Home Retail The role of supply chain management in today’s retail scenario

The role of supply chain management in today’s retail scenario

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With the retail market growing vigorously, retailers across the nation are ideating on how to make the best of the opportunities at hand. Supply chain management plays a vital role in the entire process. We talked to the SCM heads of some of the prominent retail chains in the country to discuss how they are beefing up supply chain management efficiencies — the changes that should be implemented, and the improvisations to keep retail on an all-time high.

The role of SCM in retail scenario of today
The warehousing, manufacturing and logistics industries will benefit the most from the implementation of GST in India and the new tax regime will also usher in an era of upgradation in the warehousing infrastructure

Importance of Time Definite SCM Service for Retailers

With an all-round boom in the retail sector, the psyche of the consumers is also rapidly evolving. Consumers today, know what they like, go for what they want, and expect impeccable services. This consumer evolution has stirred the retail sector and to keep up with the pace; retailers are coming up with ways to minimise the operational cost as much as they can, without hampering the quality of product, time management and keeping up with the demand forecasting.

Providing the right product at the right time is the need of the hour. Management of the transition of products from manufacturing to the point-of sales is key. Achieving this by itself would ensure the smooth functioning of any retail organisation. From planning of inventory, transition of products and the point of sales, SCM deals with the proper control of it all. A slight shift for the worse to any of the processes in the supply chain could cause dissatisfaction of consumers and lead to major risks in business.

“Availability of stock on shelves is the single largest success factor for a retail business. Timely delivery of products and faster replenishment requires time bound logistic services. Time definite logistic service is critical for any grocery retail business, particular dairy and F&B sectors, but not so critical for apparel retail business,” says Asst Vice President – Supply Chain Management, Aditya Birla Fashion and Retail Ltd – Pantaloons, .

He further adds, “With e-commerce and Omnichannel players competing in the market place, retailers are indeed getting more and more conscious about time definite logistic service.”

Head IT and Supply Chain, Bestseller Retail India Pvt Ltd, Ranjan Sharma says, “We have weekly new launches and the entire supply chain is geared to meet those dates as a lot of planning is involved in it and any misses cost us heavily.”

It is key for retailers to come up new strategies and re-evaluate with their supply chain and modes of distribution. With SCM in place the retailer is able to monetise on new and upcoming trends with a faster pace and avoid the other risks usually faced.

Resonating the same, General Manager & Head – Logistics, Raymond, says, “Retailers are becoming more conscious nowadays because it’s directly linked with secondary sale. More efficient and timely logistics services can help retailers fetch better sell thrust especially for ‘Fresh Sale’, which is already under pressure due to extended EOSS window every season/year.”

Revising the Supply Chain Practices in Omnichannel Era

The consumer today is driving the need for transformation in Omnichannel retail supply chains. The buyers have all the power in today’s market. They are demanding more options and leveraging retailers against each other to get the best value for their money. A competitive retail environment is leading retailers to opt for an Omnichannel strategy. Retailers are working towards seamlessly integrating their distribution channels to improve visibility into inventory and serve their customers in a better way.

Talking about how supply chain mechanics are changing in the digital age, with retailers going Omnichannel way, Vice President – Marketing, , Vineet Kanaujia says, “Development of a profitable Omnichannel supply chain strategy requires analysing the business from top
to bottom. We need to look at the retailer’s market strategy, the Omnichannel operating model and execution enablers. Being the supply chain and logistics industry leader, Safexpress has created 30 ultra-modern Logistics Parks, pan-India network covering every square inch of India, and backed the same with world-class systems, processes, human resources, fleet and IT infrastructure.”

The mechanics of logistics is constantly evolving and today as the world is more connected than ever, there is a need for real time integration across channels. Resonating the same fact, CEO and Whole Time Director, , P. C. Sharma says, “ At we are constantly tracking the movement of goods on a real time basis and we also look at online response management (ORM) as a critical mechanism to address the consumer through the social network. We have uniformly deployed content across platforms such as our website, catalogues, brochures, Facebook page, Twitter and LinkedIn, to ensure common messaging. We also follow package scanning through barcode technology such as HPT (Hand Pallet Truck), Pallets and Forklifts. This provides accuracy in the operations and real-time tracking of the shipments at packet level.”

