TERM II_Operations Management_Max Fashion Retail

7/29/2019 TERM II_Operations Management_Max Fashion Retail

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Indian Institute of Management Kozhikode

7/12/2011

Operations Management I

For Prof. Sanjay Jharkaria

[MAX FASHION RETAIL, CALICUT]

Group No: B-5

Section BArnab Guha Malik (74), Atul Sharma (75), Avinash Kumar (76), Bishnu Kumar Dokania (78),

Meeta Dandekar (80), Hersh Kenkare (91), Amol Panditrao (100), Saurav Suman Mishra (112)


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Table of ContentsAcknowledgement .................................................................................................................................. 3

Introduction ............................................................................................................................................ 4

Organizational Structure ..................................................................................................................... 7

Employee Break-up ............................................................................................................................. 8

Recruitment ........................................................................................................................................ 8

Work Timings ...................................................................................................................................... 8

Training & Personnel Management .................................................................................................... 9

Product Profile .................................................................................................................................... 9

Store Layout .......................................................................................................................................... 10

Store Layout Divisions ........................................................................................................................... 11

Retail layout: ......................................................................................................................................... 13

Supply Chain .......................................................................................................................................... 15

Service System Design and Process Flow .............................................................................................. 16

Service Process Matrix .......................................................................................................................... 17

Inventory Management ........................................................................................................................ 21

Inventory Management at Max ............................................................................................................ 21

Inventory Control System Design Matrix .............................................................................................. 23

Inventory System employed at Max ..................................................................................................... 23

Product Lifecycle at Max ....................................................................................................................... 24

After Sales Customer Feedback Mechanism ........................................................................................ 25

LANPOS Software Billing System: ......................................................................................................... 26

Manager mode ...................................................................................................................................... 26

Client (Regular) Mode ........................................................................................................................... 27

Billing Process: ...................................................................................................................................... 28

Marketing and Advertising Operations ................................................................................................. 29

Customer feedback Mechanism ........................................................................................................... 31

Alteration .......................................................................................................................................... 31

Exchange ........................................................................................................................................... 32

Return Policy ..................................................................................................................................... 32

Feedback Form Filling ....................................................................................................................... 32

Recommendations ................................................................................................................................ 33

References ............................................................................................................................................ 34


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Acknowledgement

First, we would like to express our sincere gratitude to Professor Dr. Sanjay Jharkharia to

provide us an opportunity to work on this dissertation. This work could not have been written

without Prof. Jharkharia who not only was our supervisor, but also encouraged and challenged us

throughout the course. We would also like to thank the employees and management of Max Retail

India, Calicut who helped us understand the various processes of a service retail outlet. Thanks for

their patience. We sincerely appreciate the Store Manager, Mr. Sanuf for his all-out support and

time. We also thank him for permitting us get the various details needed in completing the

dissertation.


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Introduction

Max Retail, a value fashion retail chain of Landmark group, was launched in 2004 in United Arab

Emirates. Today, Max has a total of 173 stores in 13 countries in the Middle East & North Africa

regions and India. The aim was to address the fashion and footwear needs of mid-income customers.

The stress was on offering good quality at amazing value. Max is currently the largest value fashion

retailer in the Middle East. Max retails its own label of apparel for men, women & children. It is

known as CityMax in Saudi Arabia. It aims to have 200 operational stores across Middle East and

India by mid 2012.

Vision & Mission of Max Retail

To create a truly global brand that provides growth opportunities for the company and its

employees, whilst achieving its goal of becoming the number one value fashion retailer across

Middle East and India

Mission Statement

Be a market leader in the field of value retailing.

Provide fashionable products at affordable prices

Be innovative, cost effective and globally competitive

Exceed customers expectations

Provide opportunities of growth for employees

Core Values

Constant focus & development on the product and value offered

Continuous improvement of the customers shopping experience

Commitment towards staff training & development

Encouraging open work culture

Timeline

May 2004 1st store opened in Abu Dhabi, U.A.E

June 2004 1st store operational in K.S.A

October 2004 1st store operational in Kuwait March 2006 1st store operational in India

May 2006 1st store operational in Jordon

June 2006 Operating 36 stores in 4 countries

June 2007 Operating 46 stores in 7 countries

March 2009 82 stores operational across Mile East & India

December 2010 145 stores operational in Middle East & North Africa region, India

June 2011 170 stores operational in Middle East & North Africa region, India

November 2011- 18th store in U.A.E


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Max Retail in India

The first Max Retail store in India was setup in Indore in March 2006. The store was a part of the

plan to set up 50 stores in India by 2010 at an investment estimated to be in the range of INR 100-

200 crores. Earlier in 1998, Landmark group had launched Lifestyle, a premium fashion retail chain,

in five cities across India. Max Retail was the first attempt by Landmark group in Value retailing in

India.

Max Retail aims to cater mid-segment, between premium and discount segments, which is

estimated to be a 40,000-50,000 crore market. An average Max store in India has an area of around

22,000 sqft and requires an investment of Rs. 5 crores. The average turnover expected from a store

is INR 15-18 crores annually at a growth rate of 14% per annum.

A Max Retail store typically offers a variety of menswear, womens wear, and clothes for children

and infants. In addition, Max Retail stores also offer footwear, accessories and home furnishings. The

pricing is the key competitive strategy of Max Retail stores. The merchandise is generally priced inthe range of INR 99-599. The target audience for a Max Retail store is the middle class income group

and the young adult aged 22-35 years who is exposed to western dressing habits.

Expansion Strategy (India)

Our growth plan is very aggressive in the near future. We plan to open quite a few stores in tier I

and tier II cities apart from the metros. Our strategy is to bring great fashion at good prices to these

cities and revolutionise their fashion scenario. This falls in line with our overall brand mission to

Democratise Fashion in the country.

- Vasanth Kumar, Executive Director, Max Retail

The above quote by the Executive Director of Max Retail sums up the business strategy of Max in

India.

Max Retail Stores in India

There are 42 operational Max Retail stores in India. Some of these stores follow a franchise model;

however, most of the stores are company owned. In design and manufacturing, 10% of the designs

are sourced from Dubai, which are later customized for the local consumers. The manufacturing is

outsourced to about 150 facilities across India, in addition to what the company sources from Dubai.

