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Supply
ChainManagement
Retail Industry1
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Presentation Flow
Retail Snapshot
Supply Chain Management - Retail Industry
Why Supply Chain Management is Important in Retail Industry
Basic Elements & Structure of Supply Chain
Information Technology Enabler of SCM in Retail Industry
Flow of Supply Chain & Planning Decision
Importance of Supply Chain
Measuring Supply Chain Performance
Benefits of Supply Chain
Case Study : Wal-Mart
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Retail Snapshot
India is one of the top five retail markets in the world byeconomic value
Indian retail sector accounts for 22% of the country's GDP andcontributes to 8% of total employment .
The Indian retail market is estimated to be US$ 450 Billion( less than 10% is Organised Retail & 90% unorganised ,2010)
Hypermarkets, currently accounting for 14% of mall space areexpected to witness high growth
In India, Organised Retail CAGR is 30%
India has highest number of unorganised retail outlets perperson (7/thousands)
India spends close to 13% of its GDP in logistics, which is farhigher than the efficient level of 8%.
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Key Players in Retail
Future Group
Reliance Retail Limited
Trent, Tata Group
Landmark Group (Lifestyle)
K Raheja Corp Group
AV Birla Group
RPG Group
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Opportunity Lost
AVAILABILITY IS AN INCREASINGLY IMPORTANT COMPETITIVE DIMENSION
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Supply chain management is a set of approaches utilized to efficientlyintegrate suppliers, manufacturers, warehouses, and stores, so thatmerchandise is produced and distributed at the right quantities, to theright locations, and at the right time, in order to minimize system wide costs
while satisfying service level requirements.
Management beyond the borders of an organization
UpstreamThe upstream business partners are the external organizations
that supply products or services to an organization.
DownstreamThe downstream supply chain is the organizations externaldistribution channels, processes, and functions that the productpasses through on its way to the end customer.
Supply Chain Management-Retail Industry
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Why SCM is Important in Retail
Demanding customers
Shrinking product life cycles
Proliferating product offerings
Growing retailer power in some cases
Doctrine of core competency
Emergence of specialized logistics providers
Globalization
Information technology
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Basic elements of a retailing supply chain
ACTIVITY
Sourcing materials
Producing the product
Wholesale distribution
Retail distribution
INSTITUTION
Materials supplier
Producer
Wholesaler
Retailer
Consumer
OTHER ACTIVITIES
Warehousing, transport to
producer
Design, warehousing, selling
through agents, transport to
wholesaler
Warehousing, transport to
retailer, cash and carry
Regional and local distributio
centres, transport to store/
home
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SCM Functional Areas Retail Industry
Indian Retail Sector
Food Retailers
Health & BeautyProducts
Home Furniture &Household Goods
Clothing &Footwear
Durable Goods
Leisure &Personal Goods
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SCM Functional Areas - Contd.
A supply chain consists of all stages involved, directly or indirectly, in
fulfilling a customer request.
Example: A detergent supply chain
Customer
ChemicalManufacturer
Manufacturer(P&G)
Reliance RetailDC
Reliance FreshStore
PlasticProducer
TennecoPackaging
Paper
Manufacturer
Timber
Industry
Oil
Industry
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Supply Chain Structure
Reliance Retail
Information Flow
Raw Materials
RETAILERFACTORY DC RDCSUPPLIER
Finished Goods
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IT - A Supply Chain Enabler for Retail Ind.
Information links allaspects of supply chain
E-business replacement of physical
business processeswith electronic ones Electronic data
interchange (EDI) a computer-to-
computer exchange ofbusiness documents
Bar code and POS Data creates an
instantaneouscomputer record of a
sale
Radio frequency identification(RFID)
It can send product datafrom an item to a reader viaradio waves
Internet
Allows companies to
communicate with suppliers,customers, shippers andother businesses around theworld, instantaneously
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Supply chain Flow Material/merchandise flows
Information flows
Financial flows
Supply chain management is themanagement of flows betweenand among supply chain stagesto maximize total supply chainprofitability
Supply Chain Flow13
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Example of a Simplified Supply Chain
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Merchandise Flow
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Information Flow16
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- - - - Merchandise flow Information flow
Buyer
Vendor
Stores
Distributioncenter
Customer
Sales info
Information and Merchandise Flows17
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Supply Chain Planning
Demand PlanningMaterial Requirement PlanningDemand Forecasting
Supplier Plant Warehouse Logistics Retailer
Production
Plan
Raw Material
Requirement
Order Management
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Supply Chain Planning Decisions
Strategic
Supply Chain Design
Resource Acquisition
Long Term Planning
(1 Year ++)
Tactical
Production/DistributionPlanning/Demand
Forecasting
Resource Allocation
Medium TermPlanning (Qtrly,Monthly)
Operational
Shipment Scheduling
Resource Scheduling
Short Term Planning(Weekly, Daily)
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Supply Chain Planning Decisions
OPERATIONAL
TACTICAL
STRATEGIC
Procurement DistributionManufacturing Logistics
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Supply Chain Planning Decisions
Supplier Selection
Allocation of
Suppliers to the
Plants
Location, Number,
Capacity of Plants
What Products to
Produce
Which Plants to
Produce them
Location, Number,
Size of Warehouses
Mode of Shipment
Port Selection
Procurement
Policy
Warehouse Allocation
Inventory Decisions
Manufacturing
Policy
Customer Allocation
Distribution Policy
Vehicle Routing
Fleet Size
Production Schedule
Scheduling on
Machines
Workload Balancing
Finished Goods
InventoryVehicle Routing
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Strategic importance of SCM in Retail
Total delivered Cost Management
End-to-End Visibility
Total Product Identification & Regulatory Compliance
Dynamic Routing
Variability Management
Integrated Workflow Integrated Planning & Execution Platform
Financial Supply Chain Management
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SCM Across the Organization
SCM changes the way companies do business.
