An Ordering Strategy for a Retail Supply Chain - Improving the Ordering Process between a Retail Brand Owning Company and its Distributors and Suppliers

Abstract

The studied retail brand owning company has two problems related to the distributors’ ordering process. The first problem is that many developed products are cancelled and never produced. The second problem is high material handling cost for distributors, due to many received mixed packaging. Therefore, the aim of the study is to propose an ordering strategy that differentiates products based on their ordering characteristics, for the ordering process between the retail brand owning company and its distributors and suppliers, in order to decrease the material handling cost for distributors and the large amount of cancelled products. Generally, more strategies, for retailers’ ordering process than distributors’ ordering process, are presented in literature. Hence, the ordering process is also interesting to study from a research point of view. The process, to create a differentiated ordering strategy, was divided into four parts. Firstly, stakeholders’ requirements were identified for segmentation, order quantity restrictions, and implementation, to detect what aspects of ordering that are most relevant for the study. Secondly, a segmentation of the product assortment was made, to identify product segments that are suitable for having different ordering strategies. The segmentation consisted of four segments. The dimensions of the segmentation matrix are distributors’ risk and demand, which are areas primarily affecting the ordering. Each Ekldimension consisted of an underlying factor. The factor for risk is customer segment, and the factor for demand is first forecast on colour level. Thirdly, order quantity restrictions were examined. Order quantity restrictions, MOQs and multiples, were recommended for all four segments. Finally, the required changes to implement the differentiated ordering strategy were identified. As a result of the differentiated ordering strategy, different product segments will have different order quantity restrictions. By implementing multiples, new packaging instructions, and a higher MOQ for 85 % of the products, the amount of mixed packaging are decreased. As a result of less mixed packaging, the material handling cost for distributors is reduced. Moreover, by a differentiated MOQ and a first forecast on colour level, the large amount of cancelled products will decrease.