The employee strength in India is estimated to be around 1500. The annual turnover of Max Retail inIndia is projected to be Rs.375-400 crores in this financial year. Max Retail has its strongest presence

in South India with about 15 stores.

Max Calicut

Max Calicut Store is located in Focus Mall on Mavoor Road. It follows a franchise model. The location

is strategic as it is a major shopping area in the centre of the city. Most of the competitors of Max

are located in this area. The main competitor of Max within this area is Reliance Trends which also

competes in the mid price apparel segment. Max Calicut uses the additional space in the retail store

as in-house warehouse. The supply to Max Calicut is sourced from the central warehouse in Cochinwhich is shared by Max- Calicut & Max-Cochin for merchandise supplies from Bangalore. On an


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average it takes 1 week for an order to be delivered to the warehouse in Cochin and another 2-3

days for supply to the local warehouse in Calicut.

List of Max Stores in India

City No. of Stores Location

Amritsar 1 Alpha One, GT RoadAgra 1 Pacific Mall, Fatehbad Road

Ahmedabad 1 Gallops Mall, Satellite Highway Road

Bangalore 6 - Commercial Street

- Oasis Centre

- CMH Road

- SPAR Hypermarket

- 11th Main Road

- III stage, Kathriguppe Circle

Baroda 1 Seven Seas MallBhopal 1 DBCity

Calicut 1 Focus Mall

Chennai 3 - Tunic City

- Express Avenue Mall

- Trishia Planet

Cochin 1 Abad Nuclues Mall

Coimbatore 1 Brookefields

Delhi 2 - West Gate Mall

- V3S Mall

Ghaziabad 1 Mahagun Mall

Hyderabad 3 - City Centre Mall

- Oasis Centre

- Inorbit Mall

Indore 2 - Treasure Island Mall

- C21 Mall

Jalandhar 1 Vival Collage Mall

Kanpur 1 2 Square Mall

Kolkata 1 New City Centre

Lucknow 2 - Fun Republic Mall

- Phoenix United Mall

Mangalore 1 City Centre Mall


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Mumbai 6 - Inorbit Mall

- Little World Mall

- Maxus Mall

- Mega Mall

- Oberoi Mall

- R- Mall

Nanded 1 Treasure Bazaar

Noida 1 Unitech Mall, Great India Place

Pune 1 Building F, Marisoft, Kalyani Nagar

Raipur 1 RK Mall

Vishakapatnam 1 CMR City Centre

Organizational Structure

The retail store is headed by a Store Manager, who is also responsible for supervising the day-to-day

operations of the store, like stock-keeping, accounts, supply-chain, etc. The Store Manager is

supported by an Assistant Store Manager who takes situation reports from the various Department

Managers. The Department Managers are assigned to various departments like Meanswear,

Ladieswear, Kidswear, Footwear and Information Technology. These Department Managers are

further supported by Senior Customer Relationship Employees specific to each department. Their

main task is to handle the sales occurring in their department and supervise the functioning of Junior

Customer Relationship Employees.

JUNIOR CUSTOMERRELATIONSHIP EMPLOYEES

SENIOR CUSTOMERRELATIONSHIP EMPLOYEES

DEPARTMENT MANAGERS

ASSISTANT STOREMANAGER

STORE MANAGER Mr. SANOOF

ASM

MEANSWEAR

MEANSWEAR

MEANSWEAR

LADIESWEAR

LADIESWEAR

LADIESWEAR

KIDSWEAR

KIDSWEAR

KIDSWEAR

FOOTWEAR

FOOTWEAR

FOOTWEAR

IT

IT

IT

HELPERS

CLEANING STAFF & SECURITY


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The store also employs a number of helpers to assist the Junior Customer Relationship Employees in

tasks like sorting, re-arranging, etc. They also help the customers in the trial rooms and regulate the

usage of the same. The store also has a decent number of cleaning staff who are responsible for the

upkeep and maintenance of the store interiors. In addition to the above, the store has employed 4

security guards, to help maintain the level of security in the store apart from checking customer

baggage.

Employee Break-up

The store employs a total number of 56 people, which includes 20 permanent women staff, 24

permanent men staff, 8 part time employees and 4 security guards. The chart below gives the

department-wise allocation of staff. The number of managers for various departments is also

different. The menswear section employs the maximum number of employees with 4 Department

Managers and 4 Senior Customer Relationship employees and 6 Junior Customer Relationship

employees.

Recruitment

Employee recruitment at the store has been outsourced to a recruitment agency, but it is done in

consultation with the Store manager. The only type of temporary employees recruited, is for the

positions of Helpers and Maintenance staff. The security guards employed are also recruited through

a Security Agency.

Max employees enjoy compensation and benefits on the following basis:

1. Full time Staff: Provident Fund (PF) apart from the regular base salary + Annual performance

linked bonus (proportional to sales volume of each department).

2. Part Time Staff: They get a fixed remuneration package without any bonus.

Work Timings

The store has separate timings for women and men staff and also for permanent and temporary

staff.

WOMEN: 10:30 TO 19:30 HRS PERMANENT STAFF: 10:30 TO 21:30 HRS

MEN: 11:30 TO 21:30 HRS TEMPORARY STAFF: 04:00 TO 21:30 HRS

Employees

Menswear

Ladieswear

Kidswear

Footwear

IT

Security

Maintenance


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Training & Personnel Management

Max retail provides the store staff with various types of training to equip them with knowledge

pertaining to the product, the material used, and on suggestive techniques. The various types of

training imparted to the permanent employees are:

Product Training

Department Layout

Product Materials (Department Specific)

Customer Handling

Role-Plays

The store does not impart training to employees who have prior work experience. It also encourages

its employees to bring new experiences and skills to work. The store has 56 employees apart from

the Store Manager. Most of the employees are on a permanent payroll basis. Each employee is given

a uniform and the responsibilities are shared equally. Max retail is also an equal opportunity

employer.

Product Profile

Most of the products at the store are from the landmark group, one of the prime brands owned by

Max. Other than that few other brands are also sold. A product line is shown below.