The path to purchase is becoming more complex amidst the ever-burgeoning growth of online and mobile shopping. According to Zebra’s 2017 Retail Vision Study (RVS), superior Omnichannel support requires 90 per cent inventory accuracy. As a result, inventory accuracy is more critical than ever as products from both brick-and-mortar and digital channels flow through the pipeline.

Talking on the same, Regional Sales Director – India, , says, “Omnichannel retailing has become a necessity more than a requirement as consumers today are digitally empowered. Consumers can virtually tap into every retailer’s stockroom from their mobile device to search for products and compare prices. To meet this demand, retailers are adopting technology solutions to heighten merchandise visibility throughout the supply chain, from the time inventory is shipped from the warehouse and received in a store’s back room to when it’s stocked and replenished on the sales floor.

Agarwal, adds, “The rise of online shopping has trained consumers to demand unprecedented convenience. Retailers today, must be nimble enough to serve their multi-channel shopping journeys seamlessly. Around the globe, retailers are investing in IoT technologies to redefine their operations and the shopper experience. Merchants are reinventing their supply chains with upgrades that enable automated, real-time inventory visibility via Internet of Things (IoT), such as RFID, which can boost inventory accuracy levels to as high as 95 per cent.”

Talking from an e-commerce perspective, CEO, , Venkat Nott says, “Customers today do not like to wait for the products they buy. However most of them do not like to pay more for express service. A paid service for fast shipments is likely to work well for retailers. Marketplaces have set the standard already and have invested in products not just to streamline their order management processes and to have real time inventory in stores and warehouses but also predictive analytics in terms of what products to carry in which store and keeping the right products in warehouses close to the buyer.”

Further talking about Vinculum services, he says, “Vinculum has cutting edge products to facilitate Omnichannel retailing and provides real time view of inventory across the supply chain using our Vin eRetail suite of products.”

Retailer’s Perspective on Omnichannel

Retail is going omnichannel and meeting the supply chain needs of this new environment is a major challenge. Talking on this aspect, Chugh says, “Yes, it’s true that retail is going Omnichannel and meeting the needs of this new environment is a big challenge. Since this is the need of the hour and must be implemented to get the better sales. We are also working on this but at very initial stage as of now.”

Khetan, says, “If you cannot beat them, join them! Ominchannel is the future and no retail organisation can stay away from entering into it. We have started selling online through prominent e-commerce players like , Flipkart etc, in addition to creating our own Omnichannel platform.”

“We are going through a lot of technology intervention which includes bringing together different portals and market places to converge to one system at store for execution with realtime integration of inventory and logistics. We have already gone live across all our stores for Tata Cliq since October 1, 2016 and will be live on our brand websites by the end of June,” says, Sharma, from Bestseller.

Forecasting Techniques and Methodologies

Traditionally, retailers have not been able to predict the demand, leading to a mismatch between demand and supply, thereby affecting profitability. Even though forecasting techniques and methodology have continued to develop in sophistication, they cannot deliver the accuracy required for managing logistics in the context of the retail scenario. The answer to these problems lies not in better forecasts, but in reducing the dependency on forecast and by harnessing the potential of modern logistics services.

Talking on the same, Sharma from Bestseller, says, “We are fast fashion brands and we have to spot trend way ahead of time. Then we get into sampling and manufacturing cycle which is also very long. Though modern logistic services definitely help to reduce the overall time to make the merchandise available but the same cannot replace the art of demand forecasting. But at the same time if the entire sourcing strategy and manufacturing is aligned well then smaller sample sets could be developed and on their success large scale manufacturing could be done thus reducing the risk.”

Chugh of Raymond, opines, “Answer to these supply chain related problem lies not in better forecasts, but in reducing the dependency on forecast and by harnessing the potential of modern logistics services. Combination of both i.e., better forecast as well as usage of modern logistics services will give much better results. None of these two components alone can generate better yield or desired results.”

“Best demand forecast accuracy is considered to be at 50-60 per cent. So, supply chain has to mitigate the risks associated with about half of the inaccurate demand forecast in any industry, which results in high or low safety stock, stock outs and loss of sale. Quick turnaround of unsold or obsolete stock and faster replenishment of high selling stock from manufacturing location to point of sale is the key to success of retail business which is achievable through harnessing the potential of modern logistics services,” states Khetan of ABRL.

