INTRODUCTION

Fabindia (or Fabindia Overseas Pvt. Ltd.) is an Indian chain store retailing
garments, furnishings, fabrics and ethnic products handmade by craftspeople
across rural India. Established in 1960 by John Bissell, an American working for
the Ford Foundation, New Delhi, Fabindia started out exporting home furnishings,
before stepping into domestic retail in 1976, when it opened its first Fabindia
retail store in Greater Kailash, New Delhi. Today it has over 170 stores across India
and abroad, and is managed by his son, William Bissell.
In 2008, Fabindia had revenue of $65 million, marking an increase of 30% from
the previous year. Fabindia sources its product from across India through 17
community-owned-companies; a certain percentage of the shares of which are
held by artisans and craft persons.
Fabindia is India's largest private platform for products that are made from
traditional techniques, skills and hand-based processes. Fabindia links over 80,000
craft based rural producers to modern urban markets, thereby creating a base for
skilled, sustainable rural employment, and preserving India's traditional
handicrafts in the process. Fabindia promotes inclusive capitalism, through its
unique COC (community owned companies) model. The COC model consists of
companies, which act as value adding intermediaries, between rural producers
and Fabindia. These are owned, as the name suggests, by the communities they
operate from; a minimum 26% shareholding of these companies is that of craft

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affordable. The Fabindia Head Office is located in New Delhi.

persons. Fabindia's products are natural, craft based, contemporary, and

LITERATURE REVIEW
BRIEF HISTORY

Founded by John Bissell to develop market for hand-woven products

and to provide rural employment

Incorporated in 1960 in Delhi to export upholstery fabric

By 1965, revenues of Rs. 2 million due to A S Khera, supplierof handwoven rugs etc from Panipat and Habitat, major UK buyerof Fabindia
Panipat products

1974 saw Fabindia's first retail store in Greater Kailash with ad-hoc
merchandising

1977-Featured contemporary designs to attract consumers and

designers

Garments were introduced in 1980s after John Bissell got khadi shirts
made for himself

Habitat was acquired by Ikeain 1992 and Fabindia could no longer

continue selling to it

John Bissell died in 1998, passing the baton to son William Bissell who
became MD in 1999

William's vision included expansion, depending less on exports and

setting up retail operations

Today Fabindia is considered one of the most profitable retailers in the country.
It earns a net margin of 8 percent, nearly three times more than the industry

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average.

Philosophy
Fabindia was founded with the strong belief that there was a need for a vehicle
for marketing the vast and diverse craft traditions of India and thereby help fulfill
the need to provide and sustain employment. We blend indigenous craft
techniques with contemporary designs to bring aesthetic and affordable products
to todays consumers.
Our endeavor is to provide customers with hand crafted products which help
support and encourage good craftsmanship.
Our products are sourced from all over India. Fabindia works closely with artisans
by providing various inputs including design, quality control, access to raw
materials and production coordination. The vision continues to be to maximize
the handmade element in our products, whether it is hand woven textiles, hand
block printing, hand embroidery or handcrafting home products.
Fabindia Products
The major portion of Fabindias product range is textile based. Non- textile
introductions to this range are Home Products (introduced in October 2000),
Organic Food Products (introduced in July 2004) & Fabindia Sana Fabindias
range of authentic bodycare products (introduced in March 2006).
The textile-based product range includes ready-to-wear garments and accessories
for men, women, teenagers and children; bed, bath, table and kitchen linen; floor
coverings, upholstery fabric and curtains. Cotton, silk, wool, grass, linen and jute
are the basic fibers used.

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baskets and a selection of handcrafted utility items.

The Home Products range carries furniture, lighting, stationery, tableware, cane

Fabindia Organics carries several types of cereals, grains, pulses, spices, sugar,
tea, coffee, honey, fruit preserves and herbs.
Fabindia Sana, Fabindias range of authentic bodycare products includes soaps,
shampoos, hair oils, pure oils, moisturizers, body scrubs, face packs, hair
conditioners & special skin care products. Holding these major product lines
together is the companys commitment to the rural and crafts sectors of India.

GL
OB
AL
SY
NE
Garments
Accessories
Home linen
Home furnishings R
GI
ES
TH
R
O
U
G
H
AC
Home products Floor coverings Personal productsOrganics
Q
UISITIONS
Louis Vuitton: As recently as March 2012, Fabindia endured a partial French
takeover: Louis Vuitton Moet Hennessy (LVMH) acquired an 8% stake in Fabindia.
EAST: Fabindia also acquired a 25% stake in UK's bohemian womens wear

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retailer EAST. EAST has 77 outlets, which includes selling through 18 John Lewis

stores. These networks will help Fabindia sell its garments in UK. Fabindia
a lr ea dy has a presence in Gulf with stores in Dubai, Bahrain and Qatar.

