Supply Chain Managment - Indian Retail Industry

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Supply

ChainManagement

Retail Industry1


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Presentation Flow

Retail Snapshot

Supply Chain Management - Retail Industry

Why Supply Chain Management is Important in Retail Industry

Basic Elements & Structure of Supply Chain

Information Technology Enabler of SCM in Retail Industry

Flow of Supply Chain & Planning Decision

Importance of Supply Chain

Measuring Supply Chain Performance

Benefits of Supply Chain

Case Study : Wal-Mart

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Retail Snapshot

India is one of the top five retail markets in the world byeconomic value

Indian retail sector accounts for 22% of the country's GDP andcontributes to 8% of total employment .

The Indian retail market is estimated to be US$ 450 Billion( less than 10% is Organised Retail & 90% unorganised ,2010)

Hypermarkets, currently accounting for 14% of mall space areexpected to witness high growth

In India, Organised Retail CAGR is 30%

India has highest number of unorganised retail outlets perperson (7/thousands)

India spends close to 13% of its GDP in logistics, which is farhigher than the efficient level of 8%.

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Key Players in Retail

Future Group

Reliance Retail Limited

Trent, Tata Group

Landmark Group (Lifestyle)

K Raheja Corp Group

AV Birla Group

RPG Group

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Opportunity Lost

AVAILABILITY IS AN INCREASINGLY IMPORTANT COMPETITIVE DIMENSION

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Supply chain management is a set of approaches utilized to efficientlyintegrate suppliers, manufacturers, warehouses, and stores, so thatmerchandise is produced and distributed at the right quantities, to theright locations, and at the right time, in order to minimize system wide costs

while satisfying service level requirements.

Management beyond the borders of an organization

UpstreamThe upstream business partners are the external organizations

that supply products or services to an organization.

DownstreamThe downstream supply chain is the organizations externaldistribution channels, processes, and functions that the productpasses through on its way to the end customer.

Supply Chain Management-Retail Industry

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Why SCM is Important in Retail

Demanding customers

Shrinking product life cycles

Proliferating product offerings

Growing retailer power in some cases

Doctrine of core competency

Emergence of specialized logistics providers

Globalization

Information technology

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Basic elements of a retailing supply chain

ACTIVITY

Sourcing materials

Producing the product

Wholesale distribution

Retail distribution

INSTITUTION

Materials supplier

Producer

Wholesaler

Retailer

Consumer

OTHER ACTIVITIES

Warehousing, transport to

producer

Design, warehousing, selling

through agents, transport to

wholesaler

Warehousing, transport to

retailer, cash and carry

Regional and local distributio

centres, transport to store/

home

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SCM Functional Areas Retail Industry

Indian Retail Sector

Food Retailers

Health & BeautyProducts

Home Furniture &Household Goods

Clothing &Footwear

Durable Goods

Leisure &Personal Goods

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SCM Functional Areas - Contd.

A supply chain consists of all stages involved, directly or indirectly, in

fulfilling a customer request.

Example: A detergent supply chain

Customer

ChemicalManufacturer

Manufacturer(P&G)

Reliance RetailDC

Reliance FreshStore

PlasticProducer

TennecoPackaging

Paper

Manufacturer

Timber

Industry

Oil

Industry

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Supply Chain Structure

Reliance Retail

Information Flow

Raw Materials

RETAILERFACTORY DC RDCSUPPLIER

Finished Goods

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IT - A Supply Chain Enabler for Retail Ind.

Information links allaspects of supply chain

E-business replacement of physical

business processeswith electronic ones Electronic data

interchange (EDI) a computer-to-

computer exchange ofbusiness documents

Bar code and POS Data creates an

instantaneouscomputer record of a

sale

Radio frequency identification(RFID)

It can send product datafrom an item to a reader viaradio waves

Internet

Allows companies to

communicate with suppliers,customers, shippers andother businesses around theworld, instantaneously

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Supply chain Flow Material/merchandise flows

Information flows

Financial flows

Supply chain management is themanagement of flows betweenand among supply chain stagesto maximize total supply chainprofitability

Supply Chain Flow13


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Example of a Simplified Supply Chain

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Merchandise Flow

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Information Flow16


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- - - - Merchandise flow Information flow

Buyer

Vendor

Stores

Distributioncenter

Customer

Sales info

Information and Merchandise Flows17


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Supply Chain Planning

Demand PlanningMaterial Requirement PlanningDemand Forecasting

Supplier Plant Warehouse Logistics Retailer

Production

Plan

Raw Material

Requirement

Order Management

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Supply Chain Planning Decisions

Strategic

Supply Chain Design

Resource Acquisition

Long Term Planning

(1 Year ++)

Tactical

Production/DistributionPlanning/Demand

Forecasting

Resource Allocation

Medium TermPlanning (Qtrly,Monthly)

Operational

Shipment Scheduling

Resource Scheduling

Short Term Planning(Weekly, Daily)

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OPERATIONAL

TACTICAL

STRATEGIC

Procurement DistributionManufacturing Logistics

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Supplier Selection

Allocation of

Suppliers to the

Plants

Location, Number,

Capacity of Plants

What Products to

Produce

Which Plants to

Produce them

Location, Number,

Size of Warehouses

Mode of Shipment

Port Selection

Procurement

Policy

Warehouse Allocation

Inventory Decisions

Manufacturing

Policy

Customer Allocation

Distribution Policy

Vehicle Routing

Fleet Size

Production Schedule

Scheduling on

Machines

Workload Balancing

Finished Goods

InventoryVehicle Routing

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Strategic importance of SCM in Retail

Total delivered Cost Management

End-to-End Visibility

Total Product Identification & Regulatory Compliance

Dynamic Routing

Variability Management

Integrated Workflow Integrated Planning & Execution Platform

Financial Supply Chain Management

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SCM Across the Organization

SCM changes the way companies do business.

