Impact of Supply Chain Management in

Organized Apparel Retail Outlets on sales

& pricing: A study in selected cities of
India
Thesis Submitted to the

Padmashree Dr. D. Y. Patil University,

Department of Business Management,

in partial fulfillment of the requirements for the award of

the Degree of

DOCTOR OF PHILOSOPHY
In
BUSINESS MANAGEMENT

Submitted by
Anurag Shrivastava
(Enrollment No. DYP-PhD-10610017)

Research Guide
Prof.Dr.Pradip Manjrekar
DEAN

PADMASHREE DR. D.Y. PATIL UNIVERSITY,

DEPARTMENT OF BUSINESS MANAGEMENT,
Sector 4, Plot No. 10,
CBD Belapur, Navi Mumbai - 400 614

March - 2014
 Impact of Supply Chain Management in
Organized Apparel Retail Outlets on sales
& pricing: A study in selected cities of
India
 DECLARATION

I hereby declare that the thesis entitled “Impact of Supply Chain

Management in Organized Apparel Retail Outlets on sales & pricing: A

study in selected cities of India" submitted for the Award of Doctor of

Philosophy in Business Management at the Padmashree Dr. D.Y. Patil

University, Department of Business Management is my original work and the

thesis has not formed the basis for the award of any degree, associate ship,

fellowship or any other similar titles.

The material borrowed from other sources and incorporated in the thesis has

been duly acknowledged.

The research papers published based on the research conducted out of and in the

course of the study are also based on the study and not borrowed from other

sources.

Place: Navi Mumbai Signature of the student

Date: Anurag Shrivastava

Enrollment No. DYP-PhD-10610017

i
 CERTIFICATE

This is to certify that the thesis entitled “Impact of Supply Chain

Management in Organized Apparel Retail Outlets on sales & pricing: A

study in selected cities of India” submitted by Mr. Anurag Shrivastava is a

bonafide research work for the award of the Doctor of Philosophy in Business

Management at the Padmashree Dr. D. Y. Patil University Department of

Business Management in partial fulfillment of the requirements for the award

of the Degree of Doctor of Philosophy in Business Management and that the

thesis has not formed the basis for the award previously of any degree,

diploma, associate ship, fellowship or any other similar title of any University

or Institution.

Also certified that the thesis represents an independent work on the part of

the candidate.

Place: Navi Mumbai

Date:

Prof. Dr. R. Gopal Prof. Dr. Pradip Manjrekar

Director & Head of The Department Dean & Research Guide

ii
 ACKNOWLEDGEMENT

In the first place, I am indebted to the Padmashree Dr. D.Y. Patil University

Department of Business Management, which has accepted me for Doctorate program

and provided me with an excellent opportunity to carry out the present research

project.

I wish to express my deep sense of gratitude to my Guide, Dr.Pradip Manjrekar,

Dean Department of Business Management for his guidance and useful

suggestions, which helped me in completing the project.

The thesis could not have been completed, if not for the help and encouragement

from various people. I would like to take this opportunity to thank Dr. R. Gopal,

Director and Head of The Department of Padmashree Dr. D. Y. Patil University

Department of Business Management for constantly motivating me and giving

valuable suggestions during the development of this thesis.

Words are inadequate in offering my thanks to my wife Mrs.Priti & my Daughter

Ms.Ria for their encouragement during the research work.

Place: Navi Mumbai

Date: Signature of the student

iii
 Table of Contents
Chapter Sub Contents Page
No. section No.
Declaration i
Certificate ii
Acknowledgement iii
Table of Contents iv
List of Tables xiii
List of Figures xv
List of Abbreviations xvi
Executive Summary xvii
1. INTRODUCTION 1
1.1 Role of Organized apparel retailing 4
in marketing channels
1.2 Organized apparel Retailing functions in Distribution 5
1.3 The Relationship of Organized apparel 5
Retailers and Suppliers
1.4 Indian Organized apparel Retail Industry: 6
1.5 The wheel of supply chain in Organized 6
apparel Retailing
1.6 Managing the supply chain as framework- 7
effective supply chain management
1.7 Supply chain management 10
1.8 Influence of supply chain management 13
1.9 Supply chain vis-a vis organized retail outlets 17
1.9.1 Cost Based Competition 17
1.9.2 Just in Time Logistics 17

1.10 Enterprise Resource Planning 19

1.10.1 Activity Map with the cost based theme 20

(Value Proposition)

1.10.2 Time-based competition 20

1.10.3 Why Time is Important 21
1.11 The Lead Time Gap 22
1.12 Product Flow Analysis 24
1.13 Purpose of Study 24
2 LITERATURE REVIEW 26

iv
2.1 Supply chain management 26

2.2 Success of Online Retailing 41

2.3 Factors to consider 41

In Internet Retailing

2.4 Items sold through 41

Internet Retailing

2.5 Present and future Internet 42

Retailing areas

2.6 Information technology in Retailing 42

2.7 Types of technology used in Retailing 42

2.8 Interactive kiosks 43

2.9 Types of Retail theft 44

2.10 STRENGTH 46

2.10.1 Raw material base 46

2.10.2 Labour 46

2.10.3 Flexibility 46

2.10.4 Rich Heritage 46

2.10.5 Domestic market 47

2.11. WEAKNESS 47

2.11.1 More dependence on cotton 47

2.11.2 Spinning Sector 47

2.11.3 Fabric Processing 47

2.11.4 Poor Infrastructure 48

2.11.5 Low Labour Productivity 48

v
2.12 OTHER WEAKNESS 48

2.13 OPPORTUNITIES 48

2.13.1 Growing Industry 48

2.13.2 Market access through bilateral negotiation 49

2.13.3 Integration of Information technology 49

2.13.4 Opportunity in High Value Items 49

2.14 THREATS 49

2.14.1 Decreasing Fashion Cycle 49

2.14.2 Formation of Trading Blocks 50

2.14.3 Phasing out of Quotas 50

2.15 Food and apparel show the way 57

2.16 Shoppers don‟t stop 60

2.17 IT essential for growth 60

2.18 At the point of sale 64

2.19 Networking and Security 66

2.20 RFID for inventory control 68

2.21 Other technologies 69

2.22 Effective SCM: 76

2.22.1 Realistic ordering lead-times: 76

2.22.2 Averting problems 76

2.22.3 Facilitating resource planning and allocation 76

2.22.4 Four R‟s of SCM 76

2.22.5 Aggressive Expansion 78

2.22.6 Food Supply Chain Management 79

vi
 2.22.7 Employee training and retention 79

2.22.8 Managing working capital 80

2.22.9 Diversifying into untapped rural areas 80

2.22.10 Backward Integration 81

2.22.11 Importance of Supply Chain and 82

Logistics Management

2.22.12 Aggressive Expansion 93

2.22.13 Four Supply Chain Management 93

2.22.14 Employee training and retention 94

2.22.15 Managing working capital 94

2.22.16 Inversifying into untapped rural areas 95

2.22.17 Backward Integration 95

2.22.18 Betting on Domestic Markets: 97

2.23 The Hidden Challenges 102

2.24 Strong Supply Chain 104

2.25 Gap Analysis 111

3 OBJECTIVES AND RESEARCH ETHODOLOGY 112

3.1 Objectives 113

3.2 Hypothesis 114

3.3 Research Methodology 115

3.3.1 Secondary Study 115

3.3.2 Primary study 115

3.3.3 Data Collection & Data Analysis 116

4. GROWTH AND DEVELOPMENT OF 118

ORGANIZED APPARELS OUTLETS MALLS

vii
4.1 Introduction 118

4.2 Mall development in India 120

4.3 Characteristics of a shopping mall 121

4.4 TATA Group 133

4.5 RPG Group 133

4.6 Reliance 133

4.7 AV Birla Group 134

4.8 Retail formats in India 134

4.9 Challenges facing Indian retail industry 135

4.10 The Future 135

4.11 Drivers of Growth in Retail: 136

4.12 Dynamic spaces 138

4.13 E - Retailing in India 139

4.14 Problems with Shipping 140

4.15 Offline presence 140

4.16 Products offered at discounted rates 140

4.17 Luggage Problem 140

4.18 Some online retailing sites in India: 141

4.19 Future of E-retailing in India 142

4.20 Niche retailing opportunities in India 142

4.21 Discount Retailing in India 143

4.22 Organized Retailing Growth In Semi-urban, Rural 144

Areas

4.23 Child‟s Play: Kids Apparel Retailing 146

viii
4.24 „Kidfluence‟ or „Pester Power‟ 147

4.25 Influence of Films on Fashion 147

4.26 Current scenario 147

4.27 Accessories 148

4.28 Apparel Retailing 149

4.29 Strategies in Apparel Retail Segment 151

4.30 Challenges Faced in Retail Segment 153

4.31 Promotion of Apparel Brand through 154

Private Labels and Mall Spaces

4.32 Private Labels 154

4.33 Malls 156

4.34 Evolution of Apparel Retailing 159

4.35 The Global Retail Scenario 160

4.36 Indian Apparel Retail Scenario 161

4.37 Retail Concept Development 164

4.38 Economic Development 165

4.39 Improvements in Civic Situation 166

4.40 Changes in Consumer Needs, 166

Attitudes and Behaviour

4.41 Influence of Fashion 168

4.42 Changes in Government Policies 168

4.43 Increased Investment in Retailing 169

4.44 Increase in Power of Organized Retail 171

4.45 Retail Branding Versus Product Branding 172

ix
5 SUPPLY CHAIN MANAGEMENT 176

5.1 Introduction – Basic concepts 176

of distribution system

5.2 Setting Distribution Objective 177

5.3 Developing Channel Design 180

5.4 Developing Physical Networking Strategy 182

5.5 Reviewing Distribution Processes 182

5.6 Flows in Channels of Distribution 183

5.7 Patterns of Distribution 184

5.8 Participants in the channel system 185

5.9 Key Issues in Determining Channel Requirement 186

5.10 Logistics for Retail Operations 187

5.11 Functional areas of logistics 188

5.12 Information Technology 188

5.13 Transportation 189

5.14 Inventory Management 190

5.15 Economic Order Quantity (E.O.Q.) 192

5.16 Mathematical Formulate 192

5.17 Warehousing 193

5.18 Types of Warehouses 194

5.19 Factors affecting Warehousing Choice 194

5.20 Materials Handing Equipments 195

5.21 Classification of Materials Handling Systems 196

5.22 Packaging 197

x
 5.23 Logistical Integration 197

5.24 Supply Chain Management for operations 199

5.25 Information Access 200

5.26 Training 201

5.27 Confidence Building 201

5.28 Successful Indian Case Studies 202

5.29 Distribution Intensive Supply Chain 204

5.30 Supply chain strategy 206

5.31 Customer Value Proposition 206

5.32 Cost of the System 208

5.33 Customer Service Level 208

5.34 Supply Chain Efficiencies 209

5.35 Efficient Consumer Response (ECR) 210

5.36 The meaning of ECR 210

5.37 Uses Of ECR 212

5.38 Efficient Inventory Planning 213

5.39 per-Purchase Order (PPO) and Purchase Order (OP 213

5.40 Integrated Supply Chain 214

5.41 Vendor Management 214

5.42 Electronic Data Interchange (EDI) 215

5.43 warehouse Management 215

5.44 A Goods Received Note (GRN 215

5.45 Inter Transfer Note (ITN): 216

5.46 Value Chain 216

xi
 5.47 Automaton and supply chain manage 217

5.48 SHOPPER‟S STOP 218

5.49 Globalization and Competitiveness 222

5.50 Advantages of ERP SAP 223

6 DATA ANALYSIS 225

6.1 Demographic factors 225
6.2 City and Nature of shop Cross tabulation 229
6.3 Importance of supply chain management 236

6.4 Supplier Performance: 250

6.5 Customer demand 263

6.6 Price Effectiveness 268

6.7 Testing of hypothesis: 280

7 RESEARCH FINDINGS AND INTERPRETATION 293

8 CONCLUSIONS 296

9 RECOMMENDATIONS 303

9.01 Recommendation 304

9.2 Create the logistics vision. 308

9.3 Supplier performance 309

9.4 Distribution channel 309

9.5 Customer demand 310

10 Limitations of Study /Further scope of Work 311

BIBLIOGRAPHY 313

Annexure – 1 Questionnaire 335

Annexure – 2 SPSS Outputs 339

xii
 LIST OF TABLES

Sr. Table Description Page

No. No. no.
1. 2.1 Eight Supply Chain Processes Proposed by 27
Lambert and Cooper (2000).

2. 2.2 Definitions of Supply Chain Management. 29

Reproduced from Croom,

3. 5.1 Supply Chain Methods 180

4. 5.2 Selecting Inventory Control Techniques 191

5. 5.3 Decision Variables in Choosing among Types of 194

Warehouses

6. 5.4 Supply Chain Process 204

7. 6.1 City wise analysis 227

8. 6.2.1 Nature of shop and SCM 228

9. 6.2.2 Nature of shop 229

10. 6.3 supply chain management mentioned and 230

recognized by your company

11. 6.4 Supply chain management is different from 231

value chain management.

12. 6.5 Supply chain management has an impact on 231

pricing
13. 6.6 There is close relation between supply chain 232
management and organized apparel retail
business.

xiii
14. 6.7 Supply chain is the network of organization 233
that are involved in different process and
activities that produces value in the form of
product and services in the hands of
consumer.
15. 6.8 Recognition of supply chain management 234
16. 6.9 Descriptive Statistics 235
17. 6.10 High recognition 235

18. 6.11 There is need to implement supply chain 236

management
19. 6.12 Supply chain management will 237
Improve company's competitive advantage.
20. 6.13 Better supply chain management leads to 238
increased sales
21. 6.14 The supply chain in the organized retail 239
apparel business extends to various levels of
company- supplier relationship
22. 6.15 Effective supply chain will lead to long term 240
performance improvement.(better pricing of
apparels)

xiv
 LIST OF FIGURES

Sr. Figure Page

No. no.
1. Distribution Chain 178
2. Distribution Development Index. 179
3. Marketing Flows in a Channel System 184
4. Pie diagram 227

5. Respondents according to city 277

6. Nature of shop 229

7. No. of respondents 270

8. Diagram of respondents according to performs of SMC 272

9. Results of chi square test 274

10. Diagram of respondents accordant to city performs 275

11. Diagram of respondents according city and customer 276

demand level
12. Diagram of respondents according SMC and price 281
effectiveness level
13 Diagram of respondents according to importance of SCM 282
and price effect
14. Suppliers performs level 283
15. Distribution chain level 284
16. Customer demand level 286
17. City wise importance of SCM level 287
18. Results of chi square test 288
19. Performance of SCM 290

20. ERP and its impact 291

xv
 List of Abbreviations

B2B Business to Business

CAGR Compounded Annual Growth Rate

CST Consumer Satisfaction Total

PDS Public Distribution System

POS Point of Sale

OOS Out of Stock

OSA On shelf availability

SCM Supply Chain Management

SCT Supply Chain Total

SKU Stock keeping Unit

xvi
 Executive Summary

Supply chain management today is as important for success in the digital economy as it

was for Roman Empire world dominance.” Douglas M. Lambert (2009) “Successful

supply chain management requires cross-functional integration within the firm and across

the network of firms that comprise the supply chain.” Many companies initially focus on

supply chain management as a way to improve customer satisfaction and reduce

operational inefficiencies. While doing this, the company improves visibility and control

over its supply chain, which also leads to better financial performance. Supply chain

management is essential to the company‟s competitive capacity. Nowadays, especially

with the globalization and IT industry development, companies are not competing as

individuals but as part of the supply chain in the global environment. How to cut cost,

improve quality and also operate effectively is every company‟s principle through the

supply chain management. With substantially cheaper labor and cost, many companies in

the developed countries have started sourcing in the booming economics in China and

some other countries. This is also the trend of global supply chain. However, low product

price in emerging economics comes together with more communication efforts, longer

delivery time, bigger purchase quantities and high inventory level. A minor company

therefore finds it rather difficult sometimes to optimize their strategies, and resolve the

quality problems. Benefit and cost are closely linked with supplier performance

Supply chain management is no longer in its infancy, and the benefits related to

managing the supply network as a whole rather than as a group of autonomous companies

have been discussed extensively in the literature. In particular, the positive influence of

xvii
supply chain management practices on the dynamics of the system have been highlighted,

putting forward the opportunity for better end-customer service at lower cost Lee et al.

(1997). First, improving transparency with end-customer demand was seen to reduce

uncertainty in supply chains. Consequently, the upstream amplification of demand

variability that is often observed in supply network (the bullwhip effect can be better

controlled. Second, evidence has shown that centralized decision making confers the

chain with opportunities to reduce the strategic misalignment of partners' capabilities.

Companies' practices and interaction policies require the company to be well coordinated

in order to achieve supply chain objectives effectively and efficiently. Above all, the

level of flexibility should be specifically aligned to the uncertainty of both the demand

and the supply processes. Without the ability to answer to uncertainty, the resulting

unreliability of the system leads to more variability in supply chain ows. As observed by

Hopp et al.(2001), increased variability in processes always damages the performance of

the systems.

Organized apparel Retailing is the final connection in the marketing channel that brings

goods from Manufactures to consumers. In other word, retailing is the combination of

activities involved in selling or renting consumer goods and services directly to ultimate

consumers for their personal or household use. In addition to selling, retiling includes

different and diverse activities like buying, advertising, data processing and maintaining

inventory.

xviii
A supply chain is a sequence of suppliers, warehouses, operations, and retail outletss.

Different companies may not have identical supply chains due to the nature of their

operations, and whether they are primarily a manufacturing operation or a service

operation (Stevenson, 1999).

The supply chain is the network of organizations that are involved, through upstream and

downstream linkages, in the different processes and activities that produce value in the

form of products and services in the hands of the ultimate consumer (Christopher,

2004:15). Thus for example a shirt manufacture is a part of a supply chain that extends

upstream through the weavers of fabrics to the manufacturers of fibers, and downstream

through distributors and retailers to the final consumer. Each of these organizations in the

chain are dependent upon each other by definition and yet closely link and relate each

other in practical operation processes.

Some retailers carry primarily the products of a product manufacturer only. for Eg : Ford

dealership may carry a variety of cars but nearly all are made by Ford. Most of the time,

however merchants are not owned by manufacturer, which allows them to order from

various manufacturers to create the product mix they believe will fill the needs of their

customers.

Businesses that sell organized apparel goods and services are departmental stores,

discount stores, specially stores and even seasonal retailers. Modern organized apparel

retailing is increasingly an expression of consciousness in society. Societies however

xix
differ in expression of that consumer consciousness.Organised apparel Retailing has

developed a more international flavor because of closer cultural and social interactions

between various countries.. In some parts of the world, the retail business is dominated

by small family run or regionally – targeted stores, but more and more of this market is

takes over by billion dollar multinational conglomerates like Wal-Mart, Sears, Carrefour

and the like. The larger organized apparel retailers have managed to set up huge supply /

distribution chains, Inventory Management Systems, financing pacts and wide scale

marketing plans.

Role of Organized apparel retailing in marketing channels:

In organization‟s marketing, producers often sell directly to their final buyers and so are

linked to their final buyers in marketing channels. These types of direct channels are

much less common in consumer product marketing. Ultimate consumers make most of

their purchases in retail stores that are independent of the producer. Organized apparel

Retailing therefore, is the final stage in marketing channels for consumers‟ product

marketing. Organized apparel Retailers provide the important link between the producer

and the ultimate consumer.

Organized apparel Retailing is a lot more than simply buying and selling. It is important

to consumers because it creates economic utility. It is important to manufacturers because

it is the major connection in the marketing channel between manufacturer and end users.

And it is important because of its contribution to the economy.

xx
Organized apparel Retailing functions in Distribution:

In general organized apparel retailers perform four distinct functions. They participate in

the sorting process by collecting an assortment of goods and services from a wide variety

of suppliers and offering them for sale. They provide information to consumers through

advertising, displays, and signs and sales personnel. Marketing research support is given

to other channel members. They store merchandise, mark prices on it, place items on the

selling floor and otherwise handle products. Generally, they pay suppliers for items

before selling them to final consumers. They complete transactions by using appropriate

store locations and hours, credit policies and other services.

The Relationship of Organized apparel Retailers and Suppliers:

Organized apparel Retailers deal with two broad categories of suppliers: (1) those who

are selling goods and services for use by the retailers, and (2) those selling goods and

services that are resold by the retailers.Store fixtures, data processing equipment,

management consulting and insurance are examples of goods or services used by the

retailers. Suppliers must have knowledge of their retailer‟s goods, strategies, and methods

of business operation in order to sell and service accounts affectively.

xxi
Indian Organized apparel Retail Industry:

History of organized apparel retailing is very old small stores play key role in the nation‟s

economy. Generally most of the organized apparel retailers are small one-man or

proprietary stores. In some developed countries one man or small stores are disappearing

and have been replaced by other forms such as department and discount stores and they

are found in abundance in urban markets. But in India such stores are sometimes found in

urban areas only. In rural areas, only general stores are existing in India. Most of the

retailers in Indian suburban and rural markets are of the form of general stores. For

explaining the continuous evolution in organized apparel retailing, few theories have

been proposed, including the wheel of organized apparel retailing,

The wheel of supply chain in Organized apparel Retailing:

Harvard professor Malcolm P. McNair developed a theory in 1958 to explain the

continuous evolution of organized apparel retailing. His theory is known as the wheel of

organised apparel retailing. This theory divides the cyclical patterns of organized apparel

retail evolution, According to this theory a new organized apparel retailer enters the

market place with low prices, low margins and limited product line.

As the innovator succeeds in attracting customer from more established organised apparel

retailers, new competitors arise to copy the innovator. These new competitors start to take

customers away from the original store, putting pressure on the first organized apparel

xxii
retailer to trade up by adding more services, expanding product lines, and opening fancier

stores. But in trading up, the innovator more like the established stores faces initially

challenges. Trading-up makes the innovator valuable to new customers because it leaves

a gap at the lower end of the market place for new competitors. These new entrants, who

are willing to accept lower profit initially, may now challenge the original innovator.

And, the newest entrants start the wheels of retailing turning once again in a new round

of evolution.

.Managing the supply chain as framework - effective supply chain management.

The framework of effective supply chain management is provided through literature

study and practical experiences. The effective supply chain management stresses the need

to extend logistics integration upstream to suppliers and downstream to distributors and

customers (Christopher,2008). The problems and ineffective phenomenon can be outlined

to facilitate the development of integrated end-to-end supply chain processes.

Review of Literature

One of the most relevant evolutions of modern business management is that companies

compete as networks of partners, rather than as single autonomous companies.

Traditionally composed of suppliers, manufacturers, wholesalers, and customers, these

partners form a network of relationships that is known as a supply chain." Closely related

to supply chains is the concept of supply chain management" which emerged from the

xxiii
natural intuition that adequate management of supply chain products, information, and

funds will improve supply chain competitiveness and profitability (Chopra and Meindl,

2001). Christopher (1998) defined supply chain management as: the management of

upstream and downstream relationships with suppliers and customers to deliver superior

customer value at less cost to the supply chain as a whole." (Christopher, 1998) The

foundation of supply chain management is underscored in this definition in that supply

chain management focuses on the optimization of system-wide performance, not the

narrow interests of single partners. There is a significant amount of evidence in the

literature that networks' bottom-line performance can be improved by counterintuitive

decisions at the retail level. For instance, Billington et al. (2004) detailed how Hewlett-

Packard Company saved $80 million in desk printer supply costs by switching

transoceanic freight lanes from air to sea.

Shanthi Venkataraman (2004) states that Strict inventory control, backward integration

and the use of private labels are some of the measures that have been taken by many

organized retailers to improve margins, for Example Pantaloon has a stock conversion

period of about 90 days. This is moderate, considering that it retails a wide range of

products with divergent inventory policies. Pantaloon is integrated backwards in the

organized apparel business, with its group company, Pantaloon Industries - supplying

fabric. This enables it to have some control over the cost and quality of its organised

apparel. It markets most of its products under private labels, thus offering products that

cost 20-25 per cent lower than branded items, owing to an absence of advertising and

other related expenses.

xxiv
Mike Kilgore, Abraham Joseph and Jeff Meterskyy (2007) argue that India‟s supply

chains will not be highly reliable. Shippers accustomed to reliability and speed will have

to reset expectations. To reduce the impact of highly-variable transportation, brought

about by inadequate logistical infrastructure, firms must adopt inventory strategies

similar to those used in small-part service industries. While service parts industries use

inventory to buffer demand versus transportation variability, the resulting network

structure is the same. Firms will need to stage inventory throughout multiple echelons to

reduce the impact of transportation variability and high transportation costs. This multi-

echelon Staging will create networks with many distribution points and double-handling

of products.

Vyas Preeta and Sharma Ankush (2007) Decision Support Systems (DSS) provide timely

and accurate information & it can be viewed as an integrated entity providing

management with the tools and information to assist their decision making. This study

which is exploratory in nature, adopts a case study approach to understand practices of

organized retailers in organised apparel outlets regarding applications of various DSS

tools. Conceptual overview of DSS is undertaken by reviewing the literature. The study

describes practices and usage of DSS in operational decisions in organized retail

organised apparel outlets and managerial issues in design and implementation of DSS. A

multi brand local chain and multi brand national chain of organised apparel was chosen

for the study. Varied tools were found to be used by them. It was also found that for sales

xxv
forecasting and visual merchandising decisions, prior experience rather than any DSS

tool was used.

Badal Choudhury (2008), head, Organised apparel and Lifestyle Business, Safexpress,

observes: “One needs to outsource the backend operations to outsourcing experts in the

industry. It should be a very specialized practice, and if not followed in the way, the

execution process could be in question.”

The growth in the domestic jeans and casual wear market is attracting an increasing

number of multinationals into the organized retail organised apparel segment in India.

In fact, the Indian jeans wear market is growing at 12 per cent per annum(2010,from

www.retailindianews.com). In an interview with Catalyst, Duncan Wilson (2004),

Managing Director of the UK-based denim wear company Lee Cooper International,

shares his view on the growth potential of the market, the factors that are egging it on and

how significant the Indian market is for his company.For global giants looking at newer

markets, India presents exciting opportunities on account of its vast middle-class and a

virtually untapped organized retail organised apparel industry.

Vineet Agarwal (2007) states the Indian organized retail apparel outlets has seen

unprecedented growth in the last few years. The KPMG report, „Consumer Markets in

India: the next big thing has predicted that the organized apparel retail outlets is expected

to grow at rate higher than India‟s GDP growth in the next five years.

xxvi
The organized organised apparel retail boom promises to give an impetus to a host of

allied outletss and the logistics industry, as the backbone of the retail outlets, stands to

gain the maximum.

In India, the logistics market is mainly thought to mean transportation. But the major

elements of logistics cost for industries include transportation, warehousing, inventory

management, courier and other valued-added services such as packaging. With the

expansion of organized organised apparel retail, supply chain will take on an increasingly

important role. With the end consumer becoming more demanding and time conscious,

the need for just-in-time services is increasing. In organized retail organised apparel,

where competition is intense and stakes are high, customer satisfaction is paramount.

Mansi Batra, M.S. and Linda S. Niehm, (2009) argues that Despite seemingly large

market potential, little is known about the scope of opportunities and threats for

international organized apparel retailers seeking to enter the growing Indian organized

organized apparel retail arena. A low level of organized retail penetration, coupled with

an ineffective supply chain, characterizes the infrastructure of the Indian retail industry.

Analysis of the current state of Indian retail, along with opportunities and threats to

growth, would have immense significance for international retailers vying to enter the

Indian market. This paper presents a conceptual framework that offers advice for

international corporations regarding successful entry and sustainability in India. Using a

metatheory approach, a series of testable propositions are presented in relation to

opportunities for international organized apparel retail development in the Indian

organized apparel retail outlets.

xxvii
Dr. S.L Gupta (2012) states that Re-engineering of product sourcing philosophies aligned

more towards collaborative planning and replishmentis important. The message,

therefore, for the existing small and medium independent organised apparel retailers is to

closely examine what changes are taking place in their immediate vicinity, and analyze

whether their current market offers potential redevelopment of the area into more modern

multi-option destination. If it does, and most commercial areas in India to have this

potential, it would be very useful to form a consortium of other such small retailers in

that vicinity and take a pro-active approach to pool in resources and improve the overall

infrastructure. The next effort should be to encourage retailers to make some investment

in improving the interiors of their respective establishments to make outletsping and

enjoyable experience for the customer.

Debasis Daspal (2010) states that among the various reasons gravitated the transition

from vertical to horizontal structure, there are the emphasis on greater organizational and

process flexibility to cater to volatile markets. Many organised apparel retail

organizations worldwide have restructured themselves from vertically integrated

composite set-up to horizontally aligned configuration

Drawing a parallel between brands across diverse categories such as automobiles,

consumer electronics, apparel and jewellery, Mr. Arvind Singhal, Chairman, KSA

Technopak, threw light on the Indian consumer‟s willingness to now experiment with

products with the element of contemporary design. “The new value drivers for

xxviii
consumers today are quality and contemporary design. While price was the predominant

purchase determinant in the pre-1980s, quality coupled with price assumed importance in

the mid-1980s. The 1990s witnessed an assortment of quality, range and price. Now it‟s

contemporary design coupled with quality that‟s determining purchase decisions across

some 30 million Indian consumers, he said. what is also favoring the domestic market to

warm up to the return and apparel fashion industry, is the current demographic profile.

“The largest number of population in India will be in the 20-44 year age group in the next

few years. This profile does not exit even in a huge market such as “China”.

The downside was that while the market was ready, and the customers were willing to

pay, there were not enough suppliers. Very few marketers have pumped in sustained

investments and efforts in their business. This needs to change, investments in

technology, quality control and training as the required focus areas for the industry.

“Investment in superior and efficient technology, and not fancy buildings, is what the

industry needs. Also, manufacturing has to take a leap jump to survive.

Defining the Problem

The concept of supply chain management" which emerged from the natural intuition that

adequate management of supply chain products, information, and funds will improve

supply chain competitiveness and profitability (Chopra and Meindl, 2001). Christopher

(1998) defined supply chain management as: the management of upstream and

downstream relationships with suppliers and customers to deliver superior customer

xxix
value at less cost to the supply chain as a whole." The foundation of supply chain

management is underscored in this definition in that supply chain management focuses on

the optimization of system-wide performance, not the narrow interests of single partners.

There is a significant amount of evidence in the literature that networks' bottom-line

performance can be improved by counterintuitive decisions at the retail level. For

instance, Billington et al. (2004) detailed how Hewlett-Packard Company saved $80

million in desk printer supply costs by switching transoceanic freight lanes from air to

sea. To avoid expensive air shipment charges without affecting its customer service level,

Hewlett-Packard had to resize upward inventory at the distribution centers, which was

against the trend of inventory reduction generally found in manufacturing companies.

So long, the chain of movement of the product from the manufacturer to the customer is

by rules and years of experience, supply chain management (SCM) gives a ready

referendum whereby entrepreneurs competing globally can streamline their businesses so

as to deliver the right product, at the right time, place, cost and quality. Such a system can

exist successfully in India if due care is given to inventory management thereby

increasing the profitability of all the stake holders in the supply chain cycle of organized

apparel industry.

Most of the loop holes appearing in an ideal supply chain management are infrastructure

facilities in India. The study tries to identify these road blocks and try to give fairly

acceptable solution to the organized retail apparel industry with regards to SCM.

xxx
Significance of The Study

Supply chain management has been identified and researched in many industries

including automobile, food service, healthcare, information technology, and retailing

outlets. However, limited information is available about the functions and practical

experiences of the supply chain management in the retail clothing business. The study

will focus on the importance of the supply chain management and framework of an

effective supply chain management in the clothing retail business. The real meaning of

supply chain management will be defined. The related practical skills and effective

management issues will be discussed. The research specially focuses on the retail

clothing business in India.

The organized apparel retail businesses are spread all over the country. The size and scale

of the businesses are various. Also the target customer and markets are quite different.

Therefore, supply chain, as a dynamic is difficult to be covered in all the aspects in the

study. The study will focus on the selected organized apparel retail business in India.

Objectives of the study

1. To study the tools and techniques with regards to supply chain management in

organized apparel outlets and its impact on pricing.

2. To study the impact of economies of scale of retailers with respect to optimum

inventory management in the supply chain cycle.

xxxi
3. To study the impact of marketing and supply chain interface on an integrated

basis In “Organized apparel and clothing” category of the retail outlets.

4. To study the impact of infrastructure related factors on improvement of sales of

the organized retail apparel outlets.

5. To study the impact of backend merchandize management on the sales of the

organized retail apparel outlets.

6. To study the impact of ERP on improving the value proposition of the retail

“Organized apparel outlets.”

Hypothesis

H01: The tools and techniques with regards to supply chain management in

organized apparel outlets has no impact on pricing.

H11: The tools and techniques with regards to supply chain management in

organized apparel outlets has an impact on pricing.

H02: The impact of economies of scale with respect to optimum inventory

management has no impact on supply chain cycle.

H12: The impact of economies of scale with respect to optimum inventory

management has an impact on supply chain cycle.

H03: There is no impact of marketing and supply chain management on an

integrated basis on organized apparel retail outlets.

xxxii
 H13: There is an impact of marketing and supply chain management on an

integrated basis on organized apparel retail outlets.

H04: The infrastructure related factors have no impact the sales improvement of

retail organized apparel outlets.

H14: The infrastructure related factors have an impact on the sales improvement

of retail organized apparel outlets.

H05: There is no impact of backend merchandise on sales of retail organized

apparel outlets.

H15: There is an impact of backend merchandise on sales of retail organized

apparel outlets.

H06: There is no impact of ERP implementation on improving the value

proposition of retail organized apparel outlets

H16: There is an impact of ERP implementation on improving the value

proposition of retail organized apparel outlets.

Research Methodology

The Research Methodology adopted for the study comprises of several steps, such as

1. Secondary Study

xxxiii
A study of several research papers/books and other reports were identified and studied,

with the objective of finding out the gaps in the study, the factors that have a bearing on

the objectives of the study.

2. Primary study

A primary study confining of discussions with various Mall Managers of Mumbai, Indore

and Delhi was initiated and conducted.

The discussions were held using a questionnaire

The questionnaire comprises of several parts such as

a) Recognition of supply chain management

b) Importance of supply chain management

c) Performance of supply chain management

d) Supplier Performance

e) Distribution channel

f) Customer demand

The questionnaire was further tested for Cronbach Alpha reliability to test the internal

consistency of the items. According to Aiken,(2003) This is a general formula for

estimating the reliability of a test consisting of items on which different scoring

weights may be assigned to different responses. Alpha reliability coefficient for the

respondent‟s questionnaire was found to be 0.740 which is within the acceptable range.

