Supply Chain and Operations Research

Westside: Inventory Replenishment Model

Submitted by

Arushi Chauhan
Manvi Taneja
Salman Ahmad
Sapna Yadav
Soumya Raj

Under the supervision of

Dr. Harleen Sahni

IN PARTIAL FULFILLMENT OF THE POSTGRADUATE DEGREE “MASTER OF

FASHION MANAGEMENT (MFM)”

Submitted to

Department of Fashion Management Studies (FMS)

National Institute of Fashion Technology (NIFT)

 Index

SECTION I – Introduction………………………………………………………………….3

1. Supply Chain Management…………………………………………………………....3

2. Inventory Management Systems……………………………………………………....4
3. Replenishment Strategies………………………………………………………….......6
3.1. Definition & Importance………………………………….………………............6
3.2. Strategies, Methods and Systems……………………………….………………...7
4. Westside’s Background and Scale of Operations………….……………………….....10

SECTION II………………………………………………………………………………......16

1. Review of Literature…………………………………………………………………...16
2. Objective…………………………………………………………………………….....18
3. Research Methodology…………………………………………………………….......18
a. Questionnaire……………………………………………………………..........19
b. Findings……………………………………………………………………......19
4. Replenishment Strategies used by Westside………………………………………......23
4.1. Supply Chain and Replenishment Process………………………………………..23
4.2. Periodic Interval Replenishment Strategy……………………………………......24
4.3. Perpetual Inventory Management System: Automated Replenishment System....23
5. Suggestions for Improvement in Westside’s replenishment strategies……………….26

SECTION III……………………………………………………………………………........27

Conclusion………………………………………………………………………….....27

Appendices
References

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SECTION I - Introduction

1. Supply Chain Management

A supply chain is the network of all the individuals, organizations, resources, activities and
technology involved in the creation and sale of a product, from the delivery of source materials
from the supplier to the manufacturer, to its eventual delivery to the end user.
Supply chain management (SCM) is the broad range of process and activity required to plan,
control and execute a product's flow, from acquiring raw materials and production through
distribution to the final customer, in the most streamlined and cost-effective way possible.

The supply chain strategy of the retailers refers to the strategic goals and objectives of their supply
chain. The SCM strategy ensures that the logistics of the company are planned out in advance so
that there is adequate supply of raw materials, minimum level of inventory is maintained and the
supply chain operations’ cost is reduced; all of these measures ensure that an organization is able
to generate an appropriate amount of profit and maintain its strong position in the industry (Cho et
al., 2011). Different types of supply chain strategies are discussed below.

1. Agile Strategy: Agile supply chain strategy aims at being responsive to customer needs as
well as being flexible (Jacobs & Chase, 2008; Lee, 2002). An agile supply chain is most
appropriate for products having uncertain demand (Ayers, 2004; Seuring, 2003; Towill &
Christopher, 2002). It is focused on speed, cost efficiency, responsiveness, flexibility, and
productivity in the production and delivery of goods.
2. Lean Strategy: Lean strategy focuses on the elimination of waste with a bias towards
“pulling” goods through the system based on demand. In retailing, lean strategy is
employed to diminish costs and wastages. This strategy requires the retailers to anticipate
the market demand and assemble the products so that customers get the maximum value at
reasonable costs.
3. Hybrid Strategy: Organizations sometimes use a hybrid strategy where both lean and agile
supply chains are utilized. It exploits the benefits of both lean and agile supply chains
(Towill & Christopher, 2002). The combined use of lean and agile method in hybrid

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 strategy can take one of several approaches: For high volume and stable demand products,
make to stock (lean strategy) is applicable and make to order (agile strategy) calls for
flexible production capacity to meet unusual demand or unexpected requirements; use of
postponement strategies, where “platform” products are made to forecast, and then final
assembly and configuration done upon final customer order.

2. Inventory Management Systems

Inventory, in most of the industries, accounts for the largest proportion of gross working
capital. A number of studies, therefore, have been conducted to find the determinants of
investment in inventories.
Inventory management supervises the flow of goods from manufacturers to warehouses
and from these facilities to point of sale. A key function of inventory management is to
keep a detailed record of each new or returned product as it enters or leaves a warehouse
or point of sale. The goal of inventory management systems is to know where your
inventory is at any given time and how much of it you have in order to manage inventory
levels correctly.

● Manual system: Depending on the size and scope of your inventory problem the
manual approach may be the most efficient. It may make sense to hire a vendor or
complete it with internal resources. Many small businesses close a day or two per
year for inventory.
Each manual step is rife with possibilities for human error, from counting on the
warehouse floor to data entry to manipulating the data. Each mistake-filled action
can exacerbate the problem, and only a manual re-do could restore any sense of
accuracy.
One of the big negatives to manual counting is the difficulties in turning paper-
based information into useful data. Making marks on a checklist is one thing --
typing those results into a spreadsheet can be a daunting task.

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● Periodic system: Periodic inventory systems do not track inventory on a daily
basis; rather, they allow organizations to know the beginning and ending inventory
levels during a certain period of time. These types of inventory control systems
track inventory using physical inventory counts. When physical inventory is
complete, the balance in the purchases account shifts into the inventory account and
is adjusted to match the cost of the ending inventory.
There are a few disadvantages of using a periodic inventory system. First, when
physical inventory counts are being completed, normal business activities nearly
become suspended. As a result, workers may hurry through their physical counts
because of time constraints. Periodic inventory systems typically don’t use
inventory trackers, so errors and fraud may be more prevalent because there is no
continuous control over inventory. It also becomes more difficult to identify where
discrepancies in inventory counts occur when using a periodic inventory control
system because so much time passes between counts. The amount of labor that is
required for periodic inventory control systems make them better suited to smaller
businesses.

