Competitive Advantage through Supply Chain

Presented by Shoppers’ Stop

Flow of Presentation• Retail Scenario• Shoppers’ Stop• The Pentagon Triangle Model• Dimensions of Our Business• Supply Chain Objectives• Past Situation• Strategic Actions based on the Triangle

– Systems– Logistics– Partners

• Impact & Benefits

Indian Retail Scenario• Retail Market valued at Rs 900,000 cr

• Only 2% is organized with a value of Rs 18,000 cr

• Unorganized independent stores dominate the retail trade structure

• Highest number of outlets per capita in the world– There are ~ 12 million retail outlets in India

• Only 4% stores are larger than 500 sq ft in size

Global Retail Scenario• World’s largest private industry at $6.6 trillion (25

times the Indian Market)

• Organized retail market holds 40% of the market

• 50 of the top Fortune 500 companies and 25 of the top 200 Asian companies are retailers

• The retail industry is one of the largest employers

We pioneered a revolution….• From 2,800 sq. ft. to over 680,000 sq. ft.• From 1 store to 15 international class stores.• From unknown customers to creating a relationship

programme with over 300,000 loyal customers.• From being just a departmental store to being the only

Indian store represented in the IGDS.• From One company to Group companies.

All this has been possible due to our constant endeavour to EXPAND OUR HORIZON and become the No. 1 global retailer in India.

C R O S S W O R D

Our Vision…….

“To be a global retailer in India and maintain its No. 1 position in the Indian Market in the Department Store Category.”

“Nothing but the best.”

Our Mission…….

Snapshot

• 2003-2004 Annual Turnover Rs 404 cr.

• Retail Space 680,000 sq. Ft.

• Number of Stores 15

• Customer Care Associates 1610

• Year Founded 1991

Our Sales Performance

Company Performance:1992-2004

0.6 4.7 17.0 27.947.2

76.1 90.7127.0

148.4

210.3249.6

303.8

404

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

No. of Stores

Rev

enue

s (R

s C

r.)

1 1 1 2 13982 2 3 5 7

• Supply Chain Award for the Second best Supply chain Co. in the Country across all Industries by S.P.Jain Institute of Management in 2004.

• CMAI industry honours in 2003& 2004 for

– CEO of the Year - Retail- Mr. B S Nagesh

– Retailer of the Year– Retail Outlet of the Year- Delhi (2003) &

Hyderabad (2004)

– Top Management Team of the Year (2003) • In 2003 NASSCOM award for the “Best IT User” in the retail

vertical(2003)• Lycra Images Fashion Award to Shoppers’ Stop for “Best Retail

Chain of the Year” and Mr. B S Nagesh for “Retail Professional of the Year” in February 2004

Industry Honours

Communication

People

Place

Value

ProductSystems

Logistics Partners

The Eight Ways To Win In Retailing

The Pentagon & The Triangle Model

• The Pentagon is customer centric and customer facing• The retailer can impact the customers’ perceptions, by

leveraging the above elements

The Pentagon

Positional

PromotionalCommunication

Service

Knowledge

ClimatePeople

Size

Location

Layout & DesignPlace

Price

QualityValue

Style & FashionIntensity

AssortmentProduct

The Triangle

• The Triangle is organization centric

• A strong and differentiating triangle would result in better service offering to customer

Systems

Logistics Partners

Dimensions of Our Business • 2 primary and 6 secondary seasons

• 85 merchandise categories

• over 260,000 SKUs

• 400 vendors

• 15 stores across India

• 33,000 customer walk ins everyday

Customer profile Shoppers’ Stop caters to consumers who are

demanding and discerning

• Age group: 25 to 50 years (77% of total customers)

Customer Philosophy

“Feel the experience. While you shop.”

Service Philosophy

“It’s Magical. It’s Comfortable. It’s My Store.”

