MARKETING MANAGEMENT

A STUDY OF THE DISTRIBUTION STRATEGIES OF RELIANCE FRESH

PROJECT
(Towards partial fulfilment of the evaluation in the subject of Marketing
Management)

Submitted to:

Submitted

by:
Dr. Archi Mathur

Prabhat Kumar

Faculty

Roll: 1282

Marketing Management

B.B.A., LL.B (Hons.)

NLU Jodhpur

UG Semester II

DATE: 19TH APRIL, 2016

NATIONAL LAW UNIVERSITY, JODHPUR
WINTER SEMESTER (JANUARY APRIL, 2016

ACKNOWLEDGEMENT
I wish to convey my deep gratitude towards my Marketing Management teacher Dr. Archi
mathur who has been a source of guidance and motivation throughout my second semester.
I am grateful to the University for facilitating me with the necessary academic and
preparatory resources, online and offline, required to make this project.
I am also grateful to all my friends who keep the spirit of competition alive in me, and my
seniors who never hesitate to help when an inexperienced first year comes looking for
genuine advice and support.

Prabhat Kumar

EXECUTIVE SUMMARY
The grocery industry is an ideal example for examining extended supply chains that is at once
universalwe all shop and eatand also the most challenging supply chain environment.
The industry has unique characteristics like hyper completion with avg. profit margins of 12% of sales, fragile products, highly perishable and customers are choosy on tastes and have
a high demand for low price. For all these reasons, extending the supply chain for groceries
(so that consumers have an experience that is more service-oriented) provides a unique
opportunity for companies to differentiate themselves. For example, customers can place
orders online from the comfort of their homes, and have their orders filled and delivered to
their doorstep. There are substantial costs involved in extending the supply chain into
consumer homes, which does not seem to fit with an extremely price-sensitive industry. And
yet, it is precisely by turning this reasoning on its head that there is a quiet insurrection
occurring. Extending the supply chain for groceries works, despite its challenges. It provides
a means of enhancing the customer's experiences and breaking away from the crushing
"price, price, price" strategy exploited by leading retailers, such as Wal-Mart. It creates the
type of customer experience that leads to greatly increased customer loyalty. The idea is to reforge links with customers that have been severed by decades of price promotions that have
eroded customer loyalty to specific brands and to individual stores. If extending the supply
chain can be used to create a loyalty effect in the ultra challenging world of retail grocers,
there are important lessons for a broader range of retailers and manufacturers.

TABLE OF CONTENT

Table of Contents
MARKETING MANAGEMENT.................................................................1
A STUDY OF THE DISTRIBUTION STRATEGIES OF RELIANCE FRESH.........1
ACKNOWLEDGEMENT..........................................................................2
EXECUTIVE SUMMARY.........................................................................3
TABLE OF CONTENT............................................................................4
RESEARCH OBJECTIVES.......................................................................6
RESEARCH METHODOLOGY.................................................................7
INTRODUCTION..................................................................................9
DISTRIBUTION STRATEGIES...............................................................11
A.

INTRODUCTION TO THE DISTRIBUTION CHANNEL..................................................11

B.

MULTIPLE CHANNELS OF DISTRIBUTION..............................................................12

C.

BENEFITS OF INTERMEDIARIES..........................................................................13

RELIANCE FRESH..............................................................................15
DISTRIBUTION STRATEGY..................................................................19
SUPPLY CHAIN AND DISTRIBUTION STRATEGIES AT RELIANCE FRESH. . .23
A....................................................................................................................... 23
PROCUREMENT..................................................................................................... 23
RECOMMENDATION AND CONCLUSION...............................................54
ANALYSIS.........................................................................................57
ANNEXURE.......................................................................................59

RESEARCH OBJECTIVES

To comprehend the concept and reason behind the various distribution

strategy used by Reliance Fresh.

To critically evaluate the success and failure rate and ratio of the particular

marketing strategy.
To identify the reasons behind the success failure of all the strategies.

RESEARCH METHODOLOGY
SUBJECT
TOPIC

:
:

Marketing Management
Study of the distribution strategies of Reliance Fresh.

The author has researched for this project by opting for doctrinal research
from primary and secondary sources. Authoritative books on marketing
management and distribution strategies have been used to inquire into the
nitty-gritty of the topic. Scholarly articles and reports on Reliance Fresh have
also been referred to.

TENTATIVE CHAPTERISATION

Executive Summary
Research Objective
Research Methodology
Chapter 1 Introduction to Distribution Strategies
Chapter 2 Introduction to Reliance fresh
Chapter 3 Data Tabulation
Chapter 4 Analysis
Chapter 5 Recommendation
Chapter 6 Conclusion
Annexures (questionnaire)
Limitations (if any)
Bibliography

INTRODUCTION
Marketing management is the organizational discipline which focuses on the practical
application of marketing orientation, techniques and methods inside enterprises and
organizations and on the management of a firm's marketing resources and activities.
Globalization has led some firms to market beyond the borders of their home countries,
making international marketing a part of those firms' marketing strategy. Marketing managers
are often responsible for influencing the level, timing, and composition of customer demand.
In part, this is because the role of a marketing manager can vary significantly based on a
business's size, corporate culture, and industry context. For example, in a large consumer
products company, the marketing manager may act as the overall general manager of his or
her assigned product. To create an effective, cost-efficient marketing management strategy,
firms must possess a detailed, objective understanding of their own business and the
market in which they operate. Marketing management facilitates the activities and functions
which are involved in the distribution of goods and services.
According to Philip Kotler, Marketing management is the analysis, planning,
implementation and control of programmes designed to bring about desired exchanges with
target markets for the purpose of achieving organisational objectives.
It relies heavily on designing the organisations offering in terms of the target markets needs
and desires and using effective pricing, communication and distribution to inform, motivate
and service the market. Marketing management is concerned with the chalking out of a
definite programme, after careful analysis and forecasting of the market situations and the
ultimate execution of these plans to achieve the objectives of the organisation.
Further, their sales plans to a greater extent rest upon the requirements and motives of the
consumers in the market. To achieve this objective, the organisation has to pay heed to the

right pricing, effective advertising and sales promotion, distribution and stimulating the
consumers through the best services.
To sum up, marketing management may be defined as the process of management of
marketing
programmes for accomplishing organisational goals and objectives. It involves planning,
implementation and control of marketing programmes or campaigns.
Marketing management has gained importance to meet increasing competition and the need
for improved methods of distribution to reduce cost and to increase profits. Marketing
management today is the most important function in a commercial and business enterprise.

DISTRIBUTION STRATEGIES

A. INTRODUCTION TO THE DISTRIBUTION CHANNEL

Distribution channels move products and services from businesses to consumers and to other
businesses. Also known as marketing channels, channels of distribution consist of a set of
interdependent organizationssuch as wholesalers, retailers, and sales agentsinvolved in
making a product or service available for use or consumption. Distribution channels are just
one component of the overall concept of distribution networks, which are the real, tangible
systems of interconnected sources and destinations through which products pass on their way
to final consumers. As Howard J. Weiss and Mark E. Gershon noted in Production and
Operations Management, a basic distribution network consists of two parts: 1) a set of
locations that store, ship, or receive materials (such as factories, warehouses, retail outlets);
and 2) a set of routes (land, sea, air, satellite, cable, Internet) that connect these locations.
Distribution networks may be classified as either simple or complex. A simple distribution
network is one that consists of only a single source of supply, a single source of demand, or
both, along with fixed transportation routes connecting that source with other parts of the
network. In a simple distribution network, the major decisions for managers to make include
when and how much to order and ship, based on internal purchasing and inventory
considerations. In short, distribution describes all the logistics involved in delivering a
company's products or services to the right place, at the right time, for the lowest cost. In the
unending efforts to realize these goals, the channels of distribution selected by a business play
a vital role in this process. Well-chosen channels constitute a significant competitive

advantage, while poorly conceived or chosen channels can doom even a superior product or
service to failure in the market.1
B. MULTIPLE CHANNELS OF DISTRIBUTION