THE FABINDIA ECOSYSTEM

Product Selection
Committee (PSC)

Designers

Business Experts

Artisans Microfinance
(AFML)

49%
Employees

10%

15%

Supplier Regional
Company

Social
Ventur
e

(SRC)

26%
Craftsmen

Artisans

Weaver

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Fabindia enjoys a Network of 167 stores across India's 35 top towns.

 Its supply chain is based on Supply chain based on inclusive capitalism: cooption of 22,000 artisans and making them into shareholders through an
elaborate community-owned model
Designers and business experts are directly employed by Fabindia. Few of the
designers work with the artisans while others form the product selection
committee. The key responsibility of this committee is to select new artisans

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and weavers and ensure that the quality standards are met before ordering

the products

FABINDIA SUPPLY CHAIN

Fabindia's suppliers are predominantly from rural India. The supply chain has 2
suppliers, the artisans and the fabricators. The artisans are the weavers or
painters from a rural background so the

designers are the ones who are

responsible for communicating with the artisans and making them

aware of

urban needs and trends. The designers have a deep knowledge of textiles as well

Since most of the fabindia artisans are poor and illiterate there are few written

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as the urban sensibilities.

contracts that exist

and govern supplier behavior.

comes through a reference from an existing

Each potential supplier

supplier. Initially the supplier is

given a trial order and based on the performance of the supplier,

they get

regular orders.
The Fabindia supply chain has moved on from a centralized warehouse model to
a more

decentralized model. To shorten the supply chain and incorporate the

artisans within the process in a greater way, fabindia introduced the concept of
community owned companies. The weaver

approaches the Supply regional

company i.e. SRC with. At the SRC level the designer steps in to help artisans
produce something relevant to the target market. The design is then approved by
the PSC or the product selection committee. Here the fabrics and the quality of
factors like colorfastness are determine and compared to the company set
benchmarks. One the product is selected by the PSC the order is placed after
price negotiation with the weaver.
The orders are completed by the weaver and brought to the company
warehouse. The fabric is delivered in the form of thaans. However there is no
uniformity in terms of the length of fabric incorporate in each of the thaan. It
varies from 20m to 50m. The stock then moves from the SRC warehouse to the
regional warehouse. The issue that fabindia faced in the initial stages was
orchestrating the supply chain which would cater to the large volume of supplies
as well as maintain quality. To resolve this the model of SRC s was introduced.
The SRC are in direct contact with the artisans and serve as interfaces to the
urban markets. The SRCs are also responsible

the

artisans credit and capital

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deal with suppliers across the length and breadth of the country. The artisans

that they require. 17 SRCs have been setup in different parts of the country to

have a 26% stake in the SRCs and the rest is owned by the investors and the
fabindia.
Once the order has been received at the SRC warehouses it becomes a part of the
fabindia online inventory system. The levels of stock and orders for a particular
product can thus be monitored online by the retailer. As and when the retailers
place their orders the products are moved from the SRC warehouses to the
regional warehouses and distributor points.

At each regional warehouse a

continuous review model for inventory of products is followed. On the retailer

side, each retailer orders as a single entrepreneurial entity. For various kinds of
products bins or wallet sizes are defined and the retailer is allowed to stock up
only upto a given wallet size.
SRCs have evolved the supply chain of Fabindia from a centralized model to a
regional supplier

companies. Benefits of this novel approach.

USE OF TECHNOLOGY IN FABINDIAS SUPPLY

CHAIN
In 2005, FabIndia decided to transform and strengthen its Supply Chain with the
goal to increase monthly revenues from 8 crores per month to 20 crores per
month. A major step in this effort was to automate a major portion of the
ordering process. As a result two distinct modules were created
B2C MODULE
This was nothing but the website www.fabindia.com which was transformed to
an online shopping website where the entire range of products in Fabindia was

warehouse in Delhi

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companies who would pick up the ordered item from the

contained. This website was linked with domestic and international courier

and deliver it to the e-customer. The B2C module served domestic 'click'
customers and international customers, who wanted Fabindia products but did
not have access to a store.
B2B MODULE
This was the software developed to connect Fabindia stores to the SRC
warehouse. This allowed store managers to independently order from each of
the SRCs. This would allow for streamlining of

order and delivery. The B2B

module would also help to project future growth by also acting as a forecasting
tool.

