SUPPLY CHAIN STRATEGY

PRESENTED BY:ARITRA CHATTERJEE GARIMA JHA POOJA KUMARI RAJAT AGARWAL ROHAN SHRIVASTAV YASHICA KORDE YATEESH KUMAWAT

Introduction, Company Background & Foodworld

Introduction

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

And remaining unorganized sector includes perishables and nonperishables.

The key to our success given where we are, is effective supply chain management - Mr. Shiv Murti, Vice President.

Company Background

Food World was a division of Spencers ,the retailing company under RPG Enterprises

RPG was one of the top 5 business houses in India ,with a sales turnover of Rs. 65 Billion in 96-97

RPGs business interests spanned several sectors including power, automobile, tyre , agri-business, telecommunications, retailing ,&financial services

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

At the time of acquisition ,Spencers had nine retail chain in India at that time
One of the options at the time of acquisition was to focus on the development of the real estate owned by Spencers However, the RPG executives who were managing Spencers felt that the potential of retail business should not be given up easily.

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

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

When the store opened ,sales increased to four times the previous levels & made a healthy contribution.
The total turnover of Spencers increased from Rs. 250 million at the time of acquisition to nearly Rs.1000 million by 1994 through a careful process of nurturing the 3 activities while eliminating over 20 other less vital activities.

Food world

Super market format was preferred for three reasons.

1. value based on price and quality. 2. choice through self service from a spread of merchandise. 3. a better shopping environment.

Residing High Street concept of location was preferred over Commercial High Street and Out of the Town.

A minimum of 3000sq.ft store was required and 4500 sq.ft preferred for a self
service formatted merchandising store. Also pleasant ambience, Fast Food joint and a bakery was proposed to be there in the store along with the merchandises.

First store in Chennai then in Bengaluru and then two more in Chennai in a span of four months only which rose to 19 in all by the End of the year.

Foodworld

Break even within few months of start and contribution towards regional expenses. Store Operating Expenses comprises of salaries and wages accounted for about 2.5% of sales, rent about 2.2% and shrinkage about 1.6% and depreciation about 0.7%.

Merchandising Function

FOODWORLD ORGANIZATION STRUCTURE

HEAD , FOODWORLD

Operation

HR

Regional Head Tamil Nadu

Merchandising

IT
Marketing Service

Regional Head Andhra Pradesh

Projects

Regional Head Karnataka

Finance

Security

CUSTOMER EXPECTATION AS PER RESEARCH STUDY

Product Range Variety for choice in a given Product Freshness Availability

Reasonable Price (not more than neighborhood store )

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

MERCHANDISHING OFFER
It Consists Seven major group :
I. II. III. IV.

Staples Processed Foods Beverages Non-food

V.
VI. VII.

Health & Beauty

Perishables & Hardware Home Appliances

Various categories, depending on their attributes

Destination Width (Brand Choice) Depth (no. of Variants) Strategic Convenience Specialty

High

High

High

High/Med

High

Low

Low

Low

Aggressive Aggressive Value Added Price "key SKUs Price Range for best in city Margin For drawing customer to the store Tactical Usage Medium High

MRP/KVI

MRP

Medium

Low

Distribution Strategy Food World

Key Elements - Distribution

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

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

Ordering Process

Category manager places order with suppliers after checking out the stocks. Supplies were made available from nearest vendors appointed by company. Suppliers had 10% margin and were willing to supply on weekly basis Average SKU per vendor was 20. Order filling rate was in the range of 60% - 75%. At arrival, Quality and Quantity check was done at warehouse and a bar code was pasted as per Food Worlds code for easy processing for nonperishable items.

Non-branded items were repacked wid Food World label on it. Most of the processing in the warehouse and in the store was computerised.

Indenting Process

Request for stocks by stores to warehouse for supply is indenting. Minimum Base Quantity (MBQ) and Supply Unit Factor (SUF) are the two specific attributes that helps indenting. MBQ= 30% of largest sales achieved/month. - The stock should be enough if there is surge in demand and short/no supply from the warehouse until the next indent. Indenting quantity was determined after a physical verification of store stock on nominated indent days. Indent Quantity = (MBQ Physical Stock) in multiples of SUF. Multiples of SUF to enable convenient repacking of suppliers stocks at the warehouse. For most SKU, the shelf space volume was less than the MBQ. To enable frequent replenishment and to provide a sense of fullness in the shelves.

Indenting Process

Automated indent quantity generation process. Total 10% stock out in figures. The other 10% accounted for the discontinued items but yet not deleted from the records.

The Indent Fill (number of SKUs) rates from the warehouse 60%.
The Case Fill (SKU quantity) rates were 85%. If case fill rate was less than 75% , it was considered, it is considered indent not having been serviced.

Vendor Development

The key elements of the Vendor Development Process

I. II.

Identification of the supplying companys one point contract. Driving towards standardized trading terms across all three regions on the following dimensions.
a) b) c) d) Credit Promotion Simple point sources of supply across SKUs/categories, preferably direct from the companys depot/CFA Margins (over and above product retails margins) for turn over, distributors allowance, new store opening, bar coding (for data) and trade schemes

Different supply chain structures in operation

Suppliers ---- CFA ---- Distributors ---- W/H ---- Store Branded products from consumer goods company Suppliers ---- CFA ------------------------- W/H ---- Store experimental Suppliers ----- Repack Section --------- W/H ---- Store Non-branded staples Suppliers -------- Consolidation Point ------------ Store Some fruits & vegetables Suppliers ------------------------------------------ Store Bakery, Dairy, Some Fruit and Vegetables

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

Strategic Location Capacity Planning and Implementation Providing a variety of products, range of brands, availability of products at an appropriate pricing. Distribution strategies which help us in better supply chain process. Ordering, SKUs and Vendor development. Thus we learned that SUPPLY CHAIN IS INDEED THE BACKBONE OF ANY RETAIL INDUSTRY.