Supply Chain Management in Retail: Challenges and Strategies

This report discusses the importance of supply chain management in retail organizations and the challenges they face. It covers positive and negative attributes of retail SCM, gap analysis between evaluation and implementation, global issues, and strategies to meet challenges.

Student ID :00311228
Supply Chain Management (Retail)
Report
MODULE: Global Supply Chain Management

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Executive Summary
A supply chain is worthless if there is no proper distribution channel in the organisation that
delivers the product to its end-customer. The success of retail organisations very much
depends on its supply chain management process. Now, in these days there are large numbers
of retail business organisations that provide each and everything to its customer by the
distribution channel. It requires effective management of logistics and supply chain of the
products and maintains the quality of product up to the mark. It is therefore increasingly
interesting how retail business organisations face the rapid change in technology and demand
of customers.
An effective supply chain management is a crucial factor in a retail business. Wide product
variety with instant availability, high accuracy in information flow, and the advantages of
inventory optimisation are the positive attribute of SCM in retail sector while it has some
negative attribute that shows hot it enhance the cost of maintaining high level of inventory
and how it enhance the competition in local market. The flow of the product, the flow of
information, and the flow of cash are the three major elements of any SCM. This has been
discussed as positive attributes of the supply chain. Where the main problems with the supply
chain management are to handle the big inventories and maintain the quality of the product as
per standards is a challenge for the retail business organisation.
To maintain the efficiency of the supply chain it is essential for a business organisation to
focus on continuous improvement in the supply chain and its logistics part that has been
shown in the GAP analysis of supply chain management. This is most crucial part of supply
chain management where it evaluates whether the customer demands are meet at the expected
level. The gap analysis shows that evaluation of improvement process is an essential part of
supply chain improvement. The gap of expected standard of performance with actual supply
chain performance should be identifying at priority level and corrective action should be
taken to reduce it. However, it can be said that the continuous changes in technology and
preference of customers force the retail giants to think about creative and cost-effective ideas
to deliver the product to its end customer on time and solve the issues of the customer with
effective and quick compliance policy.

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Table of Contents
Executive Summary...............................................................................................................................1
1. Supply Chain Management (SCM).................................................................................................3
2. Retail SCM.....................................................................................................................................3
2.1 Positive attributes related to Retail SCM...................................................................................4
Wide product variety with instant availability...................................................................................4
Information Flow...............................................................................................................................4
Inventory Optimization......................................................................................................................5
Flexibility...........................................................................................................................................5
Customization....................................................................................................................................5
Compliance and visibility...................................................................................................................5
2.2 Negative Attributes Related to Retail SCM................................................................................6
Cost of maintaining high level of Inventory.......................................................................................6
Lack of corporate understanding.......................................................................................................6
Strong competition among local retailers..........................................................................................6
Information collection challenges......................................................................................................6
Risk related to managing a high level of inventory and large numbers of customers.......................7
3. Gap Analysis between Evaluation and Implementation in Supply Chain Improvement................7
4. Global Issues in Retail SCM............................................................................................................8
Global management of large and diverse supply flows.....................................................................8
Cost optimization of supply chain......................................................................................................8
Product Un-availability......................................................................................................................9
Handling of Large Inventories............................................................................................................9
Low-Profit Margins............................................................................................................................9
5. Strategies to meet these challenges............................................................................................10
Increase Profitability........................................................................................................................10
Collaborative supply chain...............................................................................................................10
Responsiveness................................................................................................................................10
Proactive compliance......................................................................................................................10
Integration in the supply chain process...........................................................................................11
Conclusion...........................................................................................................................................11

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References...........................................................................................................................................12

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1. Supply Chain Management (SCM)
Supply Chain Management (SCM) plays a significant role in any business organisation in
modern days. SCM is a network that manages the delivery of products or services from
manufacture to end customers through a systematic flow of information, physical
distribution, and cash (Fredendall and Hill, 2016). In other words, supply chain management
includes a sequence of key activities and processes that must be accomplished in an effective
manner. There are numbers of people involves along with the advanced communication
technology that helps to deliver the product from the producer to the end customers. A supply
chain is not the responsibility of a single person rather it is a collaborative effort of a group of
people, information technology, and the communication channel through which the delivered
products or services can be tracked by the company (Mangan, Lalwani, and Lalwani, 2016).
In other words, a supply chain involves everyone and everything that directly or indirectly
participates in extract materials, convert it into a product, and provide it to its end user by
selling. It includes various entities such as the raw material extractor, supplier of raw
material, product manufacturer, or producer of services, distributors, and end customers. The
structures of supply chain management vary on demand history, the focus of business,
technology and needs for connectivity and equipment. In the success or failure of an
organisation, supply chain management plays a crucial role. Walmart, Amazon, Marks &
Spencer, and Alibaba are the few big names in the retail industry, which depends on the
SCM.
2. Retail SCM
In the era of retail market booming, all the entrepreneurs and businessman of the big retail
companies focusing on catching the new opportunities in the retail industry with new
initiatives, advanced technology, and more developed communication technology (Ayers and
Odegaard, 2017). The major focus of these retail companies is to provide speedy and fast
delivery of product and services to the end customers. The mentality of customers is
changing dramatically with their changing needs and advancement of technologies. The
current consumers are more aware of their choice, know what they like, go for what they
want, and expect a fast and quick service by the companies in product or service delivery
within their budget. This awareness and revolution of digitalization caused the top leaders of
the retail companies to reduce the cost of the product and operation without compromising

