push supply chains are more efficient
for merchandise that has steady,
predictable demand.
C. Radio Frequency Identification Devices
• Radio frequency identification devices are
tags that transmit identifying information
and are attached to individual items,
shipping cartons, and containers.
• RFID has several demonstrated benefits
including: (1) reduced labor costs for
warehouse and distribution, (2) reduced
labor costs at point-of–sale, (3) inventory
savings, (4) reduced theft, and (5) reduced
out-of-stock conditions.
See PPT 9-37, 9-38
they foresee any disadvantages. What are the
risks or downsides of these systems?
D. Supply Chain for Fulfilling Catalog and Internet
Orders
• The supply chain and information systems
for supporting catalog and Internet
channels tend to be distinct from those that
support the traditional store channel
sure that the right number of products are
delivered to each store—while information
systems supporting nonstore channels are
focused on the customer—making sure that
the right customer receives the right
product.
E. Drop Shipping
• Drop shipping, or consumer direct
fulfillment, is a system in which retailers
receive orders from customers and relay
these orders to vendors; the vendors then
ship the merchandise ordered directly to
the customer.
customers.
• Disadvantages in drop shipping from a
retailer’s perspective include a longer
delivery time, increased costs (with multiple
purchases), loss of control, and defining the
process for handling returns.
Ask students when drop shipping orders would
make the most sense for product-related
purchases. Which retailers could utilize drop
shipping? Could this be a sustainable competitive
F. Customer Store Pickup
• For retailers to be successful with the buy-
online/pick-up–in–store option, they need to
invest in technology that enables order
allocation systems to locate every item in
stock to fulfill the order in a timely manner.
• Mobile task management technology is a
wireless network and a mobile device that
receives demand notification and enables a
speedy response. This solution allows the
associate closest to the ordered item to
physically pull it and verify its availability.
G. Reverse Supply Chain
• Reverse supply chain is the process of
capturing value from and/or properly
disposing of merchandise returned by
customers and/or stores.
V. Summary
• Supply chain management and information
systems have become important tools for
achieving sustainable competitive
advantage. Developing more efficient
methods of distributing merchandise
creates an opportunity to reduce expenses
and improve customer service levels.
• Many retailers are adopting a quick
response inventory system that is
characterized by smaller, more frequent
shipments from manufacturers.
ANSWERS TO “GET OUT AND DO IT!” QUESTIONS
1. CONTINUING ASSIGNMENT Interview the store manager working for the retailer you have
selected for the Continuing Case assignment. Write a report that describes and evaluates the
retailer’s information and supply chain systems. Use this chapter as a basis for developing a
set of questions to ask the manager. Some of the questions might be these: Where is the
store’s DC? Does the retailer use direct store delivery from vendors? How frequently are
deliveries made to the store? Does the merchandise come in ready for sale? What is the
store’s percentage of stockouts? Does the retailer use a push or pull system? Does the store
get involved in determining what merchandise is in the store and in what quantities? Does
the retailer use VMI, EDI, CPFR, or RFID?
2. INTERNET EXERCISE Go to Barcoding Incorporated’s web page at
http://www.barcoding.com and search for retail, warehouse management, and RFID. How is
this company using technology to support retailers with information systems and supply
chain management?
Some of the information students will find on this homepage…
“If inefficiencies throughout the system could be eliminated, from the stockroom to the shelf to
the point of sale, it eases the pressures faced at the register, and unlocks even greater profit
potential. Mobile computing and data capture solutions, such as bar code and RFID (radio
frequency identification), provide retail companies with greater visibility and control over
inventory and stock levels, more productive employees, and a better customer experience.
They predict that “robot as a service” will account for 30 percent of all commercial service
robotic applications by the year 2019, and the same percentage of top organizations will have a
designated chief robotics officer role.
Talent Shortage
They project that 45 percent of the world’s top commercial companies will use robot systems for
delivery operations and order fulfillment warehousing by 2018. Robots will increasingly depend
on cloud software, with a robotics cloud marketplace eventually emerging.
Better Efficiency
3. INTERNET EXERCISE Go to the homepage for RFID Journal at www.rfidjournal.com/ and
search for supply chain in the current issue. Summarize one of the recent articles, and
explain how the key concept(s) described could make the shopping experience better for
consumers and improve efficiency in the supply chain.
