MIDLANDS STATE UNIVERSITY

FACULTY OF BUSINESS SCIENCES

DEPARTMENT: SUPPLY CHAIN, INSURANCE & RISK SCIENCES

LSC 131 PRINCIPLES OF SUPPLY CHAIN MANAGEMENT

MARCH 2023

DR. S. MLAMBO
CONTENTS
INTRODUCTION .................................................................................................................................................... 6
What is Management? ......................................................................................................................................... 6
Zimbabwe Economy ............................................................................................................................................. 8
Fourth Industrial Revolution (4IR or Industry 4.0) ......................................................................................... 8
What is a product? (Goods & Services) (Varley, 2006) ........................................................................................ 9
Supply chain: a new term born .......................................................................................................................... 10
Defining Supply Chain Management (SCM) ....................................................................................................... 10
The Council of Supply Chain Management Professionals (CSCMP).................................................................... 10
o Logistics = Materials Management + Distribution ..................................................................................... 11
Humanitarian Logistics and Supply Chain Management. (Wassenhove, 2012) ........................................... 11
Elements of supply Chain ............................................................................................................................... 12
“Developing a consensus definition of supply chain management” (Stock, James and Boyer, Stefanie, 2009)
............................................................................................................................................................................ 12
Supply Chain Entities ......................................................................................................................................... 16
THE SUPPLY CHAIN ............................................................................................................................................. 16
Supply chain maps & tiers .................................................................................................................................. 17
The number of suppliers and customers for any organisation or products may be very large indeed. So,
when we represent a supply chain we must often focus on suppliers and customers who are critical for the
delivery of products or services. .................................................................................................................... 19
• Customers .............................................................................................................................................. 20
• Suppliers..................................................................................................................................................... 20
Supply Chain Coordination ................................................................................................................................. 20
Disintermediation in the Supply Chain........................................................................................................... 21
‘ Logistikos’ : Logistics. ................................................................................................................................... 22
Operations Management: Overview ............................................................................................................ 24
The Value Chain .............................................................................................................................................. 27
Service Supply Chains ......................................................................................................................................... 29
PRODUCT LIFE CYCLE [PLC]................................................................................................................................. 30
SUPPLY CHAIN MANAGEMENT: (Hutchinson, 2013) ........................................................................................ 31
Issues from Supply Chain Management (SCM) .............................................................................................. 34
Supply Chain Risk (Vulnerability, resilience & disruption) ................................................................................. 35
Sources of supply chain risks .............................................................................................................................. 35
Supply Chain Resilience ...................................................................................................................................... 36

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Challenges of supply chain management ......................................................................................................... 36
Supply Chain models ......................................................................................................................................... 36
Pillars of Supply Chain ....................................................................................................................................... 36
Logistics & Supply Chain complexity .............................................................................................................. 36
Airbus inventory management in a complex business. ................................................................................. 37
Transportation Methods ................................................................................................................................ 38
Information flow: advancing retail buyer performance (Fiorito, Gable and Conseur, 2010) ............................ 38
Retail Technologies: ....................................................................................................................................... 40
Inventory Management Systems [IMS].......................................................................................................... 42
Automatic Replenishment Systems. [QR, ECR, JIT & CPFR]. .......................................................................... 42
Check ERP (Enterprise Resource Planning). ................................................................................................... 43
The Future of Retail Buying. ........................................................................................................................... 43
Retail Supply Chains: Retail and Logistics: (Fernie, 2009).................................................................................. 44
Retail & Logistics: Introduction ...................................................................................................................... 44
Retail Logistics: changes & challenges ........................................................................................................... 45
The logistics task............................................................................................................................................. 46
Sustainability: Environment, Corporate Social Responsibility (CSR) .............................................................. 46
Triple Bottom Line (TBL) (3BL)........................................................................................................................ 46
Tragedy of the Commons (William Foster Lloyd, 1833) ................................................................................. 47
The circular economy ......................................................................................................................................... 47
UNSDGs Sustainable Development Goals LNOB ................................................................................................ 47
Internationalisation of the retail supply chain. .............................................................................................. 48
Fashion supply chain ...................................................................................................................................... 49
Typology of fashion retailer supply chain relationships. ............................................................................... 50
CSR in international fashion supply chains .................................................................................................... 51
Footwear supply chain. .................................................................................................................................. 52
Fashion and luxury industry ........................................................................................................................... 52
Cold supply chain issues and practices in retail and logistics ............................................................................ 53
The Food Supply Chain ................................................................................................................................... 58
Miscellaneous Supply Chains ......................................................................................................................... 58
Green Supply Chains .................................................................................................................................. 58
Sustainable Supply chains .......................................................................................................................... 58
• Supply chain coordination & Bullwhip (Jay Forrester, MIT. 1961) .......................................................... 58
Causes of Bullwhip ......................................................................................................................................... 59

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 Mitigating Bullwhip effects ......................................................................................................................... 59
RETAIL and LOGISTICS: UK .................................................................................................................................. 60
Lean, agile & leagile............................................................................................................................................ 62
Grocery Retail Supply Chain [UK]. .................................................................................................................. 63
Supply & Demand Chain Comparison (Rainbird, 2004). ................................................................................ 64
Evolution- UK .................................................................................................................................................. 64
Fashion Logistics [UK]. .................................................................................................................................... 65
Characteristics of fashion markets include: ................................................................................................... 65
E-tail Logistics. ................................................................................................................................................ 65
Tesco.com: delivery home shopping. ............................................................................................................. 67
Logistics and Fast Fashion. (Dicken, 2003). Global Shift. ................................................................................... 68
Last Mile: E-fulfilment in the grocery sector. ..................................................................................................... 71
Retail Logistics in the UK: past, present & future (Fernie, Sparks and McKinnon, 2010) .................................. 72
Logistics Mix ................................................................................................................................................... 72
1) The FIVE elements of logistics (Logistics mix)........................................................................................... 73
1) Role of packaging and unitisation ......................................................................................................... 74
2) Role of inventory ................................................................................................................................... 74
3) Role of transport.................................................................................................................................... 74
4) Role of information and control ........................................................................................................... 74
Logistics mix ....................................................................................................................................................... 75
7 Rs in Logistics Management ............................................................................................................................ 76
Development of Retail Logistics in the UK ..................................................................................................... 76
New Approaches to Retail Logistics. .............................................................................................................. 78
Future issues for retail logistics. ..................................................................................................................... 79
Reverse Logistics Hierarchy. ........................................................................................................................... 80
Retail format. What is it? ............................................................................................................................... 80
Private brand/label......................................................................................................................................... 80
TESCO: SUPERPOLY: (Rowley, 2009) .................................................................................................................. 81
Store Formats ................................................................................................................................................. 81
Tesco Brand Ranges ....................................................................................................................................... 82
Understanding the Supply Chain (Chopra and Meindl, 2014) ............................................................................ 85
Objective of the SC. ........................................................................................................................................ 85
Decision phases in a SC. .................................................................................................................................. 86
Process views of a SC. ..................................................................................................................................... 87

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 SC Macro processes in a firm: ........................................................................................................................ 88
Drivers of SC performance. ................................................................................................................................. 88
Framework for structuring drivers.................................................................................................................. 93
Characteristics of forecasts................................................................................................................................. 93
Lean thinking and agile supply chains................................................................................................................. 94
Key issues.................................................................................................................................................... 94
Ambidexterity ..................................................................................................................................................... 94
PRODUCT LIFE CYCLE [PLC]................................................................................................................................. 95
Retail Formats .................................................................................................................................................. 100
Multi-channel Retailing [omni-channel]. ......................................................................................................... 101
FLIPKART & WALMART: August 2018........................................................................................................... 101
E-tail logistics. ............................................................................................................................................... 101
Web 2.0 ........................................................................................................................................................ 102
The e-consumer............................................................................................................................................ 103
The grocery market ...................................................................................................................................... 104
Retail channel ............................................................................................................................................... 104
US & Global online retailing ............................................................................................................................. 105
Learning task: Online retailing ......................................................................................................................... 105
Some issues about e-tailing. (Doherty and Ellis‐Chadwick, 2010) ............................................................... 111
E-commerce [including mobile] ................................................................................................................... 112
Tesco.com: delivery home shopping. ........................................................................................................... 113
SUPPLY CHAIN MAPPING ................................................................................................................................. 114
Supply Chain Design ........................................................................................................................................ 117
World’ s leading companies (See Ranking of companies) (July, 2018) ............................................................ 128
The World's Largest Employers ................................................................................................................... 129
DOWNTIME: The 8 Deadly Lean Wastes .......................................................................................................... 129
REFERENCES ..................................................................................................................................................... 134
Must Read: Business News: ............................................................................................................................. 135
ADDITIONAL READINGS................................................................................................................................... 135

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LSC 131: PRINCIPLES OF SUPPLY CHAIN MANAGEMENT

"In my whole retailing career, I have stuck to one guiding principle: give your customers what
they want…and customers want everything: a wide assortment of good quality merchandise,
lowest possible prices, guaranteed satisfaction with what they buy, friendly knowledgeable
service, convenient hours, free parking, and a pleasant shopping experience.

You love it when you visit a store that somehow exceeds your expectations and you hate it
when a store inconveniences you, or gives you a hard time, or just pretends you are invisible…"

Sam Walton (Founder, Walmart)

INTRODUCTION

This module, LSC 131, is about management; focussing in particular on the management of supply
chains. So, it helps, for a start to grasp the scope of management as a discipline. No doubt you will
gain deeper appreciation of management from your shopped module Principles of Management
(BM131)

What is Management?

Management can be defined as a process of setting and achieving goals by carrying out five basic
management functions i.e.:

1) Planning. This is the first and foremost function of management, i.e., deciding in advance what
needs to be done in future. Planning covers formulating policies, establishing targets and
scheduling actions.

2) Organizing: Once the plans are in place, the next step is to organise the activities and resources
by identifying the tasks, classifying them, assigning duties to subordinates and allocating resources
e.g., through budgeting processes.

3) Staffing: This involves hiring personnel for carrying out various activities within the organization
and ensuring that people with appropriate skills are appointed.

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4) Directing: In this role, the manager has a duty to guide, supervise, lead and motivate subordinates
and to ensure that they work in the right direction in accordance with set objectives.

5) Controlling: The controlling function involves that steps are taken so that that the performance
of the employees accords with plans made at the beginning. So, establishing performance
standards and comparing them with the actual performance is key. In case of any variations,
necessary steps are to be taken for its correction.

Coordination is an important feature of management which means integration and synchronisation

of activities, processes and operations of the organization to ensure that every element of the
organization contributes to success. So, any discussion of supply chain issues needs to deal with
planning, organising, staffing, directing and controlling activities within the individual firm surely but
also across supply chains.

Two terms feature prominently in this module: namely logistics and supply chain. A separate module
in the degree programme focusses on retail management which occupies a very important place in
the economy of any country as it stands within a supply chain as the final stage of distribution of a
product or service. Retailing not only contributes to country’ s GDP but also empowers a large
number of people by providing employment. The quotation at the beginning of these notes is from
one of the world’ s foremost retailer and founder of the world’ s largest retailing company. In running
any retailing enterprise, logistics and supply chain management are key ingredients. Retail
Management, Logistics and Supply Chain Management are therefore closely intertwined.

In running any retailing enterprise, logistics and supply chain management are key ingredients. Retail
Management, Logistics and Supply Chain Management are therefore closely intertwined.

The terms logistics on one hand and supply chain management on the other are sometimes
(mistakenly) used interchangeably. It will be important to identify the differences and similarities
between them. In this module we will explore both international and Zimbabwean practices in
logistics and supply chain management. Although we will often name organisations for profit i.e.
companies, logistics and supply chain issues affect all entities including organisations not designed
for profit e.g. churches, NGOs, parastatals as well as operators in the informal sector. Behind the
successes scored by the World Food Programme (WFP) leading to winning the much-coveted Nobel
Peace Prize in 2020 is the strength of its logistical and supply chain competences.

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Students are urged to read beyond the module notes as suggested in the reference list at the end of
the notes. It is also important to keep abreast of current business news. For example, in the context
of Zimbabwe, what is NDS 1, what does it seek to achieve? Or the Transitional Stabilisation
Programme? Or Vision 2030? Or Education 5.0? or Agenda 2063: The Africa we want? Or AfCFTA?
SADC, COMESA.

BRICS countries CIVETS countries

G7 countries G20 countries

Economic rankings of African countries

Upper middle income?

Knowledge of current business issues is for all students of business but especially so for those who
do not have a strong background in business and commerce. Reading business news in print media
and listening to current local, regional and global business news is especially beneficial. The world of
retail, logistics and supply chain management is very dynamic. In 2020, corona virus for example,
impacted business in many significant ways.

Zimbabwe Economy
• Main sectors of the economy

• GDP and trends

• Role of small and medium enterprises

• Leading Zimbabwe and multinational companies

• ZSE & VFSE

• Recent external influences on economy

• Regional & International trade blocks

Fourth Industrial Revolution (4IR or Industry 4.0)

• What is in the first three Industrial revolutions?

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 o How much of that still matters for economic activity in the world?

o And for Zimbabwe?

• And now what is new in the Fourth Industrial Revolution?

o Are we all in it?

Tiwari, Saurabh: “Supply chain integration and Industry 4.0: a systematic literature review”

What is a product? (Goods & Services) (Varley, 2006)

Goods, services and products generally are at the centre of economic activities and therefore of
Supply Chain Management (SCM). The following paragraphs attempt to explain these terms.

Products [whether as tangible goods or services] are central to most organisations e.g. retailers or
manufacturers. Some retailers even have their own factories. However, a retailer is an organisation
whose core activity [providing more than half of its revenue from selling products or providing
personal services] to final consumers.

A product has been defined as “a physical good, service, idea, person or place that is capable of
offering tangible and intangible attributes that individuals or organisations regard as so necessary,
worthwhile or satisfying that they are prepared to exchange money, patronage or some other unit
of value in order to acquire it”. Goods retailers also offer services that help the customer during the
purchase decision e.g., parking spaces, changing rooms, home shopping services even location,
layout and design of shops.

Some tangible goods are extremely durable and for these the purchase decision is more complex and
there is a high level of involvement of the customer. Other tangible goods are consumable and
convenience oriented e.g., food and toiletries. They are less complex, frequently purchased and of
lower value and involve less risk. Other products are information based at the purchase stage and
are consumed as they are used e.g., travel ticket or holiday. Some service products are experienced
as they are purchased and consumed e.g., restaurant meal or haircut. Service products in general
have a higher proportion of intangibility. The quality of a service product depends on how the
exchange is actually delivered with the ‘ product’ experience being immediate and perishable.

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Retailing covers all these ‘ products’ and different types of products require unique sets of product
management approaches in order to achieve consumer satisfaction.

In the retail sector the main type of product sold has been used to classify the business e.g. Clothing
sector, furniture retailers etc. However, today large retailers sell a variety of goods e.g. supermarkets,
department stores. Hence no one type of product dominates.

Supply chain: a new term born

1982: Keith Oliver (British logistician) in an interview with Arnold Kransdorff of the Financial
Times (4 June 1982). However, the idea has a long history. Check on it.

Defining Supply Chain Management (SCM)

Supply Chain: An interrelated series of processes within and across firms that produces a
service or product to the satisfaction of customers. (Krajeweski)

Supply Chain Management: The synchronisation of a firm’ s processes with those of its
suppliers and customers to match the flow of materials, services and information with
customer demand. (Krajeweski)

Supply chain: a sequence of organisations [their facilities, functions and activities] involved in
producing and delivering a product/service. From basic suppliers of raw materials to the final
consumer. (Hutchinson, 2013).

The Council of Supply Chain Management Professionals (CSCMP)

Logistics and supply chain management: The nature of logistics (CSCMP)

o The Council of Supply Chain Management Professionals (CSCMP) in the United

States defines logistics management as (2016): “… that part of supply chain
management that plans, implements and controls the efficient, effective
forward and reverse flow and storage of goods, services and related
information between the point of origin and the point of consumption in order
to meet customers’ requirements.”
o CSCMP (2016) defines SCM as encompassing:
o … the planning and management of all activities involved in sourcing and
procurement, conversion, and all logistics management activities. Importantly,
it also includes coordination and collaboration with channel partners, which
can be suppliers, intermediaries, third-party service providers, and customers.

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 In essence, supply chain management integrates supply and demand
management within and across companies.

Rushton, Croucher and Baker (2017) explain the difference between logistics and of SCM in the
following manner as an equation:

o Logistics = Materials Management + Distribution

o Supply chain = Suppliers + Logistics + Customers

Humanitarian Logistics and Supply Chain Management. (Wassenhove, 2012)

Writing on the subject of disaster management, Wassenhove also explain the intersection between logistics
and SCM and says:

“Since disaster relief is 80% logistics it would follow then that the only way to achieve this is through
slick, efficient and effective logistics operations and more precisely, supply chain management”

In a disaster context, it is important to ensure efficient and effective delivery such that commodities
and people reach victims (logistics view). However optimising logistics performance requires that all
relationships among actors are managed through an integrated approach in order to:

• Coordinate inter-organisational performance

• Eliminate redundancy
• Maximise efficiency along the entire emergency supply chain (SC M point of view).
Logistics is focussed on moving something or someone from point of origin to destination: supply
chain management mainly focusses on relationships among actors that make this movement possible.

A supply chain is a system of organizations, people, activities, information, and resources involved in
moving a product or service from supplier to customer. Supply chain activities involve the
transformation of natural resources, raw materials, and components into a finished product that is
delivered to the end customer. In sophisticated supply chain systems, used products may re-enter
the supply chain at any point where residual value is recyclable. Supply chains link value chains.

Students

a) Consider the logistical issues in local/international disaster in recent times (Cyclone Idai).

b) Read: WFP Supply Chain Report 2019

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Elements of supply Chain

(See further notes from Chopra & Meindl)

“Developing a consensus definition of supply chain management” (Stock, James and Boyer,
Stefanie, 2009)

Most scholars agree that SCM includes coordination and integration, cooperation among chain
members, and the movement of materials to the final customer. However, there are varying
conceptualizations of how SCM should be defined among academic as well as practitioner
communities.

In early definitions, the term SCM was used/misused synonymously with traditional definitions of
logistics management. However, the consensus today is that SCM is somewhat more than logistics.

Stock & Boyer (2009) identified three major SCM themes. Each theme was associated with some sub-
themes as shown below.

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 (1) Activities:
• Both flows of materials, services, finances, and information, and networks of internal
and external relationships. The effective management of product and information
flows is clearly a key aspect of SCM. The supply chain encompasses all activities
associated with the flow and transformation of the goods from the raw materials stage
(extraction), through to the end-user, as well as associated information flows.
Materials and information flow both up and down the supply chain
(2) Benefits:
• Adding value, creating efficiencies, and customer satisfaction.

(3) Constituents/components.

The integrated supply chain structure seeks to minimize non-value-add activities and their associated
structure, because this drives investment cost, operating cost, and time out of the supply chain
process. This serves to inject greater customer responsiveness and flexibility into the supply chain,
driving costs down and thereby enhancing bottom-line performance and cost competitiveness.

SCM consists of a set of three or more entities (organizations or individuals) directly involved in the
upstream and downstream flows of product, services, finances, and/or information from a source to
a customer.

In the vast majority of definitions, flow is identified only as a one-way process. Either material flows
one-way from the supplier to consumer or information flows one-way from consumer to supplier.
However, SCM should involve establishing a system for linking together (constituent parts) via the
feed forward flow of materials and the feedback flow of information. Information concerning
demand flows upstream from the marketplace and ultimately to the raw material supplier and
material flows downstream, ending up as a particular physical product.

Uni-directionality would ignore the overall bi-directional dependencies of activities, actors, and
resources between the points-of-consumption and origin. If materials and information only flow uni-
directionally downstream and upstream, it would be difficult to account for the upstream flow of
materials resulting from reverse logistic activities and the downstream flow of information that
undoubtedly occurs from raw material suppliers, to manufacturers, and then to retailers.

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Networks of relationships. Establishing networks of relationships between interrelated and
interdependent organizations, as well as across business units internal to an organization, is another
sub-theme of the activities theme identified in SCM definitions. Illustrative examples include the
following:

• SCM works to bring the supplier, the distributor, and the customer into one cohesive process.
Supply chain management has recently concentrated on closer relationships between parties
involved in the flow of goods from the supplier to the end-user.

• It is necessary to manage relationships between internal customers and suppliers

simultaneously with the management of relationships between the organization and its
customers and suppliers.

• SCM has also been described as the management of the interface relationships among key
stakeholders and enterprise functions and the coordination within and between various
supply chain members.

Ultimately, the goal of SCM is to achieve greater profitability by adding value and creating
efficiencies, thereby increasing customer satisfaction.

Value creation. Illustrative examples of include the following:

• Integration of business processes from end use through original suppliers that provides
products, services, and information that add value for customers.
• Processes and activities that produce value in the form of products and services in the hands
of the ultimate consumer.

SCM has traditionally been identified closely with logistics because of similarities associated with the
flow of materials and services between suppliers and consumers. However, the concept of SCM
adding value for consumers and stakeholders highlights that the value-added components of SCM,
such as technical support and training services, separates it from traditional logistics management.
This concept of adding value in the supply chain is becoming even more important. In some
industries, additional support features such as 24-hour technical support may carry more weight than
price when making the purchase decision. Each supply chain member performs a specific added value

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function in relation to the product/service as it progresses towards the final consumer. Although
SCM adds value to the process, it is important to note that a basic premise of SCM is that value must
increase faster than the costs associated with managing the supply chain.

Creates efficiencies.

• Making optimum use of shared resources

• Integrating suppliers, manufacturers, warehouses and stores efficiently.
• Management of the interface relationships among key stakeholders and enterprise functions
that occur in the maximization of value creation which is driven by customer needs
satisfaction and facilitated by efficient logistics management.

Enhanced SCM capabilities can create efficiencies and cost savings across a wide range of business
processes. Linking the manufacturer, suppliers and customers, SCM makes optimum use of shared
resources, both internal and external to the organization, to achieve operating synergy by creating
greater efficiencies by creating mutually beneficial supply chain networks. These networks create
greater synergy and efficiencies by allowing organizations to cut costs and improve profits.

Customer satisfaction.

• Integration of business processes from end-users through original suppliers to provide

products, services and information that add value for customers
• Managing inventory throughout the channel, from source of supply to end-user aiming at
improved customer service
• Reducing investment without sacrificing customer satisfaction.

Understanding and meeting consumer needs is of paramount importance in SCM as a way of

optimizing value to customers and improving return to all stakeholders in the supply chain. Another
basic purpose of SCM is conforming to customer requirements and one of the two most important
aspects of SCM is that it focuses on customers at the end of the chain.

Components & Constituent parts.

In the case of identifying the components and constituent parts, it may suffice to say that SCM is
composed of all operations, systems, business functions and organizations involved in the

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management of a particular supply chain. The majority of definitions included mention of
constituents or component parts, which could have included functional areas or processes within an
organization, or external entities such as manufacturers, retailers, wholesalers, distributors, and
transportation companies.

Each of these themes and sub-themes are included in our definition (Stock, James and Boyer,
Stefanie, 2009) to ensure that the definition includes the most salient aspects of each previously
published definition. By integrating these disparate, yet encompassing aspects, we propose the
following encompassing definition of SCM:

The management of a network of relationships within a firm and between interdependent

organizations and business units consisting of material suppliers, purchasing, production
facilities, logistics, marketing, and related systems that facilitate the forward and reverse flow
of materials, services, finances and information from the original producer to final customer
with the benefits of adding value, maximizing profitability through efficiencies, and achieving
customer satisfaction”.

Supply Chain Entities

a) Products – things in demand
b) Facilities- places where products are made, stored, sold or consumed
c) Vehicles – mechanisms for moving products between facilities to meet demand
d) Routes- paths taken by vehicles to move products between facilities.

THE SUPPLY CHAIN

The supply chain consists of the series of activities that move materials from suppliers through
operations to customers. Each product/service has its own supply chain involving many organisations
in processing, transportation, warehousing and retail. The set of relationships between a firm and its
suppliers and customers in the supply chain is termed the supply network or web e.g., Nestle and
cocoa from Ivory Coast or fashion retailers and Bangladesh.

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Basic Structure of a Supply Chain

RAW MATERIALS PRODUCER DISTRIBUTOR RETAILER CONSUME

RR

3rd Tier 2nd Tier 1st Tier 1st Tier 2nd Tier 3rd Tier
Supplier Supplier Supplier Customer Customer Customer

FOCAL FIRM OPERATIONS

Materials Component Sub- Wholesalers Retailers End Users

Suppliers Suppliers Assembly
Suppliers

Upstream Suppliers Downstream Customers

Supply chain maps & tiers

A supply chain starts with the delivery of raw materials from a supplier to a manufacturer
and ends with the delivery of the finished product or service to the end consumer. SCM thus oversees
each touchpoint of a company's product or service, from initial creation to the final sale.

Supply chain: a sequence of organisations [their facilities, functions and activities] involved in
producing and delivering a product/service. From basic suppliers of raw materials to the final
consumer. (Hutchinson, 2013)

Supply chain: a sequence of processes and flows within and between different stages.

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 Supply Chain: An interrelated series of processes within and across firms that produces a
service or product to the satisfaction of customers. (Krajeweski)

Supply Chain Management: The synchronisation of a firm’ s processes with those of its
suppliers and customers to match the flow of materials, services and information with
customer demand. (Krajeweski)

Supply chain: a sequence of organisations [their facilities, functions and activities] involved in
producing and delivering a product/service. From basic suppliers of raw materials to the final
consumer. (Hutchinson, 2013)

Process: Any activity or group of activities that takes one or more inputs, transforms them,
and provides one or more outputs.