● Perpetual system: This system continually updates inventory records and accounts
for additions and subtractions when inventory items are received, sold from stock,
moved from one location to another, picked from inventory, and scrapped. This
type of inventory control system works best when used in conjunction with
warehouse inventory database of inventory quantities and bin locations updated in
real time by warehouse workers using barcode scanners. Inventory management
apps are perpetual inventory systems.
There are some challenges associated with perpetual inventory systems. First, these
systems cannot be maintained manually and require specialized equipment and
software that results in a higher cost of implementation, especially for businesses
with multiple locations or warehouses. Periodic maintenance and upgrades are
necessary for perpetual inventory systems, which also can become costly. Another
challenge of using a perpetual inventory system is that recorded inventory may not
reflect actual inventory as time goes by because they do not conduct periodic

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 physical inventory counts, a necessary activity even when inventory trackers are
used. The result is that errors, stolen items, and improperly scanned items impact
the recorded inventory records and cause them not to match actual inventory counts.

3. Replenishment Strategies

3.1. Definition & Importance

Inventory is one of the largest factors of the consumer supply chain. Each time a facility
fulfills an order, it reduces its inventory of finished goods. Sooner or later, that inventory
has to be replenished.
In supply chain, the stock replenishment is an operation that consists in ordering more
stocks in order to fulfill the customer demand. It is a "relocation of material from a
warehouse or bulk storage area to an order pick-up or shipment area." The movement of
inventory from upstream or reserve product storage locations to downstream or primary
storage locations. The purpose of replenishment is to keep inventory flowing through the
supply chain by maintaining efficient order and line item fill rates. The process helps
prevent costly inventory overstocking.
Effective inventory replenishment requires careful planning using demand forecasting,
inventory analysis (i.e., loss due to damage or going bad) and other supply chain metrics
such as in-stock status and product velocity (the rate at which an SKU sells).
The three important questions that Inventory Control needs to keep in mind are:

● When should inventory be replenished?

● What quantity should be ordered with each replenishment?
● How much inventory should be maintained on site?

There are various different replenishment strategies and systems used to carefully answer
these questions and plan the replenishment accordingly.

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3.2. Strategies, Methods and Systems

3.2.1. Replenishment Strategies

The goal of a replenishment strategy is to determine:

● Safety stock level – it is a stock buffer used to control the random fluctuations in
demand or supply, and

● Replenishment plan – it is a schedule reflecting how much inventory should be

ordered.

There are two fundamentally different strategies used for replenishment.

Fixed Order Point (FOP) strategy and Time Phased Ordering (TPO) strategy.

● Fixed Order Point (FOP) strategy: For the Fixed Order Point strategy, Inventory
Control reorders an item when the available quantity falls below a set reorder point.
Each item is assigned its own reorder point. For example, a retailer might reorder black
pens when the available quantity is less than five boxes.

● Time Phased Ordering (TPO) strategy: For the Time Phase Ordering strategy,
Inventory Control reorders the item based on a time period of supply and demand. This
strategy allows the analysis of the item's movement and base future orders on that
movement. For example, a retailer’s stock for copier paper was depleted at a higher
rate during the past three months and the trend is expected to continue. The retailer can
reorder at a rate that matches the depletion rate.

Depending on these two fundamental strategies, it can further be divided into the following
methods:

Reorder point strategy: In this strategy inventory levels are continuously reviewed and
as soon as the stocks fall below a predetermined level (usually called, reorder point, or
reorder level), a replenishment order is placed. For instance, if a retailer stocks 1,000

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pillows, he may set the reorder point to when 200 pillows remain in the inventory and as
soon as the number pillows falls below 200, he might place a replenishment order. A
maximum inventory level along with the minimum inventory level has to be determined in
this strategy. When determining how much to reorder, the minimum inventory level is
subtracted from the maximum inventory level, which results in an order quantity.

Periodic strategy: With the periodic strategy, inventory is replenished at specific intervals.
The inventory levels are reviewed at a set frequency. Depending on specific inventory
needs, a replenishment order can be placed, but only at the review point. For example,
every three months, a retailer might look at the inventory levels to see if they need
replenishing. If the inventory levels are still fine, then there is no need to reorder
anything.Even if the inventory runs out before that point, using a periodic strategy, one
would not re-order until the cycle ends. Replenishment orders are placed only at the
predetermined review points.

Top-off strategy: The top-off replenishment strategy, also known as lean time
replenishment, takes advantage of times when picking operations are slow to bring stock
to acceptable levels in forward pick locations. During these down times, each fixed picking
location is filled to capacity using minimum and maximum thresholds similar to the
min/max replenishment strategy. The top-off replenishment strategy works well for
businesses that have short picking windows, such as those with high-demand, high-velocity
SKUs. By taking advantage of slow demand periods to top off inventory levels in forward
pick locations, this strategy helps to improve efficiency during peak periods.

Demand strategy: Many businesses use the demand strategy for inventory replenishment.
It’s simple and straightforward: replenishment is based on demand. Restocking or
reordering is limited only to what is needed to fill orders. While placing a replenishment
order, a lot size needs to be determined. All the strategies use a lot-sizing method to
determine the optimal lot size. The effectiveness is determined by the trade-off between
the SKU (item) carrying costs and the costs of ordering it from the supplier. In the case of
the Periodic strategy, this compromise also indicates the future periods in which

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replenishment orders should be issued, i.e. determines the order cycle – the time between
two successive replenishment orders. Order cycle can be constant or variable depending
on the lot-sizing method. Here is a list of commonly used lot-sizing methods:

●Fixed order quantity. A method that only allows for a specific amount of a given item
to be ordered at one time.

