The Future of Retail Operations

Retailing consists of all the activities associated with the selling of goods to the final consumer. In this article, we review the research on retail operations published in Manufacturing & Service Operations Research (M&SOM) since 1999. We then discuss the current retail landscape and the new research directions it offers, in which M&SOM can play a prominent role

The influence of promotional activity on supply chain stability: a fast moving consumer goods (FMCG) perspective.

Master of Commerce. University of KwaZulu-Natal, Pietermaritzburg, 2014.Today, most sales are stimulated at the point of purchase, so sales promotions are becoming a crucial element of any marketing campaign. The consequence of these promotions is the creation of unpredictable demand. The resultant instability has been termed the “Bullwhip Effect” (BWE). The BWE has a negative effect on business performance as it creates information distortions that cause excessive inventory holdings, higher overall costs, poor customer service and lost sales. An important strategy to achieve a smooth flowing supply chain is to mitigate or preferably eliminate the BWE. The aim of this research was to monitor the stock levels of a high value product flowing through the supply chain to determine whether marketing activities, such as promotions, contribute to increased instability in the chain. The study followed a case study approach and analysed the business activities of consumer packaged goods company (CPGC) “X” promoting their product “X”, an item of high value, with retailer “X”. The promotion was monitored in three phases. The phases included pre-promotion planning, execution of the promotion and post promotion analysis. The researcher employed both qualitative and quantitative research methods. The research established that the ROI on the promotion was greater than the target and that the retailer made an additional profit. However, when the assessment of ROI included more of the supply chain, there was a negative operating profit due to excess upstream inventory. The study confirmed that promotional activities contribute to the BWE and that this effect may be more pronounced with products of higher value. The phenomenon worsened as the distance of supply chain nodes from the real demand increased. This caused a major shift in ordering patterns and an altered total inventory pipe fill in the chain. The recommendations arising from this study are that the CPGC and retailer should implement a true scorecard and a joint business plan for those brands that have products of high value. Subsequently, a vendor managed inventory (VMI) system should be implemented. This will remove the retailer’s need to forecast and may prevent unstable ordering and delays due to cost avoidance. Shrinkage will be reduced as the CPGC would directly own, control and supply stock in the retailer’s DCs

Proactive food waste prevention in grocery retail supply chains – an exploratory study

Purpose Regarding the retail internal supply chain (SC), both retailers and research are currently focused on reactive food waste reduction options in stores (e.g. discounting or donations). These options reduce waste after a surplus has emerged but do not prevent an emerging surplus in the first place. This paper aims to reveal how retailers can proactively prevent waste along the SC and why the options identified are impactful but, at the same time, often complex to implement. Design/methodology/approach The authors follow an exploratory approach for a nascent topic to obtain insights into measures taken in practice. Interviews with experts from retail build the main data source. Findings The authors identify and analyze 21 inbound, warehousing, distribution and store-related options applied in grocery retail. Despite the expected high overall impact on waste, prevention measures in inbound logistics and distribution and warehousing have not been intensively applied to date. Practical implications The authors provide a structured approach to mitigate waste within retailers' operations and categorize the types of barriers that need to be addressed. Originality/value This research provides a better understanding of prevention options in retail operations, which has not yet been empirically explored. Furthermore, this study conceptualizes prevention and reduction options and reveals implementation patterns

An exploration of online fulfilment centres in omni-channel grocery retail

Grocery retail is going through a rapid shift and retailers are moving towards omni-channel. Omni-channel means that a retailer has multiple channels in which thecustomer can move seamlessly, with the back-end organised to make this possible.While the grocery-retail sector has started to see a rapid growth in online sales,omni-channel grocery retailers are struggling with profitability in their onlinechannels. For these retailers, efficient logistics and material handling are crucial toachieve profitability. Today, it is common for omni-channel grocery retailers toinvest in an online fulfilment centre (OFC) when volumes are growing. A keycomponent for improving profitability is thus to improve the OFC configuration (i.e.warehouse operations, design, and resource). Despite the important role that an OFCplays for omni-channel performance and profitability, extant research is lacking onhow to configure an OFC in omni-channel grocery retail. Hence, the purpose of thisthesis was to ‘explore how grocery retailers are configuring their OFCs and in whatway they adapt to specific challenges and context’

An assessment of the sustainability of E-fulfilment models for the delivery of fast moving consumer goods to the home