SUPPLY CHAIN OPTIMIZATION:

The integrated supply chain has been proven to be superior capabilities as
opposed to standalone supplier and retail entities. AS we already know, some of
this has been already built in through FabIndia's stakes in Cs. A complete
integration of the Cs will lead a greater degree of control over the supply chain
and better align the motives of FabIndia with those of the artisans. This will lead
overall greater order quantities and hence a greater amount of profits

Ease of expansion: Bringing the SRCs under its gamut brings with it the

advantage of ease of access to company capital and also helps artisans raise
money much more easily. This leads to an easier expansion of capacity

Quality Control: The integration of the supply chain results in controlling

delivery times more easily through centralized processes using technology and
also helps in a greater degree of standardization and defects in the raw material

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problem of non-repeat of purchases does not occur.

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procured and used. It also helps ensure a benchmark quality which ensures that a

KEY CHALLENGES IN CURRENT SUPPLY CHAIN

The main problem for Fabindia is to maintain consistency of products since the
suppliers and manufacturing locations are scattered over a large geographical
area on a small scale. As these products are made in interior, rural locations in
various locations, it has been difficult to maintain same level of quality due to lack
of knowledge on urban customers and also cultural, behavioral differences in
suppliers across different locations.
In case of organic products, Market in not matured. So it targets customer with
prior knowledge on this product. The major problem there is fickle delivery and
product availability, which does lead to customer dissatisfaction. But this is a very
small part of the customer base.
INFLUENCING FACTORS ON MARKET SELECTION:
Market selection is primarily done after analyzing three main factors:

Indian population in the place Large number of settlers from the source
country increases the influence. It also leaves an impact on affinity and
acceptability in the foreign country.

Per capita income of the place Fabindia tries to makes its product affordable
to as many people as it can and hence even a medium level per capita income

Consumer beliefs and attitudes of the place

For cotton fabrics, some soft variables like ethnicity, nationalism, weather,
regional demographics, etc. also play an important role.

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11

is sufficient to determine the extent of market.

Political factors and economic factors of the country

The parameters were self-explanatory from the revenue generated in Canada,

which is by far the maximum that has been generated overseas.

NEED FOR INTERNATIONAL EXPANSION

Although the domestic expansion story for Fabindia is exuberant, the need for
international expansion is rising because of budding competition from other
organized players in the Indian market. Certain initiatives from Government like
"Delhi Haat" in the hub of Delhi aims at similar target audience with a similar
pitch of enhancing craftsmanship of our country. Similarly, in Ahmedabad
Government initiatives have provided an organized platform for unorganized
hawkers to showcase their art. Although these govt. initiatives are at a much
smaller scale and highly diverse, they offer goods at a very nominal price hence
pose a growing threat to Fabindia.
Moreover, being a lucrative market, Fabindia is also facing competition from
established retail chains such as Shoppers Stop, Westside, and Reliance Trends
etc. who are operating at a comparable scale.

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12

CHANNELS TO INTERNATIONAL MARKETS

Sales

Retail

Wholesale

Institutional Sales

Fabindia has already created its presence in international markets via own retail
stores, other retailers and institutional sales. The complete product range is
exported from India. Fabindia does a special collection twice every year to include
in exports. To lure potential international customers, they show case these special
collection in Indian handicraft and gift collection fair

INVENTORY MANAGEMENT
Effective inventory management is all about knowing what is on hand, where it
is in use, and how much finished product results.
Inventory management is the process of efficiently overseeing the constant flow
of units into and out of an existing inventory. This process usually involves
controlling the transfer in of units in order to prevent the inventory from
becoming too high, or dwindling to levels that could put the operation of the
company into jeopardy. Competent inventory management also seeks to control
the costs associated with the inventory, both from the perspective of the total
value of the goods included and the tax burden generated by the cumulative

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13

value of the inventory.

Balancing the various tasks of inventory management means paying attention to

three key aspects of any inventory. The first aspect has to do with time. In terms
of materials acquired for inclusion in the total inventory, this means
understanding how long it takes for a supplier to process an order and execute a
delivery. Inventory management also demands that a solid understanding of how
long it will take for those materials to transfer out of the inventory be established.
Knowing these two important lead times makes it possible to know when to place
an order and how many units must be ordered to keep production running
smoothly.
Calculating what is known as buffer stock is also key to effective inventory
management. Essentially, buffer stock is additional units above and beyond the
minimum number required to maintain production levels. For example, the
manager may determine that it would be a good idea to keep one or two extra
units of a given machine part on hand, just in case an emergency situation arises
or one of the units proves to be defective once installed. Creating this cushion or
buffer helps to minimize the chance for production to be interrupted due to a lack
of essential parts in the operation supply inventory.
Inventory management is not limited to documenting the delivery of raw
materials and the movement of those materials into operational process. The
movement of those materials as they go through the various stages of the
operation is also important. Typically known as a goods or work in progress
inventory, tracking materials as they are used to create finished goods also helps

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inventory gets dangerously low or is inflated to an unfavorable level.