Accounting shares SCM benefits due to inventory level
decreases
Marketing benefits by improved customer service levels
Information systems are critical for information sharing through
PSO data, EDI, RFID, the Internet, intranet, and extranets
Purchasing is responsible for sourcing materials
Operations use timely demand information to more effectively
plan production schedules
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Cost Optimization SCM
An Integrated Supply Chain Management can help eliminate the
Intermediaries & Company can save upto 37.5%
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Cost Optimization - SCM
Improve return on investment
Improve product availability
Net profit = Net profit x Netsales
Total assets Net sales Total
assets
Reduce Costs! Increase Efficiency!
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Measuring supply chain performance
Traditional measures include:
Return on investment
Profitability
Market share
Revenue growth
Additional measures
Customer service levels
Inventory turns
Weeks of supply
Inventory obsolescence
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Benefits of SCM
Cost and Financial
Retailers
Manufacturers
Distributors
Streamlined inventories and
reduced costs
Reduced errors and
redundant laborIncreased visibility of all
business transaction
Improved return on inventory
investment
Optimized transportation
costs, routes, and load times
Increase cost savings from
outsourcing for low cost
materials
Improvements
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Benefits of SCM28
Processes
Improvements
Manufacturers
Improved forecast accuracy
as well as resource and
distribution planning
Improved manufacturing andreplenishment cycle time
Enhanced manufacturing
scheduling
Increased effectiveness of
planning and decision making
Improved overall efficiency inproduction
Enhanced a seamless multi-
channel shopping
Reduced supplier base
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Benefits of SCM
Services
Improvements
Retailers
Reduced out-of-stock
situations
Improved order fill rates
Increased ship-complete
and on-time percentages
E.g. Wal-Mart uses the
replenish model to keep
their shelves full and
penalize their suppliers for
late shipment.
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Key Issues of SCM Retail Industry
Inadequacies in infrastructure such as lack of high quality roadnetworks, power shortages and insufficient storage spaces
Indian supply chain is suffering from its inadequacy of infrastructure
for warehousing facility
With availability of retail space serving as a key enabler, the current
rise in property prices and rentals may render a few retail business
models unviable
The retail industry loses millions of rupees every year in frauds,
thefts and employee pilferage, shop lifting, vendor frauds or
inaccurate supervision despite using standard and modern security
features
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Multiple taxes at the central and state level
Lack of clear policies (especially on the entry of foreignretailers)
The industry also faces a huge shortage of experts in areassuch as supply chain and store management.
The most significant challenge that impedes thedevelopment of an efficient and modern retail sector is anunderdeveloped supply chain
Key Issues of SCM Retail Industry
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Case Study :Wal-Mart's SCM System
Wal-Mart pioneered the hub-and-spokesystem.
The company directly procured from manufacturers, by
passing all intermediaries
Wal-Mart spends a significant amount of time meetingvendors and understanding their cost structure.
Using EDI for Procurement (It enabled the suppliers to downloadpurchase orders along with store-to-store sales information relating to
their products .)
Wal-Mart also made use of a logistics technique called cross-
docking (goods were directly picked up from supplier, sorted out
and then directly supplied to the customers.)
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Case Study - Contd.
Wal-Mart invested heavily in IT and communicationsystems to effectively track sales and merchandiseinventories in stores across the country.
Wal-Mart was able to reduce unproductive inventory byallowing stores to manage their own stocks, reducing packsizes across many product categories, and timely pricemarkdowns.
Instead of cutting the inventory across the board, Wal-Mart made full use of its IT capabilities to make moreinventories available in the case of items that customerswanted most, while reducing the overall inventory levels.
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Case Study Contd.
Employees at the stores had the Magic Wand, a hand-
held computer, These helped them to keep track of the
inventory in stores, deliveries, and backup merchandise in
stock at the distribution centers.
The order management and store replenishment of goods
were entirely executed with the help of computers through
the Point-of-Sales (POS) system.
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Case Study Contd.
Wal-Mart had invested approximately $4 billion to build a retaillink system(More than 10,000 Wal-Mart retail suppliers usedthe retail link system to monitor the sales of their goods atstores and replenish inventories.)
Retail Link had emerged into an Internet-enabled SCM systemwhose functions were not confined to inventory managementalone, but also covered collaborative planning, forecasting andreplenishment (CPFR).
In efforts to implement new technologies to reduce costs andincrease the efficiency, in July 2003, The company believed thatthis replacement would reduce its supply chain managementcosts and enhance efficiency.
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Road Ahead for SCM Retail Industry
Goal: Lean, Green and AgileConsolidation and outsourcing will set the foundations for a leaner
supply chain.
Multimodal transport and energy-efficient infrastructure will keep
it green.
Collaboration between channel partners and integration of various
stakeholders will keep the supply chain agile and competitive.
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Road Ahead Contd.
Game Changers Policy Reforms
Modernization of Retail and Advent of New Channels
Change in Demand Structure
Impetus to Infrastructure
Empowered through Technology (ERP,WMS,TMS,RFID & Telemetry)
Key Implications Cold chain will emerge as a hot sector for investment
Development of multimodal transport network
Shift to a demand-driven supply chain
Increased outsourcing and collaboration
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Thank You
Cyril Cherian - 110
Niyati Pujara - 128
Raj Chajjed - 132
Santosh Uchil - 141Sejal Desai - 142
Sumesh Shetty - 147
Vineet Badiani 152
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