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Supply Chain in Vishal Mega Mart

Submitted in Partial Fulfillment of

Master of Business Administration (MBA)

Programme : 2011 -13

Gautam Buddh Technical University, Lucknow

Under the Supervision of : Mr. Anubhav Saxena Submitted By: Group - 6
Karishma Joshi Pravin Kumar Ekta Singh Sameera Naaz Keshav Gupta Rohit Kumar Gaurav Shrivastava

Faculty of Management Science



Shri Ram Murti Smarak College of Engineering & Technology, Bareilly



The Retail Sector is the largest sector in India after agriculture, accounting for over 10 per cent of the countrys GDP and around 8 per cent of the employment. India has the most unorganized retail market in the world. Most retailers of the unorganized retail market have their shop in the front and house at the back. Retail industry is booming all around the globe at a very fast pace. Vishal Retail is a known and strong competitor in the retail industry since 23 years. When we talk about Indian market, the demands of every thing which you can find in every retail store are increasing every year. Indians are famous for their traditions and festivals and exchanging gifts with friends and relatives is a part of it. VISHAL MEGAMART is a retail house in India. As it operates more than 1000 retail stores, including stores which are operated by their franchisees. These stores are spread over about 1,282,000 square feet and are located in 18 states across India. In its efforts to strengthen thier supply chain, it has set up seven regional distributions centres and an apparel manufacturing plant. It started as a retailer of ready-made apparels in Kolkata in 2001. At the time of incorporation, the registered office of thier Company was situated at 4, R. N. Mukherjee Road, Kolkata 700 001. In 2003, it acquired the manufacturing facilities from Vishal Fashions Private Limited and M/s Vishal Apparels. It follows the concept of value retail in India. In other words, their business approach is to sell quality goods at reasonable prices by either manufacturing themself or directly procuring from manufacturers (primarily from small and medium size vendors and manufacturers). It facilitate one-stop-shop convenience for their customers and to cater to the needs of the entire family. It believes this concept has helped them grow to thier current size within a short time frame of their years. Mr. Ram Chandra Agarwal has been ranked as the 28th most pitiful person in the Indian retail industry.


Introduction about the topic Scope of study Objective Finding Interpretation Conclusion Suggestion Questionnaire for interview References



In the background of high consumerism and income of the urban consumers, in recent year there are a number of companies have expressed their interest towards retail sector outlets. As a result numbers of shopping malls have started their operations in metro and urban areas. Pantaloon, big bazaar, Vishal Mega Mart, Reliance Fresh are the best known examples of retail sector outlets in India. Retailing is the interface between the producer and the individual consumer buying for personal consumption. This excludes direct interface between the manufacturer and institutional buyers such as the government and other bulk customers. A retailer is one who stocks the producers goods and is involved in the act of selling it to the individual consumer, at a margin of profit. As such, retailing is the last link that connects the individual consumer with the manufacturing and distribution chain. Some of the key features of retailing include:

Selling directly to customers with out having any intermediaries Selling in smaller units / quantities, breaking the bulk Present in neighborhood or in the location which is quite convenient to the customers. Very high in numbers Recognized by their service levels Fitting any size and or location

It is assumed that due to the entry of a number of retail outlets in the urban and semi urban areas, the mindset of the existing customers have undergone drastic changes. Besides it is also reported that the traditional retailing such an age old Grocery shops have directly faced competition with the organized retailing sector. In some parts of the country, it is reported that the traditional retails are resisting the entry of organized shopping malls. For instance the traditional retails of Bhubaneswar with the active support of the consumers at large didnt allow reliance Fresh to start outlet initially.


1. Opportunity to understand the Supply chain of Vishal Mega Mart 2. Able to know the Inventory management. 3. Get to know the ideal time between ordering & getting the goods.

1) To analyze the complexities involved in management of a supermarket. 2) To know the current suppliers. 3) To understand criteria of supplier selection. 4) To understand the key areas of company through which its tries to maintain the good supplier relation hence to have the strong supply chain. 5) To recommend the strategies for future to increase the supplier satisfaction and to have the strong supply chain.



VRPLs business process can be summarized as below:

Establishment of Stores:
Selection of location In selecting location for a new store, VRPL start by identifying the city/town. VRPL target primarily cities/towns which may be classified as Tier II or Tier III cities. In this regard, an analysis of the demography, literacy levels, nature of occupation and income levels. Within a city/town, VRPL target locations with good infrastructural facilities such as easy accessibility, provision for water, electricity, parking, security and other basic amenities. VRPL prefer to locate their stores in areas where real estate is available at reasonable prices. The efforts of VRPLs retail business are targeted towards families having total income which can be classified under the lower middle and middle income groups. Accordingly, VRPL plan their strategy to search for areas within cities where such customers are domiciled in large numbers and make efforts to locate themselves within the reach of such customers. VRPL believe that adoption of standard formats for their stores has led to their brand establishment and identification among their customers and will increase their base of loyal customers. In pursuance of this, they have adopted standard parameters for store planning and establishment. For ensuring standardized formats of their stores, VRPL consider various factors, such as internal and external dcor and colour schemes, allocation of store space, stock mix and pricing and accounting methods.