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to identify the need to adjust ordering amounts before the raw materials

Finally, inventory management has to do with keeping accurate records of

finished goods that are ready for shipment. This often means posting the
production of newly completed goods to the inventory totals as well as
subtracting the most recent shipments of finished goods to buyers. When the
company has a return policy in place, there is usually a sub-category contained in
the finished goods inventory to account for any returned goods that are
reclassified as refurbished or second grade quality. Accurately maintaining figures
on the finished goods inventory makes it possible to quickly convey information
to sales personnel as to what is available and ready for shipment at any given
time.
In addition to maintaining control of the volume and movement of various
inventories, inventory management also makes it possible to prepare accurate
records that are used for accessing any taxes due on each inventory type. Without
precise data regarding unit volumes within each phase of the overall operation,
the company cannot accurately calculate the tax amounts.
This could lead to underpaying the taxes due and possibly incurring stiff penalties
in the event of an independent audit.
Management of inventory assumes importance due to the fact that investment in
inventory constitutes one of the major investments in current assets.
The term inventory refers to the stockpile of the products a firm is offering for
sale and the components that make up the product. The assets which firms store

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(i) Raw Materials

15

as inventory in anticipation of need are:

These represent inputs purchased and store to be converted into finished

products in future by making certain manufacturing process on the same.
(ii) Work in Process
These represent semi-manufactured products which need further processing
before they can be treated as finished products.
(iii) Finished Goods
These represent the finished products ready for sale in the market.
(iv) Stores and Suppliers
These represent that part of the inventory, which does not become a part of final
product but are required for production process. They may be in the form of cotto
n waste, oil and lubricants, soaps, brooms, light bulbs etc. Normally, they form
a very minor part of total inventory and do not involve significant investment.
Let us have a look on Different Inventory Management Views. Means emphasis
role of Inventory Management in different Sectors.

Inventory
Management

16

Logistic Inventory
Management

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Physical Inventory
Management

Financial Inventory
Management

PHYSICAL INVENTORY MANAGEMENT

Meaning:
Keeping of goods is also a type of management. Whenever requirements comes
from the production department, providing of those required materials in a
proper manner & providing those at the specified period, is the main motto of
Physical Inventory Management.
Benefits in Purchasing
Benefits in Production
Benefits in Work-in-Process
Benefits in Sales

OBJECTS OF INVENTORY MANAGEMENT:

Usually, the company is faced with the following conflicting objectives in the area
of inventory management:
1. To carry maximum inventory in order to facilitate efficient and s m o o t h
production and sales operations.

consequences.

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investment and under investment in inventories is undesirable as both involve the

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2 . To minimize investment in inventory for maximize the profitability. Both over-

The over-investment involves the consequences like:

I ) Unnecessary blocking of funds in inventory and hence loss of profit.
ii) Excessive storage and Insurance Cost.
iii)

Risk of liquidity.

The inventories

once purchased

and

stored

are

normally difficult to dispose of at the same value.

The under-investment involves the consequences like:
1). If sufficient stock of raw material and work in process is not available, it may
result into frequent interruptions in production.
2). If sufficient stock of finished goods is not available it may not be possible for
the company to serve the customers properly and they may shift to the
competitors.
Thus, it can be said that the objective of inventory management is to minimize
the investment in inventory without affecting production or sales operations.
Inventory, as a current asset, differs from the other current assets because only
financial managers are not involved. Rather, all the functional areas,
finance, Marketing, Product &Purchasing are involved. The job of the
financial manager is to reconcile the conflicting viewpoints of the various
functional areas regarding the appropriate inventory levels in order to fulfill the
overall objective of maximizing of owners wealth.

