As a consumer or worker in retail have you ever wondered how the products in store and online get to you?
by Daemonite Hannah Green
Let’s take the basic white shirt…the ‘back to school white shirt’ you might call it. It’s instore and online all year round and then en masse from July until September. How does it get there?
We need to talk about the Retail Supply Chain. We’ll keep it simple — there are many variations. Assuming ‘we’ the retailer buy finished products, (and do not manufacture them), then the links in the Supply Chain are: Source, Plan, Buy, Move, Sell/Consume — (SPBMS/C).
As retailers we know all the White Shirt Suppliers and will have a ‘Preferred Supplier List’. This list will be made up as a result of assessing delivery lead times and cost prices. Speed of delivery is critical; suppliers with a longer delivery lead time generally give better cost prices and will deliver in large volumes. Suppliers with shorter delivery lead times will charge more but will be able to deliver quickly — usually in smaller amounts.
Planning will work out how many white shirts are to be purchased, when they are needed and at what cost price. The ‘how many’ will usually be determined by looking at previous years’ sales. This information must be made ‘like for like’. Ensuring that public holidays, Christmas, high selling periods and Black Friday align, and then applying the expected sales growth uplift. This will give a pre-season plan for the White Shirt.
Pricing this type of product needs to be competitive with other retailers. This must be balanced against the expected margin the range and item is expected to deliver. Your plan will need to be tuned and honed as market conditions change.
The planned sales will drive a stock need, which will get converted into Purchase Orders. These tell the supplier how many white shirts are wanted and when they need to be delivered.
Before delivering the shirts to the warehouse, the supplier will send a sample of the finished items for quality checking. Alternatively, the retailer’s quality control department might visit the Supplier’s factory and carry out checks there. Once approved the supplier will be allowed to arrange a booking slot at the retailer’s warehouse.
On receipt of the shirts at the warehouse: some might be put away to be issued to stores at a later date, some might be sent straight out to fulfill online customer orders, and some might be sent straight out to stores. Stores may also act as click and collect sites for customer orders.
Customers who have ordered the white shirt from a website may have it delivered directly or might collect it from a specified location. Other customers will purchase when they go into stores.
This is a very high level description of the supply chain that gets a white shirt to the customer. Price architecture, stock planning & forecasting, open to buy and other mechanisms all come into play.
So when the customer purchases that white shirt, remember the journey it has taken…