●Economic order quantity (EOQ). Ordered quantity is determined based on the item
carrying and ordering costs.

●Lot-for-lot. The exact quantity is ordered necessary to cover the demand in a particular
period.

●Periods of supply. The ordered quantity covers the demand of a given number of future
periods.

●Period order quantity. The method uses the result of EOQ in order to determine a
fixed number of future periods it can cover.

●Least unit cost. The ordered quantity is an accumulative demand sum up to the period
with the least unit cost. The cost includes the unit ordering and carrying costs.

●Least total cost. The ordered quantity is an accumulative demand sum up to the period
where the item carrying and ordering costs are the closest.

●Part period balancing. The ordered quantity is an accumulative demand sum up to the
period where the item carrying and ordering costs are the most balanced.

3.2.2. Replenishment Systems

The inventory replenishment system uses a software that performs the calculation of
replenishment using the planned stock on hand, planned issues and receipts and sometimes
the goals like service levels to calculate the replenishment stock. The most common
inventory system is ERP (Enterprise Resource Planning) which uses a procedure called

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 MRP (Material Requirement Planning, a generic term referring to complex data
management systems that determine inventory replenishment levels by estimating
expected quantity and comparing it to expected demand), combined with consumption
bases methods like reorder point.

Another efficient inventory replenishment system is VMI (Vendor Managed Inventory). In

VMI a manufacturer or distributor assumes the role of inventory planning for the customer.
Extensive information sharing is required so that the manufacturer/distributor can maintain
a high degree of visibility of its goods at the customer’s location. Instead of the customer
reordering when its supply has been exhausted, the supplier is responsible for replenishing
and stocking the customer at appropriate levels. Wal-Mart has mastered VMI and is the
company against which many other organizations benchmark themselves.

4. Westside’s Background and Scale of Operations

Established in 1998 as part of the Tata Group, Trent Ltd. operates Westside, one of India’s
largest and fastest growing chain of retail stores. The story of Westside began when Trent
Pvt. Ltd, the retail vertical for Tata Group, acquired Littlewood’s in 1998, based in
Bangalore. Littlewood’s was a London based retail chain which was later renamed
Westside upon acquisition. Trent is a portmanteau for Tata Retail Enterprise. In 1999, Tata
expanded in Hyderabad, Mumbai and Chennai through Westside stores, and then launched
its operations in these cities.

Westside has quickly risen to become a niche multi-brand outlet in India for fashion and
lifestyle goods - with its objective to satisfy customers with its range, quality and value for
money through its products. It has consistently been in the forefront of fashion and related
services by anticipating and exceeding the customer expectations.

To meet different shopping needs of different customers, Westside has different

departments including Menswear, Women’s wear, Kid’s wear, Footwear, Cosmetics,
Perfumes and Handbags, Household Accessories, lingerie, and Gifts.Westside products are
known for style and class amongst fashion conscious consumers. In recent years, the chain
has launched and refreshed a number of brands, available exclusively at Westside stores.

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These brands have been evolved to target key customer segments based on their needs,
purchasing power and appetite for fashion. Customer response to the refreshed offerings
has been encouraging and the intent is to continue investing on growing the exclusive brand
portfolio. Some of the key brands in the women's wear segment are Bombay Paisley, Gia,
L.O.V and Zuba. While, Bombay Paisley offers chic, western and contemporary ethnic
wear for the experimental and vibrant youth, Gia offers a fashionable casual collection for
the curvy women. L.O.V is a smart, casual, feminine offering for the 25-plus women and
Zuba offers silk and handloom blends with handcrafted embroidery. Other noteworthy
brands include Wardrobe, a trendy 9-to-9 fashion for women and Nuon, a young casual
fashion brand.

Westside aspires to deliver a uniform experience to all its customers irrespective of

whichever store they walk into. During FY ‘15, the parent Trent continued to focus on a
number of internal improvements in Westside. Apart from the launch and refreshing
exclusive brands portfolio, other key initiatives included, improved presentation in stores,
focus on select newer categories and providing a better shopping experience to the
customers by improving the look and feel of select existing stores. In order to increase
walk-ins and improve the customers’ shopping experience, it pursued the modernisation of
some older stores and optimisation space allocation based on the category mix which have
a better sales potential with a renewed effort to improve service.

The chain runs its own rewards program Clubwest, that has been designed exclusively for
Westside regulars. The program has a base of over 2.5 million members and contributes to
over 70 percent of the Westside sales. The loyalty program offers special privileges for
classic and gold members, who earn reward points every time they shop, that can be
redeemed during future purchases at Westside stores. It also extends exclusive offers,
discounts, gifts and privileges from time to time across a range of lifestyle products and
services besides privileges at stores. Clubwest cards are now accepted across all landmark
stores. Moreover, the customers can also buy gift cards and e-gift cards for others.

The mission of Westside says that “We want to be the most preferred and consistently
profitable lifestyle retailer”. According to the account statements of Trent, its annual sales

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in the year 2010 were Rs. 542.60 cr., and Westside accounts for 80% of the total sales. The
profits earned by Trent were Rs. 40 cr..

Scale of Operations

No. of stores: The chain currently has 125 stores measuring 8,000- 34,000 sq.ft. across 53
cities like Ahmedabad, Allahabad, Aurangabad, Bengaluru, Bareilly, Bhopal, Bilaspur,
Chandigarh, Chennai, Coimbatore, Dehradun, Delhi-NCR, Goa, Guwahati, Hyderabad,
Indore, Jabalpur, Jaipur, Jalandhar, Jammu, Kanpur, Kochi, Kolkata, Kurnool, Lucknow,
Ludhiana, Mangalore, Mumbai, Mysore, Nagpur, Nashik, Pune, Raipur, Rajkot, Sangli,
Siliguri, Surat, Trichy, Thrissur, Udaipur, Vadodara, Varanasi, Vijayawada, Vizag, etc.
Westside has one store in Gandhinagar and four in Ahmedabad.

