Information Technology In Inventory Management

Published Date: 02 Nov 2017

Dans le cadre de sa quête permanente visant le perfectionnement de sa formation des cadres supérieurs en management, l’Université Internationale de Rabat et l’Ecole Supérieure de Commerce de Rennes soumettent à leurs étudiants, l’opportunité de faire un travail de recherche dans le cadre d’un graduating project.

Mes études dans le cadre du programme grande école de l’ESC Rennes et mon expérience professionnelle m'ont doté non seulement d'une connaissance théorique, mais aussi d'une expérience pratique dans le domaine de la supply chain et de la logistique. La supply chain est un domaine qui est au cœur de mon projet professionnel: l’optimisation des flux, le stockage, le transport et l’approvisionnement avec le souci majeur de réduire les coûts et d’augmenter la satisfaction du client. Ce sont des objectifs hautement opérationnels autour desquels j’ai décidé de bâtir mon projet professionnel.

The retail industry, operate in a very competitive market. That represents some research opportunities about d’éventuelles stratégies de réduction des coûts de production et des frais de fonctionnement.

Dans cette optique, j’ai l’ambition de faire un travail de recherche orienté vers the retail industry et qui met en évidence les différents supply chain challenges in order to suggest some solutions for this industry.

Purpose of the Research

On entend par "supply chain management" la gestion d'une chaîne qui s’étale sur trois étapes: l'achat, la gestion de production et la distribution. C'est au niveau de cette chaîne que l'entreprise peut agrandir ses marges et donc faire du profit. C'est donc un élément clé dans la réussite de l'entreprise. Etant donné la crise économique (récession) que la majorité des pays du monde traversent, la question de la bonne gestion d'entreprise est à l'ordre du jour. Comment pouvons-nous sortir de cet état de crise? Certain prétendent à des solutions d'ordre financières et d'autres plutôt économiques. La réponse à cette question se trouve dans le mot 'optimisation' qui est le mot clé dans la "supply chain management". Pour moi, comme pour de nombreux chercheurs et doctorant dans ce domaine, il y a beaucoup à faire dans la "supply chain management" pour aider les entreprises à dépasser la crise.

State Research Question

Ainsi, la question sera d’identifier les supply chain challenges in the retail industry and comment faire des économies, et donc réduire les coûts, pour mener à bien le principal objectif d'une entreprise, qui est sa prospérité? Quels outils de la supply chain management peuvent permettre de réduire les coûts, augmenter les profits, et optimiser les rendements d'une entreprise in the retail industry?

LITERATURE REVIEW (5 pages)

Supply Chain Management

Sunil Chopra and Peter Meindl thinks that the supply chain has two different process views – the Cycle view and the Push/Pull view - which organizations adopt, and for Sunrise Doors, the Pull view is the most applicable to the organization. The Pull view process is whereby the process is initiated in response to the customer’s order and it is operated in an environment where the customer demand is known and is reacted upon the customers’ order.

The supply network concept from Nigel Slack, Michael Lewis and Martin Christopher, is about the buyer-supplier relationships, which is the main heart behind all businesses. It’s about seeing each different operations working together to make the supply chain management flow run smoothly.

Supply Chain Management (SCM) is a process which consists of strategising, planning, organising, marketing, manufacturing, distributing, and customer servicing to satisfy the customers’ needs of a product or service.

APICS Dictionary defines SCM as the "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally."

As we can see from these different authors, supply chain is about a well organized company with a need to have a proper plan or process in order to produce with an effective and efficient process to satisfy the customers’ need and increase profitability of the company. Every department in an organization plays an important role. Without a proper work flow or process, an organization would not be able to do well. Different

In the article, An Examination of International Retail Franchising in Emerging Markets by Dianne H. B. Welsh, Ilan Alon and Cecilia M. Falbe from Journal of Small Business Management - Volume 44 Issue 1, Pages 130 – 149, 6 Dec 2005, it begins with an overview of the development of the literature and then discusses the nature and scope of emerging markets, with particular reference to their impact on the stakeholders of international retail franchising. Next, the article develops a conceptual model relating international retail franchising to its stakeholders. Then, a review of the research is divided into the areas of emerging world market: Central and Eastern Europe, Mexico and South America, Asia, and other areas that include India, Kuwait, and South Africa. The article concludes by discussing the next step to develop a research base for further understanding of emerging markets in addition to the opportunities and challenges for retail franchising and future research.

