An analysis into the impact marketing has on the supply chain within the Clicks organisation.

Abstract

This study sets out to ascertain the impact that the marketing initiatives of a retail chain have on the inventory levels of the retail chain. The stock levels of a retail chain are the source of many frustrations. However, through developing an efficient and effective supply of inventory, a viable, competitive advantage is created for the firm. The bullwhip effect is the name given to the fluctuation in demand for specific products that is seen through the supply chain, the discoverer of this effect was J W Forrester. The primary objective of this study is to identify whether the movement of stock through the supply chain identifies with the bullwhip effect where the influences of the marketing initiatives are felt. The secondary objective is to discover what impact the different role players have on this phenomenon, i.e. the store managers, buyers and suppliers. The promotion process is utilised as a tool to drive the strategy of the Clicks organisation, but a side effect is the creation of the Bullwhip Effect. The main problem is that the demand for the item is increased for a specific period and then the demand is either reduced to levels lower than before the promotion or will revert to the same level as before. Sales and stock movement data was recorded and graphically displayed to determine whether the Bullwhip effect was created. This research has highlighted the following problems: (a) There is no direct communication between the role players. (b) Decisions are based on somewhat dubious information. (c) Large promotional orders are based on sales history. (d) There are no real measures in place to rectify any errors. (e) The measuring criteria and KPAs differ between the role players. Recommendations derived from this research include: (f) Increase communication between the category buyers and the store managers. (g) Rather than bulk ship stocks to the stores, introduce a staggered shipping approach. (h) Create a position for a specialist person who can deal with the overstocks. This person would be responsible for reallocating overstocks including returning the overstocks to the DCs. (i) Reduce the number of "lost leaders" and extensive advertising of these "lost leaders" and rather concentrate on more generic advertising.