Reliability refers to the consistency of scores obtained by the same person when re-

examined with the same test on different occasions or with different sets of equivalent

items or under variable examining conditions.

xxxiv
Data Collection & Data Analysis

For the purpose of the study Delhi, Indore and Mumbai were chosen as the area where

the study will be conducted. The preliminary study indicates that the impact of supply

chain management and its effect was felt to be high in Mumbai.

A pilot study was conducted in Mumbai with the objective of checking the reliability of

the study.

Sample Size

The sample size calculator indicated that a sample of around 864 respondents would be

required.

The basis of this is as fallows

Method to find sample size (source of formula is sample size calculator)

Sample size for this study

Consider z = 1.96 ( it is standard for 95% level of confidence)

Standard deviation calculated from pilot study = 11.25 ( app)

Margin of error = 0.75

xxxv
 Sample size = ( 1.96 * 11.25/0 .75)^2 = 864(approximate)

Minimum requirement of data is of 864 respondents

To have uniform proportion sample size is finalized as under.

3 cities * 300 respondents from each city= 900 respondents.

The actual sample used was 900 comprising of 300 respondents in each of the 3 cities.

The 300 respondents were than further stratified to take into consideration the number of

outlets for each city.

Thus

S.No. Nature of outlet Mumbai Delhi Indore Total

1 Single outlet 100 100 100 300

2 Less than 5 100 100 100 300

outlets

3 More than 5 100 100 100 300

outlets

4 300 300 300 900

Data Analysis

The data collected was then curetted and analyzed using SPSS 20. Statistical tools like

ANNOVA, Chi Square etc were used.

xxxvi
Limitations of the study

Researcher has assumed that the information provided by the retail executives and

managers is transparent and accurate. However there can be constraints while sharing

information by the retailers for general and academic survey. Hence more accurate

information can be gathered only if such survey is commissioned by large retailers for

their own use.

The Indian apparel organized retail scenario is evolving and is in dynamic state with

all retail chains expanding aggressively. However many of them could not sustain this

growth because of liquidity problems and debt related issues. Therefore care has been

taken to include only those retailers who have stabilized operations. The scenario

can change in the future. Thus this research work can only be used as a reference for

conducting a similar study on organized retail. But the sampling frame will have to

be decided as appropriate at the time of conducting any future study.

Findings

During the survey and data collection some useful insights were obtained, both from

retailers as well as consumers which are useful for practical application by the retailers

in improving their overall business efficiency.

xxxvii
Some of the important findings are summarized below:

52 percent of the respondents are strongly agreeing that supply chain management is

mentioned and recognized by their company where as 9 percent of the respondents are

strongly disagreeing that supply chain management is mentioned and recognized by their

company11 percent of the respondents are having neutral opinion that supply chain

management is mentioned and recognized by their company

42 percent respondents are strongly agreeing to the fact that supply chain management is

different from value chain managemnt.8 percent respondents are strongly disagreeing to

the fact that supply chain management is different from value chain management and 6

percent respondents are not having any opinion that supply chain management is different

from value chain management

7 percent of the respondents strongly disagree that supply chain management has an

impact on pricing.19 percent of the respondents strongly disagree that supply chain

management has an impact on pricing,30 percent of the respondents strongly are neutral

that supply chain management has an impact on pricing,37 percent of the respondents

agree that supply chain management has an impact on pricing,6 percent of the

respondents strongly agree that supply chain management has an impact on pricing

5 percent respondents strongly disagree that there is close relation between supply chain

management and organized apparel retail business.22 percent respondents disagree that

xxxviii
there is close relation between supply chain management and organized apparel retail

business,56 percent respondents are neutral that there is close relation between supply

chain management and organized apparel retail business,11 percent respondents agree

that there is close relation between supply chain management and organized organised

apparel retail business and 7 percent respondents strongly agree that there is close

relation between supply chain management and organized apparel retail business.

5 percent of respondents strongly disagree that there is a need to implement supply chain

management,8 percent of respondents disagree that there is a need to implement supply

chain management,23 percent of respondents strongly are neutral towards the need to

implement supply chain management,17 percent of respondents agree that there is a need

to implement supply chain management and 47 percent of respondents strongly disagree

that there is a need to implement supply chain management.

Conclusions and Recommendations

Indian Retail industry has witnessed the entry of many large corporate houses and growing

acceptance of modern formats. Though modern retail is relatively new in India. It is

heartening to note that they have quickly adopted required processes in their operations.

Given the industry's changing landscape and emerging challenges, the focus of retail

industry players too is changing. They are concentrating on strengthening the existing

operations and assessing options for profitable growth through enhancing efficiency in

Supply chain, embracing appropriate technology, upgrading skills of employees and

xxxix
are moving towards consolidation and innovation of processes. In today's world of

Internet and wide media reach and connectivity, consumers are well informed and are

able to exercise their option in deciding their preferred store for shopping. One of the

major challenge modern retail outlets are facing is in attracting and retaining new

customers. This explains the reason why all store formats be it convenience store, mid

sized store and hypermarket are working on improving supply chain alignment with sales

and pricing of organized apparel retail outlets. Only happy customers come back for

repeat and regularly buying and help in consolidating base of loyal customers.

Further the study reveals that retailers are focusing on enhancing employee productivity

and operational efficiency and outsourcing of logistics to improve delivery of goods and

services and managing inventory to remain profitable.

However, the focus differs among different formats and mid sized stores in general

barring few exceptions has still a lot of ground to cover in adapting to their processes

modern retail practices.

The study also showed that though a lot of data is collected on items like wastage, slow

moving items, customer complaints, there is no structured approach in processing this

data and comparing it with any set target. Retailers have to move to the next phase and

make use of this information in achieving measurable targets for operational efficiency

improvement.

xl
The study reveals that still complete outsourcing of inwards logistics is not being

significantly practiced by retailers in any format be it Hypermarkets, Mid sized stores

and convenience stores. Most of the stores are optimizing this process by partially

outsourcing. This could be because there is still no large dependable logistics service

providers for retailers whose services these retailer can avail. This is a big business

opportunity and large retail chains are themselves planning to enter into this area. Once

this is implemented it is expected to have a major impact on procurement of apparels for

the organized retailers.

Recommendation

Decision support systems are seldom passive instruments and are often applied to support

Supply Chain Management via feedback mechanisms that instigate corrective actions.

The direction and particularly the amplitude of the likely management action/response

however have not been defined. There exists a recognized need for some universally

accepted strategic model to coordinate the organizations within the supply chain,

integrating, measuring and controlling key business processes effectively, but to date any

measured impact of the performance measurement element within such a systems, on the

dynamic behavior within the supply chain, has yet to be examined.

In Indian organized retail scenario it appears that all three formats viz Hypermarket,

Midsized Store and convenience store are here to stay. Hence in order to make each of

these format's commercially viable, some innovative business models specifically valid

xli
to Indian situations will have to be developed. This will entail particularly back end of

supply chain. Thus, it is recommended that retailers should consider sharing of facilities

like logistics service provider for inward logistics and godown space. This would help in

reducing the operational cost and make the enterprise viable business proposition.

It was observed during the study that price display particularly for apparels is not

streamlined and unsatisfactory. It is a major source of irritant to the customer. It is

recommended that properly designed placard displaying facilities should be installed

which should show the correct price of the item in the shelves. Many times shopper

drops the item from his list resulting in the loss of sale when he is not able to know the

exact price of the item that he wants to buy. By implementing this recommendation the

retailers will be able to resolve this problem. Also promotional offers which are displayed

on the shelves should be valid. Sometimes the offer is still displayed when the Sales

promotional scheme is over and offer is no more valid.

The results of this study hopefully will provide organized apparel retail outlets with

additional knowledge to peruse collaborative opportunities aimed to benefit supply chain

management in organized apparel retail outlets.

xlii
 CHAPTER 1

INTRODUCTION

Supply chain management is as important for success in the digital economy as it was

for Roman Empire world dominance.‖ Douglas M. Lambert (2009) ―Successful

supply chain management requires cross-functional integration within the firm and

across the network of firms that comprise the supply chain.‖ Many companies initially

focus on supply chain management as a way to improve customer satisfaction and

reduce operational inefficiencies. While doing this, the company improves visibility

and control over its supply chain, which also leads to better financial performance.

Supply chain management is essential to the company‘s competitive capacity.

Nowadays, especially with the globalization and IT industry development, companies

are not competing as individuals but as part of the supply chain in the global

environment. How to cut cost, improve quality and also operate effectively is every

company‘s principle through the supply chain management. With substantially

cheaper labor and cost, many companies in the developed countries have started

sourcing in the booming economics in China and some other countries. This is also

the trend of global supply chain. However, low product price in emerging economics

comes together with more communication efforts, longer delivery time, bigger

purchase quantities and high inventory level. A minor company therefore finds it

rather difficult sometimes to optimize their strategies, and resolve the quality

problems. Benefit and cost are closely linked with supplier performance.

Supply chain management is no longer in its infancy, and the benefits related to

managing the supply network as a whole rather than as a group of autonomous

1
companies have been discussed extensively in the literature. In particular, the positive

influence of supply chain management practices on the dynamics of the system have

been highlighted, putting forward the opportunity for better end-customer service at

lower cost (Lee et al., 1997). First, improving transparency with end-customer

demand was seen to reduce uncertainty in supply chains. Consequently, the upstream

amplification of demand variability that is often observed in supply network (the

bullwhip effect can be better controlled. Second, evidence has shown that centralized

decision making confers the chain with opportunities to reduce the strategic

misalignment of partners' capabilities. Companies' practices and interaction policies

require the company to be well coordinated in order to achieve supply chain

objectives effectively and efficiently. Above all, the level of flexibility should be

specifically aligned to the uncertainty of both the demand and the supply processes.

Without the ability to answer to uncertainty, the resulting unreliability of the system

leads to more variability in supply chain ows. As observed by Hopp et al.(2001),

increased variability in processes always damages the performance of the systems.

Organized apparel Retailing is the final connection in the marketing channel that

brings goods from Manufactures to consumers. In other word, retailing is the

combination of activities involved in selling or renting consumer goods and services

directly to ultimate consumers for their personal or household use. In addition to

selling, retiling includes different and diverse activities like buying, advertising, data

processing and maintaining inventory.

A supply chain is a sequence of suppliers, warehouses, operations, and retail outletss.

Different companies may not have identical supply chains due to the nature of their

2
operations, and whether they are primarily a manufacturing operation or a service

operation (Stevenson, 1999).

The supply chain is the network of organizations that are involved, through upstream

and downstream linkages, in the different processes and activities that produce value

in the form of products and services in the hands of the ultimate consumer

(Christopher, 2004). Thus for example a shirt manufacture is a part of a supply chain

that extends upstream through the weavers of fabrics to the manufacturers of fibers,

and downstream through distributors and retailers to the final consumer. Each of these

organizations in the chain are dependent upon each other by definition and yet closely

linked and relate each other in practical operation processes.

Some retailers carry primarily the products of a product manufacturer only. for Eg :

Ford dealership may carry a variety of cars but nearly all are made by Ford. Most of

the time, however merchants are not owned by manufacturer, which allows them to

order from various manufacturers to create the product mix they believe will fill the

needs of their customers.

Businesses that sell organized apparel goods and services are departmental stores,

discount stores, specially stores and even seasonal retailers. Modern organized apparel

retailing is increasingly an expression of consciousness in society. Societies however

differ in expression of that consumer consciousness.Organised apparel Retailing has

developed a more international flavor because of closer cultural and social

interactions between various countries. Organized apparel Retailing is a vibrant part

of our challenging society and a major source of employment. Over the past couple of

decades, there has been sweeping changes in organized apparel retailing business. In
3
some parts of the world, the retail business is dominated by small family run or

regionally – targeted stores, but more and more of this market is takes over by billion

dollar multinational conglomerates like Wal-Mart, Sears, Carrefour and the like. The

larger organized apparel retailers have managed to set up huge supply / distribution

chains, Inventory Management Systems, financing pacts and wide scale marketing

plans.

1.1 Role of Organized apparel retailing in marketing channels:

In organization‘s marketing, producers often sell directly to their final buyers and so

are linked to their final buyers in marketing channels. These types of direct channels

are much less common in consumer product marketing. Ultimate consumers make

most of their purchases in retail stores that are independent of the producer. Organised

apparel Retailing therefore, is the final stage in marketing channels for consumers‘

product marketing. Organized apparel Retailers provide the important link between

the producer and the ultimate consumer. Organized apparel Retailing is a lot more

than simply buying and selling. It is important to consumers because it creates

economic utility. It is important to manufacturers because it is the major connection in

the marketing channel between manufacturer and end users. And it is important

because of its contribution to the economy.

Organized apparel Retailers deal with two broad categories of suppliers: (1) those

who are selling goods and services for use by the retailers, and (2) those selling goods

and services that are resold by the retailers.

4
1.2 Organized apparel Retailing functions in Distribution:

In general organized apparel retailers perform four distinct functions. They participate

in the sorting process by collecting an assortment of goods and services from a wide

variety of suppliers and offering them for sale. They provide information to

consumers through advertising, displays, and signs and sales personnel. Marketing

research support is given to other channel members. They store merchandise, mark

prices on it, place items on the selling floor and otherwise handle products. Generally,

they pay suppliers for items before selling them to final consumers. They complete

transactions by using appropriate store locations and hours, credit policies and other

services.

1.3 The Relationship of Organized apparel Retailers and Suppliers:

Organized apparel Retailers deal with two broad categories of suppliers: (1) those

who are selling goods and services for use by the retailers, and (2) those selling goods

and services that are resold by the retailers.

Store fixtures, data processing equipment, management consulting and insurance are

examples of goods or services used by the retailers. Suppliers must have knowledge

of their retailer‘s goods, strategies, and methods of business operation in order to sell

and service accounts affectively. Most of the retailers in Indian suburban and rural

markets are of the form of general stores. For explaining the continuous evolution in

organized apparel retailing, few theories have been proposed, including the wheel of

organized apparel retailing.

5
1.4 Indian Organized apparel Retail Industry:

History of organized apparel retailing is very old small stores play key role in the

nation‘s economy. Generally most of the organized apparel retailers are small one-

man or proprietary stores. In some developed countries one man or small stores are

disappearing and have been replaced by other forms such as department and discount

stores and they are found in abundance in urban markets. But in India such stores are

sometimes found in urban areas only. In rural areas, only general stores are existing in

India. Most of the retailers in Indian suburban and rural markets are of the form of

general stores. For explaining the continuous evolution in organized apparel retailing,

few theories have been proposed, including the wheel of organized apparel retailing,

1.5 The wheel of supply chain in Organized apparel Retailing:

Harvard professor Malcolm P. McNair developed a theory in 1958 to explain the

continuous evolution of organized apparel retailing. His theory is known as the wheel

of organized apparel retailing. This theory divides the cyclical patterns of organized

apparel retail evolution. According to this theory a new organized apparel retailer

enters the market place with low prices, low margins and limited product line.

As the innovator succeeds in attracting customer from more established organised

apparel retailers, new competitors arise to copy the innovator. These new competitors

start to take customers away from the original store, putting pressure on the first

organized apparel retailer to trade up by adding more services, expanding product

lines, and opening fancier stores. But in trading up, the innovator more like the
6
established stores faces initially challenges. Trading-up makes the innovator valuable

to new customers because it leaves a gap at the lower end of the market place for new

competitors. These new entrants, who are willing to accept lower profit initially, may

now challenge the original innovator. And, the newest entrants start the wheels of

retailing turning once again in a new round of evolution.

1.6 Managing the supply chain as framework-effective supply chain

management.

The framework of effective supply chain management is provided through literature

study and practical experiences. The effective supply chain management stresses the

need to extend logistics integration upstream to suppliers and downstream to

distributors and customers (Christopher,2008). The problems and ineffective

phenomenon can be outlined to facilitate the development of integrated end-to-end

supply chain processes.

Reduced prices, superior product quality, excellent customer service, expanded

variety, and exceptional value are examples of the ever-increasing demands being

placed on businesses by their customers. How will companies satisfy the increasing

number of customer requirements? Many believe that the answer lies in supply chain

management. Supply chain management (SCM) has become an important topic of

discussion among managers and academicians alike. One definition for SCM is ―the

integration of key business processes from end user through original suppliers that

provides products, services and information that add value for customers and other

stakeholders‖ (Lambert and Cooper 2000). Improved SCM can enhance customer
7
service while maintaining low costs. Having recognized these benefits of SCM, many

successful firms are implementing SCM principles to create and sustain their

competitive advantage. What should companies do to maximize the benefits offered

by SCM? One answer lies in choosing the appropriate supply chain strategy. The

appropriate supply chain strategy should match the corporate strategy in order to ―fit‖

within the company. In addition, the supply chain strategy should complement the

logistics and manufacturing strategies in order to achieve superior performance. A

dissonance among these strategies could lead to building conflicting capabilities. As a

result, companies will not realize the complete benefits of SCM.

Strategic alignment between the corporate and supply chain strategies is essential for

the success of a company. A survey conducted by Ernst and Young LLP and Stevens

Institute of Technology revealed that only 13% of the respondents believed that their

supply chain practices were fully aligned with their business unit strategy. Only 47%

said that they were "somewhat" aligned with their business unit strategy (Tamas,

2000).There are many reasons as to why a company might fail. One important reason

according to Chopra and Meindl (2001) is: ―A company may fail either because of a

lack of strategic fit or because its processes and resources do not provide the

capabilities to support the desired strategic fit.‖

What exactly is meant by strategic fit? Chopra and Meindl (2001) give the following

definition―Strategic fit means that both the competitive and supply chain strategies

have the same goal. It refers to consistency between the customer priorities that

competitive strategy is designed to satisfy and the supply chain capabilities that the

supply chain strategy aims to build.‖

8
The above definition of strategic fit can be expanded to include the manufacturing and

logistics strategies. The logistics and manufacturing strategies should be aligned with

the supply chain strategy in order to build the necessary capabilities to address

customer priorities. Thus, a lack of strategic fit can mean that a company wastes time

and valuable resources developing capabilities that will not satisfy current customers

nor win new customers.

Before choosing what type of supply chain strategy to pursue, a firm must first

evaluate the type of supply chain(s) in which it participates. One paradigm that has

evolved over the years consists of two types of supply chains: the lean and the agile.

Naylor, Naim and Berry (1999) define agility as ―using market knowledge and a

virtual corporation to exploit profitable opportunities in a volatile market place‖. They

define leanness as ―developing a value stream to eliminate all waste, including time,

and to ensure a level schedule‖ Manufacturing strategy has been defined as the pattern

of decisions that, over time, enables a business unit to achieve a desired

manufacturing structure, infrastructure and set of specific capabilities. Typical

manufacturing competitive priorities or strategies are low cost, delivery, flexibility

and quality (Hayes and Wheelwright 1984).

Unlike manufacturing strategy, logistics strategy literature has varying views on what

constitutes the typical logistics strategies. Bowersox and Daugherty (1987) proposed a

framework for logistics strategy classification. The three strategies they articulated

were the process, market, and channel strategies. McGinnis and Kohn (1990)

performed a factor analysis of logistics strategy where they identified four strategies:

9
(1) Intensive logistics strategy;

(2) Integrated logistics strategy;

(3) Low integration strategy;

(4) Low effectiveness logistics strategy.

The research presented in this dissertation suggests a logistics strategy framework that

parallels that of manufacturing strategy – cost, quality, delivery and flexibility – and

incorporates several of the scales previously developed by logistics researchers. This

framework attempts to designate the competitive priorities and capabilities that a firm

attempts to build through their logistics operations. Providing such a framework for

logistics strategy is an expected contribution of this research.

1.7 Supply Chain

Given the previously mentioned functional strategies and supply chain characteristics,

it follows that certain manufacturing and logistics strategies are more appropriately

used within certain supply chains. For example, it can be hypothesized that given a

lean supply chain, cost leadership manufacturing and logistics strategies are more

appropriate. Aimed at minimizing costs, the cost leadership strategies result in the

same efficiency capabilities that are valued in a lean supply chain. Firms exhibiting

consistency among the logistics strategy, manufacturing strategy and the type of

supply chain should experience higher levels of performance and competitive

advantage than firms whose strategies are not consistent with supply chain type.

Improved performance should result from the three entities guiding the firm‘s actions

toward the same objectives and goals instead of toward conflicting goals. Therefore,

the following research questions are posed.

10
1. Are there distinct supply chain types?

2. What characteristics contribute most to supply chain type determination?

3. Among the supply chain types, do firms differ in the competitive priorities that they

choose to emphasize in their logistics and manufacturing operations?

4. Given a specific supply chain type, do higher performing companies emphasize

different competitive priorities than lower performing companies?

A web survey of logistics and supply chain executives who are members of the

Council of Logistics Management (CLM) and employed manufacturing firms was

used to gather the needed data. Because CLM is often considered to be the premier

logistics organization, it is believed that members have sufficient working knowledge

of supply chain, logistics and manufacturing issues within their organization to

accurately complete the survey. In addition, executives (possessing the title manager

or above) were chosen because their high-ranking position should afford them a fairly

comprehensive view of the firm and its functional priorities. The sampling frame

includes manufacturing firms from multiple industries. Scales from previous studies

and articles were used to compose the survey.

The respondents were divided into two initial groups, those participating in lean

supply chains and those participating in agile supply chains. Once the supply chain

type was determined, members of each type of supply chain were divided into high

and low performers. Multivariate analysis of variance (MANOVA) was performed to

detect differences in relative emphasis for the competitive priorities among the

groups. Contributions.

11
This study makes several contributions to the literature. First, the characteristics of

lean and agile supply chains can be empirically supported to further the development

of supply chain management theory. Much of the literature to date is conceptual with

little empirical support. Secondly, an alternative framework for logistics strategy is

presented. The framework parallels that of manufacturing strategy and encourages

integrative research using the two strategies. In addition, the framework will enable

advanced understanding of logistics strategy and priorities. Lastly, the relationships

among the type of supply chain, logistics and manufacturing strategies and their

relation to perceived performance can be empirically examined, thereby advancing

supply chain theory development as well. This study imparts several managerial

implications as well. First, the financial impact of choosing logistics and

manufacturing priorities that complement their type of supply

As our economy is booming and every organization is facing severe competition in

the market whether it may be local or an international market. The traditional

corporate model of organization was based on vertical integration, hierarchy, and

functional management. There is a drastic change in the traditional and modern

business world, where in the modern world, when demand became unpredictable in

both quality and quantity, when the domestic and international markets became too

diversified and thereby difficult to forecast, and when there is a dynamic change in

the technology which made single-purpose production equipments obsolete, the mass

production system became too costly and too rigid. Emerging technologies now allow

for the transformation of assembly main characteristic of the large corporation into

easy-to-program production units with product flexibility sensitive to market

variations, and process flexibility sensitive to changes in technology.

12
Most of the modern organizations have adapted the new environment and the main

shift is featured as the shift from the vertical bureaucracies to horizontal corporations.

There are seven major modern trends which features such corporations and they are as

organizing around process, not tasks; a flat hierarchy; team management; measuring

performance by customer satisfaction, maximization of contacts with suppliers and

customers; information, training and retraining of employees at all levels and rewards

based on team performance.

Contemporary business life cycle is process driven and chain oriented hence

integration has become a core-question for companies. The problems and challenges

with the traditional vertical co-operation between organizations are costly and time

consuming, instead of co-operating, there is also no scope of cost reductions or profit

improvements at the expenses of someone else in the supply chain.

1.8 INFLUENCE OF SUPPLY CHAIN MANAGEMENT

There are various ways to look at supply chain. One can say that it starts from the raw

material vendor and ends with the customer; thus, it includes purchasing, marketing

and even consumer buying the product. Therefore all the processes involved in the

entire spectrum from demand generation to demand satisfaction can be called as

supply chain management. Today, in some advanced companies supply chain extend

right from the vendor procuring his raw material to the point of sale where the last

sale of the product takes place. This implies that there is transparency and information

flow in the entire chain resulting in appropriate action at each point. This action by

each entity contributes to the smooth functioning of supply chain.

13
In some companies supply chain could only be internal that is across the

manufacturing facilities to company owned depots. One can always choose a part of

the supply chain that is most relevant and focus resources to achieve increased

productivity.

The objective of every supply chain should be to maximize the overall value

generated. The value a supply chain generates is the difference between what the final

product is worth to the customer and the costs the supply chain incurs in filling the

customer's request. For most commercial supply chains, value will be strongly

correlated with supply chain profitability (also known as supply chain surplus), the

difference between the revenue generated from the customer and the overall cost

across the supply chain.

For example, a customer purchasing a mobile Best Buy pays Rs.1800, which

represents the revenue the supply chain receives. Best Buy and other stages of the

supply chain incur costs to convey information, produce components, store them,

transport them, transfer funds, and so on.The difference between the Rs.1800 that the

customer paid and the sum of all costs incurred by the supply chain to produce and

distribute the router represents the supply chain profitability or surplus. Supply chain

profitability or surplus is the total profit to be shared across all supply chain stages

and intermediaries.

The higher the supply chain profitability, the more successful is the supply chain.

Supply chain success should be measured in terms of supply chain profitability and

not in terms of the profits at an individual stage.

14
Having defined the success of a supply chain in terms of supply chain profitability,

the next logical step is to look for sources of revenue and cost. For any supply chain,

there is only one source of revenue: the customer. Thus, the appropriate management

of these flows is a key to supply chain success. Effective supply chain management

involves the management of supply chain assets and product, information, and fund

flows to maximize total supply chain profitability.

Retailing is largely consolidated, with large chains buying consumer goods from most

manufacturers. This consolidation gives retailers sufficient scale that the introduction

of an intermediary such as a distributor does little to reduce costs and may actually

increase costs because of an additional transaction. In contrast, India has millions of

small retail outlets.

The only way for a manufacturer to keep transportation costs low is to bring full

truckloads of product close to the market and then distribute locally using "milk runs"

with smaller vehicles. The presence of an intermediary who can receive a full

truckload shipment, break bulk, and then make smaller deliveries to the retailers is

crucial if transportation costs are to be kept low. Most Indian distributors are one-stop

shops, stocking everything from cooking oil to soaps and detergents made by a variety

of manufacturers. Besides the convenience provided by one-stop shopping,

distributors in India are also able to reduce transportation costs for outbound delivery

to the retailer by aggregating products across multiple manufacturers during the

delivery runs.

15
Distributors in Mumbai also handle collections, because their cost of collection is

significantly lower than each manufacturer collecting from retailers on its own. Thus,

the important role of distributors in Mumbai can be explained by the growth in supply

chain surplus that results from their presence. The supply chain surplus argument

implies that as retailing in Mumbai begins to consolidate, the role of distributors will

diminish.

Due to the purchasing power that comes with control over consumer contacts,

retailers are often dominant in a supply chain. Closeness to end consumer markets

gives retailers fast and precise information about matters such as shifting fashion

preferences and attractiveness of competitor‘s offerings, comparable to continuous

market research. Even though power is no end in itself, it does include the opportunity

to organize the supply chain in a suitable way. Many challenges face retailers today.

Expanding product variety, greater fluctuations in demand, and shorter and shorter

product life cycles make time-to-market reductions essential. The ever-increasing

need for reduced lead times continues. Maximum coordination of work in and

between companies is therefore necessary, as otherwise it will lead to higher costs as

well as to longer lead times.

There is however no single best way to manage a supply chain, the way retailers

compete in consumer markets influence what should be focused on. As no company

can be everything for everyone, there is interdependence between what a company

sets out to be for a consumer, i.e. the company‘s value proposition, and that

company‘s supply chain.

16
1.9 Supply Chain Management Vis-a -Vis Sales and pricing

1.9.1 COST-BASED COMPETITION

Before going into the study‘s two cost-based case studies, will bring in logistics

related just-in time management and the umbrella term for supply chain cooperation

in the organized apparel sector efficient

1.9.2 JUST-IN-TIME LOGISTICS

One of the most significant concepts in business management in past decades has

been just-in time (JIT), originating in Japan, it is a philosophy as much as a technique

based upon the idea that wherever possible no activity should take place until there is

a need for it, i.e. no products should be made or ordered until there is a requirement

for them. According to this requirement.

JIT is a pull concept where demand pulls goods towards the market. In contrast,

traditional push systems carry manufactured goods in batches in anticipation of

demand, and are stored in the supply chain as buffers between various functions. In

such a conventional approach, reordering takes place when inventory falls to a certain

predetermined point - the reorder point which is based upon the expected length of

the replenishment lead time. At this point, the amount to be ordered may be based

upon the economic order quantity (EOQ) principle, hence balancing the cost of

holding inventory against the costs of placing replenishment orders. The dilemma

with the EOQ model is that it is assumed that there is an optimum amount to order
17
(amount to hold in inventory), thus arriving at the core problem as the reorder

quantity force a corporation to carry more inventory than is actually demanded per

day over the entire order cycle.

As maximized batch quantities were conventional insights in production before the

introduction of JIT, similar insights could be found in the rest of the supply chain. For

example, companies used to ship by container or truck load and therefore customers

who ordered smaller quantities faced price penalties, as well as delivery schedules

that were expected to be optimized through efficiency of routes. Contradicting this

approach, JIT favors small shipments to be made more frequently and to meet time

requirements of the customer; without uneconomic escalations of cost of course,

which in itself argues there may have to be certain tradeoffs in order to achieve total

supply chain cost effectiveness. The greater the demand for variety and the higher the

value, the more JIT and synchronized delivery becomes preferable.

The prerequisites for successful JIT logistics would be:

A disciplined approach to planning and scheduling of inbound requirements.

A high degree of communication and planning linkage between supply chain

partners.

More often than not the use of third parties or logistics partners to manage the

inbound consolidation and sequencing of deliveries.

The design of vehicles and physical facilities to make small shipment

quantities easy to load and unload rapidly.

The value and variety of the materials tend to be higher than average.

18
Summarizing this, the basic requirement for JIT logistics to function properly is to

make sure that all activities and involved parties of the supply chain are synchronized,

with each and everyone receiving early information about shipping and replenishment

requirements. With the emergence of enterprise resource planning (ERP) systems, it is

possible to have integrated logistics systems linking replenishment of products in the

marketplace with their own and their supplier‘s activities through the use of shared

information. This way it is possible to convert the supply chain from a push to a pull

system, enabling companies to respond to known demand rather than having to

anticipate that demand through forecasting.

1.10 ENTERPRISE RESOURSE PLANNING

Enterprise resource planning (ERP) has become the umbrella term for supply chain

cooperation the organized apparel sector. It began in the US in the beginning of the

1990‘s, focusing on four main areas that had great improvement potential:

Continuous replenishment programs, passing point-of-sales data back to

suppliers. This requires standardization of bar codes and methods and

implementation of EDI.

Efficient pricing and promotion, aiming at reducing self caused demand spikes

and inventory swings.

Changes in product introduction. Combined market research by channel

members in order to forecast new-product success better.

Changes in merchandising for the purpose of finding better ways to

merchandise brands and categories of products.

19
One operational practice that has developed from the JIT and ERP ideas is continuous

replenishment. The idea is that consumer‘s purchases, or withdrawals, of goods are

the base for that which should be delivered. Point-of sales data turns the supply chain

into a pull system, as retailer‘s stock is replenished based on actual sales. By

automating the replenishment system the goal is also to reduce errors and processing

costs.

1.10.1 Activity map with a cost-based theme (value proposition)

It is belive supply chains are affected by retail strategies and the value chain is

tailored to deliver a company‘s value proposition, to see how activities fit together

and what tradeoffs companies need to make. We believe that a good way to analyze

the configuration of activities that companies perform is by drawing activity maps.

Such maps show how a company‘s value proposition is contained in a set of tailored

activities designed to deliver it.

1.10.2 Time-based competition

Having detected the patterns outlining competition based on cost and physical

efficiency, the purpose is to explore the supply chain variables significant for time and

market responsiveness.

The actual time that can be saved while performing these activities becomes crucial as

late market entrances increase the risk for obsolete stock.

20
1.10.3 Why time is important

There are three areas in which the importance of time as a competitive variable are

increasing according to the need to meet the fast changing markets of today:

Shortening life cycles

The drive for reduced inventories

Volatile markets making reliance on forecasts dangerous.

In accordance with technological improvements as well as societal changes, product

life cycles have been radically shortened the last few decades. It is within this time to

market scenario companies must be able to capture an opportunity, develop,

manufacture and distribute products in accordance with the existing market pace, and

if successful, the actual time that can be saved while performing these activities

becomes crucial as late market entrances increase the risk for obsolete stock.

Regarding the drive for reduced inventories, many companies have realized the need

to release inventory holding costs. Time to serve, i.e. order to delivery time is also

important as companies need to be able to respond to demand of products that are

already on the market, i.e. the lead time to resupply a product determines the

organizations ability to meet demand during the life cycle, which is also the base for

the concept of quick response which will be discussed later on.

The volatility of markets is a popular topic to discuss and as forecasting is becoming

increasingly crucial due to companies‘ attempts to reduce lead times, managers seek

new methods to reduce forecast errors; still the real problem would be that forecast

errors increases as lead time increases. Time to react, i.e. responsiveness, is

21
essentially achieved through time compression in the supply chain and the costs

should be lower at the same time. Still, the system of having suppliers able to deliver

a complete order at required time might simply shift the cost burden from one part of

the supply chain to another.

There is a direct relationship between the length (measured in time) of a supply chain

and the inventory carrying cost, but the declared truism ―time is money‖ is arguably

more true for companies supplying innovative products with unpredictable demand

than it is for others.

Besides the release of capital, shorter lead times also mean higher service level

because of the faster response to consumer demand. Higher flexibility in meeting

demand also makes companies less vulnerable to market volatility. Reducing lead

times generally means higher distribution costs; benefits must be weighed against

costs. High volatility in demand for innovative products motivates high distribution

costs, but more important on time sensitive markets where time-to-market reductions

are extremely important, shorter lead times not only mean lower cost but also higher

sales. This, together with avoidance of market mediation costs, is the biggest

difference between cost-based and time-based competition.

1.11 The lead-time gap

The lead-time gap is based upon the problem that the time it takes to produce and

deliver a product is longer than a retailer is willing to wait.

The traditional way to meet the lead-time gap is to hold inventory, hence forecasting

need to be used and as the accuracy of such actions are prone to errors the whole idea
22
will more likely end up in an inventory problem. Therefore, a company that achieves

a perfect match between the logistics lead-time and the retailer‘s order cycle will have

no usage for forecasts and no need for inventory. Whether or not the above statement

is of a utopian character, closing this lead-time gap might be possible by:

shortening the logistics lead time

moving the retailer‘s order cycle closer by attaining earlier warning of

requirements through improved visibility of demand

When improving visibility of demand, opportunities can be found at the interface

between suppliers and retailers as retailers rarely share routine data with suppliers,

hence suppliers are forced to use forecasting and carry inventory. Producers need to

extend the customer‘s order cycles, i.e. finding approaches how to capture earlier

warnings of the customer‘s requirements.