Brands sold at Westside:

In Men’s wear category, following brands are available:

Ascot- Ascot is the modern classic lifestyle brand for the discerning man - who seeks
excellence and perfection. From office to the perfect weekend getaway Ascot provides the
finest quality apparel adding a touch of style to your wardrobe.

ETA- A modern contemporary brand with ethnic roots promises effortless fashion at
affordable prices, West side’s ETA range, with its neutral colour palette and subtle designs
creates a sophisticated look. Its signature collection, with its subtle designs and neutral
colour palette creates a very calm elegant feel. The collection is available at a good price
in the Westside Store.

West sport- Westport caters to the casual, sporty needs of young men. Providing a casual,
relaxed and classical touch, the brand offers functional yet stylish casual men’s apparel,
the Westsport collection includes items such as cotton shirts, crew tops, hooded jackets,
cargo pants, and more. Be it boating, trekking or a picnic by the lake Westsport gets its
spot on.

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Nuon- The brand revolves around the philosophy of their younger customers, giving them
a chance to represent their identity and express themselves through their clothing. NUON
offers the hottest fashion at affordable prices. Stylish, preppy, edgy & cool casual’s
best describe NUON. Footwear- Shoes are a must have accessory for every man. Put your
best foot forward with Westside's footwear. Be it any occasion – our footwear range will
help complete your look.

In Women’s wear category, following brands are available:

Bombay Paisley- The perfect blend of chic western and contemporary ethnic wear,
Bombay Paisley is for the experimental and vibrant youth. Differentiated by its
contemporary styling of western silhouettes with Indian influences Bombay Paisley is for
the edgy and free spirited soul who is highly individualistic and does not believe in
conforming to the expected.

GIA- Being plus size doesn’t mean baggy clothes anymore. Wide necklines, embellished
sleeves, long tops, bright colour and bold prints Gia is perfect to accentuate your curves.
Gia offers clothes for every occasion from casuals to office wear that ooze style and at the
same time embrace those sexy curves that will make you radiate with confidence.

L.O.V- The one thing that a woman looks for in any apparel is comfort. L.O.V offers that
perfect fit with everyday casual wear. L.O.V includes the season’s trendiest and most
stylish apparel – casual shirts, jeans, sexy leggings, cool trousers, stylish tunics and more.
Adding high street style to everyday Style, L.O.V is the ideal choice for trendy, pleasant
and breezy everyday wear. Discover the woman in you who lives her life with ease,
confidence and style.

Mix & Match- Prepare to explore the world of femininity with Westside’s Mix N Match
collection. The ethno-chic collection of women’s ethnic wear will amaze you with its
vibrant colors, comfortable fabrics at affordable prices. The collection is Individualistic

13
and yet in sync with the fashion trends and needs of today’s woman. The collection comes
in stylish cuts that are perfect for every occasion, be it casual or corporate.

Nuon- The brand revolves around the philosophy of their younger customers, giving them
a chance to represent their identity and express themselves through their clothing. NUON
offers the hottest fashion at affordable prices. Stylish, preppy, edgy & cool casual’s
best describe NUON.

Sassy Soda- Westside introduces Sassy Soda, its latest collection of trendy clothing
designed for today’s youth who love their curves and are ready to flaunt them. Displaying
a unique understanding of the fashion needs of the curvier youth of today, our funky new
range ‘Sassy Soda’ explores fashion beyond the simple tees and widens the offering with
fun prints and silhouettes, colours that pop, and all the latest trends.

SKD- The ethnic and ornate collection, Westside’s salwar kameez dupattas sets are a
complete Indian wear solution for day and occasion wear. The collection is warm and
conventional and the intricate detailing, gives an appealing and well- dressed look.

Wardrobe- Westside has the perfect versatile garments that you can wear to work and to
an evening out. Be it the 9 am meeting or the 9 pm dinner date the one stop solution is here.

Zuba- Westside’s premium Indian wear offering – in silk and handloom blends with
handcrafted embroidery. Silk kurtas woven carefully with thread embroidery, cuts that
define volumes and fabrics that speak of rich Indian heritage exemplifies Zuba. It is sheer
elegance woven in silk and handlooms.

Footwear: Boots, wedges, stilettos, kitten heels, ballet shoes, pumps, sandals, flip flops.
Whatever your requirement Westside ensures that your soulful love story will always be
happily ever after one.

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 Product Segmentation at Westside Store, R-16, Gandhinagar, Gujarat

The Westside, R-16, Gandhinagar is a single storey building. It is divided section wise as
follows:

Ground floor:
● The ground floor of the store consists of kids’ wear and accessories.
● The kids section consists of the apparel and footwear for boys and girls from the age-groups
zero to fourteen.
● The floor starts off with a collection of apparel for new born babies till the age group
fourteen.
● The collection includes daily wear and party wear garments under their label ‘Westside’.
Tops, shirts, skirts, jeans, hot-pants, kurtis, leggings, capris and one-piece dresses for girls
in sizes from small to large.
● T-shirts, shirts, hoodies, jeans and capris for boys in sizes small till extra large.
● The left side is the jewellery section along with some basic accessories like belts.
● The jewellery items are neck-pieces, earrings, bracelets and chains. The style of all the
items was a mix of ethnic and indo-western. The colours steel-grey and golden highly
dominate the collection, hence it catches the customer’s eye as soon as they enter.
● The footwear section includes casual shoes by the brand westsport, flip-flop, bellies,
wedges and party-wear sandal by the brand head over heels. It offers a variety of footwear
for men, women and kids as well.
● At the extreme left there is a billing counter.

