Efficiency and Effectiveness in Food and/or The Clothing Retail Sector - Research Proposal Example

Analyze and evaluate how such strategies can enhance efficiency and effectiveness in food (supermarkets) and/ or the clothing retail sector Introduction: The advent of e-commerce has had a great impact on the supply chain management of companies engaged in retailing business. Advanced business techniques available in e- commerce helped companies to improve their operational efficiency by reducing the operating cost requirements. Business firms in the retailing business are required to maintain higher level customer satisfaction for ensuring sustainable business growth. For this, cost reduction is an essential factor. Customers always prefer quality products at reduced cost. Thus firms in the retailing industry are required to reduce their operating cost. A major part of the total cost requirement in retailing business is related to the supply chain. Through the application of e-logistics, firms are able to reduce the cost relating to procurement of resources, delivery of products, distribution, management cost etc. Supply chain management not only envisages internet business transactions but also encompasses all-round efficiencies at all levels. Supply Chain means all inter-linked resources and activities needed to create and deliver products and services to customers. Quick response and just-in-time inventory can be effectively implemented in the supply chain system through the application of e-logistics. Efficient communication resulting from the application of e-logistics facilitates to reduce the operating cost at the minimum level. In the B2C ecommerce, the accessing of information becomes wide and suppliers can be effectively managed. Literature review: Critical appraisal and evaluation of the importance of E-supply chain management strategies should be capable of identifying its importance in the business sector. The discussion is focused on how business organizations in the food and retail clothing sector, develop and apply e-logistics in their business functions and its effectiveness in attaining the operational performance improvement and cost reduction objectives. The literature review will cover e-applications in general and e-fulfilment, e-procurement, e-distribution, e-transport, and e-logistics in particular. E applications: The e-applications have greater role in effective and efficient business operations. In the fields of procurement, sales, information exchange, warehouse management, etc. e- applications can be effectively applied. It helps to increase the flexibility and reducing the overall value chain in the supply chain process. In the field of production planning, lead time requirements can be greatly reduced through applying technology. It will provide better image for the business in the market as the company is ready to accept the changes in the market for sustaining the customer satisfaction. In the book of Purchasing and supply chain management, Arjan J.Weele states that e supply chain system provides advantages to the business by enhancing customer satisfaction and improving the product availability, reduction of waste, streamlining of the business process. (Weele, 2005:p314). According to Kornum, Neils and others, in the UK economy, online retailing is a growing concept and thus the need for e commerce is increasing day by day. Continuous growth in the online shopping necessitates business firm to adopt e-logistics for enhancing the supply process. The growth rate in the online retail marketing is more than that of growth rate of the total market. The massive increase in online shopping necessitates home shopping fulfilment market. Fulfilment of the customer needs in a most efficient way is the critical success factor in online retail business. I-Force is a specialist in the fulfilment service business. Keen pricing strategy has to be followed by business firms in their online business for attracting and sustaining in the business. (Wilson J S & Reynolds, 2005: p7). Brian Stanford Smith and Paul T. Kidd in their book E-Business states that e commerce applications are becoming part of the international business. ECommerce facilitates the business units to perform their transnational business so smooth and effortless. (Stanford & Kidd, 2000: p 9) Important e-applications are described below: 1. E-fulfilment: In the book of international logistics and supply chain outsourcing, by Alan Rushton, Steve Walker, e commerce and e fulfilment are described as one of the most dramatic developments in recent years. In case of companies engaged in distance selling, fulfilment is a prime function. They have to ensure greater care in fulfilment of the customer needs. E-tailors are required to take the responsibility to maintain better functioning of their fulfilment system. In order to sustain the customers on long term they are required to provide reliable service to the online customers. Through the application of user selectable delivery time windows, customer service can be highly standardized. (Rushton & Walker, 2007:p.125). In the ecommerce field, e-fulfilment is highly essential for keeping the customer satisfaction. It is an increasing market sector in the e-commerce. Through the outsourcing of e-business function of the outsiders, standardized performance can be ensured. I-Force is the leader in the e-fulfilment market in UK. In the e-commerce field, there exist various challenges for the marketing of branded products. The third party specialists have greater role in transacting the business in the optimum manner capable of satisfying the customers and developing trust with the business. In the e-commerce field, poor delivery will affect the business badly. 