An analysis of current supply chain best practices in the retail industry with case studies of Wal-Mart and Amazon.com

Thesis (M. Eng. in Logistics)--Massachusetts Institute of Technology, Engineering Systems Division, 2005.Includes bibliographical references (leaves 184-188).In support of the Supply Chain 2020 Project at MIT, this thesis identifies current best practices in retail industry supply chains, with a specific focus on mass merchandising and Internet retailing. Using a survey of current literature for context and industry expert interviews, this thesis assesses the current state of the retail industry and analyzes case studies of Wal-Mart and Amazon.com to illustrate retail supply chain best practices. Topics covered in each case study include supply chain strategy and business strategy linkage, operating models, supply chain design, replenishment and distribution processes, and ongoing supply chain improvement initiatives. Wal-Mart and Amazon.com are found to have very different supply chains in terms of structure and processes, based on their different operating models. However, there are many supply chain themes that are common among the two companies. Both case study companies have supply chain strategies, designs, and processes that clearly support their business strategies. Additionally, these companies tailor processes to fit specific product and demand profiles, collaborate extensively with supply chain partners, invest significantly in information technology, focus on operational efficiency, and leverage scale to facilitate competitive advantage through supply chain management. Based on the common and unique aspects of Wal- Mart and Amazon.com's supply chains, we provide recommendations for the potential transferability of Wal-Mart and Amazon.com practices within the retail industry and to other industries.by Colby Ronald Chiles and Marguarette Thi Dau.M.Eng.in Logistic

Developing a supply chain framework for omni-channel presence: retailer omni-channel knowledge framework

Confidential until 18. May 201

Measuring the sales impact of improving inventory records: How improving the accuracy of inventory records can grow sales by 4-8%

There is a growing body of evidence to suggest that retailers’ inventory records are inaccurate to a significant extent. And it is reasonable to assume that the higher the inventory record inaccuracy (IRI), the higher the impact on sales. But what does this mean in real terms? This report describes the outcome of a 3-year project (conducted with the participation of 7 of Europe’s largest retailers) the aim of which is to quantify the IRI problem and demonstrate the sales lift resulting from fixing it. A structured test-control type experiment is used, according to which test stores are subjected to stock counts at some particular point in time, whereas control stores are not, allowing us to measure the effect of reconciling (or not) the stock records on sales. The analysis covers approximately 1 Million stock keeping units (SKUs) sold in about 100 stores; such data is of a different order of magnitude to anything previously attempted in the academic and practitioner literature, leading to important, reliable and trustworthy conclusions. We find that about 60% of the SKUs analysed are affected by inventory record inaccuracies. We also find that positive IRI is as prevalent as negative IRI, with the same detrimental effects though on sales. Very importantly, correcting inventory inaccuracies is found to lead to approximately 4% to 8% of increased sales in the participating retailers. Interestingly, this applies to all retailers including the particularly ‘accurate’ ones. The results demonstrate that the biggest opportunity for improvement comes from high-volume expensive items, and detailed analysis by product category shows which categories should attract most attention. Finally, we discuss and show results on how inventory accuracy deteriorates over time following a stock count. This has implications for deciding how often and when stocktakes should take place. Our findings should be of great value to retailers to: i) inform their decisions on the appropriate levels of resource and investment against improving inventory records accuracy; ii) prioritise investments per product category and class; iii) appreciate the behaviour of positive and negative discrepancies; iv) discuss counting as a sales increase strategy rather than a cost-intensive necessity