The supply chain therefore consists of the series of activities that move materials from
suppliers through operations to customers. Each product/service has its own supply chain
involving many organisations/activities in processing, transportation, warehousing and retail.

Because a supply chain is a sequence/series, a supply chain diagram has a beginning and an
end; there must be a clear sense of direction. Processes are often internal activities happening
within one organisation. The supply chain spans these as well as several organisations. So, the
following are merely processes; they do not constitute a supply chain in themselves:

• Receiving, crushing, processing, packing, storage etc.

• Extracting, processing, stacking, moving, stacking, loading, shipping.
The essence of producing a supply chain diagram is to enable an organization to know who the
members of the supply chain are so that supply chain management ie synchronisation of a firm’ s
processes with those of its suppliers and customers to match the flow of materials, services and
information with customer demand can take place. (Krajeweski). So, there is little benefit in using no-
specific umbrella terms such as manufacturer, distributor, wholesaler, retailer etc. Who is that
manufacturer, distributor, wholesaler, retailer?

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The number of suppliers and customers for any organisation or products may be very large indeed.
So, when we represent a supply chain we are often tempted to focus on suppliers and customers
who are critical for the delivery of products or services.

• Customers
• Parties that use or consume the products of operations management within individual
organisations.
• An end user or intermediary (manufacturer, financial institution or retailer) buying a
firm’ s finished services or products.
• Suppliers
• Parties that provide inputs in general.
• Businesses or individuals who provide the resources, services or products and materials
for the firm’ s short-term or long-term needs. These businesses or individuals may consist
of:
o Upstream product suppliers of raw materials or components needed for
manufacturing.
o Downstream product suppliers: providing enhancements such as assembly,
packaging, or transportation services.
o Resource and technology suppliers e.g. equipment, labour, product/process
designs to support a firm’ s processes
o Aftermarket suppliers e.g. maintenance, repairs, disposal, recycling etc.

NB: From the descriptions/definitions of customers and suppliers above, it is important to note that
suppliers and customers may deal in either goods or services.

Using the descriptions/definitions of customers and suppliers above, an organisation most probably
will have several immediate suppliers and customers (Tier1): not just one. Further, each Tier 1
supplier/customer has suppliers/customers of their own. These are Tier 2 suppliers/customers to the
original focal firm. Know them by name e.g. Arda Estate or perhaps out grower sugar farmers in
Triangle.

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Supply Chain Coordination
The activities on the input side are the ‘ upstream’ or supply side. Upstream organisations that
supply the firm directly are the 1st tier and behind them are 2nd tier and so on. The output
[downstream/demand] side is also arranged similarly.

Upstream/Supply Side Downstream/Demand Side

SUPPLIERS PROCUREMENT OPERATIONS PHYSICAL DISTRIBUTION CUSTOMERS

MANAGEMENT

MATERIALS
MANAGEMENT
INBOUND LOGISTICS OUTBOUND LOGISTICS

SUPPLY CHAIN MANAGEMENT/LOGISTICS

Terms used to describe the Management of the Supply Chain.

The terms used in the area of SCM are defined in different ways:

a) SCM and Logistics refer to the management of the flow of materials and information through
the entire supply chain. Sometimes logistics refers to the downstream side of the chain. But
we also use the terms inbound and outbound logistics.

b) Physical distribution management refers to the movement of materials from the operations
to the customer. It has four main areas:

• Materials handling

• Warehousing

• Packaging

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 • Transportation.

Over the years, the services sector has increased in size and importance though there is disagreement
about what this sector consists of. Broadly however it excludes:

▪ Primary sector [farming, forestry and fishing]

▪ Secondary [manufacturing, mining and construction]

The services sector can be divided into:

▪ Private sector [retail, restaurants, hotels, transport, accounting, legal services etc.

▪ Public sector [health, defence, education, administration].

The growth of the services sector is attributable to the growth of:

▪ Consumer services [aimed at the final consumer]. This has increased as disposable incomes
have grown especially in developed countries.

▪ Producer services used in the production and delivery of goods and services. Here firms
provide services to other firms.

Disintermediation in the Supply Chain

The supply chain structure can sometimes be altered by bypassing some tiers through the process of
disintermediation. Thus, a producer may omit both the wholesaler and retailer. This allows costs to
be reduced.

OPERATIONS WHOLESALER RETAILER CUSTOMER

Sometimes however, new intermediaries are created between customers and suppliers. This is called
re-intermediation.

a) Vertical & Horizontal integration. Complete integration is achieved when an organisation

takes over ownership of other organisations in the supply chain. The amount of ownership
achieved is the level of vertical integration. Ownership of upstream [supply side] elements is
called backward vertical integration. Ownership of downstream [demand side] is termed

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 forward vertical integration. [Compare with horizontal integration where the other
organisations operate in different markets]. Vertical integration allows for greater control.
Even in a market-based economy, many companies try to reduce competition and so increase
profits. It may also be used to keep distinctive competences in-house. However, there may
be risks in trying to do everything. Integration calls for large resource investments which
smaller companies may not have.

The set of relationships between a firm and its suppliers and customers in the supply chain is termed
the supply network. Upstream suppliers that supply the organisations directly are termed ‘ first tier’ ;
those that supply 1st tier organisations are 2nd tier and so on. Activities on the output side are termed
downstream or demand side. These downstream organisations include wholesalers and retailers. As
there is a separate supply chain for each product/service the overall structure is sometimes referred
to as the ‘ supply network’ or ‘ supply web’ .

‘Logistikos’ : Logistics.
(Value Chain Perspective. (Wessel and Vogt, 2012))

No region [or company] is singly able to provide all the products needed to satisfy everybody’ s
material needs. Everywhere there is spatial and temporal separation between where/when
resources occur and where most people live. Sometime materials have to be moved or stored before
delivery.

The word ‘ logistics’ derives from the Greek word ‘ logistikos’ meaning ‘ skilled in calculating’
relating to arithmetic or reasoning. Thus, logistics is about ability to ‘ calculate, to reason or to think’ .
Over time the word came to be associated with the art of combining, and coordinating the quartering,
means of transport, supply and support of troops by means of reasoning and calculating during a
military campaign. It was thus the military science of planning, implementation of personnel, related
materials, facilities and other factors. It makes possible for an army to march, fight and win battles.
In business, the word was subsequently applied to refer to the means and methods of organising a
service or business especially the flow of materials before, during or after production.

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Logistics is therefore the critical link between production and marketing: how to deliver materials
where they are needed, when they are needed and in the most economical fashion.

• One definition is that managing logistics [within business] concerns that part of supply chain
management that plans, implements and controls the efficient, effective forward and reverse
flow and storage of goods, services and related information between the point of origin and
the point of consumption in order to meet customer needs.

o Logistics is a subset of SCM. It requires action to

▪ Prepare [plan]. This includes selecting facilities; durable equipment necessary

for the flow of goods through the logistics network; distribution parties
[wholesalers, retailers and other 3rd party service providers; carriers as
needed].

▪ Organise [implement] i.e., allocating and positioning resources; design of

production and distribution activities in response to customer needs,

▪ Execute [control] - as materials move to customers. Including routing of trips

and scheduling of vehicles and crews.

Logistics involves many company activities at different levels in the organogram:

• Strategic decisions which have long-term effects on the firm

• Tactical: may be monthly or annual

• Operational: day-to-day decisions based on very detailed data.

Logistics operations aim to be efficient and effective across the entire system by minimising system-
wide costs [transport, handling, distribution, warehousing or keeping inventory]. To be successful, a
systems approach is required. Thus, not just the cheapest or fastest transport; or reducing inventories
but instead an integrated and coordinated system.

Inbound logistics, outbound logistics and reverse logistics [handling returned goods and waste
disposal] are together called business logistics [or logistics management]. These 2 terms [business
logistics and logistics management] are often used interchangeably. Business logistics activities thus
include:

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 a) Inbound logistics (Materials management). Raw materials are moved from their point of
origin to the place where they are converted into finished goods

b) Outbound logistics (Physical distribution management) manages the flow of finished

goods from point of manufacture to point of consumption. The point of consumption is
where no further value is added and the product is used without serving as input to
another supply chain. The definition of logistics also includes the flow of information.
Normally users want the product and its related information to arrive simultaneously.

• Supply Chain Management [SCM]: planning and management of all activities involved in
sourcing and procurement and all logistics management activities. Including collaboration
with channel partners [suppliers, service providers and customers]. It integrates supply and
demand management within and across companies.

Logistics management is the performance required to move and position inventory throughout a
supply chain. It creates value by timing and positioning goods [spatial/temporal]. SCM is the broader
concept as it includes all logistics management activities. Today supply chains also include the return
journey that products undergo after use by end-users. Thus, a reverse supply chain operates
alongside the primary supply chain. This includes replacement parts and re-usable packaging; the
disposal of waste and recycling of parts and components.

Operations Management: Overview

Stevenson, William [2013] McGraw Hill. African edition [11e] Operations Management: Theory &
Practice

Most people working in any organisation are somehow involved with the supply chain with one or
more organisations. In the US, the value of company inventories in supply chains at any given time
is over $1trillion.

Supply chain: a sequence of organisations [their facilities, functions and activities] involved in
producing and delivering a product/service. From basic suppliers of raw materials to the final
consumer.

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 • Facilities- warehouses, factories, processing and distribution centres, retail outlets, and
offices.
• Functions & activities: forecasting, purchasing, inventory management, information
management, quality assurance, scheduling, production, distribution, delivery and customer
service.

SCM is the strategic coordination of the supply chain for purposes of integrating supply and demand.
SCM occurs within and between/across organisations. SC managers are to be found at different
levels. They are concerned with planning and coordinating activities including sourcing and
procurement of materials and services, transformation activities and logistics.
Typical Manufacturing Supply Chain

Supplier

Supplier
Storage Mfg Storage Distributor Retailer Customer
Supplier

Typical Service Supply Chain

Supplier

Storage Service Customer

Supplier

Logistics concerns itself with the forward and reverse flow of goods, services, cash and information.
Every business organisation is part of at least one Supply Chain.

Consumers

Marketing

Reverse
Logistics Supplie
rs

Product/Service
Design

Customers Production

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 Logistics

Goods and Services flow clockwise in this diagram; cash flows counter clockwise.

Supply chains are sometimes referred to as value chains because value is added as goods and services
progress through them. However, supply chains are not synonymous with value chains. Supply chains
typically comprise separate organisations rather than a single one. Most supply chains have two
components:

• A supply component which starts at the beginning of the chain ending with internal operations
within the organization.
• A demand component: from the delivery of the organisation’ s output to immediate customer
ending with the final consumer in the chain. This is the sales and distribution portion of the
supply chain.

The length of each component depends on where the organisation lies in the supply chain.

The closer an organisation is to the final customer, the shorter the demand component and the
longer the supply component. Supply chains are the lifeblood of any organisation. They connect
suppliers, producers and final customers in a network that is crucial for delivering goods and services.
The goal of SCM is to match demand to supply as effectively and as efficiently as possible. While
identifying problems and responding to them quickly. It therefore involves outsourcing where
appropriate, managing procurement, managing suppliers as well as customer relationships. Key
issues include:

• Determining the appropriate level of outsourcing

• Managing procurement
• Managing suppliers
• Managing customer relationships
• Being able to quickly identify problems and respond to them.

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An important aspect of SCM [e.g., tracking produce from farm to fork] is flow management of three
types of flows:

• Product and service flow. Movement of goods and services from suppliers to customers.
• Information flow. Sharing forecasts and sales data, transmitting orders, tracking shipments
and updating order status.
• Financial flows. Credit terms, payments.

Managing these flows is greatly enhanced by technological advances. The cost of transmitting and
receiving information has decreased due to the ease and speed of communication. This has enabled
better coordination of Supply Chain activities and more timely decision making.

The Value Chain

Value chain includes a business' primary activities. These activities should be run at optimum level if
the organization is to gain any real competitive advantage. If you are searching for a way to gain an
edge on your competition, consider one of the business world's most valuable tools: value chain
analysis.

Value chain analysis relies on the basic economic principle of advantage —companies are best served
by operating in sectors where they have a relative productive advantage compared to their
competitors. Simultaneously, companies should ask themselves where they can deliver the best
value to their customers. A value chain is the full range of activities including the design, production,
marketing and distribution that businesses go through to bring a product or service from conception
to delivery. For companies that produce goods, the value chain starts with the raw materials used to
make their products, and consists of everything that is added to it before it is sold to consumers.

The process of actually organizing all of these activities so they can be properly analyzed is called
value chain management. The goal of value chain management is to ensure that those in charge of
each stage of the value chain are communicating with one another, to help make sure the product is
getting in the hands of customers as seamlessly and as quickly as possible. To conduct a value chain
analysis, the company begins by identifying each part of its production process and identifying where
steps can be eliminated or improvements can be made. These improvements can result in either cost

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savings or improved productive capacity. The end result is that customers derive the most benefit
from the product for the cheapest cost, which improves the company's bottom line in the long run.

Value chain analysis is primarily a strategy tool used to analyse internal firm activities.

Porter's value chain

Harvard Business School's Michael E. Porter was the first to introduce the concept of a value chain.
He also developed the Five Forces Model that many businesses and companies use to figure out how
well they can compete in the their marketplace in his book "Competitive Advantage: Creating and
Sustaining Superior Performance" (1985).

Activities within an organization add value to the service and products that the company produces.
If these activities are run efficiently, the value obtained should exceed the costs of running them so
customers should return to the company and transact freely and willingly. The activities conducted
in a business consist of primary activities and support activities.

1) Primary activities include:

• Inbound logistics: Everything involved in receiving, storing and distributing the raw
materials used in the production process.
• Operations: Here raw products are turned into final products.
• Outbound logistics: The distribution of the final product to consumers.
• Marketing and sales: Including advertising, promotions, sales-force organization,
selecting distribution channels, pricing, and managing customer relationships to
ensure that the final product it is targeted to the correct consumer groups.
• Service: All activities designed to maintain the product's performance e.g. installation,
training, maintenance, repair, warranty and after-sales services.

2) Secondary/Support activities to help the primary functions. They comprise:

• Procurement: How the raw materials for the product are obtained.

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 • Technology development: As used in the development of a product e.g. research and
development, design and process automation.
• Human resource management: Hiring and retaining the proper employees to help
design, build and market the product.
• Firm infrastructure: An organization's structure and management, planning,
accounting, finance and quality-control mechanisms.

The term margin in value analysis implies that organizations realize a profit margin that depends on
their ability to manage all activities in the value chain in order to deliver a product/service for which
the customer is willing to pay more than the sum of the costs of all activities in the value chain.

Service Supply Chains

Liu, W., Wang, D., Long, S., Shen, X., & Shi, V. (2019). Service supply chain management: a
behavioural operations perspective. 1(1), 28–53. Modern Supply Chain Research and
Applications Vol. 1 No. 1, pp. 28-53

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Vural, CA (2017) Service-dominant logic and supply chain management: a systematic literature
review Journal of Business & Industrial Marketing 32/8 (2017) 1109–1124

PRODUCT LIFE CYCLE [PLC]

The concept of Product Life Cycle (PLC) is widely used in marketing, retailing new product
development etc. It also has application outside these core areas to include design and operation of
processes. There you will find the principles of PLC applicable in some aspects of SCM. For that
reason, I have presented a summary of PLC below.

A company’ s differentiation and positioning must change as the product, market and competitors
change and as the product passes through each stage of the life cycle. The concept of PLC asserts 4
things:

1) Products have a limited life

2) Products and processes go through distinct stages, each with its own challenges,
opportunities and problems for the firm.
3) Profits, opportunities, risks and challenges rise and fall at different stages of PLC.
4) Products require different management, competences and skills at each stage.

Most PLC curves are bell shaped and are divided into 4 stages:

1) Introduction with slow growth or activity. returns may be low due to expenses of
introduction.
2) Growth: rapid acceptance, application and substantial process/product improvement.
3) Maturity. Growth begins to slow down; profits and returns stabilise or decline as competition
increases.
4) Decline. performance drifts and returns are eroded.

In retailing, PLC can be used to analyse a:

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 1) Product category [e.g., liquor]. Categories have the longest life cycles and may stay in the
mature stage indefinitely and grow with population growth. However, there may still
experience decline e.g., newspapers.
2) Product form [e.g., white liquor]. They generally follow the standard PLC more faithfully.
3) Product [e.g. Vodka]. They may follow the standard PLC or a variant.
4) Brand [Smirnoff]. Branded products can have a long/short PLC; but some may die early.

Other shapes of PLC:

a) Growth-slump-maturity pattern.
b) Cycle-recycle pattern e.g., when a product gets a promotion push
c) Scalloped pattern- a succession of life cycles as new product characteristics, uses and users
are brought in over time.

Maturity itself has three phases:

▪ Growth
▪ Stable
▪ Decaying.

PLC Critique: Critics say that the life-cycle patterns are too variable in shape and duration. Unlike
living organisms PLCs do not have a fixed sequence of stages and a fixed length for each stage. It is
also difficult to say what stage a process/product is in. A plateau can be mistaken for maturity.

Source: (Kotler, P; Keller, 2006)

SUPPLY CHAIN MANAGEMENT: (Hutchinson, 2013)

Most people working in any organisation are somehow involved with the supply chain with one or
more organisations. In the US, the value of company inventories in supply chains at any given time is
over $1trillion.

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 Supply chain: a sequence of organisations [their facilities, functions and activities] involved in
producing and delivering a product/service. From basic suppliers of raw materials to the final
consumer.

• Facilities- warehouses, factories, processing centres, distribution centres, retail outlets, and
offices.
• Functions & activities: forecasting, purchasing, inventory management, information
management, quality assurance, scheduling, production, distribution, delivery and customer
service.

SCM is the strategic coordination of the supply chain for purposes of integrating supply and demand.
SCM occurs within and between/across organisations. SC managers are to be found at different
levels. They are concerned with planning and coordinating activities including sourcing and
procurement of materials and services, transformation activities and logistics.

Supplier

Supplier Storage Mfg Storage Distributor Retailer Customer

Supplier Typical Manufacturing Supply Chain

Supplier Typical Service Supply Chain

Supplier Storage Service Customer

Supplier

Logistics also concerns itself with the forward and reverse flow of goods, services, cash and
information. Every business organisation is part of at least one SC. Logistics is that part of the SC
involved with the forward and reverse flow of goods, cash, and information.

Consumers

Marketing

Revers
e Supplie
Logistic Page 32 of 137rs
Storage s
 Product/Service

Design
Custome
Productio
rs
n

Logisti
cs

Goods and Services flow clockwise in this diagram; cash flows counter clockwise.

Supply chains are sometimes referred to as value chains because value is added as goods and services
progress through the organisation. Value is added as goods and services progress through the chain.
Supply/value chains typically comprise separate organisations rather than a single one. Most supply
chains have two components:

• A supply component which starts at the beginning of the chain ending with internal operations
within the organisation
• A demand component: from the delivery of the organisation’ s output to immediate customer
ending with the final consumer in the chain. This is the sales and distribution portion of the
value chain.

The length of each component depends on where the organisation lies in the value chain

The closer an organisation is to the final customer, the shorter the demand component and the
longer the supply component. Supply chains are the lifeblood of any organisation. They connect
suppliers, producers and final customers in a network that is crucial for delivering goods and services.
The goal of SCM is to match demand to supply as effectively and as efficiently as possible. While
identifying problems and responding to them quickly. It therefore involves outsourcing where
appropriate, managing procurement, managing suppliers as well as customer relationships. Key
issues include:

• Determining the appropriate level of outsourcing

• Managing procurement

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 • Managing suppliers
• Managing customer relationships
• Being able to quickly identify problems and respond to them.

An important aspect of SCM [e.g. tracking produce from farm to fork] is flow management of three
types of flows:

• Product and service flow. Movement of goods and services from suppliers to customers.
• Information flow. Sharing forecasts and sales data, transmitting orders, tracking shipments
and updating order status.
• Financial flows. Credit terms, payments.

Managing these flows is greatly enhanced by technological advances. The cost of transmitting and
receiving information has decreased due to the ease and speed of communication. This has enabled
better coordination of SC activities and more timely decision making.

Issues from Supply Chain Management (SCM): See Shukla et al (2011): UNDERSTANDING OF
SUPPLY CHAIN: A LITERATURE REVIEW

• Greening the environment. Often motivated by reasons such as corporate responsibility,

regulations or public pressure. “Green” suppliers, managing returns, implementing end-of-
life programmes especially for appliances and equipment.
Student task: What are the main and topical issues about greening the environment?
• Managing risks: identifying them, assessing likelihood of occurrence and impacts and
developing strategies for managing them e.g., risk avoidance [e.g., not operating in a certain
country or not dealing with a certain supplier] or reduction, risk transference [e.g., supplier
assuming responsibility for quality standards]. Geopolitical risks.
• Lean principles – eliminating non-value adding processes; using pull rather than push systems.
• Global supply chains. Pursuing opportunities beyond domestic markets; outsourcing to
countries with cheaper labour or materials; or those with young well-educated people. Such
markets introduce additional complexities e.g., differences of culture, currency fluctuations,
increased transportations costs. There is need to build trust and cooperation among supply
partners. These factors make risk management an important aspect of global supply chain

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 management. Sometimes inventory is increased along the SC though this may tend to
compromise the benefits of global sourcing. Some risks are supply related: e.g., supplier
failure, quality issues, transportation, terrorism. On the demand side are: demand volatility,
forecasting errors, compliance issues.
• Ethics and the Supply Chain (SC). False/fraudulent claims e.g., about the level of ‘ greening’ ;
ignoring health, safety or environmental standards; violating workers’ rights, sweatshops,
mislabelling country of origin; selling goods abroad that are banned at home. Thus, every
company needs to develop an ethical supply code.

Supply Chain Risk (Vulnerability, resilience & disruption)

Risk is the possibility of harm occurring. It therefore involves uncertainty about the
effects/implications of an activity. Risk often focusses on negative or undesirable consequences.

Sources of supply chain risks

These occur in three groups:

a) Company internal risks,

b) Supply chain internal risks and

c) Environmental risks. Two risk sources directly associated with supply chain (process
and control risks) are located within the company itself.

Tips for mitigating Supply Chain Risk

1) Evaluate and Identify Current Risks. Identify areas with risk exposure.

2) Prioritize by Probability and Impact.

3) Ensure Supplier Quality.

4) Diversify Suppliers.

5) Be Aware of Suppliers' Risks.

6) Include Partners in Risk Planning.

7) Purchase Cargo Insurance.

8) Be Transparent with Partners

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Supply Chain Resilience

Collins Dictionary (2008) says that something is resilient if it is capable of regaining its original shape
or position after bending, stretching, compression, or other deformation; an object that is elastic and
capable of recovering quickly from shock, illness or hardship. Resilience is therefore the ability to
cope when things go wrong by:

a) Bouncing back after difficult experiences.

b) Dealing with challenges and still holding your head up.

c) Being able to cope with whatever life throws at you.

Challenges of supply chain management

• Customer service
• Planning, risk management and resilience
• Supplier/Partner Relationship Management
Supply Chain models
a) Continuous flow model
b) Fast chain flow model
c) Efficient chain model
d) Custom configured
e) Flexible chain
Pillars of Supply Chain
a) Value for money (not just lowest price)
b) Open and effective competition
c) Ethics and fair dealing
d) Accountability and reporting
e) Equity

Logistics & Supply Chain complexity

The example below has been chosen to illustrate complexity and interconnectedness of supply
chains in modern industry. Check Boeing in comparison.

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Airbus inventory management in a complex business.

Airbus is one of the leading aircraft manufacturers. It is a global company with manufacturing and
design facilities in France, the UK, Germany and Spain: including subsidiaries in China, the US, Japan,
and the Middle East. Their largest passenger aircraft from Airbus is the A380. The size of their
inventory management is huge:

• A380 consists of 4 million individual components with 2.5 million-part numbers produced by
1 500 companies from 30 countries around the world. It takes 13 000 rivets to join the 3
sections of the fuselage and 4 000 rivets for the junction of the wings and the fuselage.

• Final assembly of the A380 takes place in Toulouse, France where production of the major
structures takes place.

• Wings are assembled in Broughton in the UK. Each wing is built of 32 000 major parts, plus
750 000 bolts and rivets. The origin of each part and fasteners is recorded: the supplier of
each is documented along with the batch of base metal and the time and date of
manufacture.

• There are many suppliers of components and key parts: 800 of whom are in the USA. The four
largest suppliers are Rolls Royce, Safran, United Technologies and General Electric.

• The major structure assembly locations in Europe are:

o Tail cone: Getafe, Spain

o Aft fuselage: Hamburg, Germany.

o Centre fuselage: St Nazalre, France

o Cockpit: Meaulte, France

o Front fuselage: Hamburg, Germany

o Engines: UK &US

o Wings: Broughton, UK

• Inventory planning at Airbus consists of the following processes (MRP):

o How much inventory do I have? (the current position)

o Proposed position (the business target)

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 o How do I get from where I am to where I want to be? (create an inventory plan)

o How do I get the desired inventory? (implement the plan)

Throughout these stages it is necessary to update the system.

Transportation Methods
Transport Normal use
mode

Rail Fast movement of bulky goods. Total transportation time is lengthened by need to use
alternative transport between train station nodes and destination point. Check history
of rail in Zimbabwe. Check rail map of Zimbabwe. Check growth of rail in Zimbabwe
with history. From Cecil John Rhodes, to UDI in 1965 or TAZARA railway line.

Road Flexible point-to-point service for most products of any size. Most popular method of
transportation but reliability of delivery time can be affected by traffic congestion.