Online retail sales are growing rapidly and have captured a significant proportion of the retail market in many countries. Although companies are under mounting pressure to reduce their environmental impact, the environmental effect of the different online distribution strategies remains unclear. Most previous studies of this subject have only included partial effects and consequences. To enable a more holistic understanding, this study proposes a more inclusive framework of environmental assessment based on life cycle analysis. This was applied to fast moving consumer goods (FMCG). Previous studies have shown that the last mile delivery contributes significantly to the environmental impact of online retailing, mainly because of the nature of the home delivery operations, including narrow time windows and short order lead times. If consumers were to buy products online on a subscription basis and give the supplier more control over the replenishment process there might be less need for fast deliveries, creating opportunities to improve the efficiency of home deliveries and reduce their environmental impact. The study classified different forms of subscription arrangement, assessed their relative attractiveness to consumers and examined their likely impact on the supply chain. Consumer views on subscriptions were surveyed by means of focus group discussions and interviews. To assess the likely supply chain impacts of subscriptions, the literature on vendor-managed inventory was consulted. A Life-Cycle Assessment (LCA) model was built to quantify and compare the environmental impact of various e-fulfilment models for FMCG products in the United Kingdom. This study reveals that the method of execution have a large influence on the environmental impact. In store-based retailing, the energy consumption within the supermarket is a significant contributor to the total greenhouse gas emissions. On the other hand, some forms of home delivery, involving for example the use of parcel networks with no pre-agreed time-slots and relatively high rates of delivery failure and customer collection, are also carbon-intensive. This contribution of consumer trips to the total footprint is much smaller in case of van-based deliveries where pre-agreed time-windows are used. Regardless of the business model, the total carbon footprint per item depends heavily on the number of items per delivery. Consequently, companies or consumers looking to decrease the environmental impact of online shopping should maximise the number of items per delivery. The study concludes with an assessment of the strengths, weaknesses and possible environmental improvements of each of the efulfilment methods, taking account of the possible role of subscriptions

Exploring the significance of digital disruption on the Finnish grocery industry: A case study on the current attitudes of Finnish grocery suppliers, retailers and consumers towards online grocery retail.

Since its inception, digitalization has been disrupting numerous industries around the world. This also includes the grocery trade: Online channels have given consumers more flexibility in regard to how and when they purchase the products that fuel their every-day lives. This transformation has challenged grocery suppliers and retailers to adapt their internal tools and processes, while reevaluating their strategic interpretation of the future of their industry. Although online commerce is often referred to as the superior retail channel of today, the share of online grocery – also referred to as e-grocery – has grown relatively slowly in Finland. The reasons for this are still fairly unknown: some suggest it may be due to the local oligopolistic parties not wanting to deter consumer cashflow from their brick-and-mortars, while others believe it may be due to a wary approach from Finnish consumers. Nevertheless, in the recent years the growth rate of Finnish e-grocery has increased notably. This sparks an interesting question: Has the era of e-grocery shopping finally arrived? Through a qualitative intense single-case analysis, this study complements existing research by exploring the significance of digital disruption on the unique setting of Finnish grocery through 20 interviews with suppliers, retailers and consumers. The aim of this study is to explore the current e-grocery related attitudes of key players in the grocery supply chain to better understand the factors behind digital grocery’s slow progression, as well as how large a role online channels may have in Finland’s traditionally concentrated grocery market in the future. The study’s findings agree as well as add to existing research in regard to the plethora of digitalization related benefits and potential challenges felt by grocery suppliers, retailers and their consumers. The gathered insights suggest that the progress of Finnish e-grocery has been limited by both supply and demand related factors. However, through the offered practical implications centered around corporate agility, shopper data -led collaboration as well the improving of service design in digital channels, this study implies that Finnish suppliers and retailers have the opportunity to maximize the potential of their digital channels, thus being able to better serve the modern as well as impending demands of Finnish grocery shoppers

