RETAIL LOGISTICS

S.Y.B.COM ‘D’
M.E.S COLLEGE OF ARTS AND COMMERCE
SUB:-RETAIL MANAGEMENT
I.S.A 2ND
 RETAIL LOGISTICS
It is often taken for granted that products will be available to buy in the shops. The cornucopia of goods that is
available in a hypermarket or a department store sometimes means that we forget how the products were
supplied. We expect our lettuces to be fresh, the new Play station to be available on launch day and our clothes to
be in good condition and ready to wear. With the introduction of e-commerce we have come to demand complete
availability and home delivery at times of our choosing.

Consumer beliefs and needs have altered. Our willingness to wait to be satisfied or served has reduced and we
expect instant product availability and gratification. It should be obvious from this that the supply or logistics
system that gets products from production through retailing to consumption has also needed to be transformed.
Physical distribution and materials management have been replaced by logistics management and a subsequent
concern for the whole supply chain.

This logistics transformation derives from cost and service requirements as well as consumer and retailer change.
Elements of logistics are remarkably expensive, if not controlled effectively. Holding stock or inventory in
warehouses just in case it is needed is a highly costly activity. The stock itself is expensive and might not sell or
could become obsolete. Warehouses and distribution centers generally are expensive to build, operate and
maintain. Vehicles to transport goods between warehouses and shops are expensive, in terms of both capital and
running costs. There is thus a cost imperative to making sure that logistics is carried out effectively and efficiently,
through the most appropriate allocation of resources along the supply chain.

At the same time, there can be service benefits. By appropriate integration of demand and supply, mainly through
the widespread use of information technology and systems, retailers can provide a better service to consumers by,
for example, having fresher, higher quality produce arriving to meet consumer demand for such products. With the
appropriate logistics, products should be of a better presentational quality, could possibly be cheaper, have a
longer shelf life and there should be far fewer instances of stock outs. Reaction time to spurts in demand can be
radically improved through the use of information transmission and dissemination technologies. If operating
properly, a good logistics system can therefore both reduce costs and improve service, providing a competitive
advantage for the retailer.

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THE LOGISTICS TASK

Retailing and logistics are concerned with product availability. Many have described this as ‘getting the right
products to the right place at the right time’. Unfortunately however that description does not do justice to the
amount of effort that has to go into a logistics supply system and the multitude of ways that supply systems can go
wrong. The very simplicity of the statement suggests logistics is an easy process. As the boxed example shows,
problems and mistakes can be all too apparent. The real management ‘trick’ is in making logistics look easy, day in
and day out, whilst reacting to quite volatile consumer demand.

The logistics management task is therefore initially concerned with managing the components of the ‘logistics mix’.
We can identify five components:

• Storage facilities: these might be warehouses or distribution centers or simply the stock rooms of retail stores.
Retailers manage these facilities to enable them to keep stock in anticipation of or to react to, demand for
products.
• Inventory: all retailers hold stock to some extent. The question for retailers is the amount of stock or inventory
(finished products and/or component parts) that has to be held for each product, and the location of this stock to
meet demand changes.

• Transportation: most products have to be transported in some way at some stage of their journey from
production to consumption. Retailers therefore have to manage a transport operation that might involve different
forms of transport, different sizes of containers and vehicles and the scheduling and availability of drivers and
vehicles.

• Unitization and packaging: consumers generally buy products in small quantities. They sometimes make
purchase decisions based on product presentation and packaging. Retailers are concerned to develop products that

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 are easy to handle in logistics terms, do not cost too much to package or handle, yet retain their selling ability on
the shelves.

• Communications: to get products to where retailers need them, it is necessary to have information, not only
about demand and supply, but also about volumes, stock, prices and movements. Retailers have thus become
increasingly concerned with being able to capture data at appropriate points in the system and to use that
information to have a more efficient and effective logistics operation.