Considering the fact that real demand is hidden from view except from already made

orders, the idea behind the demand penetration point becomes useful in this case. The

demand penetration point could be described as the point in the supply chain where

real demand meets the projected plan; upstream from this point everything is driven

by a forecast.

Therefore, new ways should be invented on how the penetration point might be

pushed as far as possible upstream; one way would be to improve the speed and

accuracy of information from the market place to manufacturers.

23
Another way to push the order penetration point upstream would be to postpone the

final commitment of the product to its final form. A frequently used example of a

postponement strategy is Benetton, who makes knitwear and then dyes everything the

last thing they do, according to customer requirements collected during and after

production.

1.12 Product Flow Analysis

Processes as a way to analyze product flows

As processes are abstract concepts they need to be modeled in some way to be

understood. Among the most widely accepted definitions of a process is ―a set of

interrelated activities‖ and― a chain of activities‖. In this respect, processes are seen as

activity flows, or workflows, consisting of activities that have some kind of

relationship to each other. Thus, if activities are not perceived interrelated, they are

not part of the same process.

1.13 Purpose of the study.

No similar research initiative has been undertaken in India that has focused on retail

competitiveness through improved supply chain management, use of technology and

its impact on sales and pricing of apparels in organized retail outlets, for scheduling

and optimizing inventory while ensuring no stock outs.

The wastage levels for apparels are as high as 18 percent because of a large number

of intermediaries, loss during transportation, unpredictable demand forecast and

24
inadequate storage facilities. Therefore there is an urgent need to look at a holistic

picture of supply chain and logistics.

In India Organized Retail is in its nascent stage hence there is not enough literature

available on efficiency measuring mechanism in different format of organized

apparel retail outlets in India. Therefore there is a need to study variation in the

efficiency practices in different formats.

25
 CHAPTER 2

LITERATURE REVIEW

The following chapter will discuss the relevant literature concerning supply chain

management, manufacturing strategy and logistics strategy.As the importance of

managing a proper Inventory control has grown investors with an appetite for risk can

consider exposures in the stock of Retailing of Apparels.

2.1 Supply Chain Management

Researchers and managers have debated for approximately the last 15 years about the

definition of supply chain management. Some believe that SCM is just integrated

logistics properly implemented. Others view SCM as the integration of more

functions that just logistics (e.g. manufacturing with marketing and R&D, etc.).

Cooper, et al. (1997) point out the need for ―the integration of business operations in

the supply chain that goes beyond logistics.‖ Discussion with members of the Global

Supply Chain Forum (GSCF) resulted in the following definition of SCM:

―Supply Chain Management is the integration of key business processes from end

user through original suppliers that provides products, services and information that

add value for customers and other stakeholders‖ Lambert and Cooper (2000).

The eight key processes identified are shown in Table 2.1. Each process is customer-

focused and aims to achieve product flows through the efficient use of information

along the supply chain.

26
 Table 2.1

Process Description of Process

Customer relationship In the customer relationship management process,
management key customers are identified and worked with closely
to establish product and service agreements that
specify the levels of expected performance. Also,
customer service teams work with customers to
further identify and eliminate sources of demand
variability.
Customer service management A single source of customer information is provided
in this process. A key point of contact for
administering the product/service agreement is
established.
Demand management Point-of-sale and ―key‖ customer data is used to
reduce uncertainty and provide efficient flows
throughout the supply chain.
Order fulfillment Integration of the firm‘s manufacturing distribution
and transportation plans is performed in this process
in order to guarantee timely and accurately filled
orders.
Manufacturing flow management Ideally, orders are processed on a just-in-time (JIT)
basis where required delivery dates drive production
priorities. Furthermore, manufacturing processes
must be flexible enough to respond quickly to market
changes.
Procurement Long-term strategic alliances with a small core group
of suppliers are utilized in conjunction with rapid
communication mechanism (e.g. EDI, Internet, etc.)
Product development and Customer Relationship Management is coordinated
commercialization with this process to identify customer-articulated and
unarticulated needs. Procurement is involved in this
process as well to select materials and suppliers.
Coordination with Manufacturing Flow Management
is needed to develop production technology and
integrate into the best supply chain flow for the
product / market combination.
Returns The Returns process enables identification of
productivity improvement opportunities.

Table 2.1: Eight Supply Chain Processes Proposed by Lambert and Cooper (2000).

Taking a slightly different perspective, Ballou, et al. (2000) identifies three

dimensions of supply chain management. They are intra-functional coordination,

inter-functional coordination and inter-organizational coordination. Intra-functional

27
coordination refers to the administration of the activities and processes within the

logistics function of a firm. Inter-functional coordination refers to the coordination of

activities among the functional areas of the firm while inter-organizational

coordination refers to the coordination of supply chain activities that take place

between legally separate firms within the product-flow channel. Hence, the following

definition for supply chain management was proposed.

―The supply chain refers to all those activities associated with the transformation and

flow of goods and services, including their attendant information flows, from the

sources of raw materials to end users. Management refers to the integration of all

these activities, both internal and external to the firm.

Also emphasizing the importance of functional coordination and strategic congruence,

Mentzer, DeWitt, Keebler, Min, Nix, Smith and Zacharia (2001) define supply chain

management as

―The systemic, strategic coordination of the traditional functions and the tactics across

these business functions within a particular company and across businesses within the

supply chain, for the purposes of improving the long-term performance of the

individual companies and the supply chain as a whole.‖

28
Other definitions of supply chain management are offered in

Table 2.2

Authors Definition

Tan et.al.(1998) SCM encompasses materials / supply management from

the supply of basic raw materials to final product (and

possible recycling and re-use). SCM focuses on how

firms utilize their suppliers‘ processes, technology and

capability to enhance competitive advantage. It is a

management philosophy that extends traditional intra-

enterprise activities by bringing trading partners together

with the common goal of optimization and efficiency.

Berry et al. (1994) SCM aims at building trust, exchanging information on

market needs, developing new products, and reducing the

supplier base to a particular OEM so as to release

management resources for developing meaningful, long

term relationship.

Jones and Riley (1985) An integrative approach to dealing with the planning and

control of the material flow from suppliers to end-users.

Saunders (1995) External Chain is the total chain of exchange from

original sources of raw material, through the various

firms involved in extracting and processing raw

materials, manufacturing, assembling, distributing and

relating to ultimate and customers.

Ellrams (1995) External Chain is the total chain of exchange from

29
 original source of raw material, through the various firms

involved in extracting and processing raw materials,

manufacturing, assembling, distributing and retailing to

ultimate and customers.

Ellram (1991) A network of firms interacting to deliver product or

service to the end customer, linking flows from raw

material supply to final delivery.

Christopher(1992) Network of organizations that are involved, through

upstream and downstream linkages, in the different

processes and activities that produce value in the form of

products and services in the hands of the ultimate

consumer.

Lee and Billington(1992) Networks of manufacturing and distribution sites that

procure raw materials, transform them into intermediate

and finished products, and distribute the finished

products to customers.

Kopezak(1997) The set of entities, including suppliers, logistics services

providers, manufacturers, distributors and resellers,

through which materials, products and information flow.

Lee and Ng (1997) A network of entities that starts with the suppliers‘

supplier and ends with the customers‘ custom production

and delivery of goods and services.

Table 2.2: Definitions of Supply Chain Management. Reproduced from Croom,

Simon, Pietro Romano and Mihalis Giannakis, ―Supply Chain Management: An

30
Analytical Framework for Critical Literature Review,‖ European Journal of

Purchasing and Supply Management, Vol.6, 2000, pp. 67-83

Though these definition differ slightly in wording, all communicate the importance of

integration, communication and coordination between functions and organizations

that will create value for the customer.

Other researchers have attempted to develop math models to address coordination in

the supply chain. Many of these models attempt to minimize inventory in the supply

chain. However, these analyses are dyadic in nature, examining the interaction of

only to supply chain members, a buyer and a supplier. Thus, the entire supply chain

as given by the previous definitions is not modeled using these analytical methods. In

addition, inventory is not the only consideration or motivation for supply chain

coordination. Thomas and Griffin (1996) reviewed the literature that uses math

models to address supply chain coordination issues.

Several authors have proposed frameworks for the design and control of supply chains

(Davis 1993). Beamon and Ware 1998; Boman 1997, Sengupta and Turnbull 1996).

However, much of this work is geared toward the manager and does not give

theoretical insights as to how supply chain management relates to functional

strategies. One of the goals of this study is to examine the relationship among the

type of supply chain a firm participates in and two of the firm‘s functional strategies,

namely their manufacturing and logistics strategies.

One of the seminal papers on supply chain management provides a framework for

determining what type of supply chain is appropriate for a particular product. Fisher
31
(1997) recommends first examining a product‘s demand nature in order to determine

what type of supply chain to use. Product fall into one of two categories according to

Enterprise Resource Planning (ERP) system software packages are highly integrated,

complex systems for businesses, and thousands of businesses are running them

successfully worldwide (Koch,1996).

Wallace and Kremzar (2001) described ERP as an enterprise-wide set of management

tools that balances demand and supply, containing the ability to link customers and

suppliers into a complete supply chain, employing proven business processes for

decision-making, and providing high degrees of cross-functional integration among

sales, marketing, manufacturing, operations, logistics, purchasing, finance, new

product development, and human resources, thereby enabling people to run their

business with high levels of customer service and productivity, and simultaneously

lower costs and inventories, and providing the foundation for effective e-commerce.

ERP evolution started with MRP (Material Requirement Planning) as universal

manufacturing equation (Wallace and Kremzar, 2001). Its logic applies wherever

things are being produced whether they are jet aircraft, tin cans, machine tools,

chemicals, cosmetics... or a dinner. MRP improved to Closed-loop MRP. Further,

tools were developed such as Sales & Operations Planning. Master scheduling.

Demand management and Rough-Cut Capacity Planning (Wallace and Kremzar,

2001). The next step in this evolution is called Manufacturing Resource Planning or

MRP II. It involves three additional elements (Wallace and Kremzar, 2001):a) Sales

& Operations Planning, b) Financial interface and c) Simulation.

32
The fundamentals of ERP are the same as with MRP II. However, thanks in large

measure to enterprise software, ERP as a set of business processes is broader in scope,

and more effective in dealing with multiple business units. Financial integration is

more robust. In order to understand the attraction of enterprise systems, as well as

their potential dangers, we first need to understand the problem they‘re designed to

solve: ―the fragmentation of information in large business organization‖ (Davenport,

1998). At its core is a single comprehensive database. The database collects data

from and feeds data into modular applications supporting virtually all of a company‘s

business activities-across functions, across business units, across the world.

Maintaining many different computer systems leads to enormous costs-for storing and

rationalizing redundant data, for re-keying and reformatting data from one system for

use in another, for updating and debugging obsolete software code, for programming

communication links between systems to automate the transfer of data (Davenport,

1998).

ERP goals include high levels of customer service, productivity, cost reduction, and

inventory turnover, and it provides the foundation for effective supply chain

management and e-commerce. It does this by developing plans and schedules so that

the high resources – manpower, materials, machinery, and money – are available in

the right amount when needed (Wallace and Kremzar, 2001).

Enterprises Resource Planning is a direct outgrowth and extension of Manufacturing

Resource Planning and, as such, includes all of MRP II‘s capabilities ERP is more

powerful in that it:a) applies a single set of resource planning tools across the entire

enterprise, b) provide real-time integration of sales, operating, and financial data, and
33
c) connects resource planning approaches to the extended supply chain of customers

and suppliers (Wallace and Kremzar, 2001).

The primary purpose of implementing Enterprise Resource Planning is to run the

business, in a rapidly changing and highly competitive environment, far better than

before.

An effective business strategy centers on an aggressive, efficient use of information

technology, for this reason the ERP systems have emerged as the core of successful

information management, and the enterprise backbone of the organization (Nash,

2000a, b). A successful ERP system will streamline processes within a company and

improve its overall effectiveness, while providing a means to externally enhance

competitive performance, increase responsiveness to customers, and support strategic

initiatives (Sandoe et al. 2001).

ERP implementation is a socio-technical challenge that requires a fundamentally

different outlook from technologically-driven innovation, and will depend on a

balanced perspective where the organization as a total system is considered ERP

implementation is considered to rely on behaviour processes and actions (Al-

Mudimigh et al:2001).

Lucas(1981) defined implementation as the whole process of introducing a system

into an organization, from conception of an idea, to analysis, design, installation and

operation. Olson and Davis (1984) defined implementation as preparing an

organization to receive an information system for its effective use.

34
Shanthi Venkataraman (2004) in her Article ―Pantaloon Retail – Buy‖, Strict

inventory control, backward integration and the use of private labels are some of the

measures that have been taken by many organized retailers to improve margins, for

Example, Pantaloon has a stock conversion period of about 90 days. This is

moderate, considering that it retails a wide range of product with divergent inventory

policies.

Pantaloon is integrated backwards in the apparel business, with its group company,

Pantaloon Industries – supplying fabric. This enables it to have some control over the

cost and quality of its apparel. It markets most of its products under private labels,

thus offering products that cost 20-25 per cent lower than branded items, owing to an

absence of advertising and other related expenses.

Mike Kilgore, Abraham Joseph and Jeff Meterskyy (2007) in their Article on

―Logistics Management in Apparels Supply Chain‖ argue that India‘s supply chains

will not be highly reliable. Shippers accustomed to reliability and speed will have to

reset expectations. To reduce the impact of highly variable transportation, brought

about by inadequate logistical infrastructure, firm must adopt inventory strategies

similar to those used in small part service industries. While service parts industries

use inventory to buffer demand versus transportation variability, the resulting network

structure is the same. Firms will need to stage inventory throughout multiple echelons

to reduce the impact of transportation variability and high transportation costs. This

multi-echelon staging will create networks with many distribution points and double-

handling of products.

35
Indian apparel retail sector poses interesting challenges to a manager as it is evolving

and closely linked to fashions.

Vyuas Preeta and Sharma Ankush (2007) in the write up on ―Indian Organised

Apparel Retail Sector and DSS (Decision Support System‖. Appealing mainly to

youth, the sector has typical information requirements to manage its operations. DSS

(Decision Support Systems) provide timely and accurate information & it can be

viewed as an integrated entity providing management with the tools and information

to assist their decision making. The study exploratory in nature, adopts a case study

approach to understand practices of organized retailers in apparel sector regarding

applications of various DSS tools. Conceptual overview of DSS is undertaken by

reviewing the literature. The study describes practices and usage of DSS in

operational decisions in apparel sector and managerial issues in design and

implementation of DSS. A multi brand local chain and multi brand national chain of

apparel was chosen for the study. Varied tools were found to be used by them. It was

also found that for sales forecasting and visual merchandising decisions, prior

experience rather than any DSS tool was used.

Badal Choudhury (2008), head, Apparel and Lifestyle Business, Safexpress, observes:

―One needs to outsource the backend operations to experts in the industry. It should

be knowledge and research based arm of the industry itself and a very specialized

practice, and if not followed in the way, the execution process could be in question.‖

The growth in the domestic jeans and casual wear market is attracting an increasing

number of multinationals into the segment. In fact, the Indian jeans were market is

estimated at Rs. 1,700 crore at present and is growing at 12 per cent per annum. In an
36
interview with Catalyst, Duncan Wilson (2004) Business Line, Managing Director of

the UK based denim wear company Lee Cooper International; share his view on the

growth potential of the market, the factors that are egging it on and how significant

the Indian market is for the $300-million company.

A retail revolution is happening in the country. For global giants looking at newer

markets, India presents exciting opportunities on account of its vast middle-class and

a virtually untapped retail industry.

Vineet Agarwal (2007) in his article on the Topic of ―Supply chain and retail: The

means to the end‖ in the Hindu Business Line. The Indian retail sector has seen

unprecedented growth in the last few years. The KPMG report. Consumer Markets

in India the next big thing has predicted that the organized retail sector is expected to

grow at rate higher than GDP growth in the next five years. The AT Kearneys 2006

Global Retail Development Index positions India as a leading destination for retail

investments.

The retail boom promises to give an impetus to a host of allied sectors and the

logistics industry as the backbone of the retail sector, stands to gain the maximum.

In India the logistics market is mainly thought to mean transportation. But in the

major elements of logistics cost for industries include transportation warehousing

inventory management, courier and other valued-added services such as packaging.

The logistics costs account for 13 percent of GDP. The industry is currently on an

upswing and is poised for a growth of 20 per cent in the coming years.

37
With the expansion of retail, supply chain will take on an increasingly important role,

With the end consumer becoming more demanding and time conscious, the need for

just-in-time services is increasing. In retail, where competition is intense and stakes

are high, customer satisfaction is paramount.

Mansi Batra M.S. and Linda S. Niehm, (2009) on ―An Opportunity Analysis

Framework for Apparel Retailing in India: Economic, Social, and Cultural

Considerations for International Retail Firms‖ in clothing and Textiles Research

Journal argues that Despite seemingly large market potential, little is known about the

scope of opportunities and threats for international apparel retailers seeking to enter

the growing Indian retail arena. A low level of organized retail penetration, coupled

with an ineffective supply chain, characterizes the infrastructure of the Indian retail

industry. Analysis of the current state of Indian retail, along with opportunities and

threats to growth, would have immense significance for international retailers vying to

enter the Indian market. This paper presents a conceptual framework that offers

advice for international corporations regarding successful entry and sustainability in

India. Using a met theory approach, a series of testable propositions are represented

in relation to opportunities for international development in the Indian apparel retail

sector.

Understanding computer psychology is equally important to maintain the Inventory

level According to Dr. S.L. Gupta (2007) in his book Retail Management the retailer

need to invest much more to capture more specific market intelligence as well as

almost real-time customer purchase behavior information. The retailers need to make

substantial investments in understanding / acquiring some advanced expertise in

38
developing more accurate and scuebtufuce demand forecasting models. Re-

engineering of product sourcing philosophies aligned more towards collaborative

planning and replacement should then be next on their agenda. The message,

therefore, for the existing small and medium independent Retailers is to closely

examine what changes are taking place in their immediate vicinity, and analyze

whether their current market offers potential redevelopment of the area into more

modern multi-option destination. If it does, and most commercial areas in India to

have this potential, it would be very useful to form a consortium of other such small

retailers in that vicinity and take a pro-active approach to pool in resources and

improve the overall infrastructure. The next effort should be to encourage retailers to

make some investment in improving the interiors of their respective establishments to

make shopping and enjoyable experience for the customer.Many apparel

organizations worldwide have restructured themselves from vertically integrated

composite set-up to horizontally aligned configuration.

Debasis Daspal in his Article on ―Powering the supply chain with E-technology‖

(March 2010) Among the various reasons gravitated the transition from vertical to

horizontal structure, there are the emphasis on greater organizational and process

flexibility to care volatile market demand. Also, remarkable improvement in

productivity and cost of machinery make it increasingly risky to underutilize the

entire range of production equipments from spinning to processing machines kept

under one roof. Cost cutting arising out of heavy debt associated with increasing

acquisition also influence management to keep organization lean and horizontally

aligned.

39
However, this splitting up of once vertically aligned organization into many

independently working apparel companies, each having a separate operation, makes

efficient coordination among them a must to sustain increased competition. Also

large, vertically oriented organizations, which still exist, need to coordinate their

entire supply in light of growing inter-unit competition for productivity, often

disregarding market priority. This stimulate apparel organization to manage their

various activities under a new paradigm, supply chain management.

Increasing market competition forces apparel companies become efficient in

managing their supply chain by reducing inventory, yet maintain the super

responsiveness to volatile market demand. Effective supply chain management,

cutting across functional silos and organization boundaries has provided integrated

solution to this challenge.

The article describes different types of demand patterns and inventory found in

apparel sector, and a typical apparel supply chain. Different types of supply chains are

discussed with reference to historical perspective and their current practice among

leading apparel organization in India . The key findings from these practice are

analyzed. Prime feature of any supply chain is the balancing the flow of demand by

strategically positioning inventory at various nodes of supply chain. Therefore, two

major components of supply chain-demand and inventory are discussed with respect

to demand variability and inventory characteristics, before explaining various types of

supply chain.

This is the impact of positive are negative campaigning in the E-retailing. As narrated

by Ms. J. P. Bharathi on the theme of ―E-Tailing‖ in March (2010). E-Retailing was

40
first developed in the European countries. E-retailing has both passive and interactive

retail system while all e-tailing is generally limited to passive, are ticketing and other

entertainment booking is designed in interactive system. The common features for

both are debit and credit cards usage.

2.2 Success of online retailing purely depends on:

1. Fully loaded custom website

2. Step by step action plan

3. Low cost and no cost advertisement methods

4. Automated prospect and customer follow up system

5. No experience necessary

6. Live weekly coaching

2.3 Factors to consider in Internet Retailing :

1. Goodwill of retailer.

2. Merchandise characteristics

3. Website effectiveness

4. Ease to access the website

5. Consumer access towards Internet buying

2.4 Items sold through Internet Retailing :

1. Computer parts and accessories

2. Computer software and hard wares

3. Gift items including electronic toys

4. Books and magazines

41
 5. Travel products

6. Branded appliances

2.5 Present and future Internet retailing areas :

1. Real estate retailing

2. Petro retailing

3. Catering retailing

4. Pharma retailing

2.6 Information technology in Retailing

Providing value for customers has become a challenge for retailers. Access to large

amount of information shrunk the world into a global village and the market to a local

market. Customers want value, price, ambience, appearance, relaxation, information,

entertainment, selection, convenience, service and many more under one roof. I tools,

mathematical models and use of technology enhance shopping experience,

convenience, better service, speed and value to customers.

2.7 Types of Technology used in Retailing

In store and online technology

These technologies are used for information, display, identification, Checkouts, point

of sale (POS), signage, and hand-held shopping assistance and body scanning

especially for physical store. In store Technology is used as Kiosks, virtual display

cases, RFID (radio frequency identification tags) Electronic point of sale (POS), hand
42
held assistance devises, body scanning systems, self scanning and self check-out

systems.

2.8 Interactive Kiosks

With touch screen display customer can identify and select products. Kiosks help

retailers in offering and expanded selection of items. Video kiosks and print a map of

the store reduces time and energy.Frequent shopper card, choice of goods, past

purchases display recipes, special offers, samples, and sweep stakes opportunities.

Even interactive kiosks like movie videos, CDS, albums, artists list of songs enable a

hassle free shopping experience.

Kiosks are useful for mom and pop stores in arranging for home delivery of goods. E

retailing also helps in low inventory costs. It is a great boon for self-employment with

very little investment. Kiosks fulfill the purpose of registry creation, retrieval,

updating, uploading, product selection from palm type scanning device. Kiosks are

used for gift card dispensing, collect and redeem points, awards, discounts, savings,

and retrieve special offers.

Loyalty kiosks are helpful in tracking and collecting information about customers.

With kiosks there is no need to have every single product in store.

Vehicle options, interiors, exteriors, color selection, designing, paints, optional

features can be tried in the virtual designing.

43
In entertainment even online sporting, gaming, mountain biking, and snow-bowling

can also be experienced in interactive kiosks. Kiosks also help in color selection in

interiors, inspirational palettes, virtual rooms receive instant color co-ordination tips,

provides paint calculator and supply list.Airlines have started using check-in kiosks

especially for frequent travelers. Consumers find product information, ordering

kiosks, and frequent shopper kiosks useful.

This customers rated kiosks as advantage

60% likely to shop at stores with aid of technology

80% used technology at some time when they shopped

Kiosks make shopping interesting, easier and faster, get current product information,

special deals, and offer and avoid carrying documents.

Opinion about Kiosks is mixed, though it takes time to bring major changes, kiosks is

still experimental. Ways and means to strengthen the position of the relating industry,

doing away with the causes for the inefficiencies, therefore, are to be taken up in an

urgent manner. Such measures may include establishment of retailer‘s co-operative,

merger and buy-out, use of technology to the greatest possible extent, setting up of

non-store retailing centers and increase in franchisee network which can predict return

on investment.

2.9 Types of Retail theft:

Employee theft accounts to 50% of loss in retail units. Broadly retail thefts are of

three types.

1. Shop lifting
44
 2. Employee theft

3. Card theft, without proper checking

According to Efficient Customer Response (ECR) in Europe, the top six measures

used by retailers to reduce shrinkage are

1. Cash protection equipments

2. Electronic article surveillance equipment

3. Employee integrity checks

4. Intruder alarm systems live closed circuit television (CCTV)

5. Mystery shoppers

This Indian Textile industry adds 14% to the industrial production and 8% to the GDP

of India. It provides employment to 38 million people and thus, is the second largest

employment provider after agriculture. The Indian Apparel & Textile Industry is one

of the largest sources of foreign exchange flow into the country with the apparel

exports accounting for almost 21% of the total exports of the country.

The better understanding of this concept is as explained by Mr. Pradeep Joshi in his

article on Apparel and Textile Exports on 11th April 2009.

India has high self sufficiency for raw material particularly natural fibres. India‘s

cotton crop is the third largest in the world. Indian textile Industry produces and

handles all types of fibers. Due to over specialization in cotton, the bulk of the

international market is missed out, synthetic product in India are expensive and fabric

required for items like swimsuit, sky-wear and industrial apparel is relatively

unavailable.

45
A systematic SWOT analysis of the textile and apparel industry indicates the

following:-

2.10 STRENGTH

2.10.1 Raw material base

India has high self sufficiency for raw material particularly natural fibres. India‘s

cotton crop is the third largest in the world. Indian textile Industry produces and

handles all types of fibers.

2.10.2 Labour

Cheap labour and strong entrepreneurial skills have always been the backbone of the

Indian Apparel and textile Industry.

2.10.3 Flexibility

The small size of manufacturing which is predominant in the apparel industry allows

for greater flexibility to service smaller and specialized orders.

2.10.4 Rich Heritage

The cultural diversity and rich heritage of the country offers good inspiration base for

designers.

46
2.10.5 Domestic market

Natural demand drivers including rising income levels, increasing urbanisation and

growth of the purchasing population drive domestic demand.

2.11. WEAKNESS

2.11.1 More dependence on cotton

Due to over specialization in cotton, the bulk of the international market is missed out,

synhetic product in India are expensive and fabric required for items like swimsuit,

sky-wear and industrial apparel is relatively unavailable.

2.11.2 Spinning Sector

Spinning sector lacks modernization and there is a need of introducing new

technology.

Weaving Sector

India has relatively less number of shuttle-less loom.

2.11.3 Fabric Processing

Processing is the weaker link, in the Indian textile value chain, adversely affecting its

ability to compete in exports.

2.11.4 Poor Infrastructure

47
High power costs and long export lead times are eroding India‘s export

competitiveness across the textile chain.

2.11.5 Low Labour Productivity

Productivity levels for manufacturing various apparel items are far lower in India in

comparison with its competitors.

2.12 OTHER WEAKNESSES:

VII. Less attention on man power training

VIII. Poor quality standards

IX. Distance of the potential market

X. Lower average consumption in domestic market

XI. Lack of professionalism and integration of supply chain

XII. Dependence on quota system

XIII. Very low investment on R & D

XIV. Limited exploitation of economies of scale

2.13 OPPORTUNITIES

2.13.1 Growing Industry

World textile trade would continue to grow at a rate of 3-4% to reach $200-210

billion by 2010.
48
2.13.2 Market access through bilateral negotiation

The trade is growing between regional trade blocs due to bilateral agreement between

participating countries.

2.13.3 Integration of Information technology

Supply Chain Management and Information Technology has a crucial role in apparel

manufacturing. Availability of EDI (Electronic Data Interchange) makes

communication fast, easy, transparent and reduces duplication.

2.13.4 Opportunity in High Value Items

(India has the opportunity to increase its UVR‘s Value Realization) through moving

up the value chain by producing value added products and by producing more and

more technologically superior products.

2.14 THREATS

2.14.1 Decreasing Fashion Cycle

There has been an increase in seasons per year which has resulted in shortening of the

fashion cycle.

2.14.2 Formation of Trading Blocks

49
Formation of trading blocks like NAFTA, SAPTA etc., has resulted in a chance in the

world trade scenario. Existence of bilateral agreements would result in significant

disadvantage for Indian exports.

2.14.3 Phasing out of Quotas

India will have to open its protected domestic market for foreign player thus domestic

market will suffer.The fashionista dream is alive and kicking. But it‘s no longer

strictly elitist With the US and Europe still grappling with recession, global luxury

apparel retailers are eyeing markets like India, which has put itself firmly on the path

of recovery.

According to the Article published in Economic Times-Mumbai, November (2009)”

Reworking their business model by focusing on affordable luxury, international

majors are in talks with Indian players to target aspirational but value conscious

consumers.

While retail chain major Shopper Stop is all set to launch Playboy brand of unisex

wear, textile conglomerate S. Kumars group is bringing in three international brands

by the end of this fiscal.Several high priced international apparel brands were earlier

forced to close shop due to sluggish demand. Few other brands like Jimmy Choo and

Bottega Veneta changed hands from the Murjanis to Genesis Colors and Springfield

in order to sustain growth. Now global brands are relying on Indian retailer‘s

50
understanding of the local market while Indian retailers are reworking the price in

accordance with preference of the consumers.

Shoppers Stop, which had launched foreign brands like MAC, Mother care and Austin

Reed among dozen of global brands, and now plans to add about half-a-dozen

international labels soon.

S.Kumars group, which tied up with Italian brand Oviesse this year, is in talks with

other international brands. Brandhouse Retails, aparel retail arm of SKNL, will look

after the retail expansion and marking of these brands in the country.

Arvind Brands, which has a licence to market segment men‘s wear brands such as

Arrow and Gant, has launched ‗Izod‘ in India, a label of global apparel firm Van

Heusen. In line with others, Murjani Group that brought brands like Calvin Klein.

Tommy Hilfiger, Gloria Vanderbilt and French connection funky wears for

youngsters FCUK, has also launched as on line sales service for the brand.

Industry analysts contend that earlier the global luxury brands, which came in India,

were highly priced for the Indian consumers. Now, in order to sustain in the market,

most of them have started discount selling. The big brands Mega Carnival in Mumbai

recently offered almost 80% on international brands like Roberto Cavall, Givenchy,

Davidoff, Choard and Calvin Klein, to name a few.

According to industry, analysis, the market for luxury and premium brands in India is

estimated at about Rs. 6,000 crore – Rs. 7,000 crore and growing at about 25-30%.

However, luxury is still in its nascent stages as only 8-10% of the Indian population in
51
metros to such brands. Overall, organied retailed contributed more than 35% of the

entire organised retail market aggregating over $ 60 billion.

Many retailers in high branded clothing has started adopting the latest methods of 11

based supply chain management in order to increase in efficiency to cater to the high

rising demands of customer as added by Mr. Salman Noorani, managing director,

Zodiac Clothing Company Ltd to FE on Saturday December (2009).

As part of its supply chain management initiative, Zodiac Clothing Company Ltd., is

now in the process of setting up new ILS web-based software at its head office at

Worli, Mumbai, soon.With the move, the company, will be able to link its Zodiac

headquarter to Zodiac offices, its three factories in Bangalore, one in Gujarat, and,

one in Dubai to its design and sales offices in three of the five fashion capitals of the

world – New York, London and Dusseldorf.

In addition, the connectivity will reach Zodiac‘s distribution centre in Bangalore, and

its existing 80 Zodiac retail stores, 300 multi branded outlets as well. The objective

behind the move is to shorten the lead time for order processing of Zodiac shirts from

the customers end till the Zodiac Design Studio, and, thereby create customer pull

based on their needs and preferences. Prior to the move, Zodiac‘s0 overall entities

were connected to each other through e-mail.

After having acquired the apparel unit of Noida based company called Niriyat Sam

Apparels, Zodiac Clothing Company will no move the manufacturing assets to its

facilities in Bangalore. This so-called green field project plant is stated to go on-
52
stream in April 2004 in Bangalore. This will help Zodiac Clothing company to make

an entry into the suits market, and, enhance, its trousers manufacturing capacity from

a few numbers to about 1100 trouser per day, he explained. Same strategies are been

planned by other players in Apparel Retailing segments as in case of Bangalore based

Madura Garments.Madura Garments has mega retail plans – To focus on supply chain

management, product innovation as narrated by Mr. Boby Kurian on February (2001)

in Hindu Business Line‘s‖ The Catalyst‖ The retail presence of Madura Garments is

poised to touch 200 urban markets in the country. The branded readymade apparel

major has indicated that it may continue the ongoing frenetic expansion in the next

financial year as well.

The Indian Rayon-acquired Madura Garments is said to have increased its retail trade

space in the domestic market by 40 per cent in the current financial year. This would

mean approximately 75000 sq.ft. of new retailing space. The company‘s five

menswear brands are being sold from about 2500 outlets across the country.

Madura‘s retail distribution presence would soon cover 200 urban centres in the

country. Industry information suggests that this would give Madura Garments a clear

lead in domestic branded apparel retailing Raymond, the nearest competition, has its

store appeal in 110 cities.

Madura Garments, after its acquisition by Indian Rayon in January 2000, has placed

special emphasis on retailing along with sprucing up its supply chain management and

product innovation. The company‘s turnover is expected to register a 30-per cent

growth in the current financial year and close in the region of Rs. 340 cores. Exports

will constitute nearly 10 per cent of the turnover.

53
The company has remained active on the retailing from and has made substantial

investments to set up mega shops like Planet Fashion, Trouser Town and Peter

England Megastore.Planet Fashion, which is a new branded retailing format for

Madura‘s premium fashion brands such as Louis Philippe. Van Heusen and Allen

Solly, is operational in Mumbai, Bangalore and Dubai.

Madura plans to open its second Planet Fashion store in Dubai towards February and

Trouser Town, an exclusive concept store for trouser labels from the Madura stable, is

operational in Chennai, Bangalore, Ahmedabad, Mumbai and Pune.Madura‘s turnover

from trousers alone in the first half of the current financial year has been pegged at

Rs. 7.6 crore as against Rs. 3.6 crore in 1999-2000.Peter England, the largest selling

shirt brand in India, is expected to enhance its overseas presence, especially in the

Gulf and in the neighboring South Asian markets, through the setting up of Peter

England Megastore. Not even apparels but also food retailing has started adopting IT

infrastructure to bring further revolution in Retailing as an Industry.

Although the organized retail sector accounts for just 3 percent of the Indian retail

market, big players are using IT to prepare themselves for global competition, says

Shivani Shinde August (2005) in her write up on ―Retail IT Loaded‖.

In a recent report by A T Kearney, India displaced Russia as the most attractive

destination for overseas mass product and food retailers. One of the bigger factors

driving this was a greatly improved investment climate following the relaxation of

direct ownership restrictions on foreign retailers (at the time of writing this article,
54
there is opposition from the CPI) According to the report, the country‘s retail market

total $ 330 billion, and has grown by 10 percent on average over the past five years.

