DRIVE Spring 2017
PROGRAM Bachelor of Business
Administration- BBA
SEMESTER Semester 6
SUBJECT CODE &
NAME
BBR603 –Merchandising &Supply chain
Management
1
Discuss the concept of retail supply chain.
Concept of
retail supply chain
Answer: Concept
of Retail Supply Chain
The success or failure of a retail supply chain depends on
stock-outs. Stockouts (lost sales) represent the failure of supply chain. It is
a serious situation for a retail organisation as it is difficult to determine
the accurate amount of lost sales and goodwill. As a result, stock-outs have
become strategically important items instead of only an operational issue.
Besides stock-outs, the retail supply chain faces various other
issues, which are given below.
Ø Gathering accurate customer requirement
Ø Complex supply chain due to fragmented supply basis
Ø Small store shelf life
Ø Focus more on services like free home delivery than the products
Ø Changes in the customers’ tastes, preferences, and buying
behaviour
Ø Handle multichannel marketing
Ø Handle mass customisation
Elements of
Retail Supply Chain
The elements of retail supply chain are the different processes
involved in the transportation of goods from suppliers to retailers and then to
customers. These processes can be broadly divided into the following categories.
Merchandise management processes: It
involve the following processes:
Ø Category management processes: Include
the classification of merchandise category and formation of strategies to
manage these categories
Ø Merchandising forecasting and budgeting processes: Help in long term forecasting of merchandise requirements,
financial budgeting process, and budget control process
Ø Assortment management
processes: Include
planning processes (line and range planning, space planning, and pack planning)
and execution processes (merchandise allocation and planogram execution)
Ø Price management
processes: Include
planning processes, such as promotion planning, trade funds planning, promotion
optimisation, and promotion collaboration, and execution processes, such as
price and promotion execution
Private label design and
sourcing processes: It
Involve designing of private labels, packaging design, outsourcing
manufacturing, selecting vendors, and releasing purchase orders.
Ø Logistics management
processes: Refer
to the processes related to the inventory movement such as transportation,
warehousing, and inventory management
Ø Customer service
processes: Include
managing reverse logistics, customer orders, loyalty programs, and
multi-channel logistics
2
Elaborate on the management of retail product life cycle.
Management of
retail product life cycle
Answer: Management
of Retail Product Lifecycle
Retail
product design
Product
design has become an essential part of retailers’ supply chain processes. For some
products, customers’ choices vary to a wide range, and where private labels
dominate, the success/failure of the retailers depend on the product design.
The examples of such products include apparel, jewellery, and footwear. In case
of grocery or packaged products, the private labels are preferred and thus, the
product design becomes important. Private labels provide several benefits such
as ensuring customer loyalty, sustainable margins, and product differentiation.
Thus, retailers start involving ever more in the development of the private
label.
Private labels
Private labels are the products that are owned, controlled,
promoted, and sold by retailers in their stores. The private labels are named
either on the store’s name, including Foodbazaar and Foodworld, or on the name
created by store, such as Food Bazzar’s Treaty Treat.
Private labels can be categorised into the following types:
Ø Store brand: Contains the retailer’s
name, like Westside and McDonalds
Ø Umbrella brand: Includes the products
promoted by common brand name such as Amul retails various dairy products
Retail
packaging
Retail
packaging enables an organisation to satisfy customers’ needs and making the
product more attractive and convenient to carry by using some innovative ideas.
In addition, innovative packaging enables organisations to create a new market
and communicate with their customers effectively. For example, the tetra pack
of Frooti helps the customers to take their drink on their way. Similarly, the
sachets of shampoos help the organisation to increase product awareness and
make the product available to the masses.
Retail distribution
Retail distribution involves distribution of merchandise from the
suppliers’ factory to the retail store for selling to the end customers. Retail
distribution can be done through different models, which are presented below:
The process of retail
distribution involves the following steps:
1. Managing various processes, including order picking, packing,
and despatch activities in the supplier’s warehouse.
2. Scheduling and routing of trucks by the supplier to identify
the best route and timings for the transportation of merchandise.
3. Sending Advance Shipping Notification (ASN) by the supplier to
the place of shipment destination, which can either be a retail store or retail
warehouse. ASN includes the information about the quality, quantity, and
expected arrival of merchandise. This information allows the retailers to make
the required preparation for the arrival of merchandise and cross check the
merchandise with the order made.
4. Checking orders and storing information about the receipt of
goods by the retailers.
5. Managing merchandise in a retail store by the retailer or the
supplier based on product category.
3
What are the factors affecting merchandise buying functions?
Factors
affecting merchandise buying functions
Answer: Factors
affecting merchandise buying functions
Merchandising
is not an isolated function. It is affected by several factors, which are
discussed as follows:
Size
of a retail organisation: Retailing
function varies with size of an organisation. The requirement of an independent
retailer is different from the needs of a large retail chain organisation. In
case of an independent retailer owning a single store, the owner or manager
along with the sales person perform the buying function of merchandise. In
addition, the buying function is centralised in a single retail store. On the
contrary, in case of a large retail chain organisation, the buying function is
performed by a procurement team and the buying function can be either
centralised or decentralised.
Type
of retailing: The buying
function of merchandise is different for different types of retailing. For
example, the buying function for the mail order/catalogue retailing is entirely
different from the online retailing. In mail order/catalogue retailing, the
buyer is required to prepare a plan in advance to procure the merchandise. This
is because the production of catalogues takes a long time, and identifying the
right vendor for a wide range of merchandise is also a time consuming task. In
contrast, in online retailing, the buyer needs to be aware of the products
bought by the customers frequently, so that they can procure these products as
soon as possible.
