SUPPLY CHAIN STRATEGY

PRESENTED BY:-ARITRA CHATTERJEEGARIMA JHA POOJA KUMARIRAJAT AGARWALROHAN SHRIVASTAVYASHICA KORDEYATEESH KUMAWAT

Introduction, Company Background Introduction, Company Background & Foodworld& Foodworld

IntroductionIntroduction

Over 6000 stock keeping units ( 80% from organized sector)

And remaining unorganized sector includes perishables and non-perishables.

”The key to our success given where we are, is effective supply chain management”

- Mr. Shiv Murti, Vice President.

Company BackgroundCompany Background

Food World was a division of Spencer’s ,the retailing company under RPG

Enterprises

RPG was one of the top 5 business houses in India ,with a sales turnover

of Rs. 65 Billion in 96-97

RPG’s business interests spanned several sectors including power,

automobile, tyre , agri-business, telecommunications, retailing ,&financial

services

RPG’s entry into retailing was through the acquisition of Spencer & Company in 1989 & established it as a separate division

At the time of acquisition ,Spencer’s had nine retail chain in India at that time

One of the options at the time of acquisition was to focus on the development of the real estate owned by Spencer’s

However, the RPG executives who were managing Spencer’s felt that the potential of retail business should not be given up easily.

Therefore, it was decided to experiment with one store to test the potential. If failed, then RPG would close down the retail operations.

• In line with this decision, the departmental store in Bangalore was modernized in 1991,retaining its product profile of hardware, food, kitchen appliances,& clothing.

• When the store opened ,sales increased to four times the previous levels & made a healthy contribution.

• The total turnover of Spencer’s increased from Rs. 250 million at the time of acquisition to nearly Rs.1000 million by 1994 through a careful process of nurturing the 3 activities while eliminating over 20 other less vital activities.

Food worldFood world Super market format was preferred for three reasons.

1. value based on price and quality.

2. choice through self service from a spread of merchandise.

3. a better shopping environment.

Residing High Street concept of location was preferred over Commercial High

Street and Out of the Town.

A minimum of 3000sq.ft store was required and 4500 sq.ft preferred for a self

service formatted merchandising store. Also pleasant ambience, Fast Food joint

and a bakery was proposed to be there in the store along with the merchandises.

First store in Chennai then in Bengaluru and then two more in Chennai in a span

of four months only which rose to 19 in all by the End of the year.

.

FoodworldFoodworld

Break even within few months of start and contribution towards regional expenses.

Store Operating Expenses comprises of salaries and wages accounted for about 2.5% of sales, rent about 2.2% and shrinkage about 1.6% and depreciation about 0.7%.

Merchandising FunctionMerchandising Function

FOODWORLD ORGANIZATION STRUCTURE

HEAD , FOODWORLD

Operation

Merchandising

Projects

Finance Security

Marketing Service

IT

HR

Regional Head Karnataka

Regional Head Andhra Pradesh

Regional Head Tamil Nadu

CUSTOMER EXPECTATION AS PER CUSTOMER EXPECTATION AS PER RESEARCH STUDYRESEARCH STUDY

Product Range

Variety for choice in a given Product

Freshness

Availability

Reasonable Price (not more than neighborhood store )

Core range of product consist of everything that a household shop for daily/weekly/monthly basis

MERCHANDISHING OFFERMERCHANDISHING OFFER

It Consists Seven major group :

I. Staples

II. Processed Foods

III.Beverages

IV. Non-food

V. Health & Beauty

VI.Perishables & Hardware

VII.Home Appliances

Various categories, depending on their attributes

Destination Strategic Convenience Specialty

Width(Brand Choice) High High High High/Med

Depth(no. of

Variants)High Low Low

Low

PriceAggressive

"key SKU’s” best in city

Aggressive Value Added

Price Range for Margin

MRP/KVI MRP

Tactical UsageHigh

Medium Medium Low

For drawing customer to the store

For drawing customer to the store

Distribution Strategy – Food WorldDistribution Strategy – Food World

Key Elements - DistributionKey Elements - Distribution

Minimum Suppliers: - Economies of Scale - Reduced Overheads & Control Requirements - Easier vendor development Creation of Regional Hubs: - 90% through Central Distribution. - 10% directly to the store. Replenishment Frequency: - Daily from warehouse to store, specific SKU twice a week. - Weekly from suppliers to warehouse, As Per Order hardware and general merchandise. Sourcing with minimum intermediaries:

- To source from as “upstream” as possible in the supply chain.

Ordering ProcessOrdering Process

Category manager places order with suppliers after checking out the

stocks.

Supplies were made available from nearest vendors appointed by company.

Suppliers had 10% margin and were willing to supply on weekly basis

Average SKU per vendor was 20.

Order filling rate was in the range of 60% - 75%.

At arrival, Quality and Quantity check was done at warehouse and a bar

code was pasted as per Food World’s code for easy processing for non-

perishable items.

Non-branded items were repacked wid “Food World” label on it. Most of

the processing in the warehouse and in the store was computerised.

Indenting ProcessIndenting Process

Request for stocks by stores to warehouse for supply is indenting. Minimum Base Quantity (MBQ) and Supply Unit Factor (SUF) are the

two specific attributes that helps indenting. MBQ= 30% of largest sales achieved/month. - The stock should be enough if there is surge in demand and short/no supply from the warehouse until the next indent. Indenting quantity was determined after a physical verification of store

stock on nominated indent days. Indent Quantity = (MBQ – Physical Stock) in multiples of SUF. Multiples of SUF to enable convenient repacking of supplier’s stocks at the

warehouse. For most SKU, the shelf space volume was less than the MBQ. To enable frequent replenishment and to provide a sense of fullness in the

shelves.

Indenting ProcessIndenting Process Automated indent quantity generation process.

Total 10% stock out in figures.

The other 10% accounted for the discontinued items but yet not deleted from the records.

The Indent Fill (number of SKUs) rates from the warehouse – 60%.

The Case Fill (SKU quantity) rates were – 85%.

If case fill rate was less than 75% , it was considered, it is considered indent not having been serviced.

Vendor DevelopmentVendor Development

The key elements of the Vendor Development The key elements of the Vendor Development Process Process

I. Identification of the supplying company’s one point contract.

II. Driving towards standardized trading terms across all three regions on the following dimensions.

a) Credit b) Promotion c) Simple point sources of supply across SKU’s/categories, preferably direct

from the company’s depot/CFAd) Margins (over and above product retails margins) for turn over, distributors

allowance, new store opening, bar coding (for data) and trade schemes

Different supply chain structures in operationDifferent supply chain structures in operation

Suppliers ---- CFA ---- Distributors ---- W/H ---- Store

Suppliers ---- CFA ------------------------- W/H ---- Store

Suppliers ----- Repack Section --------- W/H ---- Store

Suppliers -------- Consolidation Point ------------ Store

Suppliers ------------------------------------------ Store

Branded products from consumer goods company

experimental

Non-branded staples

Some fruits & vegetables

Bakery, Dairy, Some Fruit and Vegetables

LearningsLearnings

The Case gives us an insight on the working of the Supply Chain Process at a Supermarket. Following are the points which emphasize on that and helps us understanding supply chain better.

Strategic Location Capacity Planning and Implementation Providing a variety of products, range of brands, availability of products at

an appropriate pricing. Distribution strategies which help us in better supply chain process. Ordering, SKUs and Vendor development. Thus we learned that SUPPLY CHAIN IS INDEED THE BACKBONE

OF ANY RETAIL INDUSTRY.