2. E-procurement: Namchul Shin in his book, Strategies for generating e-business returns on investment, states that e procurement initiatives are essential in the successful e commerce business. The present business conditions require cost effective operational strategy for sustainable business. Cost saving is the mot essential factor determining the competency of a firm. By the application of electronic technology in the process of procuring resources, cost reduction can be achieved. Online purchasing has a lot of cost advantages. Along with direct cost savings in terms of lower fixed asset requirements, efficiency can be improved a lot through the shrinking of number of suppliers and at the same time administration costs can be greatly reduced. (Shin,2004:p 136). E-procurement is the business to business purchase and sale of resources by way of online. It is also referred as supplier exchange. Websites developed for carrying out the online business can be used for the purpose of sales and purchases. The pricing bids can be placed through this technique. Through the implementation of e-procurement software, automation of buying and selling process can be implemented. It facilitates greater control over the inventory. Overheads on purchasing can be reduced, and thus manufacturing cycles could be improved. It is an integrated function of the e-supply chain management. Advantages of e-procurement: Through the linking of the e-procurement system with the whole business process chain, the competency can be further improved. Companies can deal the organizational, cultural and technological innovations. E-procurement is helpful for discarding the unnecessary expenditure on the purchasing process. The spending on indirect goods and services required for the transactions can be greatly reduced through the implementation of e-procurement process. By reducing the purchase costs, operating costs can be lowered and thus profitability could be increased. 3. E-distribution: Electronic market place termed as B2B (Business to Business) is applied in wide range of business applications. They are acting as electronic link between the suppliers and the purchasers. E-distribution should be capable of reducing the distribution cost as the requirements of human resources and warehousing can be greatly reduced. 4. E- transport: Different modes of transportation have their own benefits and challenges and it would depend upon the characteristics of the firm and its business priorities to decide as to which line of transportation, or blending of modes, would be necessary for the enterprise. In case of e-transportation, the logistics are controlled and directed through technological basis. It would be helpful for managing the transportation of logistics with up-to-date data. In the book of Introduction to E-supply Chain Management, David Frederick Ross states that e supply chain system is increasingly demand in the new business environment characterised by keen competition and higher need for customer satisfaction. (Frederick, 2003: p2). 5. E-logistics: E-logistics is referred as combination of functions involved in the supply chain management in electronic basis. It helps to avoid the mediators such as wholesalers and retailers. It is the business within the Transport Logistics Cluster between companies and external business between Transport Logistics Cluster and customers. E-logistics decreases the error rate and it provides more satisfaction to the customers. The risks and other problems are reduced by the usage of E-logistics. E-logistics can be referred as the application of electronic technology for the logistics activities. Different kinds of services are available in the e-logistics field and each of the function involves separate functional specialist service providers. (Yeung). E-logistics is a part of the e-commerce transactions. Greater speed and quality delivery services are essential for the success of business in e-commerce industry. Online customers always look for instant delivery of the products along with flexibility and convenience. Tracking of order process by the customers is possible through the application of e-logistics. It allows customers to determine the delivery costs and time. Customer expectations have greater value in the present business environment. An active and high speed approach towards logistics becomes possible through the application of technology. Applications of e-logistics in the food and clothing retailing industry: Supplier customer relationships in the textile supply chain have greater influence on attaining cost efficiency and improved operational performance which are two essential factors for customer satisfaction. For the efficient delivery of products, better cooperation with each player in the supply chain is required. Visibility through the entire supply chain is possible through the application of e-logistics. In the retail marketing field, the supply chain is complex in nature. Different parties are involved in the supply chain system. The industry is highly