Efficient supply chain management has a cascading impact on all aspects of retail – from sourcing of raw materials based on demand forecast and then speeding up the production to getting the product to the store and finally to the consumer, everything depends on the supply chain. Experts unanimously agree that besides infrastructure and complications in taxation, it is the efficiency of manpower and adoption of technology that gives a huge boost to supply chain management. However, it still remains to be seen whether the Indian Retail Industry has actively invested in the smooth running of its backend supply and logistics.
Setting the context of the story, Farah Malik Bhanji, Metro Shoes says, “While supply chain may be invisible to the end consumer, it is definitely very visible on a business’ balance sheet. It is as critical to the functioning of a retail business, as the central nervous system is to the functioning of a body. A warehouse is the heart of a business and the nerves are the dispatches across the retail network.”
Malik throws light on two aspects of supply chain management –the first is the physical movement of goods and the second is the tracking of these movements and bringing efficiencies into place. She points out that where there is not a very high level of talent needed for the former with goods needing to go from A to B, it is however vital to know the processes, and the flow of supplies and to understand that to be able to achieve the latter.
Vasanth Kumar, Managing Director, Lifestyle International shares, “Supply chain is increasingly getting sophisticated on two counts: one is that there is constant demand to deliver freshness always at the B&M stores. And two, we are moving to an Omnichannel world where customer delivery happens through real time supply chain connecting warehouse or store inventory for which supply chain needs to implement advanced ERP/ planning tools to be effective including web order fulfillment. With the advent of e-commerce and Omnichannel, the supply chain function is no longer limited to B2B as it now encompasses B2C deliveries direct to customer. And the single biggest factor which affects NPS is quality of deliveries which is very much the responsibility of the supply chain. This is a huge shift in terms of mindset and capabilities indeed moving from cost efficiency to customer experience orientation.”
Echoing the effects of e-commerce in shaping up supply chain management efficiency, Hemant Gupta, Chief Operating Officer & Chief Finance Officer – The Mandhana Retail Ventures Ltd. shares, “The introduction of e-commerce in the Indian market has brought about a drastic change in the retail scenario leading to a different perception of the supply chain management. The advancement of technology has helped decrease manual processes comparatively and has also been adopted by our logistic partners and warehouses easing out the entire supply chain process.”
Talking specifically about the jewelry sector, Vijay Jain, CEO & Founder Director, ORRA shares, “Historically, supply chain in diamond jewellry centers around trust and long term relationships and while prior experience, or training/ certification in diamond and allied areas is given due regard is taken as secondary to integrity and trust. However, given the new complexities of businesses what is held in premium is skills that understand the trade offs in managing inventories, vendors, commercial demands, deliveries, and responsiveness to market conditions and balances the pressures across departments, like design, merchandising, procurement, vendor management and logistics. Mind sets required to run the front end part of the business and supply chain are different.”
Moving towards food, the role that supply chain management plays cannot be underestimated. Gaurav Dewan, COO & Business Head, Travel Food Services shares his take, saying, “India today has a burgeoning economy, rising urban population and a fast growing middle class; and along with an increase in their disposable income, there has also been a proportionate rise in travel and consumption rates. However, given the vastness of the country, and the magnitude of people, there are definitely challenges involved, being in the F&B sector. Among the major challenges that we face, the lack of proper infrastructure is one that has hampered the growth of the food retail sector across the country. And while we are in the process of developing the right infrastructure to support the growth, we also need to build a network of reputed and reliable suppliers, to move away from the current scenario of multiple vendors and lack of aggregators for products. Because of this, we also face challenges in the distribution system, which is quite poor across the country.”
“The logistics and supply chain management function has been undergoing an unprecedented transformation in the last few years, fueled by innovations in IT and digitization. Government initiatives like Make in India and Digital India are providing thrust towards the logistics and supply chain management function. According to a study by The Associated Chambers of Commerce and Industry of India (ASSOCHAM), the logistics market in India is expected to grow to US $307 billion by the year 2020, recording a CAGR of 16 percent on an average,” says Vivekanand, Country Manager, India & SAARC, Greyorange.
Complications & Challenges
Complications in taxation are one of the biggest hurdles gripping the industry besides infrastructure. Where GST has bee introduced to simplify the taxation woes, there seems to be a long way to go before the issue of taxes, invoicing etc. cease to be an issue. Gupta explains, “The challenges we face are more on the statuary compliance side with the change in laws on day-to-day basis like the introduction of GST and error in E-way bills due to lack of knowledge and inefficient websites. Currently due to the difficulty in generating the E-way bills, the entire process of movement of goods has been slowed down.”
