India is amongst the fastest growing economies in the world that will see a significant population growth in influential consumers by 2020. This number is estimated to range between 350 million and 400 million by 2020, which is similar to the entire population of the United States. Many Indian consumers are looking for differentiated products. Meanwhile, there’re more than 30 million retail stores in India, which is about one store for every 100 people and that’s where the true potential of retailers lies. The only differentiating factor that will shape the growth of the industry is serving to the customers when needed in the shortest possible time and that can only happen through an EXCEPTIONAL SUPPLY CHAIN ably aided by technology & automation. This cover story reflects the vibrant side of retail and how each player is doing their bit to give this sector a MIDAS TOUCH …
Retail industry has been very disruptive over the recent years, from being just brick & mortar stores to now delivering goods to customers almost the same day, it has come a long way in the last decade. The key drivers of this change seemingly are speed, choice, price, and convenience. As Rakesh Biyani, Joint Managing Director, Future Retail Limited, aptly puts it, ‘Retail is always about detailing.’ It’s about providing better service to customers and meeting their evolving demands. And those front-end service upgrades must be crucially backed by back-end supply chain enhancements. As leading retail supply chain experts hail, over the next decade, the difference between the companies that thrive and those that fail will be which ones master the modern supply chain and which don’t.
Talking about the changing retail dynamics, Dr. Anil Chinnabhandar, Senior Vice President – Planning & Supply Chain Management, Landmark Group India, elaborates, “Omni-retail is the current trend in Indian retail. Customers have become powerful after the explosion of online retail. In apparel retail, it’s the ‘Lady with the smart phone’ who is dictating the choice around trends, variety, freshness, frequency, value for money and service levels. Customers are demanding ‘nothing but the best’ from the retailers in terms of customer experience, quality and delivery. Same day delivery, click & collect (at stores), COD, assured delivery, etc., have become the ‘norm’. Such a highly committed and responsive consumer demand obviously exerts enormous pressure on the supply chain. The modern supply chain needs to be agile right through, by ensuring that each order is treated with utmost care and acted upon within the shortest lead-times. Customers are highly aware of the processes such as Pick-Pack-Ship and expect ‘six-sigma’ level accuracies with the deliveries all the way to the last-mile.
SCM at Shoppers Stop begins and ends with customer. The guiding philosophy is to improve the organization’s performance by managing constraints and uncertainty inherent in the prevailing system. The focus is to use new tools and technique and change of mindset to manage the constraints and uncertainty. Devadas Nair, Customer Care Associate & Head – Supply Chain, Shoppers Stop Ltd., adds, “Supply chain management is the top management priority for retailers in today’s business scenario. Fierce competition is forcing retailers to respond to changes in the market quickly. This highlights the growing importance of supply chain management in managing stock availability, supplier relationships, new added value services and cost cutting. SCM is a key management function viewed to enable profitable growth in line with company’s strategic growth planning. The SCM function at Shoppers Stop coordinates and integrate all activities associated with moving products, services and information into seamless processes. This is facilitated by embracing all the partners in the chain including various departments, vendors, transporters and other service providers and necessary information system to monitor the SCM activities facilitates this.” "Retailers continue to invest in their physical stores and enable their sales associates with the right technology tools to serve as business development personnel providing the visibility and actionable insight into shoppers, inventory and other valued assets that help elevate the customer experience and strengthen operations."
FACTORS CLAMPING GROWTH
The biggest challenge in retail supply chain is to manage the supply for demand variabilities which in peak days and festivals goes more than 100% in terms of the average volumes. “Especially since we are in value retail business, ensuring that the alignment of the same happens in an agile manner, without cost over runs, adds to the challenge. Also, in a fast-growing organization like ours where our CAGR is 30%, scaling our supply chain model to meet the aspiring goals of growth and keeping all our variables within limits would be the other big challenge,” informs Srinivasan Muthukumaran, VP – Planning & Supply Chain, V-Mart Retail Ltd.