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Two-Bin System:

Under this system, the inventory items are grouped into two categories. In one
group or bin, sufficient quantity is kept to meet the current requirements over
a designated period of item

FINANCIAL INVENTORY MANAGEMENT

Meaning:
Recording, maintaining and evaluating of stocks in a value terms is known as
Financial

Inventory Management. In

other

words

valuation

of stocks,

and controlling of ordering and holding costs and also maintaining of sufficient
valued stocks in Inventory is known as Financial Inventory Management.Financial
Inventory Management is again divided into three different categories.
1)Based on Valuation
2)Based on Cost Analysis
3)Based on Financial Statement
1) Based on Valuation
There are number of generally accepted methods of determining the cost of
inventories at the close of the accounting period. The selection of a suitable
method assumes significance in view of the fact that it has a direct bearing on the
cost of goods sold and consequently on profit.
Therefore, the method should be selected in the light of probable effects on

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First in First Out (FIFO) Method:

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profits over a period of years.

The FIFO method of valuation of inventory is based on the assumption that the
inventory is consumed in chronological order, that is, those received first are
issued/consumed first and value fixed accordingly. The merit of FIFO method is
that the physical flow of materials matches the flow of cost.
Last in First Out (LIFO) Method:
Under the LIFO method, the cost of goods sold and the value of closing inventory
can be determined only after the final lot of the year has been received. This is
because of the assumption underlying the valuation of inventory, according to
this method. As the name LIFO suggests, the use of inventory is valued on the
basis of the inverse sequence of receipts.
Since the LIFO method assumes that the latest item in is the first item out, the
current cost of materials are matched with the current selling price/current
revenues. This matching of current costs with current revenues is the essence of
the argument for the LIFO method.

Average Cost Method:

According to average cost method, each purchase is added to inventory and an
average cost determined. Materials are charged into cost of sales at this average
until another lot is received, when a new average unit inventory cost is calculated.
2) Based on Cost Analysis Cost of Holding Inventory:

the cost of merchandise, the costs associated with inventory fall into two basic

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categories: (i) Ordering or Acquisition or Set-up Costs, and (ii) Carrying

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One operating objective of inventory management is to minimize cost. Excluding

Costs. These costs are an important element of the optimum level of inventory
decisions.
3) Based on Financial Statement
For having assistance by banks, bankers should first evaluate the followings:
1. Collateral Strength.
2. Inventory Position
3. Some Financial Ratios
4. Payment of all requirements like Income Tax, Wealth Tax, Interests on debt
etc.
5. Agreement papers of all authorized persons like Debenture holders,
Shareholders etc.
6. All required documents.
7. Who is the Buyer and his Countrys relationship etc.?

LOGISTICS INVENTORY MANAGEMENT

Meaning of Logistics:

making and taking the permission for sell/exporting the companys products in

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foreign countries. In fully export-oriented business this is one of the main

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Logistics is the Organization of Services and Supplies. In other words, logistics is

department, where this department gets an approval to sell their goods in

foreign countries. And also their main intention is to maintain all
documents of those that are related to the exporting of their products.
Logistics Inventory Management:
Yes, already we have observed about the meaning of Inventory Management in th
e Organization. But in fully export oriented business; Inventory Management is a
very important concept. Because every exporter or importer, they do not know
about

each

other

who

are staying

in

other

countries.So every company, which are exporting or importing of materials, they s

houldcommunicate each other through banks only.
These banks are listed by Central Bank of that Nation. In our Country
RBI is lists some banks for intermediating purpose and every year RBI declare
some listed Banks as a mediator.

INVENTORY MANAGEMENT OF FABINDIA

PHYSICAL INVENTORY MANAGEMENT
Each unit of Fabindia has its own store department that we can call it as Work-inprocess inventory.

Business

of

extracted

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percentage

Page

The

from Apparel and Home in FabIndia

Percentage of
Business extracted
from Women, kids
and Mens in
Garment Product
Line in FabIndia

Core Apparel Category It includes Printed and Woven Cotton. It forms 80% of
buying.
This inventory process is fully computerized and here paper work is very less. Only
maintaining of documents, which were sent by suppliers as like challans etc., are
only

here

to

maintain

as paper

documents.

Otherwise

it is

fully

computerized. Through computers only Store Department receives Purchase

Order and by computer only they send documents of issuing of products to store.
For easy to communicate and distribution of products, Fabindia has having only
one Go down in Procedures involved in receiving and issuing of products are as
follows:

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Purchase Order Number:

23

1) Go down will first get Purchase Order No.

This PO is comes from Purchase Department. This Purchase Department gives a

number for the each order made by Purchase Department only. Before placing
any order to suppliers they first check the products in inventory as to know about
whether products are available in Inventory or not. If not available in Inventory
then only they will place an order according to the requirement. So, normally it
does not have any stocks in its inventory.
For every demand they make a fresh Purchase Order for purchasing of. It means
products whatever the products are requiring for present orders, those products
are only they kept as stocks in Inventory. In some cases, products may be in Go
down, which they call it as Buffer Stock.
If these old stock is matches the requirements of product which has ordered now
by its customers, then purchase Department will sent a notice to Inventory
for issuing of those products.