Menswear

Casual Denim

Casual Non

Denim

Formal

Semi formal

sportswear

Casual DenimO B (Ordinaryand Basic)

Casual NonDenim (O)

Semiformals(O B)

Formal (O B)Innerwear

Ladieswear

WesternCore

WesternYoung

Night Wear

WesternBasic &WesternDenim

Western (OB)

Kidswear

2-8 boys &girls

8-14 boys &girls

Sleepwear

Footwear

Sportswear

Formal

Semi formal

Casuals

Others

Apparel

Accessories

FashionJewelry

LeatherAccessories

Neckwear


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Store Layout

Store Location

The store is located on the first floor of Focus Mall, which is one of the three malls in Calicut. The

location is strategic as the Mall is located on Rajaji

Road, in the centre of Calicut city. This area has

restaurants, book stores, retail outlets and a hub for

apparel purchases which attracts quite a big crowd

on weekends. Although the mall has retail outlets of

leading brands such as Indigo Nation, Provogue,

Bossini, and Titan, Max Store is the anchor shop of

the mall.

Store Layout

Max Store is located on the first floor, and is visible to anyone walking in the centre area on the

ground floor. When a person gets off the escalator on the first floor, Max Retail Store is the first

store he/she sees. The total floor space is approximately 14,000 sq. ft inclusive of back-end office

and storage space (approx 2,000 sq. ft) and retail area (approx 12,000 sq. ft). Of this space about 300

sq. ft is allotted to branded clothes in each section. There is a huge merchandise display using

models, outside the entrance for attracting customers attention to the variety offered at the store.

There are two trial rooms one for men and the other for women. There are very few mirrors in the

store except the ones in trial rooms.

Setting of Shelves

There are two broad categories of displays used in the store:

Horizontal Shelves These shelves consist of apparel, shoes and accessories ofdifferent sizes stacked in normal shelves. Since all the sizes of a particular pattern of T-

shirt/other apparel are placed in once stack, searching for the required size becomes slightly

cumbersome. Moreover, once the customer removes it from the stack, it has to be folded

again and replaced in the same order by the personnel. The key advantage of using this

display system is that lesser storage space is utilised. It adds to the neatness and aesthetic

appeal of the store, provided dislodgedgarments are put back quickly.

Circular hangar displays Thesedisplays comprise a plurality of about 5 hangars

radially placed, and completely a full circle.

These displays are customer-friendly as the

customers can easily flip through the

merchandise. The only drawback of having too

many such displays is that it takes a lot more

space and may create obstruction for

customers to manoeuvre in the store.


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Store Layout DivisionsMax India follows a strict standardised layout for all its chain and franchisee stores, which is adhered

to in Calicut outlet. The store can be broadly classified as womens apparel section to the left side

and mens and childrens apparel section to the right of the store, which is closer to the entrance.

Left side of the store from the entrance:

The womans apparel section is located to the left of the store. A large amount of floor space is

covered with revolving hangar displays and the horizontal shelves and wall hangars are restricted to

along the walls. In general, the relatively inexpensive apparel is displayed in the central area

whereas the expensive ones are displayed on the wall hangars, to ensure minimal damage.

Ethnic apparel: The womens apparel section is located to the left side of the store beginning with

the ethnic wear, ranging from kurtis, kurtas, pyjamas and salwars, to dress materials in the far left

front end of the store. Max also houses ethnic

branded wear such as Praful and Melange in thissection. The ethnic apparel is the highest

contributor for sales in womens apparel, mainly

owing to larger demand for conservative and

traditional clothes by women, bearing the

culture. There are wall hangars for displaying

clothes, which avoids discomfort to the

customers had a higher height shelf been placed

there. The trial room is at the back end of the

store, so the customer has to move a large

distance.

Western wear: The womens western wear is located from the cash counter to the end of left side.

This section has a large variety of T-shirts, tops, tunics, shirts, skirts, denims and trousers for women.

The clothes are mostly displayed in revolving

hangars, which are much cluttered and with

limited space between two hangars. During peak

hours/crowded times, it could prove to be a

discomfort for the customers. Towards the far

left back end of the store, ladies innerwear and

nightwear are displayed. The trial room has 6

cubicles which are very close to the western

wear section.


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Accessories and Bags: The handbag and accessories section is placed near the cash counter. Max

houses different types of handbags, rucksacks, and sling-bags. In the accessories section, there is a

large collection of neckpieces, earrings, bracelets, bangles, hair accessories.

Central area of the store from the entrance:

Footwear for men, women and children are

placed in the central area of the store. Max has

both casual, formal and sports footwear for all.

The fancy footwear for ladies and kids are the

highest sales earners of this section. The

footwear is placed in the order of the price

range.

Right Side of the store from the entrance:

The mens apparel (about 4,500 sq. ft in area) and kids wear section is located to the right of the

store. At the right of the entrance, there is a security baggage counter, which follows a token

system. The guard is also responsible for counting the footfalls in the store on a daily basis. A similar

display system is used for mens wear.

Childrens wear: The kids wear section has been divided according to the age, beginning in an

ascending order. There are separate racks for girls and boys after the age of 3 years. The firstsection 1 is for Kids (0 4 years), which is followed by garments for Kids (4 - 12 years). The Kids

section typically consists of horizontal shelves for display. This section approximately covers 1/8 thof

the total floor space. In between, the racks, there are boxes with soft toys and colourful cushions,

which attracts children.

Mens casual wear: Beyond the childrens section, mens casual wear has been placed based on

price range, including T-shirts, semi-formal

shirts, innerwear, and trousers and denims.

There are many hangars to allow ease in

browsing the merchandize. The trial room issituated close to this section. The mens apparel

section in all contributes to around 1/6th of retail

space. There are some branded apparel such as

Kappa, Levis available in this section. Since this

apparel is the overall highest contributor to sales,

it has more shelf space in the right corner as well

as centre of the store.


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Mens formal wear: This section is situated at the

right back-end of the store, and includes shirts,

trousers, and ties. The store has an exclusive space

for Peter England formal apparel, which is managed

by their personnel. The formals are typically kept on

revolving hangars but include shelf display too.

