Supply chain management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers. Supply Chain Management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption. It 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." A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. Supply chains exist in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry and firm to firm.
Supply chain management is typically viewed to lie between fully vertically integrated firms, where the entire material flow is owned by a single firm, and those where each channel member operates independently. Therefore coordination between the various players in the chain is key in its effective management. Cooper and Ellram [1993] compare supply chain management to a well-balanced and well-practiced relay team. Such a team is more competitive when each player knows how to be positioned for the hand-off. The relationships are the strongest between players who directly pass the baton, but the entire team needs to make a coordinated effort to win the race.
Supply chains encompass the companies and the business activities needed to design, make, deliver, and use a product or service. Businesses depend on their supply chains to provide them with what they need to survive and thrive. Every business fits into one or more supply chains and has a role to play in each of them. The pace of change and the uncertainty about how markets will evolve has made it increasingly important for companies to be aware of the supply chains they participate in and to understand the roles that they play. Those companies that learn how to build and participate in strong supply chains will have a substantial competitive advantage in their markets.
Supply Chain Decisions: We classify the decisions for supply chain management into two broad categories -- strategic and operational. As the term implies, strategic decisions are made typically over a longer time horizon. These are closely linked to the corporate strategy and guide supply chain policies from a design perspective. On the other hand, operational decisions are short term, and focus on activities over a day-to-day basis. The effort in these type of decisions is to effectively and efficiently manage the product flow in the "strategically" planned supply chain.
There are four major decision areas in supply chain management:

1. Location
2. Customer
3. Planning
4. Purchasing
5. Production
6. Inventory
7. Transportation or distribution

1.Production Decisions

The strategic decisions include what products to produce, and which plants to produce them in, allocation of suppliers to plants, plants to DC's, and DC's to customer markets. As before, these decisions have a big impact on the revenues, costs and customer service levels of the firm. These decisions assume the existence of the facilities, but determine the exact path(s) through which a product flows to and from these facilities. Another critical issue is the capacity of the manufacturing facilities--and this largely depends the degree of vertical integration within the firm. Operational decisions focus on detailed production scheduling. These decisions include the construction of the master production schedules, scheduling production on machines, and equipment maintenance. Other considerations include workload balancing, and quality control measures at a production facility

2.Inventory Decisions

These refer to means by which inventories are managed. Inventories exist at every stage of the supply chain as either raw material, semi-finished or finished goods. Since holding of inventories can cost anywhere between 20 to 40 percent of their value, their efficient management is critical in supply chain operations. It is strategic in the sense that top management sets goals. However, most researchers have approached the management of inventory from an operational perspective. These include deployment strategies (push versus pull), control policies --- the determination of the optimal levels of order quantities and reorder points, and setting safety stock levels, at each stocking location. These levels are critical, since they are primary determinants of customer service levels.

3.Location Decisions

The geographic placement of production facilities, stocking points, and sourcing points is the natural first step in creating a supply chain. The location of facilities involves a commitment of resources to a long-term plan. Once the size, number, and location of these are determined, so are the possible paths by which the product flows through to the final customer. These decisions are of great significance to a firm since they represent the basic strategy for accessing customer markets, and will have a considerable impact on revenue, cost, and level of service. These decisions should be determined by an optimization routine that considers production costs, taxes, duties and duty drawback, tariffs, local content, distribution costs, production limitations, etc. Although location decisions are primarily strategic, they also have implications on an operational level.

4.Transportation Decisions

The mode choice aspect of these decisions are the more strategic ones. These are closely linked to the inventory decisions, since the best choice of mode is often found by trading-off the cost of using the particular mode of transport with the indirect cost of inventory associated with that mode. While air shipments may be fast, reliable, and warrant lesser safety stocks, they are expensive. Meanwhile shipping by sea or rail may be much cheaper, but they necessitate holding relatively large amounts of inventory to buffer against the inherent uncertainty associated with them. Therefore customer service levels, and geographic location play vital roles in such decisions. Since transportation is more than 30 percent of the logistics costs, operating efficiently makes good economic sense. Shipment sizes (consolidated bulk shipments versus Lot-for-Lot), routing and scheduling of equipment are key in effective management of the firm's transport strategy.

