A supply chain comprises of four or more companies including a wholesale company, an immediate supplier, marking firm, distribution firm and the transport companies working independently. Each such firm has its unique set of objectives conflicting each other. For example, maximum sales turnover and high customer service may conflict with distribution and transport firms.

The result of these conflicting objectives is the delay in the procurement by retail store, non-delivery/late delivery to customers and sometimes lack of quality due to delayed supplies. Therefore, an efficient supply chain system integrates these independent firms and goes into improving the way a retailing firm finds the supplies it needs to display and sell to the customers.

Following are the basic components for supply chain management:

1. Planning:

This is the fundamental step in supply chain management. Retailer needs step by step plan to manage all the resources that not only go towards meeting customer demand for a product or service but key to competitive advantage. Many retailers are under the impression that having a plan is same as having a retail strategy. They must understand that having a plan is not enough to ensure retail success but devising and implementing a set of metrics to monitor the supply chain will ultimately work.

2. Source:


The retailers must carefully select the suppliers that will deliver them goods and services as and when required without compromising with quality. It includes developing proper policies that ensure proper pricing, delivery and payment mechanism suitable to both parties. More specifically, it’s a periodic event that includes the identification and selection of initial commercial agreements with short listed suppliers that either create or reset a relationship.

3. Procurement:

This is a buying and receiving step. This includes ordering, receiving and displaying merchandise in a retail store. This also includes how much merchandise should be kept for display and in warehouse. This is the most critical phase of supply chain management as it requires measurement of quality levels, following planograms, sales turnover and floor staff productivity.

4. Sell:

This involves coordination between the customers’ orders and retailers’ supply to deliver goods and services ordered and setting up billing and invoice system to collect payments and returning balance thereof.

5. Return/Exchange:

Under this heading, we include the items that flow from customer back to the retailer. This is because of defective supplies or different item provided by retailer unknowingly. It also involves customers’ complaints handling issues related to dissatisfaction due to non-performance of the products and delayed supplies.