5th Edition
PPT10-1
Chapter 10
Information Systems
and Supply Chain
Management
McGraw-Hill/Irwin
PPT10-2
Levy/Weitz: Retailing Management, 5/e
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
Retailing Strategy
Retail Market Strategy
Financial Strategy
Site Location
Information Systems
Retail Locations
Organizational Structure and
HR Management
Customer Relationship
Management
PPT10-3
Supply Chain Management
Supply Chain Management is the
integration of business processes
from end user through original
suppliers that provides products,
services, and information that add
value for customers.
PPT10-4
What Supply Chain Management Entails
PPT10-5
Illustration of Supply Chain
PPT10-6
Strategic Importance of
Supply Chain Management
• Opportunity to Reduce Costs
– Transportation Costs
– Inventory Holding Costs
• Provide Value to Customers by Making the
Right Merchandise is in the Right Place at the
Right Time
– Fewer Stockouts
– Greater Assortment with Less Inventory
• Improved ROI
PPT10-7
Improve Return on Investment
Return on assets = Net profit margin x Asset turnover
Net profit =
Total assets
Net profit x Net sales
Net sales
Total assets
Efficient Supply Chain Management  Higher Asset Turnover
Same Sales Using Less Inventory
PPT10-8
The Flow of Information and Merchandise
Customer
Sales info
Quick
response
systems
Buyer
Stores
Vendor
Distribution
center
- - - - Merchandise flow
PPT10-9
Information flow
Information Flows
PPT10-10
Information Flow
1. When customer makes a
purchase, sales associate
scans UPC code on merchandise
and customer credit card/loyalty card
2. Information about purchase is
transmitted from POS terminal to the
buyer/planner.
3. Information about purchases are
aggregated by buyer/planner and
sent to distribution center and
vendor
PPT10-11
Information Flow
4. Buyer/planner communicates with
vendor and places a purchase order
to re-supply stores.
5. Buyer/planner notifies distribution
center about incoming orders and
how they are to be distributed to stores
6. Store managers inform
distribution center about receipt of
merchandise and coordinate
deliveries
PPT10-12
Data Warehousing
Data warehousing is the coordinated and periodic
copying of data from various sources, both inside
and outside the enterprise, into an environment
ready for analytical and informational processing
Wal-Mart makes good use of its data warehouse.
It should. Experts estimate that it is second in
size only to that of the U.S. government
PPT10-13
Data Warehouse Structure
PPT10-14
Electronic Data Interchange
• EDI is the computer-to-computer exchange of
business documents between retailers and vendors
• Merchandise sales
• Inventory On Hand
• Orders
• Advanced shipping notices
• Receipt of merchandise
• Invoices for payment
PPT10-15
Networks for EDI
• Proprietary Systems – Network using special
software
• Extranet – Public internet with access
restricted to partners
• Intranet – Internet with
access restricted to
people within a
company
security
PPT10-16
Ease
of
access
Physical Flow of Merchandise
Merchandise is sent from vendor
either to the retailer’s distribution
center (1) or directly to store (3).
Retailer send merchandise from its
distribution center to its stores (2).
PPT10-17
Advantages of Using a Distribution Center
• More cost effective
• More accurate sales forecasts
• Less merchandise in the individual store,
thus a lower inventory investment system-wide.
• Less out-of-stock
PPT10-18
When to Use Distribution Centers
• Unpredictable merchandise sales – wide
fluctuations in demand
• Frequent replenishment required – high
number of units sold per day
• Items shipped to store in less than full case
quantities
• Many retail outlets that are not concentrated in
one area
PPT10-19
When to Use Direct Store Delivery
• Retailer has only a few outlets
• Many retail outlets are concentrated in metro areas
yielding increased efficiency of direct store delivery
• Important to get merchandise in store quickly
•Fashion - first to have latest video game
•Merchandise perishable - produce
PPT10-20
Activities Performed by Distribution Center
• Managing inbound transportation
• Receiving and checking merchandise
• Storing or cross docking merchandise
• Preparing merchandise for the sales floor
– Ticketing and marking
– Putting on hangers
• Shipping merchandise to
stores
• Managing outbound
transportation
PPT10-21
Crossdocking
Merchandise flows directly from the vendor’s trucks
through the retailer’s distribution center and is
loaded on the trucks going to the retailer’s stores
without being stored in the distribution center
PPT10-22
Logistics Strategy
Pull
Merchandise shipped
to stores based on
sales and inventory
levels in the stores
PPT10-23
Push
Merchandise shipped to
the stores based on
forecasted sales rate
Quick Response Delivery System
QR delivery systems are inventory management
systems designed to reduce the retailer’s lead time
for receiving merchandise, thereby lowering
inventory, improving customer service levels, and
reducing logistics expenses.
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Benefits of QR Systems
Reduces lead time
Increases product availability and lowers
inventory investment
Reduces logistics expenses
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Costs of QR Systems
Smaller orders - more expensive to transport
Greater order frequency - deliveries and
transportation more difficult to coordinate
Computer hardware and software must be
purchased by both parties.
PPT10-26
Logistics Support for Electronic Channel
• Requires a different type of distribution center
– Picking and packing individual items sent to
customer vs.
– Receiving, storing, and cross docking cartons
to stores
• Multi-channel retailers may outsource fulfillment
of Internet orders to third party
– Target, Toys R Us  Target
PPT10-27
Outsourcing Supply Chain
Management Functions
Transportation
Warehousing
Freight Forwarders
Integrated Third Part
Logistics Services
PPT10-28
Control
vs.
Cost
Third-Party Logistics Companies
These firms facilitate the movement of
merchandise from manufacturer to retailer,
but are independently owned.
• Transportation
• Warehousing
• Freight forwarders
• Integrated third-party logistics services
PPT10-29