SEMESTER 4

RETAIL LOGISTICS

RAUL RAJ MOHANTY SCO9364 S.Y.B.COM D M.E.S COLLEGE OF ARTS AND COMMERCE SUB:-RETAIL MANAGEMENT I.S.A 2ND

RETAIL LOGISTICS
It is often taken for granted that products will be available to buy in the shops. The cornucopia of goods that is available in a hypermarket or a department store sometimes means that we forget how the products were supplied. We expect our lettuces to be fresh, the new Play station to be available on launch day and our clothes to be in good condition and ready to wear. With the introduction of e-commerce we have come to demand complete availability and home delivery at times of our choosing.

Consumer beliefs and needs have altered. Our willingness to wait to be satisfied or served has reduced and we expect instant product availability and gratification. It should be obvious from this that the supply or logistics system that gets products from production through retailing to consumption has also needed to be transformed. Physical distribution and materials management have been replaced by logistics management and a subsequent concern for the whole supply chain.

This logistics transformation derives from cost and service requirements as well as consumer and retailer change. Elements of logistics are remarkably expensive, if not controlled effectively. Holding stock or inventory in warehouses just in case it is needed is a highly costly activity. The stock itself is expensive and might not sell or could become obsolete. Warehouses and distribution centers generally are expensive to build, operate and maintain. Vehicles to transport goods between warehouses and shops are expensive, in terms of both capital and running costs. There is thus a cost imperative to making sure that logistics is carried out effectively and efficiently, through the most appropriate allocation of resources along the supply chain.

At the same time, there can be service benefits. By appropriate integration of demand and supply, mainly through the widespread use of information technology and systems, retailers can provide a better service to consumers by, for example, having fresher, higher quality produce arriving to meet consumer demand for such products. With the appropriate logistics, products should be of a better presentational quality, could possibly be cheaper, have a longer shelf life and there should be far fewer instances of stock outs. Reaction time to spurts in demand can be radically improved through the use of information transmission and dissemination technologies. If operating properly, a good logistics system can therefore both reduce costs and improve service, providing a competitive advantage for the retailer.

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THE LOGISTICS TASK

Retailing and logistics are concerned with product availability. Many have described this as getting the right products to the right place at the right time. Unfortunately however that description does not do justice to the amount of effort that has to go into a logistics supply system and the multitude of ways that supply systems can go wrong. The very simplicity of the statement suggests logistics is an easy process. As the boxed example shows, problems and mistakes can be all too apparent. The real management trick is in making logistics look easy, day in and day out, whilst reacting to quite volatile consumer demand.

The logistics management task is therefore initially concerned with managing the components of the logistics mix. We can identify five components:

Storage facilities: these might be warehouses or distribution centers or simply the stock rooms of retail stores. Retailers manage these facilities to enable them to keep stock in anticipation of or to react to, demand for products. Inventory: all retailers hold stock to some extent. The question for retailers is the amount of stock or inventory (finished products and/or component parts) that has to be held for each product, and the location of this stock to meet demand changes.

Transportation: most products have to be transported in some way at some stage of their journey from production to consumption. Retailers therefore have to manage a transport operation that might involve different forms of transport, different sizes of containers and vehicles and the scheduling and availability of drivers and vehicles.

Unitization and packaging: consumers generally buy products in small quantities. They sometimes make purchase decisions based on product presentation and packaging. Retailers are concerned to develop products that

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are easy to handle in logistics terms, do not cost too much to package or handle, yet retain their selling ability on the shelves.

Communications: to get products to where retailers need them, it is necessary to have information, not only about demand and supply, but also about volumes, stock, prices and movements. Retailers have thus become increasingly concerned with being able to capture data at appropriate points in the system and to use that information to have a more efficient and effective logistics operation.

GOALS OF LOGISTICS       Economy in movement of goods (external internal movement) Accuracy in order management Time management of shipments and deliveries Shelf-life and replenishment of perishable goods (Eg.Egatematrix) Coordination with suppliers and third-party service providers (Eg.Verisign, Gati) Backup plans and return shipments

PERFORMANCE GOALS Relate costs incurred to specific logistics activities Place and receive orders as easily, accurately, and satisfactorily as possible Minimize the time between ordering and receiving merchandise Coordinate shipments from various suppliers Have enough merchandise on hand to satisfy customer demand, without having so much inventory that heavy markdowns will be necessary Place merchandise on the sales floor efficiently Process customer orders efficiently and in a manner satisfactory to customers Work collaboratively and communicate regularly with other supply chain members Handle returns effectively and minimize damaged products Monitor logistics performance Have backup plans in case of breakdowns in the system

