SUPPLY CHAIN MANAGEMENT IN RETAIL STORES

Under the guidance of

S.V UDAYAKUMAR SHETTY
Assistant Professor (Selection Grade)

DEPARTMENT OF MECHANICAL AND MANUFACTURING ENGINEERING

MANIPAL INSTITUTE OF TECHNOLOGY

(A constituent Institute of MANIPAL UNIVERSITY)

MANIPAL-576104,KARNATAKA,INDIA

CONTENT

Sl. No

Topic

Page No

1.

Introduction

2.

Literature Survey

3.

Objectives & Methodology

4.

Details of project completed

5.

Future work plan

16

6.

Conclusion

19

7.

Reference

20

Introduction

Supply chain management (SCM) is the oversight of materials, information, and

finances as they move in a process from supplier to manufacturer to wholesaler to
retailer to consumer.
2

 Supply chain engagement in retail sector and consumer product goods is important,
not only because it is necessary in order to address key impacts in product life cycles,
but also because it represents opportunities for retailers to minimize risks, cut costs,
enter new markets, and build their reputation among consumers
.
Supply chain management flows can be divided into three main flows:

The product flow-movement of goods

The information flow- transmitting of orders & updating delivery schedule.
The finances flow-credit terms,payment schedule.

With extension of retail supply chain will take on an increasingly important role. With
the end consumer becoming more demanding and time conscious, the need for just in
time services is increasing.

LITERATURE SURVEY

Paper Title

Methodology

Comments

SCM

Optimization,Data Modelling &

Results were analysed for

Research

Simulation

base scenarios wrt to

Journal

costs,demand volume,

Including

production volume,service

Reports By

frequency and

Graduates of

transportation costs

the
MIT Master
of Supply
Chain
Managemen
t Program
[1]
Project

Review of relevant articles and corporate

Trends influencfing the

report by

reports.Interviews with retail sector and

SCM systems were

management

consumer goods industry employees

analysed and 7 principles of

paradise on

SCM were taken into

supply chain

perspective.

management
and its
sustainibility
in consumer
goods
industry[2]

Objectives & Methodology

 To understand the importance of logistics and supply chain management in organized

retail markets.

To study on impact of logistics and supply chain management on organized retail

market.

Thus application of SCM concepts to improve materials sourcing and selection,

delivery of the nal product to consumers, and end-of-life product management using
some technical and innovative processes leading to business benefits.

It involves the raw materials,work in progress inventory and and consumer goods
from point of origin to destination

Use of the following tools:

Operational analysis

Warehouse management.

SCM pipeline review of retail chains using interviews and

available corporate

data.

Simulation methods along with forecasting

For

reducing working capital,

taking assets off the balance sheet,

accelerating cash-to-cash cycles,

increasing inventory turns, and so on

 Steps involved1. Planning the research design.

2. Selecting the research method.
3. Selecting the sampling procedure.
4. Data collection.
5. Evaluating the data.
6. Preparing and presenting the research report.

Process Flow of Research Work

Design a Questionnaire

Getting Response

Data Entry

Data Cleaning and Analyzing

Findings and Reccomendations

Details of project completed

The question given in the annexure were orally asked to store managers, management etc. of
various retail outlets across Manipal and Udupi. In order to get proper and true data regarding
merchandise management practices in retail stores of Manipal; care was taken that all
different types of retail store formats are included as sample unit.
The various formats include:
1. Chain stores like Big bazaar etc.
2. Franchise Stores like Reebok etc.
3. Single stores owned by local Businessmen like Manipal Store and Manohar Superstore
.
3. Unorganized Retail stores

Sample Question
Q 1- Do you use any standard strategies and standard tools like budget plan and open
to buy for purchasing?
In case of franchise stores and chain stores, they have their own strategic plans for capturing
market and companys management also helps these store owners in strategic planning. As all
brands have their own vision and mission so mainly these Retail store owners are also
adopting same strategies for them. While in case of single stores the owner takes all the
purchasing decisions based on the inputs from the store manger regarding purchasing trends
and preferences about the customer for previous month/s. But as all customers have their own
specialties so these retailers also have to change their strategies according to their own
localities and they make some modifications in the plan according to suit the local
circumstances.When asked about whether they use standard tools like Budget plan or open to
buy the retailers gave different responses. In case of single stores owned by fairly literate
businessman they told that some of them have no idea about such tools but then they were
told that a budget plan contains items like:
1. Monthly sales percentage distribution to season