For many products and services, their manufacturers or providers use multiple channels of
distribution. A personal computer, for example, might be bought directly from the
manufacturer, either over the telephone, direct mail, or the Internet, or through several kinds
of retailers, including independent computer stores, franchised computer stores, and
department stores. In addition, large and small businesses may make their purchases through
other outlets. Channel structures range from two to five levels. The simplest is a two-level
structure in which goods and services move directly from the manufacturer or provider to the
consumer. Two-level structures occur in some industries where consumers are able to order
products directly from the manufacturer and the manufacturer fulfills those orders through its
own physical distribution system. In a three-level channel structure retailers serve as
intermediaries between consumers and manufacturers. Retailers order products directly from
the manufacturer, and then sell those products directly to the consumer. A fourth level is
added when manufacturers sell to wholesalers rather than to retailers. In a four-level
structure, retailers order goods from wholesalers rather than manufacturers. Finally, a
manufacturer's agent can serve as an intermediary between the manufacturer and its
wholesalers, creating a five-level channel structure consisting of the manufacturer, agent,
wholesale, retail, and consumer levels. A five-level channel structure might also consist of the
manufacturer, wholesale, jobber, retail, and consumer levels, whereby jobbers service smaller
retailers not covered by the large wholesalers in the industry.

1 Reliance Fresh Stores in Food Retailing, Dr. Debasis Pradhan & Dr. B.K. Mangaraj,
London Business School reference CS 08-029

C. BENEFITS OF INTERMEDIARIES
If selling directly from the manufacturer to the consumer was always the most efficient
methodology for doing business, the need for channels of distribution would be obviated.
Intermediaries, however, provide several benefits to both manufacturers and consumers:
improved efficiency, a better assortment of products, reutilizations of transactions, and easier
searching for goods as well as customers. The improved efficiency that results from adding
intermediaries in the channels of distribution can easily be grasped with the help of a few
examples. Take five manufacturers and 20 retailers, for instance. If each manufacturer sells
directly to each retailer, there are 100 contact linesone line from each manufacturer to each
retailer. The complexity of this distribution arrangement can be reduced by adding
wholesalers as intermediaries between manufacturers and retailers. If a single wholesaler
serves as the intermediary, the number of contacts is reduced from 100 to 25: five contact
lines between the manufacturers and the wholesaler, and 20 contact lines between the
wholesaler and the retailers. Reducing the number of necessary contacts brings more
efficiency into the distribution system by eliminating duplicate efforts in ordering,
processing, shipping, etc.<br />In terms of efficiency there is an effect of diminishing returns
as more intermediaries are added to the channels of distribution. If, in the example above,
there were three wholesalers instead of only one, the number of essential contacts increases to
75: 15 contacts between five manufacturers and three wholesalers, plus 60 contacts between
three wholesalers and 20 retailers. Of course this example assumes that each retailer would
order from each wholesaler and that each manufacturer would supply each wholesaler. In fact
geographic and other constraints typically eliminate some lines of contact, making the
channels of distribution more efficient.<br />Intermediaries provide a second benefit by
bridging the gap between the assortment of goods and services generated by producers and
those in demand from consumers. Manufacturers typically produce large quantities of a few

similar products, while consumers want small quantities of many different products. In order
to smooth the flow of goods and services, intermediaries perform such functions as sorting,
accumulation, allocation, and creating assortments. In sorting, intermediaries take a supply of
different items and sort them into similar groupings, as exemplified by graded agricultural
products. Accumulation means that intermediaries bring together items from a number of
different sources to create a larger supply for their customers. Intermediaries allocate
products by breaking down a homogeneous supply into smaller units for resale. Finally, they
build up an assortment of products to give their customers a wider selection. A third benefit
provided by intermediaries is that they help reduce the cost of distribution by making
transactions routine. Exchange relationships can be standardized in terms of lot size,
frequency of delivery and payment, and communications. Seller and buyer no longer have to
bargain over every transaction. As transactions become more routine, the costs associated
with those transactions are reduced.<br />The use of intermediaries also aids the search
processes of both buyers and sellers. Producers are searching to determine their customers'
needs, while customers are searching for certain products and services. A degree of
uncertainty in both search processes can be reduced by using channels of distribution. For
example, consumers are more likely to find what they are looking for when they shop at
wholesale or retail institutions organized by separate lines of trade, such as grocery,
hardware, and clothing stores. In addition, producers can make some of their commonly used
products more widely available by placing them in many different retail outlets, so that
consumers are more likely to find them at the right time.

RELIANCE FRESH
Reliance Fresh is the convenience store format which a part of Reliance Retail limited, a fully
subsidiary of Reliance Industries Limited. Reliance plans to invest Rs 25000 crores in the
next 4 years in their retail division.
RRL launched its first store in Hyderabad in November 2006; major focus was on selling
fresh fruits and vegetables at lower prices by eliminating the middle men and intermediaries.
Now it has more than 560 reliance fresh outlets across the country of which 117 are in Delhi
and plans to increase this number to 784 to have pan-india presence by 2011. These stores
sell fresh fruits and vegetables, staples, groceries, fresh juice bars dairy products and non
vegetarian products.
Stores, size varying from 2000-4000 sq ft, are located in the radius of 1-2 km of each other
providing a good coverage of the area. Reliance retail has decided to reduce its exposure to
fruit and vegetable business and position itself as a pure play super market and will focus on
categories like food, auto accessories, FMCG, with food accounting for most of its business.
High quality products are offered to the customers having better shelf life and more
consistent quality. Company has expanded its supply chain management and it is capable of
handling it rapidly growing stores network effectively and efficiently.
When stores were launched, there was some initial problems post launch due to
circumstances prevailing in West Bengal, Orissa and U.P.
In 2008-09, Reliance fresh limited had a turnover of Rs 1778.06 crores and reported a loss of
Rs 249.30 crores.
Reliance Fresh started the retail journey in November 2006 with the first Reliance Fresh
store. Today they operate over 93 cities across India with 700+ stores with a family of over
13 million happy customers. They are not only the largest grocery retailer in the country but

also the only retailer who has successfully fulfilled the entire spectrum of Indian consumer's
needs as they provide good quality Fresh produce, Dairy and bakery products over and above
the staples and FMCG products. Reliance Industries Limited (RIL) is the biggest private
company of India, a conglomerate that has its business spread across retail, gas exploration
and Production, refining and marketing Petrochemicals and telecommunications. The
company seeks to capture the entire Indian market with the launch of its Jio Infocomm 4G
services and become the largest data service provider. The Brand Trust Report 2013 also
reports RIL as the 7th most trusted brand in India. 2. Business Practices of Reliance Fresh
Reliance Fresh is a supermarket chain which forms part of the retail business of Reliance
Industries of India which is headed by the corporate giant Mukesh Ambani. With a vision to
generate inclusive growth and prosperity for farmers, vendor partners, small shopkeepers and
consumers, Reliance Retail Limited (RRL), a subsidiary of RIL, was set up to lead Reliance
Groups foray into organized retail. Since its inception in 2006, Reliance Retail Limited
(RRL) has grown into an organization that caters to millions of customers, thousands of
farmers and vendors. Based on its core growth strategy of backward integration, RRL has
made rapid progress towards building an entire value chain starting from the farmers to the
end consumers. Reliance plans to invest in excess of Rs 25000 crores in the next 4 years in
their retail division. The company already has in excess of 560 reliance fresh outlets across
the country. These stores sell fresh vegetables and fruits, staples, groceries, fresh juice bars
and dairy products. A typical Reliance Fresh store is approximately 3000-4000 square feet
and caters to a catchment area of 2-3 km. RRL now operates 22 different formats across
India. 453 Reliance Fresh stores in over 45 towns and cities are operational across India.
Including the Reliance Fresh stores, the company now operates over 900 retail stores across
India. 3. Growth and Development of Organization Post launch, in a dramatic shift in its
positioning and mainly due to the circumstances prevailing in UP, West Bengal and Odisha, it

