Understanding the Sector-Specific Characteristics in the Day-to-Day Management of the Retail Supply Chain
Erasvuo, Santeri (2024)
Erasvuo, Santeri
2024
Tuotantotalouden DI-ohjelma - Master's Programme in Industrial Engineering and Management
Johtamisen ja talouden tiedekunta - Faculty of Management and Business
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Hyväksymispäivämäärä
2024-04-23
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:tuni-202404113477
https://urn.fi/URN:NBN:fi:tuni-202404113477
Tiivistelmä
Retailers around the world aim to optimise their supply chains in the ever-changing operating environment. They do not want to lose sales because of low availability but on the other hand, they want to maximise their inventory efficiency and avoid tying up capital in excess inventories. However, not all retail sectors are identical. Each sector has its characteristics that should be taken into account when forecasting the demand and planning the replenishment of products. This thesis focuses on better understanding the sector-specific differences in the day-to-day management of supply chains in grocery, pharmacy, do-it-yourself (DIY), and consumer electronics retailing. Improved understanding helps create more effective solutions for retail demand forecasting and replenishment, ultimately enabling retailers to serve their customers better and reduce wastage by right-sized on-time deliveries.
The topic is first studied from a theoretical viewpoint with the fundamentals of demand forecasting and replenishment through the whole supply chain from the manufacturer to the end customer. Understanding the demand fluctuations and the underlying reasons causing especially the so-called bullwhip effect are emphasised. Sources of demand fluctuation are studied alongside concepts that can help in managing retail supply chains more effectively in the selected sectors.
To gain up-to-date knowledge, various retail supply chain experts were interviewed, and selected retailers’ operational performance was analysed in the field of forecasting and replenishment. The interviews provided valuable information on the supply chains, and thus it was possible to identify a few key considerations that should be remembered in retail business process design for forecasting and replenishment.
The interviews were supported by an analysis of key operational metrics that were identified to provide essential information to support daily supply chain management. An international sample of retail cases was used to identify potential region-specific characteristics that may not be equally relevant in other markets. Finally, the metric levels were compared between the selected sectors to identify variations such as the seasonal- and shelf life-related impacts across the different retail sectors.
The results indicate that the end-of-the-year demand peaks are present in retail regardless of sector. However, the reasons and the magnitude of the demand increases vary across the sectors. On a day-to-day level, retail supply chain management focuses on three main areas: order management, demand forecast review, and collaboration without significant differences between the sectors. From a performance measurement perspective, all studied sectors emphasise the importance of availability. Additionally, spoilage is important for grocery retailing, whereas other studied sectors focus rather on other metrics such as inventory turnover.
The topic is first studied from a theoretical viewpoint with the fundamentals of demand forecasting and replenishment through the whole supply chain from the manufacturer to the end customer. Understanding the demand fluctuations and the underlying reasons causing especially the so-called bullwhip effect are emphasised. Sources of demand fluctuation are studied alongside concepts that can help in managing retail supply chains more effectively in the selected sectors.
To gain up-to-date knowledge, various retail supply chain experts were interviewed, and selected retailers’ operational performance was analysed in the field of forecasting and replenishment. The interviews provided valuable information on the supply chains, and thus it was possible to identify a few key considerations that should be remembered in retail business process design for forecasting and replenishment.
The interviews were supported by an analysis of key operational metrics that were identified to provide essential information to support daily supply chain management. An international sample of retail cases was used to identify potential region-specific characteristics that may not be equally relevant in other markets. Finally, the metric levels were compared between the selected sectors to identify variations such as the seasonal- and shelf life-related impacts across the different retail sectors.
The results indicate that the end-of-the-year demand peaks are present in retail regardless of sector. However, the reasons and the magnitude of the demand increases vary across the sectors. On a day-to-day level, retail supply chain management focuses on three main areas: order management, demand forecast review, and collaboration without significant differences between the sectors. From a performance measurement perspective, all studied sectors emphasise the importance of availability. Additionally, spoilage is important for grocery retailing, whereas other studied sectors focus rather on other metrics such as inventory turnover.