Term Paper on scm

7/29/2019 Term Paper on scm

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Retail operational

strategies in complex

supply chains

SUBMITTED TO SUBMITTED BY Brig. s.k dubey, vsm SANJITA

TANDON

deputy director AMITY SCHOOL of business

CLASS OF

2009-2014

BBA+ MBA

A3923009011



AMITY SCHOOL of BUSINESS

AMITY UNIVERSITY, UTTAR PRADESH

SECTOR 125, NOIDA - 201303, UTTAR PRADESH,

INDIA

ACKNOWLEDGEMENTS

Words put on paper are mere ink marks, but when they have a purpose there exist a thought behind

them. I too have a purpose to express my gratitude towards those individuals without whose guidance

the report would not have been possible.

I am thankful to our Director, Dr. Himanshu Mohan and other members of the organization for their

support and providing the required information.

The experience that I have garnered has had a profound impact on my career choices and has helped

me realize what is requisite for success in the corporate world.

I also take this opportunity to express a great sense of gratitude towards Brig. S.K Dubey for

providing me vital inputs to co-relate the present project work and hence provide a sound base to the

report structure. A special word of thanks also goes to all the teaching staff of my institute and my

Friends.

SANJITA TANDON

DATE:



CONTENTS

S.NO TOPIC PAGE NO.

1. INTRODUCTION

2. LITERATURE REVIEW

3. METHODOLOGY

4. DISCUSSION

5. CONCLUSION

6. BIBLIOGRAPHY



AbstractIndia is going through a retail revolution. All the big business houses are entering this Sector and it is

growing at a very past pace. International giants in this sector like Wal- Mart, Tesco and Carefour are also

trying to enter the Indian market. Retail is offering tremendous opportunities in employment. However,

our country also poses a big challenge to organized large retailers particularly in food sector. Food being

perishable item, for the retailer to be successful the key is proper supply chain management. The challenge

comes from a number of factors, e.g. huge size and population of our country, varied culture and hence

varied taste, very poor infrastructure like improper roads, bad connectivity between production centers and

markets, lack of proper cold chain facility like refrigerated transportation, ware-housing etc. Under these

circumstances it is interesting to find out how large organized retailers are coping up with these problems.

In this paper we would retail operational strategies in complex supply chain.

Introduction

The role of supply chain in Indian organized retail is very significant for on it depends the growth of this

sector. The Indian Supply Chain Council have been formed to explore the challenges that a retailer faces

and to find possible solutions for India.

In the organized retail market in India, the role of supply chain is very important for the Indian customer demands at affordable prices a variety of product mix. It is the supply chain that ensures to the customer in

all the various offerings that a company decides for its customers, be it cost, service, or the quickness in

responding to ever changing tastes of the customer.

The infrastructure in India in terms of road, rail, and air links are not sufficient. And so warehousing plays

a major role as an aspect of supply chain operations. To overcome these problems, the Indian retailer is

trying to reduce transportation costs and is investing in logistics through partnership or directly. The

Indian organized retail sector is growing so the role of supply chain becomes all the more important. It

should become all the more responsive and adaptive to customers demand. There is also need for the

supply chain to be more cost efficient and collaborative to win the immense competition in this

sector.

The role of supply chain in Indian organized retail has expanded over the years with the boom in this

industry. The growth of the Indian retail industry to a large extent depends on supply chain, so efforts

must be made by the Indian retailers to maintain it properly.

Supply chain and Retail

A retail revolution is happening in the country. For global giants looking at newer markets, India presents

exciting opportunities on account of its vast middle-class and a virtually untapped retail industry.

The Indian retail sector has seen unprecedented growth in the last few years. The KPMG report,

`Consumer Markets in India: the next big thing has predicted that the organized retail sector is expected to



grow at rate higher than GDP growth in the next five years. The AT Kearney's 2006 Global Retail

Development Index positions India as a leading destination for retail investment.

The success in this competitive and dynamic sector depends on achieving an efficient logistics and supply

chain, which can be provided by professionals, as they combine the best systems and expertise to manage

a ready flow of goods and services.

The retail boom promises to give an impetus to a host of allied sectors and the logistics industry, as the

backbone of the retail sector, stands to gain the maximum.