Innovations that Inextricably Links SCM and Retail

India has occupied a remarkable position in global retail rankings. The Indian retail industry is one of the fastest growing in the world. India’s retail sector is experiencing exponential growth, with retail development taking place not just in major cities and metros, but also in Tier-II and Tier-III cities.

Talking about the innovations that is happening in the space of supply chain management, Kanaujia, says, “Emerging trends like making the supply chains digital, increasing the role of procurement in supply chain, increasing collaboration for efficient supply chain management, etc., will be the major factors driving growth in the organised retail market in India. Being the industry leader, our role is very vital in bringing about the global standards to India. We are proactively working towards hastening this change in our industry and taking it to a different level.”

Future Supply Chain Solutions Limited, has recently inaugurated a High Speed Cross Belt Sortation Technology, at its distribution centre at Mihan, Nagpur.

This new technology, being first of its kind in India, is touted to be a game changer and a stepping stone, making it India’s most automated first of- its-kind.

Talking about this new innovative SCM facility, Group CEO, Future Group, says, “This distribution center will be a milestone in the Indian warehousing sector. With the brilliant technology used in the Sorting system at the DC along with the individually coordinated system solutions, we can ensure the highest level of service to the consumers of the nation.”

The elevated technological quotient in the sector and India is already witnessing the importance of big data and IoT in the logistics sector. Even while technology is evolving, we do not see a divide but co-existence of manpower with technology to move ahead to the next level.

Putting things in perspective, Sharma of TCIExpress, says, “Some of the trends and practices which are already in play in the global markets includes robotics, automation and unmanned aerial vehicles/drones. We use piece level scanning through RFID/ barcode technology. It is noticeable that this technology is widely used by manufacturers and retailers in modern trade segment. We being future-ready have technologically adapted to this need and are in sync with Industry demand.”

Talking about some of the SCM best practices adoption, Khetan, says, “There had been quite a few best SCM practices adopted by us, key ones being: use of warehouse management system (WMS) coupled with RFID technology turning our warehouses into paperless operation, Auto replenishment system (ARS), ensuring faster replenishment of stock to the stores and Vendor portal for auto approvals of shipment requests from vendor.”

Divulging the details of SCM innovative practices that has helped Raymond in staying ahead in the game, Chugh, says, “Layout restructuring, current season stock kept on ground floor and previous season stock moved to first and second floors based on the ageing. This helped us in increasing picking productivity; man power deployment based on season/ month wise load helped us in cost reduction of WH transactions/piece; working on Auto LSP selection program which help us in significant reduction of the
logistics cost/ piece; manual processes converted to system based programs which helped in hassle and error free work.”

Customer Care Associate & Head-Supply Chain and Mission Control, , Devadas Nair says, “Supply chain in Shoppers Stop coordinate and integrate all activities associated with moving products, services and information into a seamless process by embracing all partners in the chain including various departments, vendors, carriers and other service providers.”

Further talking about the innovative SCM practices, which they have adopted, he says, “Regionalised distribution centre operation, which helps us to manage the inventory better; distribution centre management is outsourced and independently handled by logistic partners; implemented advance warehouse management system with Omnihannel capabilities; same-day turnaround across DCs. Some of the fast moving products are delivered directly to the stores to ensure faster availability; sales and stocks information are provided to vendors on a daily basis so that they can be proactive.”

Keeping Business Seamless Even During Peak Seasons

Managing fluctuations in demand during peak and seasonal requirements is a
must for every retailer. Talking about the same, Khetan, says, “There is a separate forecast for peak and seasonal requirement which is aligned with capacities at each node of supply chain, right from transporters’ hubs to warehouse capacities for transaction as well as storage.”

“We start building up stock at the DC and retail points well in advance so as to reduce the spike in demand. We also cross train people to handle loads during peak seasons in multiple shifts,” says, Sharma from Bestseller.

Lot of automation devices/ equipment are being used in International SCM industry which reduces the dependency on labour. It helps on improving the productivity as well as reduction of manual errors. Talking in the same context, Chugh, says, “We plan the manpower in such a way that during non-peak months/ seasons, we reduce the unskilled labour but we don’t touch the skilled labour. We cover up the additional workloads by doing over time by extending working hours on normal days and working on Sunday, as and when required.”

