“We are working on ‘SCM 2.0’ strategy, which includes co-innovation and supply chain design. Digitalization is only one part of this growth phase, which has just begun, and we are only starting to see the impact that digital transformation will have on business. We will focus on technical capabilities and infrastructure in our supply chain as we move ahead,” shares Vijay Wadhwani, Asst. Vice President – Supply Chain Management, Relaxo Footwears Limited, during an exclusive interview…
From just a single product in 1976, Relaxo has come a long way today. How has supply chain contributed towards this growth?
There are many parameters a company may use to measure its growth. We at ‘Relaxo Footwears’, besides profitability and financial numbers, focus on physical expansion by having large number of variety footwear in different sizes and colors as well as in increasing market share. One of the most critical factors in driving profitable growth and expansion is customer service and most importantly, customer satisfaction. Customer satisfaction is highly dependent on supply chain and to be successful, your business must manage its supply chain with that in mind. Customer must be the primary focus when considering supply chain strategy, network design, and performance management.
The last 42 years has seen us growing from North India focussed sales to pan India with equal sales contribution and then going global to become Asia’s largest footwear manufacturing company. This growth has only been possible because of an exceptional supply chain, which has constantly been steering the company towards the fastest growth trajectory. To enable such a fantastic growth, we introduced the concept of mother warehouse, FOR basis transportation in which we rationalized our number of transporters, started dealing with organized transporters direct from company and started delivering goods at the customer’s doorstep. Alongside, we also introduced RDCs (Regional Distribution Centres) for efficient and timely deliveries to distant states’ customers. We ensured better production planning and inventory management through effective SAP based computer software, inventory in and out through barcode scanning as well as introduced SAP based despatch and transport management modules.
How complex is the supply chain in this industry? How do you manage the supply chain complexities at Relaxo?
Supply chain complexity is relative to a variety of factors such as rising customers’ expectation for faster lead times, expanding products & services portfolio as well as ensuring a tailored experience. To deliver unique orders for each customer across the supply chain, greater collaboration with suppliers is needed, which calls for deeper visibility and control in the entire supply chain function.
With the expanding businesses and geographies, we are adding a ton of complexity in our supply chain. At Relaxo, we mainly deal with high-volume low-cost products, lightweight products, and our customers are spread in more than 600 towns across India. So, timely delivery in the lowest possible cost to our distant customers is a big challenge because our production set up is in North India. Our plants are located in Bahadurgarh, Haryana, Bhiwadi, Rajasthan and Hardwar, Uttarakhand. At present, we are dealing with large number of SKUs, which are changing frequently as footwear business has become a part of the fashion industry. Besides, sale of SKUs comes in 80:20 ratio i.e., 20% SKUs contribute 80% sales. As part of the continuous evolution process, we have decided to open RDCs to address the requirements of distant places at optimal cost and in the least possible time.
What are the pillars on which the success of Relaxo supply chain rests?
I would like to emphasize here that devoted employees and great teamwork is what successful organizations are made of. To harness these traits, we thrust a lot on values and culture, percolating from top to down. We are working towards capturing share of unorganized & semi-organized sectors, as well as expanding business through e-commerce platform, retails, omnichannel retail, etc. We are working on what we call ‘SCM 2.0’ strategy, which includes co-innovation and supply chain design. The digitalization is one part of this growth phase, which has just begun, and we are only starting to see the impact that digital transformation will have on business. We will focus on technical capabilities and infrastructure in our supply chain as we move ahead.
You have been a part of this fast-growing organization for more than a decade. How has the transformation been over the years?
Transformation is a common term in business. Companies apply it loosely, to any form of change. Strategic transformation implies a change in the business model. The term transformation is also increasingly used for a digital reinvention. The most important starting point of a transformation and the best predictor of success is the CEO who recognizes that only a new approach will dramatically improve the company’s performance. Here I would like to mention that the leadership style of our CEO, Mr Ramesh Kumar Dua, is a classic example of transformational leadership. His is the leadership style in which leaders encourage, inspire and motivate employees to innovate and create change that will help grow and shape the future success of the company. This is accomplished by setting an example at the executive level through a strong sense of corporate culture, employee ownership and independence in the workplace. He inspires and motivates workforce without micromanaging, he trusts trained employees to take authority over decisions in their assigned jobs. Employees on the leadership track are also prepared to become transformational leaders through continuous mentorship and training.
What are the major milestones you have achieved during the journey?
In my journey of 12 years at Relaxo, I have seen tremendous growth in the company in every function be it manufacturing, finance, sales & marketing, procurement, supply chain, etc., besides working on a highly effective IT network. During my stint, the annual sales has grown from 200 crore to 2500 crore and expecting further increase considering our stronghold and the market potential. The number of highly sophisticated manufacturing plants have expanded from three to ten, whereas the production capacity has increased to 7 lakh pairs per day and set to touch a million soon.
How do you maintain a close connect with your partners – dealers & distributors to enhance your market share?
More than 80% of our business happens through wholesale dealers. We provide our dealers with mutually beneficial tools and resources that help them become stronger businesspeople, more knowledgeable brand experts and better sellers. As we continuously keep finding new markets, develop dealers’ network, we provide regular communication related to supplies and other related information. We provide them with all the possible sales support and arrange regular programmes at local and national levels. In line with this, we organize Hall of Fame, a platform for introducing new product developments, company schemes, etc. During this exercise, we also get the opportunity to talk to them on their grievances and suggestions with a view to further expand our reach.