On fit uncertainty-reducing interventions in retail supply chains

Fit uncertainty is used in this doctoral thesis to describe the customer’s experience of uncertainty about the physical fit of a product when shopping for experience goods. Experience goods are products whose attributes are difficult to ascertain without physical examination. In online retailing, the ability to provide experiential fit information is limited, which poses product flow and inventory challenges for supply chains, including product returns, lost sales, and obsolescence. Thus, product fitting is a critical pre-sales activity for customers to successfully purchase fit-dependent products, and retailers must facilitate the fitting activity in order to reduce unnecessary product handling. To foster improved performance for retail supply chains of experience goods subject to fit uncertainty, this doctoral thesis sets out to explore the effects of fit uncertainty and fit uncertainty-reducing interventions on retail supply chain performance. Fit uncertainty-reducing interventions consist of existing digital product fitting and recommendation technologies. The research designs are included in the five appended research papers. Paper I uses a case survey of retail practices to develop a maturity model of digitalization of product fitting, and it proposes supply chain effects for each of the three maturity levels. Paper II uses three cases, design science, and interventionist research to conceptualize digital product fitting as an intervention that improves product flow and reduces lost sales in retail supply chains for experience goods. Paper III uses case research, quantitative analysis of return transactions, test of an intervention, and mathematical modeling to calculate product return costs associated with fit uncertainty in online retailing. Paper IV uses order and return transactions to investigate how online customers shopping for experience goods seek to mitigate fit uncertainty through different order-placing behaviors, and it assesses the cost implications of the behaviors. Paper V uses order and return transactions to explore the effects of an online apparel-fitting intervention on order performance outcomes and fit uncertainty-mitigating ordering tactics. This thesis theorizes fit uncertainty-reducing interventions. The use of these interventions to facilitate the product-fitting activity can reduce fit uncertainty, leading to many benefits for the retail supply chain in terms of product flow, such as fewer returns and more sales. This thesis contributes to previous research on end-customer behaviors by focusing on order and return behaviors associated with fit uncertainty. The quantification of existent order and return behaviors is an important theoretical contribution to our understanding of the direct effects of fit uncertainty on retail supply chain performance. This thesis theoretically contributes to returns management and to inventory and assortment planning management; its practical contribution supports retail supply chains of experience goods that are reconsidering how they handle fit uncertainty and the unwanted effects thereof. This thesis provides hands-on knowledge on how the interventions work in real life and how they improve retail supply chain performance. Studying the link between fit uncertainty and retail supply chain performance is important for retailers and manufacturers\u27 understanding of end-customer behavior and for improving product development and assortment planning to ensure availability of products that fit

Pulling the chain in the MMR: an exploratory analysis on the business model of online delivery companies and their shifting role within Porter's 5-forces framework

La tesi, attraverso un'analisi esplorativa e un'approfondita revisione della letteratura di riferimento, mira ad approfondire il ruolo attuale degli attori complementari attraverso il modello delle cinque forze competitive di Porter e la possibilità di un cambio di ruolo di questi attori. Il mercato della Grande Distribuzione Organizzata (GDO) è il case study selezionato per dare evidenza dei risultati.The thesis, through an exploratory analysis and a deep literature review, aims to investigate the current role of complementors using the lenses of Porter's 5-forces framework and the possibility of a shifting role for these actors. The Mass Market Retailers (MMR) is the selected case study that will highlight the topic deepended

Optimising supermarket promotions of fast moving consumer goods using disaggregated sales data: A case study of Tesco and their small and medium sized suppliers

The use of price promotions for fast moving consumer goods (FMCG’s) by supermarkets has increased substantially over the last decade, with significant implications for all stakeholders (suppliers, service providers & retailers) in terms of profitability and waste. The overall impact of price promotions depends on the complex interplay of demand and supply side factors, which has received limited attention in the academic literature. There is anecdotal evidence that in many cases, and particularly for products supplied by small and medium sized enterprises (SMEs), price promotions are implemented with limited understanding of these factors, resulting in missed opportunities for sales and the generation of avoidable promotional waste. This is particularly dangerous for SMEs who are often operating with tight margins and limited resources. A better understanding of consumer demand, through the use of disaggregated sales data (by shopper segment and store type) can facilitate more accurate forecasting of promotional uplifts and more effective allocation of stock, to maximise promotional sales and minimise promotional waste. However, there is little evidence that disaggregated data is widely or routinely used by supermarkets or their suppliers, particularly for those products supplied by SMEs. Moreover, the bulk of the published research regarding the impact of price promotions is either focussed on modelling consumer response, using claimed behaviour or highly aggregated scanner data or replenishment processes (frameworks and models) that bear little resemblance to the way in which the majority of food SMEs operate. This thesis explores the scope for improving the planning and execution of supermarket promotions, in the specific context of products supplied by SME, through the use of dis-aggregated sales data to forecast promotional sales and allocate promotional stock. An innovative case study methodology is used combining qualitative research to explore the promotional processes used by SMEs supplying the UK’s largest supermarket, Tesco, and simulation modelling, using supermarket loyalty card data and store level sales data, to estimate short term promotional impacts under different scenarios and derive optimize stock allocations using mixed integer linear programming (MILP). ii The results suggest that promotions are often designed, planned and executed with little formalised analysis or use of dis-aggregated sales data and with limited consideration of the interplay between supply and demand. The simulation modelling and MILP demonstrate the benefits of using supermarket loyalty card data and store level sales data to forecast demand and allocate stocks, through higher promotional uplifts and reduced levels of promotional wast