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The supply chain can be defined as the organised system of people, activities, organisations and different resources which are included in the process of moving any goods or service from any supplier to the customers. It includes a range of different functions through which the raw materials are transformed into finished products so that it can be delivered as an end product to the final consumers. It is a long chain of process in which the involved parties may face a number of complexities (Hugos, 2011). The present report is based on the discussion about the concept of the supply chain. The chosen industry for this purpose is retail industry where they deal in a number of grocery products. For accomplishing the purpose of supplying the end products to final consumers, the retail companies have to execute different functions according to which several issues can be faced. Some of these issues can be in outsourcing, information systems, maintaining relationships etc. The present report will be discussing over all of these issues and the supply chain strategy which are followed by the retail firms in detail. Besides this, various significant functions and issues of in the entire process will also be talked about in the current report.
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Supply chain strategies
The past years in the retail market has shown up various fluctuations as a result of the economical inflation situations. Besides these fluctuations, there is a huge volatility in the demands of customers, prices of raw materials, fuel and other related products (Luthra and et.al., 2011). As a result, the executives in supply chain management are responsible for many functions and to perform in efficient ways that can help in reducing the costs. The pressure on supply chain executives are more as they have to make efforts for developing the efficient and customer centred approaches which are helpful in getting the minimum cost of operations. Thus, the managers of such retail firms are trying to set all the projects on priority basis so as to bring reduction in the cost of inventories and logistics. In this, process, the managers are required to develop some concrete strategies that can help in ameliorating the pressures and being ready for adopting the changes that may come in near future. Thus, several strategies can be developed in this regard for managing a better supply chain through below mentioned plan of action:
- Demand driven planning: The first and foremost step in the supply chain strategy is to make an identification of all those factors that are necessary to be addressed for being in competition (Pettit, Fiksel and Croxton, 2010.). The managers must be enough potential to make a right prediction over the contingency planning so as to give a right response against different risk factors that may be faced in accomplishing the demands of business. In retail sectors, for the supply of groceries, it is necessary to have a sound and continuous relationship with the multiple suppliers so that the logistics can be maintained without any barriers. There can be some situations in which the supply can be affected like unavailability of supplier, changes in political conditions, occurrence of natural catastrophes causing an impact on manufacturing and supplies. As a result, the managers have to make some contingency plan so that they can handle such situations. This can be done by the retail companies by making some minor adjustments and modifications in their pricing and promotional plans so as to trigger the demand of available products. Further, the plans can be made to increase the demand of some additional products so that the demand driven market can be created and the major challenge regarding the unavailability of products can be mitigated (Richey and et.al., 2010).
- Adaptive supply chain with integrated execution: When the managers become enough able to predict risks and demand, they must develop the systems to adapt the supply chains so that various opportunities available in the market can be tapped at right time. For this purpose, the organisations are required to make concrete planning that have the features of dynamism. For instance, Walmart, which is a well known grocery store of UK, utilises its information technology and infrastructures in an ideal way. By using their techniques and various network designs, they easily make a forecast about the demands, make projections related to the inventories, manage good relations with customer and suppliers and also create an efficient transportation routes (Sarac, Absi and Dauzère-Pérès, 2010). Thus, for managing the supply chain in an effective manner, it can be used with integration of technologies.
- Optimising designs, supply and manufacturing: The designing, manufacturing and supply of products and services must be done with the help of innovative measures so as to utilise the maximum opportunities available in the market. For this purpose, it is crucial to manage the production cycle in appropriate way which can help in giving the minimum cost of operations. The major element that should be focussed here is the innovation and creativity that must be applied so as to attain the competitive advantage. In the retail industry, it is evident that various innovations are used in regards of products, their promotion and marketing along with their distributions. This helps them in maintaining the right balance between people, process and information so that product's life cycle can be managed in right way.
- Aligning supply chain with business objectives: The retail sectors often formulate their plans and policies under sales and operations planning in which they attempt to make a coordination between sales, production and distribution (Ahi and Searcy, 2013). But, it is evident that this can result into several gaps in the process and also various departments of organisation. Therefore, it is crucial to manage the process as per integrated business plans. Under this, the planning is formulated by incorporating plans of various departments with sales and operations. In Tesco, which is a leading retail firm of UK, also makes the integration of budgets, financial decisions etc. with the sales planning so as to make better forecast and detailed planning. Apart from this, it also helps in taking account different factors like demand, supply, risk elements etc.
