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In the beginning days of retailing, an assistant was normally responsible for fetching the entire commodity from the shelves while the customer waited and indicated the products they wanted. A shop assistant had to assess and wrap the defined quantity required by the consumer as most of the foods and merchandise were not in separately packed consumer-sized packages. This practice was very labour intensive and was considered expensive. The number of customer served was restricted by the number of shop assistant employed; hence this process was very slow.
Retailing in today's market environment is a dynamic industry, consisting of activities such as food, fashion, consumer goods, financial services and leisure, which is growing at an exponential rate. To stay competitive in this globalized world, retailers should be able to launch products and promotions quickly. The retail market in UK is estimated to increase in size by almost 15% in next five years, making its value to just above £312bn. Although the retail sector also faces challenges as a slow down in annual growth and with operating costs and margin of credit set to rise. Companies who are finding hard to compete against the falling margins will suffer. The electrical sector in UK retail is presently performing at their best, with the estimated growth of 24%.
UK Grocery retail is ruled by big multiple ‘supermarket' chains. It is the largest business sector in retail market. They put themselves in competition with a much bigger sphere of competitors, i.e. other supermarket retailers by selling an increasing number of non-food items than any other specialist retailers.
Success in grocery market depends on meeting the needs of the end customer, which are changing at a very rapid rate, as the consumer taste and preferences changes. Consumers expect the high quality product for fewer prices, businesses are trying harder then ever to balance the act of holding a high level of service and at a low cost which is becoming difficult for retail supply chain department. Businesses are trying to meet the growing market mantra of “more for less” to stay in competition.
According to IGD research centre, the United Kingdom grocery market is worth £146.3 billion for the year 2009, a rise of 4.8% on 2008 and it also predicts that the grocery market will almost double in size by 2014. With consumers looking for a greater diversity in what and where they buy, the suppliers and retailers will recognize the emerging demands of consumers and adjust their strategies accordingly. The grocery retail spending accounts 52p in every£1 of spending.
United Kingdom has 96000 grocery stores and has been divided into following 4 different sectors; Convenience stores, traditional stores, supermarket and alternative kiosk. IGD has estimated the UK convenience retail market at £30.3billion (growth 6.1%), from overall 48,303 stores all over UK including co-operatives, forecourts, convenience etc. Food, Drink and Tobacco is now 12.4% of total consumer household spending compared to 14.3% ten years ago and 17.3% twenty years ago. 11.6% of supermarket accounts for non-food (+6.4%year on year growth). It is forecasted by IGD that by 2014, non-food in grocery retail will be worth £16.2billion and will account for 9.2% of the total grocery retail market, as contrasting to the 7.9% share that it presently holds.
Online grocery retailing is another trend of retailing in UK market which represents only 2.6% of the overall market. The share of online grocery retailing has increased by 85% from £2billion in 2006 to 3.7%billion in 2009 and it is estimated that it will almost double in size to £7.2billion by 2014. Online grocery retailing is becoming popular as four in ten plan to go online for grocery shopping in another few years time as a result of shoppers living a busier lifestyles which would encourage them to more online usage.
In the light of this study, the objectives of the research are three-fold:
(a) To explore how effective is supply chain management in Grocery retail in UK.
(b) How it helps the organisation to meet the customer ends by keeping the expense budget in limit without compromising on product quality and reducing waste.
(c) To identify and understand the supply chain capabilities.
Supply chain management (SCM) is the term used to identify the management relationship and flows between the different levels of operations and processes that generate value in the shape of products and services to the ultimate consumer.
A supply chain is a combination of retailers, distributors, transporters, storage facilities, and suppliers that actively participate in the production, sale and delivery of a finished product to the end customer. It is a chain of multiple companies who coordinate activities to set themselves apart from the competition, but all involve somewhat similar operations and are organised in a similar way. The complexity of the supply chain will fluctuate with the size of the business and the intricacy and numbers of items that are manufactured. The supply chain management applies to both internal and external supply networks. The supply chain is not restricted to the downstream flow of information and products and services from suppliers through to customer. Although the most evident fall out in SCM takes place when downstream flow lacks to meet the customer requirements, the core cause may be a failure in the upstream flow of information.
Modern supply chain management is as much concerned with managing the information and product and services that flows between both upstream and downstream. If an organisation makes a end product from parts acquired from Suppliers, and those finished products are traded to customers, then we have a supply chain.
All supply chain management deals with the one communal and fundamental objective, i.e. to cater the needs of end customer. All operations in a supply chain essentially reckon consideration of the final customer, no matter how far an individual operation is from the end customer. When a customer decides to make a purchase, he or she triggers action back along the whole chain. All the businesses in the supply chain pass on that portion of that end customer's money to each other, each retaining the margin for the value it has added. Each operation in the chain should be satisfying its own customer, keeping in mind that eventually the end customer is also satisfied.
SCM plays a vital role in an organisation as it is responsible for getting increased performance from different operational levels to minimize the waste or loss to the business. As competition in UK retail increases, retail organisations increasingly realise that the contribution of effective supply chain are the key aspects of competitive and business success.
A supply chain has three key parts:
· Supply concentrates on the availability of raw materials for manufacturing from suppliers keeping in mind, how, when, and from what location.
· Manufacturing concentrates on transforming these raw materials into finished products.
· Distribution concentrates on ensuring these finished products are made available to the consumers through a formalised network of distributors, warehouses, and retailers.
In UK grocery retail business, we have customers who are choosy, profit margins are low, and competition is fierce. In retail industry, it's only a matter of keeping their shelves stocked, costs under control, and keeping customers happy, which is never an easy task.
SUPPLY CHAIN OBJECTIVES
The sole objective of supply chain management is to meet the requirements of end customers