PU/FBA/MKG/Logistics & Supply Mgt.

Retail Logistics , 2021

THE DEVELOPMENT OF THE RETAILING ENVIRONMENT

Knowing Your Customer

1. Research your Customer market and Get to know your customers. Obtain data
and consumer profiles of customers in your area from appropriate state departments or
offices and local organizations such as the Chamber of Commerce.
Consumer profile refers to a description of a customer or set of customers that
includes demographic, geographic, and psychographic characteristics, as well as
buying patterns, creditworthiness, and purchase history. Businesses should
continuously monitor the profile of customers in the community to identify products
and services that fit their needs and preferences. It is important to know more than
names and addresses. Demographics refer to gender, age, income, origin, and family
size.

2. Understand your customers’ lifestyles. Lifestyle information is important to

understand their leisure activities and how they spend their money. Various lifestyle
segmentation systems are available from marketing data firms to help you better
understand the buying behaviors of your visitors. If your store is serving a large
number of visiting golfers, these systems can help you understand what these
consumers like to do with their free time and money (play tennis, drink wines, enjoy
boating, etc.). Buying behaviors are often tied to customer activities.

3. Know what attractions draw customers to your store. Identify the busiest seasons,
days, and hours of these attractions.

4. Conduct Research into retail activity in larger metropolitan areas. The

purchasing preferences of many customers from metropolitan areas are often reflected
in the retail stores near their homes.

5. Tap into growing market segments. Gather market research and consumption
statistics for your area to identify growing market segments to target. For example, the
growth in population at Kasoa has provided many new selling opportunities for local
retailers.
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Location
1. Benefit from traffic congestion. A busy street teeming with people and activity is
usually more interesting and exciting than an empty street where you can park any-
where. Use traffic congestion as an opportunity, not a problem to be solved. If you
are going into business, look for a site in a high traffic area.

2. Provide parking for vehicles. It is important to provide adequate parking for

vehicles. This is especially important at locations near major highways.

Store Appearance

1. Examine the first impressions customers may have on your business. As

customers may not know your store, they may be quick to judge your operation and
whether they will do business with you. Consider the first things you see, hear, smell,
or feel upon approaching your store.

2. Window show. Have a window show to grab the attention of pedestrians.

3. Use sidewalk displays. The use of creative sidewalk and window displays can attract
potential customers.

4. Reflect the architecture of the community in the building. You can design your
building to reflect the historic architecture of the town, making visits a lesson in
history.

Atmosphere

1. Appeal to the senses of sight, smell and sound with good interior décor, lovely mild
air-fresheners and sounds of music.

2. Make shopping easy for parents. Some retailers greet customers with coffee, a table
for children to play games, and soothing background music. Experts are of the view
that, parents feel much more at ease when they don’t have to constantly worry about
their children.

3. Create an atmosphere that takes the customer to a different place.

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Convenience

1. Accept advance orders. Customers can make advance orders and visit the shop at
their own convenient time knowing that their desired selection will be waiting for
them.

2. Accept credit cards and traveler’s checks. Credit card sales are allows for a great
deal of convenience. In addition, travelers often prefer to use charge cards or
traveler’s checks so that they don’t have to carry excess cash.

3. Accept foreign currency. Accept foreign currency from customers where necessary.

4. Keep regular hours. To the extent possible, operating hours should be coordinated
among businesses and based on what is most convenient for the customer.

5. Provide clean restrooms. Clean restrooms are important as they make a positive
statement about your business. They can also draw customers into your store.

Hospitality
1. Set quality service standards. Retailers should set standards for their staff such as
greeting each customer, serving within a set time period, and offering customers
information to make their visit more enjoyable.

2. Develop a mission statement that recognizes hospitality. Staff and management

should be reminded of the importance of service and hospitality.

THE RETAIL VALUE CHAIN

Value Chain Defined
A value chain is a chain of activities that a firm operating in a specific industry performs
in order to deliver something valuable (product or service). Products pass through
activities of a chain in order, and at each activity the product gains some value. Chain of
activities gives the product more added value than the sum of the independent activities'
values.
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The value chain categorizes the generic value-adding activities of an organization. The

"primary activities" include: inbound logistics, operations (production), outbound
logistics, marketing & sales, service.
An industry value chain is a physical representation of the various processes that are
involved in producing goods (and services), starting with raw materials and ending with
the delivered product (also known as the supply chain). It is based on the notion of value-
added at the link level. The sum total of link-level value-added yields total value.

Value Chain Analysis

The term ‘Value Chain’ was used by Michael Porter in his book "Competitive Advantage:
Creating and Sustaining superior Performance" (1985). The value chain analysis describes
the activities the organization performs and links them to the organizations competitive
position.

Value chain analysis describes the activities within and around an organization, and relates
them to an analysis of the competitive strength of the organization. Therefore, it evaluates
which value each particular activity adds to the organizations products or services. This
idea was built upon the insight that an organization is more than a random compilation of
machinery, equipment, people and money. It is only when these things are arranged into
systems and systematic activities that it will become possible to produce something for
which customers are willing to pay a price. Porter argues that the ability to perform
particular activities and to manage the linkages between these activities is a source of
competitive advantage.

