Annexure 1

Annexure - 1 Supply Chain Revamp at Fabindia

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Table of Contents
1.0 SCM Revamp .............................................................................................................................3
1.1 Current Issues / Reasons for Change ............................................................................................................ 3 1.2 Objectives / Goals ......................................................................................................................................... 3 1.3 New Model .................................................................................................................................................... 3

2.0 Entity Definitions ......................................................................................................................4 3.0 SCM Routes ...............................................................................................................................4

3.1 Perennials (Except Furniture) ........................................................................................................................ 4
3.1.1 RULES: ............................................................................................................................................................................... 5

3.2 Furniture........................................................................................................................................................ 5
3.2.1 RULES: ............................................................................................................................................................................... 5

3.3 Collections ..................................................................................................................................................... 6

3.3.1 RULES: ............................................................................................................................................................................... 6

4.0 Assumptions .............................................................................................................................6 5.1 List of Features ..........................................................................................................................7

5.1 SKU Management.......................................................................................................................................... 7 5.2 Purchases and Distribution Mechanisms ...................................................................................................... 7
5.2.1 Purchases .......................................................................................................................................................................... 7 5.2.2 Distribution ....................................................................................................................................................................... 7

5.2.2.1 Auto-replenishment ........................................................................................................................ 8 5.2.2.2 DL Push ............................................................................................................................................ 8 5.2.2.3 Stock Transfers ................................................................................................................................ 8 5.2.2.4 Customer Orders ............................................................................................................................. 8 5.3 Jobwork ......................................................................................................................................................... 8 5.3 Modules Required at Procurement Hubs ..................................................................................................... 9 5.5 Features not required / Removals ................................................................................................................ 9 5.6 Other Changes ............................................................................................................................................... 9

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1.0 SCM Revamp

FOPL had setup Community owned Companies (CoCs) to manage its procurement across the country. Over a period of time, it has been observed that the experiment has not yielded the desired results.

1.1 Current Issues / Reasons for Change

Following are some of the issues being faced by FOPL forcing the organization to make a change in its Supply model: a) SRCs have failed to deliver on costs resulting in higher cost of purchase of goods for Fabindia, this has further driven the retail prices up. b) SRCs were supposed to ensure timely deliveries of goods to the markets; however, the time to deliver goods to the markets has increased. c) SRCs have failed to develop clusters in their regions. d) Limited or no Quality Control on incoming goods. e) Suppliers feel disconnected with Fabindia as the SRC interface has failed to carry on the relationship.

1.2 Objectives / Goals

The revamp exercise should achieve the following goals: a) b) c) d) e) Simplify Supply Chain Processes Reduce time to market Reduce costs Direct and better Supplier relationship Minimum physical disruption to the existing system

1.3 New Model

Fabindia has decided to discard the SRC (CoC) model and procure from the suppliers directly. With the intention of minimum physical disruption, FOPL has decided to buy out the SRCs post a rightsizing exercise of the number of SRCs. Each existing SRC would be evaluated in terms of location, supplier base and past performance, basis which, a decision to close these units / buy them would be taken on a case to case basis. The SRCs that would be bought-out, would start playing the role of Procurement Hubs within the FOPL Supply Chain post the restructuring. A total of 7-8 Procurement Hubs have been envisaged in the new model. The principle behind the restructuring exercise is to have Procurement Hubs closer to the suppliers while Market Region Warehouses / Distribution Centers would be closer to the Stores. The Procurement Hubs would continue to service the Supply Chain in exactly the same fashion as SRCs do in the current system and all the functions currently being carried out by SRCs would be dealt with by these Hubs (except placing of orders on Suppliers, which would take place centrally and would be administered by the Product Selection Team).