Retail Logistics Basics In the highly competitive retail marketplace, typified by changing consumer preferences, different formats as well as large geographical stores spread, the onus on retail logistics to ensure efficiency and cost margins is quite substantial. Hence, it would not be inappropriate to state that oftentimes the viability of a retail operation hinges as much on achieving efficient logistics and supply chain as it does on attaining success in the front end. The compulsion of retailers, which necessitate seamless logistics function, can be summarised as follows:

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To ensure perfect coordination among various entities involved in the supply chain such as suppliers, manufacturers and vendors. To ensure that consumers get the right product at the right time and at the right place. To ensure that supply to retail stores across various geographies is seamless and consistent. To be flexible in order to allow for changes in the product mix owing to changes in consumer demand. To constantly improve operating margins. To achieve profitable and sustainable growth of retail operations in the long run. To achieve optimal inventory levels and reduce wastage of products. Components

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Traditionally, retail logistics had two major components transportation and storage. But with the increasing complexity of modern retail supply chains, the scope of logistics has also expanded beyond the traditional definition. An efficient retail logistics function has become a significant instrument for retailers to ensure competitive advantage, and its scope now includes plans and processes that allow the back end to effectively meet consumer demand. Currently, retail logistics is a holistic concept that involves coordinating the following main processes among others:

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Inbound and outbound transportation Warehousing Packaging and labeling Shipment consolidation Tracking/Tracing the products Inventory management Quality checking Planning for cost control On Point Retail Distribution Warehousing 5 Distribution of merchandise Reverse handling and flow of products (reverse logistics) The main processes and activities of retail logistics listed above are aimed at making sure that the shelves in a retail front-end store are never vacant and are filled with the right products at the right time and at the right place. Apart from maintaining an efficient supply chain, which keeps the stores filled with the correct products, it is also important that retail logistics increases operational efficiencies to allow retailers to run a viable retail operation. Delivery Models For decades, retail logistics has evolved through various models. Years ago, retailers and manufacturers had to rely on a traditional distribution channel composed of transporters, clearing and forwarding agents and stockiest. Since mid-1990s, the emergence of alternative modern distribution channels has allowed retailers to choose from a range of logistics service providers to achieve an efficient storage and flow of products. As of now, there are four logistics delivery models that retailers can choose from:

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Entirely self-managed logistics and warehousing network Partly outsourced to traditional service providers like transporters, clearing and forwarding agents and stockiest Partly or completely outsourced to third-party logistics service providers (otherwise known as PL players) Completely outsourced to fourth-party logistics providers (otherwise known as 4PL players) Whilst the above four are broad delivery models available to manufacturers, retail chains and retailers, it has been observed through interactions with retailers and warehouse users during this study that oftentimes, hybrid models of distribution are preferred. For example, a retail chain may choose to manage the transportation of its goods while the warehousing may be outsourced to a PL provider. The first two models listed above are more or less selfexplanatory, while the following definitions further explain the 3PL and 4PL delivery models: 3PL A third-party logistics provider (3PL) is an entity that provides services to companies for some or all of their supply chain management functions. PL providers typically specialize in integrated warehousing and transportation services that can be scaled and customized to the clients needs based on market conditions and the demands and delivery service requirements for their products and materials. In India, a large number of professional 3PL players like DRS, Gati, DHL, OM Logistics, Indo Arya, Sical Logistics, Reliance Logistics, SafeExpress, Agility, M J Logistics, AS Cargo,

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Kuehne+Nagel, Panalpina, Expeditors and AFL among others have been providing services to retailers and other sectors for their logistics requirements. 4PL As retailing in India is expanding and reaching new heights in terms of both geographical coverage and volume of products, there is an emerging requirement for an integrating logistics firm to assemble various resources, capabilities and technologies of its own as well as other companies to provide a complete logistics package to clients. Such firms are typically known as 4PL players. Typically, the resources used by a 4PL player are of other service providers, and its fundamental role is to manage all the PL players and other independent agencies employed for a logistics function, providing a turnkey logistics solution to retail chains and to other sectors. Whilst this model is quite prevalent in developed countries, the 4PL sector in India is at a nascent stage, with a few players emerging such as Future Logistics (which is a 4PL for Future Group). In order to better comprehend and appreciate the respective range of services under each of the outsourced delivery models, the table below is a compilation of the typical spread of services delivered under each respective model. It is pertinent to note that the table below is an indicative compilation based on the feedback received from meetings with logistics service providers and not a comprehensive listing of all possible logistics services. The organized PL sector in India has been consistently growing over the last few years, mirroring the growth witnessed in the retail logistics sector overall. The sector comprises of global as well as Indian companies that are ramping up their operations on a Pan-India level to cater to retail as well as other sectors. According to a Technopak study, the total outsourced logistics revenue in 00 was INR 1,151 billion, of which 5% or INR 58 billion was attributed to revenue gained from the PL sector. Revenue generated from retail 3PL was estimated at INR billion. The retail PL revenue has been predicted to continue to grow at a CAGR of around 1 % for the next few years. The entry of large 3PL players has led to significant improvement and organization within the retail logistics and modern distribution warehousing sector in the country. Over the years, the range of services of PL players has expanded to cover the service lines depicted in the table below. In some cases, it has been observed that PL players have even gone beyond their main service offerings to provide logistics network planning to clients as well.