First floor:
● The first floor consists of menswear and women’s wear.
● On the left side, there is a billing section and right after the staircase there is a huge
collection of ethnic wear for women.
● The ethnic collection for women includes kurtis, leggings and dupattas in a wide variety
of lengths, colours and designs by their own label ‘westside’.
● The ethnic collection is followed by a small section of western tops, dresses and some
casual bottoms like palazzos, jeans and pants.

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 ● On the extreme right side are the fitting rooms.
● The next segment is lingerie which includes bras from sizes 28B till 40D and underpants
in sizes small till extra large. This segment is dominated by the brands amante’ and
enamour. Apart from the undergarments it also includes basic utility garments like socks,
camisoles, etc.
● On the first floor there is also a section for menswear which starts off with casual wear
including regular T-shirts, Polo T-shirts and casual jeans by the brand Nuon. The walls are
displayed with their exclusive T-shirts and the regular ones are hung below while the jeans
are displayed on the tables.
● The formal shirts are by the brand Ascot, it is divided into categories like executive class,
club class and business class according to the requirement. Semi-formal shirts, casual shirts
and shorts by the Westside label.

SECTION II

1. Review of Literature

The SCM strategy ensures that the logistics of the company are planned out in advance so
that there is adequate supply of raw materials, minimum level of inventory is maintained
and the supply chain operations’ cost is reduced; all of these measures ensure that an
organization is able to generate an appropriate amount of profit and maintain its strong
position in the industry (Cho et al., 2011). According to Sehgal (2011), the success of a
supply chain strategy mandates the adoption of SCM strategy that is properly aligned with
the organization’s business strategy and ensures that its resources and capabilities are
utilized in highly effective manner. The business strategy of a company is defined as the
key element that guides the organization in making decisions that are compatible with the
requirements of its objectives so that it can make successful progression and improve its
profitability effectively. It is believed that SCM strategy is highly dependent on the
business strategy as it is the basis on which most of the companies want to compete in the
market and gain competitive edge for a long period (Elgazaar et al., 2012).

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Best Supply Chain Practices by some Brands:

Colgate-Palmolive has a global supply chain system which has three key supply chain
strategies that forms the basis of this system. The first one was the introduction of the
Vendor Inventory Control (VMI) product so that there was a decline in the inventory
channel and timing of the cycle as well. The second strategy was the implementation of a
resource planning system at cross-border level so that regional models were developed for
the international patterns; it ensured that the company had an adequate pool of assets so
that there was a balance with the company’s business strategy.

The last and final strategy was implementation of a collaborative program that ensured
there was a well-balanced downstream business system for effective management of the
market demand of supply chain along with effective coordination of the system’s activities.
With the help of new system, everyone in the organization is well-aware of the supply
chain statistics; the IT system has enhanced the company’s SCM system which has helped
in utilizing the supply chain information with accuracy so that the consumers always had
easy access to the products and the shortage problems was reduced by 50% in the first three
months of the SAP R/3 implementation.

Zara changes its clothing designs every two weeks on average, while competitors change
their designs every two or three months. It carries about 11,000 distinct items per year in
thousands of stores worldwide compared to competitors that carry 2,000 to 4,000 items per
year in their stores. Zara’s highly responsive supply chain is central to its business success.
The heart of the company and its supply chain is a huge, highly automated distribution
center (DC) called “The Cube”. Zara buys large quantities of only a few types of fabric
(just four or five types, but they can change from year to year), and does the garment design
and related cutting and dyeing in-house. This way fabric manufacturers can make quick
deliveries of bulk quantities of fabric directly to the Zara DC – the Cube. The 11 Zara
owned factories are connected to the Cube by underground tunnels with high speed
monorails (about 200 kilometers or 124 miles of rails) to move cut fabric to these factories
for dyeing and assembly into clothing items. The factories also use the monorail system to
return finished products to the Cube for shipment to stores.

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 It uses both lean and agile (hybrid) supply chain strategy. Stores take deliveries twice per
week, and they can get ordered inventory often within two days after placing their orders.
Items are shipped and arrive at stores already on hangers and with tags and prices on them.
So items come off delivery trucks and go directly onto the sales floor. This makes it
possible for store managers to order and receive the products customers want when they
want them, week by week.

2. Objective

The objective of this analysis was to study the functionality of the existing channels of
supply chain operations for Westside, to determine whether these operations were apt and
congruous with its retail scale and identify any gaps, and suggest improvements for the
same.

3. Research Methodology

The methodology adopted for this project was a thorough assay of both primary and
secondary data available. Primary data consisted of store visit - namely, Westside outlet in
Sector 16, Gandhinagar, and an in person interview of replenishment managers/store
authorities using a structured questionnaire. Other information was acquired through
telephonic conversations with the Westside Head Office based out of Mumbai,
Maharashtra. The secondary data consisted of articles in websites, journals, research papers
and theses available online on the subjects of fashion, retail, supply chain operations and
inventory management systems. After a thorough analysis of all the available secondary
data - the findings were utilised to consolidate a questionnaire that would reach the
objective optimally. As aforementioned, the objective of this analysis was to gather,
develop and analyse our knowledge of Westside’s existing replenishment strategies,
identify gaps and suggest improvements, if possible for the same.