In the Regional Business Networks and the Multinational Retail Sector, Long Range Planning by Stéphane J.G. Girod, Alan M. Rugman from International Marketing Review, Volume 38, Issue 4, August 2005, Pages 335-357, the article examines the network relationships of a set of large retail multinational enterprises (MNEs). The paper analyzes under what conditions a flagship-network strategy (the "flagship" designation is liberally applied to stores in prestigious locations, stores with unique features, and stores that are larger than the average outlet in the chain; characterized by a network of five partners – the MNE, key suppliers, key partners, selected competitors and key organisations in the non-business infrastructure) explains the internationalization of three retailers whose geographic scope, sectoral conditions and competitive strategies differ substantially. It   explores why and when retailers will adopt a flagship strategy. The three firms are two U.K.-based multinational retailers (Tesco and The Body Shop) and a French-based global retailer (Moët Hennessy,Louis Vuitton). Evidence of strong network relationships for all three retailers is found, although each embraces network strategies for different reasons. Their flagship relationships depend on each retailer's strategic use of firm-specific-advantages (FSA s) and country-specific advantages (CSA s). It infers that a flagship strategy can succeed in overcoming internal and/or environmental constraints to cross-border resource transfers, which are barriers to foreign direct investment (FDI). 

In Host economy impacts of transnational retail: the research agenda by Neil M. Coe and Neil Wrigley from Journal of Economic Geography, April 21, 2007, the last decade has witnessed an acceleration of retail foreign direct investment into a range of emerging markets across East Asia, Central and Eastern Europe and Latin America, led by a small cohort of food and general merchandise retailers from Western Europe, and to a lesser extent, North America. While these investment flows have had profound developmental impacts in host economies, research in this area is still in its infancy. This article therefore maps out a detailed research agenda with respect to the host economy impacts of transnational retailing. After setting the scene empirically and conceptually, the article considers different dimensions of these impacts on retail competitiveness, supply chain dynamics, consumption practices and consumer/civil society, institutional and regulatory frameworks and, reciprocally, on the retail transnational corporations themselves. It concludes by calling for a concerted interdisciplinary research effort into this important and understudied aspect of economic globalization.

Inventory Strategy in Supply Chain Management

Overview of Inventory Management

Effective management of inventory throughout the supply chain is one of the most important success factors as it involves highest cost in the supply chain. If the inventory planning is not properly done, the costs of holding inventories could increase to a much larger amount. Effective and efficient management of inventories certainly reduce logistics-related costs by addressing the volatility in customer demand. Inventories can be reduced across the supply chain by critically examining various processes in the production method that helps determining the needs of improvement to reduce inventory costs. Holding too much stock at different places within one supply chain system can be very costly (Rao, Cheryl, Johnson, 2006).

One of the most important strategic steps is to developing partnership with suppliers and maintaining customer-supplier relationships. For strategic partnership with Supplier, organization should look at suppliers with especially strategic significance. In warehouse management system, there is a concept, which is called the Multi-echelon inventory management. The Multi-echelon inventory management system coordinates inventories at multiple warehouse of one company; a joint inventory replacement strategy in supply chains involves synchronization among multiple firms through strategic partnership (Johnson and Pyke, 2001). 

Information Technology in Inventory Management

Information technology enables a firm to flow its business information throughout various functional departments, suppliers and customers, which makes the supply chain more robust and flexible. It creates flawless supply chains by connecting suppliers with customers that better prepares firms against volatile customer demands and uncertain business environment. 

For supply chain, IT is implemented in order to gather, process and disseminate raw data among the concerned parties, and summarize these data for the supply chain managers. Managers need timely and accurate information about raw material, processed and semi-processed goods inventories. Business partners can build a common platform to share information, which will assist to make decision promptly with more accuracy helps to reduce inventory level, better respond to customer, rapidly adapt to market changes and better management of facilities and labor. (Tsenga, Wub, and Nguyena, 2011)

Technology such as GPS, RFID, Electronic data interchange and wireless technology are used for supply chain management. Enterprise resource planning (ERP) and manufacturing resource planning (MRP II) are implemented to provide precise information to the decision maker. 

According to Shapiro (2001), there are two types of analytical information technology model for effective decision-making. Those are descriptive and normative models. Descriptive model includes demand forecasting, activity-based costing, developing customer profiles based on point-of-sale data, and various rule-based decision making models. The normative models include location of suppliers and distribution centers, which seek optimal decisions to minimize costs. 

Measuring Performance 

Developing a performance measurement mechanism is an essential part in inventory planning and analysis. A framework for performance measure is used to monitor the SCM strategy and to take curative measures to verify the efficiency and effectiveness of the implemented strategy. There are some qualitative and quantitative parameters to measure the performance of implemented system. Qualitative parameters are customer satisfaction, emergency response ability to random fluctuation in the market demand, integration of information flow between all functional levels. Quantitative Performance Measurement parameters are the degree to which the implemented SCM system minimizes overall cost, maximize sales, maximize profit and minimize inventory investment requirement. Reducing inventory investment requirement is the most desired performance, because inventory not only include direct costs for storing goods but there is an opportunity cost involved which otherwise could be invested in other venture. There are also some parameters such as whether the system minimizes the amount of product delivery time, minimize the lead-time of production and reduces the number of stock out or delay in filling orders (Kanji, (2002).