Wal-Mart Stores, Inc. Strategic Corporate Research Report

[Excerpt] Wal-Mart Stores, Inc. (hereinafter Wal-Mart) is the second-largest company in the world. It has more annual revenue than the GDP of Switzerland. It sells more DVDs, magazines, books, CDs, dog food, diapers, bicycles, toys, toothpaste, jewelry, and groceries than any other retailer does worldwide. It is the largest retailer in the United States, Mexico, and Canada, the second-largest in the United Kingdom, and the third largest in Brazil, With its partners, it is the largest retailer in Central America. Wal-Mart is also the largest private employer in the United States, Mexico, and Canada, and it has 1.8 million employees around the globe. Wal-Mart is so huge that it effectively sets the terms for large swaths of the global economy, from retail wages to apparel prices to transoceanic shipping rates to the location of toy factories. Indeed, if there is one single aspect to understand about the company, it is the fact that Wal-Mart is transforming the relations of production in virtually every product category it sells, through its relationships with suppliers. But its influence goes far beyond the economy. It sets social policy by refusing to sell certain types of birth control. Its construction of supercenters molds the landscape, shapes traffic patterns, and alters the local commercial mix. The retail goliath shapes culture by selling the music of patriotic country singer Garth Brooks but not the critical (and hilarious) The Daily Show with Jon Stewart Presents America (the Book): A Citizen’s Guide to Democracy Inaction. It influences politics by donating millions to conservative politicians and think tanks. Wal-Mart is, in short, one of the most powerful entities in the world. Not surprisingly, Wal-Mart has developed a long list of critics, including unions, human rights organizations, religious groups, environmental activists, community organizations, small business groups, academics, children’s rights groups, and even institutional investors. These groups have exposed the company’s illegal union-busting tactics, its many violations of overtime laws, its abuse of child labor, its egregious healthcare policies, its super-exploitation of immigrant workers, its rampant gender discrimination, the horrific labor conditions at its suppliers’ factories, and its unlawful environmental degradation. They have also chronicled the deleterious effect Wal-Mart has on the public coffers and the quality of community life. New Wal-Mart stores and distribution centers often swallow up government subsidies and tax breaks, take public land, create more congestion, reduce overall wages, destroy retail variety, and increase public outlays for healthcare. To its critics, Wal-Mart represents the worst aspects of 21st-eentury capitalism. Wal-Mart usually counters any criticism with two words: low prices. It is a powerful mantra in a consumerist world. The company does make more products affordable to more people, and that is nothing to sneeze at when wages are stagnant, jobs insecure, pensions disappearing, and health coverage shrinking. With low prices, Wal-Mart helps working men and women get more from their meager paychecks, more necessities like bread, and more luxuries, like roses, too. It is a brilliant and incontrovertible argument, and Wal-Mart’s most ardent defenders take it even farther. They say its obsession with low prices makes the entire economy more efficient and more productive. Suppliers and competitors have to produce more and better products with the same resources, and that redounds to everyone. In the micro, it means falling prices and rising product quality. In the macro, it means economic growth, more jobs, and higher tax revenues. To its defenders, Wal-Mart represents the best aspects of 21st-century capitalism. Despite their radical opposition, critics and defenders of the world’s largest corporation agree on one thing: Wal-Mart represents 21st-century capitalism. It symbolizes a system of increasing market penetration and decreasing social regulation, where more and more aspects of life around the world are subject to economic competition. Wal-Mart’s success rests upon the ongoing destruction of social power in favor of corporate power. It takes advantage of the conditions of the neo-liberal world, from the availability of instant and inexpensive global communication to the continuing collapse of agricultural employment around the world to the rapid diffusion of technological innovation to the oversupply of subjugated migrant labor in nearly every country to the continued existence of undemocratic and corporate-dominated governments. For some, this is as it should be, all part of capitalism’s natural and ultimately benign development. For the rest of us, Wal-Mart is at the heart of what is wrong with the world

Supply chain management in the fashion retail industry: a multi-method approach for the optimisation of performances

2014 - 2015Fashion and Apparel Supply Chains work in a very fast-changing environment always demanding better quality, higher availability of products, broader assortments and shorter delivery times. Then, an efficient Supply Chain Management can make the difference between success or failure in the market. In this context, this thesis analyses the characteristics of this particular industry at different levels. Starting from the analysis of the whole Supply Chain, aimed at identifying the most critical areas and processes, this work proposes a reference framework for the definition and subsequent optimisation of the physical and informative flows. The model also includes all the cost and revenue items connected to the processes which are characteristic of a Fashion Supply Chain working with a wide network of direct-operated or franchising mono-brand stores. In recent years, the traditional model, only based on a brick & mortar business, has been overcome due to the wide spread of ecommerce. This evolution forced companies to adopt a new integrated strategy, called Omni- Channel Retailing, in order to meet customers requests and offer a wider product selection. With these perspectives, the framework has been revised and extended in order to represent no longer only the physical network but also the mobile purchasing paths and allow us to evaluate how this new integrated strategy may impact on the performances of a traditional Supply Chain. From all these analysis it emerged that the most critical process for a company operating in this sector, is the Replenishment process, i.e. the definition of the delivery times and quantities from the central warehouse to the whole network of stores and clients. An heuristic optimisation method, called the Bees Algorithm, was adopted to solve this problem and, together with the reference framework, represents a useful Decision Support System for fashion companies in the definition of the purchasing quantities and operations plans well ahead of the sales season. [edited by author]XIV n.s

A critical analysis of the relationship between business information system technology and supply chain management with special reference to optimum efficiency within large enterprises in the food and drug retail sector in KwaZulu-Natal.

