Modernization of International Retailing Industry

International Retail Industry’s evolution can be traced to the period around 1990s with the ECR - Efficient Consumer Response initiatives that led to the evolution of new supply chain trends and gave the industry a new dimension. Europe is said to have spearheaded the evolution closely followed by US. The implementation of new supply chain solutions and change of trends of retailing was successful and augmented in Europe while in the US it took a while for the changes to take place.

Prior to 1990s, the retail industry was heavily dependent upon the suppliers and manufacturers who exercised control over the transactions. The introduction of ECR initiatives saw a change in the power dynamics wherein the logistics and purchase decisions shifted from Suppliers to Retailers. These changes came about mainly due to the new ECR concepts that were brought about in the Retail segment. The entire supply chain focus shifted to being process driven. The concept of product replenishment and category management were the concepts that changed the entire process flow, replacing the earlier concepts of inventory management and dependence upon the consignment supplies. Further implementation of the pull system gave way to emergence of JIT.

Thus changes in the processes called for major changes to supply chain models to support the new processes. Retailers began to invest heavily into building infrastructure to own and manage logistics functions. They invested into creating Regional Distribution Centres to stock inventories and centralise the delivery system as well as implement ‘On Call Delivery’ system to the stores. These initiatives brought about a lot of benefits and advantages in terms of inventory control, control over wastage and spillage as well as reduced inventories. Thereafter we see the development of Warehousing and Logistics growing as specialized areas of operation that yielded major advantages to the entire supply chain. Developing specialised Distribution and Warehousing as well as Logistics solutions called for huge investments as well as management focus. Thus began the trend of Third Part Logistics Services or the LSP services. Being in dependant as well as highly specialised in inventory and distribution operations, the LSPs could focus on providing innovative and efficient services besides taking off the investments from the Retail Company’s balance sheets. In the beginning the LSPs were setting up distribution services and temperature controlled warehouses for specific retail clients. Few years down the line, the industry matured enough to be able to provide consolidated Regional Distribution Centres for all Retailers where the inventory or the space could be charged based on occupancy and services provided.

All of the above mentioned major changes in the evolution of supply chain solutions for the International Retail industry were enabled mainly by the development and availability of technology. EDI and Electronic Funds Transfer ushered major changes in the supply chain providing major cost benefits to the retailers. Availability of warehousing soft wares to drive warehouse operations and the ability to interface the same with the Retailers inventory systems coupled with the ability to exchange real time data on transactions and documents brought about increased efficiency and reduced costs of operations.