The overall layout of the store is user-friendly, neat and adequately furnished. During festival or

offer seasons, the retail area is decorated using balloons, festoons and other decorative

embellishments.

Retail layout:The following diagram shows the layout based on approximations.

Keys to reading the figure:

The red line at the right-hand side of the store is the line of visibility.

Green squares depict horizontal shelves

Blue circles depict the circular hangars


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Supply Chain


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Service System Design and Process Flow

ELEMENTS IN THE DESIGN OF A SERVICE ORGANISATION

There are basically four elements involved in the design of a service organization:

Target Market: The target segment for Max Retail is diverse as reflected by its product

portfolio. The store aims at attracting people in the age group of 4 to 50. The continuously

increasing brand-consciousness and disposable income of the countrys population has

aided the growth of Max Retail.

Service Concept : Max Retail offers a variety of quality products both of their own brand and

well-known brands like Puma, Peter England, Sparx. Variety of products across footwear,

menswear, and womens wear is the USP of this store and it hopes to maintain customer

loyalty via a two pronged approach of quality and efficient customer service.

Service Strategy: Max Retail provides service to the customers with the highest possible

quality. Customers walk in with expectations and walk out with a wardrobe. He goes there

for the experience of having healthy food. The staff at any service establishment plays a very

important role in the proper functioning and success of that establishment. In retail stores,

the staff is instrumental in helping the customer select the desired product of the right size

and addressing queries or grievances. Employees help the store to facilitate the process of

quality service. The behaviour of the employees directly contributes to the customers

overall experience. Their actions, reactions and conduct while interacting with the

customers will directly affect the customer satisfaction.

Service Delivery System: The delivery of the product plays an important role in improving

customer service. Some of the factors like the time spent waiting outside the trial room,

time required to find a desired product in an alternative size or colour from stores will

directly affect customer satisfaction and loyalty.

Waiting Time is the time spent outside the trial room.

ServiceConcept

TargetMarket

ServiceStrategy

ServiceDeliverySystem


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Query Fulfillment Time is the time taken from the point when the customer would like to try

a variant of a product to when it is located and handed over to the customer for trial.

Service Process Matrix

The service process matrix applicable to Max Retail is shown as below. A high amount of customer

interaction is required and the degree of labour intensity is relatively low which puts it in the

category of Service Shop. It is important for the sales and other executives to address the needs of

each customer separately and provide appropriate products with minimum possible delay.

Degree

of

Labour

Intensit

Degree of Interaction

MassService

ProfesionalService

ServiceFactory

ServiceShop


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SERVICE SYSTEM DESIGN MATRIX

Essentially this points out the fact that quality and consistency of services; sales force management

and consumer involvement are the key issues to be taken care of by Max Retail. Also in the service

system design it falls in the face-to-face loose specs position, highlighting the importance of selling

skills being the key in differentiating with the competitors.

Process Flow in Store:

The process flow of Max has been studied as different components with each having a typical

process flow. That is, the different sections like Security Counter, Trial Rooms, Billing counters and

the Purchase Process of the Store as a whole- each of them are observed to be different processes

functioning independent of each other. Therefore each process was studied separately and is

presented as shown below.

Trial Rooms: There are 2 trial rooms in total. One placed in the Gents section and the other

one in the ladies section. The Trial rooms execute the following procedures:

Maximum 3 garments only Rule: Each person is allowed to carry a maximum of 3 garments

at a time. This is to ensure smooth replacement of the tried clothes back in their original

positions.

Coupon System: Based on the number of clothes a customer has taken for trial a color

coded coupon is handed over to the customer. The customer is expected to return the

coupon back to the Security guard. The coupon is taken back after the trial is done and the

person in charge makes sure that all the garments tried are in proper condition. The

intention behind the coupon system is to keep track of the number of people in the trialrooms and number of clothes being tried at any given time.


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General waiting time= 0 during weekdays (observation of store manager)

Weekends, the waiting time is predicted to be somewhere around 10-12 minutes during

peak shopping hours (5pm-9pm)

Baggage Counter: The baggage counter is handled by two security guards and this counter is

located right at the entrance of the store. The purpose of the store is to ensure that no

personal baggage is carried inside. This is to -

o Make sure that customers comfort levels are high which enhances shopping

o Avoid unfair means of theft which would be facilitated with the presence of personal

baggage. This helps in avoiding embarrassing situations like examination of baggage.

The flow of the process is depicted below:

PROCESSFLOW

Clothes checked andissues token based on

the number ofclothes. Max.

garments allowed=3

Garments tried andreturned. Coupon

given back

Garments placed inthe BIN for

replacement

Service staff pick upthe garments formthe BIN and placethem back in their

respective positions

Baggage likebags/helmets/coversetc are collected and

tagged with a tokenhaving a unique

number.

Customer given a tokenwhich has the same

number of the taggedtoken to avoid mix-up

Customer's belongingsare returned back oncethe token is given back.

Loss of the tokenentitles a fine of

Rs.200/-


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SERVICE BLUEPRINT:

SUGGESTED SERVICE BLUEPRINT:


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Inventory Management

Inventory is the stock of any item or resource used in an organization. For Max store, the stock of

apparels, accessories, footwear and all the items that are being sold in the retail area forms the part

of inventory. For this project, we are ignoring the office supplies which form a negligible part ofinventory. Inventory management system is the set of policies and controls that monitor the levels

of inventory and determine what levels should be maintained, when stock should be replenished

and how large stock orders should be. In making any decisions that affects inventory size, various

types of costs must be considered such as holding costs, ordering costs and storage costs. Hence

inventory management is a trade-off between lower costs and meeting the sales demand.

Inventory Management at MaxThe following diagram shows inventory management system for Max stores. As shown there are two

manufacturing facilities viz. Mumbai and Bangalore. Bangalore has central warehouse for southern

region. This caters to 6 local stores in Bangalore city itself. These retails outlets are owned by Max.

Bangalore warehouse also caters warehouse in Kochin. This warehouse caters to two retail outlets

viz. Kozhikode and Kochin. These retail outlets are franchise stores. The inventory in Max Stores is

replenished from Bangalore to Kochin warehouse on weekly basis. The mode of transport used is

trucks. From Kochin warehouse, the stocks are replenished every 2 to 3 days depending on the sales.

