How a Grocery Retailer Could Uses Inventory to Increase the Responsiveness of the Company's Supply Chain?

Inventory is the key to profitability in supply chain. Inventory cycles and components turns assets into profits. The faster inventory turns the greater the profitability. Customers demand that their orders be shipped complete, accurate and on-time. That means having the right inventory at the right place at the right time. Inventory covers all types of businesses-manufacturers, distributors, wholesalers, retailers and others in about every industry.

Role in the Supply chain

Inventory plays a significant role in supply chain. It exists in a supply chain because of a mismatch between supply and demand. The inventory, together with the transport, the location of the production spaces and of the storage represents an important factor that influences the performance of the supply chain. Inventory contains the raw materials, the work in process and all the finished products of supply chain.

Role in competitive Strategy

Inventory plays an important role in a supply chain's ability to support a firms competitive strategy. Competitive edge can be gained on the basis of following

1. Responsiveness

2. Cost efficiency

If a firm wants to be responsiveness, a company can achieve it by locating large amount of inventory close to customers

If a firm wants to be cost efficient, accompany can achieve it by reducing inventory through centralized stocking.

What does Grocery Retailer Means ?

A grocery retailer is a store established primarily for the retailing of food. A grocer, the owner of a grocery store, stocks different kinds of foods from assorted places and cultures, and sells them to customers. Large grocery stores that stock products other than food, such as clothing or household items, are called supermarkets. Small grocery stores that mainly sell fruits and vegetables are known as produce markets or greengrocers, and small grocery stores that predominantly sell snack foods and sandwiches are known as convenience stores or delicatessens.

AGHA'S SUPER MARKET

AGHA'S SUPER MARKET is a grocery retailer located in Karachi, Pakistan. Today's grocery retailers face two major challenges: maintaining market share and staying profitable. The Grocery retail market has become crowded as convenience stores, drug stores, specialty food retailers and large, mega supermarkets compete with traditional grocery stores for the same share of wallet with responsiveness. At the same time, supermarkets face the usual operational challenges of maintaining optimal inventory levels and running an efficient store. To meet these challenges and to be responsive AGHA'S have manages their inventory in a very convenient way for customers.

AGHA's super market deals in multiple products and therefore they are responsive and somewhat cost-efficent.In order to be responsive ,they have huge level of inventory in a stock as a result of which customers get every thing they want when they walk in AGHA's super market.

Cycle inventory

It defines the number of cycles that AGHA's retailer uses for ordering their inventory. AGHA'S purchase in large lots to exploit economies of scale, but with the increase in lot size, however comes an increase in carrying cost. For few products AGHA'S cycle inventory is low and the cost of ordering products is high as a result they achieve responsiveness. These products are fresh meat, vegetables , fruits , cakes and all bakery products. So AGHA'S retailer are managing their inventory for provisioning of fresh raion on daily basis or after every 3rd day due to which huge number of customers prefer to bur fresh ration from them.

At the same time ,for most of the products AGHA'S cycle inventory is high when they are holding lots of inventory to be responsive. So they are using their cycle inventory for tinned food and products such as pampers, packed milk, juices , chocolates , Towels etc in large lots and at dame time ,they are having less inventory for fresh ration in order to be responsive.

Safety Inventory

AGHA'S are managing their safety inventory to achieve maximum responsiveness and to safe them self from shortage of supply to customers