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a. Questionnaire

The questionnaire was open ended and semi-structured. The questionnaire was formulated
in such a way due to the intention to delve deeper into the avenues of Westside’s supply
chain management systems.

b. Findings

The plan of action was to do a store visit in the vicinity, have a one-to-one conversation
with an authority in charge, and then gain an in-depth understanding of the Westside
supply chain management. For the store visit, we interacted with Ashish Dey, who was the
Department Manager for Women’s and Kid’s Wear for the Westside outlet in Gandhinagar
Sector 16. Additionally, we also spoke to Arushi Taneja, who is the merchandiser at the
Westside Head Office, at Bandra Kurla in Mumbai.

Interview Transcript

What merchandise does your store provide?

Westside generally deals with kids wear, men’s wear, women’s wear, all of which consists
of both western and ethnic wear, footwear, lifestyle products such as fragrances and
cosmetics, lingerie, accessories, and so forth.

How many stores are there in the area?

The store at Sector 16, Gandhinagar, is the only store in the city, while Ahmedabad has 4
stories in total. All the stores fall under the western zone category. Western Zone region
has cumulatively 40 stores - across Mumbai, Gujarat and Goa.

How many suppliers do you have?

When it came to discussing suppliers, Ashish conveyed that there are different vendors for
different categories of products. Even within a range of products, there are different
suppliers for a particular type of product within that range, and as an aggregate would have
a total of 100 vendors and maybe more for all the products across categories combined.

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Does your supplier have visibility to your inventory?

The suppliers are abreast with information related to inventory size and specifications, but
from the backend team and not the store front end, and the two coordinate accordingly.
However, the backend team places orders, but the suppliers rarely have an idea about the
ebbs and flows within the supply chain, as their main functionality to provide the orders
placed with them. It’s the backend’s work to forecast demand, place orders with suppliers
and then direct the provision to the various store fronts respectively.

How does your supply chain work?

Ashish explained the supply chain as follows. The stock is ready with the vendor, which
travels to the warehouse in the respective zone - which here is the western zone. The
western zone has three warehouses - in Pune, Bhiwandi and Vapi. The Vapi warehouse
stocks the entire inventory for Gujarat. The stock for different stores in the area from its
designated warehouse is allocated on the basis of the store order and inventory needs. All
stock travels from the designated location’s warehouse.

How do you forecast future demand?

The inventory is based on demand forecasting, which is conducted by a separate team

appointed for trend analysis - which forms the basis of all demand forecasting. The reports
for all the targets reached are sent to the backend team which aids the demand forecasting
procedure. Westside also conducts store rotation - or inter store transfer is done for stock
that works at one branch of the outlet and not others.

Who manages the inventory and its replenishment in your store?

Inventory is overlooked by the store manager and replenishment is carried out by

department manager.

Why is inventory replenishment important?

Replenishment was cited by Ashish Dey to be extremely important. It is carried out

monthly. If replenishment is not carried out, a particular size or version of a product, if out

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of stock, can lead to loss in sales if the stock is unavailable but still in demand by the
customers.

When do you replenish inventory?

Hourly replenishment is carried out between 1pm to 2pm everyday and log in the number
of pieces sold for a particular commodity. If 70 pieces of a commodity are sold, the team
checks for 70 pieces in the inventory in stock and is then replenished. Day to day sales
forecasting is also carried, till 3pm everyday and is then compared on a daily basis.

What replenishment strategy do you follow?

Periodic interval system is employed as a replenishment strategy.

How frequently do you replenish your inventory?

The store has an inventory management team which carries out the hourly replenishment
for the outlet. Replenishment usually takes 15 minutes in total. Some products are logged
onto ARS, or automatic replenishment system - which factors in any missing sizes, colours
or variations of a particular product, and replenishes the next time stock is delivered to the
outlet. This process is carried out weekly.

How do you determine the order quantity for each replenishment? (lot-sizing method)

Replenishment is carried out on the basis of demand however, every product range and
type has different numbers of stock depending on the sales. The base stock is divided into
various sizes, for example, small, medium, large, and so forth, and the sizes sold according
to demand is stocked accordingly. If the number of stock goes beneath base stock number,
it is replenished through ARS. Westside’s base stock for Western wear is 18 and kidswear
is 13, but varies for every department, outlet and commodity type. It varies from
department to department and store to store. Westside takes a situational call if a particular
size or variation of a commodity is out of stock in their outlet, and offers to get the piece
arranged from a different outlet in the vicinity. This results in lack of loss sale from a
particular branch. For the lot sizing method, anything below the base stock is replenished
accordingly.
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How much inventory do you maintain on-site?

Westside at the moment has 36,000 total inventory cumulatively across all departments for
the store at Gandhinagar, Sector 16. Safety stock level is equivalent to the base stock level.

What is your inventory lead time?

Inventory lead time ranges from 1 to 2.5 days at the maximum right from the initiation at
the warehouse to the store outlet. It travels from the warehouse at Vapi, to Surat, Baroda,
Ahmedabad and Gandhinagar, and then moves to Rajkot, Bhavnagar, Jamnagar and then
Gandhidham. If a replenishment order is placed at the Vapi warehouse, it arrives
approximately by 9pm the consecutive day.

What special replenishment strategies do you use during sales?

During the sale season, more importantly End of Season Sale, all the stock is displayed on
the floor and the warehouse has no stock in the backend. Each store has a warehouse for
storage, with this particular outlet having 300 sq. ft. of storage space behind the store front.

Do you keep a check on inventory shrinkage? How do you deal with it?

Stock tech is conducted every three months by the company to check for shrinkages.
Shrinkages are waived off at .04% of the total inventory cost price. Upon exceeding this
limit, the store has to pay for the shrinkages. Stock tech is the process of counting the total
stock present to and sold to check for shrinkages. As per problems faced during shrinkages,
Ashish had to explain the following. Even though Westside has adopted the process of
carrying out replenishment on an hourly basis, it is difficult to execute it in such narrow
frequency due to such as staff unavailability, or existence of damaged products in stock.

