1

Retail logistics: changes and challenges
John Fernie and Leigh Sparks
It is often taken for granted that products will be available to buy in the shops. The cornucopia of goods that is available in a hypermarket or a department store sometimes means that we forget how the products were supplied. We expect our lettuces to be fresh, the new Playstation to be available on launch day and our clothes to be in good condition and ready to wear. With the introduction of e-commerce we have come to demand complete availability and home delivery at times of our choosing. Consumer beliefs and needs have altered. Our willingness to wait to be satisfied or served has reduced and we expect instant product availability and gratification. It should be obvious from this that the supply or logistics system that gets products from production through retailing to consumption has also needed to be transformed. Physical distribution and materials management have been replaced by logistics management and a subsequent concern for the whole supply chain (Figure 1.1). This logistics transformation derives from cost and service requirements as well as consumer and retailer change (see Fernie, 1990; Fernie and Sparks, 1998). Elements of logistics are remarkably expensive, if not controlled effectively. Holding stock or inventory in warehouses just in case it is needed is a highly costly activity. The stock itself is expensive and might not sell or could become obsolete. Warehouses and distribution centres generally are expensive to build, operate and maintain. Vehicles to transport goods between warehouses and shops are expensive, in terms

2

❚

Logistics and retail management

Materials management

Physical distribution management Inventory C O N S U M E R S

Raw materials Storage facilities Parts Packaging Materials Communication Logistics management Finished product