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Study On Shoppers Stop
Study On Shoppers Stop
Objectives
To understand Procurement pattern of shoppers stop One of the fastest growing departmental stores One of the only stores to implement ERP and Supply chain management To Understand the Procurement pattern of Akbarallys the oldest departmental store in Mumbai To compare and contrast the 2 models and identify problem areas Give suggestions to Akbarallys by benchmarking Shoppers Stop
Methodology
Interview were conducted of approximately 70 minutes each with the following designated individuals Purchase Manager Merchandise manager Logistics Manager
References
Mr.Devdas- Logistics Head Shoppers Stop Mr.Gopal Head Mens Division Shoppers Stop Mr.Yunus Purchase Manager Akbarallys
It operates with 90 departments handling around 450 brands managing a combined footfall of over 20,000 customers each day. Shoppers Stop Motto: "We are responsible for the goods we sell". Top Management Shoppers' Stop is headed by Mr. B.S. Nagesh, Customer Care Associate, Managing Director & CEO. The company has recruited top line professionals with hardcore retail experience from the leading companies in India and the UK. Hierarchy in the logistics department Director Buying and Merchandising Supply chain management head Manager logistics and distribution Distribution Coordinator (link between SS and DCs) Four Distribution Centres Operating costs The logistics cost equals to 1% of the total turnover and includes the follow expenses Warehousing (OH, rents, staff, facilities), Transportation, Handling charges, Allocated Expenses, Re-packaging. SWOT Analysis of Supply Chain o o o o Strengths Suppliers, Efficient logistics, partners Weakness Less control over inbound logistics Opportunities Floor ready, Ready to sell garments Threats Competitors, rapidly changing systems
Manufacturer
Mumbai DC
Delhi DC
Bangalore DC
Calcutta DC
6 stores
3 stores
3 stores
1 store
Shoppers stop has 4 regional distribution centres. Previously each store had its warehouse(DC) but that turned out to be a wrong strategy as the flexibility was being affected and costs were building up. There was also a lot of inventory pile up in each of these stores and hence added to cost in inventory and transportation from one store to another to transfer excess inventory.
Delivery Authorization
Illustration Purchase order for 5000 shirts of Arrow Purchase order is a guarantee from shoppers stop that they will buy but supplier cannot dispatch goods on PO. PO helps is reducing inventory cost as the goods are ready and stocked at the manufacturers place, so no inventory pile up at the DCs or stores. 4 purchase orders are sent by the buying and merchandising manager for 4 DCs. For eg Vendor ABC gets 4 Purchase orders from shoppers stop, for four DCs Mumbai DC 2500 shirts catering to 6 stores Banglore DC 1000 Shirts catering to 3 stores Delhi DC 1000 shirts catering to 3 stores Calcutta DC 500 shirts catering to 1 store Delivery Authorisation for 500 Shirts Delivery Authorization is an international system followed by all major retailers. DA is prepared on the projected sales for that week. So if the PO (6monthly for 2 seasons) for all 13 stores is 5000 and for a particular week shoppers stop sells 500 shirts, it will send a DA for 500 shirts. Thus with delivery authorization system Shoppers Stop can place order according to the demand assessment with the condition that it would pick up a fixed amt every week. Thus it doesnt have to stock goods at his place and block money in inventory. It also helps in better inventory management as it is based on weekly projections. It is an assurance for both the Shoppers Stop as well as the manufacturer. Manufacturer dispatches the weekly requirements to the 4 DCs according to the DAs DCs check the details (date, number) of the product and match it with the invoice. Anything not matching even if it is one piece is rejected. If accepted it causes a mis-match between the Purchase Order and Delivery Authorisation. Hence the PO has to match with the Invoice carried by the Manufacturer. Accounts department receives confirmation in the system for the pieces physically accepted. The accounts department can make payment that very second, in which they receive confirmation. This process is so stable and fast because of being connected and fully integrated. Once the confirmation is sent by the DC, the stocks are transported to the stores. Dispatches are always made early morning. There is a PRERETAILING Team that receives the stocks and their duty is to put them on
display before 10.30 when the store opens, so that when the customer enters everything is on display. Stocks are updated in the store