was mentioned that, Reliance Retail is moving out of stocking vegetables and fruits. Reliance
Retail has decided to minimize its exposure in the fruit and vegetable business and position
Reliance Fresh as a pure play super market focusing on categories like food, FMCG, home,
consumer durables, IT and wellness, with food accounting for the bulk of the business. RRL
increased its footprint to more than 900 stores in 80 cities across 14 states in India. Reliance
fresh has over 20 stores all International Conference on Technology and Business
Management March 23-25, 2015 566 over Pune. The company may not stock fruit and
vegetables in some states. Though Reliance Fresh is not exiting the fruit and vegetable
business altogether, it has decided not to compete with local vendors partly due to political
reasons, and partly due to its inability to create a robust supply chain. This is quite different
from what the firm had originally planned. When the first Reliance Fresh store opened in
Hyderabad, not only did the company said the stores main focus would be fresh produce like
vegetables and fruits at a much lower price, but also spoke at length about its farm-to-fork
theory. The idea the company spoke about was to source from farmers and sell directly to the
consumer removing middlemen out of the way. Reliance Fresh, Reliance Mart, Reliance
Digital, Reliance Trendz, Reliance Footprint, Reliance Wellness, Reliance Jewels, Reliance
Timeout and Reliance Super are various formats that Reliance has rolled out. In addition,
Reliance Retail has entered into an alliance with Apple for setting up a chain of Apple
Specialty Stores branded as iStore. RRL has a direct engagement with over 5 million
customers following a loyalty programme 'Reliance One' which was offered from the first
day of its operation. Reliance Fresh at a Glance Reliance Fresh is the convenience store
format which forms part of the retail business of Reliance Industries of India. Taking another
leap ahead, Reliance Fresh Direct makes the grocery shopping even simpler by bringing it to
customers door step. A comfortable shopping can be done from home; office or on the move
and selection can be made from a wide range of 6000+ products. Reliance Fresh offers

convenience of shopping for everything that the customer needs for his/her home - be it Fresh
Vegetables and fruits, rice, dals, oil, packaged food, bakery and dairy item, frozen and pet
food, household cleaning items, specialized beauty and personal care products from a single
virtual store. The customer can get started by registering with Reliance Fresh, select the
products he/she needs, choose the delivery time convenient to him/her and pay the way
he/she wants to-through cash/credit card/net banking and food coupons. Reliance Fresh will
handpick the customers order the way he/she would have done it himself/herself and deliver
it to his/her home just when he/she wants it. Promise Reliance Fresh gives all that the
customers want, wide range of brands and products to choose from exclusive ranges like
organic, regional delicacies and many more. It offers on - time delivery at customers
convenience and dedicated workforce network and infrastructure to ensure it. It provides
convenient options of delivery slots, customer friendly interface, user friendly and easy to
navigate website, well-trained customer service agents to assist customers during order
booking and enquiries. It also ensures fresh, hygiene and high quality products stored and
transported in high standards of hygiene and temperature control.

DISTRIBUTION STRATEGY

Structure of Channel

National

National

Sourcing

Sourcing

The vegetables are collected in villages from farmers directly.

They are submitted to Collection Centres (CC) like Baktawar Pur, Khewrada, Hapur,
Patodi, Panipat,etc.
Payment and quality checks are done in collection centres.
From CC they are transferred to Distribution Centres (DC) via Reliance own logistical
units. Kundli is the DC for Delhi/NCR.
If the capacity is not fulfilled by the collection centre then National sourcing is used

 This leads us to the next and final step in the process, i.e. the local Reliance Fresh
stores.
The order for new vegetables has to be placed one day before. Till evening the stock is in
distribution centres. At night it is transhipped to the local store. So there is a delay of one day
from farm to the stores which are 113 in New Delhi.
The distribution centre and the local stores are rent based.
Daily rates are monitored. The farmers are paid less than the prevailing rates in mandi. If the
requirement is not met through farmers then the additional goods are brought directly from
mandi at a 3-4% cheaper rate from the usual mandi rate.

The total volume entering in NCR is at average around 100 tons, but due to rising prices of
vegetables, the consumption has fallen. This has made the volume fall to 70-80 tons. Almost
65% of the volume bought is from Collection Centres and warehouses, the rest 35 % is
procured from mandis.

Movement of Goods (Logistics)

Reliance itself pays for all logistics from the collection centre to the retail stores. Reliance
earlier has a logistics company which used to provide man power as well as transportation of
goods. But now the logistics company is no longer in place. Some of the company owned
trucks of logistics company are used for transportation along with other trucks on rent based
system from a third party vendor.

Members and their Roles

Farmers: The farmers harvest the crop and bring it to the collection centre. They save on the
transportation cost they would incur in taking the vegetables to the mandi.
Collection Centre: One Reliance authorized person is in charge of collection centre. He
inspects the quality and takes in the vegetables. He is also responsible for payment of the
farmers. He ensures the loading of all vegetables in the trucks which are sent to the DC.
National Sourcing: In order to provide a constant supply of all perishable vegetables
warehouses have been bought where goods are kept in cold storage. Whenever there is a
shortage in supply from any region then, these warehouses takeover and start supplying
goods. Eg. Tomatoes are stored in Nasik, Ratlam, Jaipur; Potatoes in Agra and Shahbad. This
gives Reliance a competitive edge. It also ensures that they buy at the cheapest rate and sell it
out when the rates are considerable higher.
Mandi: A team of two people is situated at the mandi. These teams are responsible for
constantly monitoring the rates and communicating the same to the head office. If there is an
urgent need which cannot be fulfilled by the collection centre then reliance purchases the
supply directly from mandi but at a rate which is 3%-4% less than the actual mandi rate.

Distribution Centre: The distribution centre receives the vegetables and does a thorough
quality check. They prepare the vegetables for the retail stores and also ship the vegetables
depending on the requirement for each store.
Retail Stores: They are just responsible for receiving and checking the quantity of vegetables
arriving each night. Then they put up all good vegetables on display for customers.

Quantum of Volumes
The total volumes procured per day is currently about 70-80 tonnes. This is the figure for last
two months. Due to rise in prices the volume has dropped as it was earlier about 100 tonnes
per day.

Management Policies
If the store owners are able to reach their target then there is a monetary award and
recognition. It is worked on monthly percentage increase in the sales. The customers are
offered services like home delivery on orders exceeding Rs 500

Conflicts
The stores in Uttar Pradesh had closed because of protests from the local vendors. This
resulted in a Reliance de-hiring all its stores. This resulted in a loss of Rs 200 crore in tax
payments to the UP government. The latest internal news is that Mayawati has sent her top
IAS officers to Mumbai to woo Reliance Fresh back in Uttar Pradesh2
2 http://economictimes.indiatimes.com/News/News-By-Company/R-Companies-/RelianceRetail/Reliance-retail-juggernaut-rolls-out-aims-to-link-farm-to-fork/articleshow/312673.cms

SUPPLY CHAIN AND DISTRIBUTION STRATEGIES AT RELIANCE FRESH

A
PROCUREMENT
Grocery industry is unique in terms of suppliers, in this industry suppliers are fragmented and
produce usually in smaller quantities.
Reliance Fresh makes most of its procurement for vegetables, fruits, dairy products, bakery
items directly from the suppliers based on the pre-negotiated contracts. By procuring directly
they weed out the middleman commissions, costs of loading and unloading, transportation
costs and wastage due to exchange of hands. They provide the farmers with high quality
seeds and technical knowhow and later buy their produce and prices higher than the
wholesale market prices. They make the farmers aware of the market prices of different crops
to enable them to choose the crops that provide them best yield on their investment and hard
work. The prices for the produce are determined based on the quality of the produce and the
prevailing wholesale market prices.
They source the perishable produce from the areas which are near to their distribution centers
which enables them to maintain lower price and maintain short cycle times. Non-perishable
produce as FMCG products which have longer shelf life are procured centrally by their
merchandising department. This allows them to procure in bulk and bargain a better price
from the supplier.
In certain areas where demand exceeds supply, their model includes the following