Masters Degree. University of KwaZulu-Natal, Pietermaritzburg.The purpose of this research is to explore the relationship between supply chain management and business information system technology within the food and drug retail sector with special reference to optimum efficiency. Business information system technology leverages information and knowledge sharing throughout the supply chain which enables them to respond more effectively to an ever-changing and volatile marketplace. The relationship between supply chain management and business information system technology is multi-faceted and complex in nature, and consequently, has the ability to penetrate every element of an organisation’s functionality. Furthermore, it has the ability to penetrate the functionality of an entire chain or network of suppliers and markets irrespective of their position around the globe. Supply Chain management literature teaches that optimisation within functional areas is not as effective as cross-optimisation across functions and supply chain networks. As supply chains rely on business information technology for crossoptimisation, optimum efficiency will always be a moving target for as long as business technology and supply chain management continue to break through new ground. In this research large food and drug supply chain networks and their business information system requirements, trends, influence, effect and constraints were reviewed, with special reference to creating optimum efficiency in their supply chain networks. This research was motivated by discussions with Pick ‘n Pay’s business information system’s service provider and their desire to optimise Pick ‘n Pay’s supply chain network efficiency in a highly price-competitive environment, resulting in an in-depth case study being carried out on Pick ‘n Pay (Pty) Ltd stores in KwaZulu-Natal. The review of literature suggests that cross-optimisation is only mutually beneficial within trust relationships that exhibit seamless flows of information throughout a supply chain. Data suggests that despite Pick ‘n Pay’s use of advanced business information system technology, Pick ‘n Pay together with the food and drug retail stores in South Africa have a long way to go on this issue

Decision models for fast-fashion supply and stocking problems in internet fulfillment warehouses

Internet technology is being widely used to transform all aspects of the modern supply chain. Specifically, accelerated product flows and wide spread information sharing across the supply chain have generated new sets of decision problems. This research addresses two such problems. The first focuses on fast fashion supply chains in which inventory and price are managed in real time to maximize retail cycle revenue. The second is concerned with explosive storage policies in Internet Fulfillment Warehouses (IFW). Fashion products are characterized by short product life cycles and market success uncertainty. An unsuccessful product will often require multiple price discounts to clear the inventory. The first topic proposes a switching solution for fast-fashion retailers who have preordered an initial or block inventory, and plan to use channel switching as opposed to multiple discounting steps. The FFS Multi-Channel Switching (MCS) problem then is to monitor real-time demand and store inventory, such that at the optimal period the remaining store inventory is sold at clearance, and the warehouse inventory is switched to the outlet channel. The objective is to maximize the total revenue. With a linear projection of the moving average demand trend, an estimation of the remaining cycle revenue at any time in the cycle is shown to be a concave function of the switching time. Using a set of conditions the objective is further simplified into cases. The Linear Moving Average Trend (LMAT) heuristic then prescribes whether a channel switch should be made in the next period. The LMAT is compared with the optimal policy and the No-Switch and Beta-Switch rules. The LMAT performs very well and the majority of test problems provide a solution within 0.4% of the optimal. This confirms that LMAT can readily and effectively be applied to real time decision making in a FFS. An IFW is a facility built and operated exclusively for online retail, and a key differentiator is the explosive storage policy. Breaking the single stocking location tradition, in an IFW small batches of the same stock keeping unit (SKU) are dispersed across the warehouse. Order fulfillment time performance is then closely related to the storage location decision, that is, for every incoming bulk, what is the specific storage location for each batch. Faster fulfillment is possible when SKUs are clustered such that narrow band picklists can be efficiently generated. Stock location decisions are therefore a function of the demand arrival behavior and correlations with other SKUs. Faster fulfillment is possible when SKUs are clustered such that narrow band picklists can be efficiently generated. Stock location decisions are therefore a function of the demand behavior and correlations with other SKUs. A Joint Item Correlation and Density Oriented (JICDO) Stocking Algorithm is developed and tested. JICDO is formulated to increase the probability that M pick able order items are stocked in a δ band of storage locations. It scans the current inventory dispersion to identify location bands with low SKU density and combines the storage affinity with correlated items. In small problem testing against a MIP formulation and large scale testing in a simulator the JICDO performance is confirmed