2) Receiving of Products
Any products comes-in or goes-out from the Go down it should be enter in the
Gate that is they call it as Gate Entry, which is maintained by security
Guard. Guard is not an employee of an organization. He is a contact-based
employee. When Inventory receives products it first inspects some samples, so for
it, they call up as Spot Inspection. Here they inspect the following points:

1. Quantity

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Are t h e s e r e c e i v e d products according to the Purchase Order? Like

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Is it our supplier only and is this parcel is for us only?

2. Date, etc.

Is it having all required Challans or Invoices and also does it approved by

authorized person?

Is it having all required documents?

Is that Challan consisting the correct information of products?
After approval of products by sample inspection, inventory department put these
details in manual book, this documentation is called as Day Book T h i s
d a y b o o k i s c o n s i s t i n g o f information like Challan No., P.O. No., Style No.,
Description of products, Suppliers Name, transporters Name, and Quantity. After
completing of these processes, products will send to inspection department. In
this inspection department they inspect in details of products. After approval by
department, this inventory department makes one document, which
are they calling it as Goods Received Document
3). Issuing of Products
Merchandising Department will send one card called Job Card which it
consisting of all details of Products requires for a store. According to that Card
Inventory department should send the products to store. After receiving of
products from inventory department they issue one document about received of
products, quantity, description of products e t c . In this process sometimes
it may happens like some products get damages and some are not fully matches

document called Order Completion Report (OCR). This report consists the

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After utilizing of all these products by inventory department they will send one

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with requirements. Then those products will be return to inventory.

information of Percentage of Utilized products for particular order and

percentage of wastage of products. This report will send to inventory and also to
Merchandising Department.
4). Return Back Products from Merchandising Units
Inventory takes those products, which are return back from merchandising units
because of excess or surplus occurs. This excess or surplus exists because
of purchase department, they always orders 20% more than its requirement to
meet the requirement of next month. So these products are kept in Inventory
as name it as Buffer stock. These Buffer Stocks will be utilize when company get
the same type of Order. Inventory issues these products (Buffer Stock) only when
it receives instruction from Merchandising and purchasing Department.
5). Rejected Products
Inspection department make the rejection of products, when products are not as
per requirements and not as per the order. These rejected products are kept in
separate section by Inventory Department. Inventory department inform to
Purchase

Department

and

also

notice

to

Suppliers

about

rejection

of products. That is called Rejection Card. In this card it involves Name of

Supplier, Description of products, Challan No., Challan Date, Gate Entry No. &
Date, No. of Quantity rejected, Reason for rejection etc., Some times supplier may
issue new products in place of rejected products. Or he may give some
compensation for wrong supply and that is after paying of full payment of

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6).Purchasing Procedure of Products

26

products.

In Fabindia they purchase products from multiple Suppliers. There

is a reason for purchase products from multiple suppliers. The reason is if one
supplier delays to fulfill the supply then there must be alternative supplier for it to
fulfill the requirement. So there must be no stock outs in the distribution process.
Fabindia always purchases at bulk but by schedule wise. In other words they
purchase products at a time for specific order.
They make the agreement of supplying products only at once. And they negotiate
the price only at once that is before supplying of products and once
their agreement is over then they provide schedule to supplier to supply
the products at a specific time and at a specified quantity.

LOGISTICS INVENTORY MANAGEMENT

There is a department called Logistic Department in Fabindia, which is concerning
about selling of goods and maintaining of all documents related to distribution of
products and also taking the permission from banks to sell specific products in
specific countries. So Logistic Department is one of the important front-office
Departments, like Marketing Department .Marketing Department is one, which
takes the orders from its stores. And this is entirely different from Logistic
Department. Logistic Department is one, which sells its products and maintains all
documents.

FINANCIAL INVENTORY MANAGEMENT

Already we saw about Logistic Inventory Management. Let us see the old and

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Valuation method for Old and Rejected Stocks:

27

rejected stocks in financial terms and also have a look on the inventory ratios.

