The Supply Chain: Management Is Key

An integrated supply chain management system can reduce inventory levels, lower labor costs, increase storage capacity, increase customer service and choice for customers, increase inventory throughput capacity, and make better use of space in stores and warehouses.

Prompted by several major business concerns, many retailers are focusing on supply chain management—achieving predetermined service levels to customers by effectively managing all the relationships in the supply chain. For example, one mass merchant has an initiative in place to improve in-store merchandise availability, especially for its top 1,000 items.

Among those concerns are pressure on margins, an increasingly competitive and complex marketplace, difficulty in managing a large vendor base, shrinking product life cycles, and customers demanding better availability and choice.

An effective, integrated supply chain management system can reduce inventory levels, lower labor costs, increase storage capacity, increase customer service and choice for customers, increase inventory throughput capacity, and make better use of space in stores and warehouses.

Well-implemented supply chain management processes result in less inventory in the supply chain overall and inventory that is in the right place, where it will sell. Costs may decrease or rise, but higher sales and fewer markdowns compensate for price fluctuations, so overall profitability rises.

An important part of an effective supply chain management solution is warehouse management software that extends into systems for controlling the movement and storage of materials within a warehouse through directed picking, replenishment, and putaway. Also included are customs handling; tracking, tracing, and alerts in the supply chain; transport planning; complex capacity planning; slotting optimization; control of material handling equipment; and order management.

Solution Architecture

In conjunction with leading business partners, Sun Microsystems can help implement supply chain solutions. The accompanying chart shows where supply chain management or warehouse management systems fit into a retailer's overall architecture. Sun provides the server for the warehouse management application, the thin client devices, and system integration services, while Sun's partners provide the warehouse management software.

Effective supply chain management enables reduced inventory levels, increased sales, and lower markdown rates. Profitability should improve, although costs per unit may actually increase.

Major Trends in Supply Chain Management

• Radio frequency communications between tag and reader to reduce out-of-stocks, reduce shrinkage and fraud, improve productivity, and enhance POS efficiency
• Cross-docking to reduce the number of stock-outs and reduce inventory holding
• Floor-ready merchandise to increase the speed of delivery to the sales floor
• Advanced shipping notes to detail contents of consignments and highlight shortages
• Shipment container marking to speed up movement through the warehouse
• Back hauling/factory pricing to reduce costs in the supply chain
• Voice technology to reduce errors
• ABC warehouse layout to maximize warehouse efficiency
• Paperless warehousing
• Roll cage sequencing
• Consignment inventory ownership by vendor (selective)
• Automated sorting
• Activity-based costing
• Outsourcing
• Multichannel environment support
• Real-time systems