RETAIL INTRODUCTION Anshuman Dutta www.anshuman-dutta.blogspot.com

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RETAIL INTRODUCTION Anshuman Dutta www.anshuman-dutta.blogspot.com ANSHUMAN DUTTA 1

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Consumer Segmentation Consumers: Persons who consume products or services Customer segmentation: Retailers cannot target individual consumers, because the cost and complexity would be too high. Therefore, they cluster their consumer base into segments, where each segment has a high degree of commonality Consumer Types Impacts Merchandise assortments and brands Decor and ambience of the store Service package offered 2 ANSHUMAN DUTTA

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Types of Retailers ANSHUMAN DUTTA 3

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Media Formats In store Online TV Shopping networks Telephone Print/ Catalog Home selling Retail Formats Location High street Destination Convenience store Size Shopping Mall Supermarket Hypermarket Ownership Private/Individual Owned Public Owned/Listed Franchisee Merchandise Range Supermarket Hypermarket Specialty Category Killer Merchandise Segment Music (Performance) Apparel/ Footwear Drugs/ Pharmacies Electronics Price Discount EDLP Factory Outlet Single Price Denomination Business Model B2B B2C 4 ANSHUMAN DUTTA

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Retail Dimensions Organizational Hierarchy Chain Division Region District City Cluster Store Company USA West/ MH Los Angeles Westlake Village Thousand Oaks 10921 Why Hierarchy Assign Responsibility Targets Analysis Decision making Promotions Pricing/ Margins Merchandise Hierarchy Division Dept Category Sub Category Brand Style Options SKU Men’s Apparel Trousers Formal Khakis Reid and Taylor Flat Style Singles Pack LW FHS B 32 Time Hierarchy Year Qtr Period Week Day 09-10 2st May 15 4 5 ANSHUMAN DUTTA

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Retailing Processes 6 ANSHUMAN DUTTA

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Value Chain of Retail ANSHUMAN DUTTA 7 Merchandising CORE NON-CORE Supply Chain Store Operations Finance Legal Marketing

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Merchandising ANSHUMAN DUTTA 8

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Merchandise 9 Merchandise: Goods or services that may be sold or traded Properties SKU (Stock Keeping Unit) Roles: Buyer – Merchandiser - Allocators Colors, Sizes, Dimensions Pack Size – Unit Of Measurement Price: Cost and Retail Hierarchy (Dept – Sub Dept – Class – Sub Class) Vendor ANSHUMAN DUTTA

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10 Width / variety/ breadth of merchandise - The number of merchandise categories Major components of an assortment strategy Depth of merchandise - the number of items in a category (SKUs) Merchandising ANSHUMAN DUTTA

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Merchandising ANSHUMAN DUTTA 11 Range Planning Range = Width * Depth

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Merchandising ANSHUMAN DUTTA 12 Merchandise Financial Planning

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Merchandising ANSHUMAN DUTTA 13 Merchandise Order Planning Open to Buy Out of Season Planning In Season Planning Open to buy is the dollar amount budgeted by a business for inventory purchases for a specific time period Determines how much was spent and how much is left to spend

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Merchandising ANSHUMAN DUTTA 14 Space Planning

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Merchandising Pricing is part of the marketing mix available to retailers Markup = MRP – Cost Markdown = Old MRP – New MRP 15 Pricing/Promotion Management C Pricing Cost + Fixed Margin = Grocery Cost + Margin Based on Demand = Apparel Trade Promotions Management: (1) Brand Based, (2) Location Based, (3) Account Based ANSHUMAN DUTTA

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Core merchandising: ANSHUMAN DUTTA 16 http://blogs.gartner.com/robert-hetu/retail-marketing-merchandising-must-sing-off-the-same-sheet-music/

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Merchandise Supply Chain and Optimization: ANSHUMAN DUTTA 17 http://blogs.gartner.com/robert-hetu/retail-marketing-merchandising-must-sing-off-the-same-sheet-music/

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POS in Retail POS data is also not limited to retail and consumer facilities, as 3PLs, warehouses, and raw material manufacturers can collect this as well. Naturally, there is direct value for Implying on-shelf availability, Determining re-order points, Analyzing trends and seasonality to forecast demand ANSHUMAN DUTTA 18 Additional supply chain touch points that can be improved with POS data. These include: Designing key performance predictors (KPPs) Including POS data as part of the organization's Sales Inventory Operations Planning (SIOP) process Leveraging POS data with shipment data. Measuring the tradeoffs between forecasts and supply chain flexibility

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Travel Merchandising ANSHUMAN DUTTA 19

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Supply Chain Management 20 ANSHUMAN DUTTA

