Optimize Indian retail supply chain management

6/25/2012
1
Supply Chain Management
for Retail in India
Anil Chinnabhandar
AGENDA
• Introduction to SCM Practices in various sectors of Industries
• Review of SCM practices being followed in India Industries
• Application of IT Tools ERP, RF, Web• Application of IT Tools ERP, RF, Web
• Best practices - case studies
• Vendor/Supplier management
• Logistics related issues such outsourcing, 3PL etc
• How to tune supply chains to get better Performances?

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2
Supply Chain Management
What consists of SCM?
• Planning
• Procurement
• Customers
• Warehouses• Procurement
• Production
• Warehousing
• Distribution
• Transportation
• Stores
• Warehouses
• Retailers
• Transporters
• Investors
• Manufacturers
• Suppliers
Supply Chain Management model courtesy: media.wiley.com
Evolution of SCM practices in industries

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Evolution of SCM practices in industries
OLD v/s NEWOLD v/s NEW
Choice for consumer in India
• Huge gap between demand – supply
o Chetak, Fiat
• Now flood of choices

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Retail boom driven sales in India
• Modern retail in India providing new market formats
• Consumer good manufacturers to cash in on new distribution opportunity
• Firms are inadequately prepared to tackle the conflict that may arise between• Firms are inadequately prepared to tackle the conflict that may arise between
the conventional distribution channels and modern-retail players
• Moon Bum Shin, managing director, LG Electronics India Pvt Ltd, said,
“We are relatively weak in the organised retail segment. We are working on
strengthening our presence in the segment and would target 30% of the
distribution through modern retail in the coming years
• Maharaja Appliances Ltd plans to introduce premium product variants
specifically targeting modern-retail outlets
• The company will also become original equipment manufacturer taking the• The company will also become original equipment manufacturer taking the
private-label route, says Harish Kumar, managing director, Maharaja.
• The company is in talks with players including Big Bazaar on this account
• Modern retail is yet small in the country and it is too early to worry, says Eric
Braganza, chief operating officer, Electrolux, Videocon Industries Ltd. However,
the company will not want to miss the opportunity, he adds

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• The biggest cause for concern for consumer-durable manufacturers is that
modern retail is considered undesirable competition by traditional distribution
channels. Harish Kumar concedes that organised retail may become a threat tochannels. Harish Kumar concedes that organised retail may become a threat to
conventional distribution.
• “The profit requirements of the different channel partners are different. LG has
evolved a new supply chain system for modern retail and is devising plans to
strengthen all channels,” said V Ramachandran, director, sales and marketing,
LG
Retailing of Consumer goods in India
• Indian organized retail to grow at 33 % in the coming 5 years.
• Most attractive retail destination for global retailers as per AT Kearney's Global Retail Dev Index
• By 2015, food, grocery, apparel, consumer goods, home décor & furnishing be• By 2015, food, grocery, apparel, consumer goods, home décor & furnishing be
the most attractive retail categories based on TSMG1 analysis
• Specialty stores, supermarkets, hypermarkets, dept stores & convenience stores
• Metro cities, tier 2 & 3 cities will emerge as high growth potential cities across
• Challenges are
• underdeveloped sc
• inadequate hr
• real estate
• lack of proper training & development, etc

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Retail in India
Weekly
marketsv
Conv
stores, Mom
Khadi & co-
operative
stores
(Sahakari
Exclusive brand
outlets,
hypermarkets/
super markets,
departmental stores,
Organised/
modern
retailing
Rural reach
Traditional
reach
Government
supported retail
Modern retail
format/international
formats
Transformation of Indian retail industry
Weekly
marketsv
illage
fairs &
melas
stores, Mom
& Pop
kirana
outlets
(Sahakari
Bhandars)
departmental stores,
shopping malls, etcTraditional
retailing
Retail in India
CHANGING ECONOMICS
• 2nd fastest growing economy; 4th largest Purchase power parity (PPP)
• Youngest countries - @ 70 % population <35; Younger population growing fast• Youngest countries - @ 70 % population <35; Younger population growing fast
• Rising disposable incomes; Per capita doubled from US$460(01) - US$797(07)
Changing trendz
• Cultural Habits changing- global lifestyle; Pubs , clubs , coffee bars, fast food...
• Spending on grooming & lifestyle; Dual income encouraging
• Rising income levels, guilt free spending

