Supply Chain Planning

and Execution

PLATFORM FOR GROWTH

 Table of Contents

INTRODUCTION 3

DEMAND PREDICTION AND SENSING 5

PRICING 7

ONE PLAN – SALES & OPERATIONS PLANNING 8

RAPID RESPONSE – INTEGRATED SUPPLY PLANNING 11

NEW PRODUCTS INTRODUCTION – DEMAND AND PRICE PREDICTION 14

Introduction

Scope of the business and supply chain:

The scope of the business is: Food and Home & Personal Care business. (Food + HPC)
The supply chain is:

Reflex Consumer Limited Reflex Retail Limited

(RCL) (RRL)

Other brands
(non RCL)
Large Format
Stores
MT Big Market,
PM Hypermart

PO -
SO Small Format
IP FG
RM, PM Stores
RM
Suppliers Samudras
Production Run Day, Kampos,
Food World
Food Hall

RCL RRL DCs

DCs

RCL JVs Aadhar

Rural Focus

RCL 3Ps
vendors
GT

Scope of the Supply Chain Distributors GT Outlets

GT CnF

• RRL – Reflex Retail Limited is the retail arm; RCL – Reflex Consumer Limited is an
FMCG company, which is involved in owned production, Join Ventures production
and third party (3P) sourcing.
• RRL sells different products of various brands, including RCL brands.
• Since RRL and RCL are different entities, RRL raises Purchase Orders (POs) for
supply, similar to POs placed with other brands. Between RRL and RCL, the PO-
SO (Sales Orders) process is followed.
• RCL has a major production facility in Tumkur, Karnataka, near Bangalore (Food
Park); and ‘Samudras’ (small store format) has its production facility near Electronic
city, Bangalore. RCL has four DCs in the zones – North, West, South and West.
The
 products from owned production, JVs and 3Ps are stocked at these RCL DCs. In
certain cases, the products are also directly delivered to stores depending on the
product type and store locations.
• RRL has different store formats. Large Formats: Big Market and Hypermart.
Small formats: Run Day, Samudras, Kampos, Food World, Food Hall. Food Hall sells
premium products. Aadhar is another format, which is focused on rural retail. CoP
(Center of Plate) are products, like rice, and staples etc.
• RCL products are also sold through General Trade channel (GT), i.e. through
non- RRL stores. The percentage of GT sales is small as of now.
• RRL DCs: RRL receives products from RCL and other brands at RRL DCs. There
are about 12-14 RRL DCs. For large formats, these DCs are pass-through. For
small formats, RRL DCs are stocking locations as well.
• Number of stores: Large format stores are about 300; small format are about 1000 as
of now. Plans are to grow the overall stores to about 3000 in the next two years.
• Number of SKUs:
o
6000 to 10000 are Food + HPC SKUs per store in Large Formats
o
1500 to 6500 articles in Small Formats.
o
Overall 30-40 K active SKUs across the board.
o
RCL has about 1200 SKUs. On an average 3 RCL SKUs are introduced per
day, and the plan is to grow this even further.
• GT network has about 12-15 CnFs, which in turn, supply to distributors and
other outlets.
Demand Prediction and Sensing

Background
It is desired to use the point of sale data (POS) and Loyalty program data, i.e. members
data to sense and predict the Reflex demand to get a more accurate demand signal and
drive the business based on that.

Functionality Required:
• Based on the POS data and Loyalty program data, predict the Reflex
demand: Final Reflex demand at Channel – SKU – Store – Week/Day
level
• The demand sensing should take into account
• Baseline sales
• Impact of sales events like Diwali Sale, 26 Jan Big Day Sale, etc.
• Impact of discounts / BOGO
• Impact of salary time, high footfall
• Other demand drivers, activities undertaken
• Ability to understand the nuances of Channel (large formats, small formats, GT),
different product attributes (like seasonality, fast moving / slow moving), by different
locations, and predict demand considering these.
• The demand prediction should be for at least for next 13-16 weeks for operational planning.
• Demand prediction should be done on a weekly basis, in certain cases, as needed basis.
• For the shorter term, daily demand prediction will be desired, at least for a set of
SKUs, typically, for perishables or low stocked SKUs.
• New stores / expansion and new products considerations (New Products discussed
as separate topic)
• Ability to consider SKU substitutions, Phase In – Phase out.
• Some of the products have variants, e.g. flavored milk has chocolate, badam, ..
other flavors. Prediction should be done at the variant level.
• Data corrections: Some of the data may need corrections, system should be able to auto
- detect and correct the data.
• Valuation of the demand and ability to consider time phased retail price.
• Prediction of the customer basket.
• Ability to support any ongoing changes in hierarchies in product, sales, channel or time.
• POS data is not applicable for General Trade (GT) channel. Ability to predict primary and
or secondary sales depending on the data availability for GT.