On the challenges, Malik says, “While logistics companies are doing very well today, there is still a lot of uncertainty involved in Tier II players. Tier I logistics players are still very highly priced and have not passed on benefits of scale to companies. There is a heavy dependence on documentation that can be better streamlined through efficient technology solutions like tracking and tagging.”
Elaborating on the set of challenges and roadblocks being faced as a retailer when it comes to implementation of effective supply chain, Malik talks about infrastructure particularly the conditions of the roads.
She says, “Although in recent years there has been an improvement, but still a lot more is needed. This coupled with a lot of documentation requirements lead to an uncertain lead time. During monsoons and extreme weather conditions, this lead time is further extended.”
However, she does add that there has been some relief as far as documentation is concerned as on the introduction of GST last year multiple taxes and multiple documents are done away with. A new e-way has also been built and hopes are high that it will ease the lead time as well.
Malik, however, shares some concerns with regards to the e-way stating, “The recent introduction of the e-way may cause some disruptions initially but are then expected to help smooth movement of goods without much harassment from various authorities. Another area, which may not be very relevant to us is the availability of proper storage facilities, particularly for perishable goods. While bigger companies are adopting advanced technology to make the supply chain efficient and robust, small and medium scale industries also need to have access to the benefits of these technological advances.”
Jain talks to challenges specific to his sector i.e. diamond jewelry, “Supply chain challenges stem primarily from the complexity induced by the range of stock keeping units that jewelry demands in its variety that is further accentuated by sizes, diamond qualities, regional preferences, price points preferred and coordinated ensembles. The increasing use of technology has helped cope with the complexity. However, while technology can manage complexity it does not mitigate uncertainty. Uncertainty in preferences, demand, regulatory changes make demands on organization mechanisms like teams, cross functional groups etc. that have to keep sharing information to respond to market conditions, competitive pressures etc. Diamond jewelry continues to be a closely held conservative business that remains fragmented despite the growth of organised retail. While new regulatory controls have brought more transparency and eliminated grey zones it will still take a while to bring in greater transparency.”
Dewan adds, “As aggregators, we are into all formats of QSR, which makes supply chain management across our various restaurants requires to be individually managed. In India, supply chain management is still in its nascent stages and the entire ordering process is still very manual, making it a challenge for us. Logistics too, which forms a very important part of seamless supply chain management needs to be developed further with the inclusion of GPS enabled vehicles to track their movements. If we are to be on par with other developed countries, these are two very important aspects which need to be worked on.”
He further adds, “As diverse as India’s culture is, her travelscape is equally so, and to tend to each variant in the sector, we need to understand the different nuances of each. Although we have the second largest road network in the world, logistics and supply chain management are not yet fully developed, keeping in mind, the location of most highways and roads being in remote locations. And while we also have the fourth largest railway network in the world by size, fully developing supply chain management in the sector is reliant on traditional small-midsized vendors who operated on a cash system, and in some cases are not too educated. With regards to the air travel sector, these are high security zones and entry into facilities is an elaborate process, often taking hours on end. At TFS, we follow a system with thorough internal checks and receiving audit frameworks to ensure products are supplied in the most desirable state. Therefore, we maintain high inventory levels and have to be extremely careful with supplies.”
Highlighting the challenge gripping the industry from logistic point of view, Vineet Kanaujia, Vice President – Marketing, Safexpress Pvt. Ltd. shares, “Due to the significant increase in customer expectation and demand over the last decade, time-definite delivery of goods has been the biggest challenge for the retail supply chain. Also, the demand for last mile delivery continues to be an uphill task for the industry. With the vast geographic spread of our country, time-definite delivery will continue to be a major challenge. And with congestion on the highways as well as inside city limits being at all-time-high levels, managing last mile delivery has never been tougher.”
With access to 22,344 pincodes, Safexpress has been helping the Indian retail industry with warehousing support and time-definite deliveries of goods anywhere in India.
The Supply Chain Challenges
The growth in retail is outpacing the delivery of key infrastructure programs within India. This will only be exacerbated by the ongoing population growth and the rise of megacities. Technology costs have hindered retailers in the past however this is an area that retailers will need to have solid investment plans for the future. Modernisation of supply chains will require a combined effort from government, private industry and foreign investments. The challenges are also amplified by volatile demand and increasing expectation of the consumers, changing trends and preferences of the consumers, increasing number of SKUs and the huge Indian customer base – ranging from highly populated metro cities to millions of sparsely populated villages.
