Supply Chain Management Retail Industry

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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 4  Future Group Reliance Retail Limited Trent. Tata Group Landmark Group (Lifestyle) K Raheja Corp Group      AV Birla Group RPG Group  .

Opportunity Lost 5 AVAILABILITY IS AN INCREASINGLY IMPORTANT COMPETITIVE DIMENSION .

Management beyond the borders of an organization Upstream The upstream business partners are the external organizations that supply products or services to an organization. manufacturers. to the right locations. . and stores. so that merchandise is produced and distributed at the right quantities. and functions that the product passes through on its way to the end customer. in order to minimize system wide costs while satisfying service level requirements. Downstream The downstream supply chain is the organizations external distribution channels. processes. warehouses. and at the right time.Supply Chain Management-Retail Industry 6 Supply chain management is a set of approaches utilized to efficiently integrate suppliers.

Why SCM is Important in Retail 7  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 .

warehousing. transport to producer Producing the product Producer Design. transport to retailer. transport to wholesaler Wholesale distribution Wholesaler Warehousing. transport to store/ home Consumer . cash and carry Retailer Retail distribution Regional and local distribution centres. selling through agents.Basic elements of a retailing supply chain 8 ACTIVITY Sourcing materials INSTITUTION Materials supplier OTHER ACTIVITIES Warehousing.

SCM Functional Areas – Retail Industry 9 Indian Retail Sector Food Retailers Home Furniture & Household Goods Health & Beauty Products Durable Goods Clothing & Footwear Leisure & Personal Goods .

10  A supply chain consists of all stages involved. directly or indirectly.  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 .SCM Functional Areas . in fulfilling a customer request.Contd.

Supply Chain Structure – Reliance Retail 11 SUPPLIER FACTORY DC RDC RETAILER Raw Materials Finished Goods Information Flow .

instantaneously . shippers and other businesses around the world. customers. 12     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.A Supply Chain Enabler for Retail Ind.IT .

Supply Chain Flow 13 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 14 .

Merchandise Flow 15 .

Information Flow 16 .

..Information and Merchandise Flows 17 Customer Sales info Buyer Stores Vendor .Merchandise flow Distribution center Information flow ..

Supply Chain Planning 18 Material Requirement Planning Raw Material Requirement Demand Forecasting Demand Planning Production Plan Supplier Plant Warehouse Logistics Retailer Order Management .

Daily) .Supply Chain Planning Decisions 19 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.

Supply Chain Planning Decisions 20 STRATEGIC TACTICAL OPERATIONAL Procurement Manufacturing Distribution Logistics .

Supply Chain Planning Decisions 21 • Supplier Selection •Allocation of Suppliers to the Plants •Location. Capacity of Plants •What Products to Produce •Which Plants to Produce them •Location. 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 . Number. Number.

Strategic importance of SCM in Retail 22   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 .

RFID. the Internet. and extranets   Purchasing is responsible for sourcing materials Operations use timely demand information to more effectively plan production schedules . intranet.  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.SCM Across the Organization 23 SCM changes the way companies do business. EDI.

5% .Cost Optimization – SCM 24 An Integrated Supply Chain Management can help eliminate the Intermediaries & Company can save upto 37.

SCM 25  Improve return on investment Reduce Costs! Increase Efficiency! Net profit sales assets  = Net profit Net sales x Net Total Total assets Improve product availability .Cost Optimization .

Measuring supply chain performance 26  Traditional measures include:     Return on investment Profitability Market share Revenue growth  Additional measures     Customer service levels Inventory turns Weeks of supply Inventory obsolescence 26 .

and load times Increase cost savings from outsourcing for low cost materials .Benefits of SCM 27 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.

Benefits of SCM 28 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 .

Wal-Mart uses the replenish model to keep their shelves full and penalize their suppliers for late shipment.g. .Benefits of SCM 29 Reduced out-of-stock situations Improved order fill rates Services  Retailers Improvements Increased ship-complete and on-time percentages E.

thefts and employee pilferage. vendor frauds or inaccurate supervision despite using standard and modern security features 30  .Key Issues of SCM – Retail Industry 30  Inadequacies in infrastructure such as lack of high quality road networks. 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. shop lifting. 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.

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 .

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 .Case Study :Wal-Mart's SCM System    Wal-Mart pioneered the hub-and-spoke system.)  .) 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.

 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. WalMart made full use of its IT capabilities to make more inventories available in the case of items that customers wanted most.Contd.   Instead of cutting the inventory across the board.Case Study . while reducing the overall inventory levels. . reducing pack sizes across many product categories. and timely price markdowns.

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. .   Employees at the stores had the “Magic Wand. and backup merchandise in stock at the distribution centers. These helped them to keep track of the inventory in stores.” a handheld computer. deliveries.

in July 2003.   .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.Case Study – Contd.  Wal-Mart had invested approximately $4 billion to build a retail link system(More than 10. In efforts to implement new technologies to reduce costs and increase the efficiency. forecasting and replenishment (CPFR). The company believed that this replacement would reduce its supply chain management costs and enhance efficiency.

. Green and Agile Consolidation and outsourcing will set the foundations for a leaner supply chain. Collaboration between channel partners and integration of various stakeholders will keep the supply chain agile and competitive. Multimodal transport and energy-efficient infrastructure will keep it green.Road Ahead for SCM – Retail Industry  Goal: Lean.

TMS.WMS.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 .  Game Changers      Policy Reforms Modernization of Retail and Advent of New Channels Change in Demand Structure Impetus to Infrastructure Empowered through Technology (ERP.Road Ahead – Contd.

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