Air freight All types of products can be moved long distances quickly. Most suitable for light
weight products and overseas destinations. Requires handling facilities which slows
overall transportation time.

Water Can carry all types of products inland on canal systems or by sea travel. Provides slow
transportation but relatively low cost and especially useful for carrying bulky items
internationally. Check major waterways and canals in the world.

Pipeline Transportation of liquids and gases e.g., water, oil and gas. After initial high cost of
laying pipeline provides a reliable transportation method with low operating costs.
Check major pipelines of the world; some controversies surrounding these. Also
pipelines in Zimbabwe.

• Consider also movement of people where appropriate.

• Task: inquire into the state of transport provision in Zimbabwe.

Information flow: advancing retail buyer performance (Fiorito, Gable and Conseur, 2010)

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Today instant transmission of sales data is common practice in the retail industry unlike the situation
not too many years ago. Technology makes the buyer’ s job easier and enhances his job performance
through information accessibility and automation of routine tasks.

The role of buyer is essential for achieving corporate objectives. The buying task can be categorised
into six main areas:

1) Analysis of past sales and promotions – analysing customer buying patterns, predicting future
trends and customer wants and desires. Identify best & slow sellers; review and analyse sales
reports; review inventory records; analyse store performance and stock levels.

2) Planning financial budgets – sales and purchase plans, analysing margins, anticipating
markdowns and calculating mark-ups. Balance stock unit ratios; create strategic
financial/budget plans.

3) Developing merchandise and assortments [well balanced]-selecting and pricing merchandise,

attending market fairs, meeting vendors, sourcing merchandise for private label brands.
Supervise price marking; develop sales goals, stock levels; write orders/follow up on orders.

4) Vendor planning and negotiations-selecting vendors and building strong business-like

relationships with vendors and manufacturers. Replenish basic stock, supervise returns

5) Initiating marketing plans –meeting sales goals through advertisements & promotions;
creating store traffic. Develop merchandising strategies. Develop distribution plans for
merchandise categories.

6) Training and developing staff. Setting sales goals, providing product information. Supervise
sales force; handle customer service issues; schedule employee work hours; supervise
inventory counts; conduct meetings with store personnel.

Many buyers have changed to more centralised buying. However, specialty, discount, department
and category killers each have their own ways of buying.

The function of technology may be viewed as either exploration or exploitation based on learning
theory. It is also often said that technology either automates or informates a firm’ s tasks. Automating
assists in making current tasks easier and more effective. Informatting [i.e., dispensing information]

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assists in the exploration of actions. However, technology improves the buyer’ s functions but does
not replace it.

In the past technology acted to automate capacity [speeding up routine tasks and communications].
However, developments such as data mining [DM] informatting capabilities have been enhanced to
increase profits and customer service.

Retail Technologies:

1) Data mining and data warehousing. Traditionally data was stored in operational systems
which did not allow cross-referencing and easy organisation.

a) Data Mining [DM] consists of computerised technologies used to find relationships

and patterns which may be hidden in a database and so help the buyer to make
informed decisions. This allows the buyer to use and analyse large data warehouse
[DWs] to maximise customer relationships; giving insights into customers wants and
needs. DM is able to address specific business questions e.g., targeting potential
customers for store events. The buyer is able to segment customers based on
purchase behaviour, store or time frame. Retailer is then able to address the issues of
oversaturated markets or increasingly demanding customers.

However, DM cannot replace business analysts and statisticians; it assists them and verifies
patterns in data. It can also be used to analyse POS data to predict trends; identify stock
movement in relation to store layout; cross-selling opportunities; to customise store layout
and so make products more accessible and so enhancing customer satisfaction and
profitability.

b) Data Warehousing involves storage of large amounts of data from the retailer’ s
operations. The data are stored in centralise locations. However, DW is limited by the
amount of data that can be collected and stored. It serves as an automation function
to collect and store data more efficiently. DM and DW are often combined.

2) Customer Relationship Management [CRM]. Faced with unlimited choice consumers today
will turn to those retailers that understand their needs and offer dependable services. CRM
today uses DM & DW. CRM is moving towards customer intimacy and customised knowledge
to attract and maintain a customer base: they transform “intelligence into intimacy” and are

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 able to identify their most valuable and profitable customers making them more loyal to the
company to address competition and saturation. Retailers are able to differentiate
themselves through sensitivity to customer needs. Through an interactive process for
achieving the optimum balance between corporate investments and satisfaction of customer
needs in order to generate maximum profits. CRM acts to personalise and develop
relationships providing specific information about each individual customer to “create an
image of remembering customers by name and knowing their purchasing behaviour”. The
relationship between the retailer and the customer are maximised; lending insight into
shopping patterns thus increasing revenue and enhancing loyalty and retention.

CRM Process
Collecting customer data Analysing customer data.
Learning Identifying target customer

Implementing CRM Developing CRM

programmes programmes
Customer Action

3) Electronic Data Interchange [EDI]. Buyers are now able to transmit and receive data in new
ways allowing for faster transmissions and immediate reaction to inventory issues through
technologies such as EDI which improve the flow of communications thus increasing profits
and efficiency. EDI has been defined as the transport of standardised electronic documents
and controlled data between and within computer systems in business organisations without
human involvement; linking corporate offices, stores, manufacturers and distribution centres.
Information now flows faster and more reliably than paper documents e.g., purchase orders,
sales reports, advertising and promotions materials etc. Time and money are saved. EDI also
minimises errors, maximises security. Much EDI data today goes via Internet but Valued
Added Networks are still in use [VANs] -3rd party network providers still allow faster
communication. Many buyers now use EDI to automate routine tasks.

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 4) Point of Sale [POS]. These are not recent systems. They are used at almost every type of retail
establishment. It includes the hardware and software finalising a sale to the customer and to
automate selection and pricing merchandise. POS can be used to transmit price changes to
stores. As sales are made data is transmitted to the retailer’ s central computer systems for
analysis of trends, forecasting, orders and re-orders. Automation of tasks provides up to the
minute information needed by buyers for replenishments.

Inventory Management Systems [IMS].

1) Tracking devices [BCs & RFID]. IMS has changed the way retailers track, order and re-
order merchandise. BCs [Bar Codes] are messages read by computers indicating price,
number of the item in stock. These are also not new having been introduced in the
1940s. Merchandise and sale can be tracked in real time. RFID [Radio Frequency
Identification] allows for the transmission of data through radio waves. First used by
government during WW11 and later in retail. RFID is used for transmitting payment
methods, date of manufacture, transit time, distribution centre location etc. This aids
inventory tracking and management. Thus, stock outs can be avoided or lessened.
Also, used to track inventory within the store environment for loss prevention thus
reducing costs due to thefts.

RFID has advantages over bar codes. Used by Wal-Mart to great advantage for
reordering, stocking and tracking purchases. The company saved $7 billion in labour
costs alone in 2007. RFID tags collect information as products move from shelves to
checkout counters. This reduces labour costs, curbs shoplifting and boosts store
productivity. Many retailers have adopted the technology.

Automatic Replenishment Systems. [QR, ECR, JIT & CPFR].

Retailers have struggled with inventory issues for long as product variety has increased and PLCs
[Product Life Cycle] have decreased. The balance between overstocking and under stocking has
assumed critical importance. Retail inventory strategy is concerned with managing this balance.
These technologies require integration and collaboration between buyers and vendors to achieve
success.

1) Quick Response [QR] developed in the 1980s. Offshore manufacturing created longer

lead times and retailers were either overstocked leading to excessive markdowns or
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 under stocked causing loss of sales. QR allows for more accurate and quicker forecasts
to keep inventory at appropriate levels. QR allows retailers to match supply with
demand providing more value.

2) Efficient Customer Response [ECR]. This was developed in the food industry to serve

the same purpose as QR. However, ECR is more concerned with perishability and
replenishment of similar products: QR focuses more on forecasting and reducing levels
of inventory and lead times.

3) Just-in-time [JIT]. JIT technology involves the fast-automated movement throughout

the supply chain to produce “high quality products at the pace of the customer with
little waste”. It creates significant reductions in lead times so retailers are able to stock
appropriate levels and so enhance performance.

4) Collaborative Planning, Forecasting & Replenishment [CPFR]. This strategy was

developed to improve precision in anticipation and fulfilment of customer needs. It is

web-based effort to coordinate various activities including production and purchase
planning, demand forecasting and inventory replenishment between supply chain
trading partners. There should be partnership between manufacturers and buyers in
product development, sales strategy and replenishment. PFR started in 1995.
Examples:

a) Proctor & Gamble with its retail trade partners and customers.

b) DW & Wal-Mart for more accurate forecasting of operational processes

c) Sears collaborated with Michelin and reduced inventory by 25%

For its success CPFR requires sharing of quality information between buyers and vendors. These IMS
technologies [QR, ECR, JIT & CPFR] have revolutionised the industry by building bridges between
vendor and buyer relationships.

Check ERP (Enterprise Resource Planning).

The Future of Retail Buying.

A few innovators have started adopting newer technologies which point to the future of retail buying:

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 • E-showrooms. Instead of travelling to New York six times in a year to preview
collections; or visiting trade shows during fashion week or meeting
representatives in person; as a result of increasing costs of travelling buyers
can collect and preview merchandise for the upcoming season any time of day
without having to travel to market. Full product information and visual
representation is made available though one is not able to feel fabric for
example. This reduces travel costs and speeds up ordering and delivery.

• Social Networking. This is changing the flow of fashion information and

providing for instant market research through Facebook or Twitter. Both
consumers and buyers are exposed to new looks simultaneously.

Retail Supply Chains: Retail and Logistics: (Fernie, 2009)

Retail & Logistics: Introduction

Supplying goods and services consists of the managed integration of a range of tasks within, and
increasingly beyond the boundaries of the company. The traditional silos of warehousing and
transportation have been removed. It is important to develop a stronger sense of supply chain
management. For retailers one of the biggest changes has been the growth of pan-company
relationships. Retailers no longer compete on the basis of their own activities alone; but also on the
efficiency and effectiveness of the whole supply chain. Problems that arise in production and primary
distribution impact on price, quality and availability.

There has been globalisation and internationalisation of retailers and sourcing of products in both
food and non-food sectors. In the garment sector, production has led western retailers to trade-off
longer lead times from off-shore markets with considerable reductions in labour intensive parts of
the production process. This has Corporate Social Responsibility consequences [CSR] e.g. Garments
without Guilt programmes in Sri Lanka. Also, note the tragedy of the collapse of a building that hosted
factories supplying western fashion houses in 2013.

For a long time, the supply of products into retail cutlets was controlled by manufacturers and was
very much a hit and miss affair. Consumers had to put up with the products they found on shelves.
There was a kind of efficiency vacuum. Now retailers have gained control of supply chains and have
reorganised their operations accordingly.

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Despite downturn in the global economy, the luxury sector especially luxury fashion business has
remained relatively immune [shoes, bags/suitcases and swimwear/underwear]. Tesco has become a
multi-format and international retailer. The company has developed world class logistics approach
and it has been influenced by dimensions of lean supply thinking. The company has been a pioneer
in e-commerce operations. On Shelf Availability [OSA]. Non-store shopping is not new. Companies
have delivered products to homes for a long time. The 1990s saw massive hype in the development
of e-commerce accompanied by predictions that a significant proportion of sales would migrate to
the internet. This period was followed by the collapse of the dot.com boom. However, the 2000s and
early 2010s saw rapid growth rates at the expense of offline shopping especially due to
improvements in online interactivity with the advent of Web 2.0, social media and m-commerce.
Retailers had to respond to a culture of anytime, anywhere. But there are still challenges with
unattended delivery and the ‘ last mile’ problem. Retailers now communicate better with customers
in tracking of deliveries and affording a variety of options for collecting and returning goods e.g., Click
& Collect or Collect Plus.

Issues about greening of retail logistics: logistical activities invite an environmental cost. Many of
these costs are borne by the community largely and do not reflect on balance sheets. Awareness of
environmental and sustainability issues has increased exponentially and retailers need to respond.
Being environmentally sensible can also sometimes improve efficiency and effectiveness

Retail Logistics: changes & challenges

Our willingness to wait to be satisfied or served has declined: we expect instant product availability
and gratification. Thus, physical distribution and materials management have been replaced by
logistics management and then subsequently by supply chain management. Channels of distribution
should be anticipatory and should react to customer demands. There is also an awareness of the
need to provide for reverse logistics. Holding stock in warehouses just in case it is needed is a costly
practice. Stock itself contains value which might not sell or it may become obsolete. Warehouses and
distribution centres [DCs] are expensive to build, operate and maintain. Vehicles are not cheap: in
terms of capital and running costs. Building and maintaining data networks is pricey despite huge
cost reductions in equipment in recent years. There is therefore a cost imperative that logistics is
carried out effectively and efficiently.

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Benefits include: better service to customers, fresher and high-quality products, possible lower
prices, longer shelf life; fewer stock-outs.

The logistics task

Retailing and logistics are concerned with product availability. They must pay attention to flows of
products and information within the business and in the wider supply chain. Today retailers are the
active designers and controllers of product supply to meet known customer demand. They control,
manage the SC from production to consumption. They are channel captains who set the pace in
logistics. Individual companies no longer compete with other stand-alone companies but rather one
supply chain competes against another [See Benetton].

Sustainability: Environment, Corporate Social Responsibility (CSR)

Sustainability involves the idea that goods and services should be produced in ways that do not use
resources that cannot be replaced and that do not damage the environment.

Increasing environmental impact of logistics and movement e.g., packaging. Many logistics
efficiencies have been generated through operating systems which are not sufficiently
environmentally aware. Logistics can have a major impact on the environment despite improvements
in vehicle design, engine efficiency, reusable handling systems and building standards. Products now
travel greater distance hence compounding problems. Climate change is at the back of many
environmental concerns. Retailers have no choice because customers expect appropriate response
and because the environmental impacts are highly visible.

Reverse logistics: a process whereby companies can become more environmentally efficient through
recycling, re-use and reducing the amount of materials used even in the forward system. In some
countries, there is legal and fiscal encouragement. It may be necessary to create a special channel to
move containers back down the chain. Often use is made of back-haul. Some cases use more rail
rather than rail e.g., Tesco train brings goods from English Midlands to Scotland.

Triple Bottom Line (TBL) (3BL)

It is about sustainability and business. The term was coined in 1997 by John Elkington. Measuring
corporate value using economic, social and environmental (ecological) variables/factors (People,
planet and profit). (See also CSR: Corporate Social Responsibility).

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Tragedy of the Commons (William Foster Lloyd, 1833)
• History

• Meaning

• Implications

The circular economy

An alternative to the traditional linear economy (make, use, dispose); the circular economy is
an economy in which we keep resources in use for as long as possible and we extract the
maximum value from them whilst they are in use and then, subsequently, we recover and
regenerate products and materials at the end of each service life. (Take some materials, make
a product, use it and then throw it away).

UNSDGs Sustainable Development Goals LNOB

• In what ways might this affect SCM?

• Which goals matter for SCM?

Key issues in retail logistics and supply chains arise as a direct response to changing demands of
consumers:

▪ Pace. Consumers are more demanding and less patient e.g., the case of fast fashion which
shortens PLC (Product Life Cycle).

▪ Span. Retailers are more global in outlook. Supply chains now span the globe. They search for
low-cost production. Retailers now talk more of global supply than global production.

▪ Availability. Products should be moved onto shelves more efficiently instead of ‘ resting’ in
stock rooms. There are developments to speed up and simplify this process sometimes called
the last 50 metres e.g., using:

o Shelf-ready merchandise

o Retail-ready packaging

o One-touch systems

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 o Products design not just with the customer in mind but also for supply and handling
requirements. Badly designed products add cost and time from a supply chain point
of view.

▪ Information. The ability to collect, disseminate and use data throughout the supply chain is
critical for retail supply chains e.g., on product levels and movement. Data has become the
lifeblood of retail supply chains. There is however potential for data overload. The
introduction of new systems can sometimes be highly disruptive.

▪ Supply chains compete. In the traditional model, retailers compete among themselves i.e. at
the horizontal level. There is now more realisation that retailers are at the fulcrum of supply
chains; between production and consumption. To the consumer, if a product is not available
then the retailer is to blame. So today retailers must compete vertically as well through the
efficiency and effectiveness of their supply chains. Retailers need to extend their reach into
the supply chain. However, retailers cannot undertake all supply chain tasks themselves e.g.,
through vertical integration. They need to achieve vertical coordination instead e.g., through
the use of information systems. Read on horse meat scandal to see the implications for
traceability and security in the supply chain. Simplification and coordination help greatly.
Supply chains have become increasingly data-rich.

Internationalisation of the retail supply chain.

There are three main threads to understanding retail internationalisation:

1) International sourcing. The apparel industry has led in this area with US, Japanese and
European companies targeting low labour areas in Far East, North Africa, Eastern Europe and
Latin America for finished and semi-finished goods. The lengthened supply chains have posed
logistical challenges. US company The Limited led the field.

Level 1 Domestic sourcing only

Level 2 international purchasing only when needed – reactive sourcing

Level 3 International sourcing as part of a sourcing strategy –proactive sourcing

Level 4 Global sourcing strategies integrated across worldwide locations

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 Level 5 Global sourcing strategies integrated across worldwide locations and
functional groups
Source: Trent & Monczka, 2005

2) International retail operations.

3) Internationalisation of management ideas.

Fashion supply chain

There have been major changes in this sector in the last 30 years. The main driver was the rise of the
retail brand and its growing internationalisation. Also, affordable style was becoming more available
on the high street with companies like Zara, and H&M departing from an era where well-made stylish
clothes were the preserve of affluent consumers. Fashion was democratised. The supply chain was
transformed from a manufacturer-push to a demand-led system; from domestic to off-shore sourcing
strategies. Retailers outsourced their supply chain functions in order to concentrate on core
competences such as design, branding and retailing of fashion products. Ethical challenges raised
debate on sweatshops, child labour and worker exploitation.

The high-street fashion market is a dynamic industry characterised by high product variety, low
predictability relatively low margins, high levels of impulse buying; pressure for shorter lead times
and reduced costs. It is necessary to manage the process from fibre to store by minimising costs and
lead times.

Historically, the luxury segment of the market was structured in a vertically integrated manner to
allow luxury brands to retain control over merchandise quality and exclusivity and hence demand
premium prices. So, production was internalised. In the mid-range, the vertical integration model is
rare. Here there is a global shift to newly emerging markets. Zara which traditionally sourced from
Spain and Portugal has expanded its supplier base to include morocco, Turkey, and India. The main
driver for a shift to developing countries is cost especially for the labour-intensive processes of
apparel production. Garment manufacturing is not suitable for extensive automation.

Supply chain models in the fashion industry.

VI = Vertical Integration DSD= Design/Source/Distribute

VI DSD

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 Design DESIGN
Fabric/trims Fabric/trims
production production

Garment SOURCING Garment

manufacture manufacture

Distribution
DISTRIBUTION

Fashion merchandise can be segmented into three major categories according to PLCs,
sensitivity/time/cost requirement and subsequent supply chain geographies:

1) Basic products: little variation in style; predictable demand profile e.g., plain white T-
shirts, plain black socks. Focus is on cost reduction.

2) Seasonal [or fashion basic] products: greater variation in style, less predictable demand
profile e.g., straight leg jeans

3) Short season [or fast fashion] products: great variation in style, unpredictable demand
profile. Require agility to match supply with demand. Manufacturing flexibility and
minimising lead times.

Fashion Product Life Cycles (PLC) have speeded up. There are increasing challenges of trade-off
between cost and lead time. Fast fashion items are often produced closer to selling markets to avoid
missing short windows for selling. UK retailers thus rely on Turkey or Eastern Europe while US relies
on Mexican, Caribbean and coastal Chinese suppliers. Flexibility and responsiveness are critical due
to unpredictable demand and uncertainty. Fast fashion retail buyers tend not to place long running
orders. Fashion industry is at risk due to ethical challenges due to the high-profile consumer segment
which attracts media scrutiny.

Typology of fashion retailer supply chain relationships.

▪ Luxury fashion house or those with unique business
model: Zara, Benetton

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 Vertically integrated or ▪ As these companies have developed a greater
strong control of supply international store network, more off-shore sourcing has
network occurred.

▪ QR concepts applied off-shore

Mid-market retailers with ▪ Development of international sourcing and distribution

collaborative relationships hubs

▪ Use of full package intermediaries e.g., Li & Fung

▪ Strong emphasis on sourcing from cheapest supplier

▪ Relationships can be short and variable

Fast fashion retailers ▪ Markets classified into short and long lead times

▪ For Western retailers, a gradual shift from China to

Vietnam, Turkey to Egypt and Romania to Moldova in
terms of sourcing patterns.

CSR in international fashion supply chains

CSR refer to a firm’ s obligations to the society in which it exists: “the continuing commitment by
business to behave ethically and contribute to economic development while improving the quality of
life of the workforce and their families as well as the local community and society at large. Fashion
retailers have often been accused of chasing cheap labour while under paying worker, turning a blind
eye to human rights. There is a need to consider the social and environmental impacts of business
operations. Three areas impact on ability of a supplier to uphold ethical requirements:

▪ Lead time. Buyers reduce risk of under/over buying by placing orders as close to the season
as possible. Short lead times and unrealistic delivery schedules increase likelihood of ethical
failures.

▪ Flexibility

▪ Cost

Sri Lanka has a reputation for levels of social responsibility. It also has a high reputation quality, on
time delivery and good customer service in key product categories of casual wear, sportswear and
intimates. This is based on relatively low labour cost, a literate labour force, high labour standards,

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investment friendly government policies and strategic shipping lanes. Continuous investment in
backward integration has created a sophisticated apparel industry.

Footwear supply chain.

Read: Schuh.

The trends of footwear mirror those of the clothing supply chain. However, footwear is more complex
and more labour intensive. The initial drivers came from the main sports brands notably Nike, Reebok
and Adidas. These companies have been termed specifiers because they specify design; they have no
manufacturing facilities. They subcontract to a range of manufacturers in low labour cost areas.
Adidas has 42 independent companies producing its brand. Italian Fratelli Rossetti, a luxury shoe
manufacturer, has strong vertically integrated supply chain for its core heritage product [men’ s
shoes]. Unlike clothing, there are longer lead times in shoes. Collaboration between stylists
[designers] and suppliers is critical for efficient production. The complexity of shoe production is in
the many variants and models that need to be designed and manufactured.

Fashion and luxury industry

The concept of luxury is often confused with that of fashion. The luxury sector has not been affected
by hard times while fashion is affected by new entrants. However, fashion and luxury companies
often share the same management challenges. Fashion markets are everyday synonymous with rapid
change. Success is determined by flexibility and responsiveness.

Brand is now not separable from the concept of fashionableness. A brand is not a product or
collection of products. A brand is the total sum of everything a company does; creating a larger
context or an identity in the consumer’ s mind. Achieving a good brand reputation is enough for
claiming a luxury positioning. “If you are not a brand, you are a commodity”. However, even a
commodity or inexpensive product becomes luxury when it carries the name of a brand. A brand
justifies a premium price due to its reputation. The pre-eminent aspects are the emotional and
intangible content conveyed by in the consumer’ s mind.

There are three types of luxury goods:

▪ Absolute luxury products characterised by elitism, heritage and uniqueness

▪ Aspirational luxury products. These are growing fastest. They are recognisable and distinctive.

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 ▪ Accessible luxury products characterised by affordability, status and membership.

There is also a distinction between fashion and continuative products:

▪ Continuative items have a lifecycle longer than 20 weeks. Some may stay for several years.

▪ Seasonal items. Lifecycle of about 20 weeks.

▪ Fashion items. Lifecycle of about 10 weeks or shorter.

Cold Supply Chain

Tina Comes (2017): Cold chains, interrupted The use of technology and information for decisions that keep
humanitarian vaccines cool. Journal of Humanitarian Logistics and Supply Chain Management Vol. 8 No. 1,
2018 pp. 49-69

DHL Cold Play (Visit website)

A cold chain or cool chain is a temperature-controlled supply chain. An unbroken cold chain is an
uninterrupted series of refrigerated production, storage and distribution activities, along with
associated equipment and logistics, which maintain a desired low-temperature range. It is used to
preserve and to extend and ensure the shelf life of products, such as fresh agricultural produce,
seafood, frozen food, photographic film, chemicals, and pharmaceutical drugs. Such products, during
transport and when in transient storage, are sometimes called cool cargo. Unlike other goods or
merchandise, cold chain goods are perishable and always en route towards end use or destination,
even when held temporarily in cold stores and hence commonly referred to as cargo during its entire
logistics cycle.

Cold supply chain issues and practices in retail and logistics

Cold Supply Chain can be defined as the network of facilities and distribution options that performs
the usual functions of a standard supply chain cycle but with temperature and humidity control
throughout the supply chain stages entities. Cold supply chain has become more and more important
within the changing global economy today due to the huge increasing demand on the products of
temperature-controlled industries, especially fresh agricultural products, manufactured foods,
chemicals, military services and medical vaccines. Issues that concern cold supply chain include
frosting, safety, suppliers, transport system, warehouses and the end consumer.

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Frosting is an issue affecting cold supply chain. Ice can slowly build up on the freezing surface of the
refrigerator during its operation. According to the World Health Organization (1998), the frost layer
must be continuously removed as it lowers the cooling efficiency of the cold chain equipment. That
is why regular defrosting important which is to be added to the equipment maintenance total cost.
Thus, showing frosting as an issue to cold chain supply.