According to Amit Gupta, Head- Retail Supply Chain, Future Group, complexities in retail supply chain are more or less the same as any other industry managing huge SKUs and large transactions on a regular basis be it from vendor to DC or vendor to store, for whichever place the supply chain is set out. Future Group is quite clear on time-to-market and inventory management as those are the key cornerstones of decision making. “We should be able to connect to the shelf in the best possible time while keeping overall inventory in check. We adopt multiple strategies for different lines of businesses. For example, in fashion merchandising, we have single warehouse strategy while for food, we have multiple warehouses, much closer to consumption centres. Transport efficiency is also achieved,” he adds.
For Chinnabhandar, the biggest challenge with the omni retail supply chain is to handle the higher number of return merchandise as refused/rejected/returned by the customers. No-questions return policy by the retailers has become a norm now. Hence the retailers have to quickly get the merchandise back from the customer and make it either saleable again or salvage whatever best is left with? This activity is also putting lot of pressure as the entire activity has to be treated as an inevitable evil of the business and dealt with.
Elaborating on this, Shamsher Dewan, Sector Head - Corporate Ratings, ICRA, says, “In the retail industry, the presence of multiple SKUs with variable demand is one of the key challenges to matching the demand with the supply. In addition to the nuances of managing this, the inefficiencies in the Indian transportation network also pose its own set of challenges in matching supply with demand in a timely manner. Visibility in the time required to move a consignment from one location to another is usually limited, on account of factors like waiting time at toll booths, inter-state check posts, tax booths, entry restrictions in major cities, bad condition of roads etc.”
RIDING OVER ROUGH TIDES
While challenges are abound, leading companies are taking many unique initiatives to tide through challenging scenarios. As Chinnabhandar adds, “We are in a great position to offer a holistic solution to the omni-customer. Customer can choose to buy apparel, FW, accessories… etc., from brick & mortar stores, online, kiosks, tabs, click & collect, COD, door delivery options seamlessly. We are able to offer the entire merchandise across by using a common-single-inventory-dashboard through which customers can order any item from anywhere in the country! Even if a customer is browsing at the B&M store and wants to order an item which is available from other stores or on line, they will be ably assisted through for this sale. All of these orders get serviced by the nearest location (Fulfillment center) with fastest delivery schedules. Customers can choose to order a click & collect at 220 stores across the country on a given time slot. Similarly, customers may also choose to return the merchandise physically to these stores which is highly convenient for returns or exchange. Overall the Omni retail is being embraced by every function to ensure an absolute customer delight!”
Talking about V Mart’s offerings, Muthukumaran, says, “We focus on each part of the value chain right from the vendor (and further on) till the customer, and see how they can be further optimized by having technology and process interventions. Also having a pro-active approach and ensuring that there is focus on reducing the variability between plan and actuals helps a lot. Increasing efficiency with technology and improving productivity with automations, help to take more out of the current eco system. Building systems, processes and infrastructure which take into account the future growth plans and do course correction wherever required help in keeping the operations commensurate with the growth requirements.”
Forward thinking merchants are investing in technology solutions — from radio frequency identification tags that boost inventory accuracy to sensors that beam consumers personalized offers — to overhaul merchants upended by digital disruption, according to Zebra’s 2017 Global Retail Vision Study. Indeed, the technology revolution that continues to unfurl is changing the shopping expectations of shoppers young and old. And consumers, who have grown accustomed to the convenience, speed and personalization of online shopping (think product recommendation engines), are now demanding the same of their in-store journeys, and as they shop both bricks and clicks.
Out-of-stock inventory at a retailer will quickly send Millennials — who’ve come of age amid an endless aisle of merchandise online — running to another brand. And inventory holes are a recipe for eroding shopper loyalty across demographic groups.