CONCEPT OF SUPPLY CHAIN MANAGEMENT 

A supply chain basically is the sum of all activities associated with the movement of goods from the raw material stage through to the end user.   This includes sourcing, procurement, production scheduling, order processing, inventory management, transportation warehousing and customer service, Importantly it also embodies the information system necessary to monitor all of these activities.   Successful supply chain management co-ordinates and integrates all of these activities into a seamless process. The best supply chain management processes focus intensely on consumer demand. Thus they simplify the flow of materials and clear the pipeline.   The objectives include excelling in reducing operating costs, improving asset productivity and compressing order cycle time. The evaluation of the supply chain competitiveness of an organisation begins with the comparison of business objectives against existing capabilities and performance.   This exercise typically reveals where the existing supply chain can achieve immediate competitive advantage and where in-efficiencies may be leaving the company valuable to the competition. The actions to implement a supply chain agenda typically fall into these broad categories.

  * Designing the long term supply chains to position the company in the right roles in the right supply chains with the right customers and suppliers

  * Re-engineering supply chains process to streamline product, information fund flow internally and externally

  * Reinforcing the supply chains fundamental foundation by improving quality and productivity within operational areas such as warehousing, transportation and fleet management

RELEVANCE OF SCM FOR RETAILING INDUSTRY (GENERAL)

As more and more retail outlets are coming up and more and more brands offering standardized attributes and qualities, it is necessary to have a proper SCM for each Retail outlets to gain a competitive advantage over its competitors.   For this the value chain of a firm has to be re-engineered as to eliminating the N.V.A. (Non Value added) processes.   Thus value chain is the value model of a firm, which shoes the values which are added at each different process. While supply chain is the value machinery of a firm which helps to identify the different processes in the value chain and makes an effort to create a seamless pipe line structure from sourcing till the end users. Thus SCM has got a very important role to play in Retail Industry.   

Chief Challenges for SC Designer in emerging countrie: "When we talk about infrastructure per say roads.   The roads in emerging countries are still not accurate to handle a smooth transport system.   There are certain places where speed limits are restricted and you have to move slow, while at other places you can have a Road Blockage because of political activities, thus these are problems for on time delivery of goods. Vast Geographic areas : The areas to be catered by transports are very large, thus this adds to your delivery time and longer order processing time.

Inaccurate data :   At times the designer face a problem because they are not able to get accurate data, which again posses or problem to design a proper model.

Proper co-ordination between Retailer and Supplier :   If there is no proper co-ordination between a retailer and supplier designing a supply chain model becomes difficult because it does not suits the purpose of the designers efforts.

TYPOLOGY 

Area based: On the bases of areas we can have two type of stores.

  (i) Super stores :- having area in between 25,000 to 50,000 sq. ft.

  (ii) Hyper markets :-   having area of more than 50,000 sq. ft.

Product mix based : It can be solely into one category of product mix per say grocery or it can be into a mix for example apparel, grooming products and grocery or any other kinds of product mix.

Relationship based : 

  (i) Owner stores (Departmental Stores)

  (ii) Franchisee Stores (Ex. McDonald)

  (iii) Company owned (Exclusive, Ex. Titan)

Future of Retailing 

As I.T. is slowly entering as a major component in any business the future of retailing is also going to face a sea of change. It is already coming where you have virtual shopping centers where a person requires just choosing the product from the display and ordering it to the sales person standing in the Kiosk.   The sales person then calls up the Distribution Centre and delivers your product at home.   Online shopping is also coming up,   where you find people ordering on the Internet. E-com has not yet entered emerging countrie in a large way but there are chances that within a span of 10-15 years it might become fully dominant, in that case the traditional retailers are going to face problems.   Thus there will be a change in Retail format, and the style of Retailing, which a company is practicing today. 

RESEARCH MODEL & HYPOTHESES (1 pages)

Objective of this Report

This report is a literature review to identify and investigate how Dell has approached the planning and implementation of their supply chain management. This report has been produced as a requirement for course Logistics Systems (TBS928).

The objective of the project is to study various techniques about retailing in relation to the importance of supply chain management which directly impacts on customer satisfaction and organizational efficiency. The study is aimed at providing solutions for managing the supply chain through Ideas, experiences creativity and innovation that would bring cost effective solution by distributing its products and services efficiently to all its store thereby bringing in customer satisfaction and organizational efficiency and objective.

Scope of this Report

I have divided the report into three sections. Section one is the introductory section which will discuss objective of the report, its scope and its methodology etc. Under section two, I will review the SCM literature related to my work. Here I will define the supply chain and elaborately discuss about inventory management strategies. Section three will describe the background of the Dell and its inventory Strategies. This section will also cover critical analysis of Dell’s inventory analysis based on the literature review. Finally, a set of recommendation will be provided with steps to improve Dells’s inventory management system under the section three.

Methodology

This research is based on the literature review of supply chain management. I have reviewed books, academic journals, and secondary data related to SCM for building understanding and then have evaluated the SCM practice of Dell. I have tried to assess Dell’s SCM strategy based on my understanding from the literature review. This evaluation is based on research done by Areti Manataki, 2007 and Kapuscinski, Zhang, Carbonneau and Moore (2004) on Dell’s supply chain strategies and inventory management system.