Our Positioning

Bi-annual tracks for Customer Satisfaction Index

The Supply Chain Objectives covers 3 main areas

• Customer Objectives

• Partner Objectives

• Organization Objectives

Supply Chain Objectives

The Customer Objectives• Customer always gets the merchandise of his / her

size and choice

• Merchandise is always presentable and ready before customer entry

• Customer easily locates price tags and product information

• Price on the price tag and Point of Sale System always match

• Timely replenishment of fast moving merchandise

The Partner Objectives• Partners always deliver the right quantities as per

schedule

• Partners are always paid as per credit terms

• Sharing of information with partners related to sales stocks and purchase orders

Organization Objectives• Customer Response Time

• Merchandise Availability

• Distribution Cost

• Shrinkage

• Efficiency of executive time

• Collaboration with Partners

The Past Situation of SCMIn 1999, Shoppers’ Stop implemented the ERP; JDA -MMS, well ahead of time and its capabilities

– 3 stores and a turnover of Rs 127 cr only

• Turnaround time: 4 days

• Poor hit rate from partners

• Difficulty in tracking merchandise

• No sharing of inventory data with partners

• High Distribution Cost

Contd...

The Past Situation of SCM contd.

• High inventory

• High Shrinkage

• Shutting down all operations for 48 hours for annual stock take

• High variance between books stock and physical stock

• Inefficient use of executive time

Strategic Actions

Systems

Logistics Partners

JDA - MMS - WMS

PICS

B2B

Source Tagging

Receipts

Direct Store Delivery

Infrastructure

Delivery Mechanism

Intake Consolidation

Systems

• Shoppers’ Stop implemented the JDA Retail Merchandise Management System (MMS)

• First retailer in Asia to implement the state-of-the-art ERP

Systems JDA - MMS - WMS

PICS

Merchandise Management System

• An end to end solution for managing merchandise throughout the chain

• Right from purchase orders, to sales, to replenishment, to markdown and inventory management

• A integrated online system connected with the back end, front end (stores) and the distribution centers.

MMS Triggers• Auto Purchase Order

– Pre-determined level of minimum stocks for core styles at distribution center

– Drop in level generates an Auto Purchase Order to the vendor

• Auto Replenishment– Pre-determined level of minimum stocks for core

styles at each store– Drop in level generates an Auto Replenishment

command at SKU level to the concerned distribution center

– Daily Auto Replenishment to all 15 stores

• Warehouse Management System

– Prior to WMS, inventory was monitored manually and transfers required more than 96 hours

– With WMS, entire process controlled electronically

– Transfers are executed in 24 hours

The WMS

The WMS Process– Distribution Center mapped onto a rack and bin system

– Calculates storage capacity

– Allocates designated area to each product category through PUT AWAY document

– PICK LIST identifies exact location of merchandise at SKU level

– Maintains records of perpetual inventory online

– Minimize shrinkage

– Reduces turnaround time to 24 hours

Perpetual Inventory Control System

• Also known as PICS• Distribution Center scans one department per day• All departments scanned in a quarter• Pre-determined schedule of all departments• Operations process not affected• Helps in checking pilferage• Variances are known everyday• Major tool for reducing shrinkage resulting in cost

savings

Ability to match physical stock with systems stock on a daily basis without affecting day to day operations

Logistics

• 4 Dedicated Distribution Centers, covering 85,000 sq ft, supply merchandise to 15 stores across the country

• Distribution Center Management is outsourced to and managed independently by regional service providers

• Regional Distribution Centers connected online to the central systems.

LogisticsInfrastructure

Delivery Mechanism

Intake Consolidation

Shoppers’ Stop Footprint

Mumbai LocationsAndheriBandraChemburKandiviliMulundMalad

Pune

Bangalore

Hyderabad

Chennai

Kolkata Locations

Elgin Rd.

Salt Lake

Jaipur

DelhiGurgaon

Distribution Centers

33,000 customers per day

Western Region

Northern Region

Eastern Region

Southern RegionStore Store

Store Store

Store Store

Store Store

Mumbai DC

Delhi DC

Kolkata DC

Bangalore DC

Partner 2

Partner 3

Operations Outsourced

Reverse Logistics

Outbound Logistics

Distribution & Logistics

Partner 0

Partner 1

WMSWin DSS / MMSBConnectB

New Initiatives• Intake Consolidation

– Also known as the Milk Run– Currently for Own Brand Partners– Delivery Authorization indicating quantity to be

received for the week– National Transporter to follow up with vendors for

merchandise– One truck to visit and collect goods from the vendors– Distribution center is informed of the ETA– Delivery status monitored and tracked through website