GOALS OF LOGISTICS
 Economy in movement of goods (external internal movement)
 Accuracy in order management
 Time management of shipments and deliveries
 Shelf-life and replenishment of perishable goods (Eg.Egatematrix)
 Coordination with suppliers and third-party service providers (Eg.Verisign, Gati)
 Backup plans and return shipments

PERFORMANCE GOALS 
Relate costs incurred to specific logistics activities
Place and receive orders as easily, accurately, and satisfactorily as possible
Minimize the time between ordering and receiving merchandise
Coordinate shipments from various suppliers
Have enough merchandise on hand to satisfy customer demand, without having so much inventory that
heavy markdowns will be necessary
Place merchandise on the sales floor efficiently
Process customer orders efficiently and in a manner satisfactory to customers
Work collaboratively and communicate regularly with other supply chain members
Handle returns effectively and minimize damaged products
Monitor logistics’ performance
Have backup plans in case of breakdowns in the system

Retail Logistics Basics

In the highly competitive retail marketplace, typified by changing consumer preferences, different formats as well
as large geographical stores spread, the onus on retail logistics to ensure efficiency and cost margins is quite
substantial. Hence, it would not be inappropriate to state that oftentimes the viability of a retail operation hinges as
much on achieving efficient logistics and supply chain as it does on attaining success in the front end.

The compulsion of retailers, which necessitate seamless logistics function, can be summarised as follows:

 To ensure perfect coordination among various entities involved in the supply chain such as suppliers,
manufacturers and vendors.
 To ensure that consumers get the right product at the right time and at the right place.
 To ensure that supply to retail stores across various geographies is seamless and consistent.
 To be flexible in order to allow for changes in the product mix owing to changes in consumer demand.
 To constantly improve operating margins.
 To achieve profitable and sustainable growth of retail operations in the long run.
 To achieve optimal inventory levels and reduce wastage of products.
Components

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 Traditionally, retail logistics had two major components – transportation and storage. But with the increasing
complexity of modern retail supply chains, the scope of logistics has also expanded beyond the traditional
definition. An efficient retail logistics function has become a significant instrument for retailers to ensure
competitive advantage, and its scope now includes plans and processes that allow the back end to effectively meet
consumer demand. Currently, retail logistics is a holistic concept that involves coordinating the following main
processes among others:

 Inbound and outbound transportation

 Warehousing
 Packaging and labeling
 Shipment consolidation
 Tracking/Tracing the products
 Inventory management
 Quality checking
 Planning for cost control
 On Point • Retail Distribution Warehousing 5
 Distribution of merchandise
 Reverse handling and flow of products (reverse logistics)

The main processes and activities of retail logistics listed above are aimed at making sure that the shelves in a
retail front-end store are never vacant and are filled with the right products at the right time and at the right place.
Apart from maintaining an efficient supply chain, which keeps the stores filled with the correct products, it is also
important that retail logistics increases operational efficiencies to allow retailers to run a viable retail operation.

Delivery Models

For decades, retail logistics has evolved through various models. Years ago, retailers and manufacturers had to rely
on a traditional distribution channel composed of transporters, clearing and forwarding agents and stockiest. Since
mid-1990s, the emergence of alternative modern distribution channels has allowed retailers to choose from a range
of logistics service providers to achieve an efficient storage and flow of products.

As of now, there are four logistics delivery models that retailers can choose from:

 Entirely self-managed logistics and warehousing network

 Partly outsourced to traditional service providers like transporters, clearing and forwarding agents and
stockiest
 Partly or completely outsourced to third-party logistics service providers (otherwise known as PL players)
 Completely outsourced to fourth-party logistics providers (otherwise known as 4PL players)

Whilst the above four are broad delivery models available to manufacturers, retail chains and retailers, it has been
observed through interactions with retailers and warehouse users during this study that oftentimes, hybrid models
of distribution are preferred. For example, a retail chain may choose to manage the transportation of its goods
while the warehousing may be outsourced to a PL provider. The first two models listed above are more or less self-
explanatory, while the following definitions further explain the 3PL and 4PL delivery models:

3PL – A third-party logistics provider (3PL) is an entity that provides services to companies for some or all of their
supply chain management functions. PL providers typically specialize in integrated warehousing and transportation
services that can
be scaled and customized to the client’s needs based on market conditions and the demands and delivery service
requirements for their products and materials. In India, a large number of professional 3PL  players like DRS, Gati,

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DHL, OM Logistics, Indo Arya, Sical Logistics, Reliance Logistics, SafeExpress, Agility, M J Logistics, AS Cargo,
Kuehne+Nagel, Panalpina, Expeditors and AFL among others have been providing services to retailers and other
sectors for their logistics requirements.

4PL – As retailing in India is expanding and reaching new heights in terms of both geographical coverage and
volume of products, there is an emerging requirement for an integrating logistics firm to assemble various
resources, capabilities and technologies of its own as well as other companies to provide a complete logistics
package to clients. Such firms are typically known as 4PL players. Typically, the resources used by a 4PL player are
of other service providers, and its fundamental role is to manage all the PL players and other independent agencies
employed for a logistics function, providing a turnkey logistics solution to retail chains and to other sectors.

Whilst this model is quite prevalent in developed countries, the 4PL sector in India is at a nascent stage, with a few
players emerging such as Future Logistics (which is a 4PL for Future Group). In order to better comprehend and
appreciate the respective range of services under each of the outsourced delivery models, the table below is a
compilation of the typical spread of services delivered under each respective model. It is pertinent to note that the
table below is an indicative compilation based on the feedback received from meetings with logistics service
providers and not a comprehensive listing of all possible logistics services.

The organized PL sector in India has been consistently growing over the last few years, mirroring the growth
witnessed in the retail logistics sector overall. The sector comprises of global as well as Indian companies that are
ramping up their operations on a Pan-India level to cater to retail as well as other sectors. According to a
Technopak study, the total outsourced logistics revenue in 00 was INR 1,151 billion, of which 5% or INR 58 billion
was attributed to revenue gained from the PL sector. Revenue generated from retail 3PL was estimated at INR
billion. The retail PL revenue has been predicted to continue to grow at a CAGR of around 1 % for the next few
years.

The entry of large 3PL players has led to significant improvement and organization within the retail logistics and
modern distribution warehousing sector in the country. Over the years, the range of services of PL players has
expanded to cover the service lines depicted in the table below. In some cases, it has been observed that PL
players have even gone beyond their main service offerings to provide logistics network planning to clients as well.

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EXAMPLE OF RETAIL LOGISTICS- GATI

Gati — an analyst, consultant and SCM partner

rolled into one
The focus is on integrated logistics solutions. Gati's transport infrastructure, IT systems, cutting - edge technology
solutions and an intensive knowledge of India allows it to tailor its products to meet every customers' unique needs. Gati
offers a wide range of options and does not waver in its focus on quality, reliability and speed.

Gati logistics package

This ready - to - use package comes with an instant distribution network and a wide system of storage locations and
distribution channels. It is ideal for clients looking to distribute goods from multiple locations and those with changing
distribution needs. For an SME or an MNC entering the Indian market, Gati Logistics is the right choice.

The unique features of this package are:

'Made Ready' distribution channel

Standardisation at all locations

Inventory location close to your customer

Entry into new markets without a large capital investment

Shelf Space at over 200 locations

Integrated logistics 
Gati provides customised solutions by integrating all the four stages of your business — procurement, production,
distribution, after sales service and reverse logistics.

Effective SCM has the following benefits

Reduces transportation management time and costs

Increases profit margins and overall profitability

Integrates transportation procurement, planning and execution

Improves on - time deliveries and customer service

Enables global supply visibility and maximum efficiency for competitive advantage

Strengthens relationships with suppliers and carriers

Enables the movement of goods across modes and around the globe

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The Gati approach

A systematic and effective four - stage approach towards the logistics requirements of clients. Gati studies their needs and
designs customised solutions for all its clients The four stages involved are depicted as follows:

 
Process flow

Gati warehousing — logistics solutions made to order

Logistics and supply chain management are an integral part of the businesses. A sharp and steady focus on these
key functions has helped Gati gain a competitive edge over the rest of the market. In recent times Indian industry
has begun to acknowledge the strategic importance of logistics and warehousing functions to their businesses. And
Gati's expertise and experience in this area is being harnessed by many companies.