In addition, safety concern is also an issue to cold supply chain. Since all of the cold supply chain
equipment are powered by electricity, a qualified electrician may be required to avoid electric shocks.
According to Blanchard (2007), a qualified electrician has to be used to confirm the proper installation
and deployment of all connection, plugs and switches, safety kits and circuit breakers has to be
considered to protect the personnel and the equipment in case of any failure. Hence showing safety
concern as an issue to cold supply chain.

More so, the use of non-environmental gas compounds can also be an issue to cold supply chain. All
cold chain equipment must contain at least one type of organic gas compounds. These gas
components are called CFC gases, and it was recently discovered that these components can cause a
serious environmental damage if released to the atmosphere. Therefore, a new generation of cold
chain equipment was introduced in 1996 to replace those using CFC gases. The new equipment is
considered as CFC free which comes for a higher price of cost. The symbol shown below is used on
refrigerators, air conditioners and drug carriers to highlight that the equipment has been made using
CFC free gases and hence has no harmful environmental effect. Thus, showing the use of non-
environmental gas compounds an issue to an issue concerning cold supply chain.

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Furthermore, continuous control and monitoring of temperature is another issue concerning cold
supply chain. According to the United States Department of Agriculture, studies and estimations have
proven that there is an approximate of 20% loss of flowers during the marketing stage only due to
temperature and humidity conditions which approximately worth around $90m losses every year.
Maintaining correct temperatures during storage and transportation is a very important task for the
cold supply chain cycle, temperature readings must be continuously taken in order to ensure that the
cold chain equipment is operating successfully. Although there are a lot of monitoring devices and
equipment to help measuring, controlling, and recording the cold chain equipment temperature, it
still needs extra man power overhead than the regular non-temperature-controlled supply chain
logistics. Thus, continuous control and monitoring of temperature an issue concerning cold supply
chain.

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Moreover, cold supply chain practice supply procurement. Supply procurement include
manufacturers, farms, and precooling system. In order to know the characteristics of the products
and to maintain proper conditions during the distribution process, they should know the temperature
necessity inside the cargo and maintenance. They should define, maintain and ensure temperature
specifications during transport and also transportation study is required. The variety of temperature
range in relation to cargo service is large and should be strictly complied at every step of distribution.
Specific requirements for storage conditions are set in case of food products for instance fresh meat

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is transported in the temperature range from -1⁰C up to 7⁰C whereas frozen in -12⁰ C and in case of
deep frozen the temperature must be -18⁰ C.

In addition, transport system is also a practice in cold supply chain. Transport conditions at various
stages of distribution including manufacturer to third party between two sites or to and from a filling
contractor. Assurance that temperature and humidity controls are monitored during shipping and
also standard practice for performance testing of transport containers. The integrity of cargo
concerns the conditions of loading and reloading and unloading of goods in a way that guarantees
the minimizing of risk of product quality loss during the transport. The integrity of transport is
characterized by the action and treatment to provide constant transport temperature for product
sensitive to the temperature fluctuations.

To elucidate further, storage is another practice in cold chain supply. Maintaining suitable
temperatures requires special technical equipment in warehouses and the proper management of
the storage space. Warehouses should be fully air conditioned, equipped with modern protection
solutions in terms of security and cold storage. In the transport of food, there are also mobile
containers possible to mount on all models of vans. They guarantee the maintenance of temperature
from minus twenty up to twenty-five degrees Celsius. If there is a need a mobile refrigerated
container can transport all goods requiring the temperature-controlled transportation. Some types
of products require special packaging types, as in the case of fish. Special packaging enables the
transport of fish in crushed ice and fish are not able to escape outside while placed on the respective
pads to protect them from immersion in water if ice has melted. For the transport of pharmaceutical
isothermal polystyrene containers are used, the ones of appropriate thickness of the pack along with
internal cooling cartridges to provide appropriate conditions for transport.

Lastly, in the cold supply chain practices there is transportation from the warehouse to the
wholesalers where the goods are distributed to delivery points. Refrigerated trucks which are
temperature regulated are used to transport the perishable goods to wholesales outlets. When the
goods reach the wholesaler, they are then distributed according to the supposed delivery points that
is the retail outlets. Refrigerated trucks are also used depending on the distance from the wholesale
to the delivery points. Retail outlets are the final destinations of the cold supply chain where the
perishable goods are then sold to customers.

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In conclusion, cold supply chain in their structure do not differ substantially from the classical
construction of the supply chain. Cold supply chain face has practices and issues that concern them
as mentioned above 25 0C.

The Food Supply Chain (Agri-food supply chains)

A food supply chain or food system refers to the processes that describe how food from a farm ends
up on our tables. The processes include production, processing, distribution, consumption and
disposal. The food we eat reaches us via food supply chains through which food moves systematically
in domino-like motion from producers to consumers while the money consumers pay for food goes
to people who work at various stages along the food supply chain in the reverse direction. Every step
of the supply chain requires human and/or natural resources. Because a food supply chain is domino-
like, when one part of the food supply chain is affected, the whole food supply chain is affected,
which is often manifested through changes in price.
Miscellaneous Supply Chains
Green Supply Chains
Sustainable Supply chains

• Supply chain coordination & Bullwhip (Jay Forrester, MIT. 1961)

Supply Chain performance depends on the actions of all organisations in the SC: one weak link can
negatively affect every other location in the chain. In principle, everyone supports optimising SC
performance. However, each firm focusses on optimisation of its own performance. Unfortunately,
self-serving behaviour by each can lead to less-than-optimal SC performance. Firms can often benefit
from better operational coordination. Two key challenges are Bullwhip effect and incentive conflicts.

a) Bullwhip effect: the tendency for demand variability to increase often considerably as you
move up the SC (retailer, distributor, factory and raw material suppliers etc.). One stage tends
to amplify the volatility of its orders relative to its demand. With several stages, the
amplification can feed on itself: one amplifying the amplified volatility of its downstream
customer. The accentuation of volatility resembles the amplitude of a whip when it is cracked.
Procter & Gamble coined the term to describe their observed diaper supply chain. This was
despite the fact that demand for diaper from babies was relatively stable.
Bullwhip does not enhance SC performance. It can lead to:

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 o Product shortages
o Excessive inventory
o Poor capacity utilisation
o Poor quality
“Bullwhip effect is present in a supply chain if the variability of demand at one level of the
supply chain is greater than the variability of demand at the next downstream level in the
supply chain, where variability is measured with the coefficient of variation” (374).

Causes of Bullwhip
o Order synchronisation: if orders tend to cluster around the same time period, bullwhip
effect emerges as a result of a flood of orders.
o Order batching so as to minimise cost of ordering and handling.
o Trade promotion & forward buying. Firms order more than they actually need. Many
customers could also buy at the same time due to inducement from the promotion.
Many companies find forward buying to be profitable.
o Reactive and over reactive ordering. Greater demand uncertainty also contributes to
bullwhip effect. An unusually high demand observation may induce a firm to increase
order quantities
o Shortage gaming (order inflation). Sometimes circumstances force a retailer to
anticipate a long wait before the next delivery. A retailer could then order more while
supply is available. Or where capacity is constrained, the supplier may allocate on a
proportionate basis. Firms are then tempted to over-order. This is fuelled by a belief
that they may not get what they order.
Mitigating Bullwhip effects
In the grocery trade, companies embarked on Efficient Customer Response (ECR) which was initiated
in the early 1990s. Strategies include:

Sharing information. Give the supplier actual consumer demand data to enable accurate
assessment of trends. And planning. However, demand is sometimes influenced by retailer
actions e.g., on pricing, merchandising, promotion, advertising and assortment planning.
Suppliers need information in order to build sufficient capacity. This sharing process is called
Collaborative Planning, Forecasting, and Replenishment (CPFR).

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 Smoothing product flow. While information sharing is helpful, it will however not eliminate
bullwhip effect. Retailers could coordinate in order to deal with order synchronisation.
Reducing order size conflicts with desire to control ordering, transportation and handling
costs. It may also be better if retailers deal with a distributor than the supplier.
Eliminating pathological incentives. Originally, suppliers introduced trade promotions in order
to create consumer demand when prices to consumers were reduced. However, this does not
always happen.
Vendor Managed Inventory (VMI). To do this effectively, the supplier needs information.
Supplier then decides the timing and quantity of replenishment.
Counter-effect to the Bullwhip Effect: Production smoothing e.g. building stock in anticipation of the
festive season and avoiding engaging too many temporary workers. This deals with seasonal demand
fluctuations.

Green Bullwhip. What is it?

RETAIL and LOGISTICS: UK

Once manufacturers allocated products to stores in anticipation of demand with retailers being
passive recipients. Today retailers are controllers of product supply for known customer demand. Six
reinforcing trends can be identified:

1) Increased control by retailers over secondary distribution [warehouse to shop]. Increasing

proportions now pass through distribution centres [DCs]. This process has advanced the most
in food where it is virtually complete. The logistical operations depend very heavily on IT
especially the large integrated stock replenishment systems that control movement and
storage.

2) Restructured logistical systems.

a) Reduced inventory

b) Through the development of “composite distribution” – moving mixed temperature

items through the same DC and even on the same vehicles.

c) Centralisation in specialist warehouses of slower moving stock.

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 d) For mixed retail businesses [with stock shared across several stores] ‘ ’ common stock
rooms’ ’ have been established.

3) Quick response [QR]. To cut inventory levels and improve speed of product flow by reducing
order lead times and instituting frequent delivery of smaller consignments internally
[between DC & shop] and externally [supplier and DC]. QR has been supported by EDI and
EPOS systems. Larger retailers have adopted ‘ ’ Sales Based Ordering’ ’ . When an item is sold
and scanned in a shop, such data is used to inform replenishment and reordering systems
leading to quick reaction to demand. Data is also shared with key suppliers to integrate
production with supply.

4) Rationalisation of primary distribution [factory to warehouse]. Due to QR as well as intensity

of competition retailers have extended control upstream of DC [from DC to manufacturer].
Some have integrated both primary and secondary distribution which they run as a single
‘ ’ network system’ ’ . This reduces waste and improves efficiency.

5) Return flow of packaged material and handling equipment for recycling/re-use. Retailers are
more involved in ‘ ’ reverse logistics’ ’ often in response to legislation as in the European
Union.

6) Introduction of Supply Chain Management [SCM] & Efficient Customer Response [ECR]. This
involves close collaboration with suppliers to maximise efficiency of the retail supply chain.
With SCM & ECR activities are coordinated effectively. Retailers now operate end-to-end
supply chains.

SCM has several themes:

• Shift from a push to a pull i.e., demand driven supply chain.

• Customers have more power

• Enhanced role of IT

• Elimination of unnecessary inventory

• Focus on core capabilities and outsourcing of non-core activities to specialists.

• Managing the supply chain both within and beyond the single firm – i.e., the benefits of a pan-
firm orientation. This is the so called ‘ ’ pipeline’ ’ . This gives competitive advantages.

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Integration within a single system was required. Companies also have to review their internal
organisation to eliminate duplication and reduce total costs.

As popularised by Womack et al in their book ‘ ’ The Machine that changed the World’ ’ [1990] lean
principles have been used increasingly by food retailers e.g., Tesco. ‘ Lean production’ ’ was
challenged in the US & UK in the 1990s because of over-reliance on efficiency measures [‘ ’ lean’ ’ ]
rather than innovative responses [‘ ’ agile’ ’ ]. The concept of agility thus grew in the US in response
to Japanese lean production. Agility points to entrepreneurship & IT. An agile system is highly
responsive to market demands. IT captures real time data instead of relying on forecasts. It creates
a virtual chain between partners. Each system has value in particular circumstances.

It is possible for systems to be both lean and agile by combining both approaches – so called
‘ ’ leagile’ ’ . This gives competitive time-based competitive advantage:

▪ Time to market – bringing a business opportunity to market.

▪ Time to serve – meeting a customer’ s order.

▪ Time to react – adjusting output to volatile demand.

Lean, agile & leagile

Attribute Lean Supply Chain Agile Supply Chain Leagile Supply Chain

Market Demand Predictable Volatile Volatile & unpredictable

Product Variety Low High Medium

PLC Long Short Short

Customer drivers Cost Lead time & availability Service level

Profit margin Low High Moderate

Stock-out penalties Long-term contractual Immediate & volatile No place for stock-out

Purchasing policy Buy goods Assign capacity Vendor managed inventory

Demand costs Physical costs Marketability costs Both

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 Information enrichment Highly desirable Obligatory Essential

Forecast mechanism Algorithmic Consultative Both/either

Typical products Commodities Fashion goods Product per customer demand

Lead time compression Essential Essential Desirable

Eliminate muda [waste] Desirable Essential Essential

Rapid reconfiguration Arbitrary Essential Desirable

Robustness Market winner Market qualifier Market winner

Cost Market qualifier Market winner Market winner

Quality Market qualifier Market qualifier Market qualifier

Time can also be considered as:

▪ Horizontal time – time spent on processes such as manufacturing, assembly, in transit or

ordering processes.

▪ Vertical time when nothing is happening; no value is added but only cost. Products/materials
stand as inventory.

Time based competition had particular significance for fashion markets due to the short time window
for changing styles. Here in the last decades of the 20th century the trend was to source products
globally often from low-cost Pacific Rim nations. This lengthened the supply chain pipeline. Today
Zara is the leader in ‘ ’ fast fashion’ ’ .

Grocery Retail Supply Chain [UK].

After decades of confrontation today the emphasis is a collaborative approach. UK appears to have
the most efficient grocery supply chain the world over forming a contributor to success and profit
margins.

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 Supply Chain Demand Chain

Efficiency focus; cost per item Effectiveness focus; customer focussed; product
market fit

Processes focussed on execution Focussed on planning & delivering value

Cost is the key driver Cash flow & productivity as key drivers

Short-term oriented within immediate & Long-term oriented- next planning cycle
controllable future

Typically, domain of tactical manufacturing & Marketing, sales & strategic operations managers
logistics personnel

Focus on immediate resource & capacity Long-term capabilities, not short run constraints
constraints

Historical focus on operations planning & controls Historical focus on demand management &
supply chain alignment.

Supply & Demand Chain Comparison (Rainbird, 2004).

Evolution- UK
✓ Pre-1980: manufacturers stored products at their factories/warehouses. Retailers then
invested in regional DCs to consolidate deliveries from suppliers for onward delivery to stores.
Buying & distribution became a headquarter function. This created a market for 3rd party
logistical service providers. Suppliers were removed from control of the supply chain. The
power position of the retailer was reinforced.

✓ 1990s: The process above was consolidated. However, in most cases inventory had merely
been shifted from stores to RDCs. Then JIT was implemented and retailers now focussed on
primary distribution networks [supplier to RDCs] and demanded more frequent deliveries of
smaller quantities.

✓ Then ECR & CPFR initiatives. Retailers have now assumed marketing responsibilities e.g.
product development, branding, advertising and distribution. Retail brand penetration has
allowed retailers to build store loyalty and diversify into other businesses e.g., banking.

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Fashion Logistics [UK].

Characteristics of fashion markets include:

✓ Short life cycles with products that represent a period of time or trend. Still getting shorter.

✓ High volatility. Trends gain/lose popularity due to forces outside the control of retailers e.g.,
influence of celebrity.

✓ Low predictability. Volatility decreases ability to forecast sales.

✓ High levels of impulse buying. High value is placed on fashion goods hence instant need to
purchase.

Fashion retailing also has on overseas sourcing of components. Production is done in countries with
low labour costs. This creates extensive and complex apparel supply chains hence long lead times
due the geographical distance to be traversed between sourcing and selling markets. The time
between ordering a product and receiving it is long. QR was developed to address the long lead time
it took to process materials into finished goods. With QR suppliers and retailers develop mutually
beneficial long-term relationships and eliminate inefficiencies, reduce lead times and forecasting
errors.

Zara is a vertically integrated retailer which uses QR methods. It puts only 20% of its budget six
months in advance of the season which it increases to 50% at season start. This gives the company
flexibility with the remainder of the budget to react to the latest fashion trends. New stock is
allocated to stores every two weeks thus encouraging frequent visits from consumers. Business at
Zara is demand driven and the time from design to product in store is as little as 21 days. In the textile
and clothing industry inventory is sometimes held in a generic/modular form with final
assembly/configuration only when precise requirements are known through postponement of
production of the finished product. Large quantities of generic products are thus sourced from low-
cost countries and then modified closer to market when exact demand is known.

E-tail Logistics.

Global use of the Internet has grown significantly in the 21st century. UK had an estimated 46.7 million
users [77% penetration rate] in 2010. For years, the internet was used for informational rather than
transactional purposes due to security concerns and difficulties in navigation. ‘ ’ Brick & mortar’ ’
retailers also feared cannibalisation of existing business. However now there is a strong increase in

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online sales. UK sales have grown from £362 million in 1998 [0.2% of retail expenditure] to £19.5
billion in 2008 [6.7%]. The major problem remains that of cost-effective fulfilment. Grocery delivery
to the home is a significant challenge. A typical grocery order consists of 60-80 items across three
temperature regimes from thousands of products and delivery within 12-24 hours. Online non-food
orders however are less demanding. Online customers also have high expectations for rapid reliable
delivery at convenient times.

Non-grocery items are generally supplied from point of production to the home. Each order has a
small number of items [sometimes only one]. About 30% of non-grocery products are returned [6-
10% for ‘ ’ brick & mortar’ ’ ] thus imposing ‘ ’ reverse logistics’ ’ challenges –retrieval, checking,
repackaging and redistribution. There is also the problem of large fluctuations in demand especially
for newly released items e.g., best seller publications.

Distribution of online grocery sales. Many items are perishable and need rapid picking and delivery.
So picking must be localised either from an existing shop or a dedicated fulfilment/pick centre. Store
base fulfilment minimises the amount of speculative investment in new logistical facilities for which
future demand may be uncertain. Sainsbury, Asda & Somerfield went for pick-centre fulfilment while
Tesco went for the store-based model. Store-based model advantages:

✓ Better utilisation of existing assets and resources

✓ Pooling inventory between store and online.

✓ Online shoppers get access to the full range of products for which they are accustomed.

✓ Retailer achieves faster roll out and geographical expansion; securing market share and
winning customer loyalty more quickly.

However, such integration of conventional and online retailing has its problems:

✓ Impairing standards for both groups.

✓ Dedicated inventory limits access for online shoppers

✓ Inappropriate substitutions.

✓ Conflict between needs of the two groups.

Purpose built fulfilment centres are often built on separate sites with inventory dedicated to online
service. But they need to be large. It is costly to offer an adequate range especially at the beginning

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when volumes are low. There is also a problem of how to dispose of excess stock for short shelf-life
products. Price reductions and in-store merchandising are more difficult to apply. Tesco.com has a
few dedicated fulfilment centres; the first opened in 2006 in London.

The geography of the retail market also matters e.g., density of demand or level of local competition.
US e-grocer Peapod uses store-based fulfilment to penetrate new markets. Later they invest in
distribution centres. In the UK, the store-based model pioneered by Tesco appears to be the most
cost effective. Thus, Tesco dominates the UK internet grocery market. It has established itself as the
world’ s largest online grocery retailer and perhaps the most profitable.

The Last Mile. Making delivery to the home must strike an acceptable and profitable balance between
customer convenience, distribution cost and security while minimising waiting time and
inconvenience. Thus, sometimes companies consider:

✓ Giving driver access to the home or an outbuilding

✓ A home base reception ‘ ’ drop’ ’ box

✓ Local collection point

✓ Delivery to a local grocer who will make final delivery.

NB: See papers listed included under E-Learning:

• Last Mile Fulfillment and Distribution in Omni-Channel Grocery Retailing: A Strategic Planning Framework. By Alexander
Hübner, Heinrich Kuhn and Johannes Wollenburg. Catholic University. November 2014
• The 'last mile' problem. Logistics - Nov 04, 2013. Written by Euan Coupland on behalf of Parcel2Go.com, one of the UK’ s
leading independent courier companies.

Tesco.com: delivery home shopping.

Tesco.com has become the largest Internet grocery system in a short time. Unlike other companies,
it has opted for in-store picking and home delivery operation instead of a dedicated distribution
centre system. This was because:

• Low penetration levels and drive times for vehicles being too high.

• To ensure that the online offer was not reduced [customers indicated this] thus
compromising the point of shopping at Tesco.

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 • Outside London the warehouse option was not valid.

Roll out was rapid soon after introduction. Each store involved has dedicated local delivery vehicles.
It was observed that:

• Fresh food was a big seller online and not big, bulky replenishment items as had been
expected

• People plan their online order better than their in-store trip.

• The non-food item offer can be more extensive online than in store

• Knowledge is gained from online shopping about item not in stock thus helping enhance the
supply system.

Logistics and Fast Fashion. (Dicken, 2003). Global Shift.

Changing patterns of demand fundamentally influence the size, organisation and location of the
textiles and garments industry. About 50% of all textiles production is directed to the garments
industry as follows:

• 28% for fashion garments [this has the fastest growth].

• 27% for fashion-basic garments.

• 45% for basic garments.

The demand is reliant on the general levels and distribution of personal incomes. However personal
incomes are very unevenly distributed geographically with the most affluent setting the nature of
demand. Beyond basic necessities, demand is dependent on growth of incomes. This is stimulated
through fashion change: away from low margin basic garments to higher margin fashion related
garments. There is much promotion of fashion products and creation of “designer” labels from the
exceptionally expensive to the relatively cheap. Designer labels seek to differentiate relatively similar
products and to encourage market segmentation.

In the garment industry, demand is dominated by the purchasing policies of major multiple retailing
chains e.g. Walmart, Sears, JC Penny, K-Mart etc. in the US; Carrefour in France, Marks & Spencer in

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the UK. In addition to these, specialist garment retailers have emerged sometimes serving niche
markets e.g. The Gap, The Limited e.g., by age or income. Then Zara in Spain; Uniqlo in Japan catering
for affluent young consumers. Some trends include:

• Frequent store-specific shipments.

• Ongoing replenishment orders.

• Direct store deliveries.

Traditional mass market retailers had long distribution runs of standardised garments at low cost.
Low frequency delivery was meant for a season. The retailer would hold the product in central
warehouses or backrooms. The modern market requires frequent fashion changes. Real-time sales
information is now critical. Time involved in delivery becomes critical:

• Product proliferation and shorter product life cycles.

• Ever changing styles.

• Demand uncertainty for both retailers and manufacturers.

• Difficult demand forecasting and production planning.

• Speed and flexibility are crucial.

Few retailers are into manufacturing but they are more involved in subcontracting arrangements.
The production chain becomes buyer-driven.

Large firms dominate the textile industry [some 30 or so companies]. However, the production of
garments is fragmented and has few large firms. In this sector, uncertainty limits long production
runs or high-volume production. Strategies pursued include:

• Producing standardised goods for mass market

• Use of low-cost labour in offshore locations.

• Producing small quantities of specialised goods for specific market niches. This requires high
quality products sold at premium prices.

Actual garment manufacturers adopt three strategies:

• Basic goods for large markets using economies of scale.

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 • Small workshops including sweatshops using immigrant or undocumented labour

• Production of short orders to fill gaps for specific segments of

the market.

There is also the growth of ‘ factory-less’ firms which organise an entire system of garments
production. Such firm exert enormous purchasing power and leverage. As a result, the boundary
between production and retailing becomes blurred as power shifts towards buyers [department
stores, discount chains or fashion-oriented firms].

Benetton [Italy] has developed a distinctive strategy. Benetton consider themselves not a
manufacturer or retailer but rather a “garments service company”. Unlike many companies who
have shifted production to Asia, Benetton produces 80% of its garments in Europe, mostly Italy by
using subcontractors mostly in north Italy [Veneto region]. This strategy allows for considerable
flexibility to changing demand. Benetton focuses on design, cutting, dyeing and packing to ensure
maintenance of quality and cost efficiency. They have 2 high-tech plants for state-of-the-art cutting
and dyeing and a highly computerised warehouse.

Zara has made spectacular progress with fast changing fashion-basic garments from its La Coruna
base [its design and manufacturing centre using over 400 local cooperatives] in north-west Spain:

• As a vertically integrated business which covers design, just-in-time production, marketing

and sales.

• Zara makes over 50% of its clothes in-house.

• Designers talk daily with store managers.

• Zara makes a new line from start to finish in 3 weeks against industry average of 9 months;
producing 10 000 new designs yearly. None stays for over a month. Other companies
abandoned manufacturing a long time ago. It combines highly efficient production and
distribution logistics with continuous monitoring of the fashion scene in its highly volatile
industry.

• Zara reps attend ready-to-wear shows in Paris, New York, London and Milan to do quick
sketches or they take digital photos.

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Last Mile: E-fulfilment in the grocery sector.
The final step in the delivery process from distribution centre to end user may range from a few blocks to
100 kilometres is especially important with a growing e-commerce market

Regardless of the model adopted for e-grocery, the problem of the “last mile” poses difficulties. Two
critical choices must be met in designing a home delivery system:

a) Supplying customers from existing shops or dedicated fulfilment [pick –up] centres

b) Attended or unattended delivery.

Tesco has built the world’ s largest online grocery business in the UK using entirely shop based
fulfilment and has no plans to develop pick-up centres. [Freathy, 2006]. US Company Peapod initially
supplied from partner shops; then invested in dedicated fulfilment centres. Sainsbury was originally
wedded to fulfilment centres. Evidence appears to suggest that existing retail centres for several
reasons:

▪ Minimising on new investment and increasing utilisation of retail assets

▪ Pooling of retail inventory

▪ Improving ratio of inventory to sales

▪ Online shoppers also get a wider range of products

▪ Allows the retailer to ‘ roll out’ the service rapidly across a wide geographical market; hence a
faster rate of market penetration.