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EXAMPLE OF RETAIL LOGISTICS- GATI

Gati an analyst, consultant and SCM partner rolled into one The focus is on integrated logistics solutions. Gati's transport infrastructure, IT systems, cutting - edge technology solutions and an intensive knowledge of India allows it to tailor its products to meet every customers' unique needs. Gati offers a wide range of options and does not waver in its focus on quality, reliability and speed. Gati logistics package This ready - to - use package comes with an instant distribution network and a wide system of storage locations and distribution channels. It is ideal for clients looking to distribute goods from multiple locations and those with changing distribution needs. For an SME or an MNC entering the Indian market, Gati Logistics is the right choice. The unique features of this package are:

'Made Ready' distribution channel Standardisation at all locations Inventory location close to your customer Entry into new markets without a large capital investment Shelf Space at over 200 locations

Integrated logistics Gati provides customised solutions by integrating all the four stages of your business procurement, production, distribution, after sales service and reverse logistics. Effective SCM has the following benefits

Reduces transportation management time and costs Increases profit margins and overall profitability Integrates transportation procurement, planning and execution Improves on - time deliveries and customer service Enables global supply visibility and maximum efficiency for competitive advantage Strengthens relationships with suppliers and carriers Enables the movement of goods across modes and around the globe

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The Gati approach

A systematic and effective four - stage approach towards the logistics requirements of clients. Gati studies their needs and designs customised solutions for all its clients The four stages involved are depicted as follows:

Process flow

Gati warehousing logistics solutions made to order Logistics and supply chain management are an integral part of the businesses. A sharp and steady focus on these key functions has helped Gati gain a competitive edge over the rest of the market. In recent times Indian industry has begun to acknowledge the strategic importance of logistics and warehousing functions to their businesses. And Gati's expertise and experience in this area is being harnessed by many companies. Gati offers its services as a 3PL or a third party logistics provider. A 3PL provider allows a company to: Concentrate on core competencies Create greater competitive flexibility and release working capital Get lean and agile Exploit the better know - how and scale efficiencies of logistics companies Maximum space, minimum investment Gati's warehousing facilities consist of completely modern storage systems and material handling equipment. Thus, Gati is able to offer customers very high levels of operational efficiency.

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With branches in all metros and mini metros, Gati has more than 200 storage locations across India. With over 600,000 sq. ft. of warehousing space spread all over the country and serving multiple clients, Gati is able to offer many more customer friendly solutions: Flexible hiring options Modern racking and handling equipment Reduction in material breakage, damage etc Engineering solutions to design and build warehouses as per requirements Warehouse management system Warehouse management system Manage inventory in real - time. Gati's web-based warehouse management system provides both functionality and flexibility for customers to manage warehouse operations. The web - based WMS can be updated online thus allowing customers a real - time picture of their inventory. The WMS gives precise, detailed, real - time information about every aspect of customer operations. The WMS application has the functionality to take care of multi - company / multi - location capabilities. And, the multi - warehouse system has been designed so that every warehouse can write its own rules. The central focus is the powerful inventory control and management system - making the management of diverse inventory holdings less complex and more organized. The web - based WMS has resulted in: Improved inventory accuracy Decrease in order processing time Improved customer service levels Elimination of put away and picking errors Less returns Reduced shipping errors Capacity utilization

Industry solution
Industries where we excel Consumer Goods Retailers are pushing for more value-added services (VAS). Exceptional customer service has become a requirement for success. And, skilled workers are increasingly hard to find. All of these factors challenge the consumer goods industry. To remain competitive, your business must adapt quickly to industry demands. Gati's innovative solutions help you to transform quickly to the changing environment. Food & Beverage Gati's logistics' solutions for perishable commodities enables support of a demand-driven supply chain to help you adapt operations to volume levels and delivery schedules as customer requirements change. Engineering / Electronics High-tech engineering and electronics' manufacturers, distributors and suppliers compete in an environment that's fastpaced and in constant flux. Gati's effective execution of operations and real-time information provides increased profitability and reduced inventory levels. Industrial Goods The industrial/wholesale industry is ever-changing and driven by consumer demand. Increased speed, reduced costs, more accurate fulfillment and value-added services are everyday requirements. To keep pace with shortened lead times and

