Supply Chain Management

Project

Team 1
DMART- Retail Business Analysis
Akshaya(08)/Ganesh(23)/Rengarajan(49)
About the Project

▪ Dmart is India’s largest food and grocery store with over 18,000 products
and over a 1000 brand.
▪ Low Pricing Strategy to eliminate Competition
Characteristics of the Business:
▪ Capital Intensive
▪ City-specific model had to be followed
▪ More investments were required in:  Maintaining Relationship with
suppliers
 D-Mart
Core Competency

Retail Outlets

Farm to Strategic
Home Location

Pays Own
Centralized Low Margins Rich product Ready Pick
Suppliers Buildings
Sourcing High Volume assortment up points
directly reducing rent

High Quality Low Cost Operations

3
 SWOT Analysis:
Strengths Weakness
· Low cost structure · High Variable Cost: 
· Product Range · Minimum order quantity/price compulsion.
· Exotic Range · Key management personnel risk and promoter risk
· Discounts · Asset heavy model for expansion
· Rapid expansion is difficult since largely follows ownership model
· Convenience 
· Target Group 
· Low Fixed Cost business model
· High Asset Turnover Ratio
· Best in class operational efficiency
compared to peers
· Relationship with suppliers and
logistics provider.
· Strong execution capability in
identifying locations for store
opening
 
Opportunities Threats
· It can increase the number of products · Aggressive pricing strategies.
under its own brand instead of merely · Competition
selling and stocking products · Bigger Players
· Market- Large Market to Penetrate in Tier · Smaller Players
2,3 Cities · Customer Retention  
· Grocery Growth:  Cross selling and Value · E-Commerce
Packaging · Failure to identifying and buying key properties.
· To capitalize on online opportunity · Hyper-Inflationary situation impacting food and grocery
through D-Mart Ready stores
· Scope to increase centralized sourcing
· To increase share of private label brands

4
Pull Strategy-Flowchart

5
Financial Health of the Company
Financial Ratio Interpretation

Asset Turnover Inventory Turnover Debtors Turnover Cash to Cash

Debt Equity Ratio Current Ratio
Ratio Ratio Ratio Cycle-32.72Days
• Lower leverage • Lower value of • The higher the • The higher ratio • A low receivables • This metric
ratios of Dmart this ratio in Dmart, ratio in Dmart, indicated fast turnover ratio takes into
tend to indicate a indicates that they indicates the moving might be due to a account how
company or stock are falling short of effective usage of inventories. company having a much time the
with lower risk to paying their short- Assets. poor collection
shareholders. term obligations. process, bad
company needs
credit policies, or to sell its
customers that inventory, how
are not financially much time it
viable or takes to collect
creditworthy. receivables,
and how much
time it has to
pay its bills
without
incurring
penalties.

7
 PORTER’s FIVE FORCES ANALYSIS
Threat of New Entrants (Strong
Threat)
• New entry of retail firms is
easily achieved even in the
presence of giants like Avenue
Supermarkets.
• Small retailers can enter the
market and compete on the
basis of convenience, location,
specialty, and other factors
• Low cost of doing business
(strong force)
• Moderate capital costs (strong
force)
• Moderate cost of brand
development (moderate force)
Threat of Substitutes (Weak Threat of Substitutes
Threat) (Weak Threat)
• Avenue Supermarkets offer a
• Avenue Supermarkets face the
wide variety of goods and some
weak intensity of the bargaining
services that have a few or no
power of buyers in the retail
substitutes. The following
industry environment. The large
external factors are the most
population of buyers makes it
significant, concerning the threat
difficult for them to impose
of substitution:
significant pressure on retail
• Considerable availability of
firms.
substitutes (moderate force)
• The bargaining power of buyers
• Low variety of substitutes (weak
is weak in influencing Avenue
force)
Supermarkets and other retail
• Higher cost of substitutes (weak
firms.
force)
• Some substitutes are more
expensive than the low-cost
goods available at Avenue
Supermarkets
8
 PORTER’s FIVE FORCES ANALYSIS
Bargaining Power of Suppliers
(Weak)
• The bargaining power of
suppliers has weak intensity in
the retail industry environment.
There are many suppliers in the
retail industry. Large firms like
Avenue Supermarkets can easily
affect these suppliers
• Large population of suppliers
(strong force)
• Tough competition among
suppliers (weak force)
• High availability of supply (weak
force)
• High availability of supply makes
it difficult for suppliers to impact
retail firms.
Intensity of Competitive Rivalry
Bargaining Power of Consumers
(Strong)
(Strong)
• The intensity of competitive
• The bargaining power of
rivalry is strong in this industry.
customers has strong intensity in
There are many firms of different
the retail industry environment.
sizes competing in this industry
There are many players in the
environment. Currently, the main
retail industry. Large firms like Big
competitor are Reliance Fresh,
Bazaar, Big Basket, Grofers to
Spencers, Future Retail, Big
Small Kirana Stores which are
Bazar, More etc
• Large number of firms in the retail convenience based can easily
affect these Dmart.
market (strong force)
• Price is the driver for choosing to
• Large variety of retail firms
shop in Dmart, so they have to
(strong force)
• High aggressiveness of retail continuously keep working on
selling at low costs
firms (strong force)
9
INVENTORY MODEL

▪ Inventory based model: The company has its own inventory and manages it
based on everyday demand. Dmart started with this model.
▪ Hyperlocal: In this model, the hyperlocal receives the order and buys items
from store based retailers, collects them in one place and delivers it to the
consumer. Companies like Grofers, ZopNow use this model.
▪ Mixed Model: Companies use a bit of both of the above mentioned models.
However, in order to maintain the costs, the inventory is generally relatively
smaller in size as compared to companies that have adopted the inventory
based model.