volatile in nature. In order to get competency in the market, business firms are required to market their products in the right place, at right time and in right quantity. Between the manufacturers and retailers there exist different types of intermediaries in the import and export category. They have greater influence over the movement of the products through the supply chain. In this period of increased globalization, intermediary is an essential factor in the retail business. Important applications of e-logistics in the retailing business are described below: 1. Information exchanging: In the retail marketing field, the supply chain involves large number of partners dealing with different functions. In order to coordinate and control the total supply chain functions in a cost effective and goal oriented manner, information sharing is a critical function. Accessibility of right information at greater speed and reliability of the individuals in the supply chain should help improve their performance level. Advanced SCM technologies are effective for sharing the up-to-date information on the process of supply chain. 2. Forecasting market demands: The retail food and clothing business are characterized by ever changing customer needs and interests. Advanced techniques available in the e-logistics should be helpful for predicting the customer demand in a more accurate manner. 3. Inventory management and control: Application of e-logistics in the supply chain management functions should be capable of enhancing the cost effectiveness of business firms in the retailing industry. It helps to control the movement of resources and products as per the requirements in the market. The order processing cost can be greatly reduced through the application of e-logistics. Players can adopt every day low pricing policy and it ensures enhanced cost reduction. While e-business makes use of electronic platforms, such as intranets, extranets and the internet to conduct a company’s business, at a macro-level, e-commerce deals with the buying and selling of products, services and utilities reinforced by electronic means, in most cases, the use of Internet technology. (Kotler & Armstrong, 2005). The various aspects of e-commerce with regard to SCM could be seen as follows: 1. B2B (Business to Business): This is intended as an online vehicle in order to use B2B trading networks, auction sites, spot exchanges, online products, catalogues, barter sites and other online resources in order to service new and existing clients and customers more effectively and achieve buying efficiencies and better prices. A minimal response to enable survival in this fast-paced world is to offer e-commerce, in which sharing of existing services and products electronically through the Web. For this purpose, the rapid sharing of expertise among employees is already a necessity. Without it, the company finds itself unable to respond to the requirements of the marketplace, whether it is Business to Business (B2B), Business to Consumer (B2C), B2E, or 2E. The explosive growth of B2B is resulted from the forces such as need for global trade, and the changing nature of the business relations. (Samtani, Healey & Samtani S, 2002:p6) 2. B2C (Business to Consumers): It involves the online selling of goods, services and utilities to final consumers. It is to be noted that in B2C, there is a direct transfer of goods, services and utilities to the consumer without the need for any intermediaries. C2B (Consumer to Business): Online exchanges in which consumers search out for sellers of products, services and utilities, learn about their terms of offers and begin initiation of purchases. Often, they even negotiate the terms of transactions. 4. C2C (Consumers to Consumers): Online exchanges of information regarding goods, services and utilities for finding out final consumers. The level of competition requires that since the customers are limited, without them, the Company ceases to exist and plans must be laid to acquire and keep customers. The level of competition to acquire and retain customers assumes centre stage in both the domestic and international business and it demands that the enterprise be quick, agile and flexible to compete with effectiveness and wisdom. Supply chain management not only envisages internet business transactions but also encompasses all round efficiencies at all levels. Supply Chain means all inter-linked resources and activities needed to create and deliver products and services to customers. (Bidgoli, 2004:p720) Appropriate examples of one or more to demonstrate the theory in practice: E-logistics in food industry: Food retailing industry is characterized by increasing demands for standardized quality and concerns for consumers. In food industry the e-logistics plays a very important role. This consists of consumers purchasing goods through internet, procurement of raw material and other resources. Relationship of business to business reduces costs and develops efficiencies in the collection of raw materials. Purchasing grocery items through internet is increasing day by day. It was motivated by the technological improvement and availability of raw materials. This business provides more satisfaction to the customers with reasonable price and maximizes the profit. Business to Business Internet market for selling industrialized inputs and retail supplies are developing