The issues faced in Supply Chain Availability

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Several surveys show that a significant number of customers leave retail stores because they cannot find the products for which they are looking [7]. Narendra et al. [7] address that most research in operations management focuses on two factors to explain suboptimal product availability: poor assortment and poor inventory planning. These perspectives which are key points in products running out should be analyze in this report.

Excellent retail supply chain management revolves around understanding and balancing three key dimensions of availability, inventory and cost [6]. Managing these trade offs efficiently can result in supply chains that improve business performance and drive competitive advantage [6].

General speaking, retailer supply chain is not only a strategic differentiator but also delivers a competitive advantage.

(2)Food supply chain

Supermarket is part of people every day lives. Food which is fundamental to health, happiness and political stability is one of the pillars upon which society is built [3]. Typically, the food chain includes agriculture, food manufacturing, food and drink wholesaling and retailing, and the food catering and service sector. There are six key factors that play an influential role in the evolution and development of modern food supply chains [3]:

(a)Quality

Quality is the degree of congruence between customers' expectations and their realization. A manager's task is to deliver the expectations of customers, workforces and suppliers.

(b)Technology

The food supply chain includes a technological dimension. Its evolution is made possible by the myriad of innovations and developments essential for its integrity, efficiency and ability to increase its productivity. These include accurate weighing, refrigeration, controlled atmospheric bacterial growth inhibition, pasteurization, micro-element pollutant detection, bar coding, electronic recognition of packaging, the use of stabilizers, artificial insemination, embryo transplantation, precision seeding, environmentally and welfare friendly animal housing, and organic crop and animal production systems.

(c)Logistics

Various researchers have argued that logistics is a key business process that provides increased customer satisfaction. It is useful to note that whilst logistics concerns primarily the processes of a single firm, supply chain management also encompasses the external environment of an organization and subsequently includes the external flows of materials, information and revenue between various businesses.

(d)Information technology

Information technology applications support the movement of products and product information dissemination in food chain.

(e)The regulatory framework

The food supply chain is affected by the socio-political environment. This regulatory framework reflects increased consumer concerns about food safety, labeling and product traceability.

(f)Consumer

Consumers drive the supply chain; 'demand chain' would therefore be a more accurate description when the primary driving force in terms of type, volume, quality and value of food supplied is considered.

(3)TESCO

According to the survey [5], Tesco which is the largest British retailer by both global sales and domestic market share is an international grocery and general merchandising retail chain. United Kingdom Tesco has seen a steady increase in market share through a customer focused strategy including getting cheaper, offering better value and providing more choice and convenience for customers [5].

In 2001/2002 Tesco introduced customer champions in many stores, and implemented a new labor scheduler to further improve service for customers [5]. In 2001 Tesco became the premier organics retailer in the UK and now stocks over 1,200 organic products [5].

Tesco's United Kingdom stores are divided into six formats, differentiated by size and the range of products sold [8]. These are shown below [8]:

(a)Tesco Extra

Tesco Extra stores are larger, mainly out of town hypermarkets that stock nearly all of Tesco's product ranges.

(b)Tesco Superstores

Tesco superstores are standard large supermarkets, stocking groceries and a much smaller range of non-food goods than Extra stores. The stores have always previously been branded as simply "Tesco", however a new store in Liverpool is the first to use the format brand "Tesco Superstore" above the door.

(c)Tesco Metro

Tesco Metro stores are sized between Tesco superstores and Tesco Express stores. They are mainly located in city centers, the inner city and on the high streets of small towns. It should be noted that this type of store is the main sample which I went to record my survey.

(d)Tesco Express

Tesco Express stores are neighbor hood convenience shops, stocking mainly food with an emphasis on higher-margin products (due to small store size, and the necessity to maximize revenue per square foot) alongside everyday essentials.

(e)One Stop

One Stop stores are the only category which does not include the word Tesco in its name. These are the very smallest stores.

(f)Tesco Home plus

Tesco Home plus is not Tesco's first non-food only venture in the UK. Until the late 1990s / early 2000s there were several non-foods Tesco stores around the country including Scarborough and Yate. Although not in a warehouse style format, the stores were located on high streets and shopping centers, they did stock similar items to Home plus stores.

As of 28 February 2009, at the end of its 2008/09 financial year, Tesco's UK store portfolio was as follows [5].

