Supply chain strategy for retail: "Push v Pull"
At all stages of the supply chain, the right replenishment strategy will depend on the following factors: constraints, lead-time, promised service level and inventory policy. The challenge for a retail supply chain is to implement the right replenishment strategy that balances tradeoffs at each stage of the supply chain delivering the highest service level at the lowest possible cost. This is achieved by implementing any of the following strategies for your retail supply chain.
Retail push versus pull strategy
The PUSH method is typically a centralised planning process which allocates inventory based on aggregated forecast demand for a number of stores. Although the push method can create operational challenges when allocating stock for standard items, it is more suited to allocating stock for:
- Launch planning (1st time distribution)
- Point of Sale and marketing collateral
- Run out stock, clearance lines etc.
The PULL method is one which tends to operate better for retail store environments where the sale is a trigger point for replenishment and calculated from number of algorithms that the system generates. Optimisation is achieved when items are rounded to pack qty’s and unit loads, rather than sell one v replace one
Pull systems for a retail supply chain
- Sell One Replace One: As products are scanned at the store till(s), the sales data is polled at regular intervals and then transmitted to the main enterprise system. An automatic replenishment order is generated for the relevant items which are picked and despatched to the store(s). Depending upon the type of stock being replenished, this method tends to have the highest cost to serve.
- Min/Max replenishment: This method requires each item to have a set minimum and maximum level for replenishment. When the minimum level is reached, a replenishment order is generated automatically. By rounding the pick requirement to a pack size, resource utilisation is more effective along with speed to floor. The challenge is always around matching shelf capacity and presentation. As the item may be occupying several locations within a store, excess stock or lower stock levels can occur due to the high sell through rate during the replenishment cycle.