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AP Fundamentals: Supply Chain Management

Retail doesn’t simply start and stop at the front door of a retail store. Supply chain management is a critical component of the retail machine. And while we may view the heart of retail as the interactions and events that happen within the store, this support system fuels the way.

Through a complex web of processes and activity, a well-managed supply chain is absolutely essential to any successful retail operation. Merchandise doesn’t magically appear on the shelves of our stores and into the hands of our customers. When we consider that every single piece of retail merchandise must in some way pass through the supply chain network, it’s easy to see the need to implement appropriate controls and protect our interests as product moves through the supply chain.

The asset protection role within the supply chain network has grown considerably in recent years and continues to grow even today. The advancements in technology, the evolution of e-commerce, and the mounting sophistication of retail crime—and specifically cargo theft—will continue to revolutionize the AP role throughout the supply chain network. This must be seen as a critical element of our overall program, and not merely as a series of tasks that occur in a remote building or buildings outside of the public eye.

Supply chain management encompasses the planning, supervision, and execution of the many activities involved in sourcing, procurement, conversion, and logistics management for the business. It involves planning and processing orders; handling, transporting, and storing the products purchased, processed and/or distributed; and managing the inventory of goods in an efficient and coordinated manner.

- Digital Partner -

The primary objective of supply chain management is to fulfill business demands through the most efficient use of resources. By maintaining effective control over inventories and distribution, the supply chain seeks to match and manage supply with demand to reduce costs, improve sales, and enhance company profitability. This is accomplished by following several key principles:

Understanding the business the customer needs, and adapting the supply chain to serve those needs and the system in the most efficient and reliable way. The goal is to tailor the system to find the balance that maximizes profitability.

Customizing the logistics network to meet the service requirements of our various markets. This may influence the size, number, location, ownership, structure, and mission of warehouse facilities. It requires robust planning and support to manage flow-through distribution and time-sensitive approaches to managing the transportation network to include transportation routes, modes of transportation, etc.

Listening to market signals and aligning planning strategies accordingly across the supply chain to ensure consistent supply forecasts and optimal resource allocation. Like all sound sales and operations planning and best practices, this process recognizes the needs and objectives of each functional group but bases final operational decisions on collaborative needs and overall profit potential.

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Strategically locating/warehousing the product close to the customer base and speeding conversion efficiencies across the supply chain. This allows the company to quickly react to market signals and store/customer needs by mitigating lead times along the supply chain and getting the product to the stores and the customer as quickly as possible.

Supply chain management calls for creativity and flexibility. This requires managing supply sources strategically to reduce the total cost of owning goods, as well as the need for our business partners to share in the goal of reducing costs across the supply chain to lower prices and enhance margins.

Developing a technology strategy that supports multiple levels of decision making throughout the supply chain; and gives a clear view of the flow of products, services, and information. Our information technology system must be able to integrate certain essential capabilities:

  • It must be able to manage day-to-day transactions and electronic commerce across the supply chain.
  • It must allow for the integration of valuable information such as demand signals, forecasts, inventory, transportation, and other essential data.
  • It must support inventory management processes, including the quantity and location of product to enhance network efficiencies.
  • It must facilitate planning and decision making by supporting the need to allocate resources efficiently.
  • It must enable strategic, tactical, and operational analysis by providing tools that assist in evaluating distribution centers, other facilities, suppliers, and third-party service alternatives.
  • It must allow for a decision support process which will give guidance in areas that may require additional enhancement for an overall optimization solution.

Adopting appropriate performance metrics that serve to gauge success in getting products to the stores/customers efficiently and effectively. This should include both service and financial metrics.

- Digital Partner -

Organizations are increasingly finding that they must rely on effective supply chain networks to successfully compete in the global retail market, and successful supply chain management requires the integration of activities into key supply chain processes.

To best serve the needs of the business, necessary steps must be taken to gain a better understanding of the overall supply chain process and how the process impacts the business while building on existing company plans and strategies specific to individual aspects of the supply chain to effectively support shrink reduction and profit enhancement efforts.

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