Present the main decisions and tools for supply management in retail companies.
The purchasing process
Centralised management models
All management operations, with the exception of sales, are carried out by a single subject, who analyses sales statistics together with the store managers, selects the suppliers, decides on promotional and pricing policies, sales objectives and merchandising plans for each store, and management power within the individual store is limited to the implementation of plans devised by central management.
Centralised purchasing model
In this model, managers of the points of sale enjoy greater decision-making autonomy: they provide central management with information on the quantity and type of products to purchase. Central management only places the orders and manages the logistics.
Decentralised management model
The buyer is only responsible for selecting the most suitable supplier and negotiating purchasing conditions. The store managers are responsible for what quantities to purchase and all aspects of logistics.
The fundamental relationship between manufacturers and distributors changes depending on whether the product is a manufacturing brand or a private or general brand. When brand loyalty is lower than store loyalty the supplier, to convince the distributor, has to compensate for the reduced market strength by offering special concessions:
Changes to the structure of relationships in the supply chain have led to important changes to the systems for evaluating suppliers. It is possible to measure and classify the supplier’s productive output as well as their company resources and competences through standardised supplier-rating procedures.
The evolution of retail enterprises in grocery has led to: a gradual weakening in the market position of small independent businesses, traditionally served directly by manufacturers or through wholesalers; increased market share and much larger retail operators have encouraged vertical integration of many independent businesses which used to operate in the phases preceding retail.
The result of these changes is that the flow of consumer goods in these markets seems to be more cost-effective if it passes through distribution centres.
Distribution Centre operations
Advantages over the Two Bin System
“Mixed” orders are possible, made up of different products in different, sometimes small, quantities which total an acceptable order size. It allows for better management of the minimum purchasing and delivery quantities, which often form the basis of manufacturers’ sales policy.
Planning manufacturing operations is simpler and more effective.
It is easier to reach an acceptable compromise between the need to achieve satisfactory levels of efficiency and the need to guarantee the network an appropriate logistics service.