Role of GST in Improving Logistics/ SCM Conditions in India

The proposed model of GST brings to the Indian economy the promise of becoming more competitive in a global market, with a better tax environment to conduct business in India. The new tax regime will result in a seamless integration of goods and services transactions across the states and will have a positive impact across the retail value chain.

According to JLL India, the (GST) and Real Estate Investment Trusts (REITs) are soon going to be a reality in India. These, coupled with a growing demand for quality warehouses by the industry, are expected to lead to an increase of Grade-A and Grade-B warehousing stock across the country in the next few years.

According to CEO & Country Head, JLL India, Ramesh Nair, “In terms of y-o-y increase, the Grade-A stock in 2016 rose by 27 per cent compared to the more modest 11 per cent increase in Grade-B stock. The corresponding figures for 2017 are expected to be 29 per cent and 14 per cent, respectively. This not only shows a growing stock of organised warehouses in the country but also a growing preference for Grade-A warehousing space.”

City-Wise Impact (Source JLL India)
– Delhi-NCR had the maximum warehousing stock in 2016 (29.3 mn sft), followed by
– Mumbai Metropolitan Region (20.5 mn sft)
– Bangalore (17.5 mn sft)
– Pune (12.8 mn sft) and
– Chennai (10.4 mn sft)

Cities like Kolkata, Hyderabad and Ahmedabad all have smaller stocks of warehousing space. Except for Pune and Chennai, all other cities have a bigger Grade-B warehousing stock than Grade-A.

Moreover, the difference between these two stocks is glaring in Delhi-NCR and Mumbai. In terms of highest Grade-A and Grade-B warehouse rentals, Pune and Chennai lead the way due to proximity to manufacturing hubs and local market dynamics. These two cities are followed by the bigger metros of Mumbai and Delhi-NCR. Other cities such as Bangalore, Ahmedabad, Kolkata and Hyderabad have lower rentals for both Grade-A and Grade-B warehouses.

The warehousing, manufacturing and logistics industries will benefit the most from the implementation of GST in India and the new tax regime will also usher in an era of upgradation in the warehousing infrastructure. While the existing eight cities (mentioned above) are expected to retain their leading positions after GST rollout, India will also witness the emergence of at least 12 new feeder/ warehousing spoke locations.

Talking about the impact of GST on the logistics and SCM sector, Kanujia, says, “With the GST being implemented, a common market for all goods and services will be created. The removal of several state level taxes will result in an absolutely unambiguous taxation system and reduce the overall cost of handling goods and services. The procurement of raw materials would become less complicated, which will create opportunities for more suppliers and vendors. Due to this, a wider base of distributors would be available
as interstate movement paperwork will not be a hurdle, resulting in better access and low transportation costs. Supply chain efficiencies are expected to improve with standardization of tax structures across states. This is expected to have a positive impact on retailers. GST will result in reduction of the overall tax burden on products and services, leading to a boost in demand. Warehousing decisions will no longer be dictated by the comparative tax advantages of various states, thereby enabling retail firms to make business decisions based on supply chain dynamics. This would result in economies of scale and improved efficiency.”

From the operations point of view, it will allow for seamless flow of goods and services across states. With the implementation of GST, multiple check posts and entry points may be removed or reduced leading to increase in efficiency and time definite delivery.

“Definitely, the implementation of GST on retail sector has a positive impact from both taxation and overall operations. From taxation point of view, it would bring down the overall indirect taxes which is 30 per cent according to present tax structure. This includes a range of taxes such as excise duty, VAT, CST, tax on warehousing, rent, octroi and entry tax,” says, Sharma from TCIExpress.

Echoing the similar sentiments on how GST will up the retail value chain, Khetan says, “Absolutely yes! Apart from warehouse consolidation, there are many other positive impacts of GST like: reduction of time at check posts due to road permits and way bills; lesser documentation resulting in reduction in lead times; feasibility of implementation of automation due to large central warehouses, thereby improving productivity.

Giving a critical stand on GST Sharma from Bestseller, opined, “To some extent it reduces inefficiencies in the current system but at the same time the current draft will make it complex.” In his concluding remark, Chugh resonated Sharma’s critical standpoint on GST, saying, “I can’t say as of now. It will depend upon the percentage of GST levied on each sector v/s existing tax structure. Some sectors might benefit and some may not. Once the GST is implemented fully, we can review and confirm the final implications.”