There have certainly been some groundbreaking changes in Hong Kong's retail sector in the last few years. Choices are greater, check-outs are faster and favourite products are rarely, if ever, out of stock. Behind these improvements have been advances in technology and increased sophistication of the methods used by leading players in the logistics industry. With the new emphasis on achieving maximum productivity at minimum cost, supply chain management has also become an essential area of expertise for any retailer whose business depends on the seamless import of products from international markets.
Leading supermarket chain ParkNShop is a case in point. They have operated a separate supply chain department since 1996 and are seen by many as a model of efficiency. "The first principle of our distribution function is to meet the needs of stores and customers," says Keith Bartlett, business process director for ParkNShop. "That means delivering products to the right places at the right time at the lowest possible cost."
A complex worldwide sourcing operation is needed to supply the more than 250 outlets in Hong Kong and China. Around 10,000 TEUs (twenty foot equivalent units) are imported by sea each year and are directly overseen by an in-house shipping and freight management team, which also deals with over 100 tonnes of airfreight per week. To assist, special consolidation centres for wine and imported goods have been set up in the US, Australia and various European countries. Corresponding distribution centres are operated in Hong Kong and China, along with a specialist facility for products like fresh food and wine.
The effectiveness of supply chain management in retail operations can be optimised by automation of the business process. At ParkNShop, for example, purchase orders are created and sent out automatically by the Electronic Data Interchange (EDI) system, which subsequently receives electronic invoices from suppliers via the Internet. This streamlined process helps to ensure a continuous flow of goods and to minimise the need for warehouse space and stock. As a result, the retailer can save storage costs, introduce a wider range of products and boost sales.
The process of replenishment is also automated. Information about the status of stocks and orders is controlled by the Retek system which has been adopted by many modern retailers around the world. "Retek manages a tremendous amount of data about each product at each outlet," Mr Bartlett explains. "It features an extremely sophisticated forecast system. This updates information on faster-selling products on a daily basis, works out a forward forecast and then renews orders." The retailer is also able to exercise better control over product wastage and keep track of expired or missing products.
Computerisation has also greatly improved communications between ParkNShop and its business partners. The company is currently finalising a system that allows suppliers to view stock information and share product forecasts by logging on to the Web. In addition, a new consignment tracking system allows suppliers to track the sale of their products at selected supermarket outlets. "Sales are only identified when products go through the check-out and we pay our suppliers accordingly," Mr Bartlett explains.
ParkNShop is constantly on the lookout for further ways to improve business performance. At present, they are investigating automatic bank payments for vendors and establishing direct electronic links with government departments for customs clearance and the settlement of import duties. "The heart of the supply chain is process management," Mr Bartlett remarks. "We allow our own suppliers to take more responsibility in the shipping and ordering process because business growth is based on solid coordination between all the parties involved."
The opening of the China market provides many opportunities for logistics specialists, but Mr Bartlett believes it is best to set medium-term goals in the area of supply chain management. He still intends to rely on Hong Kong's ideal location, excellent infrastructure and advanced systems when coordinating operations for the stores on the mainland.
Demand is on the rise for talented professionals who are aware of the latest developments in technology. Knowledge of computers and good analytical skills are qualities which ParkNShop expects of all potential recruits. "We look for people who can understand each stage of the business process as well as the whole picture," Mr Bartlett highlights. "Our ultimate goal is to deliver the highest level of service so we expect our staff to be able to analyse customer needs in different circumstances. Good communication skills are a major plus because we need well-rounded people who can justify and explain their ordering decisions both within and outside the company."
To get new recruits off to a flying start, comprehensive training is offered, ranging from general courses on communication and IT training to job rotations in different offices and outlets. Specific programmes on the operation of the supply chain management system are also arranged to complement continuous on-the-job training. "In a fast-changing business like supply chain management, we believe constant evolution to be the key to success," Mr Bartlett concludes.
- Complex worldwide sourcing operation to supply over 250
- EDI system for automated invoicing of suppliers and reordering
- Supply chain improvements sought through better process
- China market expected to create many new opportunities