Gati offers its services as a 3PL or a third party logistics provider. A 3PL provider allows a company to:

Concentrate on core competencies

Create greater competitive flexibility and release working capital

Get lean and agile

Exploit the better know - how and scale efficiencies of logistics companies

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Maximum space, minimum investment

Gati's warehousing facilities consist of completely modern storage systems and material handling equipment. Thus,
Gati is able to offer customers very high levels of operational efficiency.

With branches in all metros and mini metros, Gati has more than 200 storage locations across India.

With over 600,000 sq. ft. of warehousing space spread all over the country and serving multiple clients, Gati is able
to offer many more customer friendly solutions:

Flexible hiring options

Modern racking and handling equipment

Reduction in material breakage, damage etc

Engineering solutions to design and build warehouses as per requirements

Warehouse management system

Warehouse management system

Manage inventory in real - time. Gati's web-based warehouse management system provides both functionality and
flexibility for customers to manage warehouse operations. The web - based WMS can be updated online thus
allowing customers a real - time picture of their inventory. The WMS gives precise, detailed, real - time information
about every aspect of customer operations.

The WMS application has the functionality to take care of multi - company / multi - location capabilities. And, the
multi - warehouse system has been designed so that every warehouse can write its own rules.

The central focus is the powerful inventory control and management system - making the management of diverse
inventory holdings less complex and more organized.

The web - based WMS has resulted in:

Improved inventory accuracy

Decrease in order processing time

Improved customer service levels

Elimination of put away and picking errors

Less returns

Reduced shipping errors

Capacity utilization

Industry solution
 

Industries where we excel

Consumer Goods 
Retailers are pushing for more value-added services (VAS). Exceptional customer service has become a requirement for
success. And, skilled workers are increasingly hard to find. All of these factors challenge the consumer goods industry. To
remain competitive, your business must adapt quickly to industry demands. Gati's innovative solutions help you to

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 transform quickly to the changing environment.

Food & Beverage

Gati's logistics' solutions for perishable commodities enables support of a demand-driven supply chain to help you adapt
operations to volume levels and delivery schedules as customer requirements change.

Engineering / Electronics
High-tech engineering and electronics' manufacturers, distributors and suppliers compete in an environment that's fast-
paced and in constant flux. Gati's effective execution of operations and real-time information provides increased
profitability and reduced inventory levels.

Industrial Goods
The industrial/wholesale industry is ever-changing and driven by consumer demand. Increased speed, reduced costs,
more accurate fulfillment and value-added services are everyday requirements. To keep pace with shortened lead times
and growing competition, Gati provides you with real-time control and visibility into what's coming, and when to expect
it.

Healthcare / Life Sciences 

The increasing number of patient safety regulations and the illegal practice of drug counterfeiting make it critical for
companies in the life sciences industry to improve supply chain security. Combined with heavy restructuring and
consolidation that has increased competition, the integration and management of accurate, real-time data is more
challenging than ever. Gati empowers healthcare companies with cutting-edge logistics solutions to meet global and
national strategic challenges.

Computer & IT Peripherals

The industry in characterized by a rapidly changing environment with new models appearing in a very short span of time.
Focus should be on increasing the productivity and performance of computer hardware supply chain. Gati's solutions for
forward & reverse logistics can be used to gain competitive edge in the market.

Retail 
Expanding distribution channels, increasing globalization and growing customer service expectations are some of the
factors that make the retail and direct-to-consumer industries exceptionally challenging business environments. With
Gati's multi-modal reach, companies can remain closer to the end-user, provide on-time information and cut costs.