Old Stock:
This old stock means excess of products from specific order. As already viewed in
Physical Inventory Process that always purchase department purchases 20% more
than its order. So that remained or excess materials are said to be Buffer Stock .
Rejected Stocks:
Again these are divides into three parts. Rejection of Products i.e., before
sending to store. Rejection of products is valuating on Purchase value of those
Products.
Holding or Ordering Cost
These costs are very important in manufacturing companies to minimize the
cost. This is not applicable to Fabindia by virtue of its Business activities. Because,
let us have a broad view on statement by following points:
In Fabindia, they purchase the Products from multiple suppliers.
Because to fulfill the requirements in required time limit.
Fabindia orders the products to suppliers only at once and according to the
schedule supplier will supply the Products.
Yes, Depending on Shorter order cycle Fabindia can hold entire stock well before
order starts and also it can have a full stock at a time before starting process of
selling.

there maximum stock level is 3 months in advance. Buying is done after each

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EOQ applicability due to the nature of Business as above said is not possible but

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EOQ:

week after checking the inventory for replenishing the stock.Each Garment style
has a code called style no. and to replenish that style the style no. and quantity is
fed into their systems.
Reorder Point:
When only the buffer stock is remaining in the stock, the reorder take place.
Lead Time:
Fabindia purchases Products from multiple supplier and by on schedule
Products basis to supply. So this is also not applicable in this type of business.

INVENTORY MANAGEMENT FOR AN INDIVIDUAL

FABINDIA STORE
WALLET
To understand how an individual store manages its inventory, it is vital to
understand the concept of the 'Wallet' which is unique for each store. This is the
maximum amount of inventory a store is allowed to own at any given time. The
maximum value of the Wallet is a function of the monthly sales. For example N-14
in New Delhi, which is FabIndia's largest store, has a wallet size of 1.5 crores
(monthly sales) * 3 months = 4.5 crores. That is N-14 is allowed to hold only 3
months' worth of inventory. When the store manager places an order to the SRC
through the B2B module the wallet decreases by that amount. As the stock is sold
and invoiced by the store, the wallet opens up and more stock can be ordered.

DUAL ORDER PROCESS FLOW FOR PERENNIAL ITEMS

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that are required whereas perennial items need only a month's lead time.

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Seasonal items need to be ordered 3 months in advance because of large volumes

The distinction between FabIndia and other garment retail chains is that FabIndia
does not return excess inventory to its supplier. This is due to their philosophy of
uplifting rural craftsmen and artisans. To prevent overage, FabIndia stores follow
a dual order strategy Bulk Order and Backup Order.
Bulk Order

Between the 1st and 5th of a month the store manager prepares an excel
sheet with expected demand for each item. This is calculated form previous
sales. This excel sheet represents 70% of the next month sales. The store
manager then mails this sheet to the SRC. (supplier region companies)

By the 20th of the month, the SRC returns this sheet with the available
products highlighted as per the order. It also mentions alternatives for items
which are stocked out.

On the 21st the store manager specifies his/her final order on the B2B
depending on product demand and availability. The store's wallet then
decreases by this amount.

The order is delivered by the SRC from the SRC warehouse to the market
region ware house. From there it is transported to the store by the 1st of the
next month

Backup Order
Meanwhile on the 15th of the same ordering month after selling a percentage of
the month's stock, the store manager calculates how much inventory is required

order is a much smaller one, it is delivered to the Store by the 25th of the same

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the back-up order on the B2B after checking the availability with the SRC. As the

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for the rest of the month. He/she uses the remaining 30% of the wallet to place

month. The back-up order is only placed in times when the demand is high and
cannot be served by the initial bulk order.
The dual order system allows for a greater accuracy in ordering as the demand for
the first 15 days is noted and is used to place the backup order. This system
allows the store to reduce overage and decrease inventory holding costs
especially since individual stores do not have large storage space.
Fabindia has 9 Market Region and each region has a regional merchandiser,
whose basic job is to see the store inventory level and maintain the minimum
level of his/her region. If a store feels they can sell more of an Item either they
can order it through Fabconnect ERP software or tell the regional merchandiser to
order the same.
If a store has ordered more stock than their wallet they have to immediately look
for other Fabindia stores which require this stock or can take their excess stock.
Perishable Items are ordered once in a month and always the expiry date is
checked, discounts are put on them when they are nearing expiry date.
Any damage item received is immediately reported to the SRC and transferred out
of the store. Fabindia uses abc analysis, 20% to 30 % of its stock are high value
items like Furniture made of Teak Bed, Sofa Sets. In apparel it carries silk range
and sarees in High value item. In Jewelry also it has 3 segment Anusuya caters to
High value items. A twice a week counting is done foe High value items.

Let us go through some tips which help to prevent loss of inventory:

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Employees working at the store might get tempted to steal the merchandise.