In India, the logistics market is mainly thought to mean transportation. But the major elements of logistics

cost for industries include transportation, warehousing, inventory management, courier and other valued-

added services such as packaging.

With the expansion of retail, supply chain will take on an increasingly important role. With the end

consumer becoming more demanding and time conscious, the need for just-in-time services is increasing.

In retail, where competition is intense and stakes are high, customer satisfaction is paramount.

Literature review

Supply chain management and effects of supply chain management

Supply chain management in retailing context is the delivery of economic value to customers through

the management of the flow of physical goods and associated information from vendors to

customers.

The power of supply chain management is its potential to include the customer as a partner in supplying

the goods or services provided by sc. Due to modern economic activities like consolidation and emergence

of large and operational fit national retailers, retailers now take an active role in planning and coordinating

supply chain activities.

Managing supply chain requires retailers to perform a delicate ―balancing act‖ that simultaneously meets

multiple needs. Effective management must take into account cording all the different pieces of this chain

as quickly as possible without losing any of the quality or customer satisfaction, while still keeping costs

down. Reduced inventories, lower operating costs, product availability and customer satisfaction are all

benefits which grow out of effective supply chain management.

A basic retailer’s role in supply chain management is to provide and sell products to customers for their

personal or family use. Retailers have to satisfy needs of ultimate consumers and that’s why info that

retailers gain is a key element in successful supply chain management.Today, among rivals, win those who better operate their supply chain. Supply chain management seeks to

enhance competitive performance by closely integrating the internal functions within a company and

effectively linking them with the external operations of suppliers, customers and other channel members.

Efficiency of a supply chain can be obtained through the interaction of all members of a particular sc.

Companies pursue different competition capabilities within the generic strategies of competing on cost,

quality, time, flexibility, or product differentiation. Supply chain management has also another goal and

that is customer satisfaction, without this the whole thing of applying the supply chain strategy could be

costly and futile.

Criticality of Supply chain management in Retail Industry

In the last few years there has been a flood of new retail space, not only there are more stores, but many

offer similar products, same brands.





METHODODLOGY

Objective of the Study

To study about retail operational strategies in complex supply chain

Methodology

The methodology of the study will be based on the secondary data. The study depends mainly on the

published research paper, books, journals, etc.

Research Methodology Adopted

Research Instrument : research papers, books, journals

Source of Data

Secondary Data : Journals, Booklets, Research papers, etc

Discussion

Strategies for Improving Inventory Management



Across Complex Networks

There obviously is no single bullet for improving inventory management in the face of these network

challenges, and many companies continue to chase increasing forecast accuracy as a key weapon – and

one often especially resistant to improvement. inventory management challenge.

1. Get Much More Granular with Safety Stock Management

Many companies today continue to use rather simplistic means to determine safety stock levels at different

echelons of the supply chain.

The most common is a simple SKU segmentation approach in which products are put into three or policiesare then set the same across each of these categories. companies have taken their safety stock policies

much further in terms of both granularity and cycle times.

The most common of the process improvements is to use many more attributes associated with each SKU

to in effect create a much larger number of item classes to which different policies are assigned – well

beyond the standard three or four levels most companies still use.

These attributes can include lead times, supply and demand variability, consumption patterns, criticality,

velocity, and several others. The more dimensions a company uses, the greater the precision a company

will have in managing inventories. It is not uncommon to see 10-12 dimensions being used in best-in-class

companies.

This obviously requires a lot more work, both in terms of upfront analysis and tweaking of the policy

settings over time, but can pay rich dividends in terms of both reducing inventories for the SKUs for

which excessive safety stocks are held, and in some cases actually increasing safety stock levels for SKUs

that are regularly experiencing out-of-stock conditions.

This more granular segmentation also clearly requires some level of skill in terms of identifying the

appropriate attributes to use for the groupings, and in understanding how to best apply differentiated

inventory policies. Here outside expertise may be required if a company is looking to make the move to

higher level of safety stock management, as this is a relatively uncommon skill set.

Leading companies both review products and policies more frequently, and have a formal schedule for

monthly Sales and Operations Planning (S&OP cycle), as we discuss in the next section, but then alsolook at higher level demand and variability data quarterly and may tweak certain inventory parameters on

a weekly basis.

