Europe is considered to be the cradle of International Retailing Industry consisting of fashion retailing as well as grocery supermarkets. The ECR movement that gained momentum around 1996 was the outcome of a decade long problems and roadblocks in the supply chain networks that hindered the growth of the industry. ECR successfully redefined the retailing business and transformed it from a supplier driven to demand driven business and introduced the concepts of product replenishment and category management as the solution to design effective supply chain networks. The solution entailed working from end to end beginning with multi level suppliers to manufacturing, whole sellers as well as retailer point of sale store including various logistics partners. Though it was felt that ECR solution favoured only the multinational grocery supermarkets and big players, the implementation of supply chain solutions proved otherwise. The solutions implemented as a part of ECR solution have become the global standards for the International Retailing Industry.
European grocery retail and fashion retail industry underwent continuous transformation from early 1980s onwards. Adapting to the new concepts and new supply chain models, the industry grew in leaps and bounds thus paving way for leadership in the global scenario too. The pre 1980s period belonged to manufacturer suppliers, who controlled, allocated and delivered the products to the store as per their convenience and schedules. The retailers had very little control over the suppliers. As the suppliers were scattered all around Europe, the logistics providers or transporters contributed to the in-ordinate delays and losses in supplies by consolidating the goods of various suppliers at various storage |transit points. Around 1980s, the Retailers began to slowly gain control over the supplier supply chain by investing in building RDC or Regional Distribution Centres to consolidate Supplier goods and supply to the stores as per schedule. This shift gave them a tremendous boost to their productivity as they could now control the supplies which also meant that they could control inventories and save a lot of money in the process. Control of supply chain also gave them the leverage to manage the lead times and schedule the deliveries in a manner that eliminated inventory holdup at the store and released storage space to be converted to selling space.
Having to build RDCs and manage such operations including vehicles, inventory, human resources and round the clock operations called for huge investments in infrastructure as well as in setting up specialised operations management. The need for focus and investment in this area brought about the concept of Third Party Logistics Service Providers or LSPs who began to invest and start specialised operations for dedicated customers. Leading retailers including Sainsbury, Tesco, Asda and Safeway outsourced their backend supply chain to the LSPs.
The next two decades saw a lot of growth in the Third party logistics services and new supply chain solutions being introduced in terms of better infrastructure in warehouses, temperature controlled warehouses as well as vehicles, load planning, better inventory management systems and controls etc. Transportation logistics received a lot of attention leading to better utilization and consolidation of loads and increased efficiencies. Further supply chain studies in 1990s introduced the concept of recycling the resources including packaging materials. On the transportation side the primary and secondary distribution was merged to gain increased vehicle utility and efficiency. The packaging recycling yielded tremendous benefits to the industry. By this time the Retailers had gained control over the supply chain and saved a lot of costs.
Around the year 2000, the ECR studies revealed the next trend that would affect the growth of supply chain in retail industry and thus the ECR initiatives that were rolled out were based neither on Supplier nor Retailer control but based on active co-operation and partnering by the Retailer as well as all suppliers. It called for Retailers as well as Suppliers and intermediary agencies to collaborate and work in a dynamic environment and create new supply chain trends and solutions to be able to manage lower costs. Further SCM models brought about the concept of Factory pricing or FGP pricing. This meant that the Supplier sold materials to the Retailer at ex. Works price and the on forwarding and transportation costs to destination were borne by the Retailer or Buyer. This concept of FGP has yielded a lot of benefits to the Retailers through cargo consolidations as well as total control over the supply chain enabled by the new technology solutions by means of unit tracking of inventory through RFID as well as increased vehicle utility and controlled supplies.
The concept of RDC is what is currently implemented in most of the other countries currently. Technology has played a major role in transforming the face of International Retailing Supply chain.
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