Vishal Mega Mart Final Report
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Transcript of Vishal Mega Mart Final Report
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FIELD WORK RESEARCH PROJECT REPORT
On
Supply Chain in Vishal Mega Mart
Submitted in Partial Fulfillment of
Master of Business Administration (MBA)
Programme : 2011 -13
Of
Gautam Buddh Technical University, Lucknow
Under the Supervision of : Submitted By:
Mr. Anubhav Saxena Group - 6Karishma Joshi
Pravin Kumar
Ekta Singh
Sameera Naaz
Keshav Gupta
Rohit KumarGaurav Shrivastava
Faculty of Management Science
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Shri Ram Murti Smarak College of Engineering & Technology, Bareilly
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EXECUTIVE SUMMARY
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 ofincorporation, 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.
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INDEX
Introduction about the topic Scope of study Objective Finding Interpretation Conclusion Suggestion Questionnaire for interview References
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INTRODUCTION ABOUT THE TOPIC
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.
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SCOPE OF STUDY
1. Opportunity to understand the Supply chain of Vishal Mega Mart2. Able to know the Inventory management.3. Get to know the ideal time between ordering & getting the goods.
Objective
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.
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Finding
VRPLs business process can be summarized as below:
Establishment of Stores:
Selection of locationIn 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 targe ted 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.
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InsuranceVRPL 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 UdyogVihar, 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 PropertiesVRPL have recently acquired freehold interest in relation to a land admeasuring 82,830
square feet in Hubli, Dharwad.
Merchandise PlanningVRPLs merchandise planning is based on the concept of category management rather
than traditional brand management practices.
Apparels and Non ApparelsUnder 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
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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 divisionis 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 sub-
categories 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 ManufacturingVRPL 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
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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
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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.
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VISHAL Apparels Brand
Apparel Manufacture
The basic raw materials required for the manufacturing process of apparels includesfabrics 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
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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 areascertained 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.
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Interpretation
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.
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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.
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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 IntegrationIt 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.
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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 FMCGHistorically, 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 storeson 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 IndiaIn 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.
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Increasing customer satisfaction and thier base of loyal customersIt 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.
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Conclusion
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.
Suggestion
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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 youare choosing this mode ?
5. Have your integration done backward ?
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REFERENCES
http://www.vishalmegamart.net/http://www.vishalmegamart.net/aboutus.htm
STORE MANAGER:
NAME: SUNIL SINGH ADDRESS: PLOT NO. 16, SECTOR-23, SANJAY NAGAR DISTRICT
CENTER, NEAR ALT BUS STAND, GHAZIABAD-201002
http://www.vishalmegamart.net/http://www.vishalmegamart.net/aboutus.htmhttp://www.vishalmegamart.net/aboutus.htmhttp://www.vishalmegamart.net/