International Retailing - Supply Chain Trends

When one talks of International Retailing be it with reference to fashion apparels or groceries, Europe has been the ground for the growth and evolution of Retailing concepts and Supply chain Management models which form the core of retailing operations. International Retailing concepts have been based on the SCM solutions which emerged as a result of the various studies conducted in Europe as well as in the US in early 1990s.

Lead time and efficiency of supply chain being the most important differentiators to International Retailing as well as the concepts of Lead Time to Market and Lead Time to Serve Customers, became the building blocks for the growth and developing of International retailing operations.

1980 and early 90s saw a lot of work and studies being undertaken in the International Grocery industries in both Europe as well as in the US. The need of the hour was to identify the problems and find effective supply chain solutions as well as models.

When the International Retailers began to procure from offshore suppliers, the local garment suppliers realised the situation and commissioned a detailed study to understand the problem as well as to arrive at the corrective supply chain solutions. Accordingly Kurt Salmon Associates [KSA] were engaged by the industry for the study.

The outcome of the study was shocking for it showed a lead time of one and a quarter years from the manufacturing floor to the store. The supplies were very badly co-ordinated and the efficiency was found to be nil.

QR or Quick Response concept took birth as a solution to the supply chain problems. The solution perceived involved cutting down the lead time as well as rationalizing the supplier base and increasing co-ordination as well as control over the processes.

Besides the solution entailed internal review by the Companies to decide to outsource non core activities to competent third party suppliers. The study lead to an estimated saving of lead time from 104 days to 61 days spanning a 30billion dollar supply chain.

The SCM solution with QR focus was applied extensively in Europe too where the large grocery chains benefitted by remodelling their supply chains by building in flexibility and reliability.

The supply chain that emerged consisted of multiple layers of suppliers as well as multiple third party logistics service providers. Thus emerged the concept of dedicated supply chain networks to support the industry.

The supply chain network concept using multi level suppliers exists not only in international retailing sector but is found in the automobile component industry too.

International Retailing has also evolved assimilating and adapting most of the concepts that were introduced in the manufacturing as well as other industries. Concepts from Lean Manufacturing, Agility, Just In Time as well as Quick Response [QR] have shaped the supply chain model designs. The most significant concept that gained acceptance in the international supply chain was ‘Efficient Consumer Response’ [ECR].

The initial study was carried out in Europe in 1994 to map the inefficiencies and roadblocks in the supply chain especially in FMCG and Grocery Retail segments. ECR aimed at providing a total end to end supply chain model encompassing Suppliers, Manufacturers, Intermediaries, Whole sellers as well as Retailers in order to be able to provide a faster, efficient customer response at affordable cost. ECR as a concept was successful in bringing about a paradigm shift in focus from Product replenishment to Category Management.

Category Management entails managing a supply chain driven by the demand. Various studies conducted in downstream areas of transportation and warehousing lead to new models of supply chains based on usage of interactive technology, integrated warehousing and third party logistics solutions. This phase marks the beginning of a new era of dynamic supply chain solutions involving Third party logistics.

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