Retail growth is visible everywhere, especially in the metros. Almost every other day

we come across a new mall opening or a new food superstore being inaugurated. The

report states that global retailers such as Walmart and Tesco are warming up to the

favourable FDI rules, and are looking for partnerships with local retailers.

With a growing market for hi-tech retail establishments and increasing global

competition, India retailers are gearing up for the same with the help of IT. One

instance is RFID adoption. Although it has yet to gain patronage among global

players, many big retail outlets in India have already piloted this technology.

According to a recent survey carried out by IMRB for Express Computer on IT

deployment in various verticals, retail is fast realising the importance of IT. The

survey pointed out that growing business means bringing in practice that make

systems more organised in terms of IT and solve some sector-specific problems. 42

percent of respondents stated that their top IT priority was to redesign or rationalise

their IT architecture. They have also started using IT for solving age-old problems

and are getting their systems more organised.

For instance, one of the biggest problems faced by companies in this sector is keeping

track of the supply chain, this helps them check stocks which in turn aids in issues

such as pilfering and the shelf life of products. This becomes particularly important

after a chain of outlets has been established.

55
In a country that has so many kirana (grocery) shops, how can IT really help ? K.V.S.

Seshasai, Head, IT & Corporate Quality, Trent, explains. ―This is precisely why the

concept of retail chains is seeing the light of the day.‖ There are outlets within the

same geography, and owned by a single family, so members can physically visit each

outlet. However, the more recent ones such as Pantaloon and Shoppers‘ Stop have

outlets spread across the country due to their technological advancement.

According to analysis, chain stores are growing at 22 percent and are expected to

overtake other store formats in sales. So as kirana stores start branching out to

different locales, the need for IT will be felt.The role of IT in retail comes when one

store multiples to become two or three and starts spreading across cities. A few

essential IT applications for a chain of stores are a robust pointed-of-sale (POS)

system, telecom network for transfer of data, merchandise management systems,

financial systems, and at a later stage, a CRM system, Seshasai believes that these

systems allow one to take better business decisions based on analysis.

Inventory is one of the most critical cost components in retail. As the scale of retail

increases, the complexity, of managing inventory boils down to understanding the

smaller details of inventory which becomes almost impossible without an IT system.

Many agree that IT deployment is based more on the volume of business. Pantaloon

is one such case which has been using technology to increase its business. It is in the

process of revamping its systems to address the growing demands of customers. The

company, is now in the final stages of deploying SAP for its entire retail

encompassing the apparel outlet (Pantaloon) and grocery business (Food Bazaar)

56
Along with this, Pantaloon has also introduced some innovative methods to enrich

customer experience. One of them is the use of handheld scanners. At some Big

Bazaar outlets, employees have been provided with such scanners to reduce the time

taken for the customer to check out. ―We found that during special offers and

festivals, queues at cash counters tended to be long which resulted in people leaving

behind trolley full of unpurchased goods—this was business lost.‖ points out Chinar

Deshpande, CIO of the company. The system is now being used in 22 outlets and,

according to Deshpande, the advantage include saving time, avoiding queues and

gaining business.

2.15 Food and apparel show the way

The Indian retail segment has two sectors that are growing rapidly—food and apparel.

According to estimates by Cygnus Economic and Business Research, the Indian

apparel Industry will grow 4 to 5 percents a year in volume, and 13 percent a year in

value.Although the demand for technology in retail is growing, most retailers opt for

application and tools from vendors abroad rather than sourcing the same from the

domestic market.

One of the biggest chains of foodstores, Foodworld, is an example, (Foodworld is run

by the RPG group, today the group has 93 outlets of Foodworld, 74 Music World

outlets, 3 Spencer Hypermarkets, and 32 Health and Glow stores).Foodworld started

in 1996, and right from the beginning had plans of diversifying. Because Indian

vendors did not have the required expertise, they bought Norwegian solutions that

suited the group‘s supermarket layout. These solutions had features such as cash
57
management, promotition-related details and POS. However, with the growing

demands of the business, they realised that they would have to upgrade their systems.

Foodworld had a home-made solution on FoxPro which was later changed to a

solution offered by Zensar Technologies. This, the company reckons, gave them a

solution that is scalable with time. ―We looked at solutions such as SAP, but there

was nothing specific to our needs.‖ says Rajatdas Gupta, Head, IT, Foodworld.

The other aspect of the retail segment is supply chain management and customer care

management. One major pain area for these companies is gathering data from

locations across the country and making the same available in real-time. Realising the

importance of sales data, investment in IT applications for sales force automation and

supply chain management are getting top priority.

Sifty, with its Fortum SCM product, has managed to make inroads in the retail space.

Chennai based Sri Lakshmi Agro Foods, which produces and supplies pulses to over

30,000 retailers in Tamil Nadu, uses Forum for managing invoicing, debtors,

inventory and sales order booking at its head office. This was the company‘s first

phase of implementation, in the second phase. Forum has been installed on the sales

force‘s laptops. ―We currently run a night shift to manually enter details about orders

and collection receipts. There was no escaping the night shift since the next day‘s

dispatches had to be scheduled on time‖ says Sudhakar, Director at Sri Lakshmi.

This company felt that once the sales force was empowered, it would be able to take

order and even issue cheque and cash collection receipts, thus speeding up the whole

process. The ideas was that the sales reps could periodically connect to the internet

and upload details about the status of cheque and cash collection to the head office.

58
Sri Lakshmi felt that this would do away with one of the biggest bottlenecks in its

supply chain.

Forum will also be deployed by retail organisations. Inside Trading, which deals in

apparel and fashion accessories, is already using it. Says Glenn Trotman, Director at

the company. ―We use Forum in six of our retail stores, a warehouse in Hon Kong,

and the head office in Delhi. It is used as a PPS tool, to manage inventory, and to

communicate with the head office and warehouse.‖

This is one area where technologies such as RFID are also being looked at. Although

RFID is still at an evolutionary stage, initiative such as a common barcode have been

gaining ground. Recently, some leading manufacturers and retailers came together to

launch Global Data synchronisation. This is a Web-based system that will be a data

pool service to manufactuerers and suppliers. It will be a database with current

information about all products retailed, stock levels, products out-of-stock,

overstocking, new product initiatives, changes in products, change in description,

product-withdrawals, etc.

Abel Correa, Assistant General Manager, Systems, Crossroads, believes that for an

efficient supply chain integration of data is necessary. This will involve

synchronisation of product code and description, price lists, and to some extent

inventory lists. This data needs to be available to suppliers, retailers, logistics

providers, and manufacturers. As with all business, after a certain amount of growth

there is a need for IT. For consolidating growth, the retail segment in India is also

doing the same.

59
2.16 Shoppers don’t stop

The Indian retail business is quite different from its international counterpart, both in

terms of maturity and volume. States Unni Krishnan T.M.CTO, Shoppers‘ Stop. IT

is a critical part of retailing. If one has to effectively manage a large number of

outlets, he has to use IT.‖ The organisation has been at the forefront of delivering IT

applications to its business with its entire focus being on providing a customer

friendly, environment. He explains, ―Recently, when Mumbai was hit by heavy rains,

all our outlets were functioning absolutely fine, and as soon as we opened the shutters

at Mumbai all our systems were up and ready with the latest data.‖

Indian retail is still at a nascent stage. With the kind of innovation that IT can bring,

these outlets are making sure they are fully geared up for any competition—foreign or

Indian.

2.17 It essential for growth

As with all business, after a certain amount of growth there is a need for IT. For

consolidating growth, the retail segment in India is also doing the same. The recently

formed Retail Association of India‘s first annual national conference had the theme of

IT as an enabler to the retail business.

Quality, Design Value drivers for Apparel, Retail Industry now it is contemporary

design coupled with quality that‘s determining purchase decisions across some 30

million consumers as coined by Mr. Ratna Bhushan, in his report on ―Quality design

value drivers for apparel retail industry‖ January (2003). WHAT‘S common to the
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Hyundai Santro, LG Televisions, Tanishq jewellery, Hidesign bags and ColorPlus

shirts? Certainly not their product profiles or balance sheets. The answer:design.‖

That, more or less, set the tone for the Images Fashion, Forum seminar being held in

Mumbai involving some of the country‘s top-notch retailers, apparel marketers and

fashion forecasters.

Drawing a parallel between brands across diverse categories such as automobiles,

consumer electronics, apparel and jewellery, Mr. Arvind Singhal, Chairman, KSA

Technopak, threw light on the Indian consumer‘s willingness to now experiment with

products with the element of contemporary design. ―The new value drivers for

consumers today are quality and contemporary design. While price was the

predominant purchase determinant in the pre-1980s, quality coupled with price

assumed importance in the mid-1980s. The 1990s witnessed an assortment of quality,

range and price. Now it‘s contemporary design coupled with quality that‘s

determining purchase decisions across some 30 million Indian consumers, ―he said.

What is also favoring the domestic market to warm up to the return and apparel

fashion industry, is the current demographic profile. ―The largest number of

population in India will be in the 20-44 year age group in the next few years. This

profile does not exit even in a huge market such as ―China‖.

The downside was that while the market was ready, and the customers were willing to

pay, there were not enough suppliers. Very few marketers have pumped in sustained

investments and efforts in their business. This needs to change, investments in

technology, quality control and training as the required focus areas for the industry.

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―Investment in superior and efficient technology, and not fancy buildings, is what the

industry needs. Also, manufacturing has to take a leap jump to survive, ―she said.

In order to be more efficient in Supply Chain most of the retailer have come up with

the software based technology for a better way of handling inventory and one of them

is Shopper‘s Stop as Explained by Mr. B.S.Nagesh, CEO, Shopper‘s Stop to Financial

Express September (2003). In an attempt to streamline its supply chain. Shopper‘s

Stop has begun initiating dialogue with its suppliers for a common barcode for all

apparel. In a step towards that the apparel retail convened a meeting last month with

its suppliers under the partnership of progress program.Shoppers Stop CEO BS

Nagesh told that last month the company met the CEOs of 60 top suppliers as a first

step towards arriving at a common barcode for all apparel at Shoppers‘ Stop.We met

suppliers under the partnership of progress programme and the agenda was to

emphasis the necessity for a common barcode for all apparel to attain more efficiency

in supply chain. Though the response was encouraging, it is a long way to go before

the initiative is accepted by all the suppliers. Within the next two months, we will be

able to get a better picture of where we stand on this. On the larger issue of the retail

industry employing integrated supply chain practice, he said a small beginning needs

to be made before arriving at common practice for the industry.

Shoppers‘ Stop is a lifestyle retail outlet and presently has 13 stores in nine cities

across the country. The company plans to be present in 25 cities with around 35-50

stores in the next four years and is aiming for a turnover of Rs. 750-800 crore in the

same time frame.

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The importance of arriving at an efficient supply chain management (SCM) gains

impetus from the fact that as retail players grow their operations all over the country.

SC, would be one of the most important determinants of success in the competitive

retail landscape as proper practices would mean cost savings leading to better margin

and efficient customer service through better lead time.

Fitch Ratings director R Jayakumar said cost savings can be achieved the supply

chain largely by cutting inventory by lowering the turnaround time. ―Proper SCM also

ensures availability of the right type of product at the right time in a store, which

would result in increased sales. Retail companies have to walk a thin line between

keeping their stock at the optimum level (due to space constraints and inventory costs)

and ensuring higher sales.

In fact Fitch Ratings, in its India-retailing special report said players still lag behind in

adopting efficient supply chain practices. ―While a part of this has been on account of

lack of proper infrastructure, a large part is also due to the basic inertia and haphazard

initiatives taken by the company,‖ the report states.On this, Mr.Nagesh admitted that

the players still have to realise the enormous benefits which one can accrue if proper

supply chain practices are in place.―There is still lack of common understanding

between retailer, distributor and manufacturer. It can happen through sharing of

information and data, which enables each participant in the entire supply chain to

manage inventory efficiently.

Citing an example of packets of shirts, Mr. Nagesh said by the time the shirts reach

the retailer and is sold, the packet is discarded, which leads to loss. ―Let‘s say the
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packets cost Rs. 10 when they are discarded they are sold for 40 paise. This means

the customer has to incur the additional burden because of the cost incurred due to

packaging. So one has to arrive at efficient supply chain practices to ensure such

things are avoided.

Technology and innovation seem to be the only saviours for the highly competitive

Indian retail industry as it now faces up to global competition as mentioned by Varun

Aggarwal in his Article on ―Retail Hardware‖ (2009). The Indian organised retail

segment is seeing companies like Globus, Pantaloon and Reliance gearing up to fend

off the challenge of foreign players who are poised to enter the Indian market.

However, it is not going to be that easy for Indian retailers to handle the competition.

Indian companies, need a sound infrastructure something that foreign companies

already possess. Today, a shopper needs much more than just a wide range of

products. He needs convenience and quick cash out all at a competitive price.

Technology plays an important role in overcoming such hurdles. Cost savings

through technology can help garner a competitive price for a retail vendor.

2.18 At the point of sale

Instead of a PC or cash register, a growing number of Point of Sale (POS) solutions

take advantage of a colour touch screen at the sales counter. Many POS systems

connect to in-store computer that, in turn, link to computers at the company‘s

headquarters. With well-designed software, touch screen can provide a simple, easy-

to-use mechanism for cashiers to handle just about any transactions—reducing

training while improving productivity and customer service. Touch screens are
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popular in the hospitality and convenience store industries and are rapidly gaining

acceptance in other retail markets.

Some businesses choose to combine other options with a touch screen POS. For

example, full motion video and integrated stereo speakers (or optional headphones)

provide a multi-media platform that allows these workstations to do double duty as

Web-or computer based training during non-business hours. Add a swivel base and

your associates will be able to use a workstation to review services or products with

customers.

Bar code scanners enable you to collect detailed data regarding products that your

customers purchase—information that is useful for inventory management,

merchandising and marketing decisions. Successful retailers use this information in

data warehousing applications to fine-tune store assortments and help assure that

consumers find the products that they want on the shelves, when they shop.

A quality scanner that reads bar codes on the first try will speed checkout and lead to

cashiers who are more comfortable and less frustrated. A pleasant cashier will

transfer this positive energy to customers.

On the customer side of the counter, most POS workstations are available with a

choice of customer displays, ranging from simple one or two line read outs to full

colour screen that display. Web-based colour graphics. The latter devices allow your

customers to learn more about your store, merchandise, or special promotions while

they view details of their transaction.

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Electronic payment peripherals enable you to readily and efficiently handle credit and

debit card transaction. Among these are terminals that not only process electronic

payment but also capture signature electronically. A signature capture terminal

incorporate a credit / debit card reader, provides means to enter a PIN number, and

includes a display for other customer input (e.g. for market surveys and graphics-

based advertising).

Retail POS printers, especially thermal printers, deliver fast, quiet printing of receipts

and paper forms at the point of service. A quality thermal printer can have a positive

impact on store productivity through intelligent design and operator-friendly features.

Because of their speed, thermal printers can produce a record of most transactions in a

fraction of a second. This makes it possible to add information and graphics, such as

a company‘s logo, to the customer receipt, or to print multiple receipts for credit

authorisation for coupons, rebate offers or gift receipts, without adding to the

transaction time.

2.19 Networking and Security

With standalone networking systems, retailers run the risk of not getting information

quickly enough. Problems such lack of visibility into inventory, weaker relationships

with partners, poor forecasting, lost sales opportunities, or inconsistent customer

service can materialize. Globus understood this and implemented VPN. According to

Meheriar Patel, DGM & Head IT, Globus stores Pvt.Ltd., ―We are using LAN and

WAN setup connected by MPLS, VPN. All our stores are connected through RF

VPN.‖
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Many retailers lack instant lines of communication between workers, customers,

managers, vendor partners and stores. This shortage of real time information

exchange often comprises service, inventory, policy changes, and management

decision making. A solution that maximise responsiveness by offering full

networking of data, voice, and video communications is essential. This can include

mobile communications, providing information access to workers at every level, from

stockroom to store to executive offices.

Retailers still often rely on older processes that increase operational costs and lowest

productivity such as outdated point-of-sale systems and technologies, ineffective

employee-management and training practices, or outdated inventory management and

partner policies. The hurdles can be overcome using products from vendors such as

Cisco that improve store operations and productivity with offering in mobile and

telephony communications, collaborative technologies. In-store broadcasting and

training and integration with inventory management and supply chain applications.

Many retailers have set up data centers. Raymond has a data centre at Thane at its

HO. According to Anil Arora, Sr. Manager, IT, Raymond Limited. ―The stores are

not interconnected but they are connected through a bulletin board which is a

collaboration Web Site, where the stores exchange information.‖ The company also

has a DR site to ensure business continuity. This site is also located at the HO.

Though security solutions such as IP surveillance and automation remain a

pipedream, most retailers take other measures to ensure a secure network. For

instance, Globus, uses a SonicWALL 4060 UTM box, which works as firewall,

content filter-device, gateway antivirus, IPSee VPN appliance, spam filter. Intrusion
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prevention system, antispyware etc. Pantaloon on the other hand chose to deploy

Fortinet‘s FG500A after an intensive evaluation process. The device allows unified

capabilities and is easy to manage and monitor. It is used at the perimeter‖ said

Vishak Raman, Country Manager, India, Fortune.

2.20 RFID for inventory control

In the retail industry, RFID assists in inventory control. All stocked items in a retail

outlet sport an inexpensive read-only tag that stores the product code and its

description, including the manufacturer, brand, batch number, expiry date and price.

The shelves, exit gates and warehouses are fitted with a small antenna that senses the

RFID tag and read the information on it to update the inventory system in real-time.

The benefits of such a system are that it provides for total asset visibility, full

inventory history with tracking and reduced inventory stocking levels that facilities

just-in-time deliveries. It also ensures better process control for products in the

facility, reduced shelf space and lead-time that shorten across docking time, higher-

level security, fewer errors and better visibility of goods.

In warehouses and container depots, pallets and containers are market with read-write

RFID chips that contain details of origin, destination and other material details. Entry

and exit gates, vehicles and cranes are fitted with an antenna that senses the RFID tags

and records and updates the system to check for any deviation in the schedule. With

precise tracking of the location of pallets and containers within the warehouse, it is

easy to pinpoint unscheduled movements. The system also considerably helps reduce

costs and time for check in and check out.

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While Globus has already begun testing RFID, Madura Garments has implemented

the technology at its newly opened retail store. Planet Fashion in Bangalore RFID

tags help automate dispatches from one factory and inventory at the warehouse.

Pantaloon Retail (India) has piloted an RFID project at one its warehouses in Tarapur

using a thousand RFID tags. The company is starting by implementing the

technology at its warehouse. It has selected a few lines of apparel, primarily shirts

and trousers, for the RFID pilot. The RFID application developed by Wipro Infotech

fits to the overall solution in line with Pantaloon‘s business processes and IT

landscape (from the factory outward to the warehouse inward and from life warehouse

outward) in order to capture real-time data. The application integrates with Oracle

database 10g and middleware along with an implementation of the RFID hardware. It

integrates with the existing IT infrastructure, the in-house developed Retail Enterprise

Manager. The primary objectives are a smoother product lifecycle and item-level

tagging for identification. The pilot was also an opportunity to do a feasibility study

regarding additional uses for RFID.

2.21 Other technologies

An interesting technology deployed at HyperCITY is the I-Scan (Symbol

Technologies-New York) that allows the customer to scan merchandise as they pick

products off-the-shelf, thus saving them significant amount of shopping time. Once

he finishes shopping, the customer can hand the device over to the customer service

desk and cash-out quickly.

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The I-Scan hardware supports applications such as inventory scanning, price check,

self-check, self-check-out PoS and Warehousing receiving.The rising scale of

organised retail distribution network and increasing competition will force players to

focus on restructuring the whole supply chain to improve productivity and provide a

better deal to customers, says Chetan Ahya in his commentary on the retail supply

chain Revolution in (2006)

Even as the government continues to delay the decision to allow FD in multi-product

retail chains, the fast-emerging Indian retail sector is becoming widely recognized

amongst domestic entrepreneurs and investors as one of the biggest opportunities in

India. Apart from existing players (such as Pantaloon) ramping up their retail chain

store operations, many large business groups, including Reliance Industries, Birla

group, and Tata group have announced their intention to cumulatively invest over $10

billion over the next five years to capture a share in the fast growing pie of the

organised retail sector. In addition, various foreign players like Wal-Mart are entering

the market via a joint venture with a domestic Indian player. We estimate that India‘s

organised retail market is likely to grow from the current $4 billion (2.1% of total

relevant consumer spending to $64 billion (10.8%) by FY2015.

In the first phase of the retail revolution, the focus of entrepreneur has been largely on

capturing the consumers attention and providing them with a new shopping

experience. However, the retail revolution is not just about the new shopping

ambience. Going forward, the rising scale of organised retail distribution network and

increasing competition will force players to focus on restructuring the whole supply

chain to improve productivity and provide a better deal to customers. The retail
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revolution will restructure the economy‘s two lagging segments including agriculture

and manufacturing by small and medium scale enterprises. For the first time since

India initiated its liberalisation programme in 1991, there is now a potential for

reforming these two important sectors of the economy, which can increase productive

job opportunities for the middle class.

The agriculture related supply chain segment suffer from maximum inefficiency.

Cumulative wastage in this supply chain is estimated to be about $11 billion, or 9.8%

of agriculture component of GDP. Over the years, owing to government intervention

in the input and output pricing, there has been little incentive for farmers to improve

efficiency. Moreover, in the past few years, public investment in agricultural as a

percentage of GDP has also been gradually declining. The archaic infrastructure for

reaching the agricultural produce from farm-gate to consumers has meant huge losses

in transit and large markups in pricing due to extra layers of intermediation.

However, the outlook, for the agricultural sector is finally turning around. Thirteen

states and three UTs have amended the laws allowing private sector participation in

direct purchases of farm produce. The rise in presence of the organized retail sector

will accelerate reform in the agriculture. Farmers will be incentives to adopt

improved management techniques to increase efficiency, better quality output and

also provide the needed variety to consumers. Increased commercial opportunity

should attract the private sector in agriculture logistics management, reducing the

number of intermediaries. The plans announced by some of the likely large retail

players reflect the potential food-chain restructuring that could take place.

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Similarly, SME manufacturing which accounts for 13% of GDP ($104 billion), will

get also major demand boost and also face pressure to increase efficiency. Two major

segments in the small and medium scale manufacturing sector that could get a boost

from the emergence of the retail chain stores are textiles & clothing and food

processing industries. Indeed, we believe the emergence of organized retailing will

bring about a transcending impact on macro by way of accelerating productivity

growth and lower inflation, increased export competitiveness, and higher productive

job opportunities.

The risk is that political parties get overly concerned by the adverse impact on the

welfare of a specific segment of the population dependent on momand-pop shops

versus the overall big picture positive impact on the lower middle income group. The

sensitivity of the retail sector restructuring on the lower middle class is very high.

The retail and wholesale trade sector contributes to 13% of GDP and employs about

40 million people (9% of workforce). A majority of mom and pop shops are very

small in size (below 50 sq.ft.) and are being used as a last resort job opportunity by

many of the low skilled working age population.

In the medium term, as the reach of chain stores increases, some adverse impact on

mom-and-pop shops in inevitable. However, opposition to evolvement of organised

sector retail chain stores is no less legitimate than opposition to removal of protection

provided to many sectors in the early 1990s liberalisation programme. Restructuring

of an economy that is still at a developing stage in today‘s globalising, competitive

world is inevitable.

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The issue of employment should not only be assessed from the perspective of welfare

of the specific of lower middle income group (LMIG) population dependent on mom-

and-pop shops but also from the welfare of the overall LMIG population. Although

the specific section of LMIG already employed in mom-and-pop shops may be

adversely affected the emergence of the organised retail sector will create new jobs

for a different section of lower middle class in low and modern retailing distribution,

small-scale manufacturing packaging infrastructure and transport sector.

Moreover, LMIG population also stands to gain from the higher productivity (in the

form of lower inflation) benefit that the organised retail sector offers. The quality of

employment will also see a vast improvement as larger institution will be able to

provide better social security, training and growth opportunities. Indeed, increased

organised sector activity should help increase aggregate tax to GDP that would allow

the government to initiate measure for direct intervention for reducing the adverse

impact on any specific section of the population.

To be sure, the political class needs to respond to the emergence of modern retailing

but not by restraining its growth but by enabling this transition by initiating

constructive measures.The role of supply chain in Indian organized retail is very

significant for on it depends the growth of this sector. The Indian Supply Chain

Council have been formed to explore the challenges that a retailer faces and to find

possible solutions for India.

According to Mr. Shivani Parasad (2009). The role of supply chain in the organized

retail sector in India should be a shelf-centric partnership between the retailer and the
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manufacture for this will create supply chains that are loss free. This will also give

rise to top and bottom line growth. In the organized retail sector in India the presence

of fresh produce (vegetables and fruits) is very small. This is so for the nature of

supply chain is very fragmented. This shows the important role of supply chain in the

organized retail sector in India. In the organized retail market in India, the role of

supply chain is very important for the Indian customer demands at affordable prices a

variety of product mix. It is the supply chain that ensures to the customer in all the

various offering that a company decides for its customers, be it cost, service, or the

quickness in responding to ever changing tastes of the customer.

The infrastructure in India in terms of road, rail, and air links are not sufficient. And

so warehousing plays a major role as an aspect of supply chain operations. To

overcome these problems, the Indian retailer is trying to reduce transportation costs

and is investing in logistics through partnership or directly. The Indian organized

retail sector is growing so the role of supply chain becomes all the more important. It

should become all the more responsive and adaptive to customers demand. There is

also need for the supply chain to be more cost efficient and collaborative to win the

immense competition in this sector.The role of supply chain in Indians organized

retail has expanded over the years with the boom in this industry. The growth of the

Indian retail industry to a large extent depends on supply chain, so efforts must be

made by the Indian retailer to maintain it properly.

A retail revolution is happening in the country. For global giants looking at newer

markets, India presents exciting opportunities on account of its vast middle class and a

virtually untapped retail industry, Explains Ms. Savitha in her article on ―Role of
74
Supply Chin in Indian Organized Retail Sector.‖ on April (2010).The Indian retail

sector has seen unprecedented growth in the last few years. The KPMG report,

Consumer Markets in India the next big thing has predicted that the organized retail

sector is expected to grow at rate higher than GDP growth in the next five years. The

AT Kearney‘s 2006 Global Retail Development Index position India as a leading

destination for retail investment.

The success in this competitive and dynamic sector depends on achieving an efficient

logistics and supply chain, which can be provided by professionals, as they combine

the best systems and expertise to manage a ready flow of goods and services.

The retail boom promises to give an impetus to a host of allied sectors and the

logistics industry, as the backbone of the retail sector, stands to gain the maximum.

In India, the logistics market is mainly thought to mean transportation. But the major

elements of logistics cost for industries include transportation, warehousing, inventory

management, courier and other valued added services such as packaging.

The logistics costs account for 13 per cent of GDP. The industry is currently on an

upswing and is posed for a growth of 20 per cent in the coming years.With the

expansion of retail, supply chain will take on an increasingly important role. With the

end consumer becoming more demanding and time conscious, the need for just-in-

time services is increasing. In retail, where competition is intense and stakes are high,

customer satisfaction is paramount. Logistics firms have also started focusing on

related services such as Customs clearing and forwarding. Inbound warehousing

labeling and packaging, fleet management, order picking and inventory management.

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2.21 Effective SCM enables:

2.21.1 Realistic ordering lead-times: Suppliers are not surprised by the next order.

Retailers respond better to demand spikes, minimize forced markdowns and avoid

obsolete-inventory costs.

2.21.2 Averting problems : Stores easily identify potential stock-outs and request

replenishment before the inventory drops to zero. Deciding to de-list or replace a

product is easier.

2.21.3 Facilitating resource planning and allocation: Product forecasts and supply

schedules are easily converted to perform space planning, establish staffing needs and

organise inbound / outbound shipments. Financial experts can plan cash flow and

analyse margins into the future.

2.21.4 Four R’s of SCM

Follow the 4 R‘s of SCM-Right time, Right place, Right price, Right quantity to reap

the advantages of the key players in the logistics industry are gearing up to meet the

challenges by initiating both organic and inorganic growth to leverage the retail

opportunity. Logistics firms have also started focusing on related services such as

Customs clearing and forwarding. Inbound warehousing labeling and packaging, fleet

management, order picking and inventory management.

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Everyday, best-in-class retailer all over the world are using 12‘s retail software

solution to power strategies that enable a superior, differentiated customer shopping

experience, supply chain efficiency, and revenue growth. 12‘s retail solutions are

scalable, designed to wrap around a retailers unique business process, and are

modularized to enable sensible and rapid implementation. With 12‘s retail solutions,

retailers can:

Rapidly execute an advanced planning process that enables a differentiated superior

shopping experience, customized to the store level and capable of enabling course

corrections in-season, while simultaneously driving inventory productivity.

Optimize the structure of the supply chain to support global sourcing and lean supply

chain strategies, and also execute these strategies in the most cost efficient manner in

order to protect and grow margins.

Rapidly, and cost effectively, implement and change planning and supply chain

business processes that span organizations both inside and outside the four walls of

the enterprise in order to stay ahead of the competition.

Booming economy, favourable demographic patterns, increasing per capita income

and organization gave rise to a new sector in India. Organized Retail. Opening up of

retail sector for FDI can be considered as the prime reason behind the blooming

organized retail sector. Sensing this opportunity several companies ventured into this

sector, including Reliance, Bharti and Pantaloons. As described by Ms. Geetika

Sharma in her article on Organized – Retail Challenges ahead for India‘s Organized

Retail on Friday December (2009).

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Despite the Government allowing only 51% of FDI in single format retail segment

global retail grants like Tesco, Wal-Mart and Metro AG are making inroads indirectly

through franchise agreements and cash and carry wholesale trading thus giving some

serious competition to domestic retailers. Nevertheless, growth opportunity in this

sector can be judged by the fact that only 3% of the total retail sector is organized and

97% of the sector still consists of total mom and pop stores.

Unfortunately, the growth strategy used by all organized retail players of increasing

their number of stores backfired when rentals dramatically shot up following the

global economic melt down. Profitability is seriously hampered and almost all major

retailers are not struggling to maintain their bottom line. Average operating profit

margin declined from 9.5% in 2007 to 7.9% in 2008. The worst part is that such a

drastic growth in the number of stores was backed by significant leverage which is

expected to further hurt these organized retailers liquidity and profitability levels.

Retailers are correcting their over enthusiastic strategies of the past and focusing on

improving their business model. This section will review some of the challenges

these organized retailers are facing on both marco as well as local levels.

2.21.5 Aggressive Expansion

Over the last few years indian retalers most preferred mode of expansion was to

increase their number of outlets across metros. Outlets were built wherever real

estate was available and not where they were actually required, which led to

―Clustering‖ Following credit crunch in 2008, several outlets were cast strapped and

had to be closed down simply because they were operating in unfeasible locations/
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2.21.6 Food Supply Chain Management

One of the major challenges for retailers is to reduce shrinkage which includes short-

weighing, pilferage and poor product handling. While the average shrinking

percentage of inventory in developed countries is 1% to 2% of Cost of Goods Sold, it

is estimated to be much higher for Indian retailers, primarily due to the lack of focus

on supply chain management. The existing supply chain is not devoid of inherent

weakness of India‘s infrastructure, besides being corrupted along the entire chain.

Tracing shrinkage is a Hercules task as almost all the transactions still continue to be

based on paper system. This gives rise to the need of third party logistics

organizations that can provide services at competitive prices. Third party logistics is a

concept still absent from the Indian retailers‘ value chain.

A large part of shrinkage takes place within the retailer by its employees. Moreover,

tracking an employee‘s track record and background check is difficult. Retailers are

now joining hands to fight this battle by creating a database of employees and share it

amongst themselves to avoid shrinkage from within.

2.21.7 Employee training and retention

The most common strategy applied by retailers to keep labor cost at minimum was to

employ fresh graduates with no experience in retail sector. They have now realized

that in difficult market situation, experienced and talented employees that have sound

understanding of ground realities could give retailers a competitive advantage.

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Despite a downturn, need for skilled manpower still continues to be a major concern

across the sector.

2.21.8 Managing working capital

One of the most important factors affecting a retailer‘s profitability is the way it

handles its working capital. Lower footfalls, resulting into lower sales has directly

impacted Indians retailers working capital position. Discounting is now the most

common technique used to turn slow moving inventory.Besides lower footfalls,

another factor which is hurting retailers, liquidity position is the significant amount of

leverage they are carrying which was used earlier for aggressive expansion. Banks

are now reluctant to finance retailer given the falling demand and plummeting

profitability. Retailers are therefore finding it difficult to finance their working

capital requirements.

2.21.9 Diversifying into untapped rural areas

Experts believe that the next phase of growth for organized retail sector will come

from rural areas that account for half of the $300 billion domestic retail market.

Retailers will have to focus on the previously untapped lower income strata by

providing them access to credit facilities. On the back of sourcing commodity prices

and improving productivity, rural economy is set to boom in the next decade. To

improve rural economy, Indian Government approved Contract farming and Leasing.

this will bring about technology transfer, increase capital inflow and assure market for

crop production,
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2.21.10 Backward Integration

One way to improve efficiency and profitability is to remove unwanted intermediaries

which eat into the already margins. To improve rural economy, Indian Government

approved Contract farming and Leasing. According to KPMG, this will bring about

technology transfer, increase capital inflow and assure market for crop production,

besides eliminating intermediaries. Pepsico and ITC‘s E-chaupal are already

benefiting from contract farming in Northern India.

Despite the above mentioned challenges, long term prospects of organized retailers

are still very attractive. Important consolidations and partnerships can be expected

soon for improving operating and cost efficiency. Focusing on supply chain

management and partnering seem to be the need for any hour for organized retailers

so as to leverage their expertise and financial muscle.There is a famous saying by

Stephen R. Covey in ―The 7 habits of highly effective people‖ that Interdependence is

higher Value than Independence. Standing on the threshold of a retail revolution and

witnessing a fast changing retail landscape, the retail sector is poised for a big leap.

As Explained by Mr. Vijay Prakash Anand in his review on ―Supply Chain and

Logistics Management Key to Success in Retailing on December (2007)‖, Currently

retail sector in India accounts for Rs. 55,000 crore ($12.4 billion) business at current

prices in the calendar year 2006, increasing its share to 4.6% of the total Indian Retail

Value that stood at Rs. 12,00,000 crore ($270 billion). With the potential of crossing

Rs. 2,00,000 croe ($45 billion) business by the Year 2010, generating employment for

some 2.5 million people in various retail operations and over 10 million additional
81
workforce in retail support activities including contract production & processing,

supply chain & logistics, retail real estate development & management etc; the retail

sector is growing at a scorching pace of about 37 percent in 2007 and expected to

grow by 42 per cent in 2008. With the enormous growth, the retail sector is also

facing challenges on the fronts of escalating real estate cost, scarcity of skilled

workforce and structured supply of merchandise.

