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In today's business environment, one of the criteria for success is how well we manage our inventories. Both manufacturers and retailers are aware of how excessive inventory, frequent stock-outs, poor item turnover and product obsolescence, can negatively affect profits. More than ever before, retailers and manufacturers are search­ing for ways to manage inventory more strategically and efficiently. Manufacturers have turned to Just-In-Time (JIT) as their answer to the problem of managing invento­ries. They look to JIT to reduce lead time, eliminate waste, produce to customer demand and develop long term rela­tionships with suppliers. In turn this will help manufac­turers to satisfy the customers' requirements with mini­mum levels of inventory and increase productivity.

Retailers, struggling for survival, also must find ways to substantially reduce their cost while improving customer service. One major cost incurred by retailers is the cost associated with carrying and handling inventory which serves to satisfy customer demand. The volume of inven­tory the retailer carries is proportional to the sizes, styles, prices, models, colors, etc., of the products and their total lead time. If lead time were zero, the inventory would be zero. Even though this is not practical, the shorter the lead time, the smaller total the inventory. Retailers are now adopting the philosophy that is referred to as Quick Re­sponse (QR).

This new thinking has caused retailers to reengineer their internal processes to take advantage of this method to manage the material flow. The Quick Response Adage, "Having the right merchandise at the right place at the exact time at the right price" is becoming easier to accomplish.

Definition of Quick Response

The above adage is the retailers equivalent of "Just-In-Time" manufacturing. The objective is to maintain maxi­mum turn and reduce costly markdowns by keeping in stock not only the hottest selling items but also just the right amount of commodity goods to meet customer de­mand. A secondary objective is to reduce administrative cost while employing the Quick Response Technology.

From its inception in the late 1980's Quick Response has taken on a number of definitions. Quick Response has been defined as a philosophical business umbrella, by which retailers decrease inventory levels while gaining greater customer delivery, through innovative use of technology and business partnerships. Quick Response in this sim­plest version is where the retailer sends a replenishment order to the supplier/manufacture via Electronic Data Interchange (EDI).

There are countless definitions of Quick Response. This is understandable because Quick Response is not simply a single function. It is a collection of technological functions that result in the creation of a partnership environment where shifts in consumer demand can be recognized (both by retailer and more importantly the supplier/manufac­turer) and satisfied quickly. It is this strategic partnership between the retailer and the supplier/manufacturer that makes Quick Response successful.

Elements of a Quick Response System

A typical relationship may begin simply with the exchange of purchase orders and invoices via EDI transaction sets (P0's=850 and Invoices=810). In this process, the retailer captures product activity data, analyzes the data and gener­ates a purchase order to the supplier/manufacturer. The supplier/manufacturer receives the EDI order, produces the goods and ships the items. The retailer receives the shipment and applies the quantity against the original purchase order. The supplier/manufacturer would also send the retailer an EDI invoice. This process is typical in many industries.

There are many tools used to create a Quick Response environment. The bedrock of any Quick Response program is data accuracy and rapid electronic transmission of data. Bar Coding appearing on retail items is one very important tool. Another is bar coded shipping containers, and of course, Electronic Data Interchange (EDI). Already com­mon are numerous practices for collecting accurate data on sales, (point-of-sale) inventory shipping and receiving. Shipment container bar coding and scanning are increas­ing rapidly. Of course electronic data capture is replacing manual data capture all along the material flow. These present and emerging technologies have improved the accuracy and timeliness of data. Key to the use of bar coding is the Universal Product Code (UPC) to identify the retailer items, which results in a single methodology to capture sales and inventory. These Universal Product Code data are now at the Stock Keeping Unit (SKU) level.

To Be Continued


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