Table1 Tesco's UK store portfolio [5]

Format

Number

Total

area (m²)

Total

area (sq ft)

Mean

area (m²)

Mean

area (sq ft)

Percentage

of space

+/- Stores

2008/9

Tesco Extra

177

1,172,622

12,622,000

6,625

71,310

40.35%

â-²11

Tesco

448

1,247,967

13,433,000

2,786

29,984

42.94%

â-²13

Tesco Metro

174

188,129

2,025,000

1,081

11,638

6.47%

â-²10

Tesco Express

961

197,419

2,125,000

205

2,211

6.79%

â-²125

One Stop

512

62,430

672,000

126

1,357

2.15%

â-²5

Tesco Home plus

10

37,904

408,000

3,790

40,800

1.30%

â-²3

Total

2,306

2,906,471

30,877,000

1,309

14,087

100%

â-²167

Data finding

According to a real survey of Tesco Metro store which located in Liverpool city center, there are three different type of products running out including Twining English Breakfast tea, organic garlic and PANTENE PRO-V Shampoo (25% bigger size) - Smooth & Sleek shampoo. In the following paragraph, this part of the report will give briefs introduce and reasons of running out for three products.

(1)Twining English Breakfast Tea [5]

The British are the second largest per capita tea consumers in the world, with each person consuming on average 2.1 kg per year. These would include watching fireworks or a dinner party and dance, concluding with a nice evening tea.

The founder of Twining, Thomas Twining, opened the first known tea room, at 216 Strand, London, in 1706, still operating today. The company is a founding member of the Ethical Tea Partnership, a group of tea-packing companies that work for a fair trade policy and monitor the ethical conditions on tea estates. Twining owns Nambarrie, a tea company based in Belfast, Northern Ireland, in trade for 140 years. According to above description, it can be sum up that tea which is a traditional culture and habit is very popular and necessary in United Kingdom. When TESCO has special offer "buy one get one free", Twining English Breakfast Tea was running out very quickly.

(2)Organic Garlic

Michael et al. [3] mention that organic retail market sales have increased exponentially throughout central and northern Europe in the last years and now account for 2.9% of food sales in the European Union (EU). Over the past five years, the area of land used for organic production has more than quadrupled resulting in more than 3% of utilizable agricultural area (UAA) now being managed organically [3]. However, the more rapid expansion of supply compared to demand has resulted in a narrowing of the gap between demand and supply [3]. These points give an overview which can be predicted that organic food will still very popular in the future. According to above description, it could be the case that organic garlic is more popular than non-organic garlic. In another word, organic garlic is running out quicker than non-organic garlic.

(3)PANTENE PRO-V Shampoo (25% bigger size) - Smooth & Sleek

Shampoo which is a hair care product is a daily item. When TESCO has special offer "Two for four pounds", PANTENE PRO-V Shampoo (25% bigger size) - Smooth & Sleek is running out very quickly.

Data analysis

In the first stage, running out problems of these products will be presented. After this, I will suggest some possible solutions which can solve out of stock problems.

As can be seen from the data finding, there are three general viewpoints of running out. First of all, special offer which is buy one get one free and two for four pounds is the main reason for Twining English Breakfast tea and PANTENE PRO-V Shampoo products out of stock (see table2). Secondly, characteristic of organic is another key reason for running out (see table2). Thirdly, location is the other general viewpoint for running out. For instance, when I have done this survey, I not only went to Tesco Metro store in Liverpool city center, but also went to ASDA which is another big supermarket company in the United Kingdom is far from Liverpool city center. PANTENE PRO-V Shampoo (25% bigger size) - Smooth & Sleek which has the same special offer (Two for four pounds) in ASDA supermarket are still available at the same day. Thus, location also is a vital point for products out of stock.

Table2 General viewpoints for products running out

Twining English Breakfast Tea

Organic garlic

PANTENE PRO-V Shampoo

Reasons of running out

Buy one get one free

Organic food is more popular than non-organic food

Two for four pounds

Location

Location

Location

In the following stage, I will try to apply theories of supply chain management such as demand forecasting, inventory control, transportation (logistics) and Sourcing decisions to solve these problems.

(1)Demand forecasting

Chopre et al. [1] asserted that forecasts of future demand are essential for making supply chain decisions. Chopre et al. [1] also mention that six step approache helps an organization perform effective forecasting. First of all, understand the objective of forecasting. Secondly, integrate demand planning and forecasting throughout the supply chain. Thirdly, understand and identify customer segments. Fourthly, identify the major factors that influence the demand forecast. Fifthly, determine the appropriate forecasting technique. Lastly, establish performance and error measures for the forecast.

On the other hand, demand forecasting also has some significant problems should be noticed. Chopre et al. [1] address that forecast are always wrong; long term forecasts are usually less accurate than short term forecasts; aggregate forecasts are usually more accurate than disaggregate forecasts, as they tend to have a smaller standard deviation of error relative to the mean; the farther up the supply chain a company is, the greater is the distortion of information it receives.

It is widely believed that demands forecasting which is really difficult to measure the real world are very important and should be linked to all planning activities throughout for supermarkets' market strategy, operation and supply chain management. It is also worth mentioning that demand forecasting is still an effective technique to reduce risk of out of stock in supermarket.

