It Is often taken for granted that goods and services are available for purchase, when demand for them has been Initiated. The cornucopia that good In a retail store or supermarket are available seldom means that consumers have forgotten how products have been Initially supplied. With the emerging e-commerce consumers have come to demand complete availability and home delivery at time suiting their lifestyles, consumer tastes and preferences have also altered tremendously in recent times.
Customer service and gratification expectations have increased and customers willingness to wait to be satisfied or served has decline which in turn has put excessive pressure on the Business Logistics Systems procedures in the retail industry. With all these developments it is only obvious that the transformation of good from point of origin to point of consumption have to be Improved, implemented and control with greater accuracy In order to meet the end user (consumers) needs.
Retailing and Logistic are primarily concerned with availability of goods; many have described this as ;getting the right product to the right place at the right time’. Along tit this great pressure are numerous Logistics Challengers that hamper the effective and efficiency of many retail organizations in the Retail Industry. Logistics Challengers In the Retail Industry 2. 1 Demand Driven Distribution Inventory being a major contributor to the market success of a company, It Is essential to manage Inventory well to meet company financial and business goals.
Companies all over the world either in the manufacturing, distribution and retail industries are striving to become demand driven. Demand driven distribution is a strategic action that’s allows actual demand for good to pull inventory through the many and its supply chain. Unfortunately with outside factors, cooperate strategies and management practices that create challengers’ in achieving success. Demand Driven Distribution is a vision for leveraging management decision support systems and automation technology that improves the warehouse and distributors business.
The idea is to redesign the distribution system activities such that based on the customer’s request and purchase Information, activities within a distribution centre are reorganized to reduce the lead time needed to load trucks and balance the workload of the order picking operations. Accompanied by an intelligent support system that captures the Information generated by purchase and sales and make use of the available order picking resources throughout a distribution centre Outbound Since becoming demand driven and improving service levels, has strongly become challenging as demand is less predictable in recent years.
Approximately every distribution intensive organization is pursuing this trend as consumers have shifted away from normative purchase patterns. Variable demand being a focused challenge and the position of the companies supply chain will determine which issues are likely o cause volatile in outbound inventory. “; Closest to the customer, retailers suffer most from fulfillment execution problems. Fulfillment execution is a problem for fully 35% of retailers, but only 18% of distributors and 11% of manufacturers. ; Furthest from the customer, manufacturers fight order changes and poor production planning.
Order changes rippling through the supply chain were identified by nearly 20% of manufacturers as the primary cause of outbound inventory volatility. This sinks to 13% of distributors and only’ http:// www. Locality. Com/files/library-section/whitepapers/demand-driven? Source=http:// www. Locality. Mom/library/white-papers/media/demand-driven-inventory- management-id 2. 2 Product Proliferation. Product proliferation is the variety and the range of different product offerings, sizes, usability in the same basic product.
Product proliferation is used to address the issue of addressing various market segments not catered for yet. In the retail industry such as Walter for example product proliferation is an integral part of being successful and a major challenge that has to be focused by retailers, for Walter to have a diverse range of products is beneficial to the customer having a greater variety of a particular product to choose from. Keeping the customers loyalty to the retailer as a whole secure. As the consumer are aware that all the options for the particular item are available. The different scents, sizes and colors.
It is important to be aware that too much product proliferation can cause customer confusion as to what decision to make and what to choose at the overwhelming presence of more options than is needed or warranted. This can also lead to wasted shelf space where more product categories can be added instead of proliferation of one specific product. Product proliferation is also used to gain a greater market share from omitting retailers or manufacturers, to close gaps in the market. Deterring potential market entrants by raising the entry barriers and providing for as many possible different needs as possible. 2. Technology Technology in retail industries is playing a greater role, with profit margins on sales decreasing, and customer loyalty playing a bigger role in the way retailers make decisions technology is viewed as the window of opportunity for most retailers today. Although the initial outlay for more advanced systems is rather pricey the benefits are unassailable. Opportunities at store front, storage facilities and supply chain management can all be improved on with technological advances payment automatic replenishment and store orders are amongst the possible solutions to keep a retail company competitive and profitable.
Cutting down on time spent on mundane operations that can be time consuming and labor intensive by diverting those resources and labor towards more direct profit making activities and allowing the stock taking, pricing inventory management, store room management re ordering and order processing be done by the CPU systems developed to manage and control these various facets of every day operations. 2.
The Empowered Consumer Back before the internet, products and services offered single items or results and if a customer had a bad experience with either/or, there was nothing much one could do about it, except continue using the product and the dissatisfaction or not using it at all. With the coming age of technology, consumers are exposed to a world filled with information. They can now decide which products to buy based on their specific needs and customize products and services in terms of what they need and when they need it.