The diffusion and impact of radio frequency identification in supply chains : a multi-method approach

As a promising and emerging technology for supply chain management, Radio Frequency Identification (RFID) is a new alternative to existing tracking technologies and also allows a range of internal control and supply chain coordination. RFID has generated a significant amount of interest and activities from both practitioners and researchers in recent years. However, the factors important for its diffusion in supply chains and the impact on supply chain performance have not been well understood. Many organizations are reluctant to participate in supply-chain level RFID projects because of this lack of understanding. My dissertation proposes to help understand RFID's use in supply chains through a multi-method approach - an empirical study to understand the diffusion and impact of RFID and a simulation study to understand RFID's impact on inventory accuracy in supply chains. My first study on the factors influencing RFID adoption decision showed that compatibility, trading partner's RFID capability, trading partner power, competitive pressure, transaction volume and financial resources are significant factors for RFID adoption in a supply chain context. The second study which looked into the post-adoption use of RFID for supply chain has found that adoption cost, complexity, organizational readiness, external pressure and trading partner readiness significantly influence RFID infusion, which finally improves firm's supply chain process performance. The third study used a simulation model to examine RFID's impact on inventory management in supply chains. The key findings were that the benefits reaped from RFID heavily depend on product type which implements RFID. The above findings indicate that organizations have to carefully evaluate their RFID project with different factors identified in this dissertation to successfully implement RFID and derive its full benefits. My dissertation has contributed to RFID research in particular, and supply chain technology adoption in general, by showing the importance of trading partner issues for supply chain technology diffusion and use

Successful Inventory Management Strategies in the Office Supply Businesses

Some small and medium-sized retail office supply stores (SMROSS) owners lack successful inventory management strategies. SMROSS business owners rely on successful inventory strategies to minimize costs, maintain the correct inventory level, and avoid stockouts. Grounded in the conceptual framework of contingency theory and inventory modeling, the purpose of this qualitative multiple case study was to explore strategies business owners use to manage inventory efficiently. The participants included eight business owners of seven SMROSS in Ontario, Canada, who operated their businesses for more than 5 years and successfully implemented inventory management strategies. Data were analyzed from semistructured interviews and information from participants’ websites following Yin’s five-step process. Four themes emerged: inventory management efficiency, nurturing supply chain partner relationships, using information technology in inventory, and responsiveness to customer demand. A key recommendation is that SMROSS business owners maintain a stock level where storage cost is lowest while maintaining inventory to satisfy demand. The implication for positive social change includes the potential for SMROSS business owners to remain competitive by maintaining customer loyalty by meeting customer demand. By remaining viable, business owners could potentially expand their businesses and create employment opportunities for individuals in the community

Retail industry adopting change : adaptation: automation: benefits

This thesis contains the research on the key change adoptive agents/forces and the solu-tions to the world‟s rapidly growing and one of the most consumer facing industry. The trillions worth retail industries are undergoing the period of important restructuring inter-nally and externally. The author highlights the key factors that force the retail industry to adopt modern technologies for their daily business processes in order to be more competi-tive. The factors have been viewed in two perspectives 1-Internal (store/warehouse man-agement, human capital) and 2-Externally (customers, suppliers). In response of these factors, the research presents state of the art 1-Self Checkout System 2-RFID 3-Cloud Computing as tested and proven technologies that has been observed and implemented in the “Future Stores” by big box retailers. Finally the author discusses the tangible and in-tangible benefits to the retail business derived from the implementation of mentioned technologies. To meet the research demands, the writer constructs a theoretical frame-work by using the descriptive and exploratory research method as a secondary resource; while empirical research was conducted through semi structured phone interviews with experts from the retail industry and the retail management consultants. The results derived from theoretical study and empirical research show that the use of updated retail management technologies like Self-checkout System, RFID and Cloud Computing can reduce cost and management pain fairly. While the bigger impact of such adoptions is to build a seamless supply chain, customer experience management and business intelligence system; which plays a vital role to prolong the competitiveness and life cycle of retail business against future economic setbacks