What are the measures you have taken to streamline the supply chain?
In the present economic environment, what strategy you were adopting earlier may not work in the future. Today supply chain managers are under tremendous pressure to contain costs and deliver results amid challenging circumstances. Considering the present circumstances, government policies, tax structure for footwear, we have decided to have mother warehouses within the state where the plant is located, and nearer to the plant to minimize cost. We have also reviewed the performance of RDCs. Post GST, as the state boundaries have practically vanished; we are thinking to merge the RDCs to achieve better operational cost.
What has been one of the most challenging projects for you at Relaxo?
In transportation, we are working with large number of transporters, some of them are organized, while some are semi-organized, including local players. In my experience, there is no single transporter who can work pan-India for both PTL (part truckload) and FTL (full truckload). Today in numbers, we have approximately 120 transporters for outbound logistics, which includes local transports as well as upcountry transport.
For handling our entire transport service, we were using effective ‘Transport Module’, which is linked with SAP. We, however, were facing challenges in negotiating FTL rates, which keep on fluctuating basis seasons, demand and supply. We then introduced E-bidding process, which has been quite effective in reaching out to large number of vendors and getting competitive rates.
How do you plan to take on the growing competition in this space on the back of an unparalleled supply chain?
Supply chains are no longer simple chains of a few vendors and customers. They are often complex networks with many participants. Goods flow, right from the raw material to finished goods for end users, is not based on fixed long-term agreement, but on actual capability, capacity and cost. Multi-plant planning has now become real-time. Visibility and transparency of all the supply chain activities are key to the successful delivery of the perfect order to the final customer. In the event of more connected supply chains to compete, we start with sensing and responding to real-time demand, supply and delivery constraints. Bringing together data from different sources, our agile supply chain enables us to use data in real time to drive smarter decisions.
Is supply chain turning out to be attractive for new age professionals?
Supply chain is the single most important business discipline in the world today and has only gotten more interconnected. The importance of a well-run supply chain cannot be overstated, supply chain management today streamlines everything from product flow to unexpected natural disasters. Logistics of a large company is managed completely by supply chain managers. With an effective SCM, organizations can diagnose problems and disruptions correctly.
Many organizations lack in the risk management sector due to not being able to effectively deal with potential problems. Many potential saving opportunities open once an effective SCM gets integrated into a company or network of companies.
So, a wide variety of opportunities available throughout the supply chain stand out as a key reason for young professionals to study and be a part of this ever-evolving supply chain profession.
What are the existing gaps in the supply chain network of the country and how can they be resolved?
India is the fourth largest supply chain market in the world. Indian industry, overall, faces a fierce competitive and volatile environment with globalization of businesses. The infrastructural bottlenecks, increasing uncertainty of supply chain networks, shortening of product life cycles and issues related to choosing and working right supply chain partners, nurturing trust between them and designing the right system of measuring performance are some of the major aspects that demand urgent attention from the stakeholders. The globalized era and changing economies have made it essential for the supply chain organizations to develop strategies that make available differentiated value to the customer at the optimum cost. Varied & comprehensive logistics expertise and human resource is the need for the service providers.
A training and education curriculum needs to be set up at the management course level to meet pre-determined skill sets required by the industry. Logistics, being service-oriented, can only be efficient with the efficiency of its lowest level employee. From the bottom to the top, a change in the efficiencies of personnel will drive the growth of the industry, and allow Indian businesses to excel to greater heights domestically and globally.
What’s the future plan of action for Relaxo and is supply chain being aligned with the objective?
With a view to further optimize our supply chain, at present we are working on two aspects – warehouse automation for our large-scale mother warehouse; and outsource our outbound logistics function. In warehouse automation, people have a very different idea of what warehouse automation is. From robots to automated processes, warehouse automation encompasses automated technologies that promise to increase productivity rapidly.
Secondly, outsourcing logistics functions helps in minimizing overall cost, as well as helps companies focus on its core competencies, meet customer demands more effectively and avail greater flexibility in maintaining and opening its supply chain. With outsourcing, if integration is taken care of and the third party has expertise and prior experience in managing the function of the organization, SCM can provide strategic advantage.
But in totality, in both the above requirements, we also understand that both should be optimally given priority basis our business requirements. In the sense that we can’t go for big bang automation techniques if they don’t suit our business requirements as they come at a certain cost. Similarly, for outsourcing, we understand that no one company can handle both warehousing and transportation together for pan- India, so we have to carefully examine and delegate the task to multi-vendors as per their expertise that can be zone wise.
What do you have to say about the government policies to boost the growth of the industry?
As a traditionally labor intensive sector, the footwear industry in India is currently transforming towards a more technological and innovation driven sector, with the increasing number of small and big footwear manufacturers focusing more on developing newer technologies and introducing better products. Today, India’s footwear industry has evolved into a highly specialized industry, where machine production with a systematic labor flow is facilitating the industry to an international level.
The government support is another crucial factor for the future development in India’s footwear industry. More than 75% of the market is in the hands of unorganized sector that does not come under tax regime. Newly implemented GST is encouraging the organized sector. Government earlier reduced rates of GST – 5% for product below `500; and 18% for products priced above `500. This huge differential rate impacts the sales of branded footwear sellers. Now, government has announced 5% for `1000 WSP, which we feel, would be quite beneficial to the industry.
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