quickly. The main benefit of this business is ensuring balance between price and quality. E-commerce business explains the purchasing and selling of quality goods. It helps to identify defective products, increasing costs of selling goods. It also explains the firms to share the risk of these problems. Operation cost reduction is another important problem in the food retailing business. Integrated supply chain software applications in Save Mart supermarkets: Save Mart Supermarkets adopted integrated supply chain software system for enhancing the efficiency of their business operations. The software implementation helped the company to co-ordinate the supply chain functions such as order processing, invoice reconciliation and warehouse management. Save Mart is a prominent grocery chain. They adopted the RF and voice enabled warehouse management software system developed by Retalix. It is a necessity for the Save Mart to adopt efficient technology to integrate its wide range of distribution networks. (Supermarket Industry News). E-Supply chain management system in Wal-Mart: Wal-Mart is a prominent player in the food retailing business. It entered in the food retailing industry in the year 1998. It implemented the software applications for managing its large volume of product distribution in better and efficient way. Applications of software for the management of supply chain functions helped it to reduce the operating cost, and at the same time facilitated the information sharing between the supply chain partners effectively. Through this Wal-Mart improved its business profitability by reduced operating cost and enhanced the procurement of resources on cost effective manner. Radio frequency identification system was implemented by Wal-Mart for co-ordinating its key suppliers. The up-to-date information on product sales, inventory level etc. can be maintained on cost effective manner. ECRU (Efficient Customer Response) system facilitates information sharing between the partners in the supply chain. Availability of up to date information regarding market demands and the level of stock at the stores should help the suppliers to adjust their delivery accordingly. Joint effort of the producers and suppliers would help successful introduction of new products in the market. (Martinez, and Stewart). E-logistics in Clothing retail sector: - E-logistics is an important managerial contribution from both the business and customer viewpoint. The e-logistics function covers the reverse logistics function in the organization. Reverse logistics stands for all operations related to the re-use of products and materials. It includes product planning, collection, distribution, remanufacturing and inventory control, inspection, disposal etc. Information technology plays a very important role in reverse logistics. Applications of e -logistics in Sainsbury: Sainsbury is an important clothing retailer operating on international basis. Sainsbury adopted e-logistics for the supply chain management in clothing and home furnishing divisions. A major problem that affected the operational performance of Sainsbury was its lack of ability in retail clothing. Areas of warehouse management, staff management, in store merchandising, were problematic in nature. In order to enhance the operational performance in these areas, the company adopted e-logistics. Sainsbury adopted i-Force as its e-logistics application for enhancing its supply chain system. “The multi-channel logistics firm will supply Sainsbury's with a range of services for its non-food operations based at the retailer's depot in Corby, Northampton shire.” (Industry News) Goody’s Family Clothing adopts the Oracle retail application for improving its inventory management. Family Clothing is a player in the moderately priced apparel market. It operates more than 380 stores. It is expected that it will improve its profitability by ensuring better inventory management and cost reduction. The forecasting will become more accurate and reliable. The predictability over promotional events also can be ensured through this approach. Customers are highly value conscious. Through the application of oracle retail price optimization, demand in the market, inventory levels, store performance etc can be predicted more accurately. This allows the merchant to set the price points in bids. (Goody's Family Clothing Selects Oracle® Retail Application to Help Boost Profitability). Findings and analysis: The discussion on the applications of electronic technology on the supply chain management system revealed that it is essential for keeping the transaction cost at the minimum level. In the food retailing business the timing of product delivery is an important factor for assuring the quality of the product and reducing the spoilage. The inventory level at the stores should be of optimum level at all times. For this, adequate information regarding market demand and up to date information on distribution process is required by the suppliers as well as purchasers. E-Supply chain system facilities the sharing of information between the supply chain partners in the most efficient manner. The distribution costs can be greatly reduced with limited human resource requirement for the inventory management. Sharing of inventory data on electronic ways between the suppliers and the stores, keeps the cost of resources at the lowest