Also security tagging of the clothes is done in Kochin warehouse. The delivery of inventory is done in

carton boxes. A typical carton consisting of clothes weighs around 10kg. It has clothes in pre-pack.

Each pre-pack contains same item in 12 different sizes. There is no concept as of Inventory storage

because typically everything is displayed in the store. The customers are well aware of this fact and

search from the choices put in front of them. Some short term storage done in small side room by

the side of the Ladies Trial room. This practice is also in line with the fact that there is no

warehouse/storage room in Focus Mall. The total pilferage from the warehouse in Bangalore to

Focus Mall in Kozhikode is estimated to be 2-3% which occurs due to spoilage, theft etc.


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INVENTORY MANAGEMENT SYSTEM AT MAX

Considering the inventory levels, fast moving goods such as T-shirts priced below Rs. 199 both for

ladies as well as men are displayed in abundance often in multiple shelves. These comparatively

cheaper products offer great variety in large numbers (on an average 20) in almost all the sizes. The

inventory level goes down with increasing prices and for non in-house brands. The sales people are

responsible for rearranging the moved inventory back to the shelves and this forms major part of

their job. In terms of searching for a particular item, a customer rarely approaches sales people and

as far as the latter as concerned, they dont come forward asking questions like what are you looking

for.


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Inventory is replenished based on the weekly sales. Plannogram is used to maintain the record of

sales. The records are maintained by two categories age group wise and season wise. Weekly sales

report is sent to the Bangalore office. The inventory allocation to each store is done in Bangalore

only.

Inventory Control System Design Matrix

INVENTORY CONTROL SYSTEM DESIGN MATRIX

If we map the MAX store in the above matrix, it would fall as shown in the above figure. This is

because the requirement of various inventory items is highly independent of each other. Also Max

store employs computerized sales reports to replenish the stocks. Hence the costs involved in the

transaction are not as high as manual two bin system. However, the inventory obsolete risk is also

on the higher side as shown.

Inventory System employed at Max

Since at Max store, the weekly sales report is reviewed by Bangalore office and accordingly, the

inventory is replaced, this comes under fixed time period model of inventory system. Here the order

quantity is variable for each item depending on the sales of that particular item. The biggest

disadvantage of this system is that sometimes, very fast selling apparels or items may go out of stock

between two review periods because after reviewing the stocks, the replenishment at least takes 3

to 4 days.


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FEATURE P-MODEL I.E. FIXED TIME PERIOD MODEL

ORDER QUANTIY q is variable (i.e. order quantity varies each time the order is

placed)

WHEN TO PLACE

ORDER

T is constant (When the review occurs and new stock comes in)

RECORDKEEPING Counted only at review period. Typically weekly for Max store

SIZE OF

INVENTORY

Larger than fixed order quantity model

Product Lifecycle at Max

The products in Max store are categorized as per following

1) Season Based Winter, Spring, Pre-autumn, Rainy

2) Age-group Based

3) Sales Based Slow moving & Fast moving

Since, it is a lifestyle retailer, Max products have a definite life cycle and the variety of clothes in the

store depends both on the prevailing fashion and the season in question. During the summer

season, there is a distinct spike in demand for light coloured clothes and similarly the winters bring

consumers in looking for light woollens. Max actively follows a summer and winter collection

schedule with the lifecycle for any product lasting between four months to 6 months. Apart from

these observations, the sections catering to other brands in the Max retail outlet may not necessarily

follow this cycle. The product life cycle for these brands may be akin to the lifecycle

determined/followed by their respective parent brands/companies. The typical lifecycle for a

product is shown the in diagram below. Fresh stock comes in at the beginning of new season. The

products are then classified into slow moving and fast moving depending on the sales of that

product. For slow moving items, after 60 days, price discounts up to 50% are given. If the product

still does not get sold, then flat price discounts are offered e.g. Rs. 400 off for a branded shirt etc. If

the product still is not sold then at the end of the season, the product is scrapped. There is no

salvage value for scrap as the product is distributed among the Max store employees only. Also,

overall on an average, the scrap is expected to be 10% of the total input.


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PRODUCT LIFE-CYCLE AT MAX STORE

After Sales Customer Feedback MechanismMax has an after sales service and customer feedback mechanism which can be generally

categorized under the following heads:

1. Return Policy

2. Alteration Policy

3. Exchange Policy

4. Customer Feedback1. Return Policy: Max has a general return policy under which products purchased within 14

days can be returned back in case of defects. Max also stipulates that the customer take

certain steps to make the process a smoother experience.

2. Alteration Policy: As a part of services provided by it, Max offers its customers a free of cost

alteration service

3. Exchange policy: Max also has an exchange policy in place if the customer is unsure of what

he/she has purchased. In their own words, Because if you are anything less than 100%

delighted with the purchase, we would feel our promise is not 100% delivered.

4. Customer feedback: Customer feedback forms an important part of Maxs feedback

mechanism to improve its service and customer experience. The store manager is always

around to lend an ear to the concerns of the customers and any ideas for improvement. Max

also has a section on its online website where they have a form which is open for

suggestions.

FRESH STOCK

DISCOUNTFOR SLOWMOVING

ITEMS

FLAT PRICEDISCOUNTS

SCRAP (10%)


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LANPOS Software Billing System:

There are many Point of Sale (POS) systems, out of which Max Retail Store uses LanPos system.

LanPos (Landmark Point of Sale) is used across all Landmark group of companies.

The two modes in which the systems operates are as follows:

Manager modeThis mode is basically for the purpose of managing and monitoring the sales, reports, other details

etc. This is not used for the regular billing.

The manager is in control of the system as he is the one who is ensured with all the responsibility of

initiating the LANPOS billing system. Following are the steps that are followed in general:

System Login and Activation: To activate the billing system, the store manager logs on to

the system using the combination of his username/password. The system authenticates the

credentials, after which the billing process gets activated. So, basically it is the first step.