This safety stock and inventory policy management challenge becomes even greater when a company

considers the multi-echelon aspect. Many companies in effect hold redundant safety stocks at each level of

this report. Many companies also lack insight into where in a complex supply chain inventory buffers

should optimally be held.

Meeting that challenge well is almost impossible to do manually today and really requires a new level of

technology support, an area where the category of inventory optimization software comes in to play, as we

discuss in the last section.

2. Add Inventory Planning to the S&OP Process

While Sales and Operations Planning has been successfully employed as a process discipline by some

through their S&OP evolution.

Still, it is only in the past 5 years or so that there has been widespread recognitions that specific inventory

decisions were often left out of the S&OP process. While S&OP delivered a ―one number forecast‖ that

the company could act on, supported by a high level supply plan that is capable of meeting that demand

plan, specific inventory decisions related to those plans were often left out of the S&OP decision process.

That usually meant middle managers were responsible for inventory decisions that could have impact on

sales or cost in the millions of dollars.

Recognizing that gap, many have pushed use of the new term Sales, Inventory & Operations Planning

(SIOP) to more forcefully drive home the need for the process to make policy decisions on target

inventory levels needed to support the demand and supply plans. In effect, this means senior company

executives need to set the direction based on a given plan as to what the trade-offs are going to be b/w



excess inventory levels and some amount of risk that there will be insufficient that have a lot of

complexity in their product ―mix.‖

Some have argued that these inventory-related decisions were always inherent to the S&OP process. That

may be true from a theoretical perspective, but was clearly often not the case in the actual monthly

practice of S&OP. There are many case studies of companies which have transformed their processes

from a traditional S&OP basis to an SIOP one with added steps related to inventory targets and which

have achieved impressive results.

Moving to SIOP in practice if not in name is a process improvement that at one level is fairly easy toaccomplish, with the right level of expertise in terms of how the new elements to the S&OP cycle will be

added. However, most companies ultimately find that a strong level of technology support becomes

necessary for robust S&OP performance, especially as decisions about inventory levels are added to the

mix. This technology is usually in the form of ―workbenches‖ and exception-based decision-making that

provide supporting data for the supply and demand plans, and importantly, allow managers and executives

to conduct a series of scenario analyzes to understand options and how they would play out across supply,

demand and financial results.

SIOP is not a cure all for the challenges of inventory management across complex networks, but it is a

necessary change to take some steps forward and to set a platform for other initiatives, in part by getting

senior company executives more engaged in the inventory planning process.

Maintain Quality in a Complex Supply Chain With Better Information Management

The growing complexity of products, along with the continued globalization of business, has made the

supply chain more sophisticated and difficult to manage than ever before. Add to this the threat of

unexpected natural disasters - such as the earthquake, tsunami and nuclear crisis in Japan last year - and

suddenly manufacturers face challenges that are so complicated they warrant re-thinking the fundamental

principles of supply chain management that have guided businesses for years.

Increasing complexity, information overload and rising quality levels are driving fundamental changes

across a number of industries. This has created a greater need for manufacturing intelligence coupled with

a need for better systems to manage the "flow" of information. These changes have also significantly

impacted the supply chain, where greater visibility and responsiveness is now needed to just maintain

"status quo," in order to respond within a reasonable time frame to today's dynamic market and customer

requirements.

Managing the flow of operations data from manufacturing operations and suppliers, while keeping an eye

on quality and customer demand, is a delicate balancing act, especially as businesses increasingly rely on

global, multi-tier suppliers for critical components. As a result, manufacturers need to proactively meet

complex supply chain issues head-on by making better use of data to enable greater manufacturing

intelligence through the use of expanded flows of information, driving higher quality and responsiveness

standards.

Streamlining the Flow of Information

Today's factories increasingly rely on data from multiple sources along the supply chain to produce their

output. But the growing complexity of products and diversity of suppliers are now generating record

volumes of information for manufacturers to deal with, ideally on a more real-time basis. In other words,

collecting operations data at the end of the week or the month will no longer suffice. Do you need to know

information on every factory every minute? Certainly not. But, if you have a performance issue, supply

issue or supplier quality challenge, then the faster you can respond and take corrective action, the smaller



your problem becomes and the less of an impact on your customers. Balancing this information flood is

becoming increasingly difficult to not only sort and analyze, but to simply manage effectively without

potentially crippling many manufacturing operations in the future.