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2.0 Entity Definitions

Supplier: Any entity supplying any product (including raw material) to Fabindia. This definition includes all existing SRCs / Direct Vendors as well as all current suppliers to SRCs. Jobworker: A type of supplier entity that gets the fabric from Fabindia and works on fabric / tailors the garments and receives tailoring / jobworking fee in lieu of his service. Procurement Hubs: The existing SRC setup for the new Supply Chain would be converted as Procurement Hubs. These Hubs would be utilized as entry points of stock for the entire Organization. All Purchases and Jobwork would take place at this location. DC: An entity attached to a specific Market Region which would be utilized as consolidation and distribution point for stock shipped via Procurement Hubs destined for the stores. This entity exists in our current system and has been wrongly named MRW (Market Region Warehouse). MRW: An entity related to a specific Market Region which would be utilized for stocking within the market regions for the stores. This entity currently exists in our system as MRW-Stores. Stores: All retail outlets of Fabindia.

3.0 SCM Routes

3.1 Perennials (Except Furniture)

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3.1.1 RULES:

All perennials will be on ISQ (no B2B facility). Procurement Hubs pack for stores and ship out to stores via DCs of Market Regions. Jobworking / Purchases take place at Procurement Hubs ONLY. No role of MRW for perennials (excluding Furniture or any other department going for 2-part ISQ).

3.2 Furniture

3.2.1 RULES:

All Furniture will be on 2-part ISQ (no B2B facility). Procurement Hubs pack for MRWs and ship to DC attached to the MRW. Purchases take place at Procurement Hubs ONLY. In future, if any other department wishes to move to 2-part ISQ, the same route would apply. However, entire department has to move at one go (all perennials) and not selectively (basis Product / SKU / Category).

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3.3 Collections

3.3.1 RULES:

All Collections would move within Fabindia system on DL push. Procurement Hubs pack for stores and ship out to stores via DCs of Market Regions Jobworking / Purchases take place at Procurement Hubs ONLY. No role of MRW in the movement of collections (except for keeping Backup Quantities, if required).

4.0 Assumptions
The new software will not be required to cater to any SRC setup. If any SRC has not been merged / bought / folded up by the time the software gets rolled out, the SRC would be treated like any other vendor with no support from the FabConnect software to run their internal operations. All Direct Purchases (DP) and Jobwork (JW) will take place ONLY at the Procurement Hubs and not at any other entity. Movement of stock from Procurement Hubs to the stores could either be a direct delivery (e.g. Jewellery) or via DCs (for the rest of the categories). This rule would get applied and will be configurable at the department level. In cases of Direct Delivery, even perennials (even on ISQ) would be shipped directly to the stores. Stock movement between Stores as well as between MRWs & Stores would be direct delivery without involving the DCs.
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5.1 List of Features

This section lists down the features of the new software for the changes to take effect. NOTE: The list appended below, from business point of view, is actually a collection of changes that have to be incorporated in the current system. This is the final list of changes that IT would deliver upon. All previous discussions / feature lists etc. should not be considered within the scope of this exercise. If any change is not listed here, it is not going to be delivered within the scope of this exercise and would be taken up post the launch of the software as per FOPL priorities.

5.1 SKU Management

SKU ID to be a 10 digit numeric series associated with an SKU. Even if the SKU parameters change, the same ID is retained. Product ID is uniquely mapped to a hierarchy ID. Even if the hierarchy changes, the SKU ID / Barcode remains the same and gets mapped to new hierarchy ID. Each hierarchy level will be of 4 character alpha numeric - thereby increasing the master data items within a single hierarchy level (1.5 million approx.) Procurement Hub Code, Vendor Code and Promotion Code will be added to the hierarchy. The barcode will be generated as a 10 digit numeric code. The status of the code will be maintained only at SKU level, No Product or Vendor level status. Product Type - Do away with Product Type (Raw Material, Finished Goods and Semi Finished Goods). SKU Format, Seasonalility remain unchanged and will be maintained at SKU level (currently the same is maintained at Product Level). For ease of PSC, software will maintain format mapping as well as level / grade of the mapping. This would however not be utilized within the system and would be kept only as metadata for reports to show. Store -SKU format mapping will be at Department level. (Currently Store-format mapping is at division level i.e. an Artisan store is fully artisan store and cannot be made partially artisans Codes would only be created by PSC team (regular SKUs as well as BOM SKUs). Discount -Central discounts can be defined at SKU level - currently it is at product level