Users
Typically, demand planners will be the main users. Once reviewed and validated, the demand
plan will be used as part of the S&OP process.
Scope;

• Demand prediction is required for all of RRL SKUs. To start off the focus will be on
RCL SKUs.

• Assortment planning will be done as a separate exercise and for now, will be out of
the scope of demand prediction and sensing, and assume that the assortment by
store will be input to the demand prediction process.

User Interface, KPIs and Reporting

• Planners should be able to slice and dice the data at different levels of product,
channels, sales – store/clusters, time hierarchies. Both online and offline modes. It
should be easy and intuitive for planners to review the output and other system
data.
• Forecast accuracy and bias
• Against system prediction and final demand
• Trends, Performance of activities
• Other demand planning related reporting
Pricing

Background:
As step 2 to demand sensing and prediction, the demand needs to be predicted at different
price points to determine the price elasticity so that the analysis can be used to make various
decisions

Functionality Required:

• Markdowns
o
In cases when there are gaps with respect to the target sales, the planners
would like to evaluate different activities including price drops, BOGO etc.
o
Ability to determine a price point to generate target demand and vice versa,
i.e. given a price point, how much additional demand can be generated.
o
Store specific attributes, SKU price sensitivity, cannibalization amongst
other criteria should be taken into considerations.
o
Markdown will also be required to control aging of products.
o
Should be able to use markdowns for liquidation as well.
o
There might be constraints like the markdown has to continue for at some
period (typically, a month), especially in specific formats of stores and specific
SKUs.
o
It should be easy and intuitive for the planners to review the information and
aid in decision making
o
System should also be able to suggest potential markdown candidates.
o
National, Regional, local considerations.

• Primary Pricing
o Analysis to determine right price points for products, especially in the new
product introduction case. See ‘New Product Introduction’ section.

• Dynamic Pricing
o In certain formats, specially premium products, Food Hall format, based on the
current demand and supply situation, the pricing should be dynamic, and should
be able to change the prices by the day / within a day.
One Plan – Sales & Operations Planning

Background:
RRL has a target or annual operating plan at channel, department, week level. Based on that,
demand planning is done between RRL MCs (at HO), RCL MCs (at HO) and zonal category
teams. The planning is ad hoc and mainly undertaken in a synchronized manner for big
events. The RCL MCs create a monthly operating plan (MoP) and based on that and past
history of the primary sales, The supply chain team determines the production / procurement
requirements for the RCL DCs. Movement of stocks to RRL DCs is based on the POs (from
RRL to RCL) from store level ARS (Auto Replenishment System) and manual POs placed by
RRL zones. It is desired to synchronize and planning and activities across these teams to
come up with ‘one plan’ that everyone is marching towards.

Functionality Required:

• To start off, the key demand inputs to the S&OP process / system will be:
• Target or AoP: As mentioned before, this is at channel, department and week
level, in Rs / target sales amt. The system should be able to disaggregate to the
lower levels of the product and sales hierarchies.

• Predicted demand: Based on the POS and membership data, Reflex weekly
demand by SKU – Store will be generated as part of demand sensing. This will be
an input, and should be aggregated at different levels of channel, product, sales
and time hierarchies.

• Gaps: Based on the statistical demand and target, the system should be able to
identify the gaps and exceptions at different levels, for the planners to review.

• Activities and adjustments: MCs, will review the gaps and identify actions or activities
to bridge the gaps. Some of these activities are promotions/discounts/BOGO, big
events/ bets etc. Based on the planned activity, the system should be able to
determine the uplift in the demand. As a starter, the uplift in the demand can be an
input by the planners, and in phase 2, system should be able to use demand price
elasticity to determine the uplift in the demand and provide the decision support for the
same and also suggest activities to be undertaken.

