real-time. In this way, companies can adapt more easily to market oscillations.
Expert advice
The specialized consulting service supports the company’s managers to overcome obstacles in their planning and execution of supply chain strategies. The goal is to generate satisfactory and tangible results.
A consulting firm will be able to perform a professional intervention and determine which methods or practices can assist in the innovation of the company’s logistics and business processes.
Optimization and results
Undoubtedly, technology gives greater agility to the supply chain processes, helping in the receipt and replacement of goods at points of sale.
The result of using these features is the clear optimization of supply chain processes and consequently increased sales.
What’s more, when combined with Business Intelligence tools, retailers can analyze purchase or sales indicators and design business growth based on demand.
Optimizing supply chain management processes enables managers to analyze departmental and store sales performance, measure where improvements can be made, and make better decisions for overall business growth.
Despite the complexity of the retail supply chain structure, it is possible to organize and enhance this management through appropriate control tools.
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