Having the right pricing strategy and tools is another factor to consider. It is a well-known fact that 50 percent of promotions don’t generate the necessary ROI.
For a diverse market like India with many fragmented players, what works at national level doesn’t necessarily work at regional level. Executing a sledgehammer promotional strategy across the entire chain without understanding factors like local events, weather, localized competitors can result in suboptimal returns. Retailers need a pricing tool which not only helps them automate decision making across the enterprise but also provides important metrics like halo and cannibalisation to compete eff ectively.
Another tricky area for retail in India is that of last mile delivery. Indian retailers are tackling these challenges in ways that cannot be addressed by a cookie-cutter approach used in the developed countries. The preferred mode of delivery like trucks in these countries face a difficult time navigating the crowded streets. Postal services can be leveraged but they are known for delays. A new option in India is the use of couriers to deliver goods using smaller modes of transportation like motorcycles and scooters. It is a common sight to see these drivers carrying giant backpacks filled with merchandise. These drivers navigate narrow streets, potholes, and erratic drivers to deliver everything from ice cream to guitars to laptops. Without the use of these couriers to deliver, the e-commerce market as a whole would grind to a halt in India.
The Role of Technology in Supply Chain Management
Jain is quick to point out, and rightly so, that adoption of new technology is not a matter of choice but timing; organizations cannot insulate themselves from the same. He shares, “Though technology is widely deployed the depth of its penetration remains limited. Technological capability outstrips our ability to harness its possibilities though it inexorably invades our decision making. ORRA has chosen two platforms that are under integration ETP and ICSoft that drive point of sale demand to supply chain responsiveness.”
Accentuating the benefits of technological advancements in boosting supply chain management, Gupta minces no words when he shares, “Due to lack of technology, there was a huge gap in the time taken between the arrivals of merchandise in the warehouse till the time taken to dispatch the goods as all the processes were then done manually. The introduction and advancement of technology has played a very important part in the supply chain, including the logistics and warehousing functions. We now have an electronically generated process which helps decide the key responsibility area which clearly indicates the cycle for the goods to come in and move out. The entire supply chain management functioning has evolved over a period of time and has been structured in a way to adhere to timelines accordingly which helps to reduce our working cycle capital of the overall supply chain management. For e.g.; to track a package, earlier one would have to manually dial a number and call the logistic partner to find out where the package is, today most of the logistic partners have developed websites with GPS enabled systems thus making tracking easier.”
“We use an ERP call Genesis which is a retail solution. It has an inbuilt operation that tracks all the processes including billing, tracking and tallying the goods. It also helps us manage our inventory agent which is an important part as far as the supply chain is concerned,” he adds.
Kumar says, “At Lifestyle International we have successfully implemented Oracle ARS as well as TOC Symphony software apart from single view inventory (SVI) order management for effective last mile deliveries from warehouse.”
At Metro Shoes, the company has migrated to SAP as an ERP. According to Malik, this has enabled them to get accurate data on the movement of goods across the country. She explains, “SAP ensures that movement of goods and the accounting of those movements happens simultaneously. This enables us to analyse our data much closer to realtime and monitor the cost effectiveness of our processes. We have invested in TOC (Theory of Constraints) to automate replenishments to stores as well as analyse vendor effectiveness. This has allowed us to streamline our purchase process and capitalize on styles preferred by customers in a much faster time period. It is also the ability of our internal team to be able learn how to look at data effectively and base their decision making on data that has been vital in the optimization of these processes.”
The lack of/ sporadic robotics technology adoption is also a challenge. While robots are widely used in manufacturing and assembling, the supply chain function has remained technologically starved for a long time. In the last five years, e-commerce and logistics companies across the globe have pioneered adoption of advanced robotics technology to create high productivity warehouses and optimizing supply chains to match the dramatic evolution – in terms of volumes and values. The vital challenge now is faster adoption of new technologies and trends such as 3D printing, automation, robotics and big data in the supply chain function.
“More international retail companies and brands are investing in supply chain automation in other parts of the world. Our Butler system is being deployed in Japan, Europe and the Americas at a faster rate,” says Vivekanand.
Supply Chain Management & E-commerce
The onset of e-commerce has played a huge role in having retailers work diligently on strengthening their supply chain management systems and practices. A large section of people has migrated to online shopping and they have become accustomed to having their products delivered to them within a day or so. Therefore, more and more retailers are upgrading their warehouses with some degree of automation as they race to deliver goods to the shoppers ever faster. The increasing demand for goods to be delivered, not only on time but on the same day is pushing the need for robotised warehouses which will make the whole process of sorting orders and delivery quicker.
