OUTSOURCING TRENDS IN INDIAN RETAIL INDUSTRY

Vivek Parekh Debashish Bagg Sakshi Agarwal 2010281 2010298 2010206 Sankha Dip Dutta Shantanu Pandey Shashank shekhar Tripathi Benjamin Weber 2010207 2010212 2010213 2010FE01

Agenda
Indian Retail Industry
Pantaloon Retail Ltd. Spencer Retail Ltd.

Summary of Results
From database and Annual Reports
Outsourcing Ratio

Survey Telephonic Interaction

Conclusion and Limitations

Indian Retail Industry

4th Most attractive among emerging markets Contributes to 12% to GDP of India Employees 25 Million people Organized retail 5% of total Market Lead players
Pantaloon Retail India Ltd. Spencers Retail Ltd. Etc.

Pantaloon Retail India Ltd. Incorporated on 12th Oct, 1987 Malls in 51 cities 78 Hyper markets, 113 Food bazaar etc. Leaders' in Indian retail Industry

Spencers Retail Ltd. approx 200 stores Started with multi format food retail A growing player

Figure 1: Outsourcing ratio

1.00 Outsourcing Ratio 0.90 0.80 0.70 0.60 0.50 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 Year Retail Industrial Average Pantaloons Retail Ltd. Spencer Retail Ltd.

Raw Material
Spencers Retail Ltd Buy Semi-finished goods Minimal processing Big Bazaar Procures raw material for home grown brands Processing outsourced

Outsourcing Ratio

0.80 0.70 0.60

Pantaloons Retail Ltd.

Outsourcing Ratio y = -1E-05x + 0.7625 R = 0.1892 0.95 0.85 0.75

Spencer Retail Ltd.

y = -0.0001x + 0.9136 R = 0.3386

5100 10100 Sales turnover Pantaloons Linear (Pantaloons

Outsourcing Ratio 1.00

100

100

600

1100

1600

turnover SpencerSalesLinear (Spencer

Retail Industrial Average

y = -1E-05x + 1.1032 R = 0.8267

0.50 14000

24000

34000

44000

Sales turnover Retail Industrial Linear (Retail Industrial

1600 1400 1200 1000 800 600 400 200 0 -2000.50 -400 Spencer Retail Ltd.

EBIT

0.60

0.70

0.80

0.90

Outsourcing Ratio Pantaloons Retail Ltd. Retail Industrial Average

0.30 Cashflow / Net Sales 0.20 0.10 0.00 0.50 -0.10 -0.20

0.60

0.70

0.80

0.90

Outsourcing Ratio Spencer Pantaloons Retail Industrial

Survey Results
Big bazaar Ltd. Single/ Multiple source Main parameters Multiple source 1. Low cost 2. High quality 3. Transport Aggregation Reverse auctions Effective Revenue sharing 3PL Spencers Retail Ltd. Multiple source 1. Capacity aggregation 2. Inventory aggregation 3. Transport aggregation One-on- One negotiation Tradeoff 1. Quantity flexibility 2. Responsiveness 3PL

Negotiations Responsive/ effective Buy back contracts Logistics outsourcing

Survey Results cont.

Big bazaar Ltd. Outlets Company owned Spencers Retail Ltd. 1. Company owned 2. Leased 3. Franchise 1. Contract 2. Permanent staffing Tier 2 One-on- One negotiation Increasing

Staff outsourcing Depth of monitoring vendors Negotiations Trends in Outsourcing

Permanent staffing Tier 2 Reverse auctions Increasing

Big bazaar logistics

Logistics by Li &Fung Group Information systems
Warehouse Management Systems Put-to-light systems Auto replenishment system by help of ERP

12 transportation hub and 40 branches in the nation 1600 transportation vehicle

Supply chain

Checks and Balances

At times big bazaar has Excess Stock Proper place to pile Excess Inventory if compulsory

Insights for Managers Interview (Spencer's Retail Ltd.)

Outsourcing for perishables Handy Boys
Tackling of price hikes

Japanese 5S for inventory management Personal forecasting

Conclusions and Limitatations

Conclusion
Big bazaar moving away from outsourced good to internal production Big bazaar looking at long term efficiency rather than responsiveness Spencer's looking at responsiveness and looking at getting its forecast's right

Limitations
Lack of more data restricted for looking at the seasonal variation Results cannot be generalized to the complete industry due to 95% of it being un organized.

Probable effects of FDI Norms

Spur of competition Increased outsourcing of goods from India Employment of farmers and other small producers? Overall efficiency increase?

Thank you
Happy shopping