On the criticality of opting for the right IT solutions, Gupta highlights that managing single warehouse strategy for such a large country can only be possible through adoption of technology & automation. “We have the capability of managing a few million garments a year through the Nagpur facility. It’s not only garments, we have our own upholstery brand which is being operated out of Nagpur warehouse, which have slower inventory turns. We are able to manage average connectivity of 4-5 days owing to technology adoption and it gives us huge advantage in terms of inventory optimization. We don’t have the challenge of inventory lying in the North vis-a-vis where it's required the most.”
Chinnabhandar adds, “Right from sourcing activities, all the way to the store shelves we use a host of technology and tools. We are also updating our technology tool continuously to be at par with the market needs. Some examples of technology reside around enterprise management (ERP), warehouse management, supplier management, distribution management, planning, labor, slotting and various business intelligence tools.”
Warehouse automation and integrated business planning are the main focus areas for Landmark. “We have been building highly automated warehouses, which can deliver 3X to 5X during peak seasons. We have also been training our staff to adapt to such technology driven productivity based operations to complement the automated workplaces. Integrated business planning suite would help us plan better, source quickly and reach our customers quickly and safely. As India being such a diverse country with competing trends and tastes, it’s very important for apparel retailers to remain ‘in touch’ with customer needs. Series of design, product development, product presentation, visual management, digital payment options and fulfillment technology-tools are also under rollout,” Chinnabhandar adds.
Agrees Muthukumaran, “Since we believe that our supply chain is unique, and we are taking an unchartered path, we implement the ‘best of breed’ technologies, which would meet our requirements rather than take a complete suite of applications. We further integrate them to meet our requirements. We have an Oracle based ERP solution and are in the process of implementing a merchandise planning solution, which would get integrated to the home-grown allocation tool. We have implemented and streamlined the best-in-class retail WMS solution and to top it have started adopting n off the shelf retails specific BI platform. Though the architecture is complex, it gives us the flexibility to get the solutions to meet our needs rather than the market needs.”
According to Nair, lot of technological interventions have been taking place at Shoppers Stop, which would aid them in attaining their vision of being a truly omni-channel company. For the company, digital evolution relates to the application of digital technologies across three main functions: Customer Experience and service (both online and offline), Merchandise and Supply Chain Management and Customer Analytics. “We have made significant investments in multiple technologies such as Warehouse Management System(WMS), Order Management System, CRM, Master Data Management, etc., to enable single view of the customers. This will allow us to provide our customers with a contextual, targeted, personalized and integrated shopping experience. With warehouses in Mumbai, Bangalore, Kolkata, and Delhi, we wanted to build certain capabilities for the digital future. We had a powerful warehousing solution that met the demands of the varied distribution environment in which we operate. But we wanted an integrated, optimized and feature-rich WMS to help achieve our omni-channel vision. So, we deployed the new WMS solution in January 2017. The project has reduced warehouse operating costs, 24x7 warehousing operations have reduced the store replenishment cycle time drastically, systemized put-away has ensured a 30% increase in order picking accuracy while also leading to an overall inventory accuracy.”
Adding further, he says, “We also implemented a Master Data Management solution. The procurement process will gather data and digital content from Shoppers Stop’s vendors through a standardized process; merchandising will be able to quickly grow the portfolio of private and exclusive brands with rich content for every product feature. Between the Warehouse Management System, the Order Management System, Master Data Management, and Customer Relationship Management – there are multiple data points and data flows that need to be streamlined and unified across the channel. An Enterprise Service Bus was needed to process this data swiftly and accurately across channels. In order to address this requirement, we are adopting Enterprise Service Bus. We have last 2 decades’ data with us as far as demand planning is concerned. We exactly know customers’ requirements based on the past data. We also can calculate like-tolike growth for each store.”