Procure the produce from the suppliers by grading their produce and offering them a

better than market price

Procure good quality produce directly from the wholesale market in bulk

Their distribution centers not only provides to their retail stores but also to other business
concerns. This ensures whatever has been bought from the supplier is sold ensuring the
assured demand to the supplier and reliance fresh has the benefit of locked in suppliers.
The perishable produce like fruits and vegetables is not kept for more than 2 days, whatever
is left over is sold back in the wholesale market and prices lower than the market price. This
strategy allows them to consistently maintain quality of produce in their stores and also get
rid of the unsold produce before it becomes waste. The non-perishable products like FMCG
goods are kept till their expiry and after that usually returned to producers.
The farmers are made payment on the spot when their produce is bought at their farms. The
perishable goods like fruits and vegetables once bought are moved through sophisticated cold
chain of cold storages and special trucks.
Large distribution centers are established to economize on the cold storage infrastructure
costs and minimize inventory levels.
D. Supplier Contracts
Reliance fresh procures most of its perishable produce through contract farming with farmers
from nearby areas of their collection/distribution centers. The contracts involve a pre-agreed
price, payment term, measures of quality, quantity and duration of the contract
Dairy products are procured from the dairy cooperatives or locally operating vendors such as
Amul in Gujarat, Nandini and Heritage in Karnataka etc. The cooperatives act as partners and
are provided with the daily demand forecasts to supply directly to their distribution centers.
Bakery items are sourced from multiple suppliers located in the vicinity of the collection or
distribution centers. These products are usually contracted such that they are returned to
suppliers after the products expiry date.

The merchandising department procures the non-perishable goods from the suppliers using
variety of contracts. This includes the contracts to return goods at lower price on expiry, bulk
purchase at lesser prices, minimum purchase contracts etc.

E. Logistics Perishable
The produce from the farmers is collected at the collection centers. Which are smaller and do
not have cold storage facilities. A preliminary quality check is done here.
Then the produce is moved to the distribution centers where they are sorted, graded and
packaged. Here, the data (product type, quantity, grade, cost price etc.) is entered into the
SAP system for easier tracking of the inventory.
Every day the retail store manager raises a purchase order for the next day based on the
estimated demand, which is received by the cluster manager at the distribution center. Based
on the availability of the products the ordered items are delivered to the area manager daily in
full or proportionately when overall demand exceeds availability.
F. Logistics Non-Perishable
Items are collected from the manufacturer or national level distributor and delivered directly
to the various distribution centers. Each store has the minimum order quantity level for each
type of product which is tracked by SAP system. Based on the sales data, as soon as the
product level goes below its minimum order quantity the SAP system automatically places
the order.
G. Inventory
Most of the inventory is kept at the distribution center level to minimize the overall inventory
across the supply chain. Perishable items are stored usually in cold storage, and are supplied
based on first in first out basis. Non-perishable items are stocked and reordered based on the
minimum order quantity levels.

However, retail stores are usually provided with small storage facility based on the forecasted
demand at that store. Store inventory is usually to store the nonperishable items. Perishable
are usually kept for more than 2 days, and after that period they are thrown provided they
perish.
H. Distribution Center
Reliance Fresh has strategically placed their distribution centers taking in to account both
collection centers and retail stores. Replenishment of the stock to the stores has a lead time of
2 days, that means each store has to provide a forecast 2 days in advance.
Perishable goods, once arrived at distribution center, are graded into different lots based on
the quality of the produce and then data is entered into SAP system. Based on the demand
they are shipped to reliance retail stores and other party stores. Left over is moved to cold
storage or sold back in the wholesale market.
Certain produce like pulses, porridge, rice, sugar are procured in bulk, graded and packaged
and then sold as private labels under the name Reliance Select. The powerful brand of
Reliance provides them good margins on their private labels than other brands.3
I. Retailers
A typical reliance store is ranges from 2000 to 4000 sq.ft. And layout is done to maximize
shelf space taking into account the ease of movement within the store. Product arrangement is
done in a way that similar items are stocked together on the shelves. Due to better margins
stores provide better and larger shelf space to private labels and restocking is done based on
the forecasted demand.
They provide customers with a variety of fresh fruits, vegetables, dairy products and bakery
items. Pulses and staples are available both under reliance and other company labels. The
stores are well lit and kept clean to provide a world call ambience to the customers.
3 Reliance Fresh Stores in Food Retailing, Dr. Debasis Pradhan & Dr. B.K. Mangaraj,
London Business School reference CS 08-029

Stores do not extensively use IT systems and almost all of the restocking requirements are
inspected and forecasted manually. However, they have implemented SAP systems to enter
the sales data as and when the sales happen.
Pricing
Reliance fresh follow the everyday low price policy for most of the products. Usually the
private labels are priced a little lesser than the popular brands for the same product.
Problems encountered at Reliance Fresh
R-fresh has a problem of holding inventory as most of the FMCG goods mainly fruits and
vegetables that R-Fresh holds doesnt get consumed the same day, which leads to wastage
and later the branch has to dump the goods leading to extra cost to the branch with regards to
inventory. It was noted that there was an average of 800 customers who used to walk in daily
to the mart, and more than 1000 during weekends.
Stock does get consumed during the weekends but there was a problem of holding inventory
during weekdays. Bringing in less stock during weekday could not be done as R-fresh did not
want a lack of inventory in case of a larger sale during the weekdays.
Most often, the stock held in by R-Fresh (FMCG) needed to be dumped and the cost of
dumping came out to be at par with the profits earned by R-fresh but this continued. R-fresh
increased the preservation cost so that it could hold the inventory for a longer time but this
was not a feasible solution due to quality constraints and still the problem with regards to
inventory holding continues, R-fresh has now reduced its inventory to some extent so that
there is inventory available for all its customers based only on their demand and it avoids
extra stock.
Problem in Detail
Inventory is nothing more than a cost until it is sold. The larger inventory, the less money we
have available for marketing, for new equipment, or simply drawing interest in a bank

account. Major manufacturers and retailers work very hard to keep inventory levels low and
constantly moving. Retail outlets like reliance fresh lose money through poor inventory
management.
Industry sources say Reliance Retail's has managed its front expansion to 600 stores across
various retail formats extremely fast, its supply chain leaves a lot to be desired, with
customers not being able to find adequate supplies at goods on Reliance's food and grocery
outlets. Following are some of the complaints given by some customers of reliance fresh.
1. Reliance Fresh is NO MORE FRESH and is NO MORE COOL either.
2. Stale and expired items are the problem with reliance stores. Their inventory management
is really poor and you need to check every item before adding it to your cart.
Inventory Level
J. Economic Order Quantity (EOQ)
Another solution could be the EOQ through which the optimal quantity to be ordered can be
determined.EOQ is a mathematical formula designed to minimize the combination of annual
holding costs and ordering costs. It is the level of inventory that minimizes the total inventory
holding costs and ordering costs. The formula is

Where,
C = fixed cost of placing order
D = annual demand per year
H = holding costs per year
EOQ can be a very effective tool for helping to optimize inventory. However, in order for it
to be effective, it requires good and thoughtful data. Reliance could use this formula to
estimate its optimal inventory.

Implementation Plan
Plan sales: In order to effectively manage our inventory, we need to know what we expect to
sell. For larger retailers that are stocking up a large inventory, sophisticated sales forecasting
software are also being used. For many small retailers, however, developing a simple
spreadsheet from our POS sales history, by month by key category, is most cost effective.
Start with last years sales histories, and make adjustments for unusual events, such as
weather, out of stocks, one-time promotions, etc. Then factor in the appropriate sales increase
or decrease percentage, based on a reading of the sales potential for the category for the
upcoming season. Finally, for larger categories, it may make sense to break the sales plan
down by sub-categories, styles or vendors.
Plan inventories: It makes little sense to bring in more inventory at any given time than we
need to set our displays, support our planned sales until the next delivery, and provide a
safety stock in the event of an unexpected sales spike or a late vendor delivery. Buying
inventory too far in advance is one of the surest ways to find our self over-stocked down the
road. For many small retailers, the best way to plan inventories is to plan to have enough on
hand at month end to support the next two or three months sales.
Plan inventory receipts: If youve planned sales by month, and ending inventories by
month, its easy to calculate how much inventory to bring in each month. We need to bring in
enough to cover that months sales plan and ending inventory, less the prior months ending
inventory. In this way, a buyer can know in March, when preparing for the fall season, for
example, how much inventory to plan on bringing in each month of the season.