Online players have been more receptive towards investing in automated supply chains as they do not have any physical stores and have relied completely on technology to run their operations. Many offline retailers could be seen as laggards in this trend simply because their development and growth may not have primarily depended on technology.
“The absence of technology and limited online presence, means that offline retailers are not faced with the kind of volume and surge ordering often witnessed by online platforms/ e-commerce players. Hence, such players are not pressed to invest in automation at the warehouse level,” says Vivekanand.
According to Gupta, the introduction of the Omnichannel module has helped to bridge the gap in the supply chain. Elaborating further, he shares, “If you are running out of stock in a store in a particular category, the Omnichannel module helps to deliver the product to the consumer due to the specialization in deliveries of the Omnichannel partners. Additionally, even at the retail store, E-look books are available which helps the customer to browse through and place their orders which can then be delivered at their doorstep. To cater to our customer’s needs, we too have started the Omnichannel module. It will keep the pressure off from the normal logistics and supply chain function and they can save the cost of transferring the goods from one location to another.”
Sourcing Manpower
Effective human resource management is often the biggest hurdle to overcome for businesses across genres. Besides lack of skilled manpower, it is the attrition level that increases that challenge of having the right team in place. Supply Chain Management until recently faced a huge challenge when it came to sourcing of manpower owing to two reasons – being a backend process, not many opted for a career in supply chain due to lack of exposure and excitement and secondly because the industry was at its nascent there was a lack of organized training. Though things are changing gradually.
Gupta says, “As far as sourcing talent is concerned, there is no problem as the retail industry is now considered to be growing successfully at a fast pace. With courses specializing in supply chain management and the introduction of technology, it is now becoming easier to source talent as opposed to earlier times.”
One of the leading logistics company in supply chain management, Safexpress Pvt. Ltd. has set a lot many standards for the industry to follow. From a world class logistic parks to a well-equipped transportation system in place, the company has a team of efficient skilled manpower as well.
Vineet Kanaujia of Safexpress says, “Training has a huge role to play in this industry, and we have been focusing heavily on the same. This has helped us in managing an employee retention rate which is way ahead of the industry average.”
EOSS & Supply Chain Management
A mad rush to grab discounts and offers is common during the EOSS. But it is only those brands that can cater to the demand of customers in terms of size and style will see an inflow of customers during the next EOSS. Hence the role of supply chain management is ever so important during EOSS to ensure that the store is well stocked.
Gupta says, “During EOSS, the movement of goods is faster as compared to the normal period, thus ensuring timely replenishment of goods is a must. Especially in retail chains, there is a term called pivotal sizes which includes 28-36 sizes as 80 percent of the demand is in these sizes. This is where the auto replenishment technology is extremely beneficial to the supply chain ensuring timely deliveries. There should not be any deliveries planned which will take longer period to reach the customer as it will increase the stock only without increasing the sales.”
Brand Speak
On the supply chain management system in place at Metro Shoes, Malik reveals, “We have over 415 stores of 4 different brand formats – Metro, Mochi, Walkway and Crocs, in 110 cities in India. For Walkway we also have shop-in-shops format in DMart stores. We retail our in-house brand as well as other brands such as Clarks, Skechers, Fitflop, etc. In case of in-house brands, the goods are received from the vendors as per purchase orders raised by our buyers in our central warehouse at Bhiwandi. The vendors are from Mumbai and from other cities such as Agra, Kanpur, Delhi, Chennai. We receive goods in our warehouse and dispatch it to 110 cities across India from our centralized warehouse. It takes between one to seven days to receive the goods from the warehouse to a store, depending on the distance of the store from the warehouse. The dispatches are on daily basis. After the introduction of GST, the company has been preparing tax. There are detailed processes in place at the warehouse to ensure control over inventory and safety. The goods at various stages of processes are recorded and daily MIS is sent to the management which covers the goods received, processed and dispatched highlighting any delay in processing or dispatch. Very recently, the company has implemented SAP ERP in the warehouse in place of warehouse management system and the inventory is kept style/ item wise in these bins so that it is tracked through system.”
She further adds, “In case of other brand’s goods, they are dispatched by the manufacturer or distributor to our stores directly as these are from organized players and there are generally no quality issues. On receipt of goods at a store, they are checked for any damage or discrepancy in quantities and then added in the stock and discrepancy is intimated to the warehouse or the supplier for corrective action. The goods received at the stores from customers for repairs are sent to repair depots in Mumbai and after repairs sent back to the stores for delivery to the customers. We run our e-commerce operation through a separate warehouse facility where we conduct Flipkart and amazon processes through our own warehouse. We currently work with eight portals in India.”