▪ But there is an inherent conflict between aisles clogged with personal shoppers and car parks
monopolised by delivery vehicles.

Sometimes online shoppers rely on the retailer to make substitutions if an item is not available. Such
substitute can be a poor second best and so impair the overall quality of customer service. There will
be conflict between conventional and online retailing at the front and back where assembly and
packing of home deliveries are made.

Most purpose-built fulfilment centres are on separate sites to give a more efficient service for inbound
and outbound vehicles and assure home shoppers of availability. But this has a high cost in capital
investment and operating costs. Offering a limited range to online shoppers reduces the appeal of
online shopping and retards market growth. Pick-up centres also experience problems with disposal of
excess stock due to short shelf-life products. Conventional store can deal with excess stock easily using
price reductions or in-store merchandising techniques.

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Retail Logistics in the UK: past, present & future (Fernie, Sparks and McKinnon, 2010)
“The process of strategically managing the procurement, movement and storage of materials,
parts and finished inventory [and related information flows] through the organisation and its
marketing channels in such a way that current and future profitability are maximised through
the cost-effective fulfilment of orders.” [Christopher, 1998]

Due to the large range of products available in a supermarket, or department store, much hard work
is needed to get the right products to the right place at the right time in the right condition. With e-
commerce, we expect 24-hour availability and home delivery. We expect instant product availability
and gratification. Physical distribution and materials management have been replaced by supply
chain management and logistics management. These elements can be very expensive unless
controlled effectively.

• Holding stock/inventory is costly.

• Stock is expensive and could become obsolete.

• Warehouses are expensive to build, operate and maintain.

• Vehicles for transport involve substantial capital and running costs.

But there are potential service benefits from integration of demand and supply through widespread
use of IT and systems which enable retailers to provide better service to consumers e.g., fresher,
higher quality produce. Better quality produce could be cheaper and have a longer shelf life; with
fewer stock outs. This can confer a competitive advantage.

Retail and logistics are concerned about product availability. Many things can go wrong during this
process e.g., demand for ice cream or soft drinks depends so much on the weather or timing e.g. to
capture the demand ahead of Valentine Day. There is little demand for cards on 15 th February.
Retailers must be concerned about the flow of products and information within the business and the
supply chain.

Logistics Mix

The logistics system consists of the following components:

a) Customer service,

b) Inventory management,
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 c) Transportation,

d) Storage and materials handling,

e) Packaging,

f) Information processing,

g) Demand forecasting,

h) Production planning,

i) Purchasing,

j) Facility location and other activities.

Five of the elements above are sometimes referred to as the logistics mix:

1) Storage, warehousing and materials handling.

2) Packaging and unitisation.

3) Inventory.

4) Transport.

5) Information and control.

1) The FIVE elements of logistics (Logistics mix)

There are five elements which together describe logistics activities and processes within any supply
chain namely:

2) Storage, warehousing and materials handling

3) Packaging and unitisation

4) Inventory

5) Transport

6) Information and control

Storage, material handling and warehouses in logistics enable a steady flow of products to be
supplied to enable facilities to operate at peak efficiency. In general, there is often an imbalance
between supply, which is steady, and demand, which is often unpredictable. Thus, goods are often

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stored to meet demand by consumers when this arises. warehouses serve this purpose. These need
specialist storage equipment such as shelving or racks and material handling equipment to move
them around the warehouse and to load and offload delivery vehicles.

1) Role of packaging and unitisation

Packaging (one of the Rs of logistics) is an essential part of the care and condition of a product.
Unitisation is also important for storage and transportation. The easiest product to move and store
is a cube, so packaging and unitisation attempts to take all different sizes and shapes of product and
pack them as near as possible into a cuboid shape.

2) Role of inventory

Inventory is closely related to storage and warehousing. It encompasses what stock to hold, where
the stock is located and how much stock to hold. In effect, inventory is controlling the flows of goods
going into and out of a warehouse by looking at sales data of past orders and using statistical tools
to predict how much goods will be demanded by consumers. Inventory management is not an exact
science, but depending on how variable demand can be, it is a useful tool to help manage the flows
of goods through the supply chain.

3) Role of transport

Includes all modes of transport including road vehicles, freight trains, cargo shipping and air
transport. Without transport, goods would be unable to move from one stage to another within a
supply chain. Some goods with short supply chains, such as foods, do not travel far. Other more
complex products consist of many components that can be transported from all over the world.

4) Role of information and control

The element of information and control is needed by all the elements to act as triggers to various
operational procedures. For example, order levels help decide what orders need to be picked and
packed in warehouses and what transport needs to be planned and organised or in the design of
information systems that can control operational procedures or in forecasting of demand or
inventory.

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Logistics mix
There are five components of the logistics mix:

1) Storage facilities – warehouses or distribution centres or stock rooms of retailers, materials

handling facilities. Stock must be kept in anticipation of demand.

2) Inventory. All retailers hold stock to some extent. However, the amount of stock/inventory
has to be held for each product and the location of this stock to meet demand changes varies.

3) Transportation is needed usually from centres of production to consumption points. The

transportation operation must be managed- different forms of transport, different vehicle
sizes; scheduling and availability of drivers and vehicles.

4) Unitisation and Packaging. Consumers buy products in small quantities. Consumers decisions
can be influenced by presentation and packaging. Products should be easy to handle should
not cost too much to package or handle.

5) Communications, information and control. Information is needed about supply/demand,

volumes, prices and movements. Retailers need to capture data at appropriate points in the
systems and to be able to use that information for more efficient and effective logistics
operation.

All these elements are interlinked. Goods sales data from check out points assists in scheduling
transport and in decisions about levels of stock holding. If lower levels of stock can be held then fewer
warehouses will be needed. Better systems can also allow the retailer to use a distribution centre to
sort products for delivery to stores in a fashion similar to JIT. But retailers cannot do all this alone.
Their primary business is selling goods and services to consumers. They must work closely with
manufacturers and suppliers in crafting better logistics systems. The entire supply system must be
optimised and managed as a single system to achieve cost reduction and enhance service for the
retailer and its suppliers. Products thus reach stores rapidly to satisfy transient customer demand.

Data can be gathered on a daily or real time basis. Variations in orders, storage needs and production
can multiply and become exaggerated as the system and its component companies react to situations
that have already changed. This is called the Forrester Effect – small disturbances are magnified as
the effects are magnified through the supply chain. This may be caused by poor retail strategies, poor

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transmission of demand data, storage requirements and availability, competitor pricing, promotions
and advertising etc. Logistics costs rise for all and ultimately for the consumers. [See Bull Whip]

Logistics systems are highly advanced and complex operations and they may be spread across the
world; retailers may have thousands of stores with numerous product lines and millions of sales daily.
Data must be used to ensure effective operations among retailers and suppliers, head office, stores,
distribution centres, vehicles and drivers. In the UK, retailers have contracted out [outsourcing] some
aspects to specialist logistics service providers. Companies which provide vehicles may paint retailer
logos on their vehicles. Logistics service providers [Hays, Exel etc.] may run many distributions centres
at motorway interchanges but these bear retailers’ names. They operate numerous facilities and
activities for major retailers. Tesco operates a few distribution centres itself for purposes of
benchmarking.

Amazon.com subcontracts delivery of products to specialist firms such as Federal Express, UPS or
Royal Mail. It thus uses a network that is already in place.

7 Rs in Logistics Management
The right:

1) Product

2) Place

3) Time

4) Price

5) Customer

6) Condition

7) Quantity

Development of Retail Logistics in the UK

Period Problem Innovation Consequences

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 Disorderly Introduction of regional Strict timing of supply delivery to RDC.
delivery by distribution centres [RDC]
suppliers; vehicle operated by retailers Retailers build & operate RDC.
1960/70s
queues –
Retailers operate own delivery fleet.
inefficiency and
disruption

Retailers become Retailer owned RDCs and Retailers concentrate on core business of
too committed to vehicle fleets outsourced to retail
1980s operating logistics specialist freight companies.
Better financial returns from capital
invested in RDCs & vehicles

Floor space at Conversion of storage floor Better sales revenues.

retail outlet space into sales floor space
underused; too RDCs absorb products formerly kept at
1980/90s much floor space supermarkets
used for storage
JIT delivery used from RDC to replenish
supermarket shelves.

Requirements for Re-organisation of DCs; Better in-store quality & stock position.
better customer development of stockless
service & cost centres; store-based Technological expansion through
1990s
control; range of Internet delivery systems. operations.
products expands
Rapid roll-out of Internet operations.

Retailers used to be passive recipients of products which were allocated by manufacturers in

anticipation of demand. Today they actively control product supply in response to known consumer
demand. They control, organise and manage the supply chain from production to consumption.
Retailers are now channel captains who set the pace in logistics. They set up cooperative and
collaborative relationships. Innovations in logistics show a movement from manufacturer controlled,
transport-oriented system to a retailer led and replenishment focussed technology rich supply chain
beginning in the food retail sector.

Trends:

1) Increased control over secondary distribution [warehouse to shop] as they channel supplies
through DCs. In grocery, this is almost complete.

2) Restructured logistical systems. Retailers have reduced inventory by developing “composite

distribution” – mixed temperature items through the same distribution centre and same
vehicle] and centralisation in specialist warehouses of slower moving stock.

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 3) Adoption of “Quick Response” [QR] to cut inventory levels and speed product flow. This
reduces order lead times and more frequent delivery of smaller consignments. This was
achieved through electronic data interchange [EDI] and electronic point of sales [EPOS]. This
has created a sales-based ordering system. As items are sold and scanned in a shop this
informs replenishment and reordering systems. Such data is also shared with key suppliers
hence integrating production and supply.

4) Rationalisation of primary distribution [factory to warehouse] due to QR pressures and

intensity of competition. Retailers have extended their control from DC to manufacturers.
Primary and secondary distribution operations have been run as a single network system. This
reduces waste and improves efficiency.

5) Introduction of Supply Chain Management [SCM] and efficient consumer response [ECR].
Retailers collaborate closely with suppliers for greater efficiency.

6) Increased return flow of packaged material and handling equipment for recycling and re-use.
Retailers become involved in ‘ reverse logistics’ and the use of reusable containers.

New Approaches to Retail Logistics.

The supply chain must be managed in a seamless way from production to consumption moving
products appropriately and rapidly. In terms of base flow [a lean system] and rapid reaction to
demand [an agile system].

1) QR and ECR. Both concepts have their origin in the US. ECR is a global movement, mainly in
the grocery industry, focussing on the total supply chain. Suppliers, manufacturers,
wholesalers and retailers work closely with each other to fulfil the changing demands of the
grocery consumer. [www.ecrnet.org]. it covers category management, product
replenishments and it uses enabling technologies such as EDI, EFT, item coding and database
management and Activity-based Costing – ABC.

2) Collaborative Planning Forecasting & Replenishment [CPFR] and Internet exchanges. CPFR
aims at reducing inventory while improving product availability across the supply chain.
Trading partners share forecasts and results over the Internet. The technology analyses data
and alerts planners at each company to exceptional situations which affect deliver or sales
performance. Partners then collaborate to solve the exceptions. Communication of critical

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 data is expanded and systematised. Thus, manufacturers are able to move from make-to-
stock approach to make-to-demand. The result is reduced inventory, less product
obsolescence and production cost savings. By using Internet, it is possible to achieve closer
alignment between suppliers and business partners. Wal-Mart has an extensive example of
such use through its Wal-Mart Retail Link; Tesco has its Information Exchange.

Clearly modern logistics systems depend heavily on the use of IT. Logistics today is as much about
product movement as it is about information movement. It is no longer a separate functional activity;
it is about integration not just within the company but also increasingly with outside suppliers,
logistics service providers and customers. Partnership is a strong component of retail logistics and
ability to work with other individuals. The ‘ reach’ of retail logistics has expanded enormously from
local suppliers and products to and from local warehouses to a much more global outlook with
products from around the world

Future issues for retail logistics.

1) Environmental Issues. Logistics aims at cost and service improvement as well as greater
efficiency and effectiveness. However, logistics can have a major negative impact on the
environment. There have been improvements in vehicle design, engine efficiency, reusable
handling systems and building standards but products now have to travel longer distances.
Companies now use reverse logistics through recycling, re-use and reduction in materials
used. Reverse logistics also reduces materials in the forward system such that fewer materials
flow back, reuse of materials is possible and recycling is facilitated. In Denmark, no soft drink
cans are allowed and all glass bottles have deposits for return. Grocery shops may use plastic
trays and boxes for fresh produce. Sometimes government is a key driver for such changes.

2) e-Commerce Future development of the distribution industry should not compromise future
needs of society, economy and the environment. Businesses should become more efficient in
their operations. Pressure can be fiscal [taxes] but it may also be more subtle.

Resource Reduction.

Reuse

Recycling

Disposal with energy

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 Disposal in landfill

Reverse Logistics Hierarchy.

3) E-commerce. Internet shopping [www.marketspace.org] allows retailer to exploit potential

for consumer contact. Internet selling [e-tailing]. In terms of brand recognition Amazon is an
Internet colossus. Its website includes online reviews, recommendations, order tracking etc.
A massive range of products is available some of these being held by Amazon itself.
Distribution by 3rd party carriers to the home is possible e.g., using the Post Office or Federal
Express. For non-food retail, companies have used catalogues and specialogues for a long
time. Rapid delivery by specialist handlers ensures products reach customers quickly. A
returns system also has to be developed.

Some issues about e-tailing:

• Should delivery always be at home?

• Does the recipient have to be there?

• Is the picking at the store or at a new centre?

• Should there be a charge?

• How should last minute, time-dependent purchases be handled [Do we need expedited
systems for these?] e.g., at Xmas?

Retail format. What is it?

The format of a retailer is the overall appearance and feel that it presents to customers, primarily its
look and layout, the sort of range it stocks and the approach taken to pricing. Format is distinct from
fascia which, strictly speaking, refers solely to external appearance.

Private brand/label
• Meaning

• Examples.

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TESCO: SUPERPOLY: (Rowley, 2009)
Monopoly is a circumstance in which one company supplies the entire market; one company has a
controlling share of the markets. It is a persistent situation where there is only one provider of a good
or service; there is lack of economic competition; lack of a viable substitute.

Large retailers and supermarkets may have significant control over consumers and an impact on the
supply chain, society and the environment. Campaign groups have even been formed to challenge
such supermarket chains. They also impact on suppliers, farmers [channel] and workers [careers],
local shops as well. Supermarkets can shape lives. The larger they are the more they exert power and
control in the market space generally.

• Tesco has the largest market share of grocery retailers in the UK. [30.5% in 2006]; only a
little less than the two largest competitors combined.
• A huge impact on consumption: £1 in £7 spent in shops is spent in Tesco; it’ s the
dominant supermarket in 81 of Britain’ s 11 postcode areas. One town, Inverness has
been branded Tesco town: 50p in every £1 spent on food goes through Tesco’ s three
stores in that city. In 2005, 53% of households in the UK visited a Tesco store every 4-week
period.
• Competitor Sainsbury fears Tesco could grab up to 43% of market share.
• Tesco has more sales space in UK than any other leading supermarket with its 1 897 stores;
124 planned for early 2008.
1) Commercial space. Tesco competes through different formats: Extra, Superstore, Compact,
and Metro & Express. This allows it to maintain a presence in settlements of all sizes and offer
a convenient solution for a wide range of shopping needs. It thus competes even with local
stores & garage forecourt shops. This is in addition to its online retailing business which is one
of the most successful.
Store Formats
Format Comment

Extra Hypermarket format; designed as destination stores with a wide

catchment area. They are a key vehicle for non-food items.

Superstore This is the core store format: full food range, supplementary
services; limited non-food ranges. Mostly out-of-town.

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 Compact Smaller versions of superstores; usually in market towns or edge
of town.

Metro/High Street “Pocket supermarkets” that focus on convenience food,

takeaways & lunch items; typically, high street locations.

Express Convenience stores located mainly on petrol forecourts;

operated as joint venture with Esso Fuels. Range broad and
shallow with emphasis on fresh food and impulse lines.

2) Channel space. The business strives to influence and control consumption through its product
and service portfolio. Originally Tesco was a food retailer or grocer. But it now has extended
its product ranges. It has different brands in the food sector for different tastes and pockets.
Non-food now includes clothing, consumer electronics, financial services, music,
telecommunications etc. This allows Tesco to claim a large share of customers’ purses. Tesco
even competes with banks and insurance companies in the financial services sector.

Tesco Brand Ranges

Range Comment

Tesco Value Around 1 000 lines benchmarked against the cheapest

branded competitor on quality and cheapest
supermarket or discounter in terms of price.

Tesco Brand Over 8 000 lines to achieve market leading quality at

lower price than market leader.

Tesco Finest 950 lines responding to changing lifestyles; to retain

existing customers and reinforce the “affluent” image
of the product.

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Healthy Living 400 products: both food & non-food based on increasing
interest in healthy eating, sports and fitness.

Kids 40 lines aimed at children 5-10 designed to increase

nutrients in children’ s diets.

Organic 1 200 products: covering produce, dairy, bakery, meat,

baby & BWS[beers, wines & spirits]

Free From 150 products designed for allergies & intolerances

Fair-trade 100 products. That developing world farmers are paid a

fair price + a premium spent on community projects in
healthcare, education, sanitation & housing.

3) Community space. Here the business becomes an integral part of social not just commercial
communities as the number of outlets grows; it is a meeting place for neighbours and friends.
Initiatives include Tesco in the Community; Computers for Schools. It promotes healthy
eating, recycling, and urban regeneration and supports charities. Green Club points
encourage re-use of carrier bags, nutritional labels & Xmas card re-cycling. A member of
Business in the Community Per Cent Club by giving 1% of its pre-tax profits to community
activities. It has adopted ‘ community’ as one of its core priorities together with customers,
operations, finance and people. Winning customers is thus based not only on value, choice
and convenience but also on being a good neighbour, being active in communities and
behaving responsibly, fairly and honestly [CEO Sir Terry Leahy].

In deals with local authorities, Tesco makes a variety of other investments in local
infrastructure and services. Tesco Club is an umbrella organization for Tesco customers and
there are related clubs for wine, healthy foods and baby products. Such clubs meet
real/genuine customer needs as well as promoting emotional attachment to the Tesco brand.

4) Cultural Space. Tesco seeks to influence values & identities of consumers and even
communities; also, the behaviours of suppliers and consumers. Suppliers are expected to
extend fair and honest dealings to employees; raise awareness of ethical trading; ethical

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 issues, worker welfare in the supply chain. Tesco Club is a powerful weapon in managing this
space by collecting data on customer behaviour, segmenting, targeting, using targeted
promotions, discounts and rewards thus allowing Tesco to influence behaviour by creating a
compelling shopping experience through products, prices and promotions; shaping consumer
values and identity within the arena of consumption. “Consumption is an important arena
through which we build identities”.
5) Communication space. A business manages its reputation, image and messages by being
heard and noticed by consumers and creating maximum impact with minimum expenditure.
Tesco has an integrated marketing communication campaign through a range of different
media. At the heart of this strategy is the brand slogan “Every little helps”. The brand symbol
is bright, positive and ever present. Clubcard builds visibility, customer interaction and image.
Clubcard and Tesco are co-branded and co-promoted. This builds presence; promotes “fun”
and “pleasure” connotations to the Tesco brand [also reward coupons]. This offers a
significant, targeted and personalized opportunity to talk to customers.
6) Career Space. This determines employment and advancement opportunities and experiences.
Pay, working experience, workplace values, priorities, and development and career
opportunities shape the lives of employees and their families. Retailers as employers have
replaced factories and mines of industrial society. In the UK, Tesco is 2nd to NHS and in 2007
it was the largest private sector employer. Tesco embraces careers and training, health and
safety, inclusivity [for people with disabilities and older people] as well as family friendly
policies.

The 7Cs above are not independent: synergies between them exist. Tesco also has a commitment to
purchase from local suppliers e.g., for fresh produce thus reducing distances from farm-to-store. This
affects the local economy and community space.

But there are both negatives and positives whenever one large business holds a dominant position
e.g., in the cultural space there may be a cynical and invasive manipulation of people’ s behaviours
thus impacting on consumption trends, values and identities. Of course, consumers may be happy
about Tesco’ s dominance- it delivers what they want [or think they want]. However, to what extent
can members of society ever make informed decisions about what they really want? This reduces the
power and choice of consumers and stakeholders.

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Understanding the Supply Chain (Chopra and Meindl, 2014)

A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer request. It
covers manufacturers and suppliers; transporter, warehouse, retailers and even customers
themselves: all functions involved in receiving, and fulfilling that customer’ s request. The range of
functions therefore covers product development, marketing, operations, distribution, and finance
and customer service. It begins with the customer and his/her needs. The customer is an integral part
of the SC. A SC is dynamic as it involves the constant flow of information, product and funds among
different stages. Due to complexity, it may help to view supply chains as supply webs or networks.
There are five main stages:

• Customers
• Retailers
• Wholesalers/distributors
• Manufacturers
• Component/raw material suppliers
Each stage in a SC is connected through the flow of products, information and funds; often in both
directions. Funds flow [in the form of cash] in the opposite direction to materials. Funds originated
from the customer and are used to pay bills progressively from one supply chain partner to the next
upstream.

Objective of the SC.

The principal objective is to maximise the overall value generated. This value is also known as the
supply chain surplus i.e., the difference between the value of the final product to the customer and
the costs the entire SC incurs in fulfilling the customer’ s request. Thus:

Supply Chain Surplus = Customer Value – Supply Chain Cost.

The value may differ from one customer to another. It may be estimated by the maximum amount
the customer is willing to pay. The difference between the value of the product and its price remains
with the customer as customer surplus. The rest of the supply chain surplus becomes the supply
chain profitability which is shared across all SC stages and intermediaries. The higher the profitability,

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the more successful the SC. SC success should be measured using SC. Success not profits at individual
stages. Focussing on SC surplus will push all members to grow the size of the overall pie.

For any SC, the customer is the only source of revenue. The customer is the only one providing a
positive cash flow. All other cash flows are simply fund exchanges within the SC as the different stages
have different owners. All flows of product, information or funds generate costs within the SC.
Appropriate management of these flows is therefore key to the success of the SC.

Supply chain design, planning and operation play a significant role in the success or failure of the firm.

Decision phases in a SC.

Decisions need to be made to raise supply chain surplus. Successful companies e.g. Walmart,
Amazon, Seven Eleven, build their success on superior design, planning and operation of their supply
chains. These decisions fall into three categories or phases:

a) SC strategy/design i.e., the structure or configuration of the SC: how resources will be used;
what processes each stage needs to perform. Whether to outsource or perform in-house;
location or capacity of production or warehouse facilities; which products to be manufactured
or stored at various locations; the modes of transportation to be used or the information
systems to be used. Design decisions are typically long term and so are expensive to alter in
the short term. They involve uncertainty.
b) SC planning. The timeframe is a quarter to a year. The configuration determined at the
strategic stage remains fixed and it sets a constraint within which planning must take place.
The goal of planning is still to maximise surplus in the light of given constraints. These
decisions concern which markets to serve; from which locations; whether to subcontract;
inventory policies, timing and size of marketing and price promotions. Planning must
recognise uncertainty in demand, exchange rates and competition. Because the timeframe is
shorter, forecasts may be better. A set of operating policies are established to govern short
term operations.
c) SC operation. The time horizon is weekly or even daily. Decisions focus on individual customer
orders. SC configuration was fixed at Stage 1 and in addition, planning policies have already
been defined. At this stage, a firm inventory/production to individual orders; a date for when
an order should be filled; generate pick up lists at warehouses; allocate shipping mode and

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 shipping; set delivery schedules for trucks; place replenishment orders etc. there is less
uncertainty about demand information.
These three stages have an important bearing on profitability and success.

Process views of a SC.

A supply chain is a sequence of processes and flows within and between different stages. These
combine to meet a customer need. The processes performed within a supply chain can be viewed in
two ways:

1) Cycle View: processes are divided into a series of cycles; each one at the interface between
successive stages. There are four process cycles:
a) Customer order cycle
b) Replenishment cycle
c) Manufacturing cycle
d) Procurement cycle.
Each one occurs at the interface between two successive stages of the SC. However, not every SC has
these 4 cycles clearly separated. Dell for example bypasses the retailer and distributor to sell to
customers directly. Each cycle however consists of six [6] sub processes:

i) Marketing the product

ii) Placing the order
iii) Receiving the order
iv) Returning reverse flows to supplier or 3rd party
v) Receiving supply
vi) Order supplied.
The cycle view defines processes involved and the owners of each process. This is useful in that it
specifies the roles and responsibilities of each party when considering operational decisions.

2) Push/Pull view – depending on whether they are executed in response to customer order
[pull] or in anticipation of customer orders based on a forecast [push]. Pull processes are also
referred to as reactive because they react to customer demand. Push processes are similarly
called speculative because they react to speculated [forecasted] rather than actual demand.
The push/pull boundary separates push from pull processes. Push processes operate in
uncertain environments because customer demand is not yet known. [Example from LL Bean

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 and Ethan Allen a manufacturer of customised furniture where customers select fabric and
finish].
The push/pull view is suitable when considering strategic decisions relating to the supply chain
design. [Example given of the changes in the paint industry].

SC Macro processes in a firm:

There are three macro processes:

▪ Customer Relationship Management [CRM] at the interface between the firm and its
customers.
▪ Internal Supply Chain Management [ISCM] all processes internal to the firm.
▪ Supplier Relationship Management [SRM] between the firm and its suppliers.