Daily Sales Report: The sales report is generated clearly listing out the overall transactions

consisting of number of articles sold, the revenue recognized etc at the end of each day. This

BillingModes

ManagerClient

(Regular)


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report is used by the head-office as a snapshot to monitor the daily progress. Other reports

regarding transaction, accounts and inventory can also be generated.

Inventory Details: Another important step is monitoring the inventory details. There is an

XML User Interface for this purpose for maintain the inventory level at any particular instant.

Each time there is any change, it is uploaded on the system, thus generating the updated

levels. It is very critical for this to be as updated as possible to avoid any subsequent

mismatch in stocks used or purchased

Client (Regular) ModeThis is the regular billing mode. It is used by the staff at the billing counter. He needs to login with

his username/password before he can start billing. Some of the important features in this mode are:

Barcode Scanning: While billing every time when the barcode of an article is scanned, all

information regarding the article appears on the user interface (on screen) connected to it.

Any updation or any inquiry can be further done for that particular article.

Price Levels: The system allows multiple price points for the products. Multiple price points

mean normal list price, multiple sales price, volume discount prices etc.

Inventory Management: The inventory levels are adjusted as soon as an item is sold. Also,

through this, the staff can keep a tab on which all items are low in quantities. Those articles

can be reordered to maintain the inventory.

Payment Mode: The system allows for various modes of payment viz. cash, credit card, gift

voucher, and loyalty points etc. The payment is also integrated with the payment gateways

of various banks and credit card agents, which are frequently used for payments. The total

amount is also updated accordingly.

Bill: The final report is generated after all the entries are made including the payment

options. The bill is printed using the attached printer.

The final bill has the following details:

o Date of Purchase

o Time of Purchase

o Transaction Type

o Customer Ref Number

o Billing Station Number

o Cash Memo Number

o Cash memo date

o Billing staff name

o Item Code

o Item Descriptiono Quantity


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o Rate

o Discount

o Gross Amount

o Tax Amount

o Amount Payable

o Payment type

Billing Process:

The Max store has at maximum 4 terminals in use at the billing counter. Depending on the customer

crowd the counters are made operational. This is to make sure that there is no waiting time for the

customers. Also in this process, the idle time of the staff can also be minimized.Calculation

Average Purchases per day = 200

Assuming on an average one person does two purchases,

Average purchase per day per customer = 200 / 2 = 100

Average time spent by a customer on billing counter = 4 to 6 minutes

Taking 5 minutes for calculation

Total billing time = 100 x 5 = 500 min

Assuming on an average 2 billing terminals are functioning

Hours worked by billing staff at one counter = 500 / (2 x 60) = 4.167 hours


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Marketing and Advertising OperationsThe differentiating strategy of Max stores, in general, is having low prices. The average prices of

products are around Rs.400-500. Due to this low price strategy and a large collection of in-house

brands, discount offers and schemes are normally not floated in the store. However as soon as you

enter the store, you see the low cost apparel mainly mens t-shirt on display. The prices of these t-shirts are generally lower than the average price. This is done in order to draw the attention of the

buyer towards them and stimulate a kind of impulse buying. Marketing of products doesnt require

promoting the brands separately as Max itself is the brand for most of the merchandise. Throughout

the store, there are no modifications done, no display changes affected to highlight any particular

apparel etc. and in that sense the display is almost static. The ambience of the store is pretty decent

with sufficient illumination. Outside the store, right at the entrance a board greets the customers

saying Max: 0 km away. As far as advertisements are concerned, they are more or less non-

existing. Next to the focus mall, there is an electronic screen which shows commercials for Max and

they are certain advertisements of Max store in around the area which form part of ATL activities.

Reports

The various reports that are generated by the MAX store which are used for analysis can be detailed

as:

Reporting and Sales Analysis: The reporting and sales analysis is done from the datacaptured by using the Lan-Pos terminals. The sales data is captured on the manager machine

as and when sales take place and it generates daily sales analysis reports. At the end of

every a sell through report is generated. This sell through report is then sent across to the

regional office at Kochi and from there it is sent to the country head office at Bangalore.

There they are analyzed against the sales targets and the store performance in terms of

sales is ascertained. Also any strategic decision shifts which are supposed to be taken are

taken and the store manager is made aware of it.

Predictive Analysis Predictive analysis reports are also prepared in the regional head office

on the basis of the information captured and relayed by the LanPos terminals and the

manager terminal. This information is thoroughly analyzed using predictive models and a

likely consumer profile is generated. The sell through report is very important and is

Reports

Reporting andSales Analysis

PredictiveAnalysis

DemandForecasting

Other Analysis

How Reports are generated at Max Retail


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properly scrutinized. Depending upon the items sold, the head office decides which items

can be classified as fast moving i.e. which items require faster replenishment at the store

and which items can be classified as slow moving. This is very important because accurate

estimation lowers the loss due to missed sales opportunity.

Demand ForecastingOnce the consumer profiling is designed through Predictive Analysis, a

demand forecast is prepared taking into account the results of the predictive analysis. The

demand forecast is then passed over to the respective retail outlets. The inventory in the

store outlet is accordingly replenished in order to cater to the expected nature of demand as

predicted by the model. Also the management takes adequate steps to make sure that the

fast moving items and apparels are replenished faster than the other items

Other Analysis Several other reports are also generated on the basis of the information

forwarded by the LanPos billing and manager terminals. These reports help MAX, Calicut, to

target its customers more effectively by campaigns, to improve response time to market

changes, to increase employee productivity and to improve customer service at the store.

Other important reports are the daily checklists of the sales manager and the assistant sales

manager who check:

Retail Standards:

Whether all lights, LCDs, PA systems are working properly

Whether music playing is lively

The ambience of the store is proper

Whether the back store is clean

The glasses and mannequins are proper and clean

Customer Service:

Check on Customer suggestion/Feedback book and speak if any negative feedback

Check whether the store employees greet the customers properly

Keep count of customer walk-inns

Make sure the promos and other offers are properly visible and the customer is aware of

it

Cash and Billing

Check the Daily sales reports

Walk-in comparative reports

Closing stock reports to RO/ HO

Stock management

Keep a check on all depts.

Monitor the Stocks received.

