P R AC T I C E S
S
UPPLY chain management
(SCM) is the top management
Betting on priority for retailers in today’s
business scenario. Fierce competi-
tion is forcing retailers to respond to
changes in the market quickly. This
the supply
highlights the growing importance of
SCM in managing stock availability,
supplier relationships, new value
added services and cost cutting. We
chain
are now moving into an era where
supply chains will compete with each
other, rather than there being com-
petition between products and mar-
keting techniques alone, to ensure
that the right goods are available at
the right place at the right time, in
the right quantities and at the right
cost.
First class products and brand
power no longer guarantee success
in the aggressive battles for market
share. Thus, it is important to get
closer to customers by understand-
ing what it is they want, when they
want it, where they want it and at
what price they want it, respond
more accurately to actual customer
demand by minimising the flow of
material at every point in the
Pic: A. Roy Chowdhury
Prasad Chandratre
pipeline, keep inventory to a mini-
mum and derive a competitive edge
Supply chain management is a top
by giving better service through
shorter cycle times
The introduction of wide and var-
ied product ranges and the growth of
priority for modern retailers
worldwide. Yet, many retailers in
competitive pressure have been the
driving forces behind the develop- India still perceive it as a low value
ment of logistics systems in the retail
environment. The challenge for the
added activity and an extension of
transportation and warehousing.
retailer has been to maintain control
of a supply chain, which has grown
in complexity.
However, SCM in India continues
to be perceived as a low value added
activity of managing transportation
Pic: Shaju John
and warehousing. It is time Indian
corporates started thinking about
SCM from a strategic perspective
rather than just as an operational
issue.
Core supply chain issues such as
month-end sales peaks, forecasting
inaccuracy, constraint-based plan-
ning and so on continue to plague
Indian corporates even after the ERP
implementations. In many organisa-
tions, SCM was started as a knee-
jerk reaction to increasing costs and
pressure on margins due to compet-
 The first step in supply itive market forces. Few corporates
viewed SCM as an enabler of prof-
chain management itable growth, but more as an area of
cost reduction.
is merchandise The desire to make this resource-
planning and intensive operation more efficient is
the catalyst behind a recent and
sourcing. extremely significant development in
the supply chain – the emergence of
retailer control over the movement of
suppliers’ goods into retailer’s distri-
bution centres. This has led to more
complex relationships involving sup-
pliers, third party distributors and
retailers through supplier\retailer
collaboration where major suppliers
52
and retailers have discussed con-
sumer demand and put into practice
the most appropriate product flows.
SCM at Shoppers’ Stop
SCM is a key management function
viewed as a means of enabling prof-
itable growth in line with the compa-
ny’s strategic growth planning. The
SCM function at Shoppers’ Stop coor-
dinates and integrates all activities
associated with moving products,
services and information into seam-
less processes. Embracing all the
partners in the chain, including vari-
ous departments, vendors, trans-
porters and other service providers,
facilitates this and the necessary
information system to monitor the
SCM activities facilitates this.
SCM at Shoppers’ Stop begins and
ends with the customer. The guiding
philosophy is to improve the organi-
sation’s performance by managing
constraints and uncertainty inherent
in the prevailing system. The focus is
on using new tools and techniques
and changing mindsets to manage
the constraints and uncertainty.
The first step in SCM is merchan-
dise planning and sourcing. The
range width and assortment planning
process is used to develop meaning-
ful sales and space plans. The plan-
ning process starts six months in
advance of the actual beginning of
the season to fill an agreed amount of
footage with a product that matches
the customer demand.
The challenge is to develop a bal-
anced range which provides the
appropriate mix of colour, price,
styling and fabric so that the cus-
tomer is given the best possible
choice at all times. Also on the agen-
da is having a mix of own label prod-
ucts and brands in such a way that it
aligns with the company’s strategic
goal of increasing own label partici-
pation to drive store loyalty through
exclusivity, and complementary to
overall brand strategy.
Once the range width and assort-
ment planning is done, the next chal-
lenge is to source the merchandise.
The buying department then decides
on suppliers who would supply the
necessary merchandise as per plan.
Considerations are given in selecting
the preferred suppliers, such as past
history, quality, hit rates in supplying
goods on time, margin and vendor’s
cooperation in crisis situations, man-
ufacturing capacity, future capacity
expansion plans, financial capabili-
ties to invest for growth and lead-
time.
Shoppers’ Stop has implemented
the Atlanta, US-based retail ERP sys-
tem JDA, through which the entire
buying process and merchandise
management is now being undertak-
en. As per the range width and
assortment plans, purchase orders
are issued to suppliers through the
central merchandising function. The
actual delivery of stocks is then con-
trolled on a week-to-week basis
through the delivery authorisation
mechanism. The delivery authorisa-
tion number acts as a tool to control The management of the
the overall inventory position. The
delivery authorisation is issued to supply chain should
vendors on a weekly basis based on
the previous week’s actual sales and
always be guided by the
forward sales plan. customer’s preferences.
The vendors then dispatch the
goods to the distribution centre based
on the purchase order and delivery
authorisation. Every distribution cen-
tre gets a copy of the delivery autho-
risation issued for the week. At the
distribution centre support is provid-
ed by the ‘warehouse management
system’ (WMS) of JDA, which man-
ages the warehousing function most
efficiently.