2.21.11 Importance of Supply Chain and Logistics Management

One of the most important challenge in organized retail in India is faced by poor

supply chain and logistics management. The importance can be understood by the

fact that the logistics management cost component in India is as high as 7%-10%

against the global average of 4% -5% of the total retail price. Therefore, the margins

in the retail sector can be improved by 3% -5% by just improving the supply chain

and logistics management.

In India, with demand for end-to-end logistics solutions far outstripping supply, the

logistics market for organised retail is pegged at $50 million and is growing at 16%.

It is expected to reach $120-$130 million by 2010. Organised retail on the other hand

is growing at 400% and is expected to reach around $30 billion by 2010. Even supply

chain and logistics firms like Hong Kong based Heng Tai Consumables and ABS

Procurements Co and ACM China (the greenhouse specialist) is also eying the

opportunity for managing the supplies.

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The supply chain management is logistics aspect of a value delivery chain. It

comprises all of the parties that participate in the retail logistics process.

Manufacturers, Wholesalers. Third Party specialists like Shippers. Order Fulfillment

House etc. and the Retailer. Here, logistics is the total process of planning,

implementing and coordinating the physical movement of merchandise from

manufacturer to retailer to customer in the timeliest, effective and cost efficient

manner possible. Logistics regards order processing and fulfillment transportation,

warehousing, customer service and inventory management as interdependent

functions in the value delivery chain. It overseas inventory management decisions as

items travel through a retail supply chain. If a logistics system works well, the retail

firm reduces stock outs, hold down inventories and improve customer service – all at

the same time.

Logistics and Supply Chain enable an organized retailer to move or store products

more effectively. Efficient logistics managment not only prevents needless

movement of goods, vehicle transferring products back and forth, but also free up

storage space for more productive use.The efficiency and effectiveness of supply,

chain, and logistics management, can also be understood by the fact retail store

maintain lower inventories than traditional retail in India, generally in the traditional

kirana stores, three weeks inventories are kept, while in a modern retail store like

Hypercity, it‘s nine days and it‘s under two weeks for Food Baaar. Now, it is

beneficial for both the manufacturer as well as the retailer. If we go through the

following food supply chain in India, we find that a lot can be improved by

maintaining the supply chain and logistics.

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Organised retail in India is still struggling to find sustainable and profitable business

models for most of the formats it has experimental with. This is been noticed by the

writer who is the managing director of Interim Business Associate in his Article on

Organized Retail: Failure of Human Supply Chain, on April(2010), A survey of most

public pronouncements of the retail players and their advisors, which are many, list

four areas that they say they are addressing to improve their performance. These are :

a) Better merchandise mix

b) Improved customer programmes.

c) Better sourcing

d) Cost control in all aspects of operations.

No doubt, improving these areas will have some impact on business performance, but

these miss out the core issue that is dogging Indian organised retail-the dismal failure

of the ―human supply chain‖.

To understand the concept of the ―human supply chain‖, let us look at the traditional

retail. For any category of products, whether grocery, apparel, furniture or even

durables, the supply chain from base raw material to the product on the shelve passes

through many hands. Purists have lamented the multiple intermediaries and have

suggested that disintermediation of the middle men will add value to the whole supply

chain. What they fail to recognize is that each intermediary is in fact a decision centre

who optimizes the use of the key resources material, money, message and men.

The much reviled arhtiya, in fact, is a critical bridge between the farm and the

wholesaler. The arhtiya has the right skill set to buy very small quantities compared

to global norms and aggregate them appropriately for the right market. When

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organized retail sets up its direct sourcing, its human chain just doesn‘t have these

skills.

Similarly, if we look at the wholesaler, he takes many critical supplies and price calls,

which stabilize markets and optimize availability, at retail. The distribution centers set

up by organized retail to replace the wholesaler are not designed to be either decision

centers or even entrepreneurial. The human supply chain this gets broken.

As a consequence, retail finds that its skills to respond to day-to-day needs are just not

there. And it tries to replace it with expensive IT systems and more centralized

controls. But without the human skill managing the supply chain, risks rise and

failures are high at each point in the supply chain.

Even at the front end, a large amount of effort and money is invested in physical

hardware. In an experiment, we did with one retailer in the furniture category, one

store manager was shifted among three locations ranging from a 5000 ft format to a

400 ft. store, from good locations to bad and with investments in ambience

improvements put on hold (some shops didn‘t even have air-conditioners). Wherever

he went, sales increased by a factor of three-four times within four months. The

difference was that he had the skill to sell trust, not products.

Another way to look at successful retail is to see everyone in the chain as both a

‗strategic‘ and a ‗tactical‘ decision maker on a daily basis. This is very different from

the manufacturing model. Very factical decision makers are the operations people

and strategic calls are taken less often by a different set of people.

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If the right human supply chain is so crucial getting the retail process right, it is a

surprise how little attention is paid to it by retailers. They will do well by developing

evidence based competency maps staffing for them and only then rolling out the

physical stores.

A well implemented human supply chain will deliver all the elements of success,

namely leadership in catchment areas, repeat business and responsive merchandise at

a lower per unit cost.

Although the organized Retailing in India has brought a revolution in Retailing an

Industry but at the same time it is diffcult for Indian People to cope up with the

Increased competition in a job marker in retailing which requires a skilled base

techniques to bring in more efficiency. On October 10, retail protested in Mumbai

against organised retail. The reason? Outlets of organised retail are proliferating in

India, rendering four crores of people jobless. Their arguments is not based on facts.

There is space for all. As described by Mr.Ravi Kant in his critique on ―The Hue and

Cry against Organized Retail in Unfair‖ in October (2010). The Argument of the

retail traders that proliferation of outlets of organised retail will lead to elimination of

the community of retail traders is not plausible. There is enough space in retail trade

to accommodate the small traders as well as organised retail.‖

Allowing large corporate, Indians or foreign, into retail can by no stretch of

imagination lead to 4 million people losing their livelihood. A decade back, people

would get their shirts and trousers stitched by the tailor in their neighborhood.

Buying ready-made shirts and trousers was deemed a luxury. Nowadays, in metros
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and large cities, one seldom comes across people who get their shirts and trousers

stitched by the tailor. In a decade, people‘s preference has switched to ready-made

shirts and trousers. Did the community of tailors raise a hue and cry when people

switched over to ready-made shirts and trousers? No, they did not. What became of

the tailors then? Are they on the streets? Nothing of the sort happened. Their

services are being made use of by large ready-made garment manufacturers like

Raymonds.

The middlemen will not be affected if they forego a part of their huge profit, provide

improved services and ensured embellishments like interior decoration. The

following will convince one and all that these retail traders can survive even if outlets

of organised retail proliferate.

1. Locational disadvantage of organised retail: Outlets of organised retail cannot

be opened in congested residential areas of each colony because they need

huge floor space for stocking as well as parking. The retail trader does not

face this problem, they can operate from every building / society. To reach a

Pantaloon outlet or Reliance outlet, one has to drive at least 2-3 Km and given

the ever rising petrol prices, it makes business sense for the customer to forego

the 3-5% discount that organised retail offers because the additional petrol

consumed offsets the said discount.

2. One-to-one relation: Another weakness of organised retail is its inability to

establish a personal rapport with its customers. Big ticket purchases and small

ticket purchases evince the same kind of impersonal and perfunctory greetings

from the counter staff. At best the customer may get some membership card,

which will prompt them to buy more, but the human gesture that coveys you
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 are important to my shop‖ is missing. The small retailers on the other hand,

are ideally placed to exploit this weakness of the customers and flourish.

Personal rapport attracts many customers.

3. Improved services : Petty shop owners act the financiers / banks of the salaries

class. They offer credit to these people without any documentation. The

middle class is a permanent feature in the Indian milieu. It is at least30-crore

strong, which is much larger than the population of several countries in

Europe and more or less equal to the population of USA! Even the so-called

credit cards do not boast of the kind of penetration that the Indian retail trading

community boasts of Besides. RBI may place some restrictions on issue of

credit cards or other credit card related aspects which may curtail the growth

of credit cards. But RBI cannot restrict retail traders from lending to their

customers since they do not come under the purview of the organised sector.

By offering free home delivery, prompt service, etc. these small shops can

definitely prosper.

Due to improved supply chain management, organised retail will benefit both the

original producers (farmers etc.) and the end users. The producers / growers / farmers

get remunerative prices whereas the end-users / customers get discounts and other

privileges.

Government should think of opening up organised retail to foreign investors also,

experience worldwide shows that the retail movement benefits everybody barring an

insignificant minority. Our competititors opened by the retail sector to foreign

investors way back in 2004 in line with their commitment to the World Trade
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Organization (WTO). The opening up of the retail sector to foreign investors will

expose large industrial houses like Reliance to competition and the customer will be

benefited in the bargain. By opening up the retail sector to foreign investment and

following other similar proactive measures. China has become the factory of the

world. Large retailers have been operating in China for some time and we have not

witnessed any protest there after the entry of Wall-Mart or Carrefour. After all, the

population of China is much more than that of India and certainly China‘s retail

trading community will be much larger than India‘s organised retail today accounts

for less than 5% of India‘s retail business, but is bound to grow, forcing choices on

the government, and upon itself.

According to Mr. K.Sudhir, in his Article on ―Road Ahead for Organized Retail

March (2007). China‘s experience and those of other Asian countries that recently

modernized their retail sector can provide valuable insight on what choices make

sense.Serving local consumer tastes in China with over 1.3 billion people poses a

similar challenge in india, with its billion people. Chinese regulations, at both the

central and local levels, had created confusion and difficulty for retailer trying to open

new businesses or acquire established ones.

India‘s regulatory patchwork frequently impedes the efficient flow of products and

needs to be coordinated across states and local jurisdictions. Finally, the Chinese

transportation infrastructure varies across the country‘s vast expanse. They are

modern and highly efficient, especially in urban and coastal areas, and organised retail

is most successful here.

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India needs better transportation and cold-chain supply chain infrastructure across the

country. Loosening foreign entry into the retail sector should be based on a strategic

quid pro quo, the profit potential of India‘s large retail market for retail operations

knowhow and investment that are critical to modernising and improving the

efficiency of Indian retail.

India is already following China‘s example initially encouraging joint ventures

between domestic and foreign retailers before allowing 100% FDI in organised multi

brand retail. This gradual opening up should preserve a vibrant domestic retail sector

in the long term, and provide India with a solid foundation of domestic expertise and

human capital. For long term success, organised retailers should pursue a few key

strategies.

First, build capabilities and backend logistics infrastructure. Domestic firms should

partner with established foreign firms to capitalise on combining foreign retail

knowhow with domestic market knowledge. This is happening already. UK-based

Tesco is working with the Tatas, US-based Wal-Mart with Bharti, etc. Over time,

these joint ventures will dissolve but both the domestic and foreign firms will have the

capabilities to establish successful retail business independently.

While the government is rapidly investing in transportation infrastructure, organised

retailers should either invest in their own supply chain.

infrastructure or promote intermediaries that develop and invest in cutting edge

supply chain infrastructure.Second, learn local and regional preferences in developing

the merchandising mix. One size fits all is not a winning strategy, as Subhiksha, till

recently one of India‘s retail success stories, learnt the hard way through bankruptcy
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when it expanded rapidly into the north from its south Indian roots with little local

market knowledge. Merchandising correctly in a diverse country such as India takes

time, trial and error, and is critical for success.

Third, to deal with the kirana challenge, organised retailers should actively engage

customers and local political leaders, to demonstrate the value of their enterprise,

especially in the context of political challenges from kirana lobbyists.

For example, Bharti has created a retail academy to train thousands of people in

Punjab. Creating thousands of jobs over time develops political constituency of

employees.

But the kirana challenge is not just political, it is also competitive, Given the high

customer loyalty to these micro-local outlets, helping kirana become more efficient

while allowing them to effectively serve their clients can be both politically expedient

and profitable. One way to address this situation is for organised retailers to engage

in co-opetition to make customers out of their smaller retail rivals.

We already see this taking form in India with cash and carry stores that essentially

serve as wholesalers to kiranas and other local establishments, as well as to individual

shoppers, Tesco Tata, Bharti Wal Mart and Metro have all created cash and carry

formats

In fact, the government has recognised the political benefits of co-opetition by

allowing 100% FDI in the cash and carry format.

Foreign retailers that have positive experience with domestic suppliers sourcing for

the Indian market are also likely to source from Indian suppliers for their global

operations. Consider this, if a $300-billion American behemoth like Wal-Mart

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sourced even 10% of its products from India, the potential for Indian farmers and

manufacturers is huge. The export potential may even dwarf the direct benefits from

organised retail.

Booming economy, favourable demographic patterns, increasing per capita income

and urbaniation gave rise to a new sector in India Organized Retail Opening up of

retail sector for FDI can be considered as the prime reason behind the blooming

organized retail sector. As Explained by Ms.Geetika Sharma in the Article on

―Organized Retail – Challenge Ahead For India‘s Organized Retailer‖ in November

(2009). Sensing this opportunity several companies ventured into this sector,

including Reliance, Bharti and Pantaloons.

Despite the Government allowing only 51% of FDI in single format retail segment,

global retail giants like Tesco, Wal-Mart and Metro AG are making inroads indirectly

through franchise agreements and cash and carry wholesale trading, thus giving some

serious competition to domestic retailers. Nevertheless, growth opportunity in this

sector can be judged by the fact that only 3% of the total retail sector is organized and

97% of the sector still consists of local mom and pop stores.

Unfortunately, the growth strategy, used by all organized retail players of increasing

their number of stores backfired when rentals dramatically shot up following the

global economic melt down. Profitability is seriously hampered and almost all major

retailers are now struggling to maintain their bottom line. Average operating profit

margin declined from 9.5% in 2007 to 7.9% in 2008. The worst part is that such a

drastic growth in the number of stores was backed by significant leverage which is

expected to further hurt these organized retailers liquidity and profitability levels.
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Retailers are correcting their over enthusiastic strategies of the past and focusing on

improving their business model. This section will review some of the challenges

these organized retailers are facing on both macro as well as local levels.

2.21.12 Aggressive Expansion

Over the last few years Indian retailers most preferred mode of expansion was to

increase their number of outlets across metros. Outlets were built wherever retail

estate was available and not where they were actually required, which led to

‗Clustering‘. Following credit crunch in 2008, several outlets were cast strapped and

had to be closed down simply because they were operating in unfeasible locations.

2.21.13 Four Supply Chain Management

One of the major challenges for retailers is to reduce shrinkage which includes short-

weighing, pilferage and poor, product handling. While the average shrinking

percentage of inventory, in developed countries is 1% to 2% of Cost of Goods Sold, it

is estimated to be much higher for Indian retailers, primarily due to the lack of focus

on supply chain management. The existing supply chain is not devoid of inherent

weakness of India‘s infrastructure, besides being corrupted along the entire chain.

Tracing shrinkage is a Hercules task as almost all the transactions still continue to be

based on paper system. This gives rise to the need of third party logistics

organizations that can provide services at competitive prices. Third party logistics is a

concept still absent from the Indian retailers value chain.

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A large part of shrinkage takes place within the retailers by its employees. Moreover,

tracking an employee‘s track record and background checks is difficult. Retailers are

now joining hands to fight this battle by creating a database of employees and share it

amongst themselves to avoid shrinkage from within.

2.21.14 Employee training and retention

The most common strategy applied by retailers to keep labor cost at minimum was to

employ fresh graduates with no experience in retail sector. They have now realized

that in difficult market situations, experienced and talented employees that have sound

understanding of ground realities could give retailers a competitive advantage.

Despite a downturn, need for skilled manpower still continue to be a major concern

across the sector.

2.21.15 Managing working capital

One of the most important factors affecting a retailer‘s profitability is the way it

handles its working capital. Lower footfalls, resulting into lower sales has directly

impacted Indian retailer‘s working capital position. Discounting is now the most

common techniques used to turn slow moving inventory.

Besides lower footfalls another factor which is hurting retailers‘ liquidity position is

the significant amount of leverage they are carrying which was used earlier for

aggressive expansion. Banks are now reluctant to finance retailers given the falling

demand and plummeting profitability. Retailers are therefore it difficult to finance

their working capital requirements.

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2.21.16 Inversifying into untapped rural areas

Experts believe that the next phase of growth for organied retail sector will come from

rural areas that account for half of the $300 billion domestic retail market. Retailers

will have to focus on the previously untapped lower income strata by providing them

access to credit facilities. On the back of souring commodity prices and improving

productivity, rural economy is set to boom in the next decade.

2.21.17 Backward Integration

One way to improve efficiency and profitability is to remove unwanted intermediaries

which eat into the already stressed margins. To improve rural economy, Indian

Government approved Contract farming and Leasing. According to KPMG, this will

bring about technology, transfer, increase capital inflow and assure market for crop

production, besides eliminating intermediaries. Pepsico and ITC‘s E-chaupal are

already benefiting from contract farming in Northern India.

Despite the above mentioned challenges, long term prospects of organised retailers

are still very attractive. Important consolidations and partnerships can be expected

soon for improving operating and cost efficiency. Focusing on supply chain

management and partnering seem to be the need for an hour for organized retailers so

as to leverage their expertise and financial muscle.Now it‘s contemporary design

coupled with quality that‘s determining purchase decisions across some 30 million

Indian consumers.
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According to Mr. Ratna Bhushan in his write up on Quality, Design Value drivers for

Apparel, Retail Industry January (2003).What is common to the Hyundai Santro, LG

Televisions, Tanishq jewellery, Hidesign bags and ColorPlus Shirts? Certainly not

their product profiles or balance sheets. The answer design. That, more or less, set the

tone for the Images Fashion Forum seminar being held in Mumbai, involving some of

the country‘s top-notch retailers, apparel marketers and fashion forecasters.

Drawing a parallel between brands across diverse categories such as automobiles,

consumer electronics, apparel and jewellery, Mr. Arvind Singhal. Chairman. KSA

Technopak threw light on the Indian consumer‘s willingness to now experiment with

product with the element of contemporary design. ―The new value drivers for

consumers today are quality and contemporary design. While price was the

predominant purchase determinant in the pre-1980s, quality coupled with price

assumed importance in the mid-1980s. The 1990s witnessed an assortment of quality,

range and price. Now it‘s contemporary design coupled with quality that‘s

determining purchase decision across some 30 million Indian consumers,‖ he said.

What is also favoring the domestic market to warm up to the retail and apparel

fashion industry, Mr. Singhal said, was the current demographic profile. The largest

number of population in India will be in the 20-44 year age group in the next few

years. This profile does not exist even in a huge market such as China.‖

The downside, Mr Singhal pointed out, was that while the market was ready, and the

customers were willing to pay, there were not enough suppliser. ―Very few marketers

have pumped in sustained investments and efforts in teir businesses. This needs to

change.‖ Ms Simone Tata, Chairperson, Trent, the retail venture of the Tata Group,
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called upon investments in technology, quality cntrol and training as the required

focus areas for the industry.‖ ―Investments in superior and efficient technology, and

not fancy buildings, is what the industry needs. Also, manufacturing has to take a leap

jump to service,‖ she said.In the race of retailers striving form better supply chain

management, Ready made garments as well as has its own niche. As highlighted by

Ms. Shanti Venkatraman in her Article on Ready Made Garments – Making the Right

Designs, October (2004). Ready Made garment is really becoming big business. With

the quota regime on textiles and clothing set to go in 2005, the garment industry

should get greater access to international market. The domestic market too presents

immense opportunities with consumer spending on the rise and organised retailing

growing. But should a garment player go global or sell at home?Some players such as

Raymond and Zodiac clothing have chosen to be aggressive in both markets. Even as

they plan to improve their retail presence over the next three years, both are

expanding their manufacturing facilities in Bangalore to cater to the expected rise in

international demand, post-2005.

2.21.18 Betting on Domestic Markets:

Once the quotas go, a good number of domestic outfits may look at the export market

to augment revenues. Interestingly, major export players such as Ambattur Clothing

(Color Plus) and Acme Clothing (Provogue) have, in the past placed their bet on the

domestic market. These companies quickly managed to give bigger players a run for

their money. But, as Color Plus discovered, further growth could come only from a

wider distribution network, which needs deep pockets. Raymond stepped in and

acquired the brand.Operating in the domestic market poses an entirely different set of
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challenges from that of the export market. It requires more than manufacturing

expertise and a heightened fashion-consciousness.

While these factors help initially, it is an entirely different ball game to emerge as a

strong brand. This is borne out by the presence of just a handful of successful brands

in an apparel market pegged at Rs. 9,000 crore. Sound branding and positioning,

supply chain management and retailing assume greater importance in the domestic

than in the export market, where garments are sold under private labels. These

elements also involve considerable costs.

Established names, however, do not have it easy either. The entry of international

brands such as Tommy Hilfiger into the Indian market is likely to be followed by

more players. Once quotas go, international manufacturers are likely to set up

facilities in India to take advantage of the low-cost base. Moreover, import tariffs are

likely to come down, which would also attract international players.Competition is

likely to hot up and keep domestic players on their toes. The retail landscape is

changing, and the traditional distribution strategy of apparel players is in for an

overhaul. Figuring out which price point to operate in is yet another challenge for an

apparel maker. Challenging, but interesting, times are ahead for the readymade

garment industry.

Apparel manufacturers were among the first to foray into organised retailing.

Raymond, Arvind Brands, Madura Garments (Indian Rayon) and Zodiac Clothing

have built an extensive retail network over the years.

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Even as they retail through other multi-brand outlets/departmental stores, they also

continue to set up their own outlets. Having their own outlets, they believe, would

help showcase their entire range of products, as well as build their brand image.

Tussle with private labels

Manufacturers have found it is advantageous to have their own outlets for another

reason. The increasing share of retailers‘ private labels is squeezing the space

available for their own brands. The likelihood of private labels emerging a major

threat to brands has debated endlessly.

Private labels, however, plateau in the boom periods, when brands stand to gain.

Players in the branded segment also contend that customers are eventually won over

to brands by familiarity and quality assurance.Going one step furhter, private labels

can help build markets for brands. For instance, the women‘s apparel segment is yet

to take off in a big way, but private labels have managed to do well in this segment.

Players such as Madura Garments, which have a presence in the segment through

Allen Solly, believe that once women try out private labels and get more accustomed

to Western wear, they are likely to upgrade to a more expensive brand.

Brands may not even be as expensive as they are today. Leading ones have, in the

past, been predominantly positioned in the premium segment.There has been a market

for such products; Louis Philippe shirts have sold for Rs. 4,000 and more. Clearly, the

promise of high quality has held value for customers.But the strong response to a

flurry of price cuts across sectors, ranging from airlines to telecom has shown that the

branded apparel segment cannot afford to miss out on the opportunity in mass markets

for long.One has to only see the huge response to a Color Plus sale to get an idea of
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the growing demand for branded clothing at lower prices. Brands have grown to

depend upon such sales to drive up their volumes.

With the exemption of excise duty on cotton garments (if a manufacturer opts for the

convent route he would have to pay 4 per cent against 10 per cent earlier) and the

creation of a level-playing filed, branded players now have a good incentive to

introduce products at lower price points for the mass market, which, till now has been

the preserve of smaller and relatively unknown players.But players may still find it

tough to cater to this market. They would have to move towards a low-margin,

volume-drive business. This would also need a far larger distribution network than

what exists today.Few retail formats in India operate on a truly large scale. Giants

such as Walmart and Carrefour, which have the ability to drive volumes, are what

industry would need; however, their entry is unlikely till such time FDI is permitted in

retailing.

The garment sector is considered one of the more promising segments in the textile

chain as. after 2005, as there would be greater demand for finished products. the

universe of readymade garment stocks is, however, limited. The stocks of Raymond,

Indian Rayon and, to some extent, Arvind Mills, have managed to draw investor

attention the past couple of months due to their increasing thrust on garments on the

domestic and export front.

Zodiac, as a pure play garment company, will be able to leverage on the potential in

this sector. The company is strongly focused on exports. Capacity expansion plans

augur well for its revenue growth; the company recently acquired a shirt-
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manufacturing unit in Dubai. It also plans to add 60 retail outlets over the next three

years. On the domestic front, Raymond‘s brands cater to the premium segment.

Raymond is also a leader in the suits segment. The decision to overhaul its retail

outlets and cater to a younger crowd might help spruce up its brand image.

Arvind Brands, is no longer a subsidiary of Arvind Mills. The latter is, however,

building its export market but the company still derives a chunk of its revenues from

its denim business. It would be some time before garments emerge as a major driver

of its revenues.

Indian Rayon has a presence in a number of businesses. As the owner of Madura

Garments, it has a strong presence domestically. The garment division is expected to

be one of the major growth drivers The revival of its power brand, Pater England,

capacity expansion plans, and retail expansion should boost earnings.

The revolution in retailing industry has brought many changes and also opened door

for many Indian as well as foreign players. In a market like India there is a constant

clash between challenges and opportunities but chances favors those companies that

are trying to establish themselves. So to sustain in a market like Indian companies

have to bring innovative solutions.

Indian market has potential to accommodate many retail players, because still a small

proportion of the pie is organized. According to Mr. Aayush in his write up on

―Indian Retail Industry–opportunities, Challenges and Strategies, July (2008). The

Indian retail scene has witnessed to many players in too short a time, crowding

several categories without looking at their core competencies or having a well though

out branding strategy.

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The growth rate of super market sales has been significant in recent years because

greater numbers of higher income Indiand perfer to shop at markets due to higher

standards of hygiene and attractive ambience. Here also small, single-outlet retailers

dominate the market.In recent years, a few retail specialised products have come into

the market. Although these retail chains account for only a small share of the total

market, their business is expected to grow significantly in the future due to the

growing quality consciousness of buyers for these products. With rapid urbanization,

and chaging patterns of consumer tastes and preferences, it is unlike that the

traditional outlets will survive the test of time. Despite the large size of this market,

very few large and modern retailers have established specialized stores for products.

There seems to be a considerable potential for the entry or expansion of specialized

retail chains in the country. The Indian durable goods sector has seen the entry of a

large number of foreign companies during the post liberalization period. A greater

variety of consumer electronic items and household appliances because available to

the Indian customer. There are specialized retailer for each category of products

(books, music Product etc.) in this sector. Another prominent feature of this sector is

popularity of franchising agreements between established manfaurecesand retailers. A

strong impetus to the growth of retailer industry is witnessed by economic boom and

driver of key trends in urban as well as rural Indian.

2.22 The Hidden Challenges:

Modern retailing is all about directly having ―first hand experience‖ with customers,

giving them such a satiable experience that they would like to enjoy again and again.
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Providing great experience to customers can easily be said than done. In Indian, as we

are moving to the key observations by customers is that it is very difficult to find the

uniqueness of retail stores. the problem, retail differentiation.

Merchandising planning is one of the biggest challenges that any multi store retailer

faces. Gritting the right mix of product, which is store specific across organization, is

a combination of customer insight, allocation and assortment techniques.

The private label will continue with brand leaders. So suplier‘s brand will take their

Own may because they have a established brand image from last decades and the

reasons can be attributed to better customer experience, value vs. Price, aspiration

innovation of supplier‘s brand.

The effectiveness of the mall developer‘s communication of the offering to the target

customers determines how well the mall gets positioned in their minds. At this stage,

the communication has to be more relative nature. This implies that the message

conveyed to the target customers must be effective enough in differentiating the

mall‘s offering from that of its competitors without even naming them. The message

should also clearly convey to the target audience that the mall offers them exactly

what they all the complete shopping-cum-entertainment point that meets all offers.

Once the message is being conveyed through these channels, the mall developer must

and a personal touch to his massage by carrying out a door-to-door campaign in order

to reinforce the message. A combination of focused merchandising extended colours

and sizes and convenience leads to success. In apparel e-tailing, effective

communication with customers can help lay the foundation for buyer- loyalty. This

implies that the message conveyed to the target customers must be effective enough in

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differentiating the mall‘s offering from that of its competitors without even naming

them.

2.23 Strong Supply Chain

Critical components of supply chain planning applications can help manufacturer‘s

retailers‘ service levels and maintain profit margins. Retailer has to develop

innovative soltion for managing the supply chain problems. lean systems and staff

should help retailers to get advantage over competitors.

It is really important to choose a proper store location for the convenience of serving

to the customers

According to the Article mentioned in Economic Times of February (2010), here has

to be 10 Questions which retailers need to ask before choosing a store location they

are as follows:

1. Is your target market there at the location? If you are too far from customers,

business may suffer.

2. Is the location in a growing or dying part of the city? Also, check the local crime

local crime levels.

3. Is the store located in a high or low traffic area?

4. Decide if you need a very visible storefront like a garment or a shoe store?

5. Condition of property-will the store need a lot of repairs immediately or even in the

near future? Is there any scope for expansion, if necessary?

6. How healthy is the local business climate?

7. Are there other ‗draws‘ nearby that will help attract your customers?
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8. Compatible businesses like a pizza parlour next to a video store can help can your

business grow too.

9. Are there any zoning restrictions set by local authorities?

10. Are the rental costs affordable or will you be paying an unrealistic premium?

11. Last but not the least, how close are your competitors? How do they compare in

appearance to your business? How prosperous do they look?

Apparel retailing is a success story, thanks to high margins. E-tailing apparels is a

different business. As explained by Mr. Prashant Mahesh (2009), in his Article on ―E

– Tailing Apparels- will it catch it on?‖

Indians love buying apparels. Whichever part of the globe they are in, Indians have

demonstrated that they are great apparel-shoppers. Even though many international

brands are locally available, they do not miss an opportunity of buying an imported

one. Apparel retailing has been successful in India. Thus, it is not surpring that we

have success stories such as Shoppers‘ Stop, Piramyd and Spencers Plaza.

In apparel retailing a retailer has two choices: either to create his own brand or sell

other brands. Margins in apparel retailing could be anywhere between 40 and 50 per

cent. The moot question now is this selling succeed on the web?

Analysts argue that though an apparel website may be great, it is not a substitute for

the tactile sensation the buyer enjoys. So apparel e-tailors would have to borrow an

idea or two from cataloguers who have to borrow an idea or two from cataloguers

who have succeeded in selling to people who do apparel shopping not at brick-and-

mortar stores.

That is one reason why cataloguers have been able to deliver the goods. They have the

advantage of being used as references or guides to be the Internet and the they work
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as a complementary channel for moving merchandise. Direct mail catalogues can

really drive people to the web. A combination of focused merchandising extended

colours and sizes and convenience leads to success.In apparel e-tailing, effective

communication with customers can help lay the foundation for buyer- loyalty. The

Askeddie allows consumers to typs in questions ans participate in live real-time chats.

A good e-tailing communication can make relevant and enticing offers to prospects

and bring them back to the site.

How to win the loyalty of apparel-buyers on the Net? Apparel e-toilers should

consider a liberal return policy, offer instant help and provide exciting range of

colours, sizes and styles. Thanks to the popularity of Internet, fashion trends from

across the globe. Most apparel e-trailers have been slow on the uptake. Pantaloon.com

is sitll under construction.If you were to visit the order large apparel e-tailor Trent,

you can find that he does not have a basic website and sketchy information is

available on the sitetata.com. ―Buying online things like a which more of a

commoditized product is fine. But then one should not expect an Indian to buy a

designer suit or a sari.‖As far as apparel e-tailing in the West is concerned, buyers are

found to shop at ease with cataloguers with whom they have had pleasant expriences

in the past. that trend might catch on here in India too. Probably, very soon we might

see Indian cataloguers flocking to the Net. Faced with operational difficulties and

pressure to manage costst, apparel retailers are increasingly realising the importance

of efficient supply chain management, as explained by Ms. Swetha Kanna in her

editorial on Apparel Retailers deck up for efficient supply chain, dated July 2010.

For Italian fast fashion brand, OVS Industry (owned by Oviesse SPA, which is part of

the Gruppo Coin group), which seeks to replace merchandise very repidly, efficient
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stock management becomes a critical component of its operations. While the average

lifecycly of fashoin products is typically four months, OVS stocks are replenished in

just 6-7 weeks.

With the growth in retailing the Indian apparel manufacturers and retailers are

working towards efficient supply chain management system. Warehousing is gaining

ground. Will all this translate into better service to the final and to reduced prices as

explained MS. Reena Mital in her article on ― retails Upgrade supply Chain‖ (July –

2006)

The retail sector is among the fastest growing sectors in the country, providing the

apparel brands, domestic and international, with the much needed contact with the

final consumer. And organized retailers in India have begun understanding and

adopting international business practices and solutions that go towards providing

better service to customers.Shoppers‘ Stop is probably is probably the first retail

outlet to adopt warehousing solutions to improve the efficiency of its supply chain

systems. We plan to have around 40 outlets within the next three years and theis will

make such system ever more sustainable. HE further stated, Our ERP solutions have

at any resulted in transparency any given point in the in time.Shopping Stop has four

warehouses in the four cities, which are managed by third party logistics (3Pl)

company. Once we cross that we may have to increase the distribution centers. ,‖ said

Mr. Shrikhande.

Warehousing and supply chain management is the area that almost event retailer is

looking at today. The retailer has a central warehouse in Mumbai. ―Plans are still at
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the drawing board stage, we have still to work out the investments that would go in,

the kind of infrastrure the warehouse would need to have. It applications would be an

integral part of such a distribution network,‖ informed pantaloon officials.

RFID is the next IT solution for the industry, but nobody in the industry today uses

this. Wal-Mart is one of the few global retailers to introduce RFID. In India, this will

take a long time to come. Barcoding has become popular only a few years ago, RFID

is a long way away. Also the cost would be an inhibiting factor. We expect that like

CDs, mobiles, etc the cost of this technology would also come down in the years to

come, and that is when it would get more popular in the country.

According to Mr Vilram Rao, group business head (fabrics and branded apparel

Indian Rayon And Industries Limited, Madura Garments, ―today, Indian brands spend

more on advertising and less on retailing and setting up flagship stores, etc, whereas

internationally, it is the other way round.

According to Mr Rahul Mehta, director, Creative Outerwear, ―With competition

increasing manufacturers will try to bring costs, and the sprucing up the distribution

channel is one way of doing this. Moreover, middlemen will get eliminated, and the

retailer and manufacturer will deal directly with each other. Similarly, investments in

inventory management, etc are being done to ultimately give better service to the

customer, while bringing down dead stocks, but certainly not to give lower prices to

the consumer.‖

As FDI in the retail sector is being allowed, several apparel majors are expected to

join the domestic apparel retail battle. As coined by Mr. Ankush Wadhwa in his write
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up on ―The Post -2005 role of RFID in the Indian Apparel Retail Sector September

(2005)‖. It is a new multi-dimensional implication model that can enable companies

to create niches and develop core competence.