• The planning can be at different levels of hierarchy, and the system should allow
adjustments at higher /lower levels and should be able to disaggregate / aggregate the
information. On the sales hierarchy, currently the demand is generated at a Region
level, which becomes the region target. The final plan need to be at the channel –
store
– SKU – week /day level, which will drive the supply planning process.
• Phase in (New products) – phase out planning:
o New product launch information should be taken into consideration. To start off,
the new product demand and price will be manually determined by the planners
and will become an input. In phase 2, when the new product demand and price
determination will be automated through data driven sensing, the system
should be able to take that as an input and determine the demand and provide
decision support for the same.
• For the phase out items, system should provide easy ways to identify and
phase out the demand.

• Expansion plans: System should be able to consider the expansion plans

into consideration.

• The demand plans will be required at sales amt(@retail), margins (% and amt), cost
amt and units.

• Inventory plan: Based on the demand plan, current inventory / supply information
and target days of cover / quantity based safety stock, the system should be able to
generate the time phased inventory plan. This will also determine the working capital
requirements.
• Inventory Aging: Visibility to the inventory aging will be required for the planners to
take actions.

• The final output will be sales, margin, inventory plan and markdown plans.

• Scenarios: The system should support multiple scenarios for the planners.

• Other: The system should provide visibility the data / analysis that will help planners
for decision making, like when viewing at an aggregate level, store count, SKU count,
Last Year (LY) information, Last n periods information etc.

• Monthly process:
System should be able to support a time based process for various teams to review and
provide updates to the plan (say, a monthly process.)
• Demand planners to review the statistical demand and provide inputs
• Individual MCs (RRL and RCL), RRL zone, supply planners to review
and provide inputs
• Joint meetings (Pre S&OP / S&OP) meetings to discuss and finalize ‘one plan’

• Ability to lock updates within the course of months, once a sub process is done.
• Frozen periods: Ability to support frozen periods (demand and supply) will be
required. Within the frozen period, the adjustments should not be allowed.
• In the Reflex, the frequency of the planning can be higher, and within
the month adjustments should be allowed.

• Exceptions: System should throw alerts and exceptions for the planners to quickly
get into the specific details where the attention is required.

• Other:

o
To start off, the teams mentioned above will be involved in the process, for
Phase 2, Zonal and Region teams may also get involved in the process.

o
Financial planning, target plan is an input here, later, should consider
financial planning in the system.

• KPIs: The key KPI’s to monitor will be

o
Demand / Forecast accuracy and bias
o
Fill rate (at different nodes) and demand satisfaction
o
Total inventory and turns
o
% manual POs
o
Other

• User interface
o
The system should allow quick slicing and dicing of the plans at various
levels, allow adjustment at different levels of channel.
o
The user interface should allow, both online and offline modes. So, planners are
able to work in an offline mode and submit/upload the plans in the online
system
o
Given the amount of information, the UI should be structured intuitively
and should allow planners to create and save various views.
Rapid Response – Integrated Supply Planning

Background:
Unlike other retail companies, the combination of RRL and RCL is combined retail and FMCG
entity under Reflex Group umbrella. So, by sharing the information seamlessly and better
coordination between RRL and RCL, lot better results can be achieved. The supply planning
processes and system(s) should be synchronized to get a responsive, POS demand signal
driven plans at various nodes in the supply chain to improve the fill rates, freshness, and turns.

Current process / system:

• Currently, ARS (Auto Replenishment System) is implemented for all stores (Large
and Small formats). ARS generates a replenishment signal (for both RCL SKUs and
Other Brands). Based on this signal, POs are placed from RRL to RCL for RCL SKUs
and RRL to other brands as well. The POs are also placed by RRL zone teams,
these are manual POs.
• Manual POs are placed in cases when demand spikes are expected that ARS
doesn’t take into account. These could be cases like first few days of the month(
salary time), big events/bets etc.
• RCL supply chain team plans for production / procurement based on historical
primary sales for the RCL SKUs. RCL SKUs inventory is in 4 DCs,

Functionality required:

• As part of the demand prediction and sensing and S&OP process, final Reflex
demand, by Channel, SKU, Store, Week will be input to the supply planning process
( at least 13-16 weeks).
• Based on the off-take Reflex demand, the supply planning system should generate
the net demand at RRL DCs. This will be based on the current and inbound stocks
netted against the Reflex demand and respecting the stocking / replenishment
policy at the stores. Currently, for the shorter term horizon, this is already done in
ARS. So, usage of ARS for this or other tool needs to be evaluated.
• Based on the net demand at RRL DCs, consolidated across the stores that the DC
serves to, total net demand at RRL DCs should be determined. Typically, the RRL DCs
are pass- through, but any current and inbound stocks should be netted out to
generate net demand requirement at all channel, regions, zone and RRL DCs level.
This net demand at RRL DCs should also be time phased.
• Based on the RRL channel - region – zone – SKU demand, for the shorter term
requirements within lead time and replenishment frequency based, POs need to be
placed. As mentioned before, current ARS does similar function, the difference
being the time phased net demand is not generated as longer term offtake demand
is not currently considered in ARS.
 • Apart from receiving the POs, RCL supply planning need to consider the
longer term, weekly, net demand requirements. This will become the weekly
primary demand for RCL, derived from off-take demand forecast at RRL
stores.
• Based on this primary demand, RCL supply planning need to determine net buy /
production requirements for the four DCs by considering the current and inbound
stocks and stocking policies.

• RM (Raw Material), PM (Packing Material) planning: For the produced SKU and
production requirements, RM / PM planning is required for the production. (Phase
2)

Planning buckets and frequency

• Overall, weekly demand buckets. For the shorter term, especially for perishables and
low stocked SKUs, daily buckets can be considered. Supply information will be point
in time. Ideally, the supply demand match should be done on a daily basis.

Stocking / Replenishment policies:

• It is desired to use forward looking replenishment / stocking policies, so target days of
cover should be based on forward looking demand at each stocking node in the
supply chain (including RRL and RCL). So, target inventory can change by period /
week.
• It is also required to have quantity based replenishment / safety stock, especially for
the slow moving / low demand SKUs. So, ideally, max (target cover days, quantity
based) policy should be used.
• Target days of cover and quantity based policies should be determined based on
data analysis, replenishment frequencies and demand and supply variability within
lead times.

Flexibility in supply network:

• System should be able to support flexible sourcing of supply and support any
changes in the supply network over a period of time.

Demand priorities:
• Demand priorities should be considered when supply is not enough to meet all
the demand. Also, demand priority across demand buckets / weeks should also
be considered to allocate the demand in a fashion to avoid stock outs at stores.

Allocations:
• There are cases when supply is not enough, or one zone placed a large PO, and all
supply at RCL DCs gets consumed by one zone, and other zone doesn’t get any
supply. It is required to allocate the supply by Zone (/Region) so that such cases
are avoided.
Manual POs:
• Based on the longer term planning, all Purchase Requirements (PRs) (From RRL to
RCL) should come from the supply plan and need to have a process / system changes
in place to avoid manual POs and should be driven by supply planning suggested
PRs.

KPIS
• Fill rates at all stocking nodes (primarily at Stores (On Shelf Availability) and
at RCL DCs)
• % Manual POs
• Other
New Products Introduction – Demand and Price Prediction

Background:
RCL introduces almost 3 SKUs per day. Currently, it takes much longer time to launch a new
product and also, the demand and pricing is not determined scientifically. It is desired to
implement a solution to address these issues faced in the new product launches, and enable
more SKUs to be introduced in shorter amount of time.

Workflow and Process

Investigate usage of the tool that Reflex Group already has licensed.

Functionality Required: Demand Prediction and Pricing:

• Based on the POS and loyalty data, detailed analytics to:
o
Identify potential SKUs to launch.
o
Predict the demand at different price points and other drivers for new launches
• Given it’s a new launch, there is no history for the demand and price points, so
similar SKUs, other advanced criteria should be considered.
• Should consider pack sizes and variants.
• Should be able to identify specific promotions for the launch
• Post-launch performance monitoring and re-predict the demand.
• Post-launch course correction recommendations, if required. (in both cases, if big hit
vs. not doing well).
• To be incorporated in the one plan – S&OP process.
• Consider channel nuances, include GT channel as well.
• Recommendations if a pre-launch in a sub-set of stores would be required or not.
• Should recommend at National, Regional, Local levels.
• Ability to see total impact of the SKUs launch, any cannibalization.
Action Plan

The Chief Supply Chain Officer has engaged you to identify an approach to bridge the digital and
supply chain divide that exists.

1. Considering that all the major digital touchpoints are to be covered in the
digital eco-system, describe how Reflex should act upon major requirements
2. Mention major pitfalls that Reflex might find itself in with Digitization and
how Reflex can tide over these obstacles.