At Shoppers’ Stop, the challenge
emanates from the fact that it has
nine stores across India, of sizes
varying from 25,000 to 45,000 sq ft,
which are expected to go up to 12 by
next year and three distribution cen-
tres - one each in New Delhi, Mumbai
and Bangalore. Also, it has 300 sup-
pliers who supply stocks to three dis-
tribution centres, which then redis-
tribute merchandise to the nine
stores.
Variety, colour and size of mer-
chandise play a very important role
in delivering a great shopping experi-
ence to the customer. Looking at this
Praxis ✦ Business Line ✦ January 2002 53

RAVIKANTH
“This is what I call a challenge: Five thousand people
out there to manage the supply chain... and we two
are holding the fort on the demand front!”
factor Shoppers’ Stop implemented
Variety, colour and
an auto replenishment system in
size of merchandise play 2000. Today, the auto replenishment
schedule (ARS) acts as a live, real-
a very important role time link between the distribution
centre and Shoppers’ Stop outlets.
in delivering a great
The ARS automatically analyses
shopping experience. data and suggests that a particular
stock in a particular quantity, size
and colour be sent to a specific
Shopper’s Stop outlet. The WMS, on
the other hand, is designed to opti-
mise the space in the warehouse. So
when stock comes in from vendor, the
system allocates the slot in the ware-
house for the merchandise to be put
54 Praxis ✦ Business Line ✦ January 2002
away in such a way that space utili-
sation is optimum. The ARS minimis-
es the reaction time to raise a replen-
ishment trigger and the WMS min-
imises processing of the replenish-
ment trigger at the distribution cen-
tre in order to provide 100 per cent
availability of goods.
Realising that infrastructure is the
key to success of SCM, Shoppers’ Stop
has made investments in warehous-
ing infrastructure and systems.
Visiting four international stores in
order to understand the best prac-
tices in SCM helped Shoppers’ Stop
revamp its entire distribution centre
operation. Today, distribution centres
operate round the clock, supplying
stock to stores much before the first
customer walks in and eliminating
any kind of interference to the cus-
tomer while he\she is browsing the
products on display. Today, Shoppers’
Stop distribution centres deliver ser-
vice levels at a cost, which is compa-
rable to the best of the world’s distri-
bution centre operation.
The other major area of concern is
inventory control. Shoppers’ Stop -
which is basically a lifestyle retailer -
is hard-pressed to keep pace with
changing fashions. Hence, the focus
is on controlling inventory in such a
way that obsolescence is decreased.
With the implementation of the
ARS and WMS, Shoppers’ Stop has
reduced the inventory to 10 weeks.
An efficient supply chain has enabled
the company to optimise stock levels
thereby conserving working capital.
It has enabled quick turnaround of
inventory, which minimises the obso-
lescence in stocks.
What makes the retailing business
complex is the dimensions - the num-
ber of SKUs, large vendor base, sea-
sonality, tax laws managing expan-
sion and scalability of operation,
inbound and outbound transporta-
tion, stock accuracy, and reverse
logistics of defective stocks. All deci-
sions and actions taken anywhere in
the chain impact each and every
member of the chain. The greatest
challenge is to get the act together
and seamlessly integrate the parts in RAVIKANTH
such a way that the effectiveness of
the whole chain is more important
than that of an individual link of the
chain.
Future projects at Shoppers’ Stop
include Automatic Data Capture
(ADC) at the distribution centres.
Every product has a different bar
code and since every bar code is
number based there are chances of
errors in operations resulting in
stock inaccuracy. Shoppers’ Stop has
already set up the ADC for the
cashier and stock taking process. It
further plans to use it for the stock
receiving process and stock replen-
ishment at distribution centres.
The company is also in the process
of testing out a consolidated intake
model, which, in time, will add value
to the total SCM. For this the compa-
ny plans to take the services of a 3PL
(third party logistics) company which
would do milk-runs on a daily basis
and collect the stocks as per the
delivery authorisations and deliver
the same to the distribution centres.
Another endeavour is to integrate “I do appreciate your honesty in admitting to a weak
suppliers into Shoppers’ Stop’s sup-
supply-chain management. But that still doesn’t
ply chain through electronic data
interchange and the Internet.
explain the one-and-a-half idly.”
Shoppers’ Stop is investing in B2B
(Web-enabled procurement solu-
tions) to achieve this. The idea is to
disseminate and seek information It won’t be very long before other
Supply chain manage-
faster at a minimal cost and do online retailers also take up developments
transactions with business associates in the area of SCM based on these ment can improve overall
to speed up the transaction process- benchmarks. The next few years will
ing. The first phase of this project is witness various innovative tie-ups efficiency and thus
already implemented and major ven- and consolidation of the various ele-
enhance customer
dors are now connected to Shoppers’ ments of the supply chain. ■
Stop’s B2B Web site. satisfaction.
SCM is a key factor in improving (The author is General Manager,
overall efficiency and through that Supply Chain and Buying &
creates an opportunity for enhanced Merchandising, Shoppers’ Stop.)
sales and customer satisfaction.
Shoppers’ Stop has already initiated
progressive steps in management of
the supply chain in line with its mis-
sion of ‘Nothing but the best’.
Praxis ✦ Business Line ✦ January 2002 55