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growing competition, Gati provides you with real-time control and visibility into what's coming, and when to expect it. Healthcare / Life Sciences The increasing number of patient safety regulations and the illegal practice of drug counterfeiting make it critical for companies in the life sciences industry to improve supply chain security. Combined with heavy restructuring and consolidation that has increased competition, the integration and management of accurate, real-time data is more challenging than ever. Gati empowers healthcare companies with cutting-edge logistics solutions to meet global and national strategic challenges. Computer & IT Peripherals The industry in characterized by a rapidly changing environment with new models appearing in a very short span of time. Focus should be on increasing the productivity and performance of computer hardware supply chain. Gati's solutions for forward & reverse logistics can be used to gain competitive edge in the market.

Retail Expanding distribution channels, increasing globalization and growing customer service expectations are some of the factors that make the retail and direct-to-consumer industries exceptionally challenging business environments. With Gati's multi-modal reach, companies can remain closer to the end-user, provide on-time information and cut costs. Fashion & Garments In the booming fashion business, we make sure that new fashion is not only displayed, but can be bought and worn the world over. We, at Gati, ensure that your products reach the outlets on time and in impeccable condition. Automotives The automotive industry has always been the most demanding of all in terms of achieving the highest quality standards in their logistics processes. Gati's efforts have been driven by the need to reduce costs and the desire to respond quickly to customer demand. Tactical and Confidential Projects Gati's solutions ensure that your goods are secure. You can track and monitor your goods at all times. It reduces in-transit time and increases supplier network responsiveness. We respond quickly to the industry's unpredictable demand. Our logistics solutions provide the visibility you need to execute on tactical and confidential operations.

Some facts about Gati covers 3.2 lakh kilometers every day Connects to 622 out of 626 districts in India First Indian logistics firm to set up in Hong Kong Massive investments on IT and warehousing

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Distribution of GATI Over the last decade, Gati has developed competence in ensuring cusotmer centric cargo mangement solutions. It is the only cargo management organisation in India to make an effective use of multi-modal connectivity, employing all four modes of transport - Road, Air, Rail & Sea. It has 5 rail transit centres, 9 Air Transit Centres and 21 surface transit centres across the countries which together cover a vast web of 3.20 lakh kilometres daily with a fleet of nearly 2000 surface vehicles. This is supported by a deep and wide network that has enabled access to the remotest corners of the country.

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Pushpull strategy The business terms push and pull originated in the logistic and supply chain management, but are also widely used in marketing.

A push-pull-system in business describes the movement of a product or information between two subjects. On markets the consumers usually "pulls" the goods or information they demand for their needs, while the offerers or suppliers "pushes" them toward the consumers. In logistic chains or supply chains the stages are operating normally both in push- and pull-manner. The interface between push-based stages and pull-based stages are called push-pull boundary or decoupling point.

Push strategy

Another meaning of the push strategy in marketing can be found in the communication between seller and buyer. In dependence of the used medium, the communication can be either interactive or non-interactive. For example, if the seller makes his promotion by television or radio, it's not possible for the buyer to interact with. On the other hand, if the communication is made by phone or internet, the buyer has possibilities to interact with the seller. In the first case information is just "pushed" toward the buyer, while in the second case it is possible for the buyer to demand the needed information according to his requirements.

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Applied to that portion of the supply chain where demand uncertainty is relatively small Production & distribution decisions are based on long term forecasts Based on past orders received from retailers warehouse Inability to meet changing demand patterns Large and variable production batches Unacceptable service levels Excessive inventories due to the need for large safety stocks less expenditure on advertising than pull strategy

Pull strategy In a "pull" system the consumer requests the product and "pulls" it through the delivery channel. An example of this is the car manufacturing company Ford Australia. Ford Australia only produces cars when they have been ordered by the customers.

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Applied to that portion of the supply chain where demand uncertainty is high Production and distribution are demand driven No inventory, response to specific orders Point of sale (POS) data comes in handy when shared with supply chain partners Decrease in lead time Difficult to implement

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References:

      

http://www.sclgme.org/shopcart/Documents/RetailLogisticsChangeandChallenges http://en.wikipedia.org/wiki/Push%E2%80%93pull_strategy http://propertybytes.indiaproperty.com/index.php/newsbytes/retail-logistics-basics http://www.gati.com/services_logistics_warehousing_supply_chain_management_industry_solutions.jsp http://www.gati.com/services_logistics_warehousing_supply_chain_management.jsp http://www.gati.com/services_logistics_warehousing_supply_chain_management_process_flow.jsp http://www.authorstream.com/Presentation/ancharlu-129781-logistics-retailing-2-entertainment-pptpowerpoint/

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