V. Warehousing
o o o o o o Regional Warehouses No in-store warehouses Number of warehouses - 4 Location Metros (Mumbai, Delhi, Banglore, Calcutta) Floor Area 20,000 to 22,000 sq.ft Transportation from warehouse to Store Done by the DCs
Distribution centers Distribution centers for S.S are 100% outsourced to another company. Each of the distributions centers has a floor area of around 22000 sq.ft.. The DC is divided in to zones and1000 based on the brands or vendors. When a delivery comes in the person in-charge feeds in the details like merchandise type, brand name, size, color, batch number, date, etc. the system give him a ticket describing where the merchandise has to be kept. It gives a detailed description of the pile and rack number. Thus, even if the person is unacquainted with the slots of the DC, the system will tell him where to keep the merchandise. The systems are thus not dependant on any person and can work independently. This whole activity is outsourced to another company who acts as a internal supplier for SS. The delivery transportation from the DC to the stores is the DCs task. Advantages of having outsourced the activities Cost benefit No Labor problems handling labor unions No liability for pilferage by own staff and damages Specialized expertise of the company Dictate terms to the outsourced company 24 hours delivery, etc
reports. Thus there is stock matching done everyday and the entire store completes a cycle in 3 months. That means SS conducts 4 cycles of stock taking each year. This has helped them get the pilferage to its minimum. As each day is accounted for and there is a complete match on a constant basis. In the day inventory levels get collated store wise. While in the night this information gets polled in the server and is integrated at the national level. Thus, each day the information on stocks available for that day and at which store is made accessible to each and every store.
Every day Auto Replenishment: Shoppers Stop has determined its minimum stock keeping units and as soon as the stocks in the store touch that level, the DC is triggered to send the replenishment. Thus the system automatically checks for stock out and replenishes it. The lead time for replenishment is 1 day. Every night data is collated and a store-wise list of merchandise is generated. During the day the dispatched is made ready and the next day morning 6.00am the truck leaves reaching the store in an hours time. The Pre-retailing team displays the stock and by 11am when the store opens their work has to be complete. Stock keeping Units Stock keeping units are determined on the basis of moving averages. The system generates averages of the required quantities for the last two weeks. As the process is concurrent to the market conditions they go up with the demand and fall with the slump. The minimum units are fixed which are based on the past lows and highs. How does the organization handle product discrepancies? Saturdays and Sundays account for 40% of the weeks business hence most fluctuations are expected on these two days. Inventory is stocked up on Friday based on the weekly forecast. But demand is never really unpredictable at shoppers stop. product discrepancies takes place very rarely.
Shoppers Stop has targeted a business of 1crore with Arrow for its Andheri branch for the year 2003-04. For its spring summer business it targets a sale of 50,00,000 Season 50lakhs Monthly - 8.33 lakhs Weekly 2.08 lakhs They keep a cover of 7 weeks hence need a stock of 14.56lakhs. On an average a Arrow shirts Costs Rs.1000/- and a Arrow trouser costs Rs.1200/-. And the ratio of shirts to trousers is 70:30 That means it needs to stock shirts worth 1.46lakhs and trousers worth 0.62lakhs of trousers for a week. This is equivalent to 146 shirts and 52 trousers. Shirts are in the ratio of 1:2:3:1 for sizes 38:40:42:44. At the store Arrow shirts are kept at their average required units, that is 2 of size 38, 3 of 40, 4 of 42 and 2 of 44, and trousers too in their respective ratio. As soon as one shirt of arrow of size 38 is sold, the system alerts the DC to send one shirt of size 38 of arrow for the specific style and option. Thus the stocks are automatically replenished. The DC also follows the same system. The DC stocks with a cover of 7 weeks so as soon as its stocks are at its minimum levels it sends a DA to the manufacturer to dispatch the order already kept ready for them. Shoppers stop give a 10 days delivery time to the manufacturer. If the good dont reach in 10 days the order is cancelled. Thus they are very stern on the execution of their policies.