Plan markdowns: Planning markdowns goes hand in hand with planning inventories. If we
plan the date of the first seasonal markdown before the season even begins, we can plan the
inventory we want to have on hand at that point in time, and thus our markdown percentage,
as well as our markdown sales before our second markdown, as well as all subsequent
markdowns.
Plan dynamically: Once weve completed our preseason planning, dont put it in a drawer
never to be seen again. Use that plan as a dynamic tool to track the progress of the season. As
each week goes by, and sales trends begin to develop, adjust future sales plans accordingly,
and adjust inventory plans for those updated sales plans. If sales are exceeding plan, we want
to be sure we have the inventory to keep the momentum going. Conversely, if sales are
coming up short of plan, the sooner we adjust our inventory plans, and thus our scheduled
receipts, the less likely we are to end up with excess inventory that needs to be marked down
at seasons end.
The root cause of many inventory problems faced by small retailers is the lack of adequate
preseason sales and inventory planning. It may seem that theres never enough time for such
planning, as if its a luxury that just cant be afforded, but in reality, its a critical necessity, a
vital investment in the future health of any small retailer.
The traditional model of vegetable retailing in India involved vegetables being sold in small
stores on the roadside, and there were no formal rules regarding weighing, bargaining and
quality issues, let alone cold storage and sophisticated supply chains. Produce travelled
slowly and inefficiently through a series of intermediaries before reaching the hands of
customers, suffering mark-ups, wastages and quality losses along the way. Reliance Fresh
marketing model operates on affordability and a hygienic ambience along with a good
shopping experience, said Mukesh Ambani, the Chairman of RIL. Reliance Fresh intended
to bring high quality fresh food to the customers at an affordable price. Reliance Fresh also

wanted to establish a benchmark of hygiene and quality in their sales. It thus sought to
provide the consumer affordable and quality produce in a congenial and pleasing
environment and enforced stringent quality and hygiene guidelines which would help it bring
high value to the consumer.

The Rationale behind the Supply Chain Strategy adopted by Reliance Fresh as given by
Reliance officials:
We will always buy from the farmer, almost never from the mandi (wholesalers), said a
group official. For example, the leafy vegetables, aubergines, tomatoes and green chillies in
the one of the outlets in Mumbai were sourced directly from farmers in nearby districts. This
in effect got translated into lower prices by at least 15% to 20%. We'll be very affordable
and competitive in the market, but we arent playing a price game here. The full effort is to
deliver value to the customer, said Chief Executive, Customer Operations, KS Venugopal.
Produce from the farmers came to Reliance's city distribution centre, which connected two
very different sides of India, the poverty-ridden countryside, steeped in tradition, and the
wealthy city centers. Already, a few hundred farmers have been hooked on to the Reliance
Retail supply chain. In the next five years, that number will grow to millions. Even contract
farming by assisting farmers in procuring high-quality seeds, fertilizers and other essential
raw materials is on the cards. By going to the farmer directly, Reliance Retail hoped to
disinter mediate the supply chain and eliminate waste. This meant fresher products at lower
cost, reasoned the same group official.
PROCUREMENT PROCESS
Reliance fresh obtains its goods locally and nationally so as to derive the best possible
mileage in terms of quality, price and ease of logistics. Fruits, vegetables, grains and other
agricultural items come from Palakkad, Kerala. All other FMCG comes from central hub of

Reliance, Thrissur. Fruits etc are thrown away 2 days after they are brought, while other
FMCG are kept till the expiry date.
For vegetables Reliance Fresh enters into contract farming with farmers where it provides the
farmers with high quality seeds technical knowhow and guarantees assured market for their
produce at price higher than prevalent in the mandi.
There are 2 warehouses. One of them in located in Calicut city and the other in
Kozhinjampara These warehouses supply goods to 6 stores. As true with reliance it has tried
to backward integration so as to secure its supply and bring in efficiency in the supply chain
for this it has. Wholesale centres not only supply to its store but also to other business
concerns. This was done so as the farmers get assured market and Reliance is able to lock in
its suppliers by offering them assured market. Other features:

Higher prices and on-spot payment for the produce to farmers

A sophisticated cold chain facility and several trucks which are used to preserve and
supply the vegetables as demand

A huge processing complex in Kochi has been built which can supply up to 120 stores

Reliance is already the largest single Big Retail buyer of fresh vegetables and fruits in Kerala.
Soon, if not already, there could be other such big players too, with their leaner, meaner
tentacles digging deep into the rural landscape of a food-, vegetable- and fruit-deficit State.

THE BASIC PROCUREMENT PROCESS

STORES

*grading and standardization takes place here

Reliance fresh procures different products from different vendors depending upon two main
factors: Quality and price. The products are not procured by individual stores, but are
procured at district or state level depending on the type of product. Perishable items such as
vegetables, fruits, dairy products, bakery items etc are procured at a district level. This
ensures that each district has the authority to procure the products quickly at the cheapest
rates possible. Other products which are non-perishable with long shelf life are procured by
the Reliance Fresh merchandising department which work at the state level. The state level
placement of the merchandising departments although are not as quick as the district level
procurers, it ensures that bulk purchases for the entire state give the merchandising
department price negotiation powers. The merchandising department placed at the state level
is helpful in providing lower prices for the products to the consumers.
PROCUREMENT STRATEGY

Procuring fruits and vegetables (agricultural perishables)

Reliance is the largest single big retail buyer of fresh vegetables and fruits in Kerala. Reliance
fresh has an aim to procure vegetables and other farm products directly from farmers. By
cutting out middlemen, their [10 per cent] commission, loading, unloading and transportation
charges are reduced. Thus they follow a philosophy to pay farmers more and sell fresh
vegetables at ever lower prices to urban customers. They also implement contract farming to
ensure stable supplies of fruits, vegetables and dairy products.

Contract
Farmers

Collection
Centre

Distributi
on
Centre/
Warehous
e

Store

Sales
(Wastage
5-7%)

Supply Chain for Fruits and Vegetables

The produce from farmers is collected at the Collection Centres (CC). The CC for the
Kunnamangalam Store is at a place called Kozhinjapara. A preliminary Quality Check is
done here.
From the CC, the goods are sent to Distribution Centres (DC), where they are sorted
and
graded. Here, all data is entered into the SAP system for easy tracking.
Every day, the store manager of each store raises a purchase order for the next days
requirements based on estimated demand. The total order for all the stores in an area is
collected by the Area/Cluster Manager.
Based on the availability of goods, the ordered items are delivered to each store
by the Area Manager daily.

Procuring Non Fruits and Vegetables

Manufactur
ers

Distribution
Centre/
Warehouse

Store

Sales
(Wastage
2-3%)

Supply Chain for Non Fruits and Vegetables

Items directly collected from Manufacturer or National level Distributor and delivered
to
the local DC.
Each store has a Minimum Base Quantity (reorder level) for all items

Whenever the stock goes lesser than the MBQ, the SAP system automatically
reorders

A Closer Look at Contract Farming

It involves a pre-agreed price between the company and the farmer, along with measures of
quality, quantity, acreage to be farmed, and/or duration of the contract. It provides secure
supplies. Reliance, through these contracts is giving farmers information about how can
farmers improve their productivity, making them aware of market rates of different crops so
that farmers can choose crops they want to sow to become profitably and also providing
technical help like information about quality of seeds and fertilizers. Reliance Fresh currently
procures different kinds of vegetables like carrots, onions, cabbage, cauliflower etc.
Advantages and Disadvantages of Contract Farming
ADVANTAGES
DISADVANTAGES
Reduce load on central and state level Fears have been expressed ,that the rejection
procurement system

rate of agricultural produce by retail chains was

high. The farmers then have to bear the extra
cost

Bring about a market focus in terms of crop Unsuitable technology and crop incompatibility
selection by Indian farmers
Generate a steady source of income at the Manipulation

of

quotas

individual farmer level

specifications;
Promote processing & value addition, Land availability constraints,
thereby

generating

gainful

employment.

and

Social

and

rural cultural constraints, Farmer discontent, Extracontractual marketing & Input diversion poses
a problem for corporates

Access to reliable markets.