- Incorporate supply chain with sustainability: The various studies and researches have proved that all those organisations which endeavour the sustainability of society and environment are placed at higher ranks thereby attaining the major competitive advantages. The supply chain system must be arranged as per the productivity, capability of suppliers, skills of the manager and employees (Christopher, 2016). It is evident that many retail sectors like Tesco, Walmart, Asda etc. use to make an attempt for getting better efficiency in production and supplies through adopting different CSR activities so as to gain sustainability.
E-commerce and information system
The E-commerce can simply be understood as the buying and selling of products through internet. But this defines it in a very limited way because the e-commerce involves not only the trade and business on internet but also involvement of different activities that aid in increasing the efficiency of business at different levels of operations. The concept of including internet and similar technologies in the supply chain management has been introduced so as to make improvements in business operations. It is evident that in retail business also, many firms have started the facility of online shopping and also placing orders through internet. Though, it is a good opportunity to capture the good market share by the companies, but it pose several challenges as well. Several challenges in this regard which can be faced by the retailers are as follows:
- Inventory management: The modern facilities that are provided by the e-commerce and different advancements that have taken place due to modern IT, the consumers also have the access of all products in a faster way (Carter and Liane Easton, 2011). However, this has resulted into the incraeseing expectations of the customers with retailers. The retail firms use to serve about thousands of customers at different locations in which each customer wants to have a rapid service. Thus, in such scenario, the retail companies are facing a major issue in the management of stocks. They have to make an efficient management in both service as well as in management of multiple stocks which become quite complex for them. Thus, it is necessary to have an efficient IT system or a developed software that can help in arranging the stocks in systematic manner with a definite information on its availability. Besides this, many times, stocks are returned due to various reasons which results into huge losses for the business. So, the management system of retail sectors must have a provision to have a record of these reverse logistics as well so that they can have better management of all the stocks.
- Supply chain visibility: It is evident that the retail chains mostly operates at a global level because of which they have to maintain an efficient network that can help in getting the nimble chain of logistics (Rushton, Croucher and Baker, 2014). In various situations, there can be the times when supply of information is slow, as a result, the companies have to face a great deal of challenges in maintaining the balance between demand and supplies. There is a need in the age of increasing advancement in IT and e-commerce to have the relationship between agility and alignment so as to get the effective results.
- Challenges in distribution: The retail firms are nowadays indulged into the selling of their various products on web stores. Theses products are not actually stored by them in their stores. Thus they are managed through a different wholesale distributors network so that the orders of customers can be accomplished without actually stocking the items. This makes the distribution networks very complex and hard to manage by the retail companies as it involves a number of formalities related to paper works, retailer-specific pricing taxes, order delivery cycles etc. Apart from this, the customers do not like to wait for a long to fulfil their orders. Thus, many retail entities have to handle the orders on their own which increases the load and complexity. Thus, the management can get disturbed (Klibi, Martel and Guitouni, 2010).
- Challenges in information technology: The supply chain management basically involves the flow of products as well as various types of information among different concerned members. As per the developments that have come in the information technology, helps in easy flow of information within the premises. But, many times, it has been noticed that the information that are used in the supply chain frameworks are often not used in the appropriate way. Thus, it has been discovered that information security is not followed properly by the top level managers. As a result, there are many cases, where it has been found that the security failure are more. This leads to more issues arising in the effective supply chain management. This may also demonstrate an impact for the retail companies to effectively identify the areas that have resulted into such breaches (Nyaga, Whipple and Lynch, 2010).