RFID is an identification or tagging method that functions similar to a barcode on an

apparel product or shipping carton. The tags can be read through packaging and

cartons without the line of sight necessary for reading barcodes. Cartons or products

using RFID technology carry a transponder made from a microchip attached to an

antenna. FID can find quite a few applications in the apparel retail industry.

Re-stocking and replenishment/

Shelves are monitored to ensure that they remain stocked at appropriate levels. When

they fall below the level, an alert is sent to the stockroom or office to bring out or

order more merchandise. For stores with stockrooms RFID monitoring alerts

employees when stock levels reach the threshold. Depending on how the system is

configured, re-orders may be done automatically for items that the store plans to

continue selling.

Returns are quickly added back to inventory, when any apparel product is returned or

exchanged, its RFID tag could be read and automatically added to the inventory

database. Employees who do re-stocking could read the RFID for returned items; An

application could automatically compare the RFID code of the returned item against

recall notifications.

Merchandise leveling across stores

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By monitoring inventories at different stores within a retail chain, the management

could make intelligent decisions about how to meet customer demand and reduce

discounting by shipping items between stores. For example, Delhi will have a longer

season for selling sweaters than Bangalore. If, in February, Bangalore stores are

oversupplied for what remains of their season, while sweaters are still selling well in

Delhi, will have may decide that enough discounting would be eliminated to justify

the cost of shipping items from Bangalore to Delhi.

Custom video presentation for merchandise brought into fitting room

If fitting rooms are equipped with RFID readers to identify the merchandise brought

in, shoppers could see a video in the fitting room describing the features of that

apparel and could see a person modeling the garment and suggesting accessories. It

can then display the shopper in the RFID-tagged apparel with the recommended

accessories.

Customer-specific shopping reminders and promotions

With RFID on loyalty cards to identify the customer and a customer shopping-history

database, items could be priced differently depending on the characteristics of the

shopper (e.g. special promotions for first-time shoppers and rewards for frequent

shoppers). at kiosks, and by employees receiving prompts on their point-of-sale

terminals. When stock levels reach the threshold. Depending on how the system is

configured, re-orders may be done automatically for items that the store plans to

continue selling.

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Gap Analysis:

Going through literature review researcher has found out that supply chain

management has been identified and researched in many industries ilncludeing

automobile, food service, healthcare, information tecnology, and retailing outlets.

however, limited information is available about the functions and practical

experiences of the supply chain management in the retail apparel business.

SCM gives a ready referendum whereby entrepreneurs competing globally can

streamline their business so as to deliver the right product, at the right time, place cost

and quality. Such a system can exist successfully in India if due care is given to

inventory management thereby increasing the profitability of all the stake holders in

the supply chain cycle of apparel industry.

SCM is in the process of being refined to the point where the customer gets what he

demands, when he demands and wherever he demands it. With changing times, it is

now an environment of "Survival of the Fastest."

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 CHAPTER 3

OBJECTIVES AND RESEARCH METHODOLOGY

Supply chain management has been identified and researched in many industries

including automobile, food service, healthcare, information technology, and retailing

outlets. However, limited information is available about the functions and practical

experiences of the supply chain management in the retail apparel business. The study

will focus on the importance of the supply chain management and framework of an

effective supply chain management in the apparel retail business. The real meaning of

supply chain management will be defined. The related practical skills and effective

management issues will be discussed. The research specially focuses on the retail

apparel business in India.

The organized apparel retail businesses are spread all over the country. The size and

scale of the businesses are various. Also the target customer and markets are quite

different. Therefore, supply chain, as a dynamic is difficult to be covered in all the

aspects in the study. The study will focus on the selected organized apparel retail

business in India.

Having defined the success of a supply chain in terms of supply chain profitability,

the next logical step is to look for sources of revenue and cost. For any supply chain,

there is only one source of revenue: the customer. Thus, the appropriate management

of these flows is a key to supply chain success. Effective supply chain management

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involves the management of supply chain assets and product, information, and fund

flows to maximize total supply chain profitability.

Due to the purchasing power that comes with control over consumer contacts,

retailers are often dominant in a supply chain. Closeness to end consumer markets

gives retailers fast and precise information about matters such as shifting fashion

preferences and attractiveness of competitor‘s offerings, comparable to continuous

market research. Even though power is no end in itself, it does include the opportunity

to organize the supply chain in a suitable way.

The objectives and hypothesis formulated are mentioned below:

3.1 Objectives

1. To study the tools and techniques with regards to supply chain management in

organized apparel outlets and its impact on pricing.

2. To study the impact of economies of scale of retailers with respect to optimum

inventory management in the supply chain cycle.

3. To study the impact of marketing and supply chain interface on an integrated

basis In ―Organized apparel and clothing‖ category of the retail outlets.

4. To study the impact of infrastructure related factors on improvement of sales

of the organized retail apparel outlets.

5. To study the impact of backend merchandize management on the sales of the

organized retail apparel outlets.

6. To study the impact of ERP on improving the value proposition of the retail

―Organized apparel outlets.‖

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3.2 Hypothesis

H01: The tools and techniques with regards to supply chain management in organized

apparel outlets has no impact on pricing.

H11: The tools and techniques with regards to supply chain management in organized

apparel outlets has an impact on pricing.

H02: The impact of economies of scale with respect to optimum inventory

management has no impact on supply chain cycle.

H12: The impact of economies of scale with respect to optimum inventory

management has an impact on supply chain cycle.

H03: There is no impact of marketing and supply chain management on an integrated

basis on organized apparel retail outlets.

H13: There is an impact of marketing and supply chain management on an integrated

basis on organized apparel retail outlets.

H04: The infrastructure related factors have no impact the sales improvement of retail

organized apparel outlets.

H14: The infrastructure related factors have an impact on the sales improvement of

retail organized apparel outlets.

H05: There is no impact of backend merchandise on sales of retail organized apparel

outlets.

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H15: There is an impact of backend merchandise on sales of retail organized apparel

outlets.

H06: There is no impact of ERP implementation on improving the value proposition of

retail organized apparel outlets

H16: There is an impact of ERP implementation on improving the value proposition of

retail organized apparel outlets.

3.3 Research Methodology

The Research Methodology adopted for the study comprises of several steps, such as

3.01 Secondary Study

A study of several research papers/books and other reports were identified and

studied, with the objective of finding out the gaps in the study, the factors that have a

bearing on the objectives of the study.

3.02 Primary study

A primary study confining of discussions with various Mall Managers of Mumbai,

Indore and Delhi was initiated and conducted.

The discussions were held using a questionnaire

The questionnaire comprises of several parts such as

a) Recognition of supply chain management

b) Importance of supply chain management

c) Performance of supply chain management

d) Supplier Performance

e) Distribution channel
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 f) Customer demand

The questionnaire was further tested for Cronbach Alpha reliability to test the

internal consistency of the items. According to Aiken,(2003) This is a general

formula for estimating the reliability of a test consisting of items on which different

scoring weights may be assigned to different responses. Alpha reliability coefficient

for the respondent‘s questionnaire was found to be 0.740 which is within the

acceptable range.

Reliability refers to the consistency of scores obtained by the same person when re-

examined with the same test on different occasions or with different sets of

equivalent items or under variable examining conditions.

3.03 Data Collection & Data Analysis

For the purpose of the study Delhi, Indore and Mumbai were chosen as the area where

the study will be conducted. The preliminary study indicates that the impact of supply

chain management and its effect was felt to be high in Mumbai.

A pilot study was conducted in Mumbai with the objective of checking the reliability

of the study.

Sample Size

The sample size calculator indicated that a sample of around 864 respondents would

be required.
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The basis of this is as fallows

Method to find sample size (source of formula is sample size calculator)

Sample size for this study

Consider z = 1.96 ( it is standard for 95% level of confidence)

Standard deviation calculated from pilot study = 11.25 ( app)

Margin of error = 0.75

Sample size = ( 1.96 * 11.25/0 .75)^2 = 864(approximate)

Minimum requirement of data is of 864 respondents

To have uniform proportion sample size is finalized as under.

3 cities * 300 respondents from each city= 900 respondents.

The actual sample used was 900 comprising of 300 respondents in each of the 3 cities.

The 300 respondents were than further stratified to take into consideration the number

of outlets for each city.

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 CHAPTER 4

GROWTH AND DEVELOPMENT OF ORGANIZED

APPARELS OUTLETS MALLS

4.1 Introduction:

Apparel is any piece or object that is used to drape the body. In simple terms it is

known as clothing. The clothing can be made of leaves, cloth, leather or any other

material. Earlier the term associated with clothing was garment. Garment refers only

to the simple clothing - outer and inner - that were not any branded or designer

specific but apparel is a broad term that includes not only clothes but the accessories

such as belts, bags, shoes. jewellery etc.

The consumer perspective has changed drastically over the years. Earlier the Indian

market was dominated by readymade players who were already into the production of

yarn. Consumers were not brand conscious then and they purchased either ready-

made garment or just pieces of cloth for their requirement which they converted to

dresses or suits according to their need and taste. Their need for appropriate

accessories was not felt important at that time. The branded or designer accessories

were worn on important occasions only.

From the simple garment Indian consumers have moved on to the world of apparel

which constitutes, in addition to clothing, the accompanied accessories that completes

his or her present ability. The trend of occasional wearing of branded or designer wear

and accessories has evolved into casual wears. Now, Indian consumers opt for

branded apparel for their daily Wear.

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India has witnessed frenetic pace of retail development over the past five years. While

local shopping centers have always existed in India, their structure ambience and

method of doing business served the needs of the local population. The pace of

change in retail developments has triggered a frantic pace in the development of

malls. A number of factors such as income growth, changing demographic profile and

socio- economic environment have driven this have driven this transformation in

retail in India.

Goldman Sachs has estimated that the Indian economic growth could actually exceed

that of China by the year 2015, It is believed that the country has the potential to

deliver the fastest growth over the next 50 years. Keeping in mind the rates of growth

predicted for India and China, the balance of economic power is poised to tip in favor

of two of the world‘s largest populations over the next fifty years. The Global Retail

Development Index developed by AT Kearney has ranked India first, among the top

30 emerging markets in the world.

Formats new to the Indian marketplace have emerged rapidly over the past five years.

There is a little doubt that retail in India is revving up for an exciting phase ahead.

Development in retail formats and patterns of shopping have always been influenced

by mobility and the lifestyles of the consumer. Typically, the development of

shopping centers has followed a pattern, which has always synchronized with the

development of the retail sector in that economy and the needs and he wants of the

consumers.

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This case study examines the rapid growth of malls in India and the challenges faced

by the mall developers. This primary aim is to examine the feasibility and

sustainability.

4.2 Mall development in India

It would be perhaps incorrect to say that shopping malls have come into existence in

India in the recent pass. While they have always existed in the local and regional

markets, the manner in which they now present themselves to the end consumers has

changed. Spencer Plaza is Chennai and Crossroads in Mumbai are considered to have

pioneered the shopping mall and shopertainment revolution in India. From three malls

in the year 2000 to almost 300 malls by the year 2010. The pace of developments is

rapid. It is estimated that mall development would spread across 60 cities in he

country by the end of the decade.

The West and Noah of India are estimated to witness the highest rate of mall

development in India. While the NCR has witnessed rapid developments in retail

developments all developments have not necessarily been successful. In many cases

the supply of retail space has far exceeded the demand of retail space. The tenants in

malls in India are also faced with high lease rentals and the payment of high costs

towards Common Area Maintenance which eventually affect the retailer‘s

profitability.

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4.3 Characteristics of a shopping mall

The development of shopping center has to synchronize with retail development in the

country. India while the retail sector may have crossed the initial phase and moved

into the second phase of development mall development has moved faster. In most

parts of the world entertainment as key components of malls emerged after the decline

of department stores, India department stores are skill evolving. Players are still

entering the market and that total numbers of players are limited. The keys are also

experimenting with the products and services being vided by them. In such a scenario

mall developers need to focus to focus on certain key elements of strategy and on

where they apprise to be over a period of time.

Today, the concept of ‗traditional shopping areas has given way to central business

locations and prime retail streets in suburbs. Not surprisingly, the focus has shifted to

new locations such as Anna Salai, Nungambakkam High Road and Adyar. And, for

retail markets to boom, location is a key factor. However, in Chennai. finding the

―right-sized space‘ on ―right locations and at ―right prices‖ is a challenge.

Sopping space in the city falls into two categories: In the city — T. Nagar, Anna

Salai, Nungambakkam High Road, Egmore, Cathedral Road, Radhakrishnan Salai and

Parrys corner — and in the suburbs — Adyar, Anna Nagar and Purasawakkam. Retail

hubs towards the west and south of the city are also fast developing, says Ramesh

Nair, senior manager, Corporate Solutions of the global real estate consulting firm,

Jones Lang LaSalle.

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a) Modern malls

With the market turning brand conscious, Chennai is seeing an unprecedented growth

of supermarkets and mega malls. RPG, a major industrial group, came up with a mega

mall — Spencer Plaza — that offers an engaging ambience, car parking facilities,

brand variety and entertainment. The mall, very different from the traditional

shopping complexes, which are Street-facing and where shops are located on the

ground floor, made multi-level shopping possible and provided ample car parking

space.

People even came to the mall just to spend time in a pleasant environment. Retail

outlets located in T. Nagar or Parrys Corner cannot address these issues, says M.

Balasubramanian, Director, Mangal Tirth Estate.

There are two other rnega malls in the city — Abirami Mega mall and lspahani

Centre. And it is likely Lifestyle is going to open an outlet in the ETA mall coming up

on Dr. Radhakrishnan Salai. A leading multiplex operator from Mumbai has also

signed up for space in this mall.

b) Stand-alone malls

After Spencer Plaza, many stand-alone malls such as Lifestyle, Globus, and Shoppers

Stop have sprung up. However, the concept of stand-alone mall is not new to

Chennaites, says V. Kalyanaraman, president, Khivraj Estates. Chennai‘s one of the

oldest retail book outlets, Higginbothams, even today, stands tall despite competition

from new and modern outlets such as Landmark.

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Mr. Kalyanaraman claims that Delhi and Mumbai are still in the primitive stage of

retailing growth, though they have acquired the cosmopolitan city tags much before

Chennai.However, many stand-alone malls are trying to ally with mega malls for their

survival. It was noteworthy that in spite of their struggle, there was growth in this

segment last year.No doubt, there is a demand for quality retail space. The supply,

however, is not there, says Mr. Ramesh Nair. New malls, each at least 2-lakh sqft,

could come up in Adyar, Anna Nagar, and on Arcot Road.There is also scope for a

small high-end boutique retail mall on Nungambakkam High Road as the place has

established itself as a high-end retail destination over the last two years.But, Chennai

retailers tend to ignore certain factors for quality growth of modern retail formats.

They must consider soft issues such as concept, trade-mix, property management,

marketing and Promotion and not just restrict themselves to hard issues such as

location, access, catchment areas, demographics, critical mass, layout and design, says

Mr. Nair. ―Developers will have to get the product-mix right before they start

construction of the mall. If the malls do not have enough car parking space, serious

shoppers with large disposable income and spending capacity who come in cars will

stay away from the mall.‖

Developers planning retail space in the lover levels and office space in the upper

levels of their ;s should make sure that there are separate entrance and exit points for

office occupiers and retail shoppers, he says.So, the development of retailing is

certainly going to be in the suburbs. Retailing has especially been a driving force for

the buoyancy in real estate prices in areas such as Anna Nagar and Adyar, which

today are sort of self-contained townships with their own supermarkets and

restaurants.
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Rents in main shopping areas range between Rs. 30 and Rs. 75 per sqft a month for an

organised retail development. Suburban rents are generally lower or in line with that

for the prime city retai1 space, ranging from Rs. 25 to Rs. 50 per sqft a month. New

retail micro market will eventually emerge in areas such as Velachery, Mogappair and

Porur. The IT corridor can also be a prime location for retail industry in the future.

The need today is for large malls where consumers can step in and get all they need

and spend some time along with their family. If shopping is going to evolve as an

experience, then retail space will have to develop accordingly.

c) Shopping Malls: The Right Destination for Retail Outlets

With the up coming concept of organized retailing, now for last few years, the Indian

market is witnessing the organized retail giants, capturing the major space even in

urban and rural markets. The paradigm shift in the demographic factors, life styles,

literacy and better disposable income of the customers, have attracted the major retail

players to the urban & rural areas of Indian market. The customers in their local cities

have given red carpet welcome to the organized retailing and seem to enjoy their

every shopping experience in it.

The growth of retail as the sector is phenomenal, in Indian market, the journey of

retail from the Super stores to hyper market is acknowledged just in 5 years. Initially,

the major factor, come up as a constrained in the growth of organized retailing was

the availability of space in market place. The simultaneous growth of the real state

addressed the issue of floor space availability for retail out lets. What happened first is

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difficult envisage but simultaneous growth of retail & real state sectors proved

complimentary to each other.

Today the major space, in the malls, is occupied by the big brands of retail chains and

spatiality stores of the private brands, ensuring the availability of variety of product to

satisfy the customers‘ needs & requirements. Even for your everyday grocery buying

customers prefer the superstores established in malls. The main attractions for all the

customer, are competitive pricing and availability of variety as compared to next door

retail grocery shop. (by Arun, published on March 23rd, 2008 and is listed in Growth,

India, Trends, consumer.)

According to study carried out by Assocham, a whooping Rs.1,31,804 crore has been

invested in organised retailing in last 6 months alone. Some of the other related

highlights of that study are :

Real estate companies like Unitech and DLF draw up plans that cater to growing

demand of shopping malls; capex of Rs.65,000 planned to be invested in real estate

development for retail space in next four to five years; food and grocery is next big

retail segment with investment plan of Rs.22,100 crore.

1. Hyper marts wilt soon dot the Indian retail space with investment

announcements of Rs.29,154 crore expected to set them up.

2. With big retail malls in the pipeline, real estate development for organized

retail sector attracts maximum investment announcements, amounting to

Rs.65.000 crore.

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3. Unitech with capex of Rs.20,000 crore, outlay of Rs.16,000 crore and 5,000

crore by Parsvnath Developers will strengthen DLF with construction of mega

retail store.

The effort of real estate and retail companies together, seems to be developing malls

as the right destination for retail outlets, fulfilling customers needs under one roof and

making their shopping experience memorable.Ma1ls are springing up in every city

and are fast becoming sought-after entertainment hotspots, with shopping as the by-

product. From a situation where there were no malls about a decade ago, the country

will have over 300 malls translating to over 100 million sq.ft. in available mall space

he end of 2007.

The Indian Government‘s initiatives to aid growth in the retail sector are showing

very visible results. Investment in world-class infrastructure is expected to be close to

USD 150 bn.

1. The hitherto restricted retail real estate sector was opened up for Foreign

Direct Investment in 2005. As a result, malls of international scale and quality

are expected to come up;

2. Mall growth is being seen as a clear indicator of the economic prosperity in

India. Significantly, the number of malls in the country has increased at a fast

pace. And they are doing brisk business. A trip to the local mall (there will be

one in every locality soon!) will bear this out;

3. From almost no malls existing in the country over a decade ago. there were 96

operational malls in August 2005;

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4. Here‘s more good news. This phenomenon is not restricted to major cities of

the country alone. It has percolated to the ―Tier II‖ and ―Tier III‘ cities as well.

The contribution of Tier II cities in organized retail sales is expected to be

about 20 - 25%.

5. Mumbai, Bangalore, Hyderabad, Pune and New Delhi are expected to have

nearly 75% of the retail space in the country

6. Niche, speciality malls, discount malls, highway malls are the new trends mall

Mania grips India:

d) Mall Mania grips India :

From eyeballs to footfalls - the human psyche has taken a complete downward

journey in the last years. If it was eyeballs (number of visits to websites) during the

dotcom boom of 2000, now it is footfalls (number of visitors to malls). The current

mall mania that has gripped a hopping-frenzy nation can only be compared to the

dotcom madness five years ago.

Today, some 250 malls are already in business and a similar number is going to come

up in the next two years. By 2006, a whopping 19.6 million sq. ft of retail space will

be made available in six major cities alone. Tier-Il and tier-III cities are not far behind

the big cities in attracting Investments in malls. Smaller cities such as Baramula,

Ludhiana, Mandya, Thrissur andMidnapore will soon have their own malls.

According to Projects Today database, some 195 shopping malls and complexes are

coming up in various parts of the country with an estimated investment of Rs 12,747

crore.
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Most of the world‘s leading brands are now available in India. McDonald‘s, Pizza Hut

and KFC are a common sight in many cities Shopping malls with multiple facilities

like shopping, entertainment, multiplexes and food courts came to be the next natural

thing to happen. To top it a retail market forecast of 30 per cent compounded annual

growth rate over the next five s is just the incentive for investors to jump onto the

‗great mall bandwagon‘.In spite of all this, the perpendicular growth in shopping

malls is bound to result in oversupply of shopping space and its consequent outcome.

The impact is already evident. There is news of rentals falling in shopping malls. Not

to speak of the concept of ‗de-mailing‘ that is creeping in. But, those behind India‘s

malls are unperturbed. As Dinesh Chauhan, Gurgaon District Town Planner states,

―Sluggish trends are not forever. [Malls] have succeeded everywhere so there is no

reason that they won‘t succeed in India. Just wait and watch.‖ Currently, Gurgaon is

the hottest spot for shopping mails. In the coming years more than 30 malls will dot

Gurgaon‘s skyline, Chauhan said. Interestingly, most of the new malls, completed or

under way, are located away from traditional retail zones. Lack of availability of large

tracts of land in historically prominent retail areas is the main reason for this. And

even if land is available, their prices are exorbitant. No doubt, industry is heading for

an overhaul. Says Sanjay Dutt, National Director-Agency, Cushman & Wakefield

India. ―A major correction in three to five years from now is expected. Three to five

years from now, developers, landlords and financial institutions will have a better

understanding of retailers. They will be more open to the revenue sharing model.‖

At present, most of the malls are being developed by real estate developers.

According to a Cushman & Wakefield India report, developers are constructing malls

as real estate development targeted for sale to investors. The developers don‘t want to

retain ownership of the malls. This has affected the confidence of the retailer who
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wants the mall to be well maintained and managed professionally by a mall operator.

Multi-ownership is perceived to be restricting professional management of malls.

Remember. Wal-Mart. the largest retailer in the world, is also the largest real estate

developer in the world. Further. Wal-Mart also has the dubious distinction of being

the largest producer of empty retail stores. Having said that mall developers are

evolving with the times, employing new gimmicks to attract customers. Speciality

malls are the trend. For instance, Omaxe is building a wedding mall in Gurgaon; an

auto mall is also on the anvil in Haryana‘s premier industrial hub. A furnishing mall is

coming up in Kolkata, on Elgin road.

Now the big question. Are the local authorities geared to meet the ‗threat‘ malls pose

to India‘s already ‗mauled‘ cities? In developed countries, before a mall is constructed

the developer has to submit a traffic plan to the local authority. Permission is granted

only after the authority is satisfied that the mall will not disrupt traffic. Nothing of that

kind is happening in India. And nor likely to happen anytime soon.

e) India: A home for Vibrant Shopping Malls:

Tourists all over the world hake always been attracted towards India as it is known for

its cultural heritage. However, since the last two decades the imposing presence of

malls all over India has transformed the look of the country. Right from clothes to

daily accessories everything is available at the malls. You can shop everything under

one roof and the advent of shopping ails has given consumers the ultimate shopping

experience.

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Retail sector in India is booming and growth of shopping malls is the clear indicator

of retail growth in the country. Shopping malls provides perfect shopping solutions as

consumers can buy anything from a small pin to a luxurious car. It provides all the

other facility like multiplexes, entertainment zone, food courts, which attracts the

shoppers more. All things are available under e roof; people can shop a variety of a

thing from the single shop so it is called ‗one stops lopping‘. It saves time, energy and

even money as it offers more discount and sell.

With several advantages like walking clubs, free health check-up, discounts, etc. gain

more attention to the customers. During festival seasons to attract more customers, it

provides few special discounts, sale, and offers, etc... This is the core marketing

strategy behind mega malls to Offer sale and discounts at the end of the .ear so that

they can clear all out dated stocks by offering them at low prices.

Before a decade ago, there were no malls existing in India, but it grows to 90

shopping malls in August 2005 it continues growth up to 300 mega malls in August

2007 and now there are 500 mega malls currently existing in our country. Thus, now

it can be said that India: home of vibrant shopping malls. Growth of shopping malls

had also been noticed even in small cities to ct small towns. However, mostly 75% of

retail malls existed in Mumbai, Bangalore. Pune, New Delhi and Hyderabad. As the

large number of malls grows constantly in India, it indicates economic prosperity of

our country.

India is the land of prosperity, different culture, diversity, festivals. However, now

after 63 years of independence it can be said India: home of vibrant shopping malls.

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Shopping Mall can be described in this sentence, ‗If you have a home then you will

find everything in the shopping mall to fill it up with. The craze of shopping malls

ventured India in e early 2000‘s and has seen tremendous growth over the years. The

government‘s five year tax relief for opening shopping malls and multiplex‘s has also

boasted this trend to a great extent.

The term ‗window shopping‘ was coined due to the huge spur in shopping malls and

the notion at it is made up of expensive stores. With the concept of ‗one stop shop‘

coupled with entertainment options and comfortable shopping experience hoteliers,

retailers and brands grabbed this opportunity with both hands. Even individual

retailers found shopping malls a beneficiary prospect.

e) The Shopping Mall Culture in India:

These individual retail outlets started speaking the consumer language and thus

altered prices and designs for the popular crowd. Selection of clothes and pricing was

related to the location of he mall. An up-market area had a different line of styling and

pricing compared to its own chain in not-so lavish vicinity. Thus people living in

these mediocre areas were not able to get the same style and fashion found in the posh

areas. Though reaching to the mall has been made comfortable with good enough

travel options and parking space, but the crowd on weekends is unavoidable.

People are exposed to the variety and know the umpteen options available in the

market. Now every time traveling to the mall is not necessary because home shopping

had evolved. People could see the options available and know the whole market

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without compromising on anything. The virtual world has served the purpose of home

shopping satisfactorily.

The growing BPO (Business Process Outsourcing) culture comprising of a huge

potential crowd, work in night shifts and at odd hours. Shopping malls in India aren‘t

open 24*7 and they aren‘t truly tapping this potential lot and serving their purpose.

Thus home shopping becomes logical as the buyer has the flexibility of time and place

at his convenience to make the right purchase without compromising on anything.

Unlike the mall there is product categorization and the buyer has the option of

choosing his seller on the basis of his requirements. Even local stores could be chosen

for buying if a product requires heavy after sales service.

f) India Retail Industry - The big Players

Pantaloon is one of the biggest retailers in India with more than 450 stores across the

country. Headquartered in Mumbai, it has more than 5 million sq. ft retail space

located across the country. It‘s growing at an enviable pace and is expected to reach

30 million sq. ft by the year 2010. In 2001, Pantaloon launched country‘s first

hypermarket ‗Big Bazaar‘. It has the following retail segments:

Food & Grocery: Big Bazaar, Food Bazaar

Home Solutions: Hometown, Furniture Bazaar.

Collection-I Consumer Electronics: e-zone

Shoes: Shoe Factory

Books, Music & Gifts: Depot

Health & Beauty Care: Star. Sitara

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 B-tailing: Futurebazaar.com

Entertainment: Bowling Co.

4.4 Tata Group

Tata group is another major player in Indian retail industry with its subsidiary Trent.

Which operates Westside and Star India Bazaar. Established in 1998, it also acquires

the largest book music retailer in India Landmark‘ in 2005. Trent owns over 4 lakh sq.

ft retail space across the country.

4.5 RPG Group

RPG Group is one of the earlier entrants in the Indian retail market, when it came into

food & grocery retailing in 1996 with its retail Foodworld stores. Later it also opened

the pharmacy and beauty care outlets Health & Glow.

4.6 Reliance

Reliance is one of the biggest players in Indian retail industry. More than 300

Reliance Fresh stores and Reliance Mart are quite popular in the Indian retail market.

Its expecting its sales to reach Rs. 90,000 crores by 2010.

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4.7 AV Birla Group

AV Birla Group has a strong presence in Indian apparel retailing. The brands like

Louis Phillipe, Allen Solly, Van Heusen. Peter England are quite popular. It‘s also

investing in other segments of retail. It will invest Rs. 8000-9000 crores by 2010.

4.8 Retail formats in India

Hypermarts/supermarkets: large self-servicing outlets offering products from a variety

of categories.

1) Mom-and-pop stores: they are family owned business catering to small sections:

they are individually handled retail outlets and have a personal touch.

2) Departmental stores: are general retail merchandisers offering quality products and

services.

3) Convenience stores: are located in residential areas with slightly higher prices

goods due to the convenience offered.

4) Shopping malls: the biggest form of retail in India, malls offers customers a mix of

all types of products and services including entertainment and food under a single

roof.

5) E-trailers: are retailers providing online buying and selling of products and

services.

6) Discount stores: these are factory outlets that give discount on the MRP.

7) Vending: it is a relatively in entry. in the retail sector. Here beverages snacks and

other small items can be bought via vending machine.

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8) Category killers: small specialty stores that offer a variety of categories. They are

known as category killers as they focus on specific categories, such as electronics and

sporting goods. This is also known as Multi Brand Outlets or MBO‘s.

.9) Specialty stores: are retail chains dealing in specific categories and provide deep

assortment. Mumbai‘s Crossword Book Store and RPG‘s Music World are a couple

of examples.

4.9 Challenges facing Indian retail industry

The tax structure in India favors small retail business

Lack of adequate infrastructure facilities

High cost of real estate

Dissimilarity in consumer groups

Restrictions in Foreign Direct Investment

Shortage of retail study options

Shortage of trained manpower

Low retail management skill

4.10 The Future

The retail industry in India is currently growing at a great pace and is expected to go

up to US$ 833 billion by‘ the year 2013. It is further expected to reach US$ 1.3

trillion by the year 2018 at a CAGR of 10%. As the country has got a high growth

rates, the consumer spending has also gone Up and is also expected to go up further in

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the future. In the last four year, the consumer spending in India climbed up to 75%.

As a result, the India retail industry is expected to grow further in the future days. By

the year 2013, the organized sector is also expected to grow at a CAGR of 40%.

4.11 Drivers of Growth in Retail:

The greater availability of personal credit and a growing vehicle population to

improve mobility contribute to a trend towards annual retail sales growth of 11.4 per

cent. Mass grocery retail (MGR) sales in India are forecast to undergo enormous

growth over the forecast period. This is a consequence of India‘s dramatic and rapid

shift from small independent retailers to large, modern outlets.

As more malls are coming up with the best infrastructure prevalent, it enhances the

retail experience of the customer to a higher level, and thereby also results in better

conversion in relation to time spent.

Manish Karsija, Manager. Governance, Risk and Compliance Services, KPMG adds,

―It‘s a chicken and egg situation. Whereas on one hand, malls are required to be set up

for deriving premium price for housing projects; on the other hand without

parallel/simultaneous housing projects, retailers/investors don‘t find the mall a

lucrative business investment. Though malls boost realty growth, there are other

factors such as schools, hospitals, utilities and infrastructure general, which gain more

importance when one selects a place to live.‖

Past experience demonstrates that the residential property rates spike after a mall

project is announced in the vicinity because it is considered as a matter of

convenience for residents. As the real estate industry matures, there is a more
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scientific approach to the development of malls. ―Developers are increasingly

circumspect about committing to a mall and are giving considered attention to the

needs of consumers and retailers and have begun to understand their Catchments and

scale better. Unlike earlier, merely having a large enough property facing a

major/arterial road is not reason enough to build a mall any more. This has led to

better planned malls, lower supply and better realisation for the developer.‖ says

Jaishankar - CMD Brigade Group.

As per the RICS Indian Commercial Property Survey Q2 2010, an upswing in retail

demand coupled with an increase in capital values and confidence in future letting

activity has been experienced due to improved economic sentiment in the country.

The factors or causes for growth are several. ―From a macro perspective fact,

organised retailing is addressing only five-six per cent of the total retailing of the

country: it indicates the unmet demand and and large scope for growth in the years to

come.Secondly, the need for brands to be present in an environment or ambience that

seeks to capture money-share and mind-share of the customer is possible only in

malls. Given the constraint of the limited time available with the urban customer to

fulfill his or her needs, it is logical for a cluster of brands to be present at a single

location like mall, which meet their demands.

Real estate as an investment medium has its cycles, its relative ‗ups and downs‘.

―Right now. demographic. urbanisation and economic indicators reflect a strong

upsurge in retail mall development fundamentals represented through strong retailer

growth and a broad middle class support this growth. This leads to retailers

developing a keen appetite to grow their chains and is is a keen signal to astute mall
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developers to plan and build appropriately sized malls where ey are needed.‘ explains

Jonathan David Yach, Chief Executive Officer, Mantri Square shopping Mall. With

changing demographics, higher disposable incomes and fewer differentiations in

consumer spending patterns, smaller towns and cities are now emerging as with

engines for retail.Not only do these regions such as Ahmedabad. Aurangabad.

Jalandhar, Ludhiana, Mysore and ijayawada have land at affordable prices but they

also have a relatively large consumer base, resulting in the creation of more retail

space in these areas. Additionally, with the trend gradually moving towards bulk

retail, investments are moving towards industrial areas where well located warehouses

can be converted into retail space, which Could derive higher rent per square meter.

Retailers today face many challenges, including increasing competitive pressures, thin

margins, high occupancy costs and unpredictable supply base that come in the day of

their attaining rational efficiency and profitability. Malls could support the drive of

the realty growth, as reflect the sentiments of the spending power of the consumer.

―While other sectors like residential and commercial drive the sector, malls only

compliment that growth. In that sense it comes a key driver for the growth of the

sector, because slowly, malls have become convenience centres to support the growth

of both the sectors.

4.12 Dynamic spaces

Unlike residential and commercial spaces, wherein flow of traffic is by and large in a

time bound fashion, a mall is a public space with significant footfalls and movement.

It is much more dynamic and hence the real estate has to meet several conditions like

roads accessibility, visibility, and proximity to mass transport systems to ensure the
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offering becomes access. Further, unlike residential and commercial spaces, a mall

has to be managed on a continuous basis in order to deliver the experience it stands

for.The result is that only developers with deep pockets and long gestation periods are

able to taste cess if they run on this model. The rest fall into the trap of selling it to

investors in order to cerate cash flows for the construction of the mall. The investor

stock typically lies vacant since rents they expect sometimes do not materialize.‖ And

for the consumer it‘s mall effect all the way!