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Retail in India - opportunity
Sector
India Retail
(US$ mil)
Org Retail
(US$ mil)
Penetration
Org Ret (%)(US$ mil) (US$ mil) Org Ret (%)
Food & Beverages 231,951 2,268 0.98
Beauty Care 6,854 244 3.56
Jewelry & Watches 13,390 829 6.19
Home décor & Furnishing 9,463 829 8.76
Books , music & gifts 2,610 341 13.08
Clothing & textile 29,024 4,756 16.39
Consumer durables 15,171 2,585 17.04Consumer durables 15,171 2,585 17.04
Footwear 3,268 1,073 32.84
Total 311,731 12,925 4.15
Retail in India - formats
• 60k – 700k sft Examples – Shopper stop, Pantaloons.Malls
• Kids Kemp, RPG's Music World, Planet M, Landmark
Specialty
• Kids Kemp, RPG's Music World, Planet M, Landmark
Specialty
stores
• <50k stores, grocery, food, etcDepartment
stores
• Discount stores, DFOs,
Discount
stores
Super
markets
• Discount stores, DFOs,
• Multi Brand outletsMBO’s
• All in one - Big Bazaar, Total,
Hyper
markets

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Retail in India - formats
Retail in India – Investments by 2013

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Retail in India
CHALLENGES
SUPPLY CHAIN
• Own strengths v/s 3rd party expertise
• Inventory management strategy
Retail in India
• Inventory management strategy
• Inbound transportation
• Warehousing
• Distribution
• Secondary transportation

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AGENDA
• Application of IT Tools ERP, RF, Web
o Changing businesses under ERP world – customer cases
o Radio frequency (RF) Bar codes, Voice technologies benefitso Radio frequency (RF) Bar codes, Voice technologies benefits
o Material handling equipment, AGVs, automation
o Case study including video case studies and user interaction
Technology in Supply chain
Objectives
• Establishing smooth flow of goods & services through Supply chain
• Lean warehousing methodology to optimise investment capital• Lean warehousing methodology to optimise investment capital
• Real-time inventory management using best of breed solutions
• Efficient supplier management – costs, services & delivery
• Merchandising planning, promotions, forecasting & Replenishment
• Greater visibility on operations through Reports & Alerts
• Increased Business intelligence through Data Analysis

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Internet
EDIEDI
EDI
Bar code/RFID
Internet
Internet
EDI
RFID technology - video
MRP/ERP

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EDI parts
• EDI is a inter company PC-to-PC bus info exchange
• EDI std: Industry standards evolved over a period
• EDI std: Industry standards evolved over a period
• EDI software: Data extract/format/send – rcv/format/integrate
• EDI com mode: VAN (Intranet)
• EDI Benefits
o Responsiveness
o Time & money
o Accuracy
o Relationships
o Quality decision making
Future super market - video

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Voice picking, Vocollect, Pick to Light

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• Best practices being followed by Global Leaders (case studies)
o What is best practice and why?
o Best practices in Supply chain – specific to Consumer goods & retail
Best practices in Supply Chain
o Best practices in Supply chain – specific to Consumer goods & retail
o Benefits of best practices – live examples – India & Asia
o Best of breed SCM applications
What is Best practices
• Best practice is an idea that asserts that there is a technique, method, process,
activity, incentive or reward that is more effective at delivering a particularactivity, incentive or reward that is more effective at delivering a particular
outcome than any other technique, method, process, etc.
• The idea is that with proper processes, checks, and testing, a desired outcome
can be delivered with fewer problems and unforeseen complications.
• Best practices can also be defined as the most efficient (least amount of effort)
and effective (best results) way of accomplishing a task, based on repeatable
procedures that have proven themselves over time for large numbers of peopleprocedures that have proven themselves over time for large numbers of people
• Transformation at Port of Tyne – Video case study

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Why Best practices
• Become business buzzword?
• To describe the process of developing and following a standard way
• To describe the process of developing and following a standard way
• Multiple organizations can use for management, policy and
• Especially software systems
• Organizations have begun using "best practices" to refer to
Business logic
Functionality
Comparability
Retail Best practices
• Processes
• Practices
• Practices
• Systems
• Benchmarking
• Information
• Informed decision-making
Best practices are not necessarily best for ever…….
What is RFID - video

