Small Business Brief


Retail 101: A Crash Course in Supply Chain and Logistics Management

With the rapid rise of online sales, retail chains are converting brick-and-mortar stores into e-commerce hubs. This ensures deliveries can get out to customers quicker.

In retail sourcing, digital sampling allows corporate buyers to view samples without getting on a plane. Consumers are demanding more than only low prices. Sustainability and ethical concerns now control how retailers run their supply chains.

Is your retail company struggling to create an efficient supply chain and logistics system? Read on to learn the key differences between these crucial product management structures.

What Is Retail Supply Chain Management?

The supply chain is a term used to explain the process of managing the flow of goods and services from the manufacturer to the consumer. Retail supply chain management explains the planning and monitoring of this process.

Many Organizations and Layers

Demand planning is the first stage of supply chain management. Demand planners forecast the need for a product, which has a direct impact on the outgoings and incomings of a business.

Demand planning includes merchandising planning. You need to make sure a product will be available when, where, and in what quantities the market demands.

Some people who work in supply chain management take care of the supply part of this field. They look for the best suppliers and manufacturers to work with and manage production schedules.

They will also take care of distribution management. Think shipping, warehousing, and delivery to the customer.

Improving Efficiency Is the End Goal

Retail is a particularly fast-moving industry so business owners need to keep a close eye on their systems. This ensures supply chain optimization.

Consumers are more demanding than ever before: they want free and immediate delivery and more customization. The retail sector focuses on delivering products to the customer as fast and cheap as possible.

Regular monitoring of a retail supply chain is essential if a company wants to know where to cut costs and improve efficiency. Employees involved in supply chain management look for ways to streamline the process.

They put in place AI management systems. Research technology-embracing manufacturers. And increase productivity.

Managing Problems Fast

Business owners need to solve problems in the retail supply chain fast. Defective products, high buy costs, long delivery times, lack of traceability, or slow responses. Customers are very unforgiving.

Smaller retailers or companies new to the retail industry can feel overwhelmed by supply chain management.

Take some of the pressure off. Invest in integrated retail shipping software. Work with a 3PL (third-party logistics) company.

What Is Retail Logistics?

It’s not so much logistics vs supply chain. Instead, logistics sits under the broader umbrella of the supply chain. Logistics is all about how products move from one place to another–from where they’re made to the hands of the consumer.

Logistics Keeps Things Moving

To maximize profits, retailers need to keep costs as low as possible. They need to connect their business to a complete and efficient logistics system.

Logistics consists of the following processes:

  • Warehouses and distribution centers where retailers keep the stock.
  • Inventory tracking of available product stock: where it’s located, volume, prices, and movement.
  • Transportation of products between suppliers to warehouse and distribution center to the customer.

Not so long ago, independent companies managed each of these elements. Today, changes in technology have helped to compress this system. Retailers can now manage many processes through a single company or even in-house.

Types of Logistics Organizations

Freight companies focus on international or domestic transport of products.

Some freight companies specialize in one mode of transportation. Others offer many shipping options. Freight companies usually work with the carriers, who own the planes, trains, and trucks.

Freight forwarders help retailers find the best way to ship their goods.

They move them from the manufacturer to their place of sale or from storage to their customer. They take care of the legal side of importing and exporting goods between countries and states. They negotiate rates and do the scheduling.

Third-party logistics (3PL) companies provide a wide range of logistics management services. Retailers can outsource a 3PL. They will take care of warehousing, distribution, goods transportation, and sales order fulfillment.

From technology and software to processes and manpower, 3PLs are experts at supply chain optimization.

Like the Southern California-based, many 3PL companies develop sophisticated online platforms. This software helps the customer better manage their logistics. They can also use it to get tracking and analytics data.

3PLs often have many hubs across the country or region they operate in.

Good Logistics Management Is Essential for Retail

Quick delivery and clear communication about when a customer will get their product is a key component of a healthy retail business. It would be difficult to gain and maintain customer confidence without a streamlined logistics system. One bad incident–a product broke on arrival, an order arriving a day late–and customer loyalty is gone.

At the end of the day, customer trends drive logistics practices.

Customer demand dictates all kinds of factors. Like how companies package their items and how fast retailers deliver the products. The quicker a logistics system can respond to changes in these requirements, the greater of an advantage a retail company will have over its competitors.

Supply Chain and Logistics: Key Differences to Remember

It’s important to clearly understand the difference between supply chain and logistics. They will help you work out which companies and services are an essential part of your particular chain.

  • Supply chain management links retail businesses to create a larger model of operation that’s competitive in the marketplace.
  • Logistics moves and stores retail goods, and sometimes services and information.
  • Supply chain managers seek to partner with manufacturers and other organizations that will give their company a competitive advantage over others.
  • Logistics seeks to serve its customers in the fastest, most efficient, and most accurate way possible.
  • “Logistics” is an old term; the term “supply chain” is newer.
  • The supply chain is an umbrella structure that logistics makes up just one part of the supply chain, which is a larger umbrella structure in the retail industry.

If you’re starting a new retail business, keep these talking points handy. Use them when talking to suppliers, freight companies, and storage facilities. At the very least, you’ll look smarter in meetings!

Investing in the Next-Gen Supply Chain

With the rapid rise in AI and smart technology solutions, logistics and supply chain management is becoming automated. In mid-2019, Material Handling & Logistics predicted that by 2022, firms will allocate 35 percent of their logistics budget to process automation.

This is set to revolutionize productivity in order, inventory, and shipment tracking. The benefits for companies that upgrade and invest in next-gen supply chain management are many.

Keeps Things Flexible

Local and global economies are increasingly volatile.

Economic crises were once experienced every ten to fifteen years. Experts suggest that this might shorten to every five years in the future. Crises like the 2000s dot-com bust or the 2020 COVID-19 pandemic take up to two years to recover from. Companies can reduce risk and shorten the recovery period if they keep their supply chain and logistics systems flexible.

Investment in an expanded supply chain ensures stability. If one market or manufacturing center fails, you have backups in place. You will have resources available to make up for a shortfall or find a new mode of delivery.

Saves You Money

Supply chain optimization is about working out how to deliver products as efficiently and affordably as you can. With careful supply chain management, you can work out which processes are leaking money instead of making it.

Looking for greater profits? Make sure your inventory keeps moving instead of sitting in a warehouse. Audit suppliers for efficiency and quality. Analyze customer demand.

Reduces Risk

Most supply chain management software comes with forecasting tools that help you plan.

Making the correct choices can make or break a fledgling retail business. Budget allocation, the supply of raw materials, and manufacturing quality control matter.

Having the ability to look into the future of your business will help you prepare for economic instability. Control fluctuations in raw materials prices and understand the change in retail trends.

If you work with a third-party service provider, you also get the benefit of accessing years of experience in process management. They will refine your supply chain and detect problems before you see them coming.

Find the Right Supply Chain Management Partners

Supply chain and logistics management is a competitive business. Service providers cater to retailers big and small.

This means that even entrepreneurs and lean startups have a chance to succeed. They can access the latest logistics technologies by partnering with smaller 3PLs. As you’ve seen, this is an area of your business worth setting aside a budget for.

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