4.13 E - Retailing in India

E-retailing, most commonly known as e-tailing is nothing but shopping through the

Internet and there media forms. There are many things that are common between

direct retail stores and the line retail stores. Both have the process of billing of the

customers and have to maintain a lationship with the suppliers.

Bottlenecks Faced By F-Retailing in India

Problems with the Payment System People in India are not used to the online

shopping system and moreover the online payment system through the credit card is

also totally alien to them. Most of them do not avail of the transaction facilities

offered by the credit cards. They are also dubious regarding the online payment

system through the credit cards. Hence different payment options should be made

available to them like the credit card. cash on delivery and net banking to give them

further assurance.

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4.14 Problems with Shipping

The customers using the online shopping channel should be assured that the products

that they ye ordered would reach them in due time. For this the retail companies have

resorted to private teed courier services as compared to postal services.

4.15 Offline presence

The customers should be assured that the online retailers are not only available online

but offline well. This gives them the psychological comfort that these companies can

be relied upon.

4.16 Products offered at discounted rates

The online retailers save on the cost of building and employee salaries. Some part of

this benefit could also be enjoyed by the online customers by a reduction in the price

of the product. The customers should be conveyed this message that they are getting

the products at a discounted price.

4.17 Luggage Problem

Most internet retail shops use English as their mode of communication. English may

not b comprehensible to the majority of the Indian population . To increase the

customer base, content in the online retail shops should be provided in local language.

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Another reason why the concept of e- retailing or online retailing has not gained

prominence in India is that the Indians prefer to touch the products physically before

buying them. This facility is provided through the multi-brand outlets, not available

online. Studies have revealed the preferences of the customers towards the traditional

shopping methods. Hence the retailer online should first make it a point to spot the

potential customers and accordingly plan out the product the customers are more open

to online shopping, then nothing can be more beneficial. They the time and effort to

visit, departmental stores, shopping malls, etc. products can be delivered by a click of

the mouse.Another problem is that the retail industry is standing on its point of

inflexion and considering its infant stage, it would take time for the new concept of c-

retailing to take off.

4.18 Some online retailing sites in India:

E-Bay is heading the race of online retailers. In this race it has become very difficult

to determine he online retail store that makes the products available at convenient and

cheap rates. From this very difficulty has cropped up comparison sites. Comparison is

done on the basis of an index which is constructed from the data available from

different shopping sites. The bechna.com and the ultop.com are such sites though

many more sites are entering this zone.

The comparison sites not only help to choose the online sites that would be providing

the best deal but also offline as well. Sites like Rediff product search, Compare

lndia.com have constructed the data that is taken from the conventional local retailers.

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These sites help the customer in finding out the local retail store that will best suit his

purpose.

4.19 Future of E-retailing in India

There are divergent views on the future of e-retailing in India. Some experts are of the

opinion that the giant, big brand retailers would dominate the small ones due to their

wider investment capacities. It would be next to impossible for the small retailers and

the kiranas to prove their existence in the battlefield of online retailing. Another

viewpoint is that there would be an onential growth in the online retailing business in

India.

4.20 Niche retailing opportunities in India

Going forward, in India, each broad retail segment is likely to be dominated by large

retailers. However, since large players aim for large share of the segment, they are

unlikely to tap niche opportunities. Hence, smaller companies aiming for

opportunities in niche retailing should not be intimidated by the entry of large players.

For example, in food retailing, opportunities in health food retailing, organic food

retailing. ethic food retailing and specialty ready to eat/ ready to cook product

retailing etc. are not likely to be tapped by large retailers. Likewise, in apparel

retailing, kids‘ apparel retailing ladies apparel retailing, ethnic wear retailing etc. can

be profitable niches for small players.companies in India could consider retailing as

an adjacency to their existing lines of business or completely diversify into niche

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retail areas. Developing unique value propositions in the tailing model is imperative

to capture the opportunity gaps in organized retailing.

Across the globe, small retailers have co-existed profitably with their larger

counterparts. In India too, ample niche organized retailing opportunities will exist for

companies to target. To capitalize on this opportunity, companies will need to focus

on creating winning retail models based on superior insights into consumption trends,

buying habits, formats and offerings of large organized players.

4.21 Discount Retailing in India:

Promotions, sales, price-offs. discounts the by-words of discount retailing have now

become part of the Indian shopper‘s vocabulary. With prices soaring, the thrifty

Indian consumer out for a gain, is looking at discount retailing in a big ay to stretch

her monthly budget. Giving added etus to discount retailing, is the proliferation of

discount retailers and the huge amounts of investments pouring into the sector.

1. The report captures the trends of discount retailing in India

2. Analyzes latest news in this sector

3. Predicts future plans of major discount retailers

4. And contains relevant tables

5. Major retailers featured in the report are Pantaloons Big Bazaar and Brand

Factory, Megamart, Subiksha, Coupon, Loot amongst others

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4.22 Organized Retailing Growth In Semi-urban, Rural Areas

India will see a growth of organized retailing in semi-urban and rural areas in the next

10 years. The growth will be led by food, fast moving consumer goods (FMCG)

durable and home improvement product categories, according to a study

commissioned by Confederation of Indian industry (CII).

The organised retailing, which is growing at the rate of 40 per cent over last three

years. is likely capture 40 per cent of total retail sector in India by 2007, the study

conducted by KSA Technopack on behalf of CII stated. The organised retailing has a

little less than 2 per cent share of total retail sector. The retailing in India is estimated

at Rs 15.000 crore which is likely to grow Rs 35,000 crore by 2005. Organised

retailing, which is limited to metros and A class cities, is likely to become a feature of

semi-urban and rural areas where disposable income India will see a growth of

organized retai1ing in semi-urban and rural areas in the next 10 years. The growth ill

he led by food, fast moving consumer goods (FMCG) durable and home improvement

product categories, according a study commissioned by Confederation of Indian

Industry (C II).

The organised retailing, which is growing at the rate of 40 per cent over last three

years, is likely to capture 40 per cent of total retail sector in India by 2007, the study

conducted by KSA Technopack on behalf of CII stated. The organised retailing has a

little less than 2 per cent share of total retail sector. The retailing in India is estimated

at Rs 15,000 crore which is likely to grow 35,000 crore by 2005.

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Organised retailing, which is limited to metros and A class cities, is likely to become

a feature of semi-urban and Rural areas where disposable income margins will reduce

due to increased competition. The value will be derived from the efficient supply

chain management. It said ding that some of the Indian retailers such as Shopper

Store, Westside and Piramyd are focusing on better inventory management to increase

bottomline.The study has pointed out that healthcare services is emerging as a major

growth area, Apolo and Life are cited as two prominent players in this segment. ?

Specialist stores are emerging though still there are lot of need gaps that can be served

by‘ them like home textiles, mother care, sand modular furniture, it said.

Organised retailing in India is still at infancy. The largest retail company. RPG has a

turnover of 500 crore whereas the largest in the US. Wal-mart has a turnover of $225

billion.With this the retail sector in India is witnessing rejuvenation as traditional

markets make ay for w formats such as departmental stores, hypermarkets.

supermarkets and specialty stores. The retailing configuration in India is fast

developing as shopping malls are increasingly becoming familiar in large cities.

When it comes to development of retail space specially the malls, the Tier II cities are

no longer Behind in the race. If development plans till 2007 is studied it shows the

projection of 220 shopping malls, with 139 malls in metros and the remaining 81 in

the Tier II cities. The government of states like Delhi and National Capital Region

(NCR) are very upbeat about Permitting the use of land for commercial development

thus increasing the availability of land for retail space: thus making NCR render to

50% of the malls in India.

A growing population, a young workforce and zooming consumer confidence will

fuel the expansion of the retail sector. As organized retail in rural India awaits the
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arrival of Reliance retail, current majors like ITC. Godrej and DSCL are expanding

their retail operations by setting up more stores, entering new states and offering

newer product categories. A shift from selling agri-inputs will help these stores target

the non-farming segments.It is a little known fact that, while 25% of the rural

population is not engaged in agriculture, it earns 50% of the rural income. The retail

market is the next growth frontier for corporate India. If offers an opportunity for a

large player to build a Rs. 40,000 Cr retail business spanning multiple categories by

2015 (at current prices). However, to capitalize on the opportunity, a player needs to

be aggressive in its outlook and build scale quickly.

4.23 Child’s Play: Kids Apparel Retailing

Children today are aware of what they want. Better education levels, media exposure,

rising affluence levels and increasing interaction with technology are resulting in kids

being more informed than parents in matters pertaining to them. One of the largest

markets in India today is that of children‘s apparel retailing, which has shown a strong

growth in the past few years.From being a small segment targetted by a few

companies, the retailing business of children‘s products has turned into a full-fledged

industry. The kids‘ apparel industry is one of the fastest growing industries today in

India with about 10 percent growth per annum. It has at least 45 percent share of the

entire kids‘ retailing business today.Gone are the days when the primary focus of a

retailer used to be men‘s or women‘s wear. Kids‘ wear was then considered non-

essential and was always treated as secondary sales by retailers. This secondary

market was also only in the non-branded apparel segment. No branded apparel that

provided quality products for kids was available.

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4.24 ‘Kidfluence’ or ‘Pester Power’

Over the years, having identified the influence that children can have on their parents,

few brands entered this niche segment of kids‘ apparel and made their mark over

time. With time, this pester power‘ emerged as kidfluence‘ there kids, with their

tremendous exposure entertainment, media and other sectors became aware of what

they want. They acted as consultants by having a direct or indirect influence over all

the family‘s purchases and not just ‗ apparel and other children‘s products.

4.25 Influence of Films on Fashion

Brands ssuch as Gini & Jony, Lilliput, Weekender, etc. entered this segment years ago

and create a benchmark for other brands to follow. They realized that kids today want

to be as fashionable and stylish as their adult counterparts. Moreover, Bollywood also

has its influence ults‘ clothing trends.

4.26 Current scenario

Significant aspect that has emerged due to the current recession is nimbleness. Soon

after realsing that there would be a slump in sales. the organised market began

restructuring itself. It heartening to see the nimbleness among the Indian retail market.

This segment envisaged huge Growth in the market from the year 2000. and has been

expanding rapidly. However, in the wake of the ongoing recession, the retail segment

has reworked its expansion plans by attempting to ice rentals of property and

synergizing businesses more than ever before. I am very hopeful the Indian organised
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retail sector will bounce back quicker than any other sector in India and any other

retail market worldwide.

The retail market in India is fast realising that like global retail players, it will also

have to start concentrating on children‘s retail segment. There are very attractive

niches, in terms of 11dren‘s needs, that can be ventured into. Retailers today are

realising that kids are fast Coming spenders rather than savers. Very soon India will

be one of the major grounds for of the international players.

4.27 Accessories

Accessories form an important component of apparel in the fashion industry. The

trends change day by day. Present day in the retail market of apparels customers have

a choice of varieties in accessories. Some of the retail chains are providing customers

with customized accessories along with the clothing. Many of the retail outlets have a

wide range of collections of accessories. These range from the traditional models to

the modern one and are made of different materials ranging from terracotta to steel

and leather.

According to the fashion trends in vogue consumers opt for the right accessories like

the jewellery, wallets, belts, footwear. etc., along with the clothing.

Jewellery: The jewellery. from a piece used to ward off the evil spirits to the identity

of ones‘ status symbol, has traveled a long way. Now it is a part of fashion accessory.

Jewellery apart from fashion, will reveal who you are! A jewellery trend lasts longer

than the fashion trends. With every piece of jewellery women/ men associate different
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characteristics like right hand diamond ring signifies women‘s independence and

empowerment etc.

Footwear. Trends in footwear are changing day by day. The latest being different

styles of beach shoes. Footwear also tells about personality of the wearer like any

other apparel accessories. The formal leather shoes that are either brown or black in

colour are still preferred for corporate executive meetings. But for other occasions the

footwear are so chosen that it suits the clothing one is wearing. Footwear is made

from different materials like wood, leather, rubber, plastic etc.

Belts and Bags/Wallets. Latest fashion trends are for the leather made belts and bags

which come in a variety of designs. Consumers choose those that would go along with

their clothing and they give importance for the appearance in addition to the quality

and price of the product.

The retail outlet of apparel, houses the required accompaniments for the customers to

avail from. The facility of getting the right clothing and the right accessories under a

roof has made the customers come back again for their requirement. The apparel

retailing is booming in Indian retail segment because of the demand for the branded

clothing and accessories.

4.28 Apparel Retailing

The concept of retailing dates back to trading. Traditionally retailing was associated

with mom and pop stores that was spotted around the neighborhoods as corner shops

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or kirana stores. But now a professional tag is being increasingly attached to the

retailing concept. The organized retailing is still in its nascent stage in India.

The Indian economy is thriving and India stands fourth in terms of purchasing power

parity (Ashish Dhir, 2007).‘ In other words Indian consumers have readily available

disposable income that has revolutionized the retail market.

The outlook of fashion and clothing has changed tremendously in recent years and the

younger population has become increasingly conscious and aware of their

appearances. The increase in the nuclear families with double income and the

availability of liquid cash at their disposal, increase in advertisements and other

promotional mediums, Indian consumers are spending more on clothing and

accessories and the retail marketers are seizing the opportunity to their full potential.

Other factors like growing younger population, the increasing number of working

youth and changing roles of women have also contributed to the retail growth.

In the organized retail sector, major player is the apparel segment. The domestic

players are dominant in this sector. Some of the big business houses like the Tata,

Reliance, Raheja, Future group etc., have already made a foray into apparel retailing

and some of them have created their own private brands with the use of private or.

store labels.

The liberalization policy of the Indian economy has thrown open avenues for foreign

direct investments in the organized retail sector with an upper cap of 51% for single

brand retailing. The industry has attracted foreign investement drastically due to the

major activities at consumer level the taste and behavior - and the fashion trends.

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Retailers along with many private players are impelling money in apparel brands and

apparel retailing is showing a northward movement.

Though foreign players are keen to enter the Indian retail market of apparel, the

economic policy does not allow foreign players to enter directly in the Indian retailing

sector. A number of foreign players are venturing into the Indian market through

joint- ventures or strategic alliances. Another difficulty for the foreign brands to

create a market in India is due to the price-sensitiveness of consumers. Apart from

this, the relatively closed economy of India till early 1990s gave the domestic market

the advantage of establishing itself This has made the foreign players to adopt the

domestic players‘ technique to establish itself into this market. In other words, the

foreign players had to adopt strategies similar to domestic players to launch its

products. The foreign players as well as the Indian players face a number of issues

and challenges in the retail segment if a thorough market study is not clone in the

apparel market. Major mistakes are made in wrong estimation of market volume,

pricing and distribution structure (Devangshu Dutta, 2003 ).

4.29 Strategies in Apparel Retail Segment

The changing trends in fashion and tastes of the consumers made the textile players to

venture into apparel retailing. Many followed the acquisition strategy that had helped

them enter into the mark-et with an established brand. Rayrnonds‘ acquired Colorplus

to venture into casual-wear and added brands like Raymonds‘ Parx and Park Avenue.

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Indian Rayon, another major player, acquired garments division of Madura Coats, the

Madura Garments that already had successful brands like Van Heusen, Peter England,

Allen Solly and Louis Philippe.

Because of high and ever increasing rent in the real estate market, many brands are

opting for franchisee model of retailing and this has also helped them to enter into the

retailing foray. This business model has helped many manufacturing firms to go into

retailing which earlier they were refraining from because of the cost involved. Some

of the giants in retailing like Reliance Retail and Kewal Kiran clothing, manufacturer

and owner of Killer and Lawman brands. have adopted this franchise model in

addition to operating their own company outlets.

Once entered into the apparel segment, the crucial factors that should be considered to

sustain itself in the market are the pricing and distribution network.

Indian consumers are price conscious and the retail market can sustain only if quality

products are offered at a reasonable price. For this the retailers have adopted the store

or private label concept that involves less cost. Branded and private label goods are

priced in such a way that they attract the middle income group who constitute the

major segment of consumers. Major players using private label for their promotion in

apparel and accessories segment include Westside. Pantaloon Retail, Shoppers Stop,

Lifestyle. The foreign players who enter into the Indian retail segment have to

undertake a thorough market research and price the apparels in accordance with the

Indian market.

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India had its own well-developed framework for marketing and distribution channels

for consumer and industrial goods even before liberalization. The same system is still

in use even after the economy has opened up. The foreign players who enter into

Indian market are taking advantage of this framework rather than the ones they adopt

in the developed markets.The favourable factors for consumer market like the

rationalisation of taxes, reduction in import tariffs and a growing young segment that

is willing to spend more area welcome change for the foreign brands in order to

establish itself in the Indian market.

4.30 Challenges Faced in Retail Segment

The retail differentiation is one of the main challenges faced by the retail outlets.

Customers are not able to identify or find any uniqueness about different retail stores.

Almost all apparel retail outlets house similar kind of clothes and accessories which

does not reflect the uniqueness of the brand or product. One of the reasons being that

a single manufacturer produces clothes for different labels like the cloth for different

branded jeans is produced by Arvind Mills.

Another challenge is in the supply chain system. In India intermediaries play an

important role. The agents or brokers or intermediaries as they are called by different

names come in between the manufacturer and the retailer. Hence the retailer has to

end up paying extra amount for the goods to reach his outlet. The logistics and

distribution channel is also not so organized in India as in the developed market. This

is another issue that has to be coordinated and sorted out by all retail chains.

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Merchandising planning is another major concern for retailers. The right

merchandising mix has to be arranged in the retail outlets. To identify the right mix of

product. a combination of customer insight, allocation and assortment techniques can

be used (Chandra Dash P, Dec 2007).

The private labels or the retail brands have to face severe competition from the

established supplier brand. The better customer experience, value vs. price, aspiration,

innovation, accessibility of suppliers brand are some of the reasons that had helped

the supplier‘s brand to gain a strong foothold in the market (Chandra Dash P, Dec

2007).

4.31 Promotion of Apparel Brand through Private Labels and Mall Spaces

With ever increasing competitors in apparel retailing segment, player are adopting

different strategies not only to promote their brands but also to retain customers. One

such strategy embraced by them is the use of Private Labels. Big players like Tata,

Raheja, Blyani, etc have intensified the competition with their professional retail

chains like Westside, Shoppers Stop and Pantaloons that uses private labels to market

its apparel.

4.32 Private Labels

The word reflects the meaning itself The label is private, denotes it cannot be used by

all. It is the property of the person/organization who is a registered user of the label.

Private labeling occurs when large business houses use their own brand to promote
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their products. This is largely applied in garment and food retailing industry. Private

label denotes either the retailers‘ or wholesalers‘ brand. As manufacturers‘ label

would incur large in but lit cost, private label is usually used by retailers who have

more control over pricing.

Private label has penetrated deep into the western retail market. In India. it is slowly

gaining popularity. Indian retailing industry is adopting its own private labels for the

simple reason of boosting its sales. Another reason for the introduction of private

labels is to establish their own brand name by retailers or to compete with existing

players. It can also be used as a marketing tool for long-term business and when used

appropriately can act as a differentiator too i.e., establish a name for its retail store.

Great caution has to be taken for designing a private label. A careful analysis of

customer needs and wants and the nature of product should be considered first in

designing the private label. Consumers are so conscious of quality that the retailer

should go in for private label for only those products for which he has a complete

know-how

The apparel retail outlets like Pantaloons, Westside have introduced private labels that

have not only made garments affordable and profitable but also have established their

brand in the minds of the customer in such a way that they revisit the store frequently.

According to the CEO of Pantaloon retail, private label accounts for 80% of their total

sales.

Studies conducted by different researchers reveal that private labels have got

advantages over the manufacturer‘s label. The private labels have the advantage of
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catering to specific demands of the customers where the national/manufacturers

brands fail. The retailers being close to the end-user would have advantage over the

manufacturer that they can cater according to the needs and wants of the customer.

Private label ensures quality and consumers are assured that the product meet

retailer‘s specific quality and standard. The quality assured through private label

makes the consumer loyal to the brand and hence does not require intensive

promotional strategies to retain the customers. The growth of private labels acts as a

catalyst for apparel retail segment to enhance its competitive position. The use of

private labels helps in bringing down the expense incurred for advertisements.

4.33 Malls

In the retail infrastructure development, mall space plays an important role. Many of

the International brands like Benetton, Lacoste. Levi Strauss, Crocodile. Dockers,

Lee, Wrangler, Nike, Reebok, Adidas, Zegna. Marks & Spencer etc have already

established their presence in Indian market with the help of Mall infrastructure. 4

Malls are located at prime location in any part of the city. The inside layout of the

malls are designed tastefully according to customer convenience. The arrangements of

goods are such that it will attract the attention of buyers and the apparel brands

occupies major shop floor area.

The mall mania of the realtors have thrown open an avenue for national as well as

international apparel retailers the much needed space in the retail marketing segment.

The customers do have the advantage of selection from different brands under one

roof The elegant and attractive shopping space in malls and the decor and the facilities
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is giving the consumer an out-of-the-world shopping experience. Malls are giving

consumers shopping as an enjoyable experience and pastime.

Malls are springing up across major cities in ndia. The National Capital Region

(NCR) in Delhi is housing small to big Malls that caters to different segments of

consumers. Two of the biggest malls in India, Ambi Mall in Gurgaon and Great India

Place in Noida houses International Brands and they have taken immense care to cater

to the consumers‘ need. The success of retailing through malls have paved the way for

setting-up specialized malls like malls housing wedding collections wherein a

customer can choose the clothes as well as the accessories necessary for the function

from one place.

Various strategies adopted by malls to promote its goods are Right Positioning,

Effective Visual Communication, Strong Supply Chain and Changing the Perception.

Effective communication is one of the key factors required for the mall owners to

position their brand in the minds of the customers. Unless the right positioning is not

done then it would be difficult to establish and sustain their retail outlets. Malls

should convey the message to the target group about their differentiated products in

the right manner so that they can resist the competition. Malls are using various

communication tools like advertisement, print media, outdoor and indoor publicity,

celebrity endorsement, buzz marketing or word of mouth etc to create its brand name

among the target customers.

Visual merchandising is an important aspect in promoting the brand. Retailers and the

malls have to give due importance to the visual communication techniques. Proper

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and apt lightings, signage, use of specialized props etc are necessary to communicate

with the customers.

Malls should have a strong supply chain, logistics and distribution system. Unless the

required inventory is not made available in the store, retention of customers would

difficult. Retailers and malls should adopt techniques or solitions to improve their

supply chain management like performance management demand and supply

planning, inventory management, frequent sales operation management etc to gain

advantage over the competitor (Chandra Dash P, Dec 2007).

It is important for the retailers and mall owners to have good store brand with

consistent and comparable quality. This will help customers to come back to the same

shop to buy goods from the same place. In other words this would ensure customer

retention. Some of the strategies like new product development or good retail mix or

discounted pricing will attract the customers and will give the store brand an edge

over the manufacturers brand.

The urban India has faired well in the retailing segment. The rural consumers are yet

to get the taste of branded and designer apparels and opening up of malls in the rural

areas can provide the retailers with a good start to enter into the rural market. The

untapped rural retail market is more compared to the urban region. It is high time the

retailers explore the large niche markets in the rural areas.

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4.34 Evolution of Apparel Retailing

A new focus on the apparel retail sector has attracted attention in recent days. Top

exporters have introduced their on brands and are aggressively positioning themselves

within segments of the domestic market. The rising importance of branded segments

in the domestic market combined with the pressure of import competition is blurring

the boundaries between exports and domestic production in countries with large home

markets, such as India. With the changing lifestyles, organized retail is playing a key

role in structuring the Indian domestic market, reinforced in particular by rising

incomes and growing purchasing power among consumers in rapidly growing sectors

of the economy such as information technology and business process outsourcing.

Retail sector in India is witnessing a huge revamping exercise as traditional markets

make way for new formats such as departmental stores, hypermarkets, supermarkets

and specialty stores. The branded apparel market represents the largest source of

growth. The men‘s branded apparel market is growing at a rate of 2 I .8% and branded

women‘s apparel segments represents 35% of the total branded apparel market and is

growing at an incredible 23% annually.

Leading domestic retailers are becoming more firmly eitrenched, increasing their

scale of operations and stabilizing their logistics and technology initiatives. A few

significant foreign players have been selling their branded apparel in India for number

of years. But, now, just like their India counterparts, global apparel brands are setting-

up their own apparel outlets, instead of just selling through departmental stores.

Though local retailers generally enjoy higher margins, they won‘t he able to keep

global retailers at bay for long because of international experience, buying power. IT
159
systems and cash flow to tolerate lower profits. Presence of these brands will make

the Indian Consumer become more aware of the international fashion and lifestyle

trends leading to a move-up of the industry in the value chain. In this paper, the recent

trend and prospect of apparel retail sector in India have been discussed.

4.35 The Global Retail Scenario

Retailing has been defined as business activities involved in selling goods and

services to consumers for their personal. family or household use (1). Although

retailing has been around for millennia. the 20th century witnessed a lot of change in

the retail sector, especially in the developed countries. Modern formats such as

department stores, discount stores, supermarkets. convenience stores, fast food

outlets, specialty stores, warehouse retailers and hypermarkets have emerged.

Retailing has become more organized and chain stores have been growing at the

expense of independent shops.

The chains are utilizing sophisticated information technology and communication to

manage their operations and have grown rapidly not only within their home countries

like US. UK, France, Germany and Holland but to other developed countries. Wal-

mart Stores, the US retailer. was recognized as the largest firm in terms of sales in

2002 in Fortune magazine‘s list of 500 largest global firms. Modern retail formats

have also spread beyond developed countries and are becoming more important in the

NICs and developing countries.

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A Large format retail businesses dominate the retail landscape in the US and across

Europe, in terms of retail space, categories. range. brands, and volumes. Indian retail

industry cannot hope to learn much by merely looking at the Western success stories

in retail. Their scales of operations are very huge, the profit margins that they earn are

also much higher an1 they operate in multiple formats like discount stores.

warehouses, supermarkets departmental stores, hyper-markets. convenience stores and

specialty stores. The economy and lifestyle of the West is not in line with that of India

and hence the retailing scene in India has not evolved in the same format as the West

nor can we learn valuable lessons from their style of operations.

4.36 Indian Apparel Retail Scenario

In its market research report, ―Indian Retail Sector — An Outlook (2005-2010)‖

RNCOS estimated that the Indian apparel retail industry generated revenue of S2.0

billion in 200-I with a growth rate of 8.2% during 2000-0-1. As a result, this industry

in India is second largest in the world after China. The Indian apparel retail industry

varies within even short distances, as the designs of the outfits are based on the

region‘s fashion trends.

According to this year‘s Global Retail Development Index, India is positioned as the

leading destination for retail investment. This followed from the saturation in western

retail markets and we find big retailers like Val-mart and Tesco entering into Indian

market. AT Kearney has estimated Indian total retail market at US$ 202.6 billion

which is expected to grow at a compounded 30% over the next five years. With the

organized retail segment growing at the rate of 25-30% per annum, revenues from the
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sector are expected to triple from the current US$7.7 billion to (18824 billion by

2010.

NICHE foreign retailers are making a beeline for the Indian market. In fact, despite

the FDI policy pertaining to retail being unclear, over 10 foreign niche segment

retailers have recently set up or announced their intention to set-up shop in India using

the franchisee route, with several others waiting in the wings.International brands

such as Benemm. Lacoste, Levi Strauss, Crocodile, Dockers. Lee. Wrang‘er. Nike.

Reebok. Adidas. Guess. Esprit. Mango. Hugo Boss. Mark & Spencers, and Tommy

Hilfiger have already built a retail presence in the country, while market watchers

point Out that several more such as Versace, FCUK, Zara, Mother Care. Kkea, Fendi,

NEXT, Debenhams, Trussardi, and DKNY have charted out a strategy to enter the

Indian market. Most of the brands entering the market are targeted at the premium

end. According to estimates, the premium apparel segment in India is valued at about

Rs. 1,900 crore and growing at 20 per cent.

In addition to the patterns above, four additional factors which are transforming

supplier capacities in ways that are blurring the boundaries between firms producing

for the domestic market and those producing for exports are as follows:

1. Enhancement of local capabilities in the area of logistics i.e., warehousing and

customized tracking systems.

2. Interesting emergence of design as a source of competitive advantage in

Indian apparel.

3. Growing importance of local investment by Indian apparel firms as a way to

counter the exclusion of India from all major regional trade agreements and
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 the advantage of tariff free entry into major markets that many of India‘s

competitors enjoy i.e., Mexico in the US markets, Turkey and Bangladesh in

EU markets.

4. Increasing focus on domestic brands.

Renowned exporters in the country such as Reliance. Arvind, Raymond. Orient Craft

etc., are developing their supply networks and distribution systems, seeking

distinctive niches and generally staking out their terrain in the domestic market to

consolidate their first mover advantage. Success story has emerged in the domestic

apparel garment segments for the local brands and not limited to Pantaloon. Lifestyle

and Westside only. No wonder a heavy weight like the Reliance group is planning to

do a Wal-Mart in India.

Now there is an increasing demand of branded apparel segment in the domestic retail

market for the same features that are valued in demanding export markets.

These shifts in retail are fuelling the demand for good quality and trendy apparel,

which in turn are deepening the importance of aesthetics and design in the domestic

market. It is worthwhile to mention that the rise of younger class of middle-class

consumers, spawned by the booming BPO and IT sector, has led to burgeoning

demand for locally designed, ready to wear clothing in Indian metros. As many

surveys have established, with good salaries, strong peer pressure and the growing

availability of brands across product categories, spending in retail is being driven by

the youth segment‘ in large and mid-sized metros .

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4.37 Retail Concept Development

With the advent of the e-commerce, new retails concepts have also been perceived. It

is a necessary component for keeping stores fresh and relevant and for staying ahead

of their competitors. This is even more important today when consumers will have

considerable choices from new channels available. Now is the-time for retailers to be

developing new concepts or, at the very least, rethinking and reenergizing their

current formats. An important and compelling reason for innovation is the overall

compression of the retail life cycle. Where a concept once had 30 to 40 years to

progress through the retail life cycle, the average life cycle is now greatly

compressed. In the present scenario, ideas get into market faster, grow more

explosively, and face obsolescence in a shorter period.

The average retail life cycle looks like any typical bell curve. There is a period of

development for an emerging concept, followed by a period of rapid growth, maturity,

and eventual decline. This life cycle is still valid but there are major changes in the

time periods involved in each stage. Concepts are growing, maturing, and declining

faster than ever.

Contributing Factors of Modern Retail Boom in India The driving forces towards

development of apparel retail in India can be broadly classified into following

categories:

1. Economic development

2. Improvements in civic situation

3. Changes in consumer needs, attitudes and behaviour

4. Influence of fashion
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5. Changes in government policies

6. Increased investment in retailing

7. Rise in power of organized retail.

4.38 Economic Development

The development of the Indian economy is a necessary condition for the development

of the Indian retail sector. The example of Thailand shows that the impetus to

modernization of retail was provided by the economic boom in Thailand.

Development increases the disposable income in the hands of consumers and leads to

an increase in the proportion of spending on discretionary non-food items. Economic

development also enfranchises new households as potential customers for modem

retail and leads to increased ownership of personal transportation among consumers,

which in turn can increase their willingness to travel longer distances to shop in new

format stores. The growth of the economy can also provide gainful employment to

those who would otherwise enter retailing in areas like hawking, roadside vending

and other similar low cost entries into the retail sector. Rapid economic development

may also positively influence the views of international retailing companies about the

business prospects and investment attractiveness in a country. A high degree of

inflation in the economy is however, not conducive to modernization of the retail

sector. In Brazil, the real progress in retail was noticed only\ after the stabilization of

the economy and control of inflation (4). Development also has an influence on the

regions and cities where modern formats are initially set-up. In the Greek. Thai and

Brazilian cases, modern formats initially appeared in the important cities. This has

been noticed in India as well as the modern formats first appeared in the metros like
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Delhi. Mumbai and Chennai and the mini metros like Bangalore and Hyderabad due

to the comparatively higher level of disposable incomes available in these cities.

4.39 Improvements in Civic Situation

The civic situation includes factors like safety and security in the city and the various

municipal regulations governing the opening, location and operation of stores, and the

nature of public transport available. A safe and secure environment will encourage

the, setting-up of 24 hour convenience stores and the operation of shopping plazas and

encourage shopping expeditions for the whole family. The presence of adequate

parking -facilities or excellent public transportation will encourage consumers job

more mobile E in their choice of store. City or state regulations on opening or closing

hours, rent control laws, availability of adequate electrical power and regulations

relating to licensing will affect both the time required to set-up a new store as well as

the cost of store operation and its viability. Many of the civic factors mentioned above

would be dependent on the economic development and administrative policies in the

area. The impact of the civic situation may influence the choice of the cities, states.

zones in which the modernization investments will be made.

4.40 Changes in Consumer Needs, Attitudes and Behavior

The growth of modern retail is linked to consumer needs, attitudes and behavior.

Marketing channels including retailing emerge because they receive impetus from

both the supply side and the demand side. On the demand side, the marketing channel

facilitates to provide service outputs that consumers value. These service outputs may
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include but are not limited to bulk-breaking, spatial convenience, waiting and delivery

time and assortment . In Indian retailing, convenience and merchandise appear to be

the most important factors influencing store choice, although ambience and service

are also becoming important in some contexts . Modification will have to address

convenience issues while presenting strong alternatives to the weaknesses of

traditional formats in selection of merchandise available for sale. Modern formats

need not be expensive and can offer lower prices to consumers . Lower prices in turn

will increase the attractiveness of modern formats and rapid growth in the preference

for purchasing from new format stores.

Store ambience includes issues such as lighting, cleanliness, store layout and space for

movement. Modern stores can offer a far better ambience compared to traditional

stores. On the service front, traditional stores offer credit and home delivery. These

needs will have to be addressed by new format. Experience from Brazil shows that the

combination of entertainment and shopping provided by some shopping centres, is

attractive to consumers. This may become important in India as well because of the

limited entertainment options currently available in cities. While consumer needs,

attitudes and behaviour will influence the development in retail; it is likely that

investments in retailing and the creation of new stores offering value will in turn

influence consumers. This appears to have happened in Greece. Thailand and Brazil.

Another important paradigm shift in Indian apparel retail pertains to the rise of the

purchasing power of the younger segment in the modern society. In fact, it is fuelling

demand for domestic and oversees branded apparel at a rapid space. This demand is

augmented by the arrival on the scene of retailing formats such as malls that are

providing ready outlets for goods catering to this growing market niche. Thus, from
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the demand side, this preference for higher value apparel, and the growing availability

of organized distribution channels through which these products can be marketed is

creating the conditions for the rise or development of whole new segments of the

apparel industry in India with higher value capabilities on the supply side across the

value chain.