Advantages and Disadvantages of Farm to Fork Model

ADVANTAGES
DISADVANTAGES
Leads to removal of non-value adding Loss of employment (intermediaries
intermediaries from supply chain
Cost reduction

quality

Need for large investments

Reduction in lead time

Reduction in intermediaries leads to lesser
wastage
Items stocked
They stock goods of both private labels and other labels. The margins on private labels ,
known as Reliance Select, is obviously higher to the tune of approximately 30%. The
products of other brands have a sales margin in the range of 20-22%. Therefore it is more
profitable for Reliance Fresh to promote its own private labels. With a strong Reliance
brand name, the stores have very effectively taken advantage of it. They promote the private
labels well in the stores by giving them sufficient shelf space. The restocking of the shelves
takes place as and when the requirements call for it. The consumer behavior is studied, the
macro-economic factors analyzed and the demand is thus forecasted. Depending on the
forecasted demand, the stocks are placed in the shelves. For most items, the shelves are
replenished as and when they seem to get exhausted with their stocks.
Usage of IT for procurement
The usage of IT systems has not penetrated deep into Reliance fresh, especially at the
individual store levels. Almost all of the procurement requirements are inspected and
calculated manually. However they have Implemented SAP solution on their systems.

Reliance Fresh: Wastage

As a supermarket serving customers with variety of item, Reliance fresh also have wastages
on
varying levels amongst different items. The percentage wastage for some of these are as
follows:
Non fruits & vegetables have a shelf life dependent on products expiry date: 0.5- 1%
Fruits and vegetables having a shelf life of 1-3 days: 5 7%
Shrinkage due to dryness in fruits and vegetables having a shelf life of 1-2 days: 3%
Therefore the major sources of wastages are fruits and vegetables. Being extremely
perishable items, they need to be kept in refrigerated environment. The inventory levels are
kept at minimum level so that the wastages are reduced.

Supply Relations
Perishable

Items: Perishable

Items: Perishable

Fruits & Vegetables

Dairy Products

Contract Farming

Partner

relationship
Arms length supplier Milk
is

Items: Non-Perishable:

Bakery Items

supplier Multiple Suppliers

FMCG Goods
HUL

&

P&G,

Durable arms length

directly Arms Length supplier

relationship

procured

from relationship

MILMA
Dairy products from
Amul & Milma

The store floor space is --------------sq. ft. It is spread on only 1 floor (ground floor) of the
complex. The inside view of the store plan is depicted in the block diagram. The layout is
based on the similar category of products stacked together.
Analysis
There are two mail gates to the store. One is meant for entry and the other for exit. In
multiproduct retail stores, one has to surrender all the articles while getting into the store
through the entrance and get the purchased articles verified at the exit. But this practice is not
religiously followed in this store. Consequently there is a high probability of shop lifting.
1. A managers counter and a refrigerator at the entry door serve no much purpose and
reduce the aesthetic value of the store.
2. There are 3 cash counters just at the entrance. There is little space for the customers to
stand in the queue due to the presence of shelves very near to the cash counter.
3. There is a large open fridge on the right bay of the store. This is used for storing
perishable items like butter, cheese, milk, fruits etc. In the front of the fridge, there are
large containers filled with fruits and vegetables. There is a lot of rotten fruits and
vegetable lying in the containers. This leaves a negative impression on the customer,
as the term FRESH in the store name appears as a misnomer.
4. Going further from the fruits/vegetable bay, there is a huge space devoted to
groceries. This is well arranged and serves the customer needs well. Also a new rack

has been added which displays packaged groceries by RELIANCE itself. This is a
good move to promote self-owned brands.
5. The end of the left bay has a huge rack containing edible oil packets. This is done to
safeguard other products from oil spillage.
6. As we move from the grocery space to the next bay on the right, we can find FMCGs
like chips, noodles, chocolates, namkeen, etc. These are highly sold items and are
strategically placed at the center of the store. The shelf space devoted to potato chips
and stuff like that seems too much though.
7. The next bay on the right is devoted to FMCG daily care products like shaving
accessories, talc, deodorant, soap, gels, shampoo etc. All the brands are kept together
due to limitation of space. This area is one of the most crowded due to the nature of
the products. The back side bay consists of household products like brooms, buckets,
doormats etc.
8. The last bay is highly unorganized and carries products varying from utensils to cloth
to foot ware to ice-cream. This bay is one of the least visited in the store. The space
devoted to products here is too much.
9. Near one of the billing counters, there is a rack containing hosiery items. This gives
the store a very poor look. The garments are not well arranged and are often hanging
around the shelf.
10. There is a magazine stand and chocolate shelf near one of the billing counters. This is
good as people usually end up buying such stuff while going out.
11. A lot of loose containers containing material for sale are found lying here and there in
the store. This is hugely due to limited floor space.
12. The outer parking space is very inconvenient due to unevenness of the land.
Recommendations

1. We suggest a proper entry exit mechanism with guard always on duty.

2. The managers counter should be removed from near the entry gate and placed at the
end of the store.
3. Some space has to be created for billing queue formation.
4. It has to be ensured that the fruits and vegetable should be of better quality and rotten
material is immediately removed from the shelf.
5. Beverages, cheese, butter, milk etc. should be arranged in a visually appealing
manner.
6. Instead of providing too much shelf space to chips and namkeen, a mechanism can be
deviced to hand these packets.
7. The toiletries should be segregated based on brands and arranged accordingly.
8. The last bay needs complete restructuring. A shoe displaying rack should be installed.
9. Ice-cream section should be brought near the counter, inducing more sale while exit.
10. The hosiery rack from near the exit door should be removed and placed in the last
bay.
11. Frequent cleaning of the floor space is suggested to avoid dirty look of the store.
12. The parking area should be leveled to cause convenience.
13. A baggage counter with token system should be installed. The entry gate guard can
take care of transactions.

K.

OPEN

MANAGER

REFRIGERAT
VEGETABLE

S COUNTER

PACKAGED GROCERIES
LOOSE
GROCERIES
GROCERIES

V
E

/ FRUIT

WT

ENTERA

CONTAINER

PACKAGED
GROCERIES
SOAP/COSMETICS
LOCAL
UTENILS/ FOOD

RELIANCE
PRODUCTS
SOAP/COSMETICS
BRANDED
PACKAGED
FOOD

GBILLING
I

MISC

SECTION
EXIT

VEGETAB

E
D

WT

C
H

C
H

M
A
G
A

H
OM

E
L

C
L

F
O

ICECREAMS

EMPLOYEE SCHEDULING
Reliance Fresh in Kunnamangalam follows a very rigid employee scheduling system. The
reason is that they cannot keep employees on variable rates and wages.
Time
7:30-16:00

No. of Employees in the store

1 Manager + 7 sales people

H
O

13:00-21:30
13:00-16:00

1 ASM + 7 Sales people

Inventory unloading time

PAYMENT OPTIONS
90% transactions are on cash. Very few transactions take place on card. The workers have
fixed monthly salary based payment system.

