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Retail Supply Chain Management: Advice from a 3PL

A warehouse worker scanning products with an RFID scanner.
Last Modified: April 5, 2024
Learn the essentials of the retail supply chain and how to manage retail logistics efficiently with an eye toward reducing costs and creating repeat customers.
Joe Weaver
April 4, 2024
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The retail supply chain bridges the gap between production and customers. However, managing this logistics process is no simple task. 

Businesses already oversee financial operations, customer relations, inventory control, and other aspects of commerce. Adding supply chain management to this mix complicates matters even further. Overcoming this challenge requires careful attention and a strategic mindset.

Join us as we review the details of the retail supply chain. We’ll show you the challenges it poses and strategies to optimize this key facet of commerce.

Key Takeaways

  • Retailing represents the final step before products reach consumers. This is true of traditional brick-and-mortar retailing and e-commerce.
  • Effective supply chain management connects manufacturers to consumers, ensures that goods arrive on time, and balances cost with customer satisfaction.
  • Challenges in the retail supply chain include adapting to consumer expectations, ensuring supply chain visibility, and managing commodity-specific issues.
  • To address these challenges, retailers can leverage technology for inventory management, optimize logistics with 3PL partnerships, and use sustainable practices for an eco-friendly supply chain.

What Is the Retail Supply Chain? Key Terms and Definitions

The shipping containers shown in this image are an important part of the retail supply chain.

The Council of Supply Chain Management Professionals states that the retail supply chain connects manufacturers to consumers through a network of:

  • Logistics
  • Inventory 
  • Transportation 

It ensures products arrive on time according to consumer demand, balancing efficiency with cost. This includes production, transportation, warehousing, and distribution in equal measure.

Before going further, let’s clarify some key terms used in retail supply chain management:

  • Supply Chain Management (SCM): The oversight of goods as they’re shipped from supplier to warehouse and, finally, to the consumer.
  • Third-Party Logistics (3PL): Companies that offer logistics services for retailers and other shippers. This can include everything from warehouse storage to final mile delivery and each touchpoint in between.
  • Inventory Management: The process of ordering, storing, and selling a company’s inventory.
  • Distribution Center: A facility where products are stored for distribution to retailers or end users (customers).
  • Lead Time: This usually refers to the time that passes between ordering an item and having it delivered.
  • Omnichannel Fulfillment: A retail strategy that gives customers a unified retail experience across e-commerce and traditional storefronts.
  • Demand Forecasting: The use of historical data to predict product demand. 
  • Reverse Logistics: The process of customers returning goods to retailers. 
  • Cross-Docking: A process by which incoming shipments are unloaded directly onto outbound carriers. This bypasses traditional warehousing. 

Understanding these terms is important for any business owner who wants to optimize their supply chain.

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Where Does Retailing Fall in the Supply Chain?

Retail is the final step in the supply chain before final mile delivery or an in-store purchase from a physical location. However, this step does look different from one retail practice to another. 

There are three principal forms of retail:

  • E-commerce: The retailer uses an e-commerce platform to sell goods directly to consumers, no storefront needed.
  • Brick-and-Mortar: This is what most people think of when they hear the word ‘retail’. Customers purchase goods from a physical location.
  • Omnichannel: E-commerce and traditional storefronts are both employed by the retailer to provide more options to customers.

Simplifying these distinctions, our Director of Fulfillment and Distribution, John Kilbride, states the following:

“In normal supply chain management, we’re shipping you cases of product to a store, and you’re putting it on a counter to sell it. In e-commerce, you send that order to us and ship it to them.”

To illustrate the differences between these three forms of retail, consider the following scenarios.

What is an Example of a Retail Supply Chain?

Warehouse employees sorting packages on a conveyor belt.

First, let’s look at an example that involves a brick and mortar location with no e-commerce involved.

An electronics retailer sources popular items such as smartphones and laptops from manufacturers across the globe. The supply chain steps might look like this:

  • Manufacturing: Products are manufactured in various countries, including China, South Korea, and Vietnam.
  • Transportation: The products are shipped to the retailer’s country via sea or air freight. Once they clear customs, they’re transported to a distribution center via truck or rail.
  • Warehousing: At the distribution center, products are stored, and inventory levels are managed to anticipate consumer demand.
  • Retail: The retailer sells these products through its physical stores, providing options for home delivery or in-store pickup.

In an e-commerce scenario, everything is more or less the same until we reach the retail stage. The customer makes their purchase via a website or app instead of visiting a physical location. This bypasses the traditional shopping experience and shifts the last mile experience directly to the customer’s door.

Omnichannel fulfillment combines both of these practices to give customers options they wouldn’t otherwise have. For instance, you might purchase two pairs of shoes online because you aren’t sure which size will fit you best. 

Once you receive them and find out which pair fits, you bring the other pair to the retailer’s local brick-and-mortar location. You’re refunded instantly with no need to ship the product back.

Each of these examples assumes that everything goes smoothly from order to delivery. In practice, this doesn’t always happen.

Supply Chain Management in Retail

Two warehouse workers examining data on a PC monitor.

Retail supply chain management means handling shipping and logistics issues without losing sight of the customer.