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PREVENTING LOSS OF INVENTORY

Check the bags of the employees before they leave the store.

Raise an alarm whenever you find someone stealing something. Supporting a

wrong deed is also a crime.

Make sure that all the employees leave from one common door.

Avoid multiple exits.

Check garbage before dumping.

Keep proper record of the inventory(Stock coming in and going out)

SWOT ANALYSIS
WEAKNESSES

Differentiable products

No specific promotions strategy

Brand recognition and loyalty

Limited channels of business

Diverse product mix

Sourcing

Partnering with suppliers

In-house manufacturing

Inconsistent quality of products

Price Trends Setter

Inconsistent service in stores

Different categories of stores

Customer Loyalty

skewed

towards

suppliers

THREATS

In store merchandising & navigation

Substitute producing competitors

Promoting e-business channel

Not in touch with Fashion Trends

Organic foods market

Customer acquisition strategies

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OPPORTUNITIES

strategy

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STRENGHTS

STRENGTHS
The product mix available at Fabindia can be easily differentiated by the
customer. The uniqueness of the fabric or styling has created a new category as
identified by the customer as ethnic wear. This leads to a very high brand
recognition and connects with the customer value. It has an enviable presence in
diverse product lines as garments, furniture, furnishing and upholstery, body care,
organic foods and the very recently introduced jewellery line. Due to its variety of
stores, it can reach to different categories of customers.
WEAKNESS
This absence of promotions strategy is believed to be resulting in sales below its
potential levels. The sourcing strategy followed for accepting raw materials is
heavily supplier centric. In the past there have been incidences when due to delay
in sending supplies for winter garments manufacture, inventory was carried over
to the next year and suppliers were not made to share the damage. It operates
through its own stores and that too fed by a centralized hub model of supply
chain management.

OPPORTUNITIES
Merchandising within stores is still in a rudimentary stage. The shopper navigation
can be greatly enhanced by focusing on the store layout and appropriate
merchandising techniques which succinctly create individual product areas. There

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department. Out of the total customer base for Fabindia, a high percentage

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is great opportunity to grow along with the fast growing organic foods

comprises repeat customers. This leads to an inference that Fabindia can focus on
customer acquisition strategies.
THREATS
Already many firms have tried to recreate the model of Fabindia. Hence, .Fabindia
needs to innovate and diversify into different product categories. It should be
nimble and responsive to changing tastes of its customers. Also as it is suppliers
are mostly artisans and manufacturing is labour driven, controlling costs can be a
challenge. Also it needs to ensure that the customer service provided and the

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quality of products is consistent.

REFERENCES
www.linkedin.com/title/buyer/at-fabindia-overseas-pvt-ltd
http://books.google.co.in/books
www.fabindia.com
www.desai.com/innovation-applied/research/...FabIndia/.../Default.aspx
Ms. Alpana Pillai Store Manager , TVM Fabindia

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Mr. Sandeep Kumar- Store Manager , Koramangala Fabindia

CONTENTS
INTRODUCTION .................................................................................................. 1
LITERATURE REVIEW ........................................................................................... 2
PHILOSOPHY ....................................................................................................... 3
FABINDIA PRODUCTS .......................................................................................... 3
GLOBAL SYNERGIES THROUGH ACQUISITIONS .................................................. 4
THE FABINDIA ECOSYSTEM ................................................................................. 5
FABINDIA SUPPLY CHAIN .................................................................................... 7
USE OF TECHNOLOGY IN FABINDIAS SUPPLY CHAIN .......................................... 9
SUPPLY CHAIN OPTIMIZATION: ......................................................................... 10
KEY CHALLENGES IN CURRENT SUPPLY CHAIN .................................................. 11
CHANNELS TO INTERNATIONAL MARKETS ........................................................ 12
INVENTORY MANAGEMENT .............................................................................. 13
PHYSICAL INVENTORY MANAGEMENT .............................................................. 17
FINANCIAL INVENTORY MANAGEMENT ............................................................ 19
LOGISTICS INVENTORY MANAGEMENT............................................................. 21
INVENTORY MANAGEMENT OF FABINDIA ........................................................ 22
LOGISTICS INVENTORY MANAGEMENT............................................................. 27

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INVENTORY MANAGEMENT FOR AN INDIVIDUAL FABINDIA STORE .................. 29

36

FINANCIAL INVENTORY MANAGEMENT ............................................................ 27

SWOT ANALYSIS ................................................................................................ 32

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37

REFERENCES ..................................................................................................... 35