3PLs DRIVING GROWTH
This journey would be incomplete if 3PLs aren’t taking into consideration. Says Muthukumaran, “Currently, 3PL plays a major role in our warehouse operations and outbound logistics. Our expectation from 3PL partners is to ensure that they retain skilled manpower and maintain overall turnaround time in warehouse fulfillment operations. We expect the 3PL logistics partners to commit on meeting the agreed delivery timelines and cost, so that store serviceability is maintained.” For Landmark Group, 3PLs play an important role in their business. “They offer an integral extension of services arm for us across the country. Both warehousing and distribution activities are dependent on the capabilities of these 3PL service partners across 8 warehouses and 250 stores. We grow together, and the least expectation is that they partner with us on this journey of building highly capable and productive operations. It’s about building capacity, competency and collaborative logistics capabilities in the country,” informs Chinnabhandar.
Dewan highlights that to have a successful e-commerce platform, it is important for the retailers to ensure that customers receive goods in the shortest possible time and the cost of shipment is low or for free. To do this, the retailers can outsource the supply chain to 3PLs who will manage all aspects including inventory management at warehousing and transport. 3PLs have established relationship in the logistics sector and have expertise in managing different supply chain functions.
According to Gupta, retail is about connectivity and inventory management. Once you manage both well, you have won half the battle. Timely connectivity and being involved in the business objective are two key parameters based on which a 3PL is selected by any retailer. Having the infrastructure & resources aligned to match the future requirements will what set them apart from the rest.
To win over customers, companies have been taking various innovative measures. In line with this, Chinnabhandar offers a sneak peek into their unique endeavors… “We have been able to scale up our infrastructure at the backend. All our fulfillment centers are equipped with smart gadgets, sorting systems, stricter quality control and accurate order processing mechanisms. We have deployed tech tools right across the value chain. Suppliers are mandated to use vendor portals while processing the orders and to scan & supply quality assured merchandise. Smart cross-docking, usage of Put- To-Light sortation systems to ‘pre-build’ ‘store-ready’ merchandise gives higher efficiencies. We deploy multiple strategies in picking, packing and shipping to ensure timely supplies for both season launches as well as Replenishments. Custom made delivery apps ensure timely deliveries with minimal errors or conflicts between warehouses and retail outlets. Omni orders are serviced by dedicated team of fulfillment centers and delivery partners. Entire back end teams are trained regularly and encouraged to practice doing ‘first-time-right’ as the mantra across the back end.”
For V-Mart, ‘Every day’ innovation is the key – how do we manage to keep the entrepreneurial spirit alive in the team at the same time have control over processes and systems, is the key to nurture that spirit. “If we talk about some of the innovations in supply chain, I would highlight the unique sorting mechanism and merchandise returns management through optimal mix of technology and insights. This has been unique and new to the industry and it reduces the processing cost, helps in processing faster. Our home-grown allocation tool has been designed to be reactive and responsive to customer demand at stores. This has been built on a flexible platform so that any logics or algorithms based on the change in business need, can be relatively easily incorporated,” Muthukumaran adds.
The future winners are those organizations that have a supply chain that can cater to specific customer needs and are very agile to the changes that happen in the market. This is especially true for players like V-Mart who are in the fashion segment supply chain needs. “We have been fast catching the trends in supply chain innovations and would implement them at some point of time,” Muthukumaran asserts. Micro-segmentation is the key to success, aligning the microsegmentation with supply chain in terms of planning and buying and pass on the value to the customer. Embedding of AI in mainstream supply chain activities is another area where retail companies must focus to lead the race.
For the retail pioneer Future Group, logistics is what forms the backbone to the entire science of retailing. “We have always been front-runners when ensuring the strength and consistency of our supply chain. We have been the pioneers in adopting bar-coding as a key component in keeping our supply chain efficient. We recently launched a distribution center in Nagpur which is the largest in the whole of Asia Pacific region, barring China. We boast India’s first automated high-speed cross-belt sortation technology, which has an incredible sorting productivity of over 36 crore pieces per annum. This sorting capacity has an accuracy of over 99%. In fact, our newly-installed sortation system comprises a cross belt tray sorter, enabled with approximately 2.5 km of conveyor system. This sortation system will make the delivery of the stock to the store a faster process, benefitting all the stakeholders involved in the process,” highlights Biyani.