Keep a tab on stocks not in Store but in Back Store

Share stock requirements with MC team / AM at sub group level


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Another important report is the report maintained by the area sales manager as and when he visits.

The thing that he checks are -

Store Ambience

Stock Management

SOP adherence relating to bills and exchange of items etc

Working of the staff

Store Fire safety alarm function

Back store & stock room

Maintenance of the store

Services on floor

Customer feedback MechanismMax Retail gives due importance to the after sales service rendered to the customers so as to

provide an enriching experience and everlasting satisfaction to its customers. The principle behind

this is build a strong loyal customer base and provide a point of differentiation in such a competitive

scenario in the retail sector of fashion clothing and footwear. Thus, studying the Max retail at the

focus mall in the Calicut, the after sale service and customer feedback mechanism provided to the

customers can be classified as follows:--

Alteration

This is the part of services provided after sale of garments to the customers in case if any change in

the purchased goods required depending upon the necessity of the customers. In general, an

alteration counter is provided in the outlet to cater the needs of the customer where they can go for

alteration in the purchased garments depending upon the requirements.

CustomerFeedback

Mechanism

Alteration

Exchange

Return

Policy

FeedbackForm

Filling


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Exchange

Max has an additional service in place for the customers as an exchange policy in which the

customer who is in dilemma of what he/she has purchased. Such a customer is considered not to be

100% satisfied with the purchase hence they are given the option to exchange with the goods of

their desire thereby ensuring 100% delight of the customers for the purchasing they make with the

Max.

Return Policy

Under this policy Max provides an option for the customers to return the purchased products within

14 days from the purchased date in case of defects. The entire return policy is so designed that the

customers receive a quick response to their grievances and have a smoother experience in the entire

policy.

Feedback Form Filling

Customer Feedback Form filled by the customers is a vital Maxs feedback mechanism to improve its

service and customer experience. Online feedback form is also available in the website for inviting

open suggestions. The customers can visit http://www.maxfashionretail.com. Moreover, the store

manager remains active so as to look into the concerns of the customers and any ideas that could

bring improvement in the services provided to the customers.
http://www.maxfashionretail.com/http://www.maxfashionretail.com/http://www.maxfashionretail.com/http://www.maxfashionretail.com/


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Recommendations1. Pilferage accounts for a loss of almost 1.5% of total sales. This translates into a monthly loss

of Rs. 45,000. Improvements in the tagging system at Kochi should help improve this state.

2. The most major issue that Max Retail faces is that of shortages. As told to us by the StoreManager, about 30% of total sales are lost due to shortages. The root cause of this is the

procurement system of Max. The apparel industry functions in a very conservative manner.

The materials (cloth) for a season of the next year Is ordered at the end of this years season.

This means that items for three months are made in advance. Unless and until the demand

forecasting is extremely accurate, this will translate into some items being fast-runners

and some being slow-movers. If a fast running item is sold out in one month in a season of

three months, it means a loss of potential sales of two months. Similarly a slow moving item

occupies shelf space and the same material could have been used to make a fast runner. The

manufacturing lead time is 2 months. A system where the supply is linked to real time

demand will solve this problem. According to most store managers, the first two weeks intothe season are enough to indicate which items are fast runners and which items are slow

movers. Thus what we are recommending is a system where we supply only the first months

inventory and then manufacture two weeks demand at a time. The garments are the same

for both classes of items. The difference starts from the dyeing process and then the

manufacture (tailor) stage. Effectively it translates into reducing the response time of the

supply chain. This can be done by increasing the number of labour hours or adding extra

machines. The additional cost is easily offset by the recovery of lost sales. A preliminary

calculation for this is shown below.

Activity Numerical Implication

Total number of customers per day 600

Proportion Making a purchase 1 out of 3

Average bill amount (as per Store Manager) 500

Total Sales per day 200 x 500 = 1,00,000

Total Cost of Goods ( 4 times markup) 25,000

Lost sales (30% fast runners and 20% slow movers) 50,000

Lead time for manufacture of 2 weeks of inventory (with

existing labour)

3 weeks

Additional labour hours to reduce lead time to 1 week 3 times

Labour costs for daily sales (30% of COGS) 7,500

Labour Costs for lead time of 1 week 22,500

Additional cost with new system 15,000

Recovered sales with new system 50,000

Profit from recovered sales (4 times markup) 37,500

Net profit by changing supply chain 22,500 per day

Monthly profit Rs. 6,75,000


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References

http://www.maxfashionretail.com

http://www.maxfashionretail.com//storelocator/

The Choice by Dr. Eliyahu Goldratt

AppendixSTANDARD OPERATING CHECKLIST AT MAX STORE

1) CASHIER

1 2 3 4

1 Switch on all the systems at 10:30 AM

2

Computer System, Sensormatics, EDC Machines, Intercom Phones, Music

System & Scanners are working properly3 Cleaning & Dusting of Cash Tills

4All Back Bins cleared by Hangers, Security Tags, Carbon Papers & ShoppingBaskets

5

All Merchandise segregated Departmentwise and handed over to Staff of each

Department

6Stationery available: POS Rolls, EDC Rolls, Scissors, Stappler, Stappler Pins,Calculator & Carry Bags in all sizes

7 Ensure that POS Rolls & EDC Rolls are their in Printers

8 Promos are being communicated to customers while billing.

9Ensure all store Promos are updated in Lanposs / Give away gifts / GVs arereceived from HC for the day .

10 Ensure that the Visitors Book available on each Cash Till.

11Greeting at start of the bill / Thanking customers at End of the billing.( Hellomadam, Hello sir )

12 Opening Invoice No. mentioned in Invoice Register

2) STORE OPENING

1 2 3

Check the lock before Unlock

Unlock the Rear Entrance(Staff Entry) at 9:30 A.M.

Switch on Optimum Lights On FloorsSwitch on Sensormatics on Floor

Security in Place with Complete Uniform

Adequate House Keeping Staff

Presence of 1 Staff In each department

Adequate House Keeping Staff for Cleaning and Moping

Switch on AC by ___ A.M.

Switch on the music

Trial Rooms are checked & cleaned before 10:30AM

Switch on adequate Lights at 10:20 A.M.

Switch on T.V. at 10:25 A.M.