10
 Strengths Weakness

• Best in class operational efficiency

compared to peers
D-Mart’s • Key management personnel risk and
promoter risk
• Relationship with Resources • Asset heavy model for expansion
suppliers and logistics provider • Rapid expansion is difficult since largely
• Strong execution capability in identifying follows ownership model
locations for store opening

Tangible Resources Intangible Resources Human Resource

- Owned Stores Model - Brand recognition due to
- 21 days Cash Conversion its long presence in the
Cycle. markets
- 80% Financing through - Increasing centralized
Equity. sourcing adding to
efficiency
DMART follows a dual system for
its manpower requirement :
1) Key employees on payroll and
2) Job roles where attrition
is high are made on contract basis
 Better pricing to consumers, Faster Payments to
Suppliers
Value Rare
• Cluster-based approach towards store • Strategically chosen regions and

•
•
expansion
Rich product assortment
Owned store model
V R premium locations provides it a deep
penetration into the retail market of
small cities and towns. A resource not
• Centralized sourcing and efficiency present with its rivals.

Inimitable and Non-

Exploitable E I-N substitutable 
• Lower cost with better locations than
• D-Mart has the potential to earn higher competitors
profits for extended period of time until
imitated and exploited by competitors • Superior access to inputs
• Price based loyalty, Long term
reputation.
 BUSINESS LEVEL STARTEGY – AVENUE SUPERMART (D-
MART)
• Mission: To be the lowest priced retailer in the area of operation/city/region
• The business strategy for D-Mart involves setting up an image of a discount store which can help them to attract
more customers towards them
• D-Mart follows the strategy of EDLP(Every Day Low Pricing) by offering 6%-12% discount on food items and
groceries or even 10% on some products.
• It’s strategy is markedly different from it competitors like Reliance and Future Group. While other companies have
quickly expanded into multiple segments, D-Mart kept its sales mix limited to food and groceries.
• The quick inventory turnover ratio allows the retailer to negotiate for better prices for itself, as it pays its suppliers
early. It then offers these low prices to its consumers.
• Unlike most retail firms which are burdened by the high cost of rentals, 90% of D-Mart stores are located in
properties owned by the firm.
• In-house logistics: Dmart has its own fleet and warehouses, giving them better control and better margins
• Focussed on weekly purchasers rather than impulse buyers to combat wafer-thin margins so that the minimum order
size exceeded a particular level.
• Gradual elimination of intermediaries: Use of a special sourcing route for perishables; obtaining them just a few
hours before the delivery was to be made directly from the farms called the “farm-to-home” philosophy.
13
 NUCLEUS OF THE BUSINESS LEVEL STARTEGY
Customer
• D-Mart focusses on catering to value-
seeking retail customers, largely from
the lower-middle, middle and aspiring
upper-middle income segments
• The business level strategy only
focusses on how much a customer can
save and become a market leader in
that
• Paying attention to meet the customer
needs in the most economical way
helps D-Mart to get promoted through
Word-of- Mouth marketing
Employees
• In order to adopt the culture of self
service with service-oriented format in
our country, business strategy for D-
Mart focusses on building a cadre of
simple, hardworking store people who
ensure fully stocked shelve, clean price
communication, efficient checkout and
not much beyond in customer service
• Since all the hardware and connectivity
is best in class hence skilled manpower
is not required by D-Mart to boost the
sales
• Live its Self-Service Dream diligently
Vendor
• D-Mart involves a strategy which
inculcates the provision of faster
payment to suppliers specially small
traders who are always short on capital
and perpetually stressed about their
working capital situation
• D-Mart decided to be a market beater
by paying faster than market norms to
its vendor.
• They quickly became best pay master
in town
• In spite of being tough negotiators,
vendors do many small things to
ensure that D-mart gets the best
availability and deal for its products
14
 Transportation in supply chains

Cost Factor Performance

   
Inventory Higher than manufacturer storage.
Difference is not large for faster
moving items.
 
Transportation Lower than manufacturer storage.
  Reduction is highest for faster moving
items.
 
Facilities and handling Somewhat higher than manufacturer
  storage. The difference can be large for
very slow-moving items.
 
Information Simpler infrastructure compared to
manufacturer storage.
 

15
 Transportation in supply chains

Cost Factor Performance

   
Inventory Can match any other option, depending
on the location of inventory.
Transportation Lower than the use of package carriers,
  especially if using an existing delivery
network.
Facilities and handling Facility costs can be very high if new
  facilities have to be built. Costs are
lower if existing facilities are used.
The increase in handling cost at the
pickup site can be significant.
 

Information Significant investment in

infrastructure required.
 

16
Selecting a Distribution Network Design

Gravity Location Models

▪ Gravity location models help to do just this. It helps managers to decide upon the
suitable geographical locations within the region for the development of a plant facility.
These models help the company to reduce the transportation costs involved in bringing
the raw material from the suppliers and delivering the finished products to the markets.
Clear focus
▪ Dmart is a Supermarket chain with a clear focus on value-retailing, limited categories &
concentrated in west & south India.
Non metro locations worked
▪ Outlets are mostly located in suburbs and non-metros. Sells in only foods, non-foods
(FMCG), general merchandise & apparel categories.
Long term planning
▪ Operates and manages all stores, with long-term lease arrangements, where lease period
is more than 30 years and the building is owned by D-Mart.
Tactical management
▪ High operating efficiency and lean cost structures through stringent inventory
management.

17
Thank you!

18