2. Monthly sales
3. Monthly Reductions percentage distribution of sales
4. Monthly reductions
5.Beginning of the month inventory to sales ratio
6. Beginning of the month inventory
7.End of month inventory &
8. Monthly additions to inventory

While Open to Buy system consists of calculating difference between actual and the planned
sales and inventory. On hearing that what actually all this standard tools contain they told that
they also make use of all this items but not in standard for as described by us thus we can say
that this businessmen make use of such standard tool but in their own way.In case of big
retailers like lifestyle, Big-bazaar etc. they told that some of them use this tool while some of
them have their own tools which they designed for their store managers to use and plan their
merchandise. Thus we can say every retailer uses proper strategy while making purchase
decisions regarding the merchandise to be offered by the store to the customers.

Industry experts opine that in India too the large retail chains will follow the global model of
outsourcing their logistics so as to better manage complex supply chains and focus on their
core business.

For the retail chains, efficiency of logistics is critical and can indeed leverage the brand to a
great extent. The main asset retailers realize is that knowing what is selling and what is not
can improve the inventory processes. Inventory is the biggest cost factor, and if not managed
well, it can also be the biggest drain. That's why retailers and their trading partners today set
store by the inventory process and its impact.

Effective SCM enables:

Realistic ordering lead-times: Suppliers are not surprised by the next order. Retailers
respond better to demand spikes, minimize forced markdowns and avoid obsolete-inventory
costs.
Averting problems: Stores easily identify potential stock-outs and request replenishment
before the inventory drops to zero. Deciding to de-list or replace a product is easier.
Facilitating resource planning and allocation: Product forecasts and supply schedules are
easily converted to perform space planning, establish staffing needs and organise
inbound/outbound shipments. Financial experts can plan cash flow and analyse margins into
the future.

Four R's of SCM:

Follow the 4 `R's of SCM Right time, Right place, Right price, Right quantity to reap the
advantages of:
The key players in the logistics industry are gearing up to meet the challenges by initiating
both organic and inorganic growth to leverage the retail opportunity. Logistics firms have
also started focusing on related services such as Customs clearing and forwarding, inbound
warehousing, labeling and packaging, fleet management, order picking and inventory
management.
9

Cold Chain
The booming retail sector has set off growth in the cold chain segment as well. It is a highly
specialized service and caters to time sensitive and perishable items. The cold chain industry
is growing at 20-25 per cent. However, there is an urgent need to establish the necessary
infrastructure for an effective cold chain.
Excellent retail supply chain management revolves around understanding and balancing three
key dimensions of availability, inventory and cost. Managing these trade-offs efficiently can
result in supply chains that improve business performance and drive competitive advantage.
In order to enable to grow in these complex and highly competitive environment retailers
must focus on three key strategy imperatives:
Provide a high quality, differentiated customer experience by carrying the right
products, at the right price and by reducing out of stocks
Streamline and take cost out of the supply chain to maintain margins and
competitiveness by improving asset utilization, inventory visibility, and by ensuring
that each division and supply chain partner has access to a uniform source of product
and supply chain data

Identify ways to grow revenue beyond simply opening more stores by providing
assortments that are tailored to specific stores

Everyday, best-in-class retailers all over Manipal are using i2's retail software solutions to
power strategies that enable a superior, differentiated customer shopping experience, supply
chain efficiency, and revenue growth. i2's retail solutions are scalable, designed to wrap
10

around a retailers unique business process, and are modularized to enable sensible and rapid
implementations. With i2's retail solutions, retailers can:

Rapidly execute an advanced planning process that enables a differentiated superior

shopping experience, customized to the store-level and capable of enabling course
corrections in-season, while simultaneously driving inventory productivity
Optimize the structure of the supply chain to support global sourcing and lean supply
chain strategies, and also execute these strategies in the most cost efficient manner in
order to protect and grow margins
Rapidly, and cost effectively, implement and change planning and supply chain
business processes that span organizations both inside and outside the four walls of
the enterprise in order to stay ahead of the competition

