International Retail Marketing

Chapter 2: Retail Logistics

Questions:

1.     Discuss the key concepts and theories of SCM and their application to fashion retailing?

The key concepts and theories of Supply Chain Management or SCM are listed as the Value-Chain Concept, Resource-Based Theory (RBT) of the firm, Transaction Cost Economics, and Network Theory.

These concepts and theories are applied by managing the chain to create value for the customer at an acceptable cost. The short-time window for changing styles added for the significance of the concepts and theories mentioned.

2.     Outline the history of ECR and discuss its implementation in the markets of different countries?

The Efficient Consumer Response or ECR started out in the early 1990’s when KSA produced another supply chain report in appeal by a US-industry sector to evaluate its efficiency in the face of growing competition to its traditional sector.

The ECT took off in Europe from the creation of a European Executive Board in 1994 with the support of European-wide associations representing different elements of the supply chain. 127 European countries focused on cost reduction from end of manufacturer’s line and small proportion of category management were conducted. This has resulted to 2.3 - 3.4% percentage point of sales turnover (60% to retailers, 40% to manufacturers).

3.     Comment on the four stages of the evolution of grocery logistics in the UK, to what extent will FGP negate the collaborative efforts by suppliers and retailers in the relationship (4th) stage?

The FGP might negate the collaborative efforts by suppliers and retailers because the desegregation of product price from transport price leads to dislocation of current prices. Many suppliers would also fear that retailers will then scrutinize the product cost demanding further price reductions.

4.     With the aid of examples show how logistics best practice/principles are being applied internationally?

As mentioned in the (Retail Logistics; 2.9.1 Tesco in Ireland and Poland; and 2.9.2 Ahold in Europe; pages 54 and 55) When Tesco took over the Power Supermarkets in the South, They also inherited a ‘push’ logistics system. Tesco then initiated a 3-year plan to transfer Tesco UK ‘know-how’ to Tesco Ireland. This involved the consolidation of all product categories, initially through third-party contractors (except one inherited warehouse). They moved to a composite ‘chilled’ distribution facility by 2000. Then they used the best practice ECR principles developed in the UK to Ireland. Finally, they upgraded the systems technology to achieve it. Overall, Tesco Ireland focused on the replenishment areas of ECR in the first instance before tackling the demand side of ECR with regard to product assortments, promotion and new product launches.

Ahold also benefited from the transference of logistics practice because of its relationships in retail alliance in addition to synergies developed with its expanding web of subsidiaries.

5.     Review the advantages and disadvantages of the two main fulfillment models for grocery e-commerce and discuss some of the solutions for overcoming the ‘last mile’ problem?

The fulfillment model store-based system model used by Tesco uses the existing distribution assets in that products pass through RDCs to stores and their store staff picks and distributes orders to customers who ordered. The advantage of this system is the speed of implementation and the relativity lower initial investment costs that accumulates. This system offers customers the full range of goods available in the local store but ‘out of stocks’ occur because the online shopper is competing with in-store customers. It also has a low start-up cost but is likely to prove more expensive in the longer term as retail outlets become more congested and service quality for both conventional and online shoppers deteriorates. The fulfillment centre model has a high initial capital and operating costs, but is likely to prove more cost effective in the longer term.

A solution for overcoming the ‘last mile’ problem is the use of collection points economizes on transport by sharply reducing the number of delivery locations and increasing the degree of load consolidation. Another solution is a more radical means of cutting transport costs is by delivering to local collection points rather than to the home of the person who ordered.