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with the product quality by considering the latest trends of the generation in mind (Yawar and
Seuring, 2017). In such a heavy competition in the retail market, it is a need of time and the
necessity of retailer to provide quality products to the consumers at the right time and
consider the price of the product, which should be in the range of customers. Proper
management of the transition of products from manufacturing to the point-of-sales is a key
element of Retail supply chain management. Achieving this by itself would ensure proper
business operation of any retail business organisation. SCM involves the same activities with
accuracy and speed. A little mistake in the Supply chain management process can cause
dissatisfaction among the consumers that further leads to major risk for the business and it
destroys the image of the company among its customers.
a. Positive attributes related to Retail SCM
An effective SCM is a crucial factor in a retail business. An effective supply chain helps the
business organisation to enhance its three key flow areas in retail SCM: the flow of product,
the flow of information, and cash flow. There are many positive factors attached to SCM in
the retail sector. Some are as follows:
Wide product variety with instant availability
Time plays a decisive factor in the efficiency of product flow in retail SCM. The less time it
takes goods to reach the end customer, the more efficient the product flow. Apart from this,
there are few aspects that determine the products flow efficiencies, such as the product
quality that reaches to the end customer, efficient product flow, demand and supply balance
of the product, shipment cost and time, and inventories (Christopher, 2016). The SCM also
enables a retail store to provide wide products variety of different companies at a single place
and provide wide range of choices to the customers. These all factors determine the product
flow efficiency in the SCM.
Information Flow
A smooth information flow is required for the effective and efficient supply chain
management. The flow of information plays a crucial role in the SCM of a retail company.
Walmart, Amazon, Flipkart, and Alibaba are the great examples of such retail business
organisation, which provides facilities to its end customer to track their product with time-to-
time updates about their order and its current-status (Salam, Panahifar, and Byrne, 2016).

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Inventory Optimization
An adequate level of inventory is required in the retail SCM. The inventory level should not
be less or too much in Retail supply chain management. The optimisation of inventory in
retail business depends on the accurate and precise forecast of demanding products. To
maintain an adequate level of inventory in the retail business organisation needs extensive
evaluation and identification of surprising changes in the market.
Flexibility
The increasing competition with the increasing number of retail business organisation in
retail supply chain management force every player to interconnected with emerging markets
and corporate players in the retail sector (Hugos, 2018). This will create a problem that how
more and more orders will be delivered in today’s competitive market to gain competitive
advantages over others. Here flexibility plays an important role. The flexibility in supply
chain management is an ability to adopt the changes within the markets and political
conditions.
Customization
Customization in supply chain management refers to how actively retail SCM implement
unique changes regarding the new needs and demands of the customer. For example, Amazon
provides a quick delivery of an order of a new mobile phone with some offers and discount
on its mobile app. The retail company also consider the festivals and provide a heavy
discount on the products and shows festival related products on their home screen on festival
days.
Compliance and visibility
The last and most important attributes of Retail supply chain management are quick and fast
settlements of the customer issues. The increasing use of technology helps the retail
companies to track the order of the customer and if any issues created regarding payment, late
delivery of products or quality of the product, then company immediately focus on issues
settlement with appropriate compensation. However, end-to-end visibility can remove all of
the potential issues by allowing others to see into the supply chain. The way of self-tracking
and assessment of retail supply chain processes leads to greater compliance.