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Retail Entities Main Entities Manufacturers Retailers Customers 21 Others SCM partners 3rd Party Logistics Labor contractors IT Vendors – (Applications, Infrastructure) E Commerce Advisories Services – Repairs, Warranty Advertising/ Marketing ANSHUMAN DUTTA

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Supply Chain ANSHUMAN DUTTA 22

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Supply Chain Management “Supply Chain Management is a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores, so that the merchandise is produced and distributed in the right quantities, to the right locations, and at the right time, in order to minimize the system wide costs while satisfying the service requirements” The 3 key processes in the supply chain are: Inventory Management Warehouse Management Transportation Management 23 ANSHUMAN DUTTA

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SCM key processes 25 The Supply Chain Management Program integrates topics from manufacturing operations, purchasing, transportation and physical distribution into a unified program. Key processes that make up the core of supply chain management are Customer Relationship Management Customer Service Management Demand Management Order Fulfillment Manufacturing Flow Management Procurement Product Development and Commercialization Returns ANSHUMAN DUTTA

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Warehouse Management Warehouse management aims to enhance inventory management by Decreasing inventory levels Improving order fulfillment Reducing order cycle time 26 ANSHUMAN DUTTA

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Warehouse Layout/ Movements & Activities 27 Inbound Processes Receiving QA Putaway Outbound Processes Order processing Picking Replenishment Shipping ANSHUMAN DUTTA

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Bullwhip Effect ANSHUMAN DUTTA 28 What is the bullwhip effect? The ripple effect of small changes in customer demand are magnified upstream through a supply chain all the way from the customer to the retailer to distributor to manufacturer. It is so named because of the resemblance to a bullwhip as the variability of demand increases sharply when you progress up the supply chain.

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ANALYTICS IN SUPPLY CHAIN RISK MANAGEMENT ANSHUMAN DUTTA 29 Descriptive - what happened? Diagnostic - Why did it happen? Predictive - what will happen?   Prescriptive - how to make it happen?

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15 Key Innovations in supply chain strategy Ford Assembly Line – Henry Ford installs the first moving assembly line of an entire automobile, the Model T, first produced in 1908 ANSHUMAN DUTTA 30 Ocean Shipping Container: - Malcom McLean invented the standard steel shipping container first implemented in 1956 at the port of New Jersey Electronic Data Interchange (EDI)  –Started when computer systems first had the capability to transfer data to other computer systems. Enables the exchange of electronic business documents. Material Resource Planning (MRP) – Josef Orlicky makes the first MRP system in Racine, Wisconsin. A year later, Gene Thomas from IBM invents the Bill of Materials Processor. For the first time, manufacturers could break down the BOM on a computer Universal Product Code (UPC) – a company called Logicon wrote a standard for something close to what became known as the Universal Product Code (UPC) to identify via a barcode a specific SKU. The first implementation of the UPC was in 1974 at a Marsh's supermarket in Troy, OH. Enterprise Resource Planning – In 1990, Gartner Group first employed the acronym ERP which came to represent a larger whole, reflecting the evolution of application integration beyond manufacturing.  Dell Direct Orders – Michael Dell started his company in his dorm room shipping computers to customers. This developed into a unique model of make to order that provided custom configurations to customers and shipped to them FedEx Tracking System – After re-inventing the category of express parcel shipments, FedEx went a step further by developing a new computerized tracking system that provided near real-time information about package delivery. Outfitting drivers with small handheld computers for scanning pick-ups and deliveries, a shipment's status was available end to end. P&G's Continuous Replenishment: Order patterns were totally dependent on sales and retail buyer input until P&G bought a mainframe application from IBM for "continuous replenishment" re-wrote it for retail, and changed that entire value chain by driving orders based on DC withdrawals and sales data. Walmart Cross Docking – With rapid expansion in the number of Walmart stores, the company needed an effective communication system. They introduced the first cross docking system, which enabled them to track goods across all their DCs and stores. The Toyota Production System:  Pioneered by Toyota's Taiichi Ohno and a few colleagues, TPS not only is the foundation for today's lean manufacturing and supply chain practices, but the concepts have penetrated virtually every area business Rise of the PC and Internet – this allowed the development of decision support systems for the supply chain on PCs as well as collaboration platforms for companies with their trading partners.  HP Postponement – The ability to delay differentiation in product design can convey many advantages. HP was the first to use this approach delaying some of the localized decision for its DeskJet printers by customizing the printers at its local distribution centers rather than at its factories. 

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15 Key Innovations in Supply Chain Strategy 1998 – Amazon Order & Delivery - Jeff Bezos left Wall Street to start Amazon and within four months, Amazon.com became extremely popular. Within a month of its website launch it had filled orders from 50 states and 45 other countries. Amazon.com carried only about 2,000 titles in its Seattle warehouse; however, usually no warehouse was needed because most orders were placed through wholesalers and publishers. ANSHUMAN DUTTA 31 2000s – RFID , Track and Trace – RFID was developed at the MIT Auto-ID Center. It is a code-carrying technology, and can be used in place of a barcode to enable non-line of sight-reading. Synonymous with track-and-trace solutions, and has a critical role to play in supply chains.

