What is the role of a retailer in supply-chain management?

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A business that fails to understand the environment in which it operates is a business with a very short life span.

“External environment” in a business context refers to all the factors that exist outside of the business’s internal structure. It is, therefore, a vast universe including laws and regulations...

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A business that fails to understand the environment in which it operates is a business with a very short life span.

“External environment” in a business context refers to all the factors that exist outside of the business’s internal structure. It is, therefore, a vast universe including laws and regulations passed and enforced by government, macroeconomic factors involving markets and interest rates, perceptions of the market targeted by the business, availability of skilled labor, and level of competition confronting the business in question. These factors or variables can directly affect a company’s performance and future. Knowledge of interest rates, for example, is essential if management determines it needs to expand or recapitalize. Knowledge of the labor pool is important if a company needs to add or replace staff and cannot afford to increase wages. Knowledge of the market is vital, as without such knowledge management may miss opportunities and indicators of changing tastes and spending habits among consumers. In short, understanding the external environment is not a luxury; it is a necessity.

Companies do not exist in a vacuum. They are part of an interchanging environment in which changes or developments in any one area can affect a company’s performance or viability. Fluctuations in interest rates, increases or decreases in the level of competition, stability of work force, and overall economic growth are all environmental factors of which business owners must be aware if they are to survive.

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Before you explain the role of a retailer, you first need to define supply chain management. In simple terms, supply chain management is a process that monitors the flow of commodities and services from the supplier to the consumer. Supply chain management has two main objectives: to increase customer value and to give those involved in supplying goods a competitive advantage.

The work of the retailer is to deliver the goods to the customer. Retailers receive the goods from wholesalers and producers at reduced prices and then sell them at an affordable price to the consumer. Successful supply chain management depends on the flow of information. Since retailers have direct contact with the consumers, they provide information to the producers. They tell them what consumers want to be changed and what they love about the product. This information allows the producers to modify the products to boost sales.

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Your questions asks about the role of a retailer in supply-chain management.  The fact of the matter is that retailers are a critical partner in supply-chain management.

To better understand why retailers are so critical to supply-chain management, CSCMP, Esper, Waller (2014) write, "Managing customer and vendor relationships is a critical aspect of managing supply chains. In many cases, the collaborative relationship concept has been considered the essence of supply chain management."  Which is to say that without one there is no use for the other, and that the relationship between the two is a vital element of supply-chain management.

Yet, why is this relationship so important?  This can be answered in one word.  Inventory, which is the raison d'etre of both the retailer and the vendor.  This is what joins, unites, and creates the two.  Without inventory, neither the retailer or vendor would have anything to sell. 

So the role of the retailer in supply-chain management is to manage their inventory in such a manner that the vendor can effectively respond to their need. As CSCMP, Esper, Waller (2014) also write,

"To effectively manage the forward and reverse flows in the supply chain, firms have to deal with upstream supplier exchanges and downstream customer demands. This puts an organization in the position of trying to strike a balance between fulfilling the demands of customers, which is often difficult to forecast with precision or accuracy, and maintaining adequate supply of materials and goods. This balance is often achieved through inventory."

Which is to say that fluctuating product demand necessitates retailers to effectively manage their role by predicting customer demands in such a way that they balance fulfilling those demands with an accurate supply of products.  And, inventory is the key to the balance of the reciprocal relationship between retailers and vendors.

 

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