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b. Negative Attributes Related to Retail SCM
These are the following negative attributes that create challenges for the Retail supply chain
management:
Cost of maintaining high level of Inventory
This is the main problem of retail SCM to manage the large inventory of products and
distribution of it (Choi, 2016). The company has to face a number of issues related to
management of inventory when it operates globally. The company should measure and
evaluate all aspects of the business when it grows across the borders, which can cause
problems related to management of inventory and its distribution.
Lack of corporate understanding
The retail SCM is composed of the functions of receiving the order, source, make and
delivers to the end customers. While corporate looking backwards in financial transactions,
the retail supply chain management looking-forward which is based on business flows; that
involves order flows, channel withdrawals, balancing in demand and supply off the product,
and sourcing strategies.
Strong competition among local retailers
The increasing competition in retail supply chain creates challenges for old players (i.e.
Walmart and Alibaba etc.) as well as new players (i.e. Flipkart, Snapdeal, Bigbasket etc.).
The retail organisations have to face lots of competition, which scattered across the globe.
Information collection challenges
The data collection is a huge challenged for the retail supply chain business organization.
Retail supply chain management has to deal with a large number of customers and product
information. A little mistake in data collection or information management regarding
customer account can cause a heavy loss for the customer or company both. Hacking is
another problem in digital supply chain management. Sometimes it has been seen that
customers personal information related accounts have been disclosed in public or hacked by
hackers, that causes a big loss for the retail company and customer both (Kurtuluş, 2017).

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Risk related to managing a high level of inventory and large numbers of
customers
Having material and supply chain unit all over the world to deliver the goods to end customer
with accuracy and within the time is a risky job. The market price fluctuation of goods, the
economy of the world, recession, natural disasters, changes in laws in a particular country etc.
all are the challenges that a retail business organisation has to face during its supply chain
management (Monczka, et. al, 2015).
Although the supply chain management in retail organisations is a tough task because it has
to face a number of challenges in the current competitive world. The success of a retail
business organisation depends on how it manages its supply chain, which full fill the
demands of the customer in time without compromising with the quality of goods or services.
3. Gap Analysis between Evaluation and Implementation in Supply
Chain Improvement
Keeping the supply chain operation at peak efficiency and effectiveness is a great challenge
for a retail organisation, special when the choice of customers and technology is changing
every day. Selecting and implementing a modern technology of supply chain management is
the need of time. The advanced information technology tools playing a major role in the
supply chain improvement process. An essential phase to express components and projects of
the strategy is the problem-solving (diagnostic) analysis phase (Diabat, Kannan, and
Mathiyazhagan, 2014). The Supply chain improvement process must include identification of
customer needs what they want and then consider the quality of the product that it meets the
expectation of the customer or not. Time of delivery and quality of product are the two main
important factors of supply chain management (Ho, et. al, 2015). The improvement stage
analyses the current performance if the supply chain and evaluate the current process and
standards of supply chain management in the retail sector. Evaluation of Supply chain
improvement process plays a significant role in identifying and tracking the progress of the
improvement against the organisation goals and objective. The evaluation of supply chain
improvement results identifying the opportunities for improvement and comparing

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performance against both external and internal standards of Supply chain quality standards
(Anand and Grover, 2015). The evaluation process is done to identify whether the needs of
customers are met and help the organisation to know the weak point of Supply chain
improvement process and identify, where problems exist and where the perfection requires. It
helps the organisation in decision-making related to the Supply chain management process
and makes it more effective and cost-efficient. The companies try to understand the needs of
the customer with its predictive skills of demand forecasting, but at the same time, the
customer's preference and choice have been changed. This leads to the big problem for the
retail companies. Rapid advancement in technology and new entrants off retail companies
forces to continuous improvement in the supply chain and its logistics (Tripathy, Tripathy,
and Das, 2015). This gap, which exists, in expected performance of supply chain
management and it is actual performance forces the company to look back at its supply chain
process and technology that is used in the distribution of goods in the supply chain.
4. Global Issues in Retail SCM
Transport and logistics play an important role in achieving competitive advantages over
competitors in the retail sector. Managing the supply chain globally is also a challenging task
for any retail companies. There are some issues that retail organisation has to face during
managing its supply chain:
Global management of large and diverse supply flows
Supply chain management becomes a much more complex task in any retail organisation that
deals in the global business. In recent years, there are a number of dynamic factors play a
crucial role in managing supply chains, such as diversification in sales, heavy demands of
products, and sourcing practices etc. therefore it is a challenging task for the retail companies
to manage and track the supply flows across the words (Fernie and Sparks, 2014). The
Walmart and Amazon are two big giants in the retail sector, offers high-reliability and real-
time tracking of customer orders with their advanced technology and mobile apps to their end
customers at both domestic and international levels.
Cost optimization of supply chain
The cost optimization of the supply chain is a bigger problem in retail SCM. The proper
control over the cost of logistics and managing delivery of goods to end customer is essential
to gain a competitive advantage over the competitors. Wal-Mart is known for its cost