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There is a well known saying that states do the best from the available capacity and leave the rest to be outsourced. In various types of business, the outsourcing function is very famous. This function can be understood as a practice which are adopted by different enterprises so as to decrease the cost of operations. In this process, the organisation who has adopted the outsourcing use to transfer the part of a particular work to some outside supplier instead of accomplishing it on internal basis. The major forces that drive a firm to have outsourcing are reducing cost of operation, making all the operations streamlined and to gain competitive advantages. There are some reasons because of which the outsourcing may fail. Thus, the major risks that are involved in the outsourcing functions for the supply chain management can be described in the following way:
- Unanticipated costs: In supply chain logistics, when any retail firm use to do outsourcing there may be a risk of many hidden charges in it (Hugos, 2011). The outsourcing is generally adopted so as to save costs and gain more advantages. But, it has been discovered that many times, the outsourcing results into many potential hidden charges taken by the third party. This hidden charge may be in the form of shipping prices, freight charges and other taxes which can even make the costs even more higher than expected. Besides this, some of the retail companies adopt an option to send their employees to the supplier place so as to maintain the communication level. But this relocation facility given to employee can also be an added cost for the organisation. Apart from this, there can be the situations when the supplier firm is located at a farther place which may result into huge cost of logistics. Further, sometimes it can also result into delayed deliveries which is also a factor that results into larger costs and expenses.
- Creation of another competitor: The outsourcing function that is adopted by the retail organisations are given in small parts and components to the outsourced firms (Tang and Musa, 2011). Therefore, it is crucial for the enterprise to give the a limited component parts to the supplier so that the major company does not lose its control over its own firm. Giving out larger parts in the outsourcing may create a competition as that organisation can create a similar product from that which will be a new rivalry in the business. Besides this, there are various paper work as well in the outsourcing which are very complex. If the chosen supplier create different timelines for the distribution which are not realistic, it may result into different problems. Thus, the retail firms may lose their customers because of delayed deliveries and inability to meet the demands.
- Disconnection with consumers: The suppliers may sometime directly connect with the customers of the major firm who has outsourced the supplier firm. In such situation, there can be a huge loss to the retail firms as they may get disconnected with their customers (Dekker and et.al., 2013). The outsourced firm represents the retail organisation because of which the customers may get easily connected by them. Sop, they may sometime indulge in activities of stealing the customers by making a personalised contacts with them. The retail companies like Tesco and Sainsbury who have their operations at a global level use to take help of outsourcing so as to serve the large number of customers in all places. They manage this service through a call centre who use to take orders and manage all the required information. Thus, the said grocery retailer use to manage the outsourcing service within a one stop service so as to maintain faster delivery.
- Leakage of information: It is very obvious that the supplier chosen by any of the retailer company may have the contact with other similar companies as well (Hugos, 2011). Therefore, that supplier has a huge amount of information that must not be leaked to another firms in any case. But, there are many cases, where it has been found that the suppliers use to give significant information to other organisations so that they can increase their contacts and number of customers for them. Besides this, it may result into a huge loss for the retailer entities in the form of loss of customers and competitive advantages. Therefore, it is necessary for the outsourcing companies to adopt the measures of security by maintaining trade securities, copyrights and patents.
Supply chain relationships
The relationships in the aspect of supply chain covers a wide area as it is not confined to maintaining the relations with a single party (Luthra and et.al., 2011). It covers a very broad aspect in which there are tactical, strategic, internal and also external relationships that an organisation have to maintain. This is necessary for a retail company to maintain the relationships with all the involved parties in a better manner. The supply chain relationship can be looked upon with the help of the terms that are maintained by different parties and also the issues that are posed by it.
- Government: The companies that use to operate within a society is headed by the government of different levels like central, state and local. Theses governing bodies use to make different norms and policies as well. As per these policies, the retail firms also get affected as they have to make adjustments in their internal practices as well. The regulatory bodies that are established at a local or state level use to implement restrictions as well some freedoms that exerts a huge impact on the policies (Pettit, Fiksel and Croxton, 2010). Thus, they play an active role in providing opportunities as well as in creating a threatening environment. Thus, in the supply chain there is a close relationship between both the parties so as to maintain a positive environment.
- Within supply chain: Within the chain of supply, there are two parties who are majorly involved in the process, customers and suppliers who are significant for the retail firms. For a retail firm, it is very necessary to maintain good terms with the both mentioned parties. For this purpose, they have to keep focus on attainment of high degree of trust level, mutual understanding, good level of communication etc. for maintaining the ideal relationship with both of these parties, the retailer has to make a chain through which the information can flow easily and have the greater transparency. Thus, there can be the situations when a firm can have issues if it is not able to maintain a trust level and good communication with both the parties. Besides this, they are also responsible for maintaining the collaborative relations so as to maintain long term relationships with them (Sarac, Absi and Dauzère-Pérès, 2010). Any wrong strategy like poor quality of products, delay in payments to the suppliers etc. may result into a loss of customers as well as the suppliers.