Floats issued in tills & Dedicated Cashier by 10:25 A.M.
http://www.maxfashionretail.com/http://www.maxfashionretail.com/http://www.maxfashionretail.com/storelocator/http://www.maxfashionretail.com/storelocator/http://www.maxfashionretail.com/storelocator/http://www.maxfashionretail.com/


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Ensure that staff is in Complete Uniform By 10:30

Ensure staff briefing incl. Security done before open to cust.

Merchandise well presented on the floor

Manager's Signature

Security Signature

3) STORE CLOSING

1 2 3

Store closing CD play before 30 min to closing time.

All the Tills closed & Cash handed over to HC>

Switch off Sensormatic, EDC Machine, Music at Till Point after last

customer left .

Recycling of Security Tags & Hangers

Merchandise well presented on the floor - 100% recovery

HK to do dry mop and dry garbage kept ready for pick up next day .

Trial Rooms are empty and cleaned

Switch off Television Sets

Switch off AC - soon closure CD played

Switch off 80% Lights On Floors after last cust.left

Lock Manager's Room / HC room and seal

Complete IT day end process / Reports to HO and Lock the IT room

Switch off Sensormatics at Entrance after all staff walked out

Closing Manger along with Security walked entire store , toilets,

stock rooms and baggage counter

Ensure all staff were frisked properly by security while leaving ./Closing Security by closing manager

Night Security Guards in Place with Complete Uniform at back

door with torch lite ,wistle & baton.

Leave if any important communications are there to opening

manager to action.

Door locked and Sealed by the Security

Manager's Signature

Security Signature


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4) STORE MANAGER DAILY CHECKLIST

Date : 1 2 3

1 Retail Standards & Customer service

Customer Greeting - Hello madam / Hello sir.Check staff grooming , dept.-sections are manned effectively forcust.service

Check Show Window Glasses/ Hotspots /Wall Mannequins are clean/neat

Back store clean and neat

Music played is Lively -Preferebly English

check all lights/signages/ LCDs / PA system are in good working condition

Check on Customer suggestion/Feedback book and speak if any _vefeedback

Check time and again count of customer walk-inns

Check on all promos communications were displayed in sections / Cash tills/ Entrances / Lifts.

2 Cash and Billing

Cashiers till open by 10:15am

Sales cash is tallied and deposited to the bank by HC

Check on un billed / un tagged merchandise if any at cash desk premises.

Periodical checking of exchange/ reversal merchandise at cash desk

Monitor cash till for fast & acurate billing / promos explain to customers.

Check on petty cash expenses , GV / Gifts stock for promos if anyCheck for any billed invoces / duplicate invoice copies at cash counter ?

3 Daily reports and check lists

Check the C.R.E-DM, inv exe /ASM. check list and acknowledge

Check the Daily sales reports / Walkin comparitive reports / Closing stkreports to RO/ HO

TIC daily enrollments were being mornitored and sent to RO/HO

Inv.MIS incl PI & Global count reports were sent

Check the store maintainance person chek list

Check all HC reports - 3page / promos/markup/down/reversals/Hold nrelese /Credit note issues & redeemed.

Reviewed on store opening / closing check lists

4 Stock management

Check on all depts. Fixture management with merchandise

Monitor the Stocks received from BRDC / DSD

Check for stock not in Store but in Back Store / BRDC

Share stock requirements with MC team / AM at sub group level.

No stock displys after 4 pm on floor .

5 HK/ Security / Admn


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Check Store entrance / Trail rooms security staff manned

Toilets were neat and odurless / Door latches / water taps / flush are inworking condition ( no leakages )

Security sensors are in working condition.- Random verify

Check Staff attendance register( Max staff)Proactive security controles were discussed for Holidays / week ends /promos

Dailly observations to be reviewed with concerned and corrected /Escalated to AM

Sign here ==================================>

5) AREA MANAGER

Date :

Yes No Remarks1 Store Ambience

VM & Retail standards incl.Merchandise management

Dept. Fixture lay outs

Manpower presentaion incl.HK/SEC/VP

Promos / Themes / Communications

2 Stock Management

Top selling subgroups available

Basic available

Non basic available

Back store stocks brought to floor/kept properly

Repln / allocation pending if any

Consolidation process if any

3 SOP adhearance

Exchanges / alterations

Cash n Billing ( CN transactions / High value CNs )

Promo handling ( Issue of GV s / Gifts - tracker )

PI / Global count

Trial room maint.

Pilferage / staff misappropriations

HC - Daily reports ( 4 reports )

DSR

3 Page reports

Exchange / Reversal / Mark up /Down

Hold n release / Promos / Staff discounts

Safe key handling and petty cash tally

Daily cash banking _ reconcillation

Pending IOUs / cashier shortages if any

Adherance of Check lists - Random verification for

3 CREs / 2 DMs / SM/ASM

4 HR .

Staff presence as per attendance register

HR monthly registers / statutory submissions.All staff / Support staff received salaries.


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Grivience issues if any

Statutory complience and renewals if any

Statutory bodies store visits if any

New staff induction

Atrrition reasons

Monthly training schdule -Validate staff

5 Store Fire safety alaram function

Fire extinguishers in good condition

store sensormatic / CCTV functioning

Pilferage prone areas if any

Electrical PDB Room maint.

Store insurance Validity period.

6 Back store & stock room

Back store neat and tidey

Stock room arranged neatly

No open merchandise in back room

Accs / F.Jewellery etc

Storage of Fixtures etc.

7 Maintainace

DG set maintainance

Lifts / Escalatiors

Toilets / cust drinking water / seating

Paint touch ups / Landscape / plumbing leakages

AC & External siganges / LCDs / PA , Music system

8 Services on floor

Staff greeting customers

Staff Guiding customers towards Lifts / Escalators /Depts. /Trail rooms

Staff explainig promos

Staff handling issues in time and solving

DMs / Managers are interacting with customers on floor / postbilling

Best / poor services noticed by staff if any

TIC enrollments / Cust. Interaction quality / Stationery mgmt.

9 Other Observations / Stores Feedback points

**********************************************************************************

Documents

TERM II_Operations Management_Max Fashion Retail