Insurance VRPL maintain comprehensive insurance coverage with Tata AIG, Bajaj Allianz, Royal Sundaram and IFFCO-TOKIO for their existing stores, distribution centers, manufacturing facilities and trucks. VRPL insurance policies include comprehensive coverage for electronic equipment, fire and special perils and burglary. Further, VRPL has filed a claim of Rs. 22.50 million on account of fire in their store at Meerut as on July 7, 2006. In this regard, they have received Rs. 7.50 million as an interim payment. Factories VRPLs existing manufacturing facilities are located at Plot No. 224, Phase 1 Udyog Vihar, Gurgaon, for which they have leasehold interest until May 4, 2009. In addition, VRPL have recently acquired freehold interest in relation to a land admeasuring 7.24 acres in Dehradun, Uttaranchal, where they are exploring the possibilities for establishment of another manufacturing facility. Other Properties VRPL have recently acquired freehold interest in relation to a land admeasuring 82,830 square feet in Hubli, Dharwad. Merchandise Planning VRPLs merchandise planning is based on the concept of category management rather than traditional brand management practices. Apparels and Non Apparels Under category management for, say, apparels, VRPL create and cater to products across length and breadth of a category at different price points, fabrics, designs, shapes, seasons, colors and sizes. VRPL formulate annual merchandising plan for each division


of merchandise taking into consideration factors such as past sales data, regional customer tastes and preferences, number of stores (established and proposed), likely fashion and trends, in-house production resources, vendor management and price. Each division is further divided into major categories (for instance, mens apparel as a division is further divided into three major categories, namely, upper, lowers and sports and ethnic wear). These major categories are in turn segregated into various subcategories. For example, mens upper as a major category would be further divided into several subcategories such as formal shirts, casual shirts, party wear etc. Each sub-category consists of pre-defined SKUs, which are classified on the basis of price point, brand, style, pattern and size. VRPL draw annual sales projections for different SKUs and, accordingly, ascertain their sourcing requirements. Based on such information and lead time estimates for supplies, purchase orders with delivery schedules are issued. The inventory position for each SKU is reviewed fortnightly taking into account the actual sales and variations from the budgeted plans. Regular visits to the stores are made by the category merchandising team to identify the slow-moving-SKUs and explore the options to expeditiously dispose of them. For certain non apparel categories, their merchandise planning and scheduling also depends on introduction of new products and schemes by the vendors. For instance, if a branded home appliance manufacturer replaces a product with a new version, then their planning for the product would need to be reviewed based on the acceptability of the new version. In-house Manufacturing VRPL benefit from backward integration and in-house manufacturing of part of the apparel products sold in their stores. Through their manufacturing capabilities, VRPL is able to attain relative independence from intermediaries with a competitive advantage in


terms of value and cost. VRPL use their manufacturing strengths to focus on enhancing product knowledge and their experiences from manufacturing enable them to negotiate better terms from the vendors and job workers. VRPL currently have an apparels manufacturing plant at Gurgaon, Haryana. The manufacturing plant is well-equipped with fully automatic machines for fusing, buttoning, embroidery and welt pocket-making operations. The factory has a capacity to manufacture 5,000 pieces per day. The plant was commissioned in 2004 and achieved a capacity utilization of 80%. It has 450 machines and is operated by 500 workers. Further, VRPL are exploring the possibilities for establishment of another manufacturing facility, for the purposes of which they have acquired certain portions of land admeasuring 7.24 acres in Dehradun, Uttaranchal. In addition to in-house manufacturing, they have outsourced some parts of the manufacturing to job workers who work in their factory premises. VRPL undertake quality control measures by way of random sampling to ensure the pre-determined quality standards are met. To verify that the quantity of supplies is as per the order, they undertake count-check for every receipt of the goods. VRPLs manufacturing team works closely with their design team to understand trends, develop products, value engineer and finally create season wise collection that cater to regional tastes. Purchasing Purchasing or vendor management assumes critical importance in retail business where one has to deal with multiple products. VRPL have in place a vendor management system, under which they identify vendors all over the country and overseas and seek to develop alliances and arrangements with them. They regularly interact with the vendors and share information such that the vendors remain familiar with their goals and targets. It has been their strategy to procure goods from small and medium sized vendors and