POINT OF SALE SYSTEM

Point of sale (POS) or checkout is the location where a transaction occurs. A "checkout"
refers to a POS terminal or more generally to the hardware and software used for checkouts,
the equivalent of an electronic cash register. A POS terminal manages the selling process by a
salesperson accessible interface. The same system allows the creation and printing of
the receipt.
There is 1 billing counter in the store. The second one is employed during prime time i.e.
5:30 to 7. The third one is also opened up in case the queue gets bigger. They use SAP for
their billing activities. The billing system gives details of product sold to the central server
and the central server forecasts the products to be supplied. This helps in keeping track of
available inventory in the store. Such compiled data helps in generating status reports, logs in
the rate of sale of the products which helps in analyzing information for other purposes. The
process involved in billing is as follows:

Customer puts the basket onto the counter

The billing associate uses the bar-code reader to upload the information of the lot no.,
batch no. and price of the item into the stores SAP. This information is also used to
prepare the customers invoice. Simultaneously, he keeps putting the items into a
plastic carry bag in order to reduce waiting time

For payment of bill the customer is given 2 options- cash or credit/debit card payment

The customer is given a copy of the bill invoice and the packed items

The customer gets the bill invoice and items verified by the guard standing at the exit
who stamps the bill upon verification

BOTTLENECK AT BILLING COUNTER

Billing Counter Queue: The customer wait time is around 2-3 minutes during normal times.
However at peak time, it increases to 5-6 minutes.

RECOMMENDATIONS

Customers can be provided with portable bar readers and hence the time taken to serve
a customer will get reduced

PROS:
It is a time saving process. Customers need not wait in long queues getting their items
checked
It helps in maintaining accurate inventory control
CONS:
The customers might not be aware of how to use the scanner and thus can cause a lot
of problems and eventually add to the delay.

Operate two billing counters at all times and employ the third one during peak time

PROS:
Easiest way to reduce waiting time

CONS:
Additional staff member is required to be present at the additional billing counter

Sales promotion tools should be advertised at the billing counters- While the customer is
waiting for the bill to be prepared, he can be provided with sales promotion tools such as
coupons which can be redeemed by him during the next visit. In case of any doubts, he
can get them cleared at that point of time itself by the billing associate.

L. INVENTORY MANAGEMENT

Storage Area

A small storage area is available per store depending upon the forecast provided by
the manager of the store. The forecast needs to be accurate as:
o Large inventory can add to the storage cost
o Way too much of inventory can also add to wastage if perishable items are
high in quantity
o Less inventory may add to disadvantage as sales figures would go down

The forecast has to be given two days prior by the store manager to the supervisor,
and then supplies of goods take place.

Thus, time lag between demand and supply of goods = 2 days

Distribution Area

Fruit and vegetables Perishable Items

o Distributor

Pallakad

o Entry at store :

9:00AM

o Unloading time :

15-20 minutes

o Inventory prediction from sales and decided by Head Office

Other products- Non Perishable

o Distributor

Trissur

o Entry at store :

between 10 AM to 4PM,

o Unloading time

30 Minutes

Cycle of replenishment

The cycle of replenishment of stores with the products from the warehouses happens
on a daily basis.

Fruits etc are thrown away 2 days after they are brought (provided they perish), while
other FMCG are kept till the expiry date has come.

This is called the Fresh model and leads to faster turnover of the inventory since the
expected customer visit to stores for replenishment of items is twice a week and twice
in a month in case of students of IIM K.

Thus, the store should maintain inventory requirement of one day.

The small storage area is replenished in the morning.

The shelves are stocked during working hours as and when required.

The entire staff at Reliance Fresh works as a cohesive team working for customer
satisfaction.

The perishable items such as vegetables, fruits, dairy products and bakery items are
stocked fresh daily into the shelves.

Other FMCG goods with longer shelf life are replenished as and when required. The
rate of replenishment varies for each product.

Expired goods and items

Many a times, the perishable and non-perishable items expire without being sold.
Reliance Fresh always strives to maintain good quality fresh products for
customer satisfaction, hence any expired stock is dumped.

On an average, 8% of the food items are dumped by the Reliance Fresh store at
Kunnamangalam, Calicut.

Certain items which reach their expiry date are taken back by the suppliers. These
include items such as bakery items, and certain dairy products.

In other cases, the stock is dumped.

Hence, Reliance Fresh ensures that the products in the stores are of good quality
and hence Freshness stands as their USP

CLASSIFICATION OF CUSTOMERS

The source of revenue for reliance fresh is customers and a study based on classification of
various customers is necessary to have an understanding about the operations associated with
it. So Customers may be classified on the basis of

Time of arrival
We have observed a larger number of customers coming between 5 to 7:30 pm. Some
customers are more interested in coming during holidays. These customers are working
people and are earning members of their family, which is the reason why they do not come in
office hours. This category does maximum purchase at the shop.

Loyal Customers
Even though the shop is new, some customers are loyal to the shop since the beginning. But
loyalty is challenged by the fact that the largest chunk of customers are students of IIM-K. So
every year around 300 of customers are lost (after they pass out of the institute) and a
prospective 300 customers (new students )are in available to be made loyal customers. In
other words Reliance Fresh kunnamangalam cannot sit back, considering that they have a set
of loyal customers. So regular large scale marketing like distribution of pamphlets and other
works needs to be done. To tap more loyal customers Reliance fresh have offered loyaly
cards, when ever new purchases is done using loyalty cards some points are redeemed to each
card depending upon the purchase he did.Upon reaching a particular level the customer is
alloweed to make a free purchase worth 250 Rs.

Basket segmentation
Customers can also be segregated on the basis of the amount of products they purchase- Wide
market customers (depend on the store or all purchases), and narrow market customers (they
purchase only a few items from the shop). Main agenda of the firm is to retain all wide
market customers and convert all narrow basket customers to wide market customers.

Age group segmentation

Customers who are older than 30 are called old age customers, while others are called newage customers. New age customers want a variety of brands and their demand cannot be
predicted easily, while old- age customers are comfortable with their brands. Predicting their
demand is quite easy. New age customers however are comfortable in testing new products
and often they are the ones who determine the amount of shelf space given to new products..
With a large chain of outlets, reliance fresh can even help the manufacturers predict the
viability of products.

COST BENEFIT ANALYSIS

The product mix at reliance fresh consists mainly of fruits and vegetables, FMCG(Ready-toeats, toiletries) , staples and other non-FMCG goods.
The reliance-fresh outlets are being used by reliance to promote their in-house private label
Reliance Select. This is a growing trend across all major retail chains like More (Aditya
Birla Group), Big Bazaar(PRIL) etc.
a) Reliance Fresh provides lesser space to well known brands which are industry leaders
in the staples category which includes rice, tea, coffee, sugar and other agro products.
b) They provide huge shelf-space to Reliance-Select
c) They provide these staples at a rate slightly lower than the popular brands and give
tough competition.
d) In this way, they are getting higher margins on their products.
e) The customers who come to do bulk shopping are enticed to buy these products from
Reliance Fresh.
The end-result is the growth of in-house brand, higher margin and an entry into the market
share of ever-expanding and lucrative food retail sector.

The FMCG products such as provide better to super-stores than to small retailers. This makes
it profitable to store in a much larger quantity. Thus offers like Buy One Get one, Discounts
etc are possible in this category. Maximum shelf space is dedicated to ready-to-eat category
to cater to the community at IIMK. The maximum revenue comes from this category.
The fruits and vegetables are procured directly from farmers eliminating the middle men to
the maximum extent possible and increase the margin. However, the freshness is heavily
compromised during the procurement and most of the fruits available at store are rotten.
Ultimately, the rotten fruits are disposed without any benefit to the store. The cost can be
progressively reduced as the fruits become stale. Instead of keeping 10Kg of rotten apples for
100Rs per Kg, it can be sold for 10 to 5 Rs less everyday to keep the inventory moving.
The other non-FMCG items include hosiery, footwear, clothes etc which are totally unrelated
to the food retail industry which is primary focus of Reliance Fresh. The sales of this section
are unimaginably low while it continues to occupy unjustifiably significant amount of shelf
space. This space can be utilised for more FMCG products or spreading out the existing
layout to occupy this space. This would make it comfortable to walk around the store and also
help earn better profits per unit shelf space available.
SWOT ANALYSIS

Strength
Only supermarket within 5 kilometers of Kunnamangalam. It has a strong presence among
young people who are brand conscious. Due to the technological advancement of Reliance,
they also have most modern software like SAP which can predict the demand on the basis of
purchases. The shop also sells fruits, vegetables, Confectionaries, stationeries and other all
household items. Quality is maintained with utmost care, fruits and vegetables are
refrigerated.