At Being Human Clothing (Mandhana), the company has a warehouse of approximately 25,000 sq.ft where they manage almost around 30 lakh pieces in a year with a team strength of about 50 people.
There is formulised KRAfunction of each employee defining each one’s role in the entire process. The company has also partnered with various logistic partners depending on the zones to ensure a quicker turn around /in the respected areas.
From ensuring the sourcing is done on a timely basis from the different vendors to management of the goods to decrease the time taken to dispatch, each and every minute detail is carefully taken note of to ensure timely deliveries to the consumer.
At ORRA, the front end and the backend of the supply chain use two different but integrated technology platforms. The key functions of the supply chain team include, diamond and metal procurement, production planning and control, vendor selection and management, quality control, pricing, distribution, repairs and custom order management apart from support processes of audit and raw material inventory management. The staff strength of the supply chain team is approximately a third of the total HO staff .
Providing the Best Service
Talking about the services offered by Safexpress, Kanaujia says, “Safexpress covers all 720 districts of India through its massive distribution network of over 620 destinations. The company has a fleet of over 6,000 GPS-enabled vehicles, operating 365 days a year on more than 1,000 defined routes across the country. The firm delivers in excess of 100 million packages to over 5,000 corporates in India. We offer 3PL solutions ranging from designing, implementing to operating the complete supply chains of companies. These solutions help in reducing costs, streamlining delivery schedules and enabling organizations to focus on their core competencies. The 3PL services offered include inventory management, packaging, labeling and reverse logistics and the services are supported by 35 ultra-modern Logistics Parks and a total warehousing space of over 14 million sq.ft. across India.”
Besides logistical support, Safexpress also offers value added services in the form of supply chain consulting. Kanaujia adds, “The team of consultants is vastly experienced and offers global know-how, best practices and cutting edge technology solutions, to make an organization’s supply chain model more dynamic. We create strategies which focus on processes and technologies required to drive growth and profi tability. The consulting services include planning, strategising, network designing as well as end-to-end supply chain implementation.”
It is interesting to note that Safexpress has been early adapter of technology for ease of taxation. Kanaujia shares, “We are India’s first logistics service provider to adopt Oracle Fusion Cloud, the next generation compliance and accounting solution for instant GST accounting. With GST having been implemented for more than a year now, technologies like Oracle Fusion Cloud ensure accounting compliance which is proving to be crucial from a customer perspective. This has led to a considerable increase in demand for our services.”
The GreyOrange Butler goods-to-person solution for automated material movement in warehouse also caters to end customer, retail stores and production floors. The AI-powered Butler robots, using Machine Learning, are able to react to various situations as well as adapt to scenarios such as seasonal peaks, or surge in demands due to flash sales. In 2018, they introduced the AI-powered Butler XL that can be used in manufacturing facilities and Omnichannel warehouses, to move different kinds of loads from raw materials to finished goods.
Talking about another innovation by the company, Vivekannd says, “The GreyOrange sorter is an advanced sortation system that automates outbound profiling and sortation process in fulfillment and distribution centres. It is a conveyor based system that routes packages based on customized logic such as destinations, cut-off times, vehicles, cities, zip codes and more. This system enables faster sorting of same and next day deliveries. This is very useful for month end scenarios in Retail/ FMCG sector.”
Niranjan Thirumale, Senior Vice President & Managing Director of Global Centers of Excellence (India, Poland, and Mexico) at JDA Software says, “JDA can address the end-to-end retail supply chain to assist retailers in delivering a profitable Omnichannel shopping experience for their customers.”
He talks about the three key areas that JDA solutions cover are Intelligent Planning, Intelligent Fulfillment and Intelligent Store: JDA Intelligent Planning which parses data from all demand channels, JDA Intelligent Fulfillment which synchronizes all physical and digital order demand channels and JDA Intelligent Store which aligns inventory, labour and store operations with demand, merchandising and fulfillment tasks.
In conclusion, effective supply chain management unlike before is not plagued with challenges that cannot be tackled, all thanks to technology and the changing mindset of decision makers.
Where the Government is seen working towards building on a strong infrastructure, companies and brands too are realising the need to invest in supply chain as that truly is the backbone of the organisation.
When a product fails to reach the customer the way it is intended to, the entire purpose stands defeated. Outsourcing supply chain management to industry experts such as Safexpress can boost the companies’ allocation of resources and when in able hands, logistical challenges can be turned into opportunities.