(2)Inventory control

The management of inventory is carried out in order to manage costs by reducing inventory and to improve efficiency [2]. However, proponents of Just in Time (JIT) manufacturing have argued repeatedly that inventory hides process problems and thus inhibits process improvements [7].

Adebanjo [2] asserted that inventory management approaches used by organisations are dependent on a number of factors including customer demand, supplier and customer locations, production patterns, product characteristics and cost. Slack et al. [4] claimed that operations managers often have an ambivalent attitude towards inventories.

Adebanjo [2] address that inventory is costly, sometimes tying up considerable amounts of working capital. Adebanjo [2] also mentions that inventory provide some security in an uncertain environment that one can deliver items in stock should customers demand them.

Slack et al. [4] indicate eight negative aspects of inventory. First of all, inventory ties up money, in the form of working capital, which is therefore unavailable for other uses, such as reducing borrowings or making investment in productive fixed assets. Secondly, inventory incurs storage costs. Thirdly, inventory can be damaged or deteriorate. Fourthly, inventory could be lost, or be expensive to retrieve, as it gets hidden among other inventory. Fifthly, inventory might be hazardous to store, requiring special facilities and systems for safe handling. Sixthly, inventory uses space that could be used to add value. Seventhly, inventory may become obsolete as alternatives become available. Lastly, inventory involves administrative and insurance costs. Narendra, et al. [7] point out that maintaining high inventory levels at retail stores causes execution problems not only by reducing opportunities to easily identify discrepancies but also by increasing the complexity in the operating environment.

To sum up above point, inventory which related to demand forecasting has a direct relationship with cost and profit. Adebanjo [2] asserted that inventory cost have a direct impact of on a company's financial performance. Narendra, et al. [7] claimed that inventory constitutes a significant fraction of the assets of a retail firm. Narendra, et al. [7] also mention that inventory is the largest asset on the balance sheet for 57% of publicly traded retailers in our dataset. Because of these, if supermarket can owns an inventory information systems which will be managed by computer, running out problems will be solved. For instance, some functions which include updating stock records; generating orders and generating inventory reports will very helpful in a supermarket 's inventory control.

(3)Transportation

Transportation refers to the movement of product from one location to another as is makes its way from the beginning of a supply chain to the customer [1]. Chopre et al. [1] claimed that supply chain use a combination of the following modes of transportation: air, package carriers, truck, rail, water, pipeline and intermodal. Chopre et al. [1] asserted that roads, seaports, airports, and canals are some of major infrastructural elements that exist along nodes and links of a transportation network.

It can be concluded that transportation is another method to reduce running out products and it also related to cost of company. Chopre et al. [1] also mention that all transportation decisions made by shippers in a supply chain network must take into account their impact on inventory cost, facility and processing costs, the cost of coordinating operations, as well as the level of responsiveness provided to customers.

In order to overcome out of stock problems, tailored transportation which is a useful method in logistics is to use different transportation networks and types which base on location, customer size and type of products such as frozen foods, fresh vegetable and daily items. It not only decrease cost of transportation effective but also solve out of stock problems.

(4)Sourcing decisions

Purchasing, also called procurement is the process by which companies acquire raw materials, components, products, services, or other resources from suppliers to execute their operations [1]. In this section, I will give some assumption that three items are outsourcing which means be made by supplier. When company decide outsourcing products, compare suppliers are very important. Adebanjo [2] claimed that an important determinant of supply chain efficiency is the performance of the purchasing function since it deals with how upstream supply chain operations are conducted. Chopre et al. [1] asserted that when scoring and assessing suppliers, the following factors other than quoted price must be considered: replenishment lead time; on time performance; supply flexibility; delivery frequency / minimum lot size; supply quality; inbound transportation cost; pricing terms; information coordination capability; design collaboration capability; exchange rates, taxes and duties; supplier viability. For sourcing strategy, Adebanjo [2] also mentions that a sourcing strategy may be considered for each supplier. First of all, long term strategic relationship. Secondly, short term strategic relationship. Thirdly, long term transactional relationship. Finally, short term transactional relationship. To sum up above perspective, excellent supplier include local supplier and global supplier can reduce risk of retailer supply chain and solve problems of running out.

Conclusion

In conclusion, when products running out occur frequently in retail stores, how to maintain products still available has received considerable attention. This report look at some problems for running out products including Twining English Breakfast Tea, Organic Garlic and PANTENE PRO-V Shampoo (25% bigger size) - Smooth & Sleek shampoo in TESCO Metro Store because of special offer, characteristic of organic and location.

This report also suggest some possible solutions which are related to supply chain management including demand forecasting, inventory control, transportation and sourcing decisions. Even with the availability of highly effective techniques complete demand forecasting, inventory control, transportation and sourcing decisions must be retained regardless of the method used.

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