What are the major problems you face during replenishment?

Logistically, smooth transportation is affected in the rainy season due to blockages in the
roadways. The store strength consists of 34 employees including managers and other staff.
The chain of command flows from the store manager, the department manager, sales

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 officer, and ends at sales associate. Every department has a separate sales officer along
with a different manager for each department.

4. Replenishment Strategies Used by Westside

4.1. Supply Chain and Replenishment Process

Westside has different suppliers for

different categories. They have
multiple vendors for the same products.
They have an assortment of around 100
vendors and 36,000 products at the
Gandhinagar store. The stock is
provided by the various vendors,
depending on the category. This is then
transferred to Westside’s warehouses
called West. They have three dedicated
locations serving as their warehouses,
namely, Pune, Bhiwadi and Vapi. The
Vapi distribution center is responsible
for supplying merchandise to the stores
located in Gujarat, whereas the Pune
and Bhiwandi distribution centers cater
to the needs of the Westside stores
located in Maharashtra and Goa.
Mahadev Roadlines is the logistics
partner for Westside that transfers the
stock to their stores’ warehouses. The
store warehouse is about 300 sq. feet
area wise. The stock is then transferred
to the Sales Floor. The Store Manager
takes care of the overall inventory. The

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availability of different categories vary from store to store. It is also dependent on the size
of the garment. For the Gandhinagar store, the Base Stock for women’s western wear is 18
units per product, S-XXL sizes, 13 for kids wear. During, unavailability of a product, a
customer’s demand is fulfilled by supplying the product from the nearest store.

Westside’s Supply Chain Flow

4.2. Periodic Interval Replenishment Strategy

Westside uses a method of aggregating requirements to place deliveries of varying

quantities at evenly spaced time intervals, rather than variably spaced deliveries of equal
quantities. This is the perpetual interval replenishment strategy they use for restocking their
inventory. The inventory is replenished on an hourly basis from store to warehouse. The

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 Department Manager is responsible for the replenishment of the various categories
assigned to them.
The replenishment process begins from the distribution centre in Vapi. From Vapi, the
stock is transferred to Surat, from Surat to Baroda. The stock is transferred to the S stores
in Ahmedabad. From Ahmedabad, the stock is transferred to stores in Rajkot, Bhavnagar,
Jamnagar and Gandhinagar. It takes about 1-1.5 days for an order stock to reach the
Gandhinagar store from the distribution center.
IMT (Inventory Management Team) is responsible for replenishing every one hour
according to the sales report on ARS (Automated Replenishment System). This process
takes about 15 minutes. If the products are unavailable in the store warehouse then they
wait for the stock coming from the distribution center weekly.
During the End-of-Season sale, the company makes sure to vacate all the items in the store
warehouses. Everything is on the floor for sale during the EOSS time.

4.3. Perpetual Inventory Management System: Automated Replenishment System

Automated Replenishment System is a computerized system that analyses inventory levels

and lead times and re-orders stock to meet forecast sales needs. The desire to use
Automated Stock Replenishment is applied in particular in a Vendor Managed Inventory
(VMI) environment, where the vendor is responsible for the availability of the product in
storage of the delivery location and the flexibility to determine when to replenish them.
The vendor therefore needs accurate demand forecasting and order generation algorithms
to ensure customers won't run out of stock. Automated Stock Replenishment leads to:
● More on-time deliveries with fewer stock-outs
● Optimal drop sizes
● Spreading of risk: avoiding too many critical orders that don't fit the fleet capacity
● Less rework on the schedule during execution as orders will now fit in the storages and
delivery vehicles, and match the delivery windows

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5. Suggestions for Improvement in Westside’s Replenishment Strategies

● Better flow of information and Transparency with the Vendors: According to the
personal interview conducted, Westside’s vendors do not have any knowledge
about the sales. In order to manage stock-outs better and provide the customers with
what they actually need, Westside should work towards better flow of information
towards its vendors and there should be a transparent relationship between the
company and the vendors.
● Tagging and packing can be done earlier in the supply chain: Sourced merchandise
is tagged and packed at the Westside warehouse which is in Vapi and then further
sent to Westside stores, which leads to an increased lead time.
● Merchandise can be made Floor Ready earlier in the supply chain: Westside
prepares FRM (Floor Ready Merchandise) in the store. It can be beneficial for it to
prepare FRM at the manufacturer’s or at the distribution centre, as the process -
adding product labels, tags, hangers etc. - is not complex and it will save time and
labour during final replenishment and merchandise can go directly from delivery
trucks to the sales floor.
● Stock review can be done more frequently: Westside stores do “Stock Tech” (stock
review) as they call it, every three months in order to check their stock shrinkage
or to change the whole range of stock, whereas brands like Zara change their stock
every two weeks on average.
● It should hire a dedicated staff for Replenishment: Westside does hourly stock
replenishment inside the store which is done by a team called IMT (Inventory
Management Team), however the task is not carried out efficiently everytime due
to unavailability of staff members.
● Westside can do better if it uses a co-operative replenishment strategy and
incorporates Vendor Managed Inventory system: Westside follows a perpetual
inventory management system, i.e. ARS (Automatic Replenishment System) in
order to replenish stock at various Westside stores which takes a week’s time.
Whereas, brands like Wal-Mart follow VMI (Vendor Managed Inventory) where
extensive information sharing is required so that the manufacturer/distributor can

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 maintain a high degree of visibility of its goods at the customer’s location. Instead
of reordering when its supply has been exhausted, the supplier is responsible for
replenishing and stocking the customer at appropriate levels.
● Westside can benefit from Hybrid supply chain strategy (lean and agile): A
Customer focused brand needs to be agile enough in order to be responsive to the
continuously changing demand from the market. Westside mostly lean as it focuses
on producing high volume at low cost. However, more and more companies are
moving away from a strictly lean model since today’s markets can change overnight
and westside can also utilise a combination of both lean and agile, as an agile supply
chain is built to be highly flexible for the purpose of being able to quickly adapt to
changing situations.

