THREE TIERS OF SUPPLY CHAIN IN RETAIL

Retail industry is a very complicated and sensitive network bound by people and machine. Any gap or lapse in process will lead to collapse of the complete supply chain. That's why its right said, "Retail is Detail". We need to plan, do, check and act (PDAC coined by William Edward Deming) in every segment of the supply chain. To implement PDCA process we also need to understand the classification or tiers in retail supply chain. We can define 3 tiers in any retail supply chain i.e. a supplier's supplier to a customer's customer.
1. Supplier Relationship Management (SRM)
2. Internal Supply Chain Management (ISCM)
3. Customer Relationship Management (CRM)


1. SUPPLIER RELATIONSHIP MANAGEMENT
SCM deals with the overall planning and assessment of the third part logistics or players involved in the sourcing and procuring of products by the organisation. This could involve manufacturers, suppliers, wholesalers, distributors and local vendors. SCM opens up the doors for closer ties with a few suppliers to uncover the potential of doing business together which will be mutually beneficial. Some of the health checks that can be done to review the relationship with the supplier in terms of SCM can be done through the below ratios and reports :
- Stock fulfilment ratio
- Payment report
- Supplier purchase report
- Supplier sales report
- Vendor Managed Inventory
- Vendor - Retailer performance report
- Demand Forecasting Report

2. INTERNAL SUPPLY CHAIN MANAGEMENT
ISCM covers all the internal movement of goods within the organisation over which the management has full control on. These involve the processes of internal distribution, replenishment and storage. The primary goal of Internal supply chain management is to satisfy the CRM's demands and manage reverse logistics.
Reports to monitor efficiency of internal supply chain management are :
- Distribution centre fulfilment report
- Distribution centre performance report
- Store Returns report
- Inventory ageing Report
- Replenishment Report
- Demand Forecasting Report

 3. CUSTOMER RELATIONSHIP MANAGEMENT
CRM deals with the processes involved in the interface between an organisation and its customers. In retail it covers Point of Sales/Service, Customer Loyalty Program, Website, Marketing activities and customer data analysis & analytics to forecast customer demand. It is CRM that defines the demand to be fulfilled by ISCM.
Reports to monitor efficiency of internal supply chain management are :
- Customer Churn Report
- Market Research Report
- Sales Reports
- E-commerce website analysis report
- Competitor Analysis report
- Market Basket Analysis

Overview of processes involved in the three tiers of supply chain management

SRM	ISCM	CRM
Sourcing	Strategy Planning	Marketing and market study
Negotiation	Demand Forecasting	Competitor Analysis
Supply Collaboration	Supply Planning	Sales analytics and analysis
Deals and Contracts	Reverse Logistics	Point of Service
Supplier Performance Review	Demand Fulfilment	Omni channel management

INVENTORY CONTROL AND PRODUCT LINE ANALYSIS

With increase in competition and customer demand, the product line has become infinite for Hypermarket retailers. Managing and analysing the SKUs (stock keeping Units / Items) have become a challenge. Few techniques can be used in analysis and classification of SKUs. We shall discuss the same in the below :


1. ABC Analysis
Methodology used in classifying the product range into 3 categories such as
-  'A' category products where tight inventory control is required because they contribute a lot to the profit of the organisation in terms of return on investment and sales. Regular perpetual inventory  checks are required to ensure minimal shrinkage. Reordering points are frequently amended to match the market demand
-  'B' category products are the ones with good inventory control deployed but there is no need for regular perpetual inventory checks. They contribute a good value to your sales as well
-  'C' category products are the ones with less inventory control and contribute a low percentage to sales. Retailers usually keep them in the product line due to customer requests or for clearance
This methodology uses Pareto's principle where in 20 % of the inventory contributes to 80% of the total sales value. It is also known as the 80-20 rule
Please do not confuse ABC analysis with Activity Based Accounting. These are two different terms and have their own importance in operations.


2. HML Analysis
Its a simple way to classify the products based on the selling price of the product i.e. 'H'igh value , 'M'edium value and 'L'ow value products. It helps in understanding what percentage of these stocks are held by us


3. VED Analysis
These are 'V'ital, 'E'ssential and 'D'esirable products that has to be maintained in our inventory. This is used in the field of pharmacy where inventory is based on the criticality of the drug and in spare parts store where criticality is based on the parts that ware out more often and needed on immediate basis for replacements


4. FSN Analysis
This methodology is used to identify the product sales i.e. 'F'ast moving, 'S'low moving and 'N'on moving. Please do not confuse this with ABC analysis. FSN analysis is based on the quantity of inventory flow for that particular product, it doesn't not evaluate the contribution of the product to sales value. It evaluates the contribution of the product to the sales quantity. In case of manufacturing the classification is based on consumption of the product


5. SOS Analysis
This is a simple way to monitor the seasonal products through the year lying in our inventory. They shift between 'S'easonal and 'O'ff-'S'easonal based on the seasonality. This is done to ensure the product is purchased and sold before the season expires or to ensure enough stock is kept on hand to facilitate sales during the beginning of the season. This method is critical with respect to seasonal fruits and vegetables


6. SDE Analysis
Methodology used by retailers in procurement side of the business operations.
- 'S'carcely available products are the ones which are imported and are not available locally. The supply does not meet the demand and it is difficult to procure due to its short supply. Hence extra caution and monitoring is required by the buyers to get the products on hand from the manufacturers
-  'D'iffult to procure products are those manufactured domestically but difficult to procure due to distance from supplier/manufacturer, short supply or less number of suppliers available in the market
-  'E'asy to acquire products are the ones that are locally available in plenty and the supply meets the demand


7. GOLF Analysis
This is the hybrid of SDE analysis where in procurement of inventory is classified based on :
-  'G'overnment supplied inventory
-  'O'rdinary available products which has supply meeting the demand, the product is easy to procure and is available within the country
-  'L'ocally available products from local vendors, these are usually perishable products with short shelf life procured locally within the state/city limits
-  'F'oreign source is required for the supply of the product