It is evident now more than ever that companies that can best serve the deeds of the consumer are more likely to survive. The intention of customer empowerment is to streamline the buying process as much as possible and provide the company with the opportunity to be of service to the consumer in supplementary and value-added ways. “Consumers now have an increased demand for competitive prices, high quality, customized products, convenience, flexibility and responsiveness”. Coyly, et al, 2003, chapter 1). The informed consumer have low tolerance for poor quality products and services, they have a larger platform to complain about the service they have received or the quality of the product they have researched, which results in increased costs associated with service delivery, such as the return of a faulty product and the replacement for the customer at no charge to them, the company loses profit and incurs more than twice the cost of moving the single product.
From a retail perspective, defective goods such as clothes are sent back to the origin such as the distribution centre and are discarded at a loss and eventually are found to be sold at a lower price in cheap department stores. With changing demographics, consumers require anytime, any day service as with normal retail stores operating from am to pm daily. With societal changes in terms of double-income families and single-parent households, the need for faster response times is essential for the convenience of the consumer as time is an important factor in their daily lives.
This requires the company to embark on strategies that will benefit the consumer which will in the end benefit them, however it can take up valuable time and funds to essentially understand what the consumer is looking for, if it has not been previously indicated, due to the fact that consumers arena especially interested in responding to surveys of any kind. Leaving the company with very few options to pursue more meaningful ways of better servicing their customers. Pick and pay found a way to bridge the convenience gap, by offering an online channel to order groceries and have them delivered to the customers door step.
This allows any family that is low on the time dimension, to have their shopping done in queue for purchase and drive back home. It saves an enormous amount of time. Increased customer service increases the importance of logistics and supply chains. As discussed previously, more and more consumers are looking for convenience and legibility to meet their demands. This puts pressure on the supply chain to best service the consumer. This can be anything from rah delivery to their doorstep or sourcing scarce products.
This entails using up more of the company’s resources including hiring more staff to work longer hours, security for vehicles traveling late at night. 2. 5. Power Shift in the Supply Chain The relationship between supply chain members is not always consistent. Sometimes a supply chain member is regarded are more powerful as they hold a larger market share, have access to more financial resources. Powerful companies, such as Walter, MM, and Proctor and Gamble to mention a few, have been known to use power tactics to further advance their goals without any regard to the well being of the supply chain as a whole.
Focus upon distribution costs and their impact on “everyday low prices”. Walter is introducing a new supply chain model to reduce supply chain costs, because of their international influence. The Supply chain foresight study report 2012, Walter will use its financial leverage to obtain cheaper deals from its suppliers and create ‘everyday low prices’ for its customers. The integration of economic power at the retail end of the supply chain led to very large retailers whose basic competitive strategy was usually based on passing on lower prices to the consumer.
Research showed a movement in economic power towards emerging market economies such as South Africa, Kate Stubs Broadsword Logistics Marketing Executive commented on the report, “This shift should present South African businesses with a major opportunity to capture market share. Companies should be embracing emerging market economies… ” 2. 6 Political Instability South Africa cannot be described as politically unstable due to its rank – 39th in the roll but politics has a very large impact on logistics in South Africa.
The state of governance in a country can have a critical influence on the logistics industry in ways which the country would lose foreign investment and leave the country’s logistics sector motionless. The instability can leave no space for fully functioning trade and transport infrastructure. One of the main factors due to political instability will be the rise in the price and availability of fuel, which in turn will affect company reliability and would lead to a downfall. The world is watching South Africa with a close eye with reference to the Looming
Marinara mine shootings and the numerous mine strikes which have had an adverse effect on the South African economy. In an online article “AS can’t afford another Marinara” (2012), the writer describes “The GAP (gross domestic product) growth is cannot afford another Marinara. ” in which he comments on how much the economy depends on mining and any and all events related to the mining sector can affect economic growth and future investment. During the strike, government did not seek to intervene before the killing of 44 miners by police, even then the negations were being handled by a non-governmental group.
This also refers Aurora Platinum mine that closed down due to gross mismanagement, the government has done nothing, leaving thousands of mineworkers Jobless and their families destitute. The government should be focusing on the needs of the people and less on the constitutional requirements needed to help people. The logistics industry will be hardest hit when the e-toll is put into direct action. Which will increase prices of products and services and also affecting the consumer at the end of the supply chain?
The toll fees will have will have a very large impact on over-all prices in the apply chain which end up in increased prices for the end user, the consumer. 2. 7 Product Movement and Demand Management Retailing, logistics and logistics management are all concerned with product availability. This involves getting the right products, to the right place, at the right time, in the right condition and quantity, at an acceptable cost/price (Fernier & Sparks, 1998). Most, if not all, products must be transported in some way or form, at some stage of their Journey from production/manufacture to consumption/use.
Retailers must therefore manage a transport operation that may involve different forms and odes of transport, different container and vehicle sizes and the scheduling and availability of drivers and vehicles (Fernier & Sparks, 1998). Product movement challenges (Mitigating factors): Inefficiencies Examples: Road congestion (traffic Jams) Poorly maintained roads (potholes, missing road signs, etc) Port congestion Border post delays, etc The regular maintenance of roads, ports, railways, etc can result in better traffic flows.