SECTION III

Conclusion

In summation, the interaction with Westside opened up our comprehension in understanding better
how contemporary retail chains work on their inventory management systems. Westside uses a
method of aggregating requirements to place deliveries of varying quantities at evenly spaced time
intervals, as compared to variably spaced deliveries of equal quantities under a type of periodic
interval replenishment strategy. The inventory is replenished hourly. Perpetual Inventory
Management System guarantees greater accuracy due to each item being recorded on a separate
ledger. It also prevents stock outs to a large accuracy. This management system coupled with
periodic replenishment strategy encourages a continuous supply of stock with low stock outs, and
frequent check in and stock techs. It also provides the retail chain with a greater accuracy in
understanding customer preferences vis-a-vis goods sold, and enables the back-end team to
forecast sales and demands in a better manner. It also reduces physical counting of inventory
continually, as this can result in greater time and efforts being invested. Instead, stock techs happen
once every three months and then analysed.

To support their perpetual inventory management system, they utilise ARS, or automatic
replenishment system. ARS - a computerised system that analyses inventory levels and lead times

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and re-orders stock to meet forecast sales needs is in particular employed in a VMI, or a vendor
managed inventory environment. ARS helps Westside to gain an accurate insight and determine
sales requirements. A combination of periodic replenishment strategy, perpetual inventory
management system and ARS provide conduciveness in accurate inventory management, greater
accuracy in supply chain operations, fewer stockouts, sales and demand forecasts with a higher
precision, reduce the risk of avoiding too many critical orders that don't fit the fleet capacity, and
less rework on the schedule during execution as orders will now fit in the storages and delivery
vehicles, and match the delivery windows.

Despite the fact that Westside employs great penetration and accuracy, it is not free from
suggestions of improvement. Some gaps suggested for their supply chain operation systems are
the following. According to the findings through the adopted research methodology, it was
discovered that greater transparency could benefit not just the vendors, but also the company. This
would encourage a better flow of information between all the parties involved. Secondly, tagging
and packaging could be done earlier in the supply chain. This increases lead time, and to avoid
this, this process could be dealt with at later stages. Floor ready merchandise (FRM) can be readied
at earlier stages instead of at the stores itself, which further eats up precious lead time. Stock
review, furthermore, can be done more frequently than at gaps of three months only to check
shrinkages - this would lower the lead time significantly. Westside could learn from Zara’s model
which has a runway of only two weeks for stock review processes. Furthermore, replenishment
could be handled by another dedicated team rather than being managed by the IMT team only to
even out the distribution of labour. A major qualm acknowledged was an unavailability of staff
during crucial moments which could hamper the entire replenishment processes and hence reach
optimal efficiency.

Additionally, we recognised that Westside could do much better if it adopts a co-operative

replenishment strategy and incorporates the Vendor Managed Inventory system into it. Westside
could learn from brands that follow a VMI (Vendor Managed Inventory) where extensive
information sharing is required so that the manufacturer/distributor can maintain a high degree of
visibility of its goods at the customer’s location. In such a system, the supplier is responsible for
replenishing and stocking the customer at appropriate levels. Currently Westside follows and

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depends on the Automatic Replenishment System which takes a week’s time. Westside could, by
the same token, follow a hybrid supply chain strategy which is lean and agile. This would help it
in being more responsive to the continuously changing demands of the market. However, instead
of focusing on the strategy just being lean, it could mix it up with an agile strategy as fashion retail
is a swiftly transforming industry and flexibility in understanding consumers’ demands could be
way more lucrative for them than just limiting themselves to a lean strategy only, which focuses
on high volume goods delivery at low cost.
In summation, Westside’s supply chain strategy with respect to their replenishment models are
highly focused on only specific areas which makes it a little rigid as compared to the flexibility it
could benefit from. From management, work distribution to supply chain channels, all are
extremely focused on delivering services and goods within their own ambit, as compared to evenly
disseminating roles that could help make it more decentralised, balanced and smooth. The
concentration of responsibilities and functions on select stages and teams results in shortages of
different kinds, which could be avoided if pockets of duties are relegated and combined with the
automatic replenishment system to keep the machinery running effortlessly. This leaves room for
improvement and a scope of achieving higher organisation in terms of efficiency, which could
surely be looked into to encourage profit maximization and optimal sales.

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Appendices

Questionnaire

INTERVIEW QUESTIONS

Background information
Name of the retail store
Store location
No. of employees
Retail segment
Market

1. What merchandise does your store provide?

2. How many stores are there in the area?
3. How many suppliers do you have?
4. How does your supply chain work?
5. Does your supplier have visibility to your inventory?
6. How do you forecast future demand?
7. Who manages the inventory and its replenishment in your store?
8. Who decides the key inventory replenishment policies for your store?
9. Why is inventory replenishment important?
10. What replenishment strategy do you follow?
11. When do you replenish inventory?
12. How frequently do you replenish your inventory?
13. How do you determine the order quantity for each replenishment? (lot-sizing method)
14. How much inventory do you maintain on-site?
15. What is your safety stock level?
16. Which inventory replenishment system do you use?
17. Which inventory control method do you use?
18. What is your inventory lead time?
19. What special replenishment strategies do you use during sales?
20. Do you keep a check on inventory shrinkage? How do you deal with it?
21. What are the major problems you face during replenishment?

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