level. Reduction in handling-cost is an essential factor for attaining competency in the industry. Overhead cost on labour can also be reduced through the application of e-logistics. Meeting the ever-changing needs and interests of the customers is the prime challenge of business firms in the food retailing industry. In order to maintain the inventory level in store at the optimum manner, identification of changing customer demands in the market is essential. To avoid spoilage and ensuring the availability of product in required quantity, effective and efficient inventory management system is required by business firms. Through the application of e-logistics, acquisition of resources in a cost effective manner is possible to the business firms. The reduction in inventory level will help to attain cost efficiency. The requirements of infrastructure can be greatly reduced. Material handling in the warehouse is also facilitated through this strategy. The need for keeping goods in the warehouses can be avoided through the application of e-logistics in the supply chain management. Companies are required to connect the ERP together with the supply chain for presenting revised information about orders, payments, and production status and product delivery. Real time information can be gathered by all of the parties involved in the supply chain. The invoicing and payments become facilitated through the application of e-logistics. In the food retailing industry, customer demands are ever changing and inventory management is a critical function determining the sustainability of the business firms. Adoption of electronic technology in the supply chain management in organizations would create problems. It is now necessary to consider the difficulties presented in e-commerce transactions: it could be seen that the lack of the physical infrastructural environment for nurturing and establishing e-commerce is a major hurdle to be overcome including the high costs of Personal Computers and the need to operate in a cost efficient telecommunication system that facilitates e-commerce transactions. (Wilson & Reynolds, 2005:p7). The major challenges facing in the installation of software applications in the supply chain process are described below; 1. Trust requirements towards the suppliers and partners: The automated supply chain system operates on trust. In order to ensure security of information sharing with the partners, trust is the basic factor. Employees of the business firms are required to change their operational styles and this is possible only for large scale firms to afford the change. In order to develop a better collaboration with the partners in the supply chain, they should be willing to compromise. 2. Internal resistance to change: The installation of software system in the supply chain would receive resistance from the organizational personnel as it affects their operational environment. 3. Mistakes in the primary stage: There will be mistakes regarding the implementation and operating the software system due to lack of awareness and adequate informational resources. (Ganeshan, and Harrison). The wide spread application of internet technologies helped firms to enhance their competitiveness on a global level. Through the application of e-commerce in business operations, companies attained increased cost efficiency and operational performance improvement in the industry. Information sharing, effective co-ordination of the resources and effective supply chain management becomes possible through the technological applications. In the retail marketing business, companies are adopting e-commerce tools for supply chain management. Conclusion: In any strategic business units, optimization of profits is the ultimate business objective. For this, operational costs have to be minimized. The vast developments in the communication technology in the electronic sector have opened up new vistas to speed up customer relations, reduce inventory level, and reduce purchase costs, through e-commerce which is broadly sub classified as e-procurement, e-fulfilment, e-distribution, e-transport, and e-logistics. Leading companies like Wall- Mart, Mc Donald’s, Sainsbury etc, use e-commerce profitably for their supply chain management system. Electronic market place provides opportunities for different types of auctions for companies to source hard-to-find components, and to unload excess inventory through brokers. One concern with auction, however, is that they tend to be counterproductive in terms of creating long term supplier relations, since they award contracts based on lowest bids. Virtually all medium-sized and large retail stores use Universal Product Code (UP) bar-code scanning. Quick response programs have grown rapidly and it is intent to create a just-in-time replenishment system between vendors and retailers. Efficient Customer Response is a type of OR and EDI adopted by the supermarket industry as a business strategy. Distributors, suppliers and grocers work together to bring products to consumers. ECRU focuses on the customers to drive the system, not the manufacturers’ deals. Customers pull goods through the store and through the pipeline by their purchases. This permits fewer inventories throughout the system. Reference E-Fulfilment is Key to The Delivery of Customer Satisfaction in E-Commerce (2009). 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