Fashion & Garments

In the booming fashion business, we make sure that new fashion is not only displayed, but can be bought and worn the
world over. We, at Gati, ensure that your products reach the outlets on time and in impeccable condition.

Automotives 
The automotive industry has always been the most demanding of all in terms of achieving the highest quality standards
in their logistics processes. Gati's efforts have been driven by the need to reduce costs and the desire to respond quickly
to customer demand.

Tactical and Confidential Projects 

Gati's solutions ensure that your goods are secure. You can track and monitor your goods at all times. It reduces in-
transit time and increases supplier network responsiveness. We respond quickly to the industry's unpredictable demand.
Our logistics solutions provide the visibility you need to execute on tactical and confidential operations.

Some facts about

Gati covers 3.2 lakh

kilometers every day
Connects to 622 out
of 626 districts in
India
First Indian logistics
firm to set up in Hong

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 Kong
Massive investments
on IT and
warehousing

Distribution of GATI

Over the last decade, Gati has developed competence in ensuring cusotmer centric cargo mangement solutions. It
is the only cargo management organisation in India to make an effective use of multi-modal connectivity,
employing all four modes of transport - Road, Air, Rail & Sea. It has 5 rail transit centres, 9 Air Transit Centres and
21 surface transit centres across the countries which together cover a vast web of 3.20 lakh kilometres daily with a
fleet of nearly 2000 surface vehicles. This is supported by a deep and wide network that has enabled access to the
remotest corners of the country.

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Push–pull strategy

The business terms push and pull originated in the logistic and supply chain management, but are also widely used
in marketing.

A push-pull-system in business describes the movement of a product or information between two subjects. On
markets the consumers usually "pulls" the goods or information they demand for their needs, while the offerers or
suppliers "pushes" them toward the consumers. In logistic chains or supply chains the stages are operating
normally both in push- and pull-manner. The interface between push-based stages and pull-based stages are called
push-pull boundary or decoupling point.

Push strategy

Another meaning of the push strategy in marketing can be found in the communication between seller and buyer.
In dependence of the used medium, the communication can be either interactive or non-interactive. For example, if
the seller makes his promotion by television or radio, it's not possible for the buyer to interact with. On the other
hand, if the communication is made by phone or internet, the buyer has possibilities to interact with the seller. In
the first case information is just "pushed" toward the buyer, while in the second case it is possible for the buyer to
demand the needed information according to his requirements.

 Applied to that portion of the supply chain where demand uncertainty is relatively small
 Production & distribution decisions are based on long term forecasts
 Based on past orders received from retailer’s warehouse
 Inability to meet changing demand patterns
 Large and variable production batches
 Unacceptable service levels
 Excessive inventories due to the need for large safety stocks
 less expenditure on advertising than pull strategy

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Pull strategy

In a "pull" system the consumer requests the product and "pulls" it through the delivery channel. An example of
this is the car manufacturing company Ford Australia. Ford Australia only produces cars when they have been
ordered by the customers.

 Applied to that portion of the supply chain where demand uncertainty is high
 Production and distribution are demand driven
 No inventory, response to specific orders
 Point of sale (POS) data comes in handy when shared with supply chain partners
 Decrease in lead time
 Difficult to implement

References:

 http://www.sclgme.org/shopcart/Documents/RetailLogisticsChangeandChallenges

 http://en.wikipedia.org/wiki/Push%E2%80%93pull_strategy

 http://propertybytes.indiaproperty.com/index.php/newsbytes/retail-logistics-basics

 http://www.gati.com/services_logistics_warehousing_supply_chain_management_industry_solutions.jsp

 http://www.gati.com/services_logistics_warehousing_supply_chain_management.jsp

 http://www.gati.com/services_logistics_warehousing_supply_chain_management_process_flow.jsp

 http://www.authorstream.com/Presentation/ancharlu-129781-logistics-retailing-2-entertainment-ppt-
powerpoint/

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