Supply Chain Management Retail Industry

Presentation Flow
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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

Retail Snapshot
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India is one of the top five retail markets in the world by economic value Indian retail sector accounts for 22% of the country's GDP and contributes 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 are expected to witness high growth In India, Organised Retail CAGR is 30% India has highest number of unorganised retail outlets per person (7/thousands) India spends close to 13% of its GDP in logistics, which is far higher than the efficient level of 8%.

Key Players in Retail

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Future Group Reliance Retail Limited Trent, Tata Group Landmark Group (Lifestyle) K Raheja Corp Group

AV Birla Group
RPG Group

Opportunity Lost
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AVAILABILITY IS AN INCREASINGLY IMPORTANT COMPETITIVE DIMENSION

Supply Chain Management-Retail Industry

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Supply chain management is a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the right quantities, to the right 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 Upstream The upstream business partners are the external organizations that supply products or services to an organization. Downstream The downstream supply chain is the organizations external distribution channels, processes, and functions that the product passes through on its way to the end customer.

Why SCM is Important in Retail

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Demanding Shrinking

customers

product life cycles offerings

Proliferating product

Growing retailer
Doctrine

power in some cases

of core competency of specialized logistics providers

Emergence

Globalization Information

technology

Basic elements of a retailing supply chain

8 ACTIVITY Sourcing materials INSTITUTION Materials supplier OTHER ACTIVITIES Warehousing, transport to producer

Producing the product

Producer

Design, warehousing, selling through agents, transport to wholesaler

Wholesale distribution

Wholesaler

Warehousing, transport to retailer, cash and carry Retailer

Retail distribution

Regional and local distribution centres, transport to store/ home Consumer

SCM Functional Areas Retail Industry

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Indian Retail Sector Food Retailers
Home Furniture & Household Goods

Health & Beauty Products Durable Goods Clothing & Footwear Leisure & Personal Goods

SCM Functional Areas - Contd.

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A supply chain consists of all stages involved, directly or indirectly, in fulfilling a customer request.

Example: A
Manufacturer (P&G)

detergent supply chain

Reliance Retail DC Reliance Fresh Store Customer

Chemical Manufacturer

Plastic Producer

Tenneco Packaging

Oil Industry

Timber
Industry

Paper Manufacturer

Supply Chain Structure Reliance Retail

11 SUPPLIER FACTORY DC RDC RETAILER

Raw Materials

Finished Goods Information Flow

IT - A Supply Chain Enabler for Retail Ind.

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Information links all aspects of supply chain E-business replacement of physical business processes with electronic ones Electronic data interchange (EDI) a computer-tocomputer exchange of business documents Bar code and POS Data creates an instantaneous computer record of a sale

Radio frequency identification (RFID) It can send product data from an item to a reader via radio waves Internet Allows companies to communicate with suppliers, customers, shippers and other businesses around the world, instantaneously

Supply Chain Flow

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Supply chain Flow

Material/merchandise flows Information flows

Financial flows
Supply chain management is the management of flows between and among supply chain stages to maximize total supply chain profitability

Example of a Simplified Supply Chain

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Merchandise Flow
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Information Flow
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Information and Merchandise Flows

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Customer

Sales info Buyer Stores

Vendor - - - - Merchandise flow

Distribution center

Information flow

Supply Chain Planning

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Material Requirement Planning

Raw Material Requirement

Demand Forecasting

Demand Planning

Production Plan

Supplier

Plant

Warehouse

Logistics

Retailer

Order Management

Supply Chain Planning Decisions

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Strategic
Supply Chain Design Resource Acquisition Long Term Planning (1 Year ++)

Tactical
Production/ Distribution Planning/Demand Forecasting Resource Allocation Medium Term Planning (Qtrly, Monthly)

Operational
Shipment Scheduling Resource Scheduling Short Term Planning (Weekly, Daily)

Supply Chain Planning Decisions

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STRATEGIC

TACTICAL

OPERATIONAL
Procurement Manufacturing Distribution Logistics

Supply Chain Planning Decisions

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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 Inventory

Vehicle Routing

Strategic importance of SCM in Retail

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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

SCM Across the Organization

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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

Cost Optimization SCM

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An Integrated Supply Chain Management can help eliminate the Intermediaries & Company can save upto 37.5%

Cost Optimization - SCM

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Improve return on investment

Reduce Costs! Increase Efficiency!

Net profit sales assets

Net profit Net sales

Net Total

Total assets

Improve product availability

Measuring supply chain performance

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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
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Cost and Financial

Retailers
Improvements

Manufacturers Distributors

Streamlined inventories and reduced costs Reduced errors and redundant labor Increased 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

Benefits of SCM
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Processes Manufacturers
Improvements

Improved forecast accuracy as well as resource and distribution planning Improved manufacturing and replenishment cycle time Enhanced manufacturing scheduling Increased effectiveness of planning and decision making Improved overall efficiency in production Enhanced a seamless multichannel shopping Reduced supplier base

Benefits of SCM
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Reduced out-of-stock situations
Improved order fill rates

Services Retailers
Improvements

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.

Key Issues of SCM Retail Industry

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Inadequacies in infrastructure such as lack of high quality road networks, 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 30

Key Issues of SCM Retail Industry

Multiple taxes at the central and state level Lack of clear policies (especially on the entry of foreign retailers) The industry also faces a huge shortage of experts in areas such as supply chain and store management.

The most significant challenge that impedes the development of an efficient and modern retail sector is an underdeveloped supply chain

Case Study :Wal-Mart's SCM System

Wal-Mart pioneered the hub-and-spoke system. The company directly procured from manufacturers, by passing all intermediaries Wal-Mart spends a significant amount of time meeting vendors and understanding their cost structure.

Using EDI for Procurement (It enabled the suppliers to download

purchase orders along with store-to-store sales information relating to their products .) Wal-Mart also made use of a logistics technique called crossdocking (goods were directly picked up from supplier, sorted out and then directly supplied to the customers.)

Case Study - Contd.

Wal-Mart invested heavily in IT and communication systems to effectively track sales and merchandise inventories in stores across the country. Wal-Mart was able to reduce unproductive inventory by allowing stores to manage their own stocks, reducing pack sizes across many product categories, and timely price markdowns.

Instead of cutting the inventory across the board, WalMart made full use of its IT capabilities to make more inventories available in the case of items that customers wanted most, while reducing the overall inventory levels.

Case Study Contd.

Employees at the stores had the Magic Wand, a handheld 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.

Case Study Contd.

Wal-Mart had invested approximately $4 billion to build a retail link system(More than 10,000 Wal-Mart retail suppliers used the retail link system to monitor the sales of their goods at stores and replenish inventories.) Retail Link had emerged into an Internet-enabled SCM system whose functions were not confined to inventory management alone, but also covered collaborative planning, forecasting and replenishment (CPFR). In efforts to implement new technologies to reduce costs and increase the efficiency, in July 2003, The company believed that this replacement would reduce its supply chain management costs and enhance efficiency.

Road Ahead for SCM Retail Industry

Goal: Lean, Green and Agile

Consolidation 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.

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

Thank You
Cyril Cherian - 110 Niyati Pujara - 128 Raj Chajjed - 132 Santosh Uchil - 141 Sejal Desai - 142 Sumesh Shetty - 147 Vineet Badiani 152