Accounting shares SCM benefits due to inventory level

decreases

Marketing benefits by improved customer service levels

Information systems are critical for information sharing through

PSO data, EDI, RFID, the Internet, intranet, and extranets

Purchasing is responsible for sourcing materials

Operations use timely demand information to more effectively

plan production schedules

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Cost Optimization SCM

An Integrated Supply Chain Management can help eliminate the

Intermediaries & Company can save upto 37.5%

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Cost Optimization - SCM

Improve return on investment

Improve product availability

Net profit = Net profit x Netsales

Total assets Net sales Total

assets

Reduce Costs! Increase Efficiency!

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Measuring supply chain performance

Traditional measures include:

Return on investment

Profitability

Market share

Revenue growth

Additional measures

Customer service levels

Inventory turns

Weeks of supply

Inventory obsolescence

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Benefits of SCM

Cost and Financial

Retailers

Manufacturers

Distributors

Streamlined inventories and

reduced costs

Reduced errors and

redundant laborIncreased visibility of all

business transaction

Improved return on inventory

investment

Optimized transportation

costs, routes, and load times

Increase cost savings from

outsourcing for low cost

materials

Improvements

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Benefits of SCM28

Processes

Improvements

Manufacturers

Improved forecast accuracy

as well as resource and

distribution planning

Improved manufacturing andreplenishment cycle time

Enhanced manufacturing

scheduling

Increased effectiveness of

planning and decision making

Improved overall efficiency inproduction

Enhanced a seamless multi-

channel shopping

Reduced supplier base


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Benefits of SCM

Services

Improvements

Retailers

Reduced out-of-stock

situations

Improved order fill rates

Increased ship-complete

and on-time percentages

E.g. Wal-Mart uses the

replenish model to keep

their shelves full and

penalize their suppliers for

late shipment.

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Key Issues of SCM Retail Industry

Inadequacies in infrastructure such as lack of high quality roadnetworks, power shortages and insufficient storage spaces

Indian supply chain is suffering from its inadequacy of infrastructure

for warehousing facility

With availability of retail space serving as a key enabler, the current

rise in property prices and rentals may render a few retail business

models unviable

The retail industry loses millions of rupees every year in frauds,

thefts and employee pilferage, shop lifting, vendor frauds or

inaccurate supervision despite using standard and modern security

features

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Multiple taxes at the central and state level

Lack of clear policies (especially on the entry of foreignretailers)

The industry also faces a huge shortage of experts in areassuch as supply chain and store management.

The most significant challenge that impedes thedevelopment of an efficient and modern retail sector is anunderdeveloped supply chain

Key Issues of SCM Retail Industry


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Case Study :Wal-Mart's SCM System

Wal-Mart pioneered the hub-and-spokesystem.

The company directly procured from manufacturers, by

passing all intermediaries

Wal-Mart spends a significant amount of time meetingvendors and understanding their cost structure.

Using EDI for Procurement (It enabled the suppliers to downloadpurchase orders along with store-to-store sales information relating to

their products .)

Wal-Mart also made use of a logistics technique called cross-

docking (goods were directly picked up from supplier, sorted out

and then directly supplied to the customers.)


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Case Study - Contd.

Wal-Mart invested heavily in IT and communicationsystems to effectively track sales and merchandiseinventories in stores across the country.

Wal-Mart was able to reduce unproductive inventory byallowing stores to manage their own stocks, reducing packsizes across many product categories, and timely pricemarkdowns.

Instead of cutting the inventory across the board, Wal-Mart made full use of its IT capabilities to make moreinventories available in the case of items that customerswanted most, while reducing the overall inventory levels.


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Case Study Contd.

Employees at the stores had the Magic Wand, a hand-

held computer, These helped them to keep track of the

inventory in stores, deliveries, and backup merchandise in

stock at the distribution centers.

The order management and store replenishment of goods

were entirely executed with the help of computers through

the Point-of-Sales (POS) system.


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Case Study Contd.

Wal-Mart had invested approximately $4 billion to build a retaillink system(More than 10,000 Wal-Mart retail suppliers usedthe retail link system to monitor the sales of their goods atstores and replenish inventories.)

Retail Link had emerged into an Internet-enabled SCM systemwhose functions were not confined to inventory managementalone, but also covered collaborative planning, forecasting andreplenishment (CPFR).

In efforts to implement new technologies to reduce costs andincrease the efficiency, in July 2003, The company believed thatthis replacement would reduce its supply chain managementcosts and enhance efficiency.


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Road Ahead for SCM Retail Industry

Goal: Lean, Green and AgileConsolidation and outsourcing will set the foundations for a leaner

supply chain.

Multimodal transport and energy-efficient infrastructure will keep

it green.

Collaboration between channel partners and integration of various

stakeholders will keep the supply chain agile and competitive.


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Road Ahead Contd.

Game Changers Policy Reforms

Modernization of Retail and Advent of New Channels

Change in Demand Structure

Impetus to Infrastructure

Empowered through Technology (ERP,WMS,TMS,RFID & Telemetry)

Key Implications Cold chain will emerge as a hot sector for investment

Development of multimodal transport network

Shift to a demand-driven supply chain

Increased outsourcing and collaboration


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Thank You

Cyril Cherian - 110

Niyati Pujara - 128

Raj Chajjed - 132

Santosh Uchil - 141Sejal Desai - 142

Sumesh Shetty - 147

Vineet Badiani 152

Documents

Supply Chain Managment - Indian Retail Industry