Students’ answers will vary depending on the article they search. The website has an entire
ANSWERS TO DISCUSSION QUESTIONS AND PROBLEMS
1. Retail system acronyms include DSD, VMI, EDI, CPFR and RFID. What do these terms
means and how are they related to one another?
Each of these terms describes a system designed to enhance the efficiency of supply chain
management. DSD, direct store delivery, bypasses the retailer’s distribution center and
delivers merchandise directly to the retailer’s stores. When DSD happens, retailers receive
additional services such as assessing the store’s stock levels and backroom inventory. DSD
and VMI are often partnered together. When a vendor engages in VMI, the vendor likely
2. Explain how an efficient supply chain system can increase a retailer’s level of product
availability and decrease its inventory investment.
By eliminating the need for paper transactions, an efficient supply chain management
system reduces lead-time. Shorter lead-time reduces the need for safety stock because the
shorter the lead-time, the easier it is to forecast demand, and therefore, less inventory is
3. This chapter presents some trends in supply chain and information systems that benefit
retailers. How do vendors benefit from these trends?
Vendors benefit from collaboration in supply chain management just as retailers do. As
vendors share the retailer’s goals of providing merchandise to customers where and when
they want it, with minimum cost, collaborations to improve the flow of information and
4. What type of merchandise is most likely to be cross-docked at retailers’ DCs? Why is this
often the case?
Merchandise prepackaged by vendors for specific stores is crossdocked because it is ready
5. Why haven’t more fashion retailers adopted an integrated supply chain system similar to
Zara’s?
Zara’s integrated supply chain management system depends on two major factors for its
success. The first is the technological connections between the sales floor and the design
center in Spain. Such technology requires higher capital investments and employee
training. The second is the fact that Zara’s is vertically-integrated- it controls the entire
design, production and sales process. Zara’s integrated supply chain management system is
particularly beneficial to Zara’s, since it sells high fashion products.
6. Explain the differences between pull and push supply chains.
A pull distribution strategy is when orders for merchandise are generated at the store level
based on demand data captured by point of sale (POS) terminals. A push distribution
strategy is when merchandise is allocated to the stores based on historical demand, and the
inventory position at the distribution center, as well as the needs of the stores. The pull
7. Consumers have five key reactions to stockouts: buy the item at another store, substitute
a different brand, substitute the same brand, delay the purchase, or do not purchase the
item. Consider your own purchasing behavior, and describe how various categories of
merchandise would result in different reactions to a stockout.
A stockout occurs when an SKU a consumer wants is not available. Students’ answers will
vary widely here. This question allows for discussion of factors such as brand loyalty, and
8. Abandoned purchases as a result of stockouts can mean millions of dollars a year in lost
sales. How are retailers and manufacturers using technology to reduce stockouts and
improve sales?
Retailers are turning to investments in information technology and supply chain
management systems to help reduce stockouts. Some retailers are turning to CPFR systems
9. What is a universal product code (UPC)? How does this code enable manufacturers,
distributors and retailers to track merchandise throughout the supply chain?
“Universal Product Codes (also known as GTIN-12) appear as lines (bars) of varying widths
representing the series of numbers commonly shown below the bars. Barcode scanners, as
10. Why are some retailers switching from UPC codes to RFID?
RFID devices have two advantages over traditional bar codes. First, they can hold more data
and update the data stored. For instance, the device can keep track of where an item has
been in the supply chain and even where it is stored in a DC. With these data, retailers can
CONNECT ACTIVITIES FOR CHAPTER 9
Activity Title
Learning Objective
Merchandise and
Information Flow
Drag and Drop;
Matching (accessible
version)
Supply Chains
9-2 Describe how
information flows in a
supply chain.
Walmart: Pioneer in
Supply Chain
Management
Case Analysis
Supply Chains
9-1 Understand the
strategic advantage
generated by a supply
chain.
Understanding the
Distribution Center
Click and Drag;
Matching (accessible
version)
Supply Chains
9-1 Understand the
strategic advantage
generated by a supply
chain.
Fast Fashion: Efficient
Case Analysis
Supply Chains
9-2 Describe how
information flows in a
supply chain.
9-1 Understand the
generated by a supply