Type
of merchandise: The buying
function of merchandise would vary based on the type of merchandise. For
example, the buying function for fashion merchandise would involve a deep
research to procure the latest trends products. On the contrary, in case of staple
merchandise (like rice, wheat, and pulses), the buyer needs to purchase a
product that can be sold at a reasonable price
4
Elaborate the process of merchandise planning.
Process of
merchandise planning
Answer: Process of
merchandise planning
Merchandise
planning is based on merchandise strategy prepared by the organisation. The
process of merchandise planning involves two important tasks, which are:
Ø Determining
goals for effective merchandise management
Ø Preparing
plans to meet the merchandise management goals
In
many retail organisations, senior management is responsible for providing the
direction to establish these goals and preparing plans for meeting these goals.
Key
concepts in merchandising
Merchandising
involves various concepts, including merchandise mix and merchandise
assortment. Hence, in this section, you will get an overview of merchandising
concepts, which are:
Merchandise
mix: The
merchandise mix represents the full range of products that a retailer offers to
its target customers. Merchandise mix is an appropriate combination of product
lines, product items, and product units.
Merchandise
assortment: Merchandise assortment refers to the number of different
product items a retailer stocks within a particular product line.
Assortment
is the number of SKUs within a category. Stores having a large assortment are
said to have a good depth. For example, Levi’s stores have a large assortment
of jeans and accessories that complement the jeans. Thus, Levi’s stores have a
good depth. The depth determines the number of SKUs within each category.
Merchandise
budget: This is the financial plan that indicates the value
of investment in each product and the total inventory, based on a pre-set profitability
or other performance measures. While merchandise mix planning is directed at
meeting the customer oriented objectives, it is equally important to meet the
firm’s financial objective of profitability. To ensure profitable operations,
the retailer must use merchandise budget in which sales volumes, stock levels,
retail reductions, purchase orders, and profit margins are planned and
controlled.
Merchandise
hierarchy: It is defined as the process of planning the merchandise
mix for a retail organisation. It is an organised group of merchandise mix at
different levels that depends on the type of product and retail store.
5
Discuss some of the standard color schemes adopted in retail stores with
example.
Standard color
schemes
Answer: Shoppers
most often choose what they buy based on color. In fact, it can account for up
to 85 percent of the reason people buy one product over another, according to
the Color Marketing Group, a professional organization for color designers in
Alexandria, Va.
Color's
influence on consumer behavior isn't confined to just merchandise. The colors
surrounding customers while they're shopping also can influence whether they
make a purchase. "Colors in a store format can create different emotions
and store retailers can use that," says Rich Kizer, a St. Charles, Ill.-based
retail design consultant.
Here are five
ways store colors can affect the shopping experience and help turn browsers
into buyers:
1. Tell a story
with color. Rather than simply select colors you like, it can be more effective
to start with a theme and choose colors that represent that concept. For
example, you could capture the essence of the beach with colors reminiscent of
sand, water and sunshine. That would transport customers to an environment they
associate with relaxation and enjoyment and make them want to stick around your
shop longer.
2. Comfort and
calm customers. Warm colors like oranges and browns are inviting and reassuring
to shoppers, while cooling colors like green and blue can have a calming
effect, says Georganne Bender, a partner and retail consultant with Rich Kizer.
3. Alert your
shoppers to certain products. Bright colors like yellow and red grab customers'
attention, stopping them in their tracks before they breeze by a product
display. That's because yellow is the color first perceived by the retina,
according to Linda Cahan, a West Linn, Ore., retail design consultant. Red, of
course, has long been associated with stopping, whether it's on a traffic
signal, emergency vehicle or store design.
6
Write short notes on:
a)
Retail Replenishment
b)
Retail ERP
Answer: a) The process
of filling up the empty shelves of retail stores with new merchandise is called
retail replenishment. However, this definition does not address all the
business conditions of retail inventory management. The replenishment of
products in a retail store depends on several factors, such as type of
merchandise and demand of merchandise. For example, in case of seasonal
merchandise, the quantity of products is based on the season, while in fashion
merchandise, the replenishment quantity depends on the demand of the product.
Hence, in a retail store, the replenishment of products should be done
carefully. From the discussion so far, it can be said that the retail
replenishment is the acquisition of products on a regular basis to support the
estimated demand. Retail replenishment has evolved over the past few years. As
a result, various models for retail replenishment have been developed. Given
below are some of these models in the order of their evolution:
Retailer
Driven Replenishment (RDR)/Computer Based Ordering (CBO) system: It is
the most common and traditional model of retail replenishment. In
this model, the retailer generates a replacement order and sends it to the
supplier. This model involves the use of information systems for
ordering the merchandise. Thus, it is also termed as Computer Based Ordering
(CBO) system.
b) Are
you aware of the term ERP? ERP systems refer to the software packages that
integrate all the data and related processes of an organisation into an
integrated IS. An ERP system uses a central database that holds all the data
relating to various system modules. To achieve a seamless integration, an ERP
system uses multiple hardware and software components. ERP packages are heavily
used by larger retail chains. Designed to facilitate the administration and
optimisation of the internal business processes across an enterprise, ERP
package has become a competitive tool for the larger retail organisations. ERP
software uses a single database that allows different departments to communicate
with each other through information sharing. ERP systems comprise
function-specific components that are designed to interact with the other
modules, including order entry, accounts payable, accounts receivable, purchasing,
distribution, sales, inventory management, human resources, and supply chain.
Strengths and
Weaknesses of Retail ERP System
|
Strengths
|
Weakness
|
|
1. Provides
enterprise wide view
|
1. Expensive
to acquire
|
|
2.
Allows integration with systems of
business partners
|
2. Requires to
train employees
|
|
3. Aids
routine decision making
|
3.
Compatibility issues with
other systems
|
|
4. Streamlines
business processes
|
4. Security
concerns
|
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