Cycle view of SCM

11

Supplier

Cost

SCM STRUCTURE OF BIG BAZAAR

12

MINIMUM ORDER SIZE

13

Big Bazaar does not have any fixed order size for any particular product. Since theorder of the
product depends upon the some of the factors such as:
1.type of product
2.life of product
3.duration of transporting
4.demand etc
Order size of the Big Bazaar mainly depends upon the offers & scheme which itsgives on the particular
day.
STOCK ASSESSMENT
Order is placed once or twice in a week based on requirements of a company.There is no
such fixed period of placing an order.
ORDER PROCESSING
Floor Incharge looks after the requirements of the different sections on the floor available.
These requirements are then passed on to the team leader (TL) and based on these requirements he fill up the
requirement forms, ie, purchase order(PO). The purchase orders are signed by the department manager and
are sent to the supplier only after the prior approval of the department manager

14

WAREHOUSING IN BIG BAZAAR

15

FUTURE WORK PLANS

Study of inventory management in retail stores

Study of the following models in SCM:

Modeling for SCM

Forecasting Models
- These models allow prediction of demand based on past data or other
parameters that are independently available. They enable better
planning, given the lead-time necessary for response.

Location Models
- These models identify the optimal location of facilities such as plants and warehouses,
considering the inbound and outbound transportation costs as well as the fixed and variable
costs of operation at the locations under consideration. These are usually formulated as
Mixed Integer Programming Models.

16

 Distribution Network Design Models

- These models are usually comprehensive in nature, deciding between two, three and even
four stages of distribution network, location of warehouses and break-bulk points, and
sometimes even the transportation.

Allocation Models
- These models help in optimally allocating commodities from

sources to destinations in

a multi-source, multi-destination environment. The costs considered for optimisation are

production costs and warehousing costs. The constraints considered can be due to demand,
capacity, route restrictions, etc.

Inventory Models
- Inventory plays a major role in SCM.
- Inventory can be of various types such as:
- Batching and shipment inventories
- Buffer stocks to take care of uncertainties
- Pipeline inventory ( primary and secondary transportation )
These models minimize the total relevant cost, based on trade-offs among, inter alia,
inventory carrying cost, ordering cost, stock-out cost, transportation cost, taxes & duties, etc.

17

 Routing Models
- These models allow optimal routing on a transportation network from a given source to a
destination. The models used are the Shortest Path Problem, the Traveling Salesman Problem
and the Vehicle Routing Problem. Decision Support Systems that interactively use the
expertise of the decision maker by providing graphical support through a map (i.e., using a
Geographical Information System ) are also very useful in such decisions.

Scheduling Models
- These models enable allocation of resources to

particular activities. Depending on the

criteria of interest and the number of resources, the models are of aid in evaluating
appropriate rules for allocation.

Alternative Analysis
- This model simply proposes the identification of alternatives, criteria for decision making
and analysis of the alternatives across the criteria to arrive at the best choice. Formal
approaches such as simulation and analytic hierarchy process could be used in assessing the
implications of the criteria.

CONCLUSION
18

The role of supply chain in Indian organized retail has expanded over the years with the
boom in this industry. The growth of the Indian retail industry to a large extent depends on
supply chain, so efforts must be made by the Indian retailers to maintain it properly.
Therefore, with the generous use of Global and Local Experiences, Indian retailers are going
to improve their bottom lines with efficient, management of Supply Chain and Logistics. At
the same time, Indian retail stores like Big Bazaar are also going to show the world as to how
it can be managed in a more innovative and efficient manner.
Retail sector always indicate that all merchandise will be available under one roof and in a
hand of customers by providing time, place and possession utility to customers. So in this
regard there is total responsibility of supply chain management to make it success.

REFERENCES

19

1. International retail marketing strategy, Dr. Ramkishen. Y, Jaico Publishing House,

First Edition 2010.
2.

Exploring the supply chain Theory & Practices, Upendra Kachru, Excel Books,
Firrst Edition 2009

.
.3. www.indianretail.com
4.

www.bigbazaar.com

5. www.vishalmegamart.com
6. Johnson P. Supply chain Management: the past, the present and the future.
Journal of Manufacturing engineer 1995; 213-217

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1.1 Origin of the term: The term "Supply chain management" entered the public
domain when Keith Oliver a consultant at Booz Allen , used it in an interview for The
Financial Times in 1982. The term was slow to take hold. It gained currency in the
mid-1990s, when a flurry of articles and books came out on the subject. In the late
1990s it rose to prominence as a management term, and operations managers began
to use it in their titles with increasing regularity.
1.2 Historical Developments: Six major movements can be observed in the
evolution of supply chain management studies

21