It's not going to get any easier. Industry estimates suggest volumes of information are now growing

worldwide at a minimum of 59 percent per year. The size of large data warehouses is almost tripling every

two years. Little wonder that industry analysts at Gartner recently found the data explosion to be one of

the "top three challenges" for the world's CIOs.

Although technology has already streamlined factory operations and relationships along the supply chain a

great deal, the ability to intelligently process and use an ever-increasing volume of information, both

quickly and efficiently, will be an important differentiator between the companies that succeed and those

that fail in a global business environment.

With today's technology, this can mean equipping plant managers with mobile handheld devices, such as

iPads and tablets, in order to access real-time information from suppliers so that the production process

can be optimally managed. Today's workers needed to be "un-tethered" from their desktops for greater

movement around the shop floor. It's critical that plant managers have an immediate view of production

and supplier so that information can be factored into the process as quickly as possible.

For example, if a plant manager becomes aware of a delay from a supplier, it may be possible to quickly

adjust the production process to accommodate for this delay, resulting in no impact in scheduled

output. This might mean modifying production, or performing necessary equipment maintenance in a way

that minimizes downtime to keep operations running smoothly. Global supply chains and high-volume

factories function in real time. Plant managers need access to this same data also, in order to ensure

efficient operations are maintained.

Winners will know what is going on faster, and are typically also capable of implementing change

quicker. Moving faster creates sustained competitive advantage by better meeting the needs of tomorrow's

customers - a "must have" advantage to compete in the future.

Increasing Quality Standards Along the Supply Chain

Quality has taken on a whole new level of importance for manufacturers. However, maintaining a high-

quality level in a global, complex supply chain has become increasingly challenging. The brand damage

that has resulted over the past few years due to low quality products has been substantial. With steadilyincreasing quality standards, the IT systems supporting production processes must be capable of

continuous improvement. As new processes are created, they must also be managed and measured,

causing a ripple effect of challenges.

No longer is it sufficient to simply identify a quality problem. It must now also be possible to take

immediate corrective action to contain any potential fallout from a quality issue. With today's tight

production schedules and Just-In-Time inventory strategies, a quality problem along the supply chain left

unchecked can quickly balloon into a very serious issue - one that significantly impacts brand integrity

and the bottom line.

For example, in the automotive industry, the complexity involved in making an automobile is

unprecedented. Vehicles have a vast range of options from Bluetooth capabilities, to automatic parking

and voice-based commands. The software required to activate these new options is staggering, with base

models requiring up to one-and-a-half million lines of code per vehicle. Naturally, this involves



coordinating with multiple suppliers for the procurement of highly specific electronic components.

This added complexity has made quality control more difficult. Increasing the number of quality checks

along the supply chain may improve product quality. However, it could also slow down production,

resulting in increased labor and inventory costs in an environment that calls for greater speed and

efficiency.

This scenario illustrates a fundamental challenge for manufacturers and points to the reason why steadilyincreasing data requirements have become the modern manufacturing challenge. In order to strike the

delicate balance between quality, cost and managing product complexity, many manufacturers must now

consider new ways to generate efficiency. This includes streamlining operations, performing continuous

improvement checks and improving the way they work with suppliers and partners all over the world.

Importantly, each of these activities requires a higher level of visibility into a company's manufacturing

operations and, especially, those of its suppliers and partners. The recent economic crisis has also forced

many manufactures to closely monitor their suppliers' economic viability .In some case suppliers were

forced to shut down completely, leaving manufacturers with giant holes in their product supply chain.

Industry leaders have learned how to tightly monitor their supplier's operations, ideally through "close to"

real-time viability. These leaders have put contingency plans in place, based on cost, material availability

and ability to deliver to corporate standards.

Building an Agile Supply Chain

The following are some of the best practices that manufacturers are implementing today to increase their

operational flexibility, enabling faster response to change. These strategic actions provide an ideal rolemodel for the factory of the future, which includes better use of data and analytics to function more

quickly and effectively, leading to performance improvement, reduced costs and greater profitability.

Build a Flexible Process Framework: Factories will need to be more flexible in the way they manage

supply chain operations in order to adjust quickly to new product demand. Those that embrace a platform-

based approach, ideally through a business process management-based architecture for their production

processes will be better able to operate over globally distributed environments, providing clear operational

benefits. Offsetting visibility challenges will need to be met with more standardized processes and

standardized data, resulting in better analytics. Manufacturers need to empower managers with the right

systems, tools and information in order to respond quickly to new, developing situations as they occur.

Create a Supply Chain-Centric Data Warehouse: Instead of pushing all data into the corporate data

warehouse, essentially into what can become a "data tomb," companies should maintain the data critical to

their business in a central location, so it is easily accessible by managers and manufacturing personnel.

This will better empower those in manufacturing to have rapid access to the key data they need.

Collaborate Locally and Globally: Companies need to recognize that as the pool of data continues to

expand, it might not make sense for it to be located within operations processes or equipment on the

factory floor. Sophisticated data archiving techniques exist such that data can be made available in "near"real-time without impacting operational performance. With ready access to more data, faster, a higher

degree of analytics can be performed on a wider scope of operational processes. To further streamline the

collaborative process, selective data can be collected and stored as an embedded component of an actual

business process, which can be leveraged to start automating responses to common circumstances in any



factory around the globe. For example, a quality check that fails could automatically trigger an increase in

the frequency of quality checks instantly, helping to potentially curtail an "out of spec" quality part.

Integrate Processes into the Business: Greater integration of business processes spanning multiple

operations will further contribute to the ability of a manufacturer to respond faster to change while

retaining the necessary visibility of manufacturing intelligence. Manufacturers should fully consider

evaluating their business processes holistically, such that information can be applied to many decision

points along the process. This will help improve performance and efficiency without sacrificing agility.Any remaining paper processes should ultimately be eradicated from the production flow, given the speed

and efficiency benefits that more digitally-driven, agile factories can achieve.

Complexity, quality and data overload are driving the need for greater manufacturing intelligence, which

in turn is driving fundamental changes across the manufacturing industry. As supply chain complexity

continues to increase, companies will be tasked with even greater data and process visibility demands in

the years to come by customers, strategic partners, shareholders and employees alike.

Fortunately, technologies exist to begin to address these challenges. The visionary companies that

understand the need for greater visibility into their manufacturing performance now have the opportunity

to gain significant market share in the future.

Conclusion

Overall, any company’s Supply Chain Management Strategy is its long-term goal. It is important for a

company to have an operational strategy because it establishes the types of goods and services the

company will offer to its target market, and how they are going to get advantages over its competitors.

Companies have to make good planning and control in its capacity, supply chain and quality. Besides, in

order to make improvements in operation, they should measure quality, speed, dependability, flexibilityand cost.

Ideally retail supply chains need to be designed to be lean & defect free prior to implementation of the

processes. However, this is rarely possible in real life given the pace at which the industry is expanding.

Even if this is done & processes designed optimally the rapidly changing market dynamics soon make

them ineffective. Hence there is a need to continuously review & revive the standard operating practices

(SOPs) that are used to document & audit process implementation. A well designed lean six sigma

initiative helps in continuous process redesign in order to ensure efficiency & accuracy despite changing

operating conditions.

Despite the external uncertainties, the strategic focus has shifted from all-out cost cutting to a balanced

perspective where supply chain service and cost are equally prioritized. Supply chain leaders realize that

they must meet customer expectations of continuous product availability while simultaneously

rationalizing inventories and reducing waste.

With the support of top management, retail SCM executives are moving forward with numerous initiatives

to meet this dual goal. Investments to refine supply chain capabilities and enhance internal alignment are

being made. Supply chain leaders are working closely with merchandising and store leadership in pursuit

of greater cross-chain agility, asset utilization, and visibility.

While the vast majority of retailers recognize the critical role of SCM, innovative organizations are

expanding the sphere of SCM control. Supply chain leaders are taking on manufacturing roles, engaging

in store operations with shelf-driven SCM, and shaping multi-channel capabilities. Their intent is to createcompetitive advantage in these areas through greater supply chain agility and responsiveness.

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