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
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
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