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SCM Mini Project 2

SCM Mini Project 2

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Published by Debashish Bagg

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Published by: Debashish Bagg on Feb 08, 2012
Copyright:Attribution Non-commercial

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02/17/2012

 
S
UPPLY CHAIN
M
 ANAGEMENT
B
ENCHING STUDY 
M
INI
P
ROJECT
2 G
ROUP
7
1 |Page
 
   P  a  n   t  a   l  o  o  n  s  v  s .   S  p  e  n  c  e  r   ’  s
   P  e  r   i  o   d  o   f   S   t  u   d  y  :   2   0   0   6  -   2   0   1   0
   O
   U   T   S   O   U   R   C   I   N   G    T   R   E   N   D   S   I   N
   I
   N   D   I   A   N
   R
   E   T   A   I   L
   I
   N   D   U   S   T   R   Y
A
BSTRACT
 
This Project is done by the team as a part of Supply ChainManagement Course. The present study aims at finding differentoutsourcing practices and trends that is either being used in the IndianRetail industry. Two retail giants Big Bazaar (Pantaloons) and Spencer& Company Ltd are used for this study. This report is based on data thathave been gathered from Capitaline and also direct and telephonic
interactions with company executives’ from Spencer and Big Bazaar.
 
S
UPPLY
C
HAIN
M
ANAGEMENT
C
OURSE
M
INI
P
ROJECT
IIP
ROJECT ON
O
UTSOURCING TRENDS IN
I
NDIAN
R
ETAIL
 T
EAM
M
EMBERS
:V
IVEK
P
AREKH
2010281
 D
EBASHISH
B
AGG
2010298
 S
AKSHI
A
GARWAL
2010206
 S
ANKHA
D
IP
D
ATTA
2010207
 S
HANTANU
P
ANDEY
2010212
 S
HASHANK
S
HEKHAR
T
RIPATHI
2010213
 B
ENJAMIN
W
EBER
2010FE01
 
 
O
UTSOURCING TRENDS IN
I
NDIAN
R
ETAIL
M
INI
P
ROJECT
II G
ROUP
72 |Page 
I
NTRODUCTION TO
O
UTSOURCING
 
Outsourcing is any task, operation, job or process that could be performed by employees withinan organization, but is instead contracted to a third party for a significant period of time.The term outsourcing is used inconsistently but usually involves the contracting out of a businessfunction commonly one previously performed in-house to an external provider. In this sense, twoorganizations may enter into a contractual agreement involving an exchange of services and payments.The concept of outsourcing thereby helps the firms to perform well in their core competencies and thusmitigating rise of skill or expertise shortage in the areas where they want to outsource.Of recent concern is the ability of businesses to outsource to suppliers outside the nation,sometimes referred to as off shoring or offshore outsourcing. In addition, several related terms haveemerged to grasp various aspects of the complex relationship between economic organizations ornetworks, such as near shoring, multi-sourcing and strategic outsourcing.One of the biggest changes of recent years has come from the growth of groups of people usingonline technologies to use outsourcing as a way to build a viable service delivery business that can be runfrom virtually anywhere in the world. The preferential contract rates that can be obtained by temporarilyemploying experts in specific areas to deliver elements of a project purely online means that there is agrowing number of small businesses that operate entirely online using offshore outsourced contractors todeliver the work before repackaging it to deliver to the client.
I
NDIAN
R
ETAIL
S
ECTOR
 
Indian retail market has been ranked 4
th
most attractive emerging market. India's retail sectoraccounts for 12% of GDP with about 25 million people being employed and second largest employer afteragriculture in the country. Moreover, India's overall retail sector is expected to rise to around USD 600billion by 2013. The organized retail currently accounting for around 5% is pegged at around USD 20billion. It is expected to touch USD 107 billion by 2013.The key challenges Indian organized retail industry faces are cost, availability and delivery of quality products, cost efficient real estate, skilled service employees, and employee attrition in theindustry. The rentals continue to be the highest expense of modern retailers and are almost 4 to 5 timesthat of their western counterparts continue to pose a challenge to their growth. Indian retailers havedifficulty in finding trained personnel and incur significant costs for training them.
P
ANTALOON
R
ETAIL
L
TD
.
Pantaloon Retail India Limited (PRIL), is a retailer which was incorporated on 12
th
October, 1987and is headquartered in Mumbai. The company operates primarily through the Lifestyle and Valueformats with multiple delivery mechanisms and selling channels in their business, some of them arefashion, food, general merchandise, home, leisure and entertainment, financial services, communicationsand wellness. The Company has stores in 51 cities across the country, constituting over 6 million squarefeet of retail space. In Value retail it is present through 78 Big Bazaar hypermarkets, 113 Food Bazaarsand other delivery formats.
 
O
UTSOURCING TRENDS IN
I
NDIAN
R
ETAIL
M
INI
P
ROJECT
II G
ROUP
73 |Page 
S
PENCER
S
R
ETAIL
L
TD
.
Spencer’s Retail Limited is a multi
-format food-first retailer providing a wide range of qualityproducts to discerning young customers - well-travelled citizens of the world, looking out for authenticflavors and experiences in a fun-filled shopping environment. Part of the Rs 15,500 crore RPG Group,Spencer run about 200 stores (including about 30 large format stores) across 35 cities in India. As one of the earliest entrants in the retail space in India, Spencer
’s
also has a wide variety of electronics andelectrical equipment, home and office essentials, garments and fashion accessories, toys, and personalcare.
I
NTERPRETATIONS FROM THE RESULTS
 
Table 1 shows the calculation of Outsourcing Ratio that is basis of comparison of Pantaloons and
Spencer’s Retail format. Source of data for calculation
in table 1 is Capital line database though annualreports of individual companies were studied for further detailed data. A comparison of industrial wiseaverage is also included to compare what the firms have been doing differently. The Interpretation on thedata here is broadly classified to heads i. e. outsourcing ratio over the year and change in outsourcing ratiowith change in sales turnover.
Year
2011 2010 2009 2008 2007 2006 2005 2004 2003 2002
RetailIndustrialAverageSales Turnover 14905 33515 35298 27598 29983 39860 32497 33211 33662 22294Raw Materials 13254 22705 23986 21686 23800 22053 20383 21820 20925 17587Outsourcing Ratio 0.89 0.68 0.68 0.79 0.79 0.55 0.63 0.66 0.62 0.79PantaloonsRetail Ltd.Sales Turnover 4326 6317 6661 5296 3393 1962 1085 658 445 285Raw Materials 3144 3279 4783 4127 2611 1478 828 467 328 214Outsourcing Ratio 0.73 0.52 0.72 0.78 0.77 0.75 0.76 0.71 0.74 0.75Spencer
’s
 Retail Ltd.Sales Turnover 952 1133 854 540 291Raw Materials 727 892 771 444 259Outsourcing Ratio 0.76 0.79 0.90 0.82 0.89
Table 1: Outsourcing Ratio across Indian Retail industry
1.
 
O
UTSOURCING RATIO
 
As can be seen from figure 1, outsourcing ration has been highly variable over the last decade. Onan overall outsourcing has gone up from .8 to .9 with the mean of .7 and standard deviation of 0.103. Both
0.500.700.902011 2010 2009 2008 2007 2006 2005 2004 2003 2002
   O  u   t  s  o  u  r  c   i  n  g   R  a   t   i  o
YearFigure 1: Outsourcing ratioRetail IndustrialAveragePantaloonsRetail Ltd.SpencerRetail Ltd.

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