Supply Chain Evolution and International Retailing - A Perspective

Supply chain is the backbone of all industries. When it comes to international retailing, all elements of supply chain assume increased significance. In fact it is the supply chain and logistics network that can provide the key differentiation between two competitors and provides the edge for the organisation to establish leadership in the market. Supply chain efficiency in an organisation not only gives it the competitive position but contributes or affects the profitability too. The fact that Supply chain is a trade off between how much and where to hold inventories to how to distribute makes it abundantly clear that Supply chain is the pillar supporting International Retailing.

Traditionally in the industrial era Supply Chain study consisted of processes and strategies aimed at managing raw materials supply for production and physical distribution of product to markets separately. This was the time when manufacturers were product driven. When the concept of customer demand and market demand began to figure and manufacturers changed their focus and orientation from product manufacturing to customer demand satisfaction, the supply chain began to be the focus for organisations. They found that by focussing on supply chain restructuring and control, they could gain huge economies of scale in efficiency as well as cost reduction and savings.

In the past several decades, supply chain concepts have undergone drastic changes and a new concept and definition of supply chain has evolved due to the overall changes in the industries. Introduction of Information Technology and the concept of Organisations concentrating on their core business and outsourcing non core activities to third party vendors perhaps can be considered to be the most important factors that changed the face of supply chain to what it is today.

Introduction of IT in the form of ERP systems and Web enabled technologies including EDI have redefined all aspects of manufacturing and distribution. Industries moved on from manual controlled activities to process driven activities. Further the ERP software provided complete seamless integration as well as total visibility of all processes, stocks as well as logistics operations or in other worlds from end to end of the entire supply chain operations. Technologies evolved further into web enabled modules and could interact with third party systems making it possible to integrate supply chain networks and gain end to end visibility as well as control.

With visibility the most important element of supply chain being the inventory became visible. Organisations could now control when and where and how much inventory to hold and improve market reach. EDI and web enabled technologies enabled the retailers to manage their design, sampling as well as production processes offshore with vendors due to instant data and information sharing made possible by Internet and other technologies. They could now save on time in a major way.

International Retailers like Benetton have benefitted immensely due to their continuous restructuring of operations adapting to the new developments in IT as well as supply chain networks as well as in response to the changing market trends. Benetton owes its success to the strong design and network of suppliers and distribution partners that it has cultivate over the past few decades. On sourcing front, Benetton has practiced successfully the principle of postponement wherein the dying of garment was postponed to the last minute to be able to accommodate the market |customer preferences. It has established increased control over sourcing its textile and thread supplies through vertical integration thus gaining control over its raw material supply stream to control production and distribution. On the marketing front too it has adopted a policy of allowing twenty percent of customisation to suit domestic market while keeping its international flavour and brand design features intact. With operations over 120 countries spanning over 5500 stores, Benetton is expanding its flagship megastores to be able to control its distribution and reach to the markets and establish brand leadership.