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

ORDER CONTROL

We will discuss in brief the different types of order management :

1. Make to Order
2. Make to Stock
3. Assemble to Order
4. Engineer to Order
5. Configure to Order

1. MAKE TO ORDER (MTO)
Manufacturing of the actual product starts only after the order is placed by the customer. This method is used in customer designer products where product is made as per the customer's requirement from start to finish. Such products are expensive and it will be a combination of the base product and the customisation needed by customer. Demand fulfilment is slow in this case compared to regular demand fulfilment rate. The advantage with make to order is that there is no excess storage cost involved after completion of the manufacturing because a customer order is already available in advance.

2. MAKE TO STOCK (MTS)
In this scenario, the products are manufactured well in advance as per the forecasted market demand.
The products once manufactured are partially stocked in warehouse and the rest is made readily available to the customer at the shop floor. The sold products are then replenished form the stocked inventory. Demand fulfilment is immediate but this also involves storage cost and also the risk of over manufacturing because we don't have a firm customer order prior to manufacturing unlike MTO. Manufacturing cost of such products are low as they are standardised with very minimal to no change in the product line.

3. ASSEMBLE TO ORDER (ATO)
This is a hybrid of MTS and MTO process. In this model product components are manufactured and kept ready. Only the assembling of the final product is done as per the customer's requirement after the customer's order is placed. This strategy can be used by manufacturers when there is a variety of finished products made available from the relatively same set of components. Manufacturers will have a subassembly line to cater to such orders upon customer's requirement, such that both the manufacturing and storage cost is reduced for the manufacturer without compromising highly on demand fulfilment rate unlike the case of MTO

4. ENGINEER TO ORDER (ETO)
This is a highly customised process as per the customer requirement. There is no defined based product unlike MTO. The product will require reengineering of the existing product or engineering a new product all together as per the customer's requirement. Fulfilment rate is very slow due to complications in the process. Usually such scenario are used to manufacture a reengineered product of an existing product or a working prototype for new product. Cost of manufacturing in very high and highly skilled manpower would be required for the process as this will involve more of human skill and not a regular assembly line setup

5. CONFIGURE TO ORDER (CTO)
This is a hybrid of ATO process wherein customer is given more flexibility and the visibility is given to the component level for the customer to choose from. Based on the configuration chosen by the customer the final product costing is calculated and assembly begins. In this way high customer satisfaction and productivity is achieved, its a win-win situation for both manufacturer and the customer. A simple example will be a computer where in customer can choose this RAM , ROM and Chipset configurations before purchasing the product and the quote for the final product is given by the manufacturer based on the configuration setup. Once the final product is agreed upon, the retailer or the manufacturer will have the product assembled as per the chosen configuration