- Within company: The significance of communication is very high in any business so as to maintain a right level of relationships with all the parties. If the internal environment of the company is not favourable and positive in relation to communication, there is no possibility that the company attains better open communication with third parties. It is evident that different operations of the retail firms like sourcing and procurements are the major functions that cannot be managed on an independent basis. Therefore, to manage them in an appropriate way, it is essential that they are included in the chain of strategic levels. If the levels of operation included in the supply chain is not managed in a proper way at internal level, it shows an alarming stage where the efforts must be made to solve the cross functional barriers (Ahi and Searcy, 2013). If they are not resolved on time by the retail organisations, it will be more difficult for them to manage the external level of relationships.
Supply chain improvements
The supply chain management suffers from a number of challenges for which there are effective solutions. To make improvements in the supply chain, it is necessary to make identification of all those challenges that may act as a threat in this aspect. Some of the areas that pose challenge with their solutions have been presented below:
- Challenge of globalism operations: It is necessary for all the retail sector companies to manage their operations in a better way so that they can manage the acquisition of materials and other goods in an appropriate manner. As per the executives of the supply chain, to identify a right procurement officer and making a selection of a strategic supplier who is able to manage and provide better options for locations of productions so as to render consistency and quality with a reliability factor is a challenge (Christopher, 2016). For solving this issue, it is necessary to bring the factor of transparency in each operation. The best way to solve this issue is to install an effective ERP system that has the capability of fixing the problems related to frauds, errors, wastages etc. The improvements that are made in the internal supply chain transparency helps in eliminating waste and losses.
- Automatic purchasing: The present developments that have taken place in the technologies can be used for the better management of inventories in the supply chain. The retail enterprises can use a high level of software that can track the stock level and can place the order automatically, if the level falls below than the specific number. Thus, the employees and managers can be relieved from this work of keeping a check on the level of inventories and placing orders and they can concentrate towards more significant works (Rushton, Croucher and Baker, 2014).
- Data insight: The supply chain strategy needs to have a continuous and reliable flow of information so that supply chain strategy can be made in effective way. The real time reports that are provided by the software help in giving a better insight of the business in terms of supply chain management. Besides this, the retail firms' employees will be able to access all required information and data whenever needed in easier way. Thus, an effective ERP will be helpful in providing detailed reports so as to take right and quick decisions.
- Maintaining quality: The maintenance of quality in a supply chain and logistics is the biggest challenge that must be supervised so as to improve the performance (Klibi, Martel and Guitouni, 2010). For this purpose, it is necessary for the managers to adopt the measures of TQM, six sigma, Just in time approach etc. these measures are highly helpful in maintaining the right quality and also to gain the better management of the available resources.
- Improving distribution network: The retail firms must ensure to have a better strategy regarding the distribution network. This can be done through two approaches, one is holistic and another one is cluster view. As per the former one, the executives of supply chain use to make a close review of all the different parts so that the synchronisation between each of them can be identified. While, in the cluster view, the managers develop various charts, graphs and similar details that can help in monitoring the particular operations of the firm (5 Ways to Increase Supply Chain Performance. 2017).
- Monitoring the cash flows: The retail companies require to monitor the cash flows of the business in an efficient way so that they can have a good understanding of the payment terms that has to be made to suppliers. This will also aid in keeping a track of the payment made to different logistics and also to maintain a right view over the different outflows of the business to check wastage and losses (Tang and Musa, 2011).
The present report is based on the supply chain in which various issues related to strategies and e-commerce in supply chain has been discussed. The report articulates in relation to the retail organisations that the managers of retail firms are trying to set all the projects on priority basis so as to bring reduction in the cost of inventories and logistics. The concept of including internet and similar technologies in the supply chain management has been introduced so as to make improvements in business operations. Besides this, the major issue is faced in the information breach that must be addressed by the companies to have a better performance and management. There can be the situations when an enterprise can have issues if it is not able to maintain a trust level and good communication with customers and suppliers. Therefore, it is crucial to make strategies for maintaining a level of transparency and good communication level which can increase the understanding between each party. Moreover, the improvements in the supply chain can be made through the maintaining the quality, improving distribution network and installing a software to track the inventories.
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