5.2 Purchases and Distribution Mechanisms

Listed below are the features of Purchases and Distribution that would be incorporated in the new system. 5.2.1 Purchases All Purchase Orders to the suppliers would be raised by the PSC team. Purchase Order Mechanism would be developed as a web-module against which GRNs would be made at Procurement Hubs locally. Purchases would take place ONLY at Procurement Hubs. 5.2.2 Distribution The distribution mechanism would rely on two-hop transfer requests against which stock would flow from Procurement Hubs to the stores. The features of the two distribution channels are listed below:

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Annexure 1 5.2.2.1 Auto-replenishment All perennials would move on Auto-replenishment basis ISQ. Auto-replenishment system would generate two-hop transfer requests (routed via DC) against which TOs would be made by Procurement Hubs. (TR from ISQ -> TO from P. Hubs -> TI at DC -> TO from DC > TI at Stores) Two-part ISQ system would be developed for departments wishing to serve stores via MRW instead of supplying directly from Procurement Hubs. All Transfer Requests would expire within 15 days (configurable) and the OFR / Efficiency would be calculated basis TOs against these TRs. 5.2.2.2 DL Push All DLs would now generate Transfer Requests instead of Purchase Orders. All DLs would have EDA (we are doing away with distinction in regular and Advanced Dls) The EDA / LDS etc. timelines would be configurable and will be decided later. All Transfer Requests would expire within 15 days (configurable) and the OFR / Efficiency would be calculated basis TOs against these TRs. TRs would get generated even if SKU is in New status. DLs wont be allowed for any Temp status SKU. DLs could be locked and unlocked (with the option of MRH access to edit quantities) 5.2.2.3 Stock Transfers All Stock Transfers between Procurement Hubs and Stores would be routed via DCs except for Jewellery. All Transfers between Stores and between MRWs and Stores would be direct (not routed via DCs). Store to Store stock transfer would not require Transfer Request Feature. Multiple TOs can be made against one Transfer Request at Procurement Hubs as well as from MRW (where 2-part ISQ would be implemented) till the Transfer Request does not expire (15 days, configurable). 5.2.2.4 Customer Orders The functionality of Customer Orders at stores basis Performa Invoices would be retained as is, however, the result of a customer order would be Transfer Requests at Procurement Hubs and not Orders.

5.3 Jobwork
Jobworking would be done ONLY at the Procurement Hubs. The pan to provide flexible BOMs for SRCs has been dropped for FOPL. Consumption and Tailoring charges per SKU would be defined by PSC after creating codes. Option to move Fabric GRN quantities to a BOM code with weighted average on cost for accurate cost of fabric would be provided.

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5.3 Modules Required at Procurement Hubs

Following modules would be developed and deployed for Procurement Hubs: Purchase Receipts / GRN (Excisable Goods as well as Non-Excisable Goods) Consolidated View of Transfer Requests by SKU for fulfillment Transfers against TRs Incorporation of Excise on Transfers Packing List: Feature to pack all SKUs of a TO in one box, In addition this can also accommodate SKUs of another TO within the same box. Returns to Vendors Repair / Alteration Module Stock Adjustments Point of Sale (if required) Inventory

5.5 Features not required / Removals

B2B module would be removed from the software. All perennials would move on Autoreplenishment. Wallets would become notional and would only be used as reference point rather than a business rule. All SRC related modules would be removed from the new build.

5.6 Other Changes

Exchange Module would be delivered at Stores to facilitate exchanges (Currently Returns and reinvoicing takes place).

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