5. Information:

How much data should be collected and how much information should be shared? Timely and accurate information holds the promise of better coordination and better decision making. With good information, people can make effective decisions about what to produce and how much, about where to locate inventory and how best to transport it.

The sum of these decisions will define the capabilities and effectiveness of a company’s supply chain. The things a company can do and the ways that it can compete in its markets are all very much dependent on the effectiveness of its supply chain. If a company’s strategy is to serve a mass market and compete on the basis of price, it had better have a supply chain that is optimized for low cost. If a company’s strategy is to serve a market segment and compete on the basis of customer service and convenience, it had better have a supply chain optimized for responsiveness. Who a company is and what it can do is shaped by its supply chain and by the markets it serves.

Importance of Supply Chain IN Retail sectors

One of the most important challenge in organized retail in India is faced by poor supply chain and logistics management. The importance can be understood by the fact that the logistics management cost component in India is as high as 7% -10% against the global average of 4% - 5% of the total retail price. Therefore, the margins in the retail sector can be improved by 3% - 5% by just improving the supply chain and logistics management.
In India, with demand for end-to-end logistics solutions far outstripping supply, the logistics market for organised retail is pegged at $50 million and is growing at 16%. It is expected to reach $120-$130 million by 2010. Organised retail on the other hand is growing at 400% and is expected to reach around $30 billion by 2010.Even supply chain and logistics firms like Hong Kong based Heng Tai Consumables and ABS Procurement Co and ACM China (the greenhouse specialist) is also eying the opportunity for managing the supplies.
The supply chain management is logistics aspect of a value delivery chain. It comprises all of the parties that participate in the retail logistics process: Manufacturers, Wholesalers, Third Party Specialists like Shippers, Order Fulfillment House etc. and the Retailer. Here, logistics is the total process of planning, implementing and coordinating the physical movement of merchandise from manufacturer to retailer to customer in the most timely, effective and cost efficient manner possible. Logistics regards order processing and fulfillment, transportation, warehousing, customer service and inventory management as interdependent functions in the value delivery chain. It oversees inventory management decisions as items travel through a retail supply chain. If a logistics system works well, the retail firm reduces stock outs, hold down inventories and improve customer service – all at the same time.
Logistics and Supply Chain enables an organized retailer to move or store products more effectively. Efficient logistics management not only prevents needless movement of goods, vehicles transferring products back and forth; but also frees up storage space for more productive use.
Retail analysts say on-time order replenishments will become even more critical once the Wal-Mart/ Bharti combine begins operations - the American retailer works almost entirely on cross-docking and is likely to demand higher service levels, including potential levies for delays in shipment.
The efficiency and effectiveness of supply chain and logistics management can also be understood by the fact that m odern retail stores maintain lower inventories than traditional retail. In India, generally in the traditional kirana stores, three weeks inventories are kept; while in a modern retail store like Hyper city, it's nine days and it's under two weeks for Food Bazaar. Now, it is beneficial for both the manufacturer as well as the retailer. If we go through the following food supply chain in India, we find that a lot can be improved by maintaining the supply chain and logistics.

Participants in the Supply Chain

Producers

Producers or manufacturers are organizations that make a product.
This includes companies that are producers of raw materials and companies that are producers of finished goods. For the customer, distributors fulfill the “Time and Place” function—they deliver products when and where the customer wants them.

Retailers

Retailers stock inventory and sell in smaller quantities to the general public. This organization also closely tracks the preferences and demands of the customers that it sells to. It advertises to its customers and often uses some combination of price, product selection, service, and convenience as the primary draw to attract customers for the products it sells.

Customers

Customers or consumers are any organization that purchases and uses a product. A customer organization may purchase a product in order to incorporate it into another product that they in turn sell to other customers. Or a customer may be the final end user of a product who buys the product in order to consume it.