This will reduce accidents and the total transit time between production and consumption. Better customs and docking processes may also speed up the logistics recess by reducing border post delays. Geographic positioning (accessibility) South Africans spatial challenges are exceptional for such a relatively small economy and derive from the fact that the industrial heartland is situated far from the coast (Pannier & Pogo, 2009:3). There is invariably a spatial and temporal separation between where natural resources occur (raw materials) and where most people live (where consumption takes place).
Similarly, there is a time gap between when production is feasible and when people need or desire to consume certain products (Pannier & Pogo, 2009:1). Suitability and market coverage determine whether the provider can physically perform the desired logistics services (Pannier & Pogo, 2009:28) I. E. Are the vehicles refrigerated for frozen goods such as fish, meat etc. The more accessible the logistics system, the more likely it will be successful. High The biggest driver of logistics costs in South Africa is transport.
Transport contributes to 53% of logistics costs (Pannier & Pogo, 2009:3). Security problems (theft, damaged/ lost goods) Insecure logistics services may result in opportunity costs including lost profits and educed productivity because the goods are not available for sale or use, or have to be sold at a lower price than intended (they do not meet customer requirements) (Pannier & Pogo, 2009:28). High financing costs If not controlled effectively, the elements of logistics can be remarkably expensive.
Holding stock or inventory in warehouses Just in case it is needed is a highly costly activity. The stock itself is expensive and might not sell or could become obsolete. Warehouses and distribution centers are generally expensive to build, operate and maintain. Vehicles to transport goods between warehouses and shops are expensive, n terms of both capital and running costs. There is thus a cost imperative to making sure that logistics is carried out effectively and efficiently, through the most appropriate allocation of resources along the supply chain (Fernier & Sparks, 1998).
There is a shortage of skills in the logistics profession There is a major skills shortage in the logistics profession. Universities should focus on creating programmer and courses for students who are interested in logistics and supply chain management. Place utility Place utility is created by moving goods to where their value is greater, I. E. Vying goods from places where they occur in a form that cannot be utilized, or where they are in surplus, to places where they are processed into a form that can be utilized, or where they are relatively scarce (Pannier & Pogo, 2009:23).
Demand management challenges: Consumer demand is volatile (constant changes in consumer tastes and preferences) Product obsolescence (most if not all products have a sell by date from perishable foods to high fashion clothing) Goods must be made available when they are needed by the consumer and may be kept in storage and delivered at a time when desired by he consumer. Demand forecasting is essential when predicting future consumer demand. If operating properly, a good logistics system can reduce costs and improve services, resulting in a competitive advantage for the retailer. . 8 Change in Demand and Holding Stock Costs, I. E. Change in Consumer Taste and Preferences (Product Obsolescence) Consumer tastes are constantly changing and small companies must constantly keep up with the types of products and services that customers want. Most small companies conduct marketing research surveys to keep track of what their consumers need and want. Consumer beliefs and needs have altered drastically. Our willingness to wait to be satisfied or served has reduced and we expect instant product gratification and availability.
In Retail Organizations, merchandise inventory forms part of one of three major cost implications. Carrying cost is one of the biggest cost to take into consideration which includes taxes, storage, insurance and opportunity costs. Promotional sales events normally require overstocking and occasionally causes inventory obsolesces and increasing carrying cost for retail business. In addition situations such as marked down goods , aging odds cause pressure to get sales volumes up, these result in a ripple effect on low value goods.
Unfortunately the increased operations cost only continue as business now have deploy employees and suppliers to move goods from different locations, take stock and re-price good and so on. Globalization 2. 9. 1 . Effect on globalization on the South African Retail Industry According to Manhunt (2011:1) The effects of globalization are bound to happen, regardless if the retailer’s target market is within a specific community or across the country. Retailers need to be able to adapt quickly to seize opportunities in global sourcing, manufacturing, procurement and logistics.
Due to globalization the 2013 consumer will not be fulfilled with a product or service that is of a lower quality than what is the highest quality offered around the globe. Therefore South African retailers must be constantly aware of what not Just their local competitors are offering but international competitors are also offering. 2. 9. 2 There are two major logistical challenges for retailers. 2. 9. 2. 1 Global Sourcing Global sourcing involves receiving raw materials, semi-finished goods and finished goods from international location that may be cheaper or of higher quality than what s found locally.
It is the opinion of Chuan & You (2009:2) that the logistical challenges include of purchasing are enquiry, tracking an order, supervising and accounting for an order, receiving goods and making payment. Other problems include longer material pipelines, increased rules and regulations, currency fluctuations and customs requirements. 2. 9. 2. 3 Global Selling The retail industry in South Africa uses international transport via air, rail, road, pipeline as well as sea transportation. In terms of global selling the retail industry mainly uses sea transportation to conduct trade globally.
According to Simi (2009) it is for this reason that South Africa has developed the harbor in Port Elizabeth, Angular, as a solution to increase capacity at ports by focusing mainly on the movement of containers. The new port gives retailers a competitive advantage by being able to transport their goods to a variety of countries. Conclusion Combined all these factors depress operating profits, which in turn results in a smaller pool of available funds to pursue expansion ventures, investments, research and development and other forward moving activities.