Drivers of SC performance.
‘ Better, Faster, Cheaper, Closer’

Galankashi, M. R. et al (2019) Agility assessment in manufacturing companies

The purpose of this paper is to propose a framework to assess the agility of manufacturing companies.
Particularly, three supply chain logistic drivers (facility, transportation and inventory) along with three
cross-functional drivers (information, sourcing and pricing) are selected as the main sets to classify all
required activities of agility.

Drivers of SC performance.

Competitive strategy

SC strategy
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 Efficiency Responsiveness

SC Structure

Logistical drivers

Facilities Inventory Transportation

Information Sourcing Pricing

Cross functional drivers

Integration of these three is crucial for successful SCM. The macro processes manage the flow of
information, product and funds necessary to generate, receive and fulfil a customer request. All are
aimed at serving the same customer. Lack of integration compromises ability to match supply and
demand effectively. [Zara, Toyota and Amazon example p 26-9].

A company’ s supply chain must strive to balance responsiveness and efficiency to support
competitive strategy. This is achieved through the interaction of logistical and cross-functional drivers
of the SC. Drivers determine supply chain performance. Responsiveness at the lowest possible cost:

1) Facilities. These are the physical locations where product is stored, assembled or fabricated.
The two major types of facilities are production and storage sites. Decisions on the role,
location, capacity and flexibility of these impact SC performance. Production or warehousing
facilities may be located close to customers and their numbers may be varied thus affecting
responsiveness. Capacity may also be increased. This however comes at a cost even though it
decreases transportation costs and cuts response time. Every supply chain must find an
appropriate trade-off when designing its facilities network. Examples: IKEA & Seven-Eleven.
Companies must examine the following components about their facilities:
a) Role. Flexible, dedicated or a combination. Whether product based or functions based.
Whether primarily cross-docking or as storage facilities.

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 b) Location. Whether to centralise and gain economies of scale or decentralise to get
responsiveness by being closer to the customer.
c) Capacity. Excess capacity allows the facility to cope with swings in demand. But this
costs money and may decrease efficiency. Another trade-off is needed.
There are also related metrics:

▪ Capacity
▪ Utilisation
▪ Processing/setup/down/idle time
▪ Production cost/unit
▪ Quality losses
▪ Theoretical flow/cycle time
▪ Flow time efficiency
▪ Product variety
▪ Volume contribution of top 20% SKUs and customers
▪ Production batch size
▪ Production service level- fraction completed on time and in full.
2) Inventory – all raw materials, WIP and finished goods within the SC. Changes in inventory
policies can dramatically affect responsiveness. Zara a good example. Inventory exists due to
mismatch between supply and demand. Mismatch may be intentional e.g., for a steel
manufacturer in order to manufacture in large lots and store for future. Or to prepare for a
surge in demand e.g., at festive season. Inventory impacts on material flow time i.e., the lapse
between the point at which materials enter the supply chain to the point where it exits.
Throughput is the rate at which sales occur. Little’ s law states: I=DT where I=inventory; T=
flow time and D= throughput. Example: Amazon holds 100 000 units of inventory and sells 1
000 daily. Thus, the average unit will spend 100 days in inventory.
Components of inventory decisions:
▪ Cycle inventory
▪ Safety inventory
▪ Seasonal inventory.
Inventory related metrics:

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 ▪ C2C cycle time [from when cash enters the process as cost to when it returns as collected
revenue]
▪ Average inventory
▪ Products with more than a specified number of days of inventory
▪ Average replenishment batch size
▪ Safety inventory
▪ Seasonal inventory
▪ Fill rate
▪ Fraction of time out of stock
▪ Obsolete inventory.
3) Transportation- moving inventory in the SC. Transportation takes many combinations of
mode and routes each with its own performance characteristics. Moves product between
different stages. It affects responsiveness and efficiency. Faster transportation allows quicker
response but is more expensive. Choice of transportation allows a firm to adjust location of
facilities. Components of transportation decisions:
▪ Network design
▪ Mode.
Metrics:

▪ Inbound/outbound transportation cost

▪ Shipment size
▪ Inbound/outbound transportation cost per shipment cost.
▪ Fraction transported by mode
4) Information – data and analysis about facilities, inventory, transportation, prices, costs or
customers. Information has the highest potential to affect performance. It can make supply
chain more efficient and more responsive. Sharing of information can help a SC. However,
more information is not always better due to increased complexity and cost of required
infrastructure and the necessary follow-up analysis which may grow exponentially. There is a
trade-off between complexity and value. Example: DHL. Components of information
decisions:
▪ Push v Pull
▪ Coordination and information sharing

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 ▪ Sales and operations sharing.
Enabling technologies:

▪ EDI
▪ Internet conveys even more information
▪ Enterprise resources Planning [ERP]
▪ RFID
Metrics:

▪ Forecast horizon
▪ Update frequency
▪ Forecast error between actual and forecast may reflect uncertainty
▪ Seasonal factors
▪ Variance from plan
▪ Ratio of demand variability to order variability
5) Sourcing. Choice of supplier, storage, transportation and management of information. At the
strategic level this determines which functions are performed in-house and which ones are
outsourced. Zara distinguishes between basic products like T-shirts which have predictable
demand and trendy products. Components:
▪ In-house or outsource
▪ Supplier selection
▪ Procurement.
Metrics:

▪ Days payable outstanding

▪ Average purchase price
▪ Range of purchase price
▪ Average purchase quantity
▪ Supply quality
▪ Supply lead time
▪ Percentage of on-time deliveries
▪ Supplier reliability.

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 6) Pricing. How much is charged for goods and services. Pricing affects customer behaviour thus
also affecting demand and supply chain performance. Pricing can be used as a lever to match
supply and demand. Components of pricing decisions:
▪ Economies of scale
▪ EDLP vs High-Low pricing
▪ Fixed prices vs menu pricing.
Metrics:

▪ Profit margin
▪ Days sales outstanding
▪ Incremental fixed cost per order
▪ Incremental variable cost per unit
▪ Average sale price
▪ Average order size
▪ Range of sale price
▪ Range of periodic sales
Framework for structuring drivers.

Most companies begin with a competitive strategy then move on to a SC strategy which determines
how the company achieves an appropriate balance between efficiency and responsiveness. Thus,
Walmart has a competitive strategy to be a reliable low-cost retailer for a wide variety of mass-
consumption goods. This puts the stress on efficiency as well as availability of product. On its
inventory driver Walmart pioneered cross-docking where inventory is not stocked in warehouse at
DC but stops there briefly. Walmart runs its own fleet to ensure responsiveness. Centrally located
DCs serve a network of stores. Investment in IT is considerable. Walmart also uses EDLP to ensure
steady demand.

Characteristics of forecasts
1) Forecasts are always inaccurate and should thus include the expected value as well as the
forecast error - a reflection of demand uncertainty
2) Long term forecasts are usually less accurate compared to short term forecasts
3) Aggregate forecasts are usually more accurate than disaggregate forecasts

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 4) In general, the farther up the supply chain [i.e., from the customer] the greater the distortion
of information that it receives. This is illustrated through the bullwhip effect.
5) Even IT based forecasts are not fool proof. Sometimes it is better to rely on human intuition.

Lean thinking and agile supply chains.

The JIT approach to scheduling squeezes out non-value adding activities [waste] to increase the speed
of materials flow. The elimination of waste has been promoted under the banner of lean thinking
[Womack & Jones, 2003]. Companies should compete against perfection, not competitors by
identifying all activities that are waste [muda] and eliminating them. This represents an absolute
rather than a relative standard. JIT and lean thinking have the same roots i.e., competitive strategies
adopted by Japanese firms especially Toyota which is often held up as the role model. However, the
Toyota image has been battered recently through widespread quality problems.

The common view is that lean thinking works best where demand is relatively stable and hence
predictable and where variety is low instead of situations where there is demand volatility and
customer want variety. Quick response and other time-based approached are important enablers of
lean and responsive supply chains. Agile chains go a step further. Marketplaces in the 21 st century
are characterised by proliferations of products and services, shorter PLCs and greater product
innovation. Simply responding quickly may not be enough in these circumstances. There is more
emphasis on the idea that the customer comes first. Speed capabilities need to be elevated to a
higher level. However, agility may increase costs.

Key issues
Lean thinking – to improve the flow of materials and minimise waste while ensuring that customer

value is delivered. Cutting out waste in all business processes. Simple paperless systems as opposed
to centralised control.

Agile supply chain: addressing the challenges of market turbulence, rapid response logistics and
managing low volume products [Corrado Cerruti – on agile partnerships].

Ambidexterity
▪ Makhashen, Y.B. (2019) Exploring the role of ambidexterity and coopetition in designing
resilient fashion supply chains: a multi-evidence-based approach. Journal of Enterprise
Information Management. Vol. 33 No. 6, pp. 1599-1625

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Ambidexterity concerns simultaneous exploration of existing capabilities and exploitation of new
opportunities whereas coopetition concerns simultaneous cooperation and competition with
business partners.

Supply chain ambidexterity (SCA) in this study, then, is a reflection of the capability of supply chains
to be both efficient in managing current business demands and flexible in light of future
perspectives.

Mbima, D. and Tetteh, F.K. (2022) Effect of business intelligence on operational performance: the mediating
role of supply chain ambidexterity. Modern Supply Chain Research and Applications

Contrarily, others believe that firms can pursue both strategies, flexibility and efficiency, by
developing an ambidexterity capability. Supply chain ambidexterity runs contrary to the
popularly held view that firms should select the right supply chain for their product: for
functional products, an efficient supply chain and innovative products, a responsive supply
chain. However, the notion of SCA assumes that the managers are not faced with an either/or
decision, but can simultaneously have a flexible and efficient supply chain for their product.

Types of waste. (TIMWOOD) (See also The 8 Deadly Lean Wastes – DOWNTIME)

PRODUCT LIFE CYCLE [PLC]

An understanding of the PLC concept is essential for understanding evolution of supply chains.

A company’ s differentiating and positioning must change as the product, market and competitors
change and as the product passes through each stage of the life cycle. The concept of PLC asserts 4
things:

1) Products have a limited life

2) Sales go through distinct stages, each with its own challenges, opportunities and problems for
the seller.
3) Profits rise and fall at different stages of PLC.
4) Products require different marketing, financial, manufacturing, purchasing and HRM at each
stage.

Most PLC curves are bell shaped and are divided into 4 stages:

1) Introduction with slow sales growth. Profits may be low due to expenses of introduction.

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 2) Growth: rapid market acceptance and substantial profit improvement.
3) Maturity. Sales growth begins to slow down; profits stabilise or decline as competition
increases.
4) Decline. Sales drift down and profit are eroded.

PLC can be used to analyse a:

1) Product category [e.g., liquor]. Categories have the longest life cycles and may stay in the
mature stage indefinitely and grow with population growth. However, there may still
experience decline e.g., newspapers.
2) Product form [e.g., white liquor]. They generally follow the standard PLC more faithfully.
3) Product [e.g. Vodka]. They may follow the standard PLC or a variant.
Brand [Smirnoff].
4) Branded products can have a long/short PLC; but some may die early.

Other Shapes of PLC:

a) Growth-slump-maturity pattern.
b) Cycle-recycle pattern e.g., when a product gets a promotion push
c) Scalloped pattern- a succession of life cycles as new product characteristics, uses and
users are brought in over time.

Special categories of product life cycles are:

• Style. This is a basic/distinctive mode of expression e.g., with architecture; clothing [formal,
casual, funky]; art e.g., abstract art. Styles can last a generation going in and out of vogue.
• Fashion is the currently accepted/popular style. It passes through four stages- distinctiveness,
emulation, mass fashion and decline. Its length is hard to predict.
• Fads come into view quickly; they are adopted with great zeal; peak early and decline very
fast. Marketing winners recognise fads early and leverage them into products with staying
power. Most products are in the maturity stage.

Maturity itself has three phases:

▪ Growth
▪ Stable

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 ▪ Decaying.

PLC Critique: Critics say that the life-cycle patterns are too variable in shape and duration. Unlike
living organisms PLCs do not have a fixed sequence of stages and a fixed length for each stage. It is
also difficult to say what stage a product is in. A plateau can be mistaken for maturity.

Source: (Kotler, P; Keller, 2006)

Challenge: Managing Product Life Cycles [PLC].

The variety of products available on the market increases every year and retailers need to decide
which products to stock e.g., for a grocery store. Decisions must be made to reflect the store’ s
clientele- men, women and children have varied tastes; disparate income levels etc. Seasonal
changes affect the number and types of products. The product ranges must reflect geography in style,
weather, culture, income. Thus, a retailer must carry an enormous range of products depending on
its customer base. [i.e., its stock keeping unit- sku].

All products have a product life cycle-PLC- which is the time over which the item, classification,
colour, fabric, style etc. will sell enough to provide a profitable return. In each phase of PLC, three
factors will change: price, number of manufacturers, and the product itself. The buying and
merchandising team must know the phase for each product to decide how sell the product will sell.
Product categories however follow predictable sales patterns. Sales generally start off low, increase,
and plateau and finally decline. However, the speed/shape/degree of demand varies from product
to product.

1) Phase 1- Introduction/Trial. The buyer aims to help the product without committing too many
resources. Low inventories are maintained; buyers seek knowledgeable suppliers who have
good technical services and he pays particular attention to quality control. This phase is
characterised by:

• Low sales

• Uncertainty on how long the phase will last

• Losses or low profits due to initial advertising and promotion costs

• Inexperienced retail staff

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 • Inexperienced customers

• Vulnerability of the product

• Few distributors [wholesale or retail]

• Product is marketed on a trial/pilot basis

Examples: Introduction of DVD player was met with both enthusiasm and caution.
Customers were unsure about the product –formats and specifications. This can cause
confusion.

2) Phase 2. Growth. Retailer now requires the right level of product flow from suppliers; looking
out for new suppliers; ensuring quality control is maintained; bigger inventories; more
frequent deliveries.

• Rapid rise in sales in a short time

• Less vulnerability

• Possibility of substantial profits

• More suppliers become available

• Product now in full scale production.

Example: Huge increase in individuals owning mobile phones in the 1990s. Variety of different
retailers became involved- electrical specialists, grocers, dedicated phone shops etc.

3) Phase 3. Maturity. Rate of growth stabilises; buyers optimise on existing stocks and begin to
reduce forward commitment. More favourable supply contacts should be obtained. Buyer
seeks lower cost prices without sacrificing on quality; watches for cut price retail competitors
and cuts peripheral costs.

• Sales still increase but at a lower rate

• Most retail competitors now stock the product

• Price competition begins

• Profits begin to decline.

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Many products are in this stage e.g., fresh vegetables have predictable demand patterns. Retailer
must work with suppliers to manage costs and improve quality.

4) Phase 4. Saturation. Characteristics are similar to maturity but are more extreme. There
should be greater emphasis on cost cutting in all areas, balancing inventories carefully; look
for low-cost substitutes.

• No longer possible to increase sales on the product

• Profits decline sharply

• Competition is severe

5) Phase 5. Decline. Sales decline and profits are eliminated. Commitment must be reduced and
retailer must begin withdrawal plan.

6) Phase 6. Abandonment. Product is deleted; surpluses must be disposed of and replacement

items brought in. Example: - Vinyl LP was replaced with the CD and the type writer with the
computer. CD is being replaced with the DVD.

Every product passes through the PLC. Time varies according to product and customer dimensions.
In general, the life cycles of products are shortening – period from introduction to abandonment as
technology brings new and better products more quickly. Customers demand the latest models, the
newest and most up to date fashions. Goods can be classified based on the time they take through
the PLC. There are four such types:

1) Fads. Sales last for a short period often less than a season. Fads are often illogical and
unpredictable. It is important for the retailer to recognise a fad at the beginning and so a
retailer might lock distribution rights before competitors. But fads are risky and require
vigilance from retail buyers. They have very lucrative but ultimately short shelf lives.

2) Fashion. These last several seasons; sales may be similar to fads.

3) Staples/Basics. These are in continuous demand over long periods of time examples include
milk, sugar, white paint etc. They are regarded as essentials and retail buyers and
merchandisers must ensure that they are available at all times.

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 4) Seasonal Merchandise. Sales fluctuate dramatically by season e.g., Xmas turkey, swim wear,
suntan lotion. However, both fashion and staple items may also show seasonal variations.
Forecasting peaks and troughs is a significant challenge.

There is a greater proliferation of products on the market and the average life expectancy of many
products has reduced considerably.

Retail Formats

Channel Examples SKUs [est.]

Discount retailer Aidi, Lidl, Netto 600 -2 000

Grocery superstore Safeway, Tesco 24 – 40 000

Category Killer Toys-R-Us 80 000

Hypermarket/Department store Wal-Mart 100 -150 000

Standard Takashimaya 800 000

Flagship Harrods 1 – 2 million

Sometimes redevelopment can involve more intensive use of existing buildings e.g. by constructing
a mezzanine floor [an intermediate storey especially one between the ground and first floor],
improved customer facilities like parking and weather protection.

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Multi-channel Retailing [omni-channel].

FLIPKART & WALMART: August 2018

E-tail logistics.

E-tailing or online retailing allows customers to search, select and purchase products, services and
information remotely over the Internet using a web browser. Consumers find a product of interest
by visiting the website of the retailer directly or by searching among alternative vendors using a
shopping search engine, which displays the same product's availability and pricing at different e-
retailers. Customers can shop online using a range of different computers and devices, including
desktop computers, laptops, tablet computers and smartphones. Online customers must have access
to the Internet and a valid method of payment in order to complete a transaction, such as a credit
card, or a service such as PayPal. For physical products (e.g., paperback books or clothes), the e-tailer
ships the products to the customer; for digital products, such as digital audio files of songs or
software, the e-tailer typically sends the file to the customer over the Internet. The largest of these
online retailing corporations are Alibaba, Amazon.com, and eBay.

Online retailing is part of E-commerce which is the sale and distribution of goods and services via
electronic means. E-commerce sectors include:

• Business-to-business [B2B]

• Business-to-consumer [B2C]

• Business-to-government [B2G]

• Consumer-to-consumer [C2C]

M-commerce, the use of mobile technology is developing more rapidly; it is a new and popular route
that is still in its infancy. But it gives an additional interface or platform and distribution network.

Non-store shopping is not new. Companies have used mail order and ‘ big book’ catalogues to sell
to family and friends. However, even with ‘ specialogues’ , these routes have been in decline. E-
commerce grew considerably in the 1990s and early part of this century. This growth was closely
linked to the development of internet usage; with more and more people using the internet. Asian
internet users form a majority followed by American and European users. Early download speeds
were slow initially to support creative online visual merchandise. Growth of broadband allowed

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faster download speed thus helping e-tail websites to succeed. Security of transactions also
improved. Growth of mobile broadband helped to bring consumers who had never shopped via e-
tail websites.

In the early years, B2B and C2C produced real benefits. In C2C markets, intermediaries acted as online
auctioneers to broker deals between bidders and sellers. B2B exchanges and collaborations between
partners reduced costs. They trade in information. Unlike C2C and B2B, B2C has the problem that it
must trade goods that are tangible and need to be stored and transported to the final consumer.
Some of these goods [books, music] were converted to electronic formats that were downloadable
directly to consumers’ computers, mobiles, MP3 players and e-readers. They were also opportunities
for disintermediation in B2C markets. The role of intermediaries [agents, wholesalers and even
retailers] would be reduced as manufacturers could interact and sell directly to consumers. New
players entered the market with online offers. Many traditional retailers were concerned about
cannibalising their existing customer base and jeopardising their investments in capital assets.

A multichannel strategy is more promising. Customers have access to all alternative channels [stores,
catalogues and online sites]. This is a ‘ clicks and bricks’ approach which gives greater flexibility even
on social networks. Customers can review products and e-word-of-mouth now counts. Large scale
multichannel retailers have become dominant.

E-tailing has grown through four stages:

a) Hype and experimentation with rapid but erratic growth

b) Retrenchment and sobriety with slower but more predictable growth

c) Sustainability. Stability in the market and consolidation among e-tailers.

d) Focus and fragmentation providing opportunities in multiple and mobile platforms.

Marketing mixes are more precisely targeted to the needs of individual consumers.

Read: Tesco & Amazon. Seven Eleven. Alibaba. Airbnb. Uber. Ownai. eBay. Check technologies used
in different industry sectors e.g. logistics.

Web 2.0
This encapsulates a number of software developments which allowed the web to be used for
information sharing and collaboration. This is illustrated through wikis, blogging and social

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networking sites. Amazon exploited this technology by allowing users to review books they had
bought and making the reviews available to other customers online. E-commerce market allowed for
much creativity in the design of e-tail stores:

• Price formats e.g., selling overstocks or stocks from a previous season. Or auction sites [eBay
for example] allow sellers and buyers to mutually agree on prices.

• Experiential formats create an interesting and enjoyable online shopping experience e.g.
exploiting social networking and discussion forums, developing editorial content or two-
way/multi-way channels of communication.

• Community-based formats create a social community at the heart of the shopping

experience.

• Mass customisation formats which provide merchandise precisely tailored to individual

desires of customers. Customers can select fashion items like shoes [heel heights, fabrics,
leathers and decorations]. Apple customers can do the same with various features of
hardware.

• Merchandise-oriented formats aim at achieving a product mix that attracts customers.

The e-consumer

E-types:

a) Virtual virgins

b) Chatters and gamers

c) Dot.com dabblers

d) Surfing suits

e) Wired living

Websites usage consists of:

• Supply side – for transactional and informational purposes

• Demand side- evaluation by customers of the ease of navigation, interactivity and product
information.

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Check market readiness: Visit Potraz website.

The grocery market

Grocery shopping impacts upon all consumers. We all have to eat! Pure players failed in grocery
because:

• Limited online potential

• High cost of delivery

• Selection-variety trade-offs

• Existing entrenched competition.

An electronic copy of a supermarket does not work. E-grocery should be a complementary channel
not a substitute. Online retail services assume that it will be possible to deliver orders to the home
at an acceptable cost. However, there are many challenges:

• Substitution and delivery failures especially for grocery where there may be 60-80 items
across three temperature regimes as well as tight delivery windows. Home delivery
terminates at the home or a nearby collection point. Some products may penetrate the supply
chain at the point of production e.g., a customer can configure a personal computer and relay
the order to the assembly plant. Delivery channel then starts at the factory.

Widespread access and use of the Internet have changed shopping behaviours and the retailing
industry. More than 80% of US retailers sell merchandise through multiple channels; including all the
large retailers and those with the best financial performance. Multichannel retailers sell merchandise
or services through more than one channel. Even some small store-based retailers also use an
Internet channel in addition to the store channel.

There are three primary channels used by retailers to communicate with and sell products and
services to customers. The Internet is also used for managing employees, buying merchandise,
managing customer relationships, advertising and promoting merchandise and providing customer
services.

Retail channel
This is the way a retailer sells and delivers merchandise and services to customers. The most common
channel is the store. Non-store channels include the Internet, catalogues, direct mail, direct selling,

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television home shopping and automated retailing. However, the vast majority of sales is through
the store channel; catalogue and Internet account for significant sales.

US & Global online retailing

Year %
US Retail Sales: 2009
Global e-commerce: share of retail sales 2015 7.3

2016 8.6

Channel Retail Sales % 2017 10.2

Store 89.8 2018 (est) 11.9

Internet 4.7 2019 (est) 13.7

Catalogue 3.1 2021 (est) 17.5

Direct Selling 0.9

TV Home Shopping 0.5

Automatic 0.9

In 2016 Amazon was responsible for 44% of all US e-commerce.

Learning task: Online retailing

• Explore the position of online retailing by sector.

• Explore the position of online retailing in Zimbabwe.

• What are the barriers and opportunities in Zimbabwe?

1) Internet channel. [Also called online retailing, electronic retailing, e-tailing]. Product/service
offering for sale is communicated to customers over the Internet. A decade ago, it was
predicted that there would be massive expansion for this channel; that store would close due
to lack of traffic and paper catalogues would be obsolete. However, even though the growth
forecast [US] is 10% -three times store sales growth or catalogue channel, Internet sales are
still less than 10% of retail sales [excluding cars and food services]. More than ¼ of apparel

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 shoppers look up basic information about stores [location, hours, special events etc.-on retail
sites; 22% research merchandise; 21% compare prices; another 21% download coupons for
use in stores. Thus, even though the Internet does not revolutionise retailing, it facilitates it.

2) Catalogue Channel. The retail offering is communicated through a catalogue mailed to

customers. Half of US customers shop through a catalogue mailed to them each year. The
most popular items are drugs, beauty aids, computers & software, clothing & accessories,
furniture & house wares, books, music and magazines. Of the millions of catalogues sent out
every year, only 1.3% generate a direct sale. Catalogues’ share of sales is declining relative to
Internet. They also have a role to play by driving traffic to the Internet and physical stores.

3) Direct selling. Salespeople interact directly with customers [face-to-face] in a convenient

location e.g., customer’ s home, or at work. Direct salespeople demonstrate merchandise or
explain service; they take orders and deliver. This is a highly interactive channel and
considerable information is conveyed: so, this channel tends to be costly. US sales are over
$30 billion annually; worldwide it is estimated at $100 billion. Products include personal care
[cosmetics & fragrances], home and family care products [cooking & kitchenware], wellness
[weight loss products, vitamins] and leisure & educational items [books, videos, toys]. Most
salespeople are independent agents; they are not employed by the direct sales firm; instead,
they are independent distributors buying merchandise from the firm and re-selling it usually
to anyone though sometimes territory is assigned. This channel can be very effective in the
less developed countries because this channel does not require an extensive infrastructure to
small villages for example. Such channels offer women more economic independence around
the world.

a) QVC distribution centres pack up to 300 000 packages daily in their large warehouses.

b) Direct selling sometimes uses the party plan system where a customer hosts friends
or co-workers to a “party”. Or they may use multi-level system where independent
businesspeople act as master distributors and they recruit other people to form a
distributors’ network. Master distributors buy from the firm and sell to their
distributors and they may then receive a commission. Some have degenerated into
pyramid schemes where the founders’ profit from inventory bought by later
participants with very little merchandise being sold.