Weakness
Inability to purchase items based on local demand has been an issue, as most items are
delivered on the basis of SAP output. Also the queuing of payment counter is not done
scientifically. Certain items like local snacks are sold at a price determined by the district
office and not the shop, and it is always found to be more than that compared to a typical
neighborhood bakery.

Opportunity
650 students and another 100 staff members of IIMK are a group of brand conscious people,
and their demand cannot be satisfied by other shops in the area. So they are compelled to
come to reliance fresh for all their purchases.

Threats
The shop has no visibility as it is in a sub road. Also there is no board on the road for new
people to find it. Another problem is the presence of socialist and communist parties in the
region. There is lot of mass organized agitation and rallies against shops run by corporate,
since people perceive it as a Bourgeois attempt to unemploy small shop keepers. So for
political reasons, the operations of shop may be disrupted or even the shop could be in a
danger.

RECOMMENDATION & CONCLUSION

There is a need to rework the farm to fork model. Perishable goods need a strategy that
combines responsiveness with efficiency as 15% losses are observed globally in perishable
items within the supply chain. Demand forecast needs to be more accurate in this case.

Discount selling is viewed negatively by customers who find this against the Fresh motto of
Reliance Fresh. They have been unable to achieve sufficient volumes which have led them to
limit the number of offerings. Use local suppliers to reduce losses from spoilage. This will
allow them to order more frequently and allow management of variations in demand. In
addition, gradation and standardization of the produce is also a challenge
Prime driver of operational strategy was Farm-to-Fork plan of Reliance. It depends upon
selling the whole FMCG products at lower price than the market, providing complete F&B
(foods and beverages) range to the consumers, providing a mix of convenience and good
ambience to shoppers, sourcing the vegetables nationally and selling at lower prices than
market (this strategy has changed significantly over the years to move to local sourcing),
obtaining aggressive discounts by promising huge volumes to the FMCG goods producers
and securing the supply chain for food (vegetables and cereals) by entering into contract
directly with the farmers eliminating middle man Introduction of IT in sourcing, ordering,
billing and report generation.
The organized retail sector in India is set to grow exponentially in the coming months and
years. Streamlining the supply chain is a major key in successes of retail players.
Procurement strategy must be streamlined according to market and demand. Inventory
management is a key issue for all retail chains. IT serves as a great enabler for supply chain
optimization. Supplier relationships are critical in the long term. Private labels should be
nurtured as a growth driver through supplier partnerships

RECOMMENDATION AND CONCLUSION

Solution & Recommendations

Cross Docking Grading of the farm produce should be moved to collection centers
from distribution centers. This will allow cross docking of the farm fresh products and
non-perishable products.

Store Inventory Management - currently reliance fresh requires stores to provide the
distribution centers with daily forecasts. Now, this can induce bullwhip effect at the
distribution center level causing high deviations in inventory levels at the warehouse.
Reliance Fresh can use an approach of store inventory management for all of the
stores products both perishable and non-perishable. They can also opt for consensus
approach between the cluster managers at the distribution centers and store managers
to arrive at forecasts. This would allow them to manage their inventory efficiently and
reduce bullwhip effect across the chain.

Everyday low pricing reliance fresh at times provides products at discounts. This
induces its customers to buy more when the price is low and buy less when the price
is high. Rather reliance fresh can try to stabilize the price levels and provide an
everyday low price to the end customers. This would also help to reduce the bullwhip
effect and improve the supply chain efficiency.

Procurement strategy reliance fresh should additionally focus on incentivizing suppliers

to produce crops on rotation basis through long term contracts. This would allow better
quality produce with lesser transportation costs
RECOMMENDATION & CONCLUSION
There is a need to rework the farm to fork model. Perishable goods need a strategy that
combines responsiveness with efficiency as 15% losses are observed globally in perishable

items within the supply chain. Demand forecast needs to be more accurate in this case.
Discount selling is viewed negatively by customers who find this against the Fresh motto of
Reliance Fresh. They have been unable to achieve sufficient volumes which have led them to
limit the number of offerings. Use local suppliers to reduce losses from spoilage. This will
allow them to order more frequently and allow management of variations in demand. In
addition, gradation and standardization of the produce is also a challenge
Prime driver of operational strategy was Farm-to-Fork plan of Reliance. It depends upon
selling the whole FMCG products at lower price than the market, providing complete F&B
(foods and beverages) range to the consumers, providing a mix of convenience and good
ambience to shoppers, sourcing the vegetables nationally and selling at lower prices than
market (this strategy has changed significantly over the years to move to local sourcing),
obtaining aggressive discounts by promising huge volumes to the FMCG goods producers
and securing the supply chain for food (vegetables and cereals) by entering into contract
directly with the farmers eliminating middle man Introduction of IT in sourcing, ordering,
billing and report generation.
The organized retail sector in India is set to grow exponentially in the coming months and
years. Streamlining the supply chain is a major key in successes of retail players.
Procurement strategy must be streamlined according to market and demand. Inventory
management is a key issue for all retail chains. IT serves as a great enabler for supply chain
optimization. Supplier relationships are critical in the long term. Private labels should be
nurtured as a growth driver through supplier partnerships

ANALYSIS
There are two mail gates to the store. One is meant for entry and the other for exit. In
multiproduct retail stores, one has to surrender all the articles while getting into the store
through the entrance and get the purchased articles verified at the exit. But this practice is not
religiously followed in this store. Consequently there is a high probability of shop lifting.
13.A managers counter and a refrigerator at the entry door serve no much
purpose and reduce the aesthetic value of the store.
14.There are 3 cash counters just at the entrance. There is little space for the
customers to stand in the queue due to the presence of shelves very near
to the cash counter.
15.There is a large open fridge on the right bay of the store. This is used for
storing perishable items like butter, cheese, milk, fruits etc. In the front of
the fridge, there are large containers filled with fruits and vegetables.
There is a lot of rotten fruits and vegetable lying in the containers. This
leaves a negative impression on the customer, as the term FRESH in the
store name appears as a misnomer.
16.Going further from the fruits/vegetable bay, there is a huge space devoted
to groceries. This is well arranged and serves the customer needs well.
Also a new rack has been added which displays packaged groceries by
RELIANCE itself. This is a good move to promote self-owned brands.
17.The end of the left bay has a huge rack containing edible oil packets. This
is done to safeguard other products from oil spillage.
18.As we move from the grocery space to the next bay on the right, we can
find FMCGs like chips, noodles, chocolates, namkeen, etc. These are highly
sold items and are strategically placed at the center of the store. The shelf
space devoted to potato chips and stuff like that seems too much though.
19.The next bay on the right is devoted to FMCG daily care products like
shaving accessories, talc, deodorant, soap, gels, shampoo etc. All the
brands are kept together due to limitation of space. This area is one of the
most crowded due to the nature of the products. The back side bay
consists of household products like brooms, buckets, doormats etc.
20.The last bay is highly unorganized and carries products varying from
utensils to cloth to foot ware to ice-cream. This bay is one of the least
visited in the store. The space devoted to products here is too much.
21.Near one of the billing counters, there is a rack containing hosiery items.
This gives the store a very poor look. The garments are not well arranged
and are often hanging around the shelf.

22.There is a magazine stand and chocolate shelf near one of the billing
counters. This is good as people usually end up buying such stuff while
going out.
23.A lot of loose containers containing material for sale are found lying here
and there in the store. This is hugely due to limited floor space.

The outer parking space is very inconvenient due to unevenness of the land.

ANNEXURE
Questionnaire prepared For Company Official:
1) What type of strategy do you use for distribution for your wide range of
products?
2) Are you having distribution in whole of India? What is reach of your
3)
4)
5)
6)

products?
Does the company conduct proper induction programme for new channels
Why do you think this strategy is perfect for distribution of your product?
Are there any problems associated with this type of distribution strategy?
Do you think by using this Strategy you are able to reach your highest
current as well as potential market?