IX. Systems
Secondary (Update Records) ERP JD Edwards Merchandise Management system and front end Warehouse Management system B2B website - S.S has around 400 vendors supplying around 450 brands. Most of the vendors are connected to S.S B2B site. Each vendor can check the stocks and movement of his merchandise. They can track which product is selling best in which city and which one is not. The vendor need not call SS for information when all that he wants is available by click of a mouse Realizing the role of IT way back in 1991, Shoppers' Stop was among the first few retailers to use scanners and barcodes and completely computerized its operations. Today it is one of the few stores in India to have retail ERP in place which has now been integrated with Oracle Financials and the Arthur Planning System, the best retail planning system in the world. With the help of the ERP, they are able to replicate stores, open new stores faster and get information about merchandise and customers online, which reduces the turnaround time in taking quick decision. Shoppers' Stop has also set up a WAN system to link all units and distribution centers and facilitating seamless operations across all the outlets. o o o o Supply Chain Management Realizing the importance of distribution and logistics in ensuring the availability of merchandise on the shop floor, Shoppers' Stop has streamlined its supply chain. The company has developed process manuals for each part of the logistics chain. These modules include vendor management, purchase order management, stock receiving systems, purchase verification and inventory build up, generation and fixing of price and store tags, despatch of stocks to the retail floor and forwarding of bills for payment. The Company now has an off location warehouse and has also streamlined the layout of its Distribution Centre. Shoppers' Stop has also tied up with Sembcorp Logistics (P) Ltd. as its logistics partner.
X. Transportation
o o o o o o Manufacture to DC Manufacturer handles DC to Store DC handles DC to Vendor (Reverse Logistics) AFL DC to DC AFL Internal transfers between Stores - AFL Modes of Transportation - Tempos
Reverse Logistics Reverse logistics comes in to action for 3 reason return due to Manufacturing defects Laying defects Consignment stocks Stocks purchased on consignement basis need to be sent back if they are unsold
Line defect- Here the no. of complaints are more & the problem is also same across all the sections so the product line itself is withdrawn from the stores across the country. For eg. There is a constant complaint for arrows blue checks shirt. The entire stock for blue checks in all the sizes is removed from the store and sent back to the manufacturer.
Process for Reverse logistics: 1. Physical transfer of goods from stores to DCs 2. DC makes RTV(return to vendor) 3. System Debits the vendor
Shoppers stop needs to have a more realistic sales forecast and it their aggressive selling strategy should not be only based on stocking up the stores but by concurrent promotions and programs to make customer buy more and have a higher rate of conversion.
I. Akbarallys Profile
One of India's oldest retailers more than 100 years old company. Akbarallys has been a part of the retail landscape for a long time, with the Khorakiwala family at the helm. The management style has been conservative all along and the core principle on which it reaches out to its customers is trust. The format so far: a department store that has evolved as a family store over decades, with only three stores in Mumbai spread across 35,000 sq. ft. with each store on an average attracting 2,500 customers a day.
o o
Number of stores: 3 No. of departments : 13 SKUs: Around 12000 in each of the stores. No. of employees: 150 Average footfalls: 400-600(weekdays) 1000-2000(weekends)
Akbarallys operational structure They have a corporate office, which takes care of purchase, finance and human resources. For day-to-day management, they have store managers. They also have between 10,000 and 12,000 stock-keeping units in each of our stores. Hierarchy in the logistics department CEO (Mr.Khorakhiwala) Purchase Manager Merchandise Manager Store Manager Department Manager Akbarallys positioning Positioning is the key to communication. Akbarallys is a family store, where they can satisfy the needs of the entire family. They have everything, from
to
cosmetics,
appliances,
electronics,
homeware,
Akbarallys customer profile Their departmental stores cater to the upwardly mobile socio-economic class (A1/A2/B1) of society.
Godown (Chembur)
Akbarallys (Chembur)
Akbarallys Purchase manager is approached by the manufacturer or distributor who wishes to stock his product at the store. The Purchase Manager and the Merchandise Manager collectively take the decision of purchasing or not purchasing the product. Once they take the decision of purchasing the goods, the manufacturer transports the goods to the store warehouse. Payment is made only after the goods reach the store.
Loss of sale due to stock out No benefits of bulk buying no discounts and credit period advantages
V. Warehousing
Akbarallys follows a decentralized warehousing strategy. Each store has its in-store warehouse and they do not follow the hub system of warehousing. Benefits of in-store warehouse Easy access No internal transportation cost between warehouse and store Low levels of stock at the display counter, providing more area for different merchandise Disadvantages High warehousing costs Weak logistics systems High cost of internal transfers incase of discrepancies
In peak seasons like festival time, the stock replenishment is higher as compared to other times. That is also decided on the basis of past trends of festival seasons.