4.41 Influence of Fashion

Fashion has played a key role in shaping apparel consumerism. With the change in

lifestyle, fashion in India is becoming more stratified, as in the West. Technology,

ideas and lifestyles are moving concurrently and speedily. Companies and brands that

offered monotonous, mundane products for years have now tripled their product

ranges and new appealing shapes and forms are being launched each season. Top

notch professional bodies in fashion trade are now working towards developing the

fashion supply chain through backward linkages with suppliers and mills, and forward

linkages with the retail and distribution network.

4.42 Changes in Government Policies

The Indian government has clarified on a number of occasions that foreign direct

investment will not be permitted in India. Major international retailer organizations

will be watching for signals of policy change especially because China has permitted

foreign investment in retail. In opening up the retail sector, the government may

consider various approaches such as insisting on joint ventures, limiting the foreign

stake, or pacific the city areas where investment is permitted. Thailand‘s example
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shows that in case of joint ventures. the local partner can play a significant role in the

success of the joint venture. The Brazilian experience shows that local retailing

groups can successfully compete against international chains if they adopt innovations

and restructure operations in accordance with market needs. Some policy protection

can be given to consumer cooperatives which have been providing value to their

members and customers. This protection can be in the form of allowing these

organizations to access capital from the local market and operate in a more

professional manner. The government can also play a positive role in simplifying or

eliminating the plethora of regulations governing retailing. Specific laws relating to

franchising will also be desirable for foreign and Indian brand owners to adopt the

franchise route in a bigger way. According to the new directive of Indian Government

foreign chains selling single brands were allowed in January to take up to 5 1 % in

Indian joint ventures.

4.43 Increased Investment in Retailing

The prospects for significant modernization and development in retailing will depend

on the nature of investment in this sector. The investments will be of two types -

foreign and domestic. The quantum and nature of investment will depend on the

factors outlined earlier namely economic development: civic situation; consumer

needs, attitudes and behavior; and government policies. Although FDI is been

permitted selectively in retailing, a number of global retailers are testing the waters by

signing technical agreements and franchises with Indian firms. Fast food chains like

McDonalds and Pizza Hut are already operating in the metros. A Marks & Spencer

store is already operational in Mumbai. Several global retailers are awaiting a change
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in policy. However, the development of the Indian retail sector is dependent not just

on foreign investment but on Indian investment as well. Since the I980 its industrial

groups such as Rehance and Raymonds have been active in encouraging development

of well appointed exclusive showrooms for their textile brands. In the 1990s,

industrial houses like Rahejas. Piramals, and Tatas have entered retailing. Several

Indian and foreign brands have used franchising to establish exclusive outlets for their

brands.

At present, the new format stores cater mostly to households belonging to the higher

income families. The catchment area for these modern stows has to be fairly or large

as the number of such. households is small in relation to the total population.

This limits the number of stores and constrains the growth of chains. The modern

stores have also been plagued by low conversion in relation to the number of footfalls.

This means that although a large number of people visit the store, the number of

buyers and the average bill amount is small. Due to low sales, the bargaining power of

the retailers with suppliers and manufacturers is low and this restricts their average

gross margin. On the other hand, the expenses involved in setting-up and maintaining

a modern format store tend to be much higher than traditional store due to the

additional expenses on larger size, better locations and superior ambience. Therefore,

if the returns on investment in the new formats have to be attractive, modern retailers

have to develop a strong supply chain that provides them significant gross margins

while delivering merchandise at attractive prices to customers. In order to do this,

modern retailers will need to eliminate middlemen and buy directly from suppliers

and make use of technology to control inventory. These developments will impact the

survival and existence of middlemen such as wholesalers and agents who will have to
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find new business models to survive. Manufacturing firms will also face pressure

from strong buyers on price, delivery and service terms.

4.44 Increase in Power of Organized Retail

Bargaining power of organized retail translates directly into higher gross margins for

the retailers. At present there are a large number of independent retailers with little

bargaining power vis-a-vis manufacturers, distributors and wholesalers.

Manufacturers have been promoting their brands and generating consumer demand

for branded products. This makes it necessary for all varieties of stores especially in

urban areas to stock branded products. Manufacturers take advantage of the consumer

pull to limit margins to the retailers. Retailers manage their profitability by operating

on a very low cost basis. This is possible because of low rental expenses due to

historical reasons and low labour costs due to employment of family members in the

store. The modern stores have somewhat higher gross margins, but their net margins

are not very significant for providing the cash flow required to fuel rapid growth in

outlets. Retailers can increase their power in several ways. They can invest efforts in

developing their own store brands. The supermarket chain. Food world. has begun

doing this in a limited way with food grains and pulses. Secondly they can invest in

supply chain, buy directly from the sources and eliminate middlemen. Thirdly they

can attempt to obtain volumes in buying by aggregating the requirements of various

stores, and bargaining for better prices by placing large orders. Although this strategy

suits chain stores, independent grocers may also get together by forming a cooperative

or buying club in order to benefit from scale economies in purchasing. Retailers can

also obtain several benefits from using information technology. They can monitor
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their stocks and sales using IT and thus manage their working capital more efficiently.

They can also analyse data about customers and their buying habits and be in a

position to develop marketing strategies and promotional offers to increase customer

purchasing at the outlet.

Manufacturing firms will need to develop new strategies for dealing with powerful

retailers. The first change required will be one of mind-set. Negotiations with

powerful retailers will have to be carried out at much higher executive levels within

the firm. New structures such as National Account Managers, Category Managers

etc., would need to be deployed. Firms will have to reconsider their brand promise,

brand promotion and their brand building policies to deal with store brands that will

be introduced by retail chains. Firms will also have to re-engineer their logistics

policies to meet the demands of powerful retailers for just in time delivery to their

distribution centres or stores. New product introductions will have to be coordinated

with the retail chains so that adequate shelf space is available at launch. The firm will

need to carefully look at their product cost structures both in terms of variable cost

and allocated fixed costs in order to maintain profitability in the face of pressures for

price reductions from powerful retailers.

4.45 Retail Branding Versus Product Branding

A great difference between product branding and retail branding is that in many‘

cases products have an anonymous or even fictitious presenter, whereas in retail,

consumers come in direct contact with the company and/or product. A Cadbury‘s

Dairy Milk chocolate bar, for example, is a product made according to a set recipe in
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a factory that is not open to the public. In addition, the people who work there never

come into contact with the consumers because the retail channel lies in between. And

those who do sell the ‗CDM‘ to the end-consumer (the retailers) do not have very

much to do with it by virtue of their function. Therefore, it is possible to conceive a

brand identity for the product. establish it for a specific target group and then fix it in

the minds of consumers.

Compare the identities of ‗Five Star‘, ‗Perle, ‗Gems‘ and ‗Temptations‘: all very

different, yet they come from the same manufacturer. The issue is not of retailers

selling brands but branding the retail business itself, like the fashion store. A

hypermarket or department store, may offer several well-known brands, but in today‘s

competitive world cannot afford to rest on its strategic product assortment and pricing

initiatives to bring in the customers. The retailer must attempt to brand himself

differently. especially when today‘s product brands are being launched through their

product brand‘s own shops. (Examples in the shoe segment - Nike. Adidas and

Reebok Jeans segment - Lee and Wrangler. Perfumes - Hugo Boss) Apparel retail will

have to ensure that its own brand includes the characteristics of product brands

detailed above. Retailers need to work on three dimensions to achieve this:

(1)Brand Value

The retail brand has to translate and transmit clear values to the customer. For

instance, ‗value for money‘. ‗Luxury shopping redefined‘ are some of the slogans.

Some companies have attempted to define this in their mission statements but they are

often too vague and not actionable. For example the UK Virgin brand has the value of
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challenging conventions and the US retailer Nordstrom has built the value of

customer service. While many Indian product brands have successfully weaved values

around their brands (Hamam on ‗trust‘, Godrej on ‗quality and TVS on ‗service‘)

retailers are yet to develop a consistent value across their businesses. Some of the

brands of domestic apparel retail of Pantaloon and Lifestyle are also attracting

attention to the consumers. Pantaloon retail brands include ―Honey‖. ―Bare‖. ―Rig‖.

―UMM‘ and Big Bazar category comprises ―DJ&C‖, ―Knighthood‖. ―Studio NYX‖

etc. Among the Lifestyle brands, ―MAX‖. ―KAPPA‘, ―BOSSINI‖ are becoming

increasingly popular to the domestic front.

(2) Brand Strategy

It is imperative that retailers have a systematic strategy on issues like whether to

develop the retail brand or corporate brand and decisions on one product/one brand

that they may be selling in their shop. Retailers can also decide to launch high quality

retailer brands (‗own labels‘) backed by promotional campaigns. reinforcing clear

personalities. Pricing policies, today position retailer brands as good value lines or

premium lines (Nilgiris department stores prices its grocery lines above manufacturer

brand prices).

The view that retailer brands offer a cheaper alternative to manufacturer brand is no

longer valid. There is even scope for retailers to develop alternative types of ‗own

labels‘ targeted at different consumer groups in their outlets. An essential ingredient

for success, in such cases, must be consumer-relevant added values -not just lower

prices. It is only a minority of consumers today. who are prepared to trade off added
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values for lower prices. Experienced consumers are no longer primarily motivated by

low prices. There is scope to attempt a retail segmentation strategy. For example,

DCM Benetton India redesigned its stores as per its international format and also

repositioned the brand from a casual wear brand to a wardrobe option. The company

is now attempting to target a niche audience through its concept stores. It launched a

‗Baby-on-Board‘ store which targets mothers-to-be and kids, an ‗Accessories‘ stores

that sells luggage, bags, sunglasses and vanity cases and an ‗Adults Only‘ store that

showcases Benetton‘s apparel collection for men and women.

(3) Brand Structure

Operational levels of the retail business have to be held together to integrate the whole

brand proposal. At this level, marketing. human resources, distribution, logistics,

administration and sales have to work to towards a common brand value that has to be

communicated to the consumer. The retail brand‘s messages must be weaved into the

‗everyday experiences that the consumer has with the retail brand. Brand building

constitutes a way in which the main value of the retail store 2 shifts to what has been

traditionally called an intangible. Indian apparel retailing is coming of age and needs

to have a clear brand proposition to offer the discerning Indian consumer. There is no

doubt that the apparel retail business is gravitating from high street towards

destination shopping (mall development) with enhanced mall space expected to hit the

metros and mini-metros across the country.

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 CHAPTER 5

SUPPLY CHAIN MANAGEMENT

5.1 : Introduction – Basic concepts of distribution system

The role of distribution in ensuring the success of organizational strategy is often

underestimated. Distribution is thought of as a competitive advantage for those

organizations, which have built up Distribution clout and economies of distribution

through sheer size.The contention is that a well-executed distribution strategy can be a

source of competitive advantage for organizations irrespective of size or market share,

provided that it is focused on end customer needs and optimized with respect to cost

of distribution.

There is a robust approach for reviewing distribution strategies industries. This I

approach, summarized a in the Andersen Consulting Distribution Strategy Pyramid

focuses on answering the following strategic questions.

1. Given the value proposition, who are the end customers and therefore, what

are the distribution objectives ?

2. What channel structure will achieve these distribution objectives at the lowest

cost to serve ?

3. How do we manage our physical network to achieve objectives at lowest costs ?

4. What processes and organization structure will help sustain the distribution

networks performance ?

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This approach aims to –

a. Ensure that a company‘s distribution strategy is based on zero-based

distribution objectives derived from end-customer needs.

b. Ensures complete integration across channel structure and supporting

processes with the zero-based distribution objectives; and

c. Results in the lowest cost to serve across product markets.

5.2: Setting Distribution Objective

What are distribution objectives ? Distribution objective are defined for a product

market in terms of availability of the product (for example, percentage of total outlets

reached). Most companies do not explicitly set distribution objectives. Of those that

do, distribution objectives often have no linkage to end-customer requirements. Often

companies fail to ask questions like, ―How many and what kind of outlets do I need,

to be available given target audience and their buyer behavior ?‖

Then, there are regional differences in category development to be taken into account.

For instance, will extending distribution in a region with a low level of category

development help me boost sales? Finally, the objectives should take note of the

marketing initiatives planned for the year. The pyramid recommends explicit setting

of distribution objectives based on end-customer needs.

In most FMCG categories, distribution objectives are heavily focused on retail

availability – how many outlets and what kind of outlets. In prescription drugs, the

objectives would include, apart from outlet availability, coverage for doctors. Agro-

chemicals, on the other hand, may require objectives in terms of share of tonnage by
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leading wholesalers.What is the basis for this difference ?. The difference lies in the

definition of the end customer, which may be different from the end-consumer. The

end-customer is the last entity in the supply chain who makes the brand decision. For

FMCG industries, where the end-customer is the consumer, retail availability

becomes the distribution objectives. In prescription drugs, however, the end customer

is the prescribing doctor. Thus, the objectives need to ensure appropriate coverage of

doctors, the end customer is the prescribing doctor. Thus, the objectives need to

ensure appropriate coverage of doctors, without which no amount of wholesale push

will drive volumes.

In agro-chemicals, distribution objectives depend largely on the land-holding pattern

in the market. Markets with large land holdings and geographic concentration require

focus on a smaller number of large wholesalers whereas those with small land

holdings and geographical fragmentation require availability to a large number of

small traders. Distribution extension decisions depend upon relative category

development by the market. Fragmentation require availability to a large number of

small traders. Distribution extension decision depends upon relative category

development by the market. In a highly – penetrated market, it is not possible to drive

off take merely by increasing availability beyond a point. Similarly, in a low

penetration market, merely increasing availability without addressing the fundamental

drivers of low penetration may not led to volume growth.

Figure 5.1

Manufacturer Distributor Malls Retailer

Distribution Chain
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 The Distribution Development Index (DDI) is defined as the availability of a brand /

category in the market relative to that of a benchmark brand / category. The Category

Development Index (GDI) is defined as the per capital consumption of the category in

that market relative to the national per capital consumption of the category. The

relative level of DDI and GDI will determine the extent of the opportunity to actually

extend distribution.

Mapping markets in terms of their Distribution Development Index – potential to

extend distribution in this market and their Category Development Index – growth

potential for the product in this market helps identify distribution priorities.

Figure 5.2

Distribution Development Index.

Concentrate demand Concentrate on quality of

generation activities distribution, service level,

High frequency etc.

Distribution Development integrated Extend distribution

Development sales and marketing immediately

package

Low

Low High

The above diagram explains the distribution development index where in the

distribution development is been explained with respect to different variables.

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 5.3 Developing Channel Design

A number of companies do not develop a channel structure; they inherit it. Channel

structures are thus often considered a consequence of the industry. Companies that do

review their channel structures do not attempt to do so from the point of view

minimizing distribution costs. The Pyramid recommends a comprehensive review of

channel structure from the perspective of achieving distribution objectives at the

lowest cost.

Table 5.1

Supply Chain Methods

Distribution Processes Setting / Achieving Controlling Distribution

Distribution Objectives

Inventory management Setting up distribution Consistently lower inventory

through a periodic strategy with alternatives levels in changing demand

review of network.

Demand forecasting Setting distribution Lower inventories

based on network objectives in line with the Lower trade spends (no attempts

demand potential to boost Sales where demand)

Monitoring of Achieving distribution Controlling trade spends.

trade spends. objectives by ensuring the Controlling distributor expenses

Monitoring of right mix of direct coverage and service evils to prevent

distributor distributors from making

An optimal channel design requires the organization to understand the following :

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a. What activities and functions need to be performed (redistribution,

stocking, collections and disbursements to company) ?

b. Which channel intermediaries can perform these functions (C and F

agents, distributors, wholesalers) ?

c. What are the service level requirements that channel intermediaries require

from an organization (credit, inventory levels, infrastructure, lead times

from order placement to receipt of goods)?

d. What are the service levels an organization required from our channel

intermediaries (number of outlets covered, frequency of coverage, etc.) ?

Given service level requirements of the company and the intermediary, what

minimum returns should intermediaries be making for hen to deliver sustainable

distribution objectives at the least cost. With C and F agents, it will be per cent

commission / flat fees, with distributors / wholesales : it will be gross margins,

return on investment.

Optimal channel designs are heavily dependent on distribution objectives and the

functions that need to be performed to achieve these. For typical FMCG

categories, availability in over 5 lakh outlets requires services of credit, readily

available stock and redistribution. This would typically require 1,500-2,000

distributors, who in turn would need to be serviced by depots / CG as for

inventory freight economies.

Multinational FMCG players have thus established that the lowest cost

distribution channel is the factory CFA distributor (wholesale) retailer route. For
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 high value medical diagnostic products where the customer base is a few hundred

hospitals and diagnostic labs, the key service requirements are high credit, low

supply lead times / inventories (since most products have a limited shelf life) and

cold chain transportation and stocking.

5.4: Developing Physical Network Strategy:

Most companies take the location and capacities of their depots and manufacturing

unites as given. The Pyramid recommends a comprehensive optimization exercise for

the TDC of distribution. This requires the optimal channel design to be populated with

a plan for the flow of goods and information in terms of the following:

1. How many facilities (manufacturing units / depots / CF As) are needed and

where?

2. Which customers / regions and which product lines should be served from

each facility?

3. How much inventory should be maintained in each facility?

The populated network need to be optimized with respect to the total delivered cost of

distribution. Using lineal optimization, several companies have managed to cut

distribution costs by as mush as 10-15%.

5.5: Reviewing Distribution Processes:

Most companies do not monitor ability of the distribution network to achieve

distribution objectives or the cost of distribution.

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The Pyramid recommends continuous monitoring of the ability of the distribution

network to achieve objectives at the lowest cost through robust action-oriented

monitoring processes. A two-step approach is required to formalize these principles.

It is a one-time exercise to bring the distribution: system (strategy, structure,

processes) in line with distribution objectives. Subsequently, undertake annual

reviews of the distribution system as a part of the annual strategic planning process.

5.6 Flows in Channels of Distribution:

A flow is a set of functions performed in sequence by channel members. In the flow

process, producers, wholesales, retailers and consumers are linked. The functions that

need to be necessarily performed in a channel system include transfer of ownership

through transportation, order processing, inventory carrying, storage, sorting

negotiations and promotions. The same function in a given channel system may be

performed at more than one level and in such a case the workload for the function

would need to be shared between channel members.

A channel symbolizes the path for movement of title, possession and payment for

goods and services. Fig. 5.3 below gives a representation of these marketing flows:

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 Figure 5.3

Marketing Flows in a Channel System

Produces Produces Produces

Title Title Title

Promotion Promotion Promotion

Negotiation Negotiation Negotiation

Wholesalers

Consumers
Produces

Retailers
Managing Managing Managing

Risk bearing Risk bearing Risk bearing

Ordering Ordering Ordering

Payment Payment Payment

Information Information Information

Source: Adapted from R.S. Valis, JS Grether and R Cox ―Marketing in the American

Economy‖ (NY – The Ronad Press).

5.7: Patterns of Distribution:

After a producer has selected the type of channel that makes the most sense for his

products, the next step is to determine the level of distribution intensity, which

specifies the number of marketing intermediaries that will carry the products.

Depending on a firm‘s product, objectives and customers, the levels of intensity may

differ from case to case. Also, distribution intensity is frequently modified as a

product progresses through its life cycle. Marketers have three basic levels of

intensity to choose from: intensive, Selective and Exclusive.

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Intensive Distribution: A channel strategy that seeks to make products available in

as many appropriate places as possible.

Selective Distribution : A channel strategy that limits availability of products to a

few carefully selected outlets in a given market area.

Exclusive Distribution : An extreme case of selective distribution in which only one

outlet in a market territory is allowed to carry a product or a product line.

5.8: Participants in the channel system

The next important stage is channel strategic decision Plan finalization includes the

development of a framework to help, analyze and select the most desirable channel

structure arrangement. The planning and analysis framework introduces a range of

tools available to assist managers in the finalization of a of a channel plan.

Primary Participants

Primary channel participants are defined as ―participants that acknowledge their

dependence upon one another in a channel arrangement and retailers.

The process in which materials and components are joined into products is typically

called manufacturing. A manufacturer is one who produces the product.

Manufacturers represent significant and highly visible channel participants because

they produce product that become the primary concern of the overall distribution

process. Manufacturing activity create form utility. Manufacturing in combination

with agriculture and mining serves to generate a flow of products, services

commodities and materials that ultimately become the local concern of marketing

channels. The balance of the distribution process serves to provide a variety of

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different manufactures products for wholesalers, retailers and customers.

Manufacturers take a significant risk with the creation of their products. This brief

introduction of manufacturers serves to highlight the complex nature of the overall

production process that drives many channel arrangements. The specific nature of a

manufacturer has a great deal of impact upon the choice of which channel

arrangement to use.

5.7 Key Issues in Determining Channel Requirement

Which a manufacture faces an agenda of issues related to finance marketing and

industrial relations, arrangement. The key issue related to this are :

1. Product Proliferation and dynamics: and

2. Total Quality Initiatives

These two issues are significant for a typical firm in determining how channel

requirements will be delineated:

1. Product Proliferation and Dynamics: A major concern throughout industry

is the rapid expansion that firms are experiencing in the number of stock-

keeping units that they maintain in their product list. Fully understanding

basic customer needs through marketing research is viewed as a key to a

successful new product launch. In practice, few firms have a lightly

successful new products fail to remove obsolete inventory. The product

life cycle is useful for planning the marketing and distribution strategy.

Numerous examples are available from the food industry to illustrate the

product proliferation dilemma. The industry is characterized by a constant

effort on the part of manufacturers to introduce new products for

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 distribution. Retailers and wholesalers want to enter into an agreement

with manufacturers in which they agree to buy all unsold inventory back at

the retails price if a product fails. Independent of the fairness of such

agreement, the fact remains that the inventory mistakes must be cleansed

from the channel.

2. Total Quality Initiatives : Total quality initiatives represent, the primary

focus of the revitalization drive. The concept of total quality is ―do it tight

the first time‖. The general concept of total quality is to focus managerial

attention on the three key concepts manufacturing: People, Process and

Design.

5.10: Logistics for Retail Operations

Logistics is not a new area of marketing management. It has been performed since the

beginning of civilization. It descries the entire process of materials and products

moving into, through arid out of the company. The actual work of logistics is

supportive in nature. It involve the integration of transportation, inventory,

warehousing, materials handling, packaging and information technology.

Logistics helps the inflow of materials into the manufacturing process. It also helps in

distribution of products to consumers through various marketing channels. Hence,

logistical support is a must for marketing and manufacturing operations, and materials

handling cannot be avoided in the performance of logistics. Logistics management

includes the design and administration of systems to control the flow of material,

work-in-process and finished inventory to support business unit strategy.

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5.11: Functional areas of logistics

There are seven important functional areas such as Manufacture plants, warehouses,

material handling distribution and after sale services are typical logistics facilities.

Network design is one of the prime responsibilities of logistical management. It is

required to determine the number and location of all types of facilities required to

perform logistics task. The selection of a superior locational network can provide the

first step towards competitive advantage. Logistical efficiency directly depends on the

proper design of network and infrastructure.

5.12 Information Technology

Two major areas that depend on information are:

a)Sales Forecasting. Sales forecasting is done to estimate the future requirements of

logistics. It helps inventory management to satisfy anticipated customer requirements.

b) Order Management: Customer‘s order is very important in logistics. Logistics

services are required for external and internal customers. External customers are

those that consumer the products or services and any trading partner that purchase

products or services for resale. Internal customers are organisational units within a

company.

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The more efficient the design of a company‘s logistical system, the more sensitive it

is to information accuracy. Incorrect information and delays in order processing can

cripple logistics performance.

5.13 Transportation

It helps in positioning inventory geographically. There are three forms of transport,

i.e. private carriage, contract carriage and public carriage.

There are three fundamental factors to transportation performance.

Cost: It is the payment for movement between two locations and expenses related to

administration and maintaining in-transit inventory. Hence, logistical systems should

be designed to utilize transportation that minimize total system cost

Speed: It is the time required to complete a specific movement. Speed and cost of

transportation are related in two ways:

i) Faster service with higher rates

ii) Faster service means shorter time interval

Therefore, balancing of speed and cost is necessary

The above figure explains the level in transportation system in this it is evident that

logistics to consumer satisfaction is dependent on 7 factors which are required to be

taken care of. The conflicting objectives of inventory control are reflected in the

seemingly conflicting demands which are made on an inventory manager from time to

time.

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Inventory Management

The interest of management in better inventory management is much more than it was

a few years back. Management knows the need, importance and practicability of

scientific inventory management.

The conflicting objectives of inventory control are reflected in the seemingly

conflicting demands which are made on an inventory manager from time to time. for

example, stocks are to be kept at a low level but not too low; turnover is to be

increased but only at a satisfactory profit rate; bulk purchases are to be attempted to

obtain better prices but over-buying is to be controller, special attention is to be given

to the disposal or near obsolete items but not before the point of obsolescence is

identified, and so on.

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 Table 5.2

Selecting Inventory Control Techniques

Sr. Title Bass Main Uses

No.
1 A.B.C. (Always Better Value of To control raw
Control) Consumption material
components and
work in progress
inventories in the
normal course of
business
2 H.M.I. (High, Medium Unit price of Mainly to control
Low) material purchases
3 X.Y.X. Value of items in To review the
storage inventories and their
uses at scheduled
intervals
4 V.E.D. (Vital Essential Criticality of To determine the
Desirable) Component stocking levels of
spare parts
5 F.N.S.D. (Fast, Consumption To control
Nominal, Slow, Dead, pattern of the obsolescence
etc.) component
6 S.D.E. (Scarce, Problems faced in Lead time analysis
Difficult, Easy to procurement and purchasing
obtain) strategies
7 G.O.L.E. (Government, Source of the Procurement
Ordinary, Local, material strategies
Foreign sources)
8 S.O.S. (Seasonal, Off- Nature of supplies Procurment /
seasonal) seasonal items like
agricultural pdts.

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The above table explains the inventory control technique selection method by various

apparels malls for improving the supply chain.

5.14 Economic Order Quantity (E.O.Q.)

Economic order quantity is the quantity for which orders are placed when stock

reaches the re-order level. E.O.Q. is the quantity, which is most economic to order.

In other words, E.O.Q. is that size of the order, which gives maximum economy in

purchasing material and ultimately contributes towards maintaining the material at the

optimum level and minimum cost.

With E.O.Q. two types of cost should be taken into account :

1) Ordering Cost. This is the cost of placing an order with the supplier. Because

of so many factors involved, it is quite difficult to quantify this cost.

2) Inventory Carrying Cost. It includes the following :

A) Cost of operating the stores

B) The incidence of insurance costs

C) Interest on capital locked up in store

D) Deterioration and wastage of materials

5.15 Mathematical Formulate

E.O.Q. can also be calculated with the help of a formula as given below:

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Economic order quantity =

annual requirement quantity (D)

Cost per order (K)
Cost per unit (c)
Carrying cost percentage (h/c)
Annual carrying cost per unit (h)

The above mathematical formula helps in identifying the variation inventory carrying

cost with reference to ordering cost to have an understanding of the economic order

quantity.

5.16 Warehousing:

Warehousing provide a key link in the physical distribution chain, and like other

stages of distribution, they are being closely scrutinized by today‘s marketing

managers. The location size and capabilities of warehouses can profoundly affect a

company‘s ability to satisfy its customers and deliver products and services profitably.

5.17 Types of Warehouses

The basic purpose of warehousing in distribution logistics is to arrange placement of

products and supply storage facility to store them, consolidate them with other and

similar products and divide them into smaller quantities on the basis of ownership.

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 There are two types of warehouses, i) private warehouses, and ii) public warehouses.

The following decision variables can be considered:

Table 5.3

Decision Variables in Choosing among Types of Warehouses

Types of Warehousing Arrangement

Decision Private

Owned Leased Public

Fixed Very high Moderate, depends on the No fixed investment is involved

investment lease‘s terms

Unit cost High High, if volume is low Low, since facilities are on ―for

hire as needed‖ and fixed costs are

widely distributed among users

Control High High Low managerial control

Adequate Highly adequate Moderately adequate May not be convenient

produce line

Flexibility Low Low High; termination of usage can be

easily arranged

5.18 Factors affecting Warehousing Choice

The warehousing decision is influenced by the difficulty of moving goods directly

from the assembly line to buyers or public warehouses. The following factors have to

be kept in mind when deciding the location of a warehouse:

Product type

Transportation cost
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 Markets

Rent

Labour supply

Taxes

Geography

Competition

5.19 Materials Handing Equipments

Material handling is such an important activity that it cannot be avoided in the

performance of logistics. Material handling activities should be minimized as it

requires a very high capital investment and direct labour cost. The network of

facilities forms a structure requirement of customers.

Transportation is required for materials handing – for efficient loading and unloading.

In warehouse operations, materials handling involves makes products to be received,

moved, sorted and assembled to meet customers and distributors requirements.

Products in the forms of cans, bottles or boxes are combined into larger units to make

master cartons because it protects the products during the logistical process.

Materials handling system in logistics is designed under certain guidelines. These are

very important to assist management. These are:

1. Equipment for materials handling and storage be standardized.

2. The system should be provide maximum continuous product flow as per the

requirements of the company.

3. handling equipment should be property utiliesd

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5.20 Classification of Materials Handling Systems

Materials handling systems in logistics are mainly divided into 3 categories:

1. Mechanized Systems. These systems utilise a combination of labour and handling

equipment to facilitate receiving, processing, and/or shipping. Mainly labour

constitutes a high percentage of overall cost in mechanized handling. Even then,

mechanized handling systems are very common. They employ a wide range of

handling equipments. These are:

i) Forklift Trucks

ii) Walkie-Rider Pallet Trucks

iii) Townlines

iv) Tow Tractors with Trailers

v) Electric Hoists or Cranes

vi) Conveyors

2. Semi-automated System: When selected handling functions are performed using

automated equipment and the remainder of the handling is completed on a

mechanised basis, then the system is said to be semi-automated. It can be called as a

mixture of automated and mechnised handling.

The main equipments used in semi-automated system are: (i) Automated-Guided

Vehicle System (AGVS) Sortations (ii) Robotics

3. Automated System: Automated system attempts to minimise labour as much as

practically by substituting capital investment by equipment.

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5.21 Packaging

Packaging includes handling and storage of finished goods. It also emphasizes on

protection from loss and damage. Hence, we can say that logistics management is the

framework of 7 Rs- Right Quantity of the Right Product or Service to the Right Place

in the Right Conditions at the Right Cost and the Right Time with Right Impression.

Excellenc in each aspect of functional work is relevant and must be viewed in terms

of improving the overall efficincy and effectiveness of integrated logistics.

5.22 Logistical Integration

The logistical integration process of two inter-related efforts, i.e., Goods flow and

information flow. Information from and about customers flows through the enterprise

in the form of sales activity, forecasts and orders. This information is refined into

manufacturing and procurement plans. A value-added inventory flow results in

transfer of finished products to customers.

a) Physical Distribution. Physical distribution refers to those activities, which are

related to providing customer service. It requires performing order receipt and

processing, deploying inventories, storage and handling and outbound

transportation within a channel of distribution. It coordinates with market

planning such as pricing, promotional support, customers service levels,

delivery standards, handling and life-cycle support. Its main objective is to

assist in revenue generation by providing desired customer service levels at

the lowest tatl cost.

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b) b) Manufacturing Support. These activities are related to plannning,

scheduling and supporting manufacturing operations. It requires master

schedule palnning and performing work-in-progress storage, handling,

transportation and time phasing of components. It is responsible for storage of

inventory at manufacturing sites and maximum coordination between

manufacturing and physical distribution captivities.

c) Procurement. It is related to obtaining prosucts and materials from outside

suppliers. It performs resource planning, supply sourcing, negotiation, Order

placement, inbound transportation, receiving and inspection, storage and

handling and quality assurance. It is responsible for coordination with

suppliers for better scheduling, supply continuity, and speculation, as well as

research leading to new sources or programmers. Its main objective is to

support manufacturing or resale organizations by providing timely purchase at

the lowest total cost.

d) Inventory Flow. It is concerned with the movement and storage of materials

and finished products. It starts with the shipment of materials or component

parts from a supplier and ends when a manufactured or processed is delivered

to a customer. The logistical process adds value by moving inventory when

and where needed. Work-in-process inventory must be moved to support final

assembly, thereby it gains‘ value at each step of its transformation into

finished inventory, e. Information Flow: Information integrates these three

operating facilities, coordination of planning and control of day-to day

operations.

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e) Information Flow. Information integrates these three operating components.

These components contain the actual logistics work and information facilities,

coordination of planning and control of day-to day operations.

5.23 Supply Chain Management for operations

Supply Chain Management (SCM) is moving up the corporate agenda. As

competitive pressures increase, companies are being forced to rethink how and

where they can squeeze costs out of the supply process.But supply chain

management should not be seen simply as a means as a means reducing casts,

experts warn. It should be regarded as a means of boosting revenue, as a source of

competitive advantage.

One health care company won a large chunk of the market from an established

competitor when it introduced a system allowing overview by investment bankers

Morgan Stanley, Dean Witter as ―the integration of the flow of materials,

documents, information and finance, which optimises individual shipments‖.

improves delivery time, eliminates all non-value-adding and improves quality and

after-sale service.

Towards achieving this, strategic alliances between various entities in-between the

customer and raw-material supplier become critical. The necessary ingredients

are: i) Information access; ii) Training; and iii) Confidence building.

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5.24 Information Access

The entire world is transforming itself into a borderless networked economy. The

recent developments in information and communication technology have enabled

consumers of goods and services from being exploited by unscrupulous

intermediaries. Computing and communication costs are falling every day and

both will become almost free in the near future. Technology advance is so fast that

the present TV screen and connecting cable will not only be able to provide

entertainment but also be used for obtaining global information instantaneously

for products and services. Once a customer‘s order is entered order is entered into

the infonework of an enterprise, relevant information is transferred to all the

concerned members of the supply chain through Electronic Data Interchange

(EDI). A good information and communication infrastructure consisting of

Enterprise Resource Planning (ERP) with Internet and intranet facilities will

facilitate the same with ease. Attempts are being made globally to modify the

present ERP packages into ―Customer Synchronised Resources Planning‖

packages.

In a typical environment, an ancillary supplier logs into the customer‘s ERP and

delivers components directly to the concerned shop-floor user on just-in-time

basis. He is paid for the actual usage determined based on dispatches effected on

the due dates through Electronic Funds Transfer. Only the statutory paper work is

handling by the Accounting Department and in some cases the same is also sub-

contracted.

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 5.25 Training

Training both internal and external players in the supply chain is a very important

ingredient. Each functionary has to be taught his role very clearly and

empowerment is very essential for an effective supply chain management.

External suppliers and service and also trained in such a way that the ultimate

customer‘s satisfaction is the focus of all the players in the chain. Every individual

is a strategic partner in the supply chain and the consequences of failure at stage is

explