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you thought of how products are made available to customers in department stores, supermarkets, sari-sari stores and other distribution channels? This is done through the process we call supply chain management.


delivery of economic value to customers through management of the flow of physical goods and associated information from vendors to customers


to reduce costs (transportation and inventory) Provide value to customers by making the right merchandise is in the right place at the right time

Fewer stockouts (merchandise will be available when the customer wants them) Greater assortment with less inventory


ROI (increased sales due to attractive assortments, improved net profit, lesser inventory levels)


2. 3.

Customer makes purchase, sales associate scans UPC code or RFID chip on merchandise and customer credit card/loyalty card Information about purchase is transmitted from POS terminal to the buyer/planner Information about purchases are aggregated by buyer/planner and sent to distribution center and vendor to ship merchandise




Buyer/planner communicates with vendor and places a purchase order to re-supply stores Buyer/planner notifies distribution center about the incoming orders and how they are to be distributed to stores Store managers inform distribution center about receipt of merchandise and coordinate deliveries


data collected at the point of sale goes into a huge database know as data warehouse. The computer-to-computer exchange of business documents in a structured format is called electronic data interchange or EDI

There are three main benefits of EDI namely reduction of cycle time, improvement of overall quality of communication, and easier analysis of data

supply chain in which orders for merchandise are generated at the store level on the basis of sales data captured by POS terminals is called a PULL SUPPLY CHAIN. Merchandise is allocated to stores based on forecasted demand is called a PUSH SUPPLY CHAIN Which do you think is better?


physical flow of merchandise or logistics is the aspect of supply chain management that refers to the planning, implementation, and control of the efficient flow and storage of goods, services and related information from the point of origin to the point of consumption to meet customers requirements


are two options retailers have in managing the flow of merchandise: direct store delivery or distribution centers Advantages of distribution centers are: more accurate sales forecast is possible, less merchandise to carry in stores, easier to avoid out-of-stock situations and less rent expense


types of retail stores and merchandise that are most efficiently supplied through distribution centers are:

Non-persihable merchandise Merchandise that has highly uncertain demand such as fashionable apparel Merchandise that needs to be replenished frequently such as grocery items Retailers that carry a relatively large number of items shipped to stores like drug stores Retailers with large number of outlets that are not geographically concentrated Retailers that do not require in-store servicing such as snacks, soda, or non-store-made baked goods


distribution centers are not appropriate for all retailers or types of merchandise. Thus direct store delivery is more appropriate for the following:

Retailer that has few outlets Retailer with many outlets concentrated in metropolitan areas Perishable goods such as meat and produce In cases where vendors prefer direct store delivery

warehouse that receives merchandise from multiple vendors and distributes it to multiple stores

Functions of Distribution Centers: Inbound Transportation and Management Receiving and Checking Storing and Cross Docking Getting Merchandise Floor Ready

Ticketing and Marking


to Ship Merchandise to Store Outbound Transportation


process of moving returned goods back through the supply chain from the customer to the stores, distribution centers and vendors


from individual customers are shipped in small packages with one or two items to a large number of different places


party logistics companies facilitate the movement of merchandise from manufacturer to retailer but are independently owned They provide transportation, warehousing, consolidation of orders and/or documentation


have to make sure that merchandise is available in the stores when customers want it. This can be accomplished through shared information using Electronic data interchange (EDI),Vendor-Managed Inventory (VMI) and Collaborative Planning, Forecasting, and Replenishment (CPFR)

The use of EDI reduces the time it takes for retailers to place orders and vendors to acknowledge the receipt of orders and communicate delivery information about these orders VMI is an approach for improving supply chain efficiency in which vendors are responsible for maintaining the retailers inventory levels in each of its stores CPFR is the sharing of forecast and related business information between retailers and vendors


happens when both do not collaborate? Excess inventory builds up which is called the bullwhip effect The bullwhip effect can be due to the following factors: delays in transmitting orders and receiving merchandise, overreacting to shortages, ordering in batches

technology that allows an object or person to be identified at a distance using radio signals. The electronic chips are inserted into oceangoing containers, on shipping cartons, or even behind merchandise labels; they then transmit data about the object in which they are embedded


benefits of RFID include:

Reduced warehouse and distribution labor costs Reduced point of sale labor costs Inventory savings Eliminate counterfeit merchandise Facilitates selling process Reduced theft Reduced out of stock conditions


disadvantages of RFID are: High cost (15 cents per tag) It generates more data than can be efficiently processed Invasion of privacy