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 4) Television Home Shopping. Customers watch a TV programme which demonstrates
merchandise. They then place orders usually by telephone, Internet or their TV remote. This
channel may use dedicated cable channels, informercials [30-60-minute programmes which
mix entertainment with product demonstrations]. Other times the channel uses direct
response advertising [1/2-minute adverts on TV or radio to describe products and to allow
customers to order. The largest channel retailers are HSN, QVC, ShopNBC, Jewellery
Television. However only a small proportion of viewers make purchases. TV home shopping
is also embracing the Internet; most shopping networks now have online operations. The
biggest advantage for this channel is that customers can see the merchandise being
demonstrated. They benefitted from the increase in cooking, decorating DIY and lifestyle
programming.

5) Automated Retailing. Merchandise or services are stored in a machine and dispensed to

customers after a cash payment or by using a credit card. They are placed in convenient high
traffic locations [workplaces or campuses]. Usually selling cold beverages, candy or snacks.

By combining channels, retailers can leverage benefits and overcome the limitations of each in order
to attract and satisfy customers.

Channel Benefits.

1) STORE

a) Touching & feeling and using all five senses. [Touch, smell, taste, sight, hearing] in
order to evaluate products. Of course, new technologies e.g., 3-D can enhance
representation of products on computer they do not match information levels from
for example trying on a garment or the smell of a perfume.

b) Personal service. Sales assistants can give meaningful and personalised information
e.g., how well a garment fits, or suggest a tie to match or answer questions

c) Risk reduction. Items [a] and [b] above increase the likelihood of customer satisfaction
with the purchase. The physical presence of the store also reduces perceived risk and
enhances confidence that problems will be corrected if they occur; store can be
approached for such after sales help. Or additional information can be obtained.

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 d) Immediate gratification. By getting the merchandise immediately after buying e.g.
when they want some medication or a last-minute gift item.

e) Entertainment & Social Experience. In-store shopping can be stimulating; it provides a

break in daily routines and allows for interacting with friends – an exciting and
rewarding experience.

f) Browsing. Shoppers often start with a general sense of what they want not the specific
item. In the store, they see what’ s available. This is easier than surfing the web.

g) Cash payment. Stores are the only channels that allow for cash payment; as some
customers prefer because it is quicker; it resolves the transaction immediately without
the burden of interest. It addresses the security concerns of some customers e.g.,
about security and identity theft. They may prefer to use their credit/debit cards
personally than sending payment information electronically.

2) Catalogue.

a) Safety. Security in shopping malls is a matter of some concern especially the elderly.
Such people are able to review merchandise and place orders from the safety and
convenience of the home environment.

b) Convenience. Looking at merchandise and placing orders from almost anywhere 24/7.
Catalogues are easier to browse than websites. The catalogues are available for
referral anytime e.g., from the coffee table, at the beach; without an Internet
connection; information in the catalogue is available for longer periods.

3) Internet.

a) Broader & deeper assortments. Internet offers a vast number of alternatives

compared to a store with its limited size.; or the number of pages in a catalogue

b) Timely information for evaluating merchandise for making better decisions. In a store
the number of assistants may be limited or the space for signage. On the Internet
information provided is unlimited; customers can also solve problems not just being
provided with information on specific products. Information is available whenever one

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 wants it; it is also more current; some of the information is generated by customers
themselves e.g., reviews of products/services.

c) Personalisation. Interactive nature of the web allows retailers to personalise

merchandise offerings and information easily; customers can drill down until enough
information has been got to make a buying decision; or to compare alternatives. Live
chats are available by clicking a button at any time and have instant messaging or voice
conversation with a representative. Customised information can be provided based
on past purchases or search behaviour; recommendations for complementary
merchandise [check FigLeaves.com] using sophisticated software which analyse
behavioural data from mouse clicks and search queries.

d) Perceived risk. Security of credit card transactions and privacy violations [when
retailers collect information about purchase history, personal information or search
behaviour]. However extensive breaches are rare due to sophisticated encryption
technologies used by retailers. Customers are concerned about how such information
will be used; whether it will be sold; or receiving unwanted promotional materials.

Benefits of Multichannel Retailing.

1) Increased assortments. Satisfy customer needs by exploiting the benefits and overcoming
deficiencies of each channel. Computer memory is low cost so the number of SKUs [stock
keeping units] presented becomes unlimited. Assortment can be vastly increased without
unduly increasing inventory costs especially for less popular styles, colours and sizes [see
Home Depot & Sears]

2) Low-cost, consistent execution. In a store, assistants must be available to help customers; but
training such knowledgeable staff is costly/expensive. And they may have bad days too. This
is especially problematic for new and complex merchandise. [Best Buy uses kiosks which
assistants and customers can use to get product information]

3) Current information. Catalogue retailers can use electronic channels to update for the latest
price changes or for new merchandise or real-time stock availability

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 4) Increasing customer satisfaction & loyalty. An additional channel might result in
cannibalisation. However, websites can result in customers viewing even more products. This
can increase a retailer’ s share of customers’ wallets.

5) Insights into customer shopping behaviour. An electronic channel offers information into how
and why customers shop; or their dissatisfaction/ satisfactions. This helps in designing stores
or designing websites. [After buying a book, Amazon.com would recommend additional titles
based on purchases made by customers who bought that book]. Or based on how customers
navigate the web.

6) Expanding market presence. For store retailers, the market is limited to those in the proximity
of the store. An Internet channel expands the market without building an extra store
especially if the retailer has a strong brand name but has limited locations and distribution
e.g., Harrods’ s or IKEA who offer unique high-quality merchandise.

7) Building strategic advantage. Multichannel retailers have propriety information about

customer purchase history and behaviour. Store based retailers are not able to link
transactions to customers who pay cash. However, Internet and catalogue transaction have
customer identification information. They have information also on search behaviour in
addition to transaction data. They can better target offerings and market activities. Customers
also want to be recognised on all channels.

Miscellaneous.

1) There are significant costs in designing, maintaining websites; attracting customers to the site,
maintaining distribution systems and warehouses for fulfilling orders and deal with the high
levels of returns.

2) Disintermediation: - a manufacturer sells directly to customers and by-passes retailers

[Hewlett-Packard for printers & accessories sold directly to consumers through it website
hewlettpackard.com] and also through retailers [Office Depot]. However, most
manufacturers lack the skill for such direct selling; they are not efficient with retail functions;
or providing complementary assortments or collecting information on customers. Retailers
can provide a broader range of products and services e.g., various brands or special offerings.

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 3) Electronic channels can be used to stimulate store visits by announcing special events and
promotions; stores can serve as “warehouses” for gathering merchandise for delivery to
customers.

4) Information systems. Store information systems are product-centric; non-store information

systems on the other hand are customer-centric. [Check Wal-Mart & JC Penny].

5) M-commerce. Customers may want to use various devices e.g. desktop or a mobile phone.
However, the small mobile phone screen presents difficulties; it also has slower speeds.

6) Profiles for customers on the different channels are not the same. Complete integration
would involve selling the same products at the same price for all channels

7) Internet is good for selling products which do not have a broad appeal; the store is good
where “touch & feel” attributes matter e.g., a shirt that fits or the smell of a perfume. Internet
might be okay where “look & see” attributes matter e.g., price, colour, grams of fat etc. Thus,
apparel retailers have a high rate of returns for Internet sales.

8) Pricing. Some retailers have different prices to deal with local competition.

9) Channel migration- customers collecting information about products then buying from a
competitor. A retailer might bank on private label merchandise.

Some issues about e-tailing. (Doherty and Ellis‐Chadwick, 2010)

Retailer’s perspective:

Internet:

• facilitates two-way communication with customers

• collects market research data
• supports online ordering of goods
• broadens target markets
• improve customer communication, efficiency
• extends product lines
• enhances customer relationships
• gives global reach
• enhances interactivity, flexibility and speed

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 • Communicates large amounts of information.

However, there are concerns about lack of security, absence of suitable online payment systems, slow
connection times.

Issues:

• Demise of the middleman: disintermediation by manufacturers which might impact on retail channels

• Bypassing traditional distributors

• Retailers might simply be cannibalising their own custom

Internet might present a golden opportunity for the small business. The web gives easy and low-cost entrance
to the market place and exit as well. Internet has made significant impacts in certain market segments e.g.,
travel, consumer electronics, hobby goods and media goods.

E-tailing: Further issues about e-tailing:

• Should delivery always be at home?

• Does the recipient have to be there?

• Is the picking at the store or at a new centre?

• Should there be a charge?

• How should last minute, time-dependent purchases be handled [Do we need expedited
systems for these?] e.g., at Xmas?

E-commerce [including mobile]

The rise and subsequent fall of many dot.com companies [1998-2002] led to reconfiguration. E-
fulfilment and last mile problems [problems of delivering to the end consumer] appear to hold the
key to success. B2B has more to offer members of the supply chain due to adoption of internet
technologies by businesses compared to customers as well as the number and complexity of
transactions. The more proactive retailers developed B2B internet exchanges as an extension of their
EDI platforms. They can then share data on sales, product forecasting promotion tracking and
production planning.

For B2C (Business to Customer), there are few pure players; most internet operations have been
small. Grocery retailers have been mostly ‘ brick and mortar’ companies. Pure players have had
problems:

• Limited online potential

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 • High cost of picking and delivery. NB: OOS – out of stock

• Selection-variety trade-offs. What a customer could trade-off in terms of place, product,

service and variety by going online

• Existing entrenched competition.

The main fulfilment models are:

• Store based

• Dedicated picking order model especially successful for non-food items.

Task: Read up on these companies: TESCO, SAINSBURY, ASDA, OCADO & WEBVAN.

Tesco.com: delivery home shopping.

Tesco.com has become the largest Internet grocery system in a short time. Unlike other
companies, it has opted for in-store picking and home delivery operation instead of a dedicated
distribution centre system. This was because:

• Low penetration levels and drive times for vehicles being too high.

• To ensure that the online offer was not reduced [customers indicated this] thus
compromising the point of shopping at Tesco.

• Outside London the warehouse option was not valid.

Roll out was rapid soon after introduction. Each store involved has dedicated local delivery vehicles.
It was observed that:

• Fresh food was a big seller online and not big, bulky replenishment items as had been
expected

• People plan their online order better than their in-store trip.

• The non-food item offer can be more extensive online than in store

• Knowledge is gained from online shopping about item not in stock thus helping enhance the
supply system.

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SUPPLY CHAIN MAPPING
A supply chain process map shows the path supplies take from raw materials to manufacturers to
consumers and afterwards. It provides a quick visual overview of the flow of merchandise through a
particular industry.

Supply chains depend on organisations and processes occurring within them. Supply chain mapping
focusses on these organisations, processes and their location in order to identify and locate activities
e.g., the exact source of every material, every process and every shipment involved in bringing goods
to market. Technology is deployed to enable this to be done accurately. Business people have been
mapping supply chains for over a century. In those early days such maps provided only a summary
view without revealing how changes take place in real time. The first online supply chain mapping
platform was developed at the Massachusetts Institute of Technology in 2008.

Supply chains are so complex that it is almost impossible for one person to trace a product all the
way from raw material to finished good: accurately and in detail. With online mapping, collaboration
possible at a vast scale: teams can work together from all of the companies in a supply chain to
account for every material, every process, every shipment. It is even possible to use crowdsourcing
and open the process up to the general public.

Before online mapping, it was impossible to verify an address without visiting in person. The use of
GPS and satellite imagery now allows us to map every mine, every farm, every factory and every
distribution centre while user account management enables us to know who mapped each piece of
the supply chain, and when and where they did it. Instead of monitoring only the supply chain sites
that can be visited in a given year, we can communicate directly with auditors and factory managers,
in order to verify the information from a distance.

A supply chain starts with the delivery of raw materials from a supplier to a manufacturer
and ends with the delivery of the finished product or service to the end consumer. SCM thus oversees
each touchpoint of a company's product or service, from initial creation to the final sale.

The process of developing a supply chain relies on 5 essential stages:

1) Planning
2) Procurement of raw materials and components

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 3) Make
4) Deliver
5) Return

Mapping is an important strategic tool in uncovering potential supply chain sensitivities and ensuring
traceability within supply networks. Businesses need to understand supplier traceability in their
supply chain.

The Value of Supply Chain Mapping

In most cases, entities have reasonably good visibility of their Tier One (T1) providers but very limited
visibility beyond that. In order to mitigate supplier risk and respond quickly to non-compliances
visibility of all tiers of the supply chain is essential. It has been demonstrated that for each T1 supplier
there are usually 10 others that may not be visible.

Supply chain traceability tools provide key support in identifying, assessing and mapping the
materials supply chain. And helping buyers, technologists, compliance and sustainability staff and
others to understand their supply network. The data is presented in a clear and user-friendly format,
with the goal of enabling the quickest insight for all stakeholders.

Due to natural disasters of all kinds, CSR (Corporate Social responsibility) issues and health and safety
failures are increasingly impacting global supply chains. Thus, mapping the supply chain
through every tier is the only way to mitigate a growing burden of risk. Pleas of ignorance are no
longer acceptable to lawmakers and consumers in a highly connected world where news is instant
and opinions are all-pervading.

The following tips on mapping supply chains address key pitfalls:

1) Identify the risks
Go beyond Tier 1 suppliers to acquire knowledge of suppliers at Tiers 2 and 3 and ascertaining how
critical they are to your supply chain. The factories and the locations in which your branded goods -
or components for those goods - are made. What would happen to your business if a lower tier
supplier failed to supply, perhaps due to an earthquake, civil unrest, flooding, fire, or financial
collapse? Or if a Tier 2 or 3 supplier is exposed for using child labour or treating workers badly? A

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brand’ s value could be severely eroded or even destroyed through the errant actions of a lower tier
supplier.

For example, in one fire incident in Savar, Bangladesh, 1,129 people died in a garment factory that
failed to meet fire regulations. A number of leading fashion and retail brands suffered highly
damaging publicity. In the food sector, poor knowledge of the linkages and activities further down
complex supply chains resulted in the Horsemeat scandal, an incident that analysts at the time
predicted would wipe £300 million off the share price of Tesco.

In the automotive sector natural disasters in Japan and Thailand during 2011 caused havoc to the
global supply chains of vehicle manufacturers, costing millions of dollars a day in lost production. The
core issue preventing manufacturers responding swiftly to the impact of both disasters was a lack of
visibility down through the tiers.
2) Establish visibility
Many organisations have no information on Tier 2 suppliers even where these are locally based. Even
more have absolutely no information about their Tier 2 suppliers across the world. Mitigating supplier
risk and being able to respond quickly when disaster strikes is dependent upon having visibility of the
supply base across all tiers. A prerequisite is to create a coordinated global supplier database, before
moving on to build an accurate supply chain map detailing every supplier at every level.

Too many companies rely on Tier 1 suppliers managing lower tiers, with the result that buyers have
no idea who those lower tier suppliers are and what measure of compliance they hold. This is not
sustainable in a world where brands are vulnerable to the actions of suppliers at any level, or where
the complexities of global sourcing increase the chances of natural disasters impacting supply. A
buying organisation must understand its supply chain in its entirety, comprehend the risks and
monitor each tier directly.

3) Build a map
The most effective way to gain visibility is to build a map using a standardised approach to the
management of supplier information. Buyers should be able to get information from everyone
involved in their supply chain. ‘ Cascading invitations’ are sent down the supply chain. The buyer
initiates action by inviting Tier 1 suppliers to join the mapping process. In turn, Tier 1 suppliers invite

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Tier 2 suppliers and the invitations cascade right down through the tiers. The key to success is
automation – ensuring that the person in the middle can link what they sell to whom; and that details
of what they buy link to the next person in the chain.
Once the map is complete, buyers can focus on assessing risks associated with those suppliers, at
every tier, gathering information in relation to key issues.

Mapping the supply chain in this way allows the buyer to assess which supplier sites are potentially
exposed to risk (e.g. natural disasters, financial failure and CSR issues) and helps in addressing
potential bottlenecks, reliance on single suppliers, and companies with long lead-times - which could
impact production. At this point buyers can become proactive, introducing counter-measures so that
should a potential risk impact their supply chain, they have the ability to identify the issue in the
shortest possible time and apply the counter-measure immediately.
4) Motivate suppliers
It is absolutely critical to success that buyers get suppliers’ support in mapping the supply chain by
clearly explaining the benefits. A major incentive for the supplier is that they will also be able to
understand risk in their own supply chains, and improve their own business resilience. Initially, some
suppliers may be reluctant to provide information, especially if they feel the information is sensitive.
It is important to reassure suppliers that they can control who has access to their information and
can maintain commercial confidentiality.
5) Work collaboratively
Mapping a supply chain can be a complex, time consuming and labour-intensive activity, making it a
tiresome exercise for any individual company working in isolation. However, most industries share
common suppliers, so what may be difficult to do for an individual organisation becomes easier to
achieve collectively. The most efficient and effective way to do it is by working within a collaborative
community, where effort and cost are shared.
Obviously individual supply chains remain visible to individual buyers only, but the whole effort is
shared.

However, building trust and collaboration is not easy.

Supply Chain Design

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A supply chain has a certain design or arrangement of players, activities and objects to meet a
purpose at a point in time. That design is not cast in stone.

Now, a design consists of a plan or specification for an object, system, activity, pattern, detailed
drawing or process. The result of a plan may be in the form of a prototype, product or process. Before
Jah Prayzah or any other artist releases a new hit, that song must first be composed i.e. designed.
The same is true of a supply chain. Note also that design is the first stage of the process of
management i.e. the planning stage.

A design is usually created to satisfy certain goals and constraints and taking into account aesthetic,
functional, economic, or socio-political considerations.

IBM: Nine cutting-edge strategies

(https://www.sdcexec.com/software- technology/article/10289661/ibm-design-for-supply-chain)

(December 3, 2007)

The next time that you pop open a soda can, take a slightly closer look —not at the beverage itself,
but at the can that contains it. What you may not notice is that the soda can is a quintessential
example of product design for supply chain. When soft drink manufacturers switched from cone top
to flat top soda cans in 1957, the change made cans much easier to stack, transport and store on
shelves, resulting in tremendous costs savings for companies in the industry.

The soda can revolution is an example of how product design for supply chain can drive efficiency
and costs savings into a business. Today, almost 50 years later, efficient product design is not just a
way of squeezing out cost savings, but a competitive weapon to be leveraged for strategic advantage.

In supply chain management today, it is widely accepted that effective upstream operations drive
efficiency further down the supply chain —take, for instance, the degree to which suppliers are
beginning to help customers reduce supply chain volatility through strategies such as vendor-
managed inventories (VMI) and collaborative planning, forecasting and replenishment (CPFR). Now,
imagine taking a step even further upstream in the production process —not just to the supplier of
the product's components, but to the supplier of the product's initial concept — the Product
Development Team (PDT). IBM's Design for Supply Chain (DfSC) program extends the idea of end-to-

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end collaboration a step forward by taking a step backward and optimizing production before it even
begins. By applying a product lifecycle management mentality as early on as the conceptual design
stage, a product can be developed from the ground up to be a truly supply-chain-efficient creation.

Design for Supply Chain is the process of optimizing the fit between supply chain capabilities and
product designs. It creates product configurations that address infrastructure limitations and use
supply chain capabilities as they evolve throughout the life of the product. In today's supply chain,
minimal component costs are still a competitive weapon, but the supply chain that can offer the
highest performance at the lowest overall cost is rapidly becoming a far more valuable and
sustainable differentiator. DfSC uses a series of supply chain management processes and techniques
that increase customer satisfaction, minimize total costs, and maximize the flexibility to address
unplanned events. It is the convergence of some of today's most innovative practices in the product
design and supply chain processes. It can be the answer to the question, "How do we stay competitive
in an increasingly commoditized market?" It is also quite possibly the next big step in product
development.

However, this is no small task. With rigorous financial requirements, as well as a plethora of customer
demands to bear in mind, PDT's are often already overwhelmed with product design considerations.
But, by examining the nine key strategies behind DfSC, and answering the basic what, where, when,
why and how of DfSC, we can help educate PDT's, and ourselves, on how to design our products for
supply chain efficiency. These strategies help a PDT manage the development and support of complex
products and services throughout the entire lifecycle, from product design to product build to post-
sale service.

While there are challenges to implementing Design for Supply Chain, there are also evolving business
means to support this type of integrated process. One such technology is service-oriented
architecture (SOA), in which the many parts that IT infrastructure needs to operate this kind of
process can be linked to support all of the interrelated functions involved. Those who deploy DfSC
techniques should consider all end-to-end factors within their business that can help or hinder their
success. Organizational culture, IT systems and information availability are all things to consider when
embarking on this journey to improve not only the way your company designs new products but also
to save cost and improve flexibility in your supply chain from end to end.

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The Nine Key DfSC Strategies

1) Optimize Levels of Product Integration: PDTs should determine the optimal level of
integration, or parts, that have been pre-assembled at an upstream supplier. This can be a
difficult decision because while integrated components can reduce the number of parts that
need to be managed in final assembly and allow for a reduction in assembly time (often by
limiting the number of physical interconnections on the manufacturing line), this bundling of
P/Ns can create additional supply risk in several ways. First, it can make it more difficult to
accurately forecast demand for the part because each integrated component presents
another demand variable that must be factored into the forecast for the overall part.
Second, aggregate lead times may be increased for an integrated component. Take, for
instance, a case where there are two components, each with a lead time of one week. With
two distinct suppliers, the components can ship on the same day to arrive at manufacturing
for assembly within a week. For integration, the first component must ship to the supplier of
the second component before facing the standard lead time of one week, resulting in an
extended aggregate lead time.
To help with the decision, consider the degrees of commonality, modular design, universal
function and postponement that can be imbedded in the integrated part —a common building
block used across multiple offerings increases the value of disintegration by allowing
postponed features to use a shared supply. While maintaining a competitive part cost is
always an important factor, in some cases overall savings be realized even when an individual
part's cost is increased.

2. Leverage Industry Standards: Use industry standard parts unless proprietary parts are
justified to create a competitive advantage. A standard part uses the vendor part number with
no unique marking or other requirements. Industry standard parts allow suppliers to pool
demand across the industry, rather than relying solely on their ability to forecast demand for
the unique part. In addition, industry standard parts allow for increased flexibility in sourcing
from other suppliers and facilitate the cost-effective disposal of excess inventory when
needed. Thus, unless the use of a unique part has a specific value add, industry standard parts
should be used whenever possible. The perception of greater control by placing unique
qualifications on industry standard components needs to be objectively evaluated.

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Similarly, inventories of unique parts for original equipment manufacturer (OEM)
customization should also be carefully monitored. PDTs should consider in the design stage
what aspects of the product will and will not be available for OEM customization and design
so that the product is configured to be line-fit to postpone any OEM personalization as far
downstream as possible. Costs are minimized by not having to plan and maintain stocks of
unique high-value OEM inventory. Where possible, these OEM-specific inventories should be
owned by the OEM.

3. Minimize Premium Freight: Premium freight and resources to expedite supply can often
compose a large portion of supply chain costs. In order to minimize these costs, DfSC
techniques should be used to reduce lead times on critical components while maximizing the
availability of alternate components in the event of a shortage. Long lead times result in
volume fluctuations at the back end. It is important to consider flexibility in suppliers and
integrated components. For example, when evaluating integration alternatives assess the
trade-off between a lowest-cost approach for accurately planned requirements and the real
need for low-cost flexibility to address unplanned events. The product should also be
designed for compatibility and commonality with predecessor components or for alternate
parts usage with other current products.

Also, the earlier suppliers can be provided with demand forecasts on a P/N level, the greater
their capacity to reserve production capabilities to meet demand and avoid the need to
expedite. Finally, engineering changes should be evaluated for their overall impact on the
supply chain. This is especially important when considering heavier components that will have
larger premium costs when expediting. Engineering changes later in the design process also
make it more difficult for suppliers to meet demand forecasts.

4. Design for Life Cycle: Product should be designed to be supply chain friendly to potential
component or infrastructure changes through its lifecycle. These include events such as small
improvement to product design, cost improvements or
commodity/technology/infrastructure advances. PDTs should determine which of the
product's components are likely to be changed throughout the product's lifecycle and
facilitate eventual change with minimum impact in the supply chain. After deciding on the

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changes that are likely to occur, PDTs should structure the product so that changes can be
implemented with minimum disruption to the supply chain.

It is also important for product design to proactively transition out old technology while
introducing new technology. Extended technology transitions add complexity and can be very
expensive when the older technologies become hard to supply. The product design must
consider forward and backward compatibility —not just from a customer viewpoint, but also
for component parts in the supply chain. Design teams should develop risk mitigation plans
for low-volume parts to avoid excess inventories or reduced service levels when the
technology is going end-of-life.

5. Configure the selected Supply Chain: The role of a cross-functional product development
team should include selecting and configuring the supply chain, but not creating one. Supply
chains need to be established based on the company's strategic network plan, not individual
products. Market requirements (i.e., volume, complexity and customization) are key factors
in the best choice of supply chain.

There are several important considerations for supply chain selection. First, PDTs should
determine if the product best fits the run rate (high volume) or the enterprise (high
complexity) model. Second, design should determine what is unique about the product when
compared to the attributes of other products using the same supply chain model, and
configure the supply chain to address product specific requirements. Third, PDTs should
specify the geographic distribution of customers and how cycle time and inventory targets
will be achieved. Fourth, design teams should critically decide how many (few) options will be
required with the product. The ultimate in postponement is for customers to enable a product
to meet their specific needs. Fulfilment of options that go with the product need to be
developed to minimize supply chain complexity. The final selection consideration is if and how
a product will transition between different supply chains to maximize profitability for the
start-of-life, mid-life and end-of-life.