Reduction in turnaround time to 24 hrs

Savings of Rs 1 Lac per month

Partners

• To ensure smooth flow of merchandise through the entire supply chain

• To improve the visibility and velocity of information through supply chain

• Partners can proactively improve efficiency and business results

Partners B2B

Source Tagging

Receipts

Direct Store Delivery

B2B

• BConnectB from Siemens• Launched in 2002 with less than 10 partners• Currently 150 partners connected online with

Shoppers’ Stop• Features include

– Order Processing• Purchase Orders• Receipt Details

– Payment• Ledger Details

– Sales & Stock• Style-wise / location-wise

B2B Advantages• Reduction in communication expenses

• Faster information exchange with Business Associates

• Frees up executive time for other value added activities

• On line information of sales and stock to vendors which increases service levels

• Bar codes capturing style and price details are attached to the merchandise at the partners’ premises

• Ensures smooth flow of merchandise through the supply chain and reduces turnaround time

Source Tagging

Reduction in turnaround time from 96 hrs to 24 hrs

Reduction in Manpower cost

Receipts & Payments• Payment against Receiver’s Confirmation

– Receiver’s confirmation report prepared on receipt of goods at the distribution center

– Report sent to the corporate office against which payment is released

100% reconciliation of receipts ensuring timely payment to vendors

• Ability to receive the merchandise directly at the stores

• Bypassing the distribution center further reduces turnaround time to 12 hours

• Reduction in distribution cost

Direct Store Delivery

Reduction in lead time

• Auto Style Set-up– Currently Shoppers’ Stop team creates styles manually– The printed barcodes are then sent through courier– In Auto Style Setup partner sets up the style codes

(based on a standard template) and prints the barcodes at his end

– The entire file is sent electronically to Shoppers’ Stop– Details of style codes to be uploaded directly into the

ERP– Shoppers’ Stop B&M team to only fill in quantities– Reduces courier cost and turnaround time

New Initiatives

Frees up 30% executive time

Error reduction process

Strategic Actions - Summary

Systems

Logistics Partners

JDA - MMS - WMS

- Improved Efficient Consumer Response

PICS

- Shrinkage beats global standards

B2B

- Seamless Integration

Source Tagging

- Seamless merchandise flow

Receipts

- 100% reconciliation

Direct Store Delivery

- 20% of merchandise

Infrastructure

- Scalability to 50 stores

Delivery Mechanism

- Turnaround time 24 hrs

Intake Consolidation

- Cost Savings

Financial Impact

A financial cumulative saving of Rs 1.21 cr

TURNOVER EXPENSE % toYear Turnover

(Rs Crores) (Rs Crores)2001-02 249.5 2.64 1.06%2003-04 404.5 3.35 0.83%

D&L Expenses

– No Shrinkage at Distribution Center

Financial Impact

A financial cumulative saving of Rs 1.2 cr

TURNOVER Shrinkage % toYear Turnover

(Rs Crores) (Rs Crores)2001-02 249.5 1.65 0.66%2003-04 404.5 1.62 0.40%

Shrinkage at Store Level

Service Standards

Month Allocated Shipped PercentageApril-01 2,410 2,187 91%April-04 11,537 11,366 99%

Shipments Allocated v Shipments Executed

• Customer– Improvement in CSI from 62 to 65 through better

availability of merchandise.

• Partner– B2B, Auto P.O and Source Tagging ensures faster

transactions– B2B will drive seamless integration between

Shoppers’ Stop and Partners in the future– Partner Satisfaction Index will strengthen partnership

• Stakeholder– Leverage SCM strength for multi-fold growth at lower

cost– Reduction in shrinkage resulting in higher profit

Competitive Advantages

Results of SCM Initiatives

Objective IntangibleBenefits

TangibleBenefits

Customer q Latest merchandiseavailability

q MerchandiseAvailability

q Correct Product andPrice information

Partner q Transparencyq Partnership

q Timely Paymentsq Greater Efficiencyq Growth

Stakeholder q Higher CustomerSatisfaction levelsthrough CSI(Customer SatisfactionIndex)

q Profitabilityq Lower distribution costq Greater efficiency in

executive timeq Scalability to 50 stores