manufacturers, which they believe has led to reduction in the cost of goods they sell and increase in their profitability. Upon ascertaining the procurements needs based on each SKU, VRPL explore the various options for sourcing the products. They continuously strive to procure goods from the place of origin to reduce the costs and control the quality. For identifying the vendors, VRPL assess the various possible options on factors such as capacity, credibility in the market, quality awareness and experience. After identifying the vendors for the goods, VRPL place purchase orders based on their SKU-wise plan, estimated lead time of each vendor and quantity to be procured from each vendor. VRPL follow a policy of payment on delivery to negotiate better prices with the vendors and in certain cases they also release payments in advance. To ensure quality of supplies, VRPL check quality by way of random sampling at the time of receipt of the goods. To verify that the quantity of supplies is as ordered, they undertake count-check for every receipt of the goods. For FMCG products, VRPL procure from large as well as small and medium size manufacturers. For procurement from the large manufacturers or their distributors, they endeavor to enter into formal arrangements for supply of products to all VRPL stores, such that they are able to derive fixed margins from sales of such products, irrespective of the locations. Under these agreements, they benefit from special discretionary discounts and offers directly from the manufacturers or their distributors.



VISHAL Apparels Brand

Apparel Manufacture The basic raw materials required for the manufacturing process of apparels includes fabrics and accessories. VRPL merchandising teams source fabrics from local manufacturers in India depending upon their production plan. VRPL also source fabrics from the place of origin. VRPL source various other components and accessories from vendors in various parts of the country and also import them from China. Inventory Management, Distribution Network and Logistics VRPLs distribution network and logistics encompasses all activities to ensure that goods are dispatched in right quantities and at right time to reach stores with sufficient time in hand to promptly cater to customer demands and optimization of inventory position. They have built a system to monitor the inventory position on a real-time basis at each store, under which a stock requisition or delivery order is generated when pre-determined stock or re-order levels are reached. The re-order levels for stores are determined based on factors such as display levels, lead time for replenishment and average daily sales. VRPL review these re-order levels on continuous basis to factor in variances in demand based on seasons, trends and promotional schemes. VRPL have seven distribution centers over approximately 385,033 square feet. These


distribution centers are located around Kolkata (West Bengal), Thane (Maharashtra), Jaipur (Rajasthan), Ghaziabad (Uttar Pradesh), Ludhiana (Punjab), Gurgaon (Haryana) and Mahipalpur (New Delhi). VRPL have clearly demarcated the stores which will be serviced by each distribution centre. The reorder levels for distribution centers are ascertained on the basis of factors like average daily sales of all the stores services, lead time for replenishment and buffer stock, which caters to both the existing and proposed stores to be fed. As for the stores, they regularly review these re-order levels. VRPLs distribution centers and stores are connected through company-wide virtual network connection through broadband which helps to efficiently manage their network of stores and distribution centers throughout the country. They primarily utilise their own vehicles to transport the inventory to their stores from the distribution centers. In addition, VRPL use the services of logistic solution providers including low cost transport service providers in order to deliver products on time to VRPL stores and optimize transportation costs. Distribution centers operations have been streamlined through the standardisation of racking system, layouts and implementation of automatic replenishment system. Under arrangements with some of their merchandise manufacturers, they receive payment on account of display of their products.



Supply chain management

Their supply chain management involves planning, merchandizing sthiercing, standardization, vendor management, production, logistics, quality control, pilferage control replacement and replenishment. Their supply chain management provides us flexibility to adapt to changing patterns in consumer behavithier and their ability to add value at various steps/levels. In particular, thier supply chain management gains strength from their ability to undertake in-house manufacture, design and development of apparels.

Strong and efficient logistics and distribution network VRPLs distribution and logistics network comprises seven distribution centers. Besides, VRPL have their own fleet of 31 trucks, which helps VRPL to transport and deliver their products in a cost and time efficient manner. VRPL believe that their distribution and logistics set up is well networked and allows them to fulfill the store requisition within short time period of generation and receipt of order, which has helped VRPL to optimize in-store availability of merchandise and minimize transportation costs. Their strong distribution and logistics network has enabled them to dispense with the requirement of a dedicated storage space at every store, which is an industry practice, and instead undertake periodical replenishment of depleted stock. Due to adoption of an efficient racking system, they are able to benefit from optimum utilization of the space allocated for display in their stores. This provides them assistance in maintaining a low working capital requirement and less carrying cost.



Geographical spread Thier stores and distribution centres are spread in various parts and regions of the country. This has not only enabled us to build thier brand value but also facilitated us to explore cost-effective sthiercing from different locations, identify potential markets and efficiently establish new stores in different locations. An aggregate of 43 of 50 of thier existing stores are located in Tier II and Tier III cities, which, It believe, enables us to capture market share in locations where a majority of thier target customers are located.