6. Design for Demand & Supply Planning: Designs that leverage DfSC techniques include
commonality, modular design, universal function and postponement "pool demand"
requirements. Pooling requirements on a common component reduce variability and improve

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the ability to accurately forecast demand during lead time. Reducing part count is desirable,
but when attach rates are low it may be best to use postponement. Another consideration
for demand/supply planning is bundling hardware and services/terms and conditions could
be unbundled. Since services and terms and conditions (T&Cs) are not planned, bundling them
with hardware creates complexity for planning. Rather than bundling a product with
predetermined services, infrastructure systems should enable the addition of the right
services to hardware and software to be postponed until the end of the manufacturing
process in order to reduce complexity and give customers more flexibility in choosing exactly
which services they desire.

7. Minimize Inventory Costs: The two key inventory costs to consider are carrying costs and
obsolescence risk. Carrying costs can be reduced when product has quick build-to-ship times
and favours a build-to-order (BTO) as opposed to a build-to-stock (BTS) supply chain model.
Also, designing to maximize the velocity of parts through the supply chain will reduce
inventory value and reduce cost take-downs while inventory is being held. Obsolescence risk
can be minimized using short lead times and easily reconfigurable components. Like carrying
costs, designing for high velocity movement will also help with obsolescence risk. Configuring
for customization at the end of the assembly line will minimize risk by increasing flexibility.
Finally, PDTs should configure product components for reuse into the next product transition
in the event that obsolescence does occur.

8. Optimize Order Management: Product design should consider the facilitation of order
management and customer fulfilment. Product design should be adjusted to provide the
maximum level of flexibility to the customer with little or no additional internal cost. This can
be accomplished by using the DfSC techniques to facilitate postponement and unbundle P/Ns,
thereby reducing complexity and increasing flexibility and order management. PDTs should
also consider the ease of special-order entry and manufacturing. The structure of the bill of
material needs to leverage the capabilities of the order management systems and facilitate
quick and accurate communication of requirements to manufacturing.

9. Minimize Warranty/Service Costs: Warranty costs are minimized by a reliable, high quality
product with easy to diagnose faults and customer replaceable parts that have a high
warranty redemption value. Using the DfSC techniques can increase flexibility in terms of

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 alternative parts usage for service. A common part for warranty use may be beneficial even
when common parts for base unit manufacture did not make good business sense. Minimizing
the portfolio of parts that need to be stocked for service and warranty decreases expense and
improves service levels. This is especially important for those parts that have the highest
typical defect rates. Additionally, designs that integrate automated internal diagnostic
capabilities may increase component costs but vastly decrease overall costs through the
facilitation of easy defect assessment. The use of a serviceability assessment tool (SAT) to
provide a service cost estimate that can be a key decision point when gauging increased
component costs against service expenses.

The profitability of maintenance contracts can be maximized by product testing that identifies
both intrinsic and systemic failure modes, and then configuring the product and the supply
chain to cost effectively addresses them.

"The ability to design for supply chain is critical for organizations as they strive to achieve the
"perfect product launch." The perfect product launch concept involves managing the
development and support of complex products and services throughout the entire lifecycle
from product design to product build to post-sale service. By deploying product commonality
and reuse, our clients achieve supply chain efficiencies from reduced complexity, improved
product quality and better manufacturing design.

With these design concepts in place, clients can realise the benefits of being first to market and
stronger profit margins while reducing end-to-end costs. (Mark Wilterding, Partner, IBM Global
Business Services)

Conclusion

A highly efficient supply chain that offers the greatest flexibility and customer service at the lowest
cost can be a substantial differentiator against growing competition. By using Design for Supply Chain
techniques to optimize products in the design phase before manufacturing even begins, or in some
cases after it has begun, supply chain disruptions can be avoided and costs of change minimized. The
DfSC strategies and concepts outlined above will give any product design team —whether designing

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for a high-tech server or a high-volume consumer good —the basis for creating products that allow
the supply chain to efficiently satisfy customer demands.

When a company’ s supply chain capabilities are directly aligned with its enterprise strategy, the
results tend to be superior performance and a strong market position. Among the organizations that
have demonstrated this is the Girl Scouts of the USA, which annually funds about two-thirds of its
operating costs by enlisting its members, mostly girls age 9 to 14, to sell its well-known cookies. In
2011, the organization simplified its product line from 28 varieties to 11, with special emphasis on
the six most popular items (Thin Mints, Samoas, Tagalongs, Trefoils, Do-Si-Dos, and Lemon Chalet
Crèmes). Variety beyond a handful of perennial favourites did not matter to customers who were
primarily looking to support their community Girl Scout organization. Simplicity enabled the Girl
Scouts to improve the effectiveness of a supply chain strategy that depends on a distributed, young
volunteer “workforce” that comes together for only a few months annually. Suddenly, the tasks
involved in this once-a-year capability—allocating product among troops and individual Girl Scouts,
tracking sales to replenish the troop’ s inventory, and getting the right varieties of cookies to each
participant—were all much easier. Not only did the change allow the Girl Scouts to be more effective,
focusing their efforts on sales techniques rather than balancing inventory, but it also taught the
young sales force “about supply chain issues and the need for efficiencies,” as Denise Pesich, Girl
Scouts vice president for communications, said in an article on the Atlantic website.
The Girl Scouts concentrated on simplifying their supply chain to better support their mission, but
leaders at companies such as Procter & Gamble (P&G), Coca-Cola, Amazon, or Walmart face a
different form of the same problem: the sheer complexity of supply chain management for multi-
category, multi-market enterprises. Their need to align supply chain solutions to more effectively
support their company’ s strategies is even more critical. And yet, a true strategic fit between
enterprise and supply chain strategy is all too rare in the business world. Few companies have been
able to marry their strategic goals with their operational capabilities. Their supply chain leaders
struggle with a myriad of often conflicting demands from marketing, sales, engineering,
manufacturing, and procurement. With little agreement across the organization—and no way to make
or manage trade-offs—issues like cost, customization, speed, and price are rarely addressed in an
effective cross-functional way.

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Conversely, when a company is strategically coherent, its supply chain can be a linchpin of superior
performance. For example, clothing retailer Nordstrom uses extremely sophisticated inventory and
product life-cycle management capabilities to move products through its channels in half the time of
Macy’ s or Saks Fifth Avenue, cycling through each season’ s new fashions more efficiently and
effectively than its competitors. This is a major factor in Nordstrom’ s consistent ability to outpace
its rivals in profit margins and EBIT as a percentage of sales.

Would Nordstrom’ s supply chain model work for your company? Probably not. Every successful
company should have an operational design and management style tailored to its own purpose and
strategy. At Booz & Company, we often divide strategies into categories based on archetypal
approaches to the market, which we call puretones. These are some of the most commonly found
puretones in global enterprises.

• Innovators are known for introducing new and creative products and services to the market; they
need to balance their forward-looking creativity with practicality and user acceptance. Apple, 3M,
P&G, and Honeywell are noteworthy examples.
• Premium players offer high-end products or services and superior customer service. Their
differentiated position allows them to demand a higher price. Success as a premium player is not as
easy as it might seem; it requires discerning and managing the costs of increased quality and
attentiveness. Nordstrom, Herman Miller, and BMW are successful premium players.
• Customizers make use of customer intelligence to offer tailored products or services to particular
segments of their market. They can flexibly adapt to changing demand. The challenge they face is
balancing this flexibility with profitability. Well-known customizers include Dell, Burger King (“Have
it your way”), and direct-sale cosmetics firms like Avon and Natura.
• Green companies are an increasingly common form of reputation player—building on the principle
that sustainability is good business. They stake out a customer base by addressing the supply chain
needs of low-carbon-emissions and toxin-free products; they are ready to invest in differentiated
technologies. They must learn to manage a green supply chain at competitively low costs. Some
differentiated green companies are GE, Seventh Generation, and automakers such as Toyota and GM
(those building businesses around hybrid or electric cars).
• Aggregators combine offerings from a variety of sources, providing people the convenience of a
one-stop solution. They may manufacture some products and outsource or subcontract for others.

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Their concerns are related to differentiation: They must ensure that the value of their own
contribution is recognized. Some examples of aggregators are Amazon, eBay, and W.W. Grainger.
• Value players develop low-cost supply chains and pass savings on to customers. They may also
leverage savings to make additional investments elsewhere. They soon discover that to avoid being
commoditized, they cannot let low-cost affect quality or service. Ikea, Walmart, Southwest Airlines,
Tata Motors (maker of the Nano), and McDonald’ s are all value players.
In real life, of course, every successful company is unique. The most successful strategies tend to be
combinations of puretones, representing highly distinctive ways to play in the market. Amazon’ s
value proposition, for example, involves being an aggregator, a value player, and an innovator. It sells
products from extremely varied sources at very low prices, using its own form of online marketing
and innovative logistics. Elements of all three puretones are essential to its strategy, and are reflected
in its value chain.

For each of the puretone archetypes, a different mix of supply chain characteristics is required. Thus,
in designing your supply chain, it’ s helpful to know which puretones represent significant elements
of your company’ s way to play. Typically, a company can focus investment on only three to five ways
to improve its supply chain at one time. Exhibit 1 shows 12 of these opportunities for leverage, and
the puretone value propositions best matched to them. Companies don’ t have to excel at
everything; they can determine the kind of organization they want to be and then develop a supply
chain agenda that matches this aspiration.

If your company is a value player, you will benefit from supply chains that emphasize complexity
management; make sure every new product conforms to existing manufacturing processes and, thus,
can be offered at a relatively low price. Manufacturing footprints should also be a priority. Place
factories in developing nations, and adopt less-expensive logistics approaches, such as railroads and
container shipping. Under the rubric of strategic sourcing, cultivate long-lasting supplier
relationships, with high levels of cooperation, so all stages of the supply chain can be constantly
improved. Indeed, continuous improvement should be an overall area of emphasis: Implement lean
manufacturing techniques in all your facilities. Unfortunately, many value players have organized
their supply chains in other ways

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Alignment between your strategy and your supply chain has one final benefit. Because each form of
leverage is associated with different metrics, it gives you an effective way to measure the ongoing
health of your supply chain. Keeping track of the right metrics is crucial, helping to differentiate you
from competitors on a daily basis. As an enterprise with an eye on its value proposition, you can reap
substantial rewards from having this sort of very capable supply chain.

World’ s leading companies (See Ranking of companies) (July, 2018)

Rank Company Nation Revenues (in billions of US dollars)

1 Walmart US $500
2 State Grid China $348.9
3 Sinopec China $326.9
4 China Natural Petroleum China $326
5 Royal Dutch Shell Netherlands $311.8
6 Toyota Japan $265.1
7 Volkswagen Germany $260
8 BP UK $244.5
9 Exxon Mobil US $244.3
10 Berkshire Hathaway US $242

Market cap (in billions of US

Rank Company Nation
dollars)
1 Apple US $851
2 Alphabet (Google) US $719
3 Microsoft US $703
4 Amazon US $701
5 Tencent China $496
6 Berkshire Hathaway US $492
7 Alibaba China $470
8 Facebook US $464
9 JP Morgan Chase US $375
10 Johnson & Johnson US $344

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 The World's Largest Employers

Rank Employer Employees (Millions)

1 United States Department of Defence 3.2
2 People's Liberation Army (China) 2.3
3 Walmart 2.1
4 McDonald's 1.7
5 China National Petroleum Corporation 1.7
6 State Grid Corporation of China 1.6
7 China National Petroleum 1.5
8 National Health Service (United Kingdom) 1.4
9 Indian Railways 1.4
10 Indian Armed Forces 1.3
11 Foxconn 0.8

DOWNTIME: The 8 Deadly Lean Wastes

Copious amounts of waste can occur in the workplace, particularly in a manufacturing process, but
do you know what the eight most commons wastes are and how they impact your organization?

Taiichi Ohno, considered the father of Toyota Production System (TPS), created a lean manufacturing
framework, which was based on the idea of preserving (or increasing) value with less work. Anything
that doesn't increase value in the eye of the customer must be considered waste, or "Muda", and
every effort should be made to eliminate that waste. The following 8 lean manufacturing wastes,
mostly derived from the TPS, have a universal application to businesses today. The acronym for the
eight wastes is DOWNTIME. Downtime stands for:
Defects
Overproduction
Waiting
Not utilizing talent
Transportation
Inventory excess

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Motion waste
Excess processing

#1 Defects
Mistakes that require additional time, resources, and money to fix. In a manufacturing process, a
defect might involve a defective part that has to be remade. Some causes:
• Poor quality controls
• Poor repair
• Poor documentation
• Lack of standards
• Weak or missing processes
• Misunderstanding customer needs
• Uncontrolled inventory levels
• Poor design and undocumented design changes

Completely eradicating any form of waste is impossible, but defects can certainly be limited by the
application of standardized work plans, more stringent quality control at all levels, a full
understanding of work requirements and customer needs, and simple job aids such as checklists.

#2 Overproduction
In some organizations, workers just blindly keep producing, even when those who receive their
output either aren't ready for it or don't need it. This is a big flaw as it can tie up significant working
capital. It’ s especially common in manufacturing, but it can occur in any workplace situation in which
there's a bottleneck. Overproduction may occur due to:
• Just-in-case production
• Unclear customer needs
• Producing to a forecast
• Long set-up times
• Engineering changes
• Poorly applied automation

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The solution to overproduction is to establish a reasonable work flow for the benefit of the customer.
Be sure that there are well-established procedures in place for every process in your organization,
and if necessary, implement new processes to keep work from backing up behind particular
bottlenecks in the organization.

#3 Waiting
This occurs whenever work has to stop for some reason: because the next person in line is
overwhelmed, because something broke down, because you're waiting for approval or materials, or
because you've run out of something. Causes can include:
• Unbalanced workloads
• Unplanned downtime
• Long set-up times
• Producing to a forecast
• Insufficient staffing
• Work absences
• Poor process quality
• Poor communication

Whatever the cause, some workers have to wait for a bottleneck to be cleared. One way to address
this is the need to provide adequate staffing to handle the workload at the bottlenecks, which some
managers may target as a source of monetary waste.

#4 Not-Utilizing Talent
While not part of TPS's seven wastes, this waste is being increasingly seen within businesses today.
Not or under-utilizing peoples’ talents, skills and knowledge can have a detrimental effect on an
organization. Companies can experience great benefits when recognizing the value of skills and
improvement ideas from all levels of the business and can suffer when not effectively engaging in the
process. This can typically be seen with:
• Assigning staff to wrong tasks
• Wasteful admin tasks
• Poor communication

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 • Lack of teamwork
• Poor management
• Insufficient training

If the above list sounds oddly familiar, it should: many of these failings are the same ones that result
in a lack of employee engagement, which can hamstring any organization's productivity. Key
solutions include empowering your employees, stop micromanaging and increase training.

#5 Transportation
Waste caused by moving things around. This is less of a problem in a business office than in a
manufacturing plant, since most of what white collar workers "transport" can be sent by email for
example. Otherwise, too much transportation tends to increase costs, wastes time, increases the
likelihood of product damage and deterioration, and can result in poor communication. In general,
transportation waste can be caused by:
• Poor plant/office layout
• Unnecessary or excessive steps in the process
• Misaligned process flow
• Poorly-designed systems

Limiting transportation waste can be easily addressed by common-sense efforts such as simplifying
processes, repairing physical layouts, handling products less often, and making distances between
steps as short as possible.

#6 Inventory Excess
This waste occurs when there is supply in excess of real customer demand, which masks real
production. Causes include:
• Overproduction and buffers
• Poor monitoring systems
• Mismatched production speeds
• Unreliable suppliers
• Long set-up times

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 • Misunderstood customer needs

#7 Motion Waste
Any excess movement, whether by employees or machines, that does not add value to the product,
service or process. Typical causes include:
• Poor process design and controls
• Poor workstation/shop layout
• Shared tools and machines
• Workstation congestion
• Isolated and siloed operations
• Lack of standards

The solution here is to re-arrange layouts to decrease the distance between stations, and make it
easier to reach things that are often used.

#8 Excess Processing
This often occurs due to the creation of multiple versions of the same task, process more than is
required or long-winded poorly designed processes. Examples include:
• Excessive reports
• Multiple signatures
• Re-entering data and duplicated data
• Lack of standards
• Poor communication
• Overdesigned equipment
• Misunderstanding of the customer's needs
• Human error

All of these unnecessarily increase your costs, time and resources. You must first examine and map
your organization to analyse the processes in order to fix them. Standardize processes, empower
employees and eliminate unnecessary documentation, sign-off processes and meetings.

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Systematic elimination of these wastes can result in faster processes, lower costs, higher quality,
happier workers and, most importantly, happier customers.

REFERENCES
• This list is indicative/suggestive. It is not meant to be exhaustive. Texts used will therefore
change from one semester to another.

• You will also find the following website useful. It will give you a wealth of examples of actual
company practices especially from Southern Africa: bizcommuniy.com

Anand, J. (2009) ‘ Supermarketization, consumer choices, and the changing food retail market
structure: The case of Citlalicalli, Mexico’ , Research in Economic Anthropology. Elsevier, 29(2009),
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Management, 39(8), pp. 690–711.

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Wessel, J. P. and Vogt, J. (2012) Business Logistics Management. A value chain perspective. Edited
by 4th. Oxford.

Must Read: Business News:

bizcommunity.com

ADDITIONAL READINGS
I extracted the following readings recently from Emeraldinsight which is accessible to all registered
MSU students. I recommend these for enrichment of your understanding of LSC131 issues. Notice
that the list is packed with some 2019-2020 readings.

Aboah, J., Wilson, M. M. J., Rich, K. M., & Lyne, M. C. (2019). Operationalising resilience in tropical
agricultural value chains. Supply Chain Management, 24(2), 271–300. https://doi.org/10.1108/SCM-05-
2018-0204
Brazhkin, V. (2020). “ I have just returned from the moon : ” online survey fraud. 4(January), 489–503.
https://doi.org/10.1108/SCM-12-2019-0466
Camargo, L. R., Pereira, S. C. F., & Scarpin, M. R. S. (2020). Fast and ultra-fast fashion supply chain
management: an exploratory research. International Journal of Retail and Distribution Management,
48(6), 537–553. https://doi.org/10.1108/IJRDM-04-2019-0133
Cheng, H., Chen, M., & Mao, C.-K. (2010). The evolutionary process and collaboration in supply chains. In
Industrial Management & Data Systems (Vol. 110, Issue 3, pp. 453–474).
https://doi.org/10.1108/02635571011030079
Comes, T., Bergtora Sandvik, K., & Van de Walle, B. (2018). Cold chains, interrupted: The use of technology
and information for decisions that keep humanitarian vaccines cool. Journal of Humanitarian Logistics
and Supply Chain Management, 8(1), 49–69. https://doi.org/10.1108/JHLSCM-03-2017-0006
Cui, L., Gao, M., Dai, J., & Mou, J. (2020). Improving supply chain collaboration through operational
excellence approaches: an IoT perspective. Industrial Management and Data Systems.
https://doi.org/10.1108/IMDS-01-2020-0016

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Dodds, S., & Hess, A. C. (2021). Adapting research methodology during COVID-19 : lessons for transformative
service research. 32(2), 203–217. https://doi.org/10.1108/JOSM-05-2020-0153
Evans, J. R., & Mathur, A. (2005). The value of online surveys. 15(2), 195–219.
https://doi.org/10.1108/10662240510590360
Galankashi, M. R., & Helmi, S. A. (2019). Agility assessment in manufacturing companies. 26(7), 2081–2104.
https://doi.org/10.1108/BIJ-10-2018-0328
Ghadge, A., & Moradlou, H. (2020). The impact of Industry 4 . 0 implementation on supply chains.
https://doi.org/10.1108/JMTM-10-2019-0368
Jayaratne, P., Lee, ·, Styger, E. J., & Perera, N. (2012). ROLE OF SUPPLY CHAIN MAPPING IN SUSTAINABLE
SUPPLY CHAIN MANAGEMENT.
Kaipia, R. (2009). Coordinating material and information flows with supply chain planning. The International
Journal of Logistics Management, 20(1), 144–162. https://doi.org/10.1108/09574090910954882
Kumar, A., Singh, R. K., & Modgil, S. (2020). Exploring the relationship between ICT, SCM practices and
organizational performance in agri-food supply chain. Benchmarking, 27(3), 1003–1041.
https://doi.org/10.1108/BIJ-11-2019-0500
Kumar, S., Hong, Q. S., & Haggerty, L. N. (2011). A global supplier selection process for food packaging.
Journal of Manufacturing Technology Management, 22(2), 241–260.
https://doi.org/10.1108/17410381111102243
Lai, P. L., Su, D. T., Tai, H. H., & Yang, C. C. (2020). The impact of collaborative decision-making on logistics
service performance for container shipping services. Maritime Business Review, 5(2), 175–191.
https://doi.org/10.1108/MABR-12-2019-0061
Linkov, I., Carluccio, S., Pritchard, O., Ní Bhreasail, Á., Galaitsi, S., Sarkis, J., & Keisler, J. M. (2020). The case
for value chain resilience. Management Research Review, 43(12). https://doi.org/10.1108/MRR-08-
2019-0353
Mcdonald, H., & Adam, S. (2003). A comparison of online and postal data collection methods in marketing
research. 85–95. https://doi.org/10.1108/02634500310465399
McKinsey & Company. (2016). Starting at the source : Sustainability in supply chains chains : 2016.
Melnyk, S. A., Narasimhan, R., & DeCampos, H. A. (2014). Supply chain design: Issues, challenges,
frameworks and solutions. International Journal of Production Research, 52(7), 1887–1896.
https://doi.org/10.1080/00207543.2013.787175
Moyano-Fuentes, J., Maqueira-Marín, J. M., Martínez-Jurado, P. J., & Sacristán-Díaz, M. (2020). Extending
lean management along the supply chain: impact on efficiency. Journal of Manufacturing Technology
Management. https://doi.org/10.1108/JMTM-10-2019-0388
Orr, S., & Jadhav, A. (2018). Creating a sustainable supply chain: the strategic foundation. Journal of Business
Strategy, 39(6), 29–35. https://doi.org/10.1108/JBS-11-2017-0157
Ouabouch, L. (2015). Overview on Supply Chain Resilience. Materials Management Review, 2020.
Rainbird, M. (2004). Demand and supply chains: The value catalyst. International Journal of Physical
Distribution and Logistics Management, 34(3), 230–250. https://doi.org/10.1108/09600030410533565
Rao, S., & Goldsby, T. J. (2009). Supply chain risks : a review and typology. 20(1), 97–123.
https://doi.org/10.1108/09574090910954864
Salmons, J. (n.d.). CHAPTER 5 GETTING TO YES : INFORMED CONSENT IN QUALITATIVE. 2, 109–134.

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 https://doi.org/10.1108/S2398-601820180000002005
Sandvik, I. M., & Stubbs, W. (2019). Circular fashion supply chain through textile-to-textile recycling. Journal
of Fashion Marketing and Management, 23(3), 366–381. https://doi.org/10.1108/JFMM-04-2018-0058
Sharma, Y. K., Mangla, S. K., Patil, P. P., & Liu, S. (2019). When challenges impede the process: For circular
economy-driven sustainability practices in food supply chain. Management Decision, 57(4), 995–1017.
https://doi.org/10.1108/MD-09-2018-1056
Soon, Q. H., & Udin, Z. M. (2011). Supply chain management from the perspective of value chain flexibility:
An exploratory study. Journal of Manufacturing Technology Management, 22(4), 506–526.
https://doi.org/10.1108/17410381111126427
Stobbe, M. (2008). Supply Chain and Supply Chain Management. Logistic Optimization of Chemical
Production Processes, 1–18. https://doi.org/10.1002/9783527622771.ch1
Suarez-Barraza, M. F., Miguel-Davila, J., & Vasquez-García, C. F. (2016). Supply chain value stream mapping: a
new tool of operation management. International Journal of Quality and Reliability Management,
33(4), 518–534. https://doi.org/10.1108/IJQRM-11-2014-0171
Taylor, D. H. (2005). Value chain analysis: An approach to supply chain improvement in agri-food chains.
International Journal of Physical Distribution and Logistics Management, 35(10), 744–761.
https://doi.org/10.1108/09600030510634599
Tummala, R., & Schoenherr, T. (2011). Assessing and managing risks using the Supply Chain Risk
Management Process ( SCRMP ). 6, 474–483. https://doi.org/10.1108/13598541111171165
Villena, V. H., & Gioia, D. A. (2018). On the riskiness of lower-tier suppliers: Managing sustainability in supply
networks. Journal of Operations Management, 64(May), 65–87.
https://doi.org/10.1016/j.jom.2018.09.004
Walters, D., & Rainbird, M. (2004a). The demand chain as an integral component of the value chain. In
Journal of Consumer Marketing (Vol. 21, Issue 7, pp. 465–475).
https://doi.org/10.1108/07363760410568680
Walters, D., & Rainbird, M. (2004b). The demand chain as an integral component of the value chain. Journal
of Consumer Marketing, 21(7), 465–475. https://doi.org/10.1108/07363760410568680
WEF. (2020). From linear to circular—Accelerating a proven concept. World Economic Forum.
https://reports.weforum.org/toward-the-circular-economy-accelerating-the-scale-up-across-global-
supply-chains/from-linear-to-circular-accelerating-a-proven-concept/

END

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