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Success Factors and Challenges in Supply Chain Management of Retail Industry

Supply Chain Management

Supply chain management is the process that involves in all process of making, designing of product that is; supplySuccess Factors and Challenges in Supply Chain Management of Retail Industry chain management play an important role in sourcing the component, and raw material for the making of product, supply chain management involves in the manufacturing of the product. Moreover, supply chain management involves in the distribution of final good to final customers or retailers.  Supply chain is an important part of the business and usually involves in a variety of processes like, sourcing of products, development of product, manufacturing of product, distribution or products, transportation of products and in last, it is involved in warehousing. It depends on the company that the how it defines it supply chain management.

Success Factors and Challenges in Supply Chain Management of Retail Industry

Some companies sell their final goods and products to direct customers, which are known as wholesalers. Although, companies also monitor their direct customers that is wholesalers that what and how they are selling companies products to distributors. Distributors are also monitors by the companies, that how they are selling their goods to the final customer or consumers. In short, companies are monitoring their direct customer’s customers’ customer. In retailing industry, supply chain management plays an important role and provides additional value to retail business. In retail industry, the goods are move or transferred from point of origin that is; manufacturer to point of destination that is final customer or consumer (Ray, 2010 ).

Supply chain management of retail industry is different from traditional supply chain management of manufacturing industry. In manufacturing supply chain management, the raw material is sourced by the manufacture with the help of supply chain management then product is manufactured. After the manufacturing of the products, the product is then transport to the customers that could be the warehouse, retailer or distributers. On the other hand, in supply chain management of retail industry, items or products are sourced with the help of supplier directly from the manufacturer of the good. These sourced items or goods are then delivered to stores or central distributor centers of retailers from where goods are then transferred to the stores (Ray, 2010 ).

Supply chain is the foundation of retail industry. Effective supply chain in retail industry requires having balance in supplying of goods and item and meeting the demand of customers. Effective supply management is important in retail industry because with the help of effective management quality and satisfaction of customers can be achieved. Moreover, many key success factors are involved related to supply chain in retail industry for example; reduction of inventories, lower operating cost, availability of products, goods and items, customer satisfaction and meeting the required demand of goods.

At present, there are many challenges that the retail industry is facing in supply chain management due to increase in number of customers choices, demand, and technological advancement. It becomes difficult for retailers to maintain the quality and price of the in this economic downfall environment. Some challenges are mentioned below;

To maintain the profit margin, is one of the difficult tasks to retailer in the supply chain management. Improvement in profit margins require investment like technological advancement etc. but it requires money, time and skilled highly skilled employee who can handle the supply chain of raw material, goods and final goods at large scale.  Another reason for decrease in profit margins is the choices and preferences of customers. Demands of customers are increasing day by day. Some cannot compromise in the quality and are ready to pay high prices, some customers are price sensitive but want high quality products. Some customers want to pay low prices for the products and are ready to compromise on quality. These ranges and categories make retailers more difficult to earn profits and to increase the sale rate.

Inefficiency in supply chain operation is also a challenge to maintain for retail industry. To manage and adopt rapid change in the business environment is difficult. Moreover, lack of communication and collaboration in the firm is also a factor of inefficiency in supply chain operations. Some companies are following old-fashioned documentation style that is, manual spreadsheet etc that makes the process of supply more difficult, time taking and in effective.  According to the supply chain bench mark study 2014, there are almost more than 46% retailers in America that are using static spreadsheets in their supply chain operations.

The third challenge that the retail firms are facing is the responsiveness by firms to change in trends. Trends of customers and consumers are changing. They want products that predict high quality, have low prices, and are socially responsible. They want these products to be delivered in less time and they want retailer that can provide ease and convenience across all channels. It become difficult for retailers to response change and meets the demand of customers.

Maintain the quality and regulatory in the organization is another challenge for the retailers in the supply chain management. Products at retailers either are branded or are private; it is difficult for retailers to maintain the quality of products. As the quality standards and regulatory measures are increasing, corporate social responsibility is decreasing. Factors that affect the quality in supply chain management of retail industry are the labor, product and environment (sourcingjournalonline, 2015).  Other big challenges for retailers are to manage the inventory, employee turnover and data integrity. Sometimes, it becomes difficult for retailers to manage their inventory due to failing of supplies, shortage of supplies or out of date supplies. These factors affect the inventory of retailers.

Infra structure of the country and transportation procedure also affects the supply chain of the retail industry. This issue has become one of the big issue nowadays. Foreign policies for the transportation of products with the help of truck also increased that are making retailers difficult to handle the profits and to manage the inventory.

There are many strategies that the retailers can use to cope with the challenges these includes; expanding their direct sourcing and increasing the private label products this will help the retailers to improve their profit margins. They can add features and assortment in the store, on doing this; they can increase their prices and can add assortments in the scouring, product activities and product developments etc. Retailers can increase their focus on the distribution channels and should think of the partnership in the business. Continuous improvement in the products will also help to improve the profit margins.

Another way to deal with the challenge in supply chain by retail industry is to build a visible and collaborative supply chain for customers. Effective collaboration and communication with the external and internal stakeholders will help retailer to increase the number of supplies and to reduce the inventory. Another way to deal with the challenge is to introduce technology in the supply chain by the retailer. Technology like monitoring of sully from one point to another point will help retailer to maintain the inventory and information about the stock a stores. Retailers should eliminate the concept of manual spreadsheets and should focus on technology so that they can increase the number of sales and can earn profits in large amount.

Retailer should be responsive towards the trends and change in the business environment. As the taste and trends due to changing demand of people is occurring, ability to response the change, make retailers to make effective decisions. Introduction of retail PLM help retailers to streamline their supply and help to manage the speed of product development. Moreover, integrated supply chain also helps retailers to manage the speed of product development and complexity in product development. Collaboration with the suppliers, vendors helps the retailers to manage the supplies of goods and products and to manage the inventory at store.  With the help of collaboration, retailers can meet the delivery dates of their products. Training of workers, risk management, update and monitoring process in the supply chain of retail industry is important in managing the supply chain and to meeting the desired dates of product delivery.

Also Study:

The History of Supply Chain Management

Role of Supply Chain Management in International Business

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