Porter distinguishes between primary activities and support activities. Primary activities
are directly concerned with the creation or delivery of a product or service. They can be
grouped into five main areas: inbound logistics, operations, outbound logistics, marketing
and sales, and service. Each of these primary activities is linked to support activities which
help to improve their effectiveness or efficiency. There are four main areas of support
activities: procurement, technology development (including R&D), human resource
management, and infrastructure (systems for planning, finance, quality, information
management etc.).
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The basic model of Porters Value Chain is as follows:

The term‚ Margin’ implies that organizations realize a profit margin that depends on their
ability to manage the linkages between all activities in the value chain. In other words, the
organization is able to deliver a product / service for which the customer is willing to pay
more than the sum of the costs of all activities in the value chain.

Some thought about the linkages between activities: These linkages are crucial for
corporate success. The linkages are flows of information, goods and services, as well as
systems and processes for adjusting activities. Their importance is best illustrated with
some simple examples:
It is only if the Marketing & Sales function delivers sales forecasts for the next period to
all other departments in time and in reliable accuracy that procurement will be able to
order the necessary material for the correct date. And only if procurement does a good job
and forwards order information to inbound logistics, only then operations will be able to
schedule production in a way that guarantees the delivery of products in a timely and
effective manner – as pre-determined by marketing. In the result, the linkages are about
seamless cooperation and information flow between the value chain activities.
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In most industries, it is rather unusual that a single company performs all activities from
product design, production of components, and final assembly to delivery to the final user
by itself. Most often, organizations are elements of a value system or supply chain. Hence,
value chain analysis should cover the whole value system in which the organization
operates.

Within the whole value system, there is only a certain value of profit margin available.
This is the difference of the final price the customer pays and the sum of all costs incurred
with the production and delivery of the product/service (e.g. raw material, energy etc.). It
depends on the structure of the value system, how this margin spreads across the suppliers,
producers, distributors, customers, and other elements of the value system. Each member
of the system will use its market position and negotiating power to get a higher proportion
of this margin. Nevertheless, members of a value system can cooperate to improve their
efficiency and to reduce their costs in order to achieve a higher total margin to the benefit
of all of them (e.g. by reducing stocks in a Just-In-Time system).

A typical value chain analysis can be performed in the following steps:

 Analysis of own value chain – which costs are related to every single activity
 Analysis of customers’ value chains – how does our product fit into their value chain
 Identification of potential cost advantages in comparison with competitors
 Identification of potential value added for the customer – how can our product add
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value to the customers value chain (e.g. lower costs or higher performance) – where
does the customer see such potential

Demand Chain Management

Demand chain management (DCM) is the management of upstream and downstream
relationships between suppliers and customers to deliver the best value to the customer at
the least cost to the demand chain as a whole. The term demand chain management is
used to denote the concept commonly referred to as supply chain management, however
with special regard to the customer pull. In that sense, demand chain management
software tools bridge the gap between the customer relationship management and the
supply chain management. The organization’s supply chain processes are managed to
deliver best value according to the demand of the customers. Some experts see DCM as
an extension of supply chain management, due to its incorporation of the market
orientation perspective on its concept.

A Demand-driven supply network (DDSN) is one method of supply chain management

which involves building supply chains in response to demand signals. The main force of
DDSN is that it is driven by customers demand. In comparison with the traditional supply
chain, DDSN uses the pull technique. It gives DDSN market opportunities to share more
information and to collaborate with others in the supply chain.
DDSN uses a capability model that consists of four levels. The first level is Reacting, the
second level is Anticipating, the third level is Collaborating and the last level
is Orchestrating. The first two levels focus on the internal supply chain while the last two
levels concentrate on external relations throughout the Extended Enterprise.

Competitive advantages
To create sustainable competitive advantages with DDSN, companies have to do deal
with three conditions:
 
1. Alignment (create shared incentives), 
2. Agility (respond quickly to short-term change)
3. Adaptability (adjust design of the supply chain)
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An important component of DDSN is DDM (“real-time” demand driven manufacturing).

DDM gives customers the opportunity to say what they want, where and when.

Demand-driven Execution

Demand chain management is the same as supply chain management, but with emphasis
on consumer pull vs. supplier push. The demand chain begins with customers, then
funnels through any resellers, distributors, and other business partners who help sell the
company’s products and services. The demand chain includes both direct and indirect
sales forces. Customers demand is hard to detect because of out of stock situations (OOS)
and falsify data collected from POS-Terminals. Reliable information about demand is
necessary for DCM therefore lowering OOS is a main factor for successful DCM.
Key factors for lowering Out of Stock-rates include:

 data accuracy
 forecast and order accuracy
 order quantity
 replenishment
 Capacity
 Shelf Replenishment
Implementation of system supported processes leads to the new technology known
as Extreme Transaction Processing. This technology allows to process huge amount of
data (POS, RFID) in real time providing information for store managers, shelving
managers and the supply chain.