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Best practices engagement includes:
• Comprehensive review of operations
• Identify current challenges
Review
ChallengesMeasure
• Identify current challenges
• Identify process gaps
• Recognise improvement opportunities
• Redefine processes flows
• Realign infrastructure/system
• Lead the change management
Challenges
IdentifyChange
Measure
• Monitor/measure benefits Redefine
FORECASTING-RELATED BEST PRACTICES AND PRINCIPLES
• Value based criteria – 80:20 rule – ABC classification of inventory
• Supply – demand matching
• Supply – demand matching
• Demand Shaping is an execution process; Dell strives to recover from excess and
short inventory positions; similar to retailers mark downs to remove surplus stocks
- Dell workers daily meet to see inventory at warehouses & manufacturing plant
- team will change plans based on promotions on the web site
- prices and deliveries times to steer customers
Logistics Simulation - video

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Case study
Samsonite
• Factory in Nasik
• Has tie ups with Maruthi Gougoan & Hyundai TN• Has tie ups with Maruthi Gougoan & Hyundai TN
• Uses return trips of large scooter bodied trucks
• Normal truck – 350 suitcases, 15-17K (Del-Nas)
• Maruthi trucks can carry – 700 suitcases
• Win-Win for both
Questions
BEST PRACTICES
is not a destination!
but a direction!

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• Vendor/Supplier management
o Vendor management basics - selection criteria
o Vendor/Supplier services - advantages, challenges and how many to have
o Vendor/Supplier services - advantages, challenges and how many to have
o vendor rating, performance tracking and management
o System driven Collaborative vendor management – case studies

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Elements of Transport costs
• Freight – Air, Road, Rail, Sea, Pipelines - (faster is costlier)
• Transit time – inventory in transit – (longer means costlier)
• Shelf life, decay – devaluation due to time (delays) (fish from AP)• Shelf life, decay – devaluation due to time (delays) (fish from AP)
• Packaging – protective (more for rail, less for road)
• Transit insurance – various risks
• Misc – local taxes, octroi, toll & B-TAX (??)
Case study
• Maruthi Udyog
- used to transport on roads
- windshields damages – tree branches- windshields damages – tree branches
- Now uses rail
- reduced damages, breakages
• Whirlpool
- used to book ‘on-spot’
- Now has 40 dedicated fleet owners
- Both raws & FGs
- Cut costs by 10%+

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Volvo India
• Big is better?
• Annual demand 7.5T/day = 70,000units = 80% 2-axle, 15,000 3-axle
• Volvo India exploiting opportunities• Volvo India exploiting opportunities
• 6-axle Volvo trailer offers 3-4 times payload
• Can do 50-100% more trips – speed, less b/downs/driver fatigue
• Resulting in 20-40% reduced costs
• 800 trucks replacing 4000 trucks
• Less congestion, fuel
• Better environment, safety
Selection of transport
• Company, products, aggressiveness, market position
• Geo, competition, market condition, territory
• Product profile: demand type – immediate? Can wait?• Product profile: demand type – immediate? Can wait?
• Product profile: transport suitability – wt, size, shape, vol
• Quantity
• Distance
• Total Costs
• Vendor capabilities

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Indian infrastructure
• Total length of rail – 62,000kms – growth of just 9,000kms in 50 years
• Rail/population – Canada 465miles/lakh……………. India 10miles/lakh people
• Freight share – USA = 63%, China = 87%........... India 36%• Freight share – USA = 63%, China = 87%........... India 36%
• Avg speed – passenger 50kmph……… Goods 26kmph
• Total length road – 5,50,000kms – less than 114km/lakh population
• National highways – 6%, State highways – 23% others – 71%
* Only 2% of NH is a 4 lane!!!!!!!!
Indian roads - video
Indian infrastructure
• High cost of transportation – 200-250kms/day
• Poor road maintenance – high costs on trucks maintenance
• Lack of ICDs• Lack of ICDs
• Poor Productivity at ports
- avg ship turn around in Singapore = 8-9hrs
- avg ship turn around in Mumbai = 6-9 days
- handling charges are high (USD450 while USD200-300 at foreign ports)
• Lack of temp controlled warehouses, cold storage, liquid cargo warehouses
• Customs – bureaucratic, no EDI, B-TAX

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Challenges
• Central v/s Network
• Fuel costs
• Flexibility• Flexibility
• Availability
• IT systems
• Value added services
Indian traffic - video
3PL service providers
Advantages
• Core competencies
• Best practices
Disadvantages
• Costs
• Customer loyalty• Best practices
• Technology & flexibility
• Investment
• Scalability
• Customer loyalty
• Asset owning v/s contractual
• Lack of control
• Lack of visibility

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• How to tune supply chains to get better Performances?
o Need to set key performance indicators (KPIs)
o How to set and measure KPIs
o How to set and measure KPIs
o Benchmarking benefits in a supply chain
o Continuous improvement case studies within SCM

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