A study conducted by IBM revealed some interesting facts about consumer demands and how supply chain professionals are addressing them. We’ve compiled some of those facts below.

Trends in Retail Supply Chain Management

95 percentPercentage of top-performing supply chain officers using AI and automation.
70 percentHow much more money certain consumers are willing to spend for sustainable goods vs non-sustainable equivalents.

For a deeper understanding of supply chain management in retail, we can look at more of these issues and the trending solutions employed by top-performing businesses.

Retail Supply Chain Issues

Some issues are commonplace across the retail supply chain, regardless of what you’re selling and how you’re getting it to your customers. Along with the previously mentioned customer demands, these include:

  • Cost Control 

Balancing the cost of doing business with quality and speed of service is a challenge for any retailer. Every step of the supply chain incurs costs that retailers must manage without damaging the customer experience.

  • Supply Chain Visibility 

End-to-end visibility is critical for managing the supply chain. This level of transparency is hard to achieve due to a lack of integrated systems between carriers and retailers. The more steps involved, the harder it is to maintain visibility.

  • Going Green

Year after year, more consumers consider a company’s sustainability practices while deciding where to shop. Retailers should ensure their supply chains are environmentally friendly and market those facts to customers accordingly.

Specific challenges can also arise based on factors like the type of product(s) you sell. Among these challenges are:

  • Temperature Control 

Perishable goods such as food and medicine require refrigerated trucks or vans. Shipping these goods at temperatures that are too high or low can cause these products to spoil. This leads to lost revenue and even health risks for consumers.

  • Fragility and Handling 

Delicate items like glassware can be damaged in transit if the proper procedures aren’t followed.

  • Regulatory Compliance 

Heavily regulated goods such as alcohol and firearms must be shipped according to strict regulations.

  • High-Value Item Security 

Items of great value need enhanced security to prevent theft and tampering. Jewelry, luxury furniture, and certain electronics are some examples of such goods. 

  • Seasonal Demand 

Seasonal products, such as fashion apparel and holiday decorations, have a limited window of demand. 

“Understock and overstock: you just don’t really know when your customer base is going to make a change,” said Kilbride. “From a retail end, that’s where the value of a 3PL like we are comes in. You can have these items without filling your store with stuff that’s never gonna sell.”

To successfully handle these issues, retailers need solutions that boost the bottom line and satisfy customer expectations.

Retail Supply Chain Trends and Solutions

Palletized goods stacked on shelves in a warehouse.

Tackling the unique challenges of the retail supply chain requires a multifaceted approach. Thankfully, businesses can use cutting-edge trends and solutions to face these challenges.

Artificial Intelligence

  • “AI is probably the single biggest disruptor I’ve seen,” said Kilbride. “For the larger environments, like big box types or giant online stores, it’s robotics in the warehouse.”

Enhanced Tracking and Monitoring Systems

  • This technology can keep you up to date on the temperature and humidity conditions of your shipments. 
  • Use Internet of Things (IoT) devices to ensure that perishable goods are stored and transported under the correct conditions. Doing so will reduce spoilage and ensuring compliance with health regulations.

Specialized Packaging Solutions

  • State-of-the-art packaging solutions offer superior protection against damage and tampering. 
  • Innovative packing materials and designs can reduce the risk of breakage for electronics and glassware.

Regulatory Compliance Software

  • Make use of software solutions that can manage regulatory compliance across different areas. 
  • These platforms help streamline the documentation process for shipping heavily regulated commodities.

Security Measures and Protocols

  • These can include GPS tracking, secure transportation modes, and vetted logistics personnel. 
  • For high-risk items like firearms, using chain-of-custody protocols provides added security and tracking options.

Optimize Inventory Management 

  • Employ advanced inventory management and forecasting tools that can analyze sales data, market trends, and other factors
  • Use this data to create a Just In Time (JIT) inventory strategy. This saves money by reducing overstock while still meeting customer demands.

Collaboration with Specialized 3PL Providers

  • Work with 3PL providers with expertise and resources tailored to specific commodity requirements. 
  • They can offer specialized warehousing, transportation, and fulfillment services such as temperature control. This keeps perishable goods compliant and in salable condition.

Sustainable Practices and Circular Supply Chains

  • Adopt sustainable practices and work towards building a circular supply chain, especially for food and medicine. 
  • This includes optimizing routes to reduce carbon emissions, using eco-friendly packaging, and implementing programs for recycling or reusing materials.

By using these strategies, retailers can address the unique challenges associated with shipping sensitive, regulated, and high-value goods. 

Retail Supply Chain Management With Fulfillment and Distribution

Many retailers get frustrated trying to balance managing their supply chain with their other responsibilities. A 3PL warehouse can handle this challenge, leaving you free to focus on growing your customer base. That’s where we come in.

Fulfillment and Distribution works with retailers, distributors, and manufacturers to meet the increasing demands of consumers. We can provide expert assistance in every link of the supply chain.

Trust us with services such as:

  • Retail fulfillment
  • Reverse logistics
  • 3PL warehousing
  • And more

Call us today at (866) 989-3082 or get a risk-free quote online. We’re standing by to help you overcome supply chain obstacles and challenges.

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