Identifying new locations It believe that It possess the ability to identify locations with potential for growth, in particular in Tier II and Tier III cities. It has an exclusive site identification and assessment team, which undertakes systematic analysis of the business prospects, taking into account factors such as population, literacy levels, nature of occupation, income levels, accessibility, basic infrastructure and establishment and running costs. Further, it has a dedicated warehouse for the purposes of storing the materials essential for setting up of new stores. Private labels It has a number of private labels for apparels (i.e. apparels manufactured by us) such as Zeppelin, Paranoia, Chlorine, Katina Studio, Famine, Flthierier Women and Roseau. In fiscal 2007, thier income from thier private labels was Rs. 583.60 million, which accounts for 9.68% of thier total sales for fiscal 2007. It believes that their focus on thier private labels and their recognition in thier customer segment enables us to differentiate themselves from thier competitors.



Their Strategy
It intends to pursue the following strategies in order to consolidate thier position as an operator in the value Retail segment in India. Thier growth strategy is based on: Increasing thier penetration in the country by leveraging thier supply chain, distribution and logistics network It intends to increase thier penetration in the country by setting up new stores in cities where it already have Presence, as also entering into new areas in the country. In particular, it intends to focus on expansion in Tier II and Tier III cities. It believe that thier existing infrastructure have been designed for a higher scale of operations than thier current size, and can help us grow without the need to significantly increase costs. Moreover, their continuous effort to improve systems and processes leads us to believe that it can deal with higher scale of operations without any hindrance. Higher business volumes will also improve thier negotiating pouters and help us get further economies of scale in thier buying.

Emphasis on Backward Integration It believes that through backward integration It will continue to substantially control the cost of production, resulting in such cost benefits being passed on to thier customers. It intends to increase the in-house manufacture, design and development of thier products and realizes economies of scale. It intends to manufacture at least 25% of thier requirement for apparels and may require expansion of thier existing manufacturing facilities. This will also enable us to reduce thier reliance on external agencies for supply of thier products and will result in loiter turn-around time.



In addition, thier focus would be to undertake in-house such functions of the manufacturing processes, which, in thier view, would add maximum value and would enable us to reduce their procurement costs.

Expansion of FMCG Historically, it has derived significant portion of thier revenue from sale of apparels. In pursuance of their business plan to diversify thier portfolio of offerings, FMCG products play a key role. FMCG products are usually meant to fulfill the daily needs of consumers and therefore, It believe retailing of FMCG products will bring customers to thier stores on a frequent basis and this may in-turn lead to consumption of thier apparels. It believe retailing of FMCG products would help us to eliminate the impact of seasonality of the apparels market in India, which depends on factors such as change in tether conditions and festival celebrations. In furtherance of thier endeavthiers to reduce costs, It intend to procure FMCG products directly from the manufacturers. For this purpose, It has entered into and will continue to explore the possibilities of entering into certain arrangements with domestic FMCG majors on such terms and conditions, which are suitable to their business model.

Procurement from low-cost production centres outside India In addition to thier strategy to continue procurement of goods from small and medium size vendors and manufacturers which leads to cost efficiencies, It intend to procure FMCG and apparels from low-cost production centres located outside India. Towards this objective, It propose to increase thier procurement of finished and semi-finished goods from China and thereby realize economies of scale and pass on the benefits so accrued to thier customers.


Increasing customer satisfaction and thier base of loyal customers It believes that understanding the needs of thier customers is of prime importance for the continuous growth of thier business. In order to continuously provide customer satisfaction, thier customer management team assimilates customer feedback and it endeavthier to take necessary steps to address the requirements of thier customers. In addition, It has introduced, in association with SBI Cards & Payment Services Private Limited, a co-branded credit card. It proposes to continuously undertake such initiatives to increase the satisfaction of thier customers.



During my study of supply chain management of Vishal mega mart i have found that vishal mega mart is using a different kind of supply chain which is different than other retailer. Vishal mega mart has its one bigger warehouse where it keeps inventories i.e. all the supplied good by the different suppliers are kept their and then the goods are supply to the vishal mega mart stores according to their necessity. I think this kind of supply chain is very good for vishal mega mart because by having this kind of supply chain they are able to deliver the goods to their stores in time. Because they have divided supply chain in two parts that is the half of the chain is completed by their suppliers and half of the chin is in the hands of vishal mega mart itself. Vishal Mega mart is planning to introduce a completely outsourced logistics and supply chain management in order to cut costs and optimise margin.




Questionnaire For Interview

1. From where do you get your product ? 2. Who are the parties involved in your supply chain ? 3. Do you get the help of your own transporter or with the help of third party ? 4. What is mood of transportation of your product ? Why you are choosing this mode ? 5. Have your integration done backward ?