Supply Chain Management Key to Cost-Cutting: Study

Leading retailers are expanding the role of supply chain management (SCM) within their organizations to better manage inventory, control costs and maintain first-rate customer service, according to a new report released by the Retail Industry Leaders Association (RILA) and the Auburn University Supply Chain Management Program.

According to “The State of the Retail Supply Chain,” although revenues are stagnant in many retail organizations, costs are viewed as controllable, and those expenses falling under the control of supply chain management executives are receiving strong attention from the top of the organization.

“In this challenging economic climate, the critical role of supply chain management is underscored,” said Casey Chroust, EVP of retail operations for Arlington, Va.-based RILA. “Retailers have responded with strategic investment and process improvements that focus squarely on delivering the products customers want and the value, and service that they deserve.”

The study found that 90 percent of respondents have invested the same or more in supply chain process improvement, 70 percent in management development, 60 percent in technology, and 60 percent in workforce training to improve supply chain efficiency. Additionally, to offset declined consumer spending, 80 percent of supply chain management executives reported focusing their efforts on reducing inventory, with close to 70 percent reporting that they’re placing smaller initial orders.

“Supply chain management has proven to be a competitive differentiator for leading retailers,” said report author Brian Gibson, professor of supply chain management at Auburn University. “Especially in these challenging economic times, supply chain executives are leveraging their internal capabilities to meet organizational cost reduction goals while maintaining excellent customer service.”

Four major themes emerged as leading practices within retail supply chain management, according to the report. Best-in-class retailers:

--Leverage strong distribution networks that are capable of supporting high volumes
--Create flexible capacity to adjust supply chain infrastructure and support unanticipated fluctuation in demand
--Align inside and outside the organization to break down silos and manage processes more holistically
--Continually develop the internal talent pool to enhance the quality of the workforce

These best-in-class capabilities will continue to be important to the future of the retail supply chain as retailers continue to adapt to the changing wants, needs and desires of consumers.

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