“If you can´t describe what you are doing as a process, you don´t know what you are doing”
After learning this chapter, you will be able to understand
· the importance of material flow in retail
· the importance of information flow
· how to do stock control
10.5.1 Supply Chain Management
Supply chain management is the management of the flow of goods and services. It includes the movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption. Supply chain management is defined as the "design, planning, execution, control, and monitoring of supply chain activities”.
In retail, supply chain management means: planning, supplier scheduling, product configuration, ordering to cash, purchasing inventory, claim processing and warehousing. Warehousing consists of receiving the goods, putting them away, picking and packing them.
The basic goals of the Supply Chain Management are to increase customer satisfaction and decrease cycle time. The supply chain should also ensure that the stocks and the costs related to stocks are reduced. In other words, the benefits are improvement of the delivery performance and the changes in the market are responded to within the shortest time.
Challenges faced in Supply Chain Management are, for example: to find out the way to shorten the time between the purchase order and delivery, and to know the amount of articles needed to sell in the future. It is also good to figure out how to share our information with our suppliers and how to decrease procurement periods. Supply Chain Management also offers us possibility to learn how to use price changes for our benefits.
10.5.2 Basic Stock Control
Stock control includes tracking and accounting for the items you sell. The stock control system you use depends on the size of your retail company. In some cases, stock is also referred to as inventory. Knowing what products to buy, when to buy and how much to buy are essential for good stock control. It is also important to work out how much stock you need to hold in order to run your business successfully.
10.5.2.1 What is Stock Management?
Stock management is about analyzing and planning a company’s stock in order to decrease costs and increase customer service. The demand is influenced both by external and internal factors. For example, weather conditions, special days like Valentine’s Day, holidays are external factors. Campaigns, promotions, sales are examples of internal factors. These factors affect demand for certain products, so purchase order requests should be taken into consideration in time.
10.5.2.2 Why is Stock Control Important?
The stock control system ensures that the shelves are appropriately stocked. If there is too much stock (any products that were not within the customers' concerns) it ties up the company's money. It would be a better idea to spend money on something else.
10.5.2.3 Check-in procedures
When the goods arrive, you first have to check:
Firstly: If the goods are for you.
Secondly: you have to check if there is any outer damage.
Thirdly: check if the dispatch notes match the order.
Fourthly: you have to check if the invoice and dispatch note match. During this matching process, all the products are registered to the stock.
Afterwards, you have to check the inner quantity and quality of the products that come to the warehouse before they are registered in the stock control system. Goods rejected by quality control procedures are returned to the firm (the sender).
10.5.2.3 Check-out procedures
Sometimes products need to be returned, because they are damaged or outdated and they cannot be offered to the consumers. The stores may not send their returns without reports and hand notes. The check-out-procedures vary from company to company, but you have to report the returns somehow. You have to remember that they affect the company's bookkeeping.
10.5.3 Inventory Management
A retail company has to have a way to control its stock. The cost of overstocking is waste of money due to monitoring and tracking costs, or need of space. Due to lengthened selling time, the goods may become unsalable. On the other hand, there are costs in under stocking, too. It will cause missed sales and delays of manufacturing. To solve this problem, a retail company has to have a way to take inventory.
Inventory is a counted list of goods and the goods in store. The purpose of inventory is to find out which goods are lost and which are still for sale. Inventory can also forecast future spending; with the inventory you can update your product balance.
Nowadays, in many cases, the inventory is mainly automatic but in small businesses it has to be done by the personnel. There are five basic reasons for taking an inventory: time, uncertainty, seasonal demand, economies of scale, appreciation in value.
10.5.4 Quantity and damage reports
To keep the stock situation updated, you need to have a system to follow up the goods that are damaged, stolen or spoiled before selling. One way to do this follow up is to have a reporting system. If you do not have quantity and damage reports, it might appear that you have some product in your storage even if you don’t have it. You have to write damage reports and check the products through the cash register in order to keep the product quantities up to date.
Case: Material and information flows
Alex orders orange juice, shampoo and bread to his shop. What kind of material and information flows are there related to these products? Draw a picture of these flows. What kind of aspects does Robert have to take into consideration concerning these products?