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Supply Chain Myths ANSHUMAN DUTTA 32 1. Reduce costs at all cost: This strategy suggests that reducing cost is the most important objective, which is not always the case. Companies need to "balance cost with service, invest in flexibility to reduce risk, and deploy the appropriate IT infrastructure for long-term visibility and growth." 2. Invest in flexibility: "Identifying the right trade-off between risk-mitigation strategies and cost is an important challenge." Companies need to identify how to get flexibility either through process, system, or product design and where is right to invest. 3. Apply the same operations strategy across the board: You can't deploy one supply chain across multiple channels, customers and products. Each product may have different requirements and characteristics. Product characteristics have to be matched with supply chain strategies. David Simchi-Levi uses the example of Gap Inc. The company owns three separate brands: Gap, Banana Republic and Old Navy. Each of the brands has a different customer value proposition. Because of this, there is a need for multiple supply chains to fit each type of customer. 4. Deploy the latest and best Information Technology (IT): "IT investment has to be driven by business needs." The latest technology cannot drive a change in the business because the company wants to keep up with the latest trends. 5. Ignore IT because it is just another commodity: Don't ignore IT altogether. While previously we discussed (Myth #4) that all technology is not necessarily right for your business, sometimes when technology is combined with the right business processes for supply chain integration it can significantly improve performance. 6. Treat Corporate Social Responsibility(CSR) as charity: Many executives believe that CSR is a waste of money and time; however, in many situations "when CSR is aligned with business value, it generates a new stream of revenue or an innovative way to reduce costs." 7. Leave Operations to the functional areas: "Operations significantly affect the firm's revenue and profit goals precisely because of their ability to control costs, shorten response times, and improve customer service." All of senior management needs to be involved with defining goals in Operations.

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Supply Chain Service ANSHUMAN DUTTA 33

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Store Operations What all are needed for the store to run smooth Understanding of the store characteristics Practices to prevent and cut short losses due to various sources Practices to best utilize all available resources in the store 35 ANSHUMAN DUTTA

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Store Operations - LP Merchandise cash taken in from the sales of merchandise, the cash registers, store fixtures equipments required to sell merchandise, building itself people in the store: Associates, Managers, and Customers. 36 Shrinkage = Actual Physical Inventory – Book Value Research says the % of reasons for shrinkage Employee theft, 46.8% Shoplifting/ Customer Theft 31.6% Administrative error, 14.4% Vendor error 3.75% Unknown error 2.86% Loss prevention is all about protecting the assets of the company and the store. ANSHUMAN DUTTA

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37 Why are Retailers use Multiple Channels Customer wants to interact in different ways Each channel offers a unique set of benefits for Customers ANSHUMAN DUTTA

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Why Multichannel Retailing 38 Increasing Online sales Increasing Internet usage Consumers interest to enjoy channel benefits Consumers expect more from retailers in terms of product information, convenience and customer service. ANSHUMAN DUTTA

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Merchandizing : Out of Stock leading to loss of sales Pilferage & shop-lifting Managing consistent visual merchandizing Workforce Management: Time & Attendance management Labor budgeting/scheduling Recruitment & training Staff productivity Point of Sales : Poor connectivity between store and host systems No up-to-date information and customized promotions and services Absence of synchronized view of the customer and inventory information Supply Chain Analytics: Visibility in SKU availability, Perfect order fulfillment, optimizing inventory holdings Supplier performance measurement Merchandise Analytics: Optimize merchandise mix Track promotion effectiveness POS Analytics: Understanding Demand Patterns Measuring store ,category, SKU performance Customer Analytics: Understand most profitable customers and cost to serve them Assortment planning and optimization Low Inventory Turns : Lack of accurate inventory information Sporadic Demand of many items Poor Supply Chain visibility Demand Response Lack of demand planning & forecasting processes Very Price Sensitive Customers, volatile demand pattern Total Landing Costs : Some suppliers, multiple tiers of distribution Lack of Transportation Management Systems Lack of Distribution planning & scheduling mechanisms Customer Experience & Loyalty: Providing seamless Omni-channel experience Personalized shopping assistance Personalized promotions Social Media engagement: Brand crises management Search Engine Optimization & Social Media Optimization Multi-channel Fulfillment : Supply Chain & logistics pressures Smaller, customized package sizes lead to high transportation and labor costs In-store Challenges Analytics Challenges Supply Chain Challenges Omni Channel and Digital Media Challenges Challenges in Retail Industry

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