Replenishment Process
Counter Staff reports requirement
PM places order with the Manufacturer or Distributor Distributor sends merchandise to the store
VIII. Systems
Systems at Akbarallys are primary level record keeping systems. Records of each transaction are maintained and inventory check is done when the management asks for it. Systems are not use efficiently to know the sales trends and the bottlenecks. Hence we can say that IT is not used very efficiently in the procurement process.
IX. Transportation
Manufacturer/distributor to the Akbarallys Warehouse Manufacturer/distributors responsibility
Warehouse to Store In store warehouse so no transportation costs Inter Store Transfers Courier
Communication between suppliers and the stores: The communication is through: Phone Fax Email
X. Future Plans
By 2004 they will be opening another 20 mini supermarkets and three additional departmental stores. At the store level, Akbarallys is becoming more fashion oriented to attune itself to the changing customer profile and to attract the younger generation which has a relatively higher propensity to spend. Thus, cosmetics and health-related products are being given more importance. The format itself is being revamped, as Akbarallys perceived the need to give people more reason to step into its stores. If Pyramid decided that it wanted to have a supermarket in its store to offer convenience to customers, then Akbarallys, too, has done that. In fact, it has gone one step ahead and added a medicine corner, too, at the flagship store at Fort. Ironically enough, Akbarallys, years ago, had both these formats in its store but decided to discontinue them in 1992, because they were not considered appropriate in the mix. Left to itself, probably Akbarallys would prefer to remain the same. The company has been facing the issue of expansion and the reason why it has not expanded beyond the three stores it has till now is the cost, when doing it alone. Going with someone else has been an option and it has been getting offers, especially from outside parties to set up a store in partnership. It has been cautious on this front as it is quite wary about something going wrong and affecting its trusted image. But a changing market means that Akbarallys has to remodel its strategy so that in the next five years, it can hold its own in what is certain to be a vastly different retail landscape.
Problem Identification
No bulk buying benefits Akbarallys buying from distributors: Loss of sale due to stock out Pilferage in the warehouse due to bad handling, shoplifting All of Akbarallys warehouses are at Prime Location, thus blocking premium area and lowering per.sq.feet sales. The area allocated for warehouse can be made available for merchandise display. Thus increasing the skus and options for customer, leading to more foot falls. The warehouses being at the prime location demand high rentals and capital investments. Akbarallys has 2 warehouses in a area of 10 kms. Once the merchandise reaches the in-store warehouse, the merchandise is labeled and stocked. There are people appointed for labeling and there is a cost attached to this re-labeling.
Suggestions
Buying Channel: An improvement in the buying channel is the need of the hour. Akbarallys needs to have better systems to forecast its sales and thus avail bulk buying. They need to buy directly from the manufacturer to avail better prices and no channel costs.
Manufacturer
Central Warehouse
Chembur
Fort
VT
Centralized Warehousing: in the form of hub system would lower real estate cost and instill better efficiency. The combined stock levels maintained will be lower to what is being stored in each store currently. Low stock levels mean low inventory cost
and low pilferage thus making warehousing more efficient. If the organization plans to grow, they can outsource the warehouse operations once its operations are stable. Outsource Logistics: Akbarallys can outsource the logistics between the warehouse and the store to ensure higher logistics efficiency level. At any point deviating from its core business of retailing would lead to opportunity loss. Outsourcing also instills a commanding position thus making sure that there is 99% efficiency level. Damages in transit and carrying cost would now become the logistics partners look out. Buying from Manufacturer: as explained earlier, Akbarallys needs to buy from the manufacturers rather than the distributor to avail better pricing and bulk buying benefits. Akarallys can also ask its manufacturers to do the labeling thus saving the time and cost of labeling each and every sku. Inventory Management system: Better inventory management systems are the need of the hour. Simple need based buying and first level record keeping systems are not growth oriented. Akbarallys needs to develop a second level system which helps them in better inventory management. One of the major benefits will be tracking merchandise and knowing whats selling and what not. The other being prompt re-order level, thus avoiding stock outs and loss of sale.