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optimisation techniques that almost force other retail online companies like Amazon and
Alibaba in reducing their operational cost, which causes heavy losses for these companies
(Beh, et.al, 2016). Walmart is known for the caring of its customer needs and is smart in
managing and optimization of its international flows and it cares about the cost factor during
delivery of products to its customers.
Product Un-availability
The success of the retail business organisation highly depends on the availability of the
product in its warehouses. It is essential for a retail organisation to maintain an adequate level
of inventory in the warehouse, thus the demand of the customer full fill within the time
(Lambert and Enz, 2017). The company can maintain the inventor level in such a way that
helps the company to deliver the products, once when they receive an order. The big
companies automate the inventory level and ensure fast replenishment of the products while
the stock of any product is being minimized in sale areas. Walmart and Amazon are known
for their techniques to provide information to their customer about the available stock and the
current quantity available for purchase. This facilities are generally not possible in small
retailers and thus they lacks in faces competition with big retail stores. But if they maintain
their inventory with the help of digital platforms and record their inventory on real time, then
it could be possible that they can inform their customers about the available inventory and
relevant information.
Handling of Large Inventories
Handling a large inventory is always a challenging task for any retail organisation. In peak
season, the retail organisation has to maintain large inventory level (Jacobs, et. al, 2014).
Walmart and Amazon tied-up with logistic partners who are capable of handling the logistics
and transportation of large volume goods at peak time.
Low-Profit Margins
The retailers are facing big challenges in profitability. Improving profit margins is one of the
main objectives of the retail SCM. The uncertainty in the global economy, frequent change in
the taste and preference of customer and price sensitivity all affects the retail sales (Ghosh
and Shah, 2015). While pressure exists to keep low prices, the logistics cost and raw material
costs are increasing in same time, making it tough to remain profitable.

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5. Strategies to meet these challenges
The retail supply chain has to make certain decisions against these challenges, which every
retail supply chain has to face during its business operation:
Increase Profitability
The retail companies have to focus on increasing their profits by offering more features and
choice to its customers, product development, and sourcing and production activities. The
retail companies need to expand direct global sourcing and growing private label ranges by
focusing on improving the key retail margin on the products (Schönsleben, 2016). The
retailers must also negotiate with its supplier's regards to product price and it's distribution
channel through which supplier delivered its product.
Collaborative supply chain
An effective and efficient supply chain needs resource optimisation, long-lasting product
cycle times, an adequate level of inventories, proper communication process and
collaboration across external and internal stakeholders. The retail supply chain needs using
the best technology in Supply chain process improvements, which enables effective end-to-
end supply chain collaboration (Waters and Rinsler, 2014). The manual process in the supply
chain should be eliminated that cuts the cost of inventory maintenance and product delivery.
Responsiveness
Accurate real-time information system integration and sharing provide a facility for
establishing an effective communication process and responsiveness with customers. Internal
collaboration within the operational area and relationship with external supply chain partners,
vendors, and suppliers are essential to providing flexibility and the ability to meet the
delivery dates quickly and within the time (Wu, et. al, 2016).
Proactive compliance
The retail companies should take quick action against any complaints or issues of the
customer regarding product quality, delivery status, information, mitigate risks and
downstream problems (Wisner, Tan, and Leong, 2014). Walmart is an expert in compliance
and it focuses on working with suppliers/partners to build a strong relationship to deliver
products on time to the end customers.

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Integration in the supply chain process
The retail companies should focus to integrate the information and transparent logistic/supply
chain processes where the customer can easily access the timely and accurate information
related to the product order, which is essential to building trust among customers (Piotrowicz
and Cuthbertson, 2014). The retail organisations should adopt the new technologies and
business transformation techniques to effectively manage and understand the Omnichannel
retail demands (Chen, Wang, and Jiang, 2016).
To exist in high-level of competitive retail supply chain market it is essential for the
companies to focus on creative and most effective supply chain market where goods are
manufactured and distributed to end customers impeccably through multiple channels without
compromising with quality and delivery time.
Conclusion
The role of Retail supply chain management in the world has expanded day by day with the
boom in the retail industry. The growth of the retail sector depends on supply chain
management. Therefore, it is essential for any retail organisation to maintain the quality of its
supply chain and logistics with cost efficiency and without compromising with the quality of
the product. To remain in the competitive retail market it is essential for the retail business
organisation to continuous improvement in the supply chain management and its evaluation.
The evaluation process of Supply chain improvement process helps the organisation to find
out the causes behind the bottlenecks of supply chain management. The retail industries more
focusing on improving its supply chain on both global and local level and focusing on
improving their bottom lines efficient management of supply chain and logistics. The
continuous changes in technology and preference of customers force the retail giants to think
about creative and cost-effective ideas to deliver the product to its end customer on time and
solve the issues of the customer with effective and quick compliance policy. At the same
time, there are numbers of retail giants (such as Tesco PLC, Flipkart, Snapdeal etc.) are
operating in the global market and give strong competition to Walmart, Marks & Spencer,
Amazon, and Alibaba.

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