Introduction of Indian Retail Industries:

Retail is India’s largest industry, accounting for over 10 per cent of the country’s GDP and around eight per cent of the employment. Retail industry in India is at the crossroads. It has emerged as one of the most dynamic and fast paced industries with several players entering the market. But because of the heavy initial investments required, break even is difficult to achieve and many of these players have not tasted success so far.
However, the future is promising; the market is growing, government policies are becoming more favorable and emerging technologies are facilitating operations. Retailing in India is gradually inching its way toward becoming the next boom industry. The whole concept of shopping has altered in terms of format and consumer buying behavior, ushering in a revolution in shopping in India. Modern retail has entered India as seen in Sprawling shopping centers, multi-storied malls and huge complexes offer shopping, entertainment and food all under one roof. The Indian retailing sector is at an inflexion point where the growth of organized retailing and growth in the consumption by the Indian population is going to take a higher growth trajectory.

Retailing is more than selling goods:

Retailing consists of the sale of goods or merchandise, from a fixed location such as a department store or kiosk, in small or individual lots for direct consumption by the purchaser.
Retailing is a well recognized business function which compromises making available desired product in the desired quantity at the desired time. This creates a time, place and form utility for the consumer. The success of retailing is highly dependent on an efficient supply chain management. A well-developed supply chain reduces wastages and transaction cost thereby reducing the cost of inventories to be maintained by the producers and the traders. A reduction in the cost of inventory management leads to a reduction in the final price to the consumer.
Retailing has been identified as a thrust area for promotion of textiles, processed foods, agricultural and horticultural produce. Retail Sector can be divided into organized and unorganized sectors:

Unorganized Retail:

Unorganized retailing is characterized by a distorted realestate market, poor infrastructure and inefficient upstream processes, lack of modern technology, inadequate funding and absence of skilled manpower. Therefore, there is a need to promote organized retailing.

Many of the world’s largest supermarket chains, including Wal-Mart, Tesco and M&S have been concentrating their collective efforts on improving their supply chain. While much has been achieved the activities have tended to be focused on specific aspects of the supply chain, such as packaging waste. It is important to recognise that there is a need to look at what else needs to be done and whether regulation is required in order to see our shopkeepers go the extra mile?

Business insight

Some of the most highly publicised supply chain issues have been focused on the footwear and textile industries in relation to labour practices. Given that many of the major supermarket brands also retail clothing items it makes sense that they have begun to focus on issues of supply chain.
So too stakeholder concerns on the impact of large retail chains on the high streets have extended to concerns over the treatment and location of their suppliers.

Transformation

Whilst each of the major chains may be at different stages of implementation of corporate responsibility activities there are a couple of common themes the programmes listed on their websites and in their corporate responsibility reports seem to cover.
Waste minimisation: Prompted by participation in the voluntary Courtauld Commitment with WRAP (Waste Resources Action Programme) many retailers have been working with suppliers to reduce packaging waste associated with the products sold. This has included an aim to maintain current waste levels despite growth which has seen ASDA sell its animal by-waste to soap and pet food manufacturers, Waitrose improve its recycling labelling and M&S use lighter packaging for its ready meals and promote the recycling of its clothes in partnership with Oxfam
Transport: Combined with local sourcing and clearer labelling of items that have been flown in from abroad many supermarket chains have been looking at their own transport usage. This has seen some, such as Sainsbury, rethink the locations of warehouses to reduce the number of road miles required. Others, including M&S, have changed their fleet vehicles to more efficient vehicles and the use of lower emission fuels. Tesco has switched some of its transportation activities from road to rail.
Retail footprint: This includes both the building of new stores as well as items used in store across their vast property portfolios. Tesco, M&S and Morrisons have all trialled new eco buildings at various locations throughout the United Kingdom.
Sustainable produce: This typically includes third party certification of fresh produce including Morrisons’ use of RSPCA certified salmon and chicken, Waitrose’s array of over 1,500 organic products and Tesco’s code of practice for animal welfare for its British growers.
Items such as reusable crates for use in transport and in displaying produce as well as the use of lower emission and more efficient refrigerant systems have also become commonplace.

End game

Whilst there have been some shining examples of what can be achieved there is generally a need for a more holistic approach as well as acceptance that not all customers are naturally predisposed to making sustainable choices.
By taking a holistic approach that follows more of a product lifecycle philosophy, perverse subsidies and unintended consequences can be avoided. For instance, the immense focus on packaging reduction can in fact lead to more waste through increased food waste. Single serve packaging can be more suitable for small households; packaged bananas ripen more slowly again leading to reduced food waste which can have significant environmental and social benefits.
In order to further improve their impacts supermarkets will need to continue to provide incentives similar to those provided by Tesco through the use of Club Card points in return for using their own bags.
These messages also need to take a holistic approach. To be taken seriously by consumers, as with any communication campaign, the messages need to be consistent and reinforcing. So too do the actions taken.2
The question remains as to how much of this will be undertaken without regulation with some in the sector calling for it to encourage those who are only paying such activities lip service. Either way there will be a need to engage with customers to ensure that retail makes a return to a focus on value rather than volume, the seeds of which the current economic environment are beginning to sow

How the Supply Chain Works in Retail Sector?

Production

Production refers to the capacity of a supply chain to make and store products. The facilities of production are factories and warehouses. The fundamental decision that managers face when making production decisions is how to resolve the trade-off between responsiveness and efficiency. If factories and warehouses are built with a lot of excess capacity, they can be very flexible and respond quickly to wide swings in product demand. Facilities where all or almost all capacity is being used are not capable of responding easily to fluctuations in demand. On the other hand, capacity costs money and excess capacity is idle capacity not in use and not generating revenue. So the more excess capacity that exists, the less efficient the operation becomes. Factories can be built to accommodate one of two approaches to manufacturing:

1. Product focus—A factory that takes a product focus performs the range of different operations required to make a given product line from fabrication of different product parts to assembly of these parts.
2. Functional focus—A functional approach concentrates on performing just a few operations such as only making a select group of parts or only
doing assembly. These functions can be applied to making many different kinds of products. A product approach tends to result in developing expertise about a given set of products at the expense of expertise about any particular function. A functional approach results in expertise about particular functions instead of expertise in a given product. Companies need to decide which approach or what mix of these two approaches will give them the capability and expertise they need to best respond to customer demands. As with factories, warehouses too can be built to accommodate different approaches. There are three main approaches to use in warehousing:

1. Stock keeping unit (SKU) storage—In this traditional approach, all of a given type of product is stored together. This is an efficient and easy to
understand way to store products.
2. Job lot storage—In this approach, all the different products related to the needs of a certain type of customer or related to the needs of a particular job are stored together. This allows for an efficient picking and packing operation but usually requires more storage space than the traditional SKU storage approach.
3. Cross docking—An approach that was pioneered by Wal-Mart in its drive to increase efficiencies in its supply chain. In this approach, product
is not actually warehoused in the facility. Instead the facility is used to house a process where trucks from suppliers arrive and unload large quantities of different products. These large lots are then broken down into smaller lots. Smaller lots of different products are recombined according to the needs of the day and quickly loaded onto outbound trucks that deliver the products to their final destination.

Inventory is spread throughout the supply chain and includes everything from raw material to work in process to finished goods that are held by the manufacturers, distributors, and retailers in a supply chain. Again, managers must decide where they want to position themselves in the trade-off between responsiveness and efficiency.
Holding large amounts of inventory allows a company or an entire supply chain to be very responsive to fluctuations in customer demand.
However, the creation and storage of inventory is a cost and to achieve high levels of efficiency, the cost of inventory should be kept as low as
possible. There are three basic decisions to make regarding the creation and holding of inventory:

1. Cycle Inventory—This is the amount of inventory needed to satisfy demand for the product in the period between purchases of the product.
Companies tend to produce and to purchase in large lots in order to gain the advantages that economies of scale can bring. However, with large
lots also comes with increased carrying costs. Carrying costs come from the cost to store, handle, and insure the inventory. Managers face the
trade-off between the reduced cost of ordering and better prices offered by purchasing product in large lots and the increased carrying cost of the
cycle inventory that comes with purchasing in large lots.
2. Safety Inventory—Inventory that is held as a buffer against uncertainty. If demand forecasting could be done with perfect accuracy, then the only inventory that would be needed would be cycle inventory.
But since every forecast has some degree of uncertainty in it, we cover that uncertainty to a greater or lesser degree by holding additional inventory in case demand is suddenly greater than anticipated. The tradeoff here is to weigh the costs of carrying extra inventory against the costs of losing sales due to insufficient inventory.
3. Seasonal Inventory—This is inventory that is built up in anticipation of predictable increases in demand that occur at certain times of the year.
For example, it is predictable that demand for anti-freeze will increase in the winter. If a company that makes anti-freeze has a fixed production
rate that is expensive to change, then it will try to manufacture product at a steady rate all year long and build up inventory during periods of low demand to cover for periods of high demand that will exceed its production rate. The alternative to building up seasonal inventory is to invest in flexible manufacturing facilities that can quickly change their rate of production of different products to respond to increases in demand. In this case, the trade-off is between the cost of carrying seasonal inventory and the cost of having more flexible production capabilities.

Location

Location refers to the geographical setting of supply chain facilities. It also includes the decisions related to which activities should be performed in each facility. The responsiveness versus efficiency tradeoff here is the decision whether to centralize activities in fewer locations to gain economies of scale and efficiency, or to decentralize activities in many locations close to customers and suppliers in order for operations to be more responsive. When making location decisions, managers need to consider a range of factors that relate to a given location including the cost of facilities, the cost of labor, skills available in the workforce, infrastructure conditions, taxes and tariffs, and proximity to suppliers and customers. Location decisions tend to be very strategic decisions because they commit large amounts of money to long-term plans. Location decisions have strong impacts on the cost and performance characteristics of a supply chain. Once the size, number, and location of facilities is determined, that also defines the number of possible paths through which products can flow on the way to the final customer. Location decisions reflect a company’s basic strategy for building and delivering its products to market.

Transportation

This refers to the movement of everything from raw material to finished goods between different facilities in a supply chain. In transportation the trade-off between responsiveness and efficiency is manifested in the choice of transport mode. Fast modes of transport such as airplanes are very responsive but also more costly. Slower modes such as ship and rail are very cost efficient but not as responsive. Since transportation costs can be as much as a third of the operating cost of a supply chain, decisions made here are very important. There are six basic modes of transport that a company can choose from:
1. Ship which is very cost efficient but also the slowest mode of transport. It is limited to use between locations that are situated next to navigable waterways and facilities such as harbors and canals.
2. Rail which is also very cost efficient but can be slow. This mode is also restricted to use between locations that are served by rail lines.
3. Trucks are a relatively quick and very flexible mode of transport. Trucks can go almost anywhere. The cost of this mode is prone to
fluctuations though, as the cost of fuel fluctuates and the condition of roads varies.

Information

Information is the basis upon which to make decisions regarding the other four supply chain drivers. It is the connection between all of the activities and operations in a supply chain. To the extent that this connection is a strong one, (i.e., the data is accurate, timely, and complete), the companies in a supply chain will each be able to make good decisions for their own operations. This will also tend to maximize the profitability of the supply chain as a whole. That is the way that stock markets or other free markets work and supply chains have many of the same dynamics as markets.
1. Coordinating daily activities related to the functioning of the other four supply chain drivers: production; inventory; location; and transportation. The companies in a supply chain use available data on product supply and demand to decide on weekly production schedules, inventory levels, transportation routes, and stocking locations.
2. Forecasting and planning to anticipate and meet future demands. Available information is used to make tactical forecasts to guide the setting of monthly and quarterly production schedules and timetables.
Information is also used for strategic forecasts to guide decisions about whether to build new facilities, enter a new market, or exit an existing market.
Within an individual company the trade-off between responsiveness and efficiency involves weighing the benefits that good information can provide against the cost of acquiring that information.
Abundant, accurate information can enable very efficient operating decisions and better forecasts but the cost of building and installing systems to deliver this information can be very high. Within the supply chain as a whole, the responsiveness versus efficiency trade-off that companies make is one of deciding how much information to share with the other companies and how much information to keep private. The more information about product supply, customer demand, market forecasts, and production schedules that companies share with each other, the more responsive everyone can be. Balancing this openness however, are the concerns that each company has about revealing information that could be used against it by a competitor. The potential costs associated with increased competition can hurt the profitability of a company.

REFERENCES

—books.google.co.in/books?isbn=0471776343..
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—globalbestpractices.pwc.com/.../Document.aspx?
—en.wikipedia.org/wiki/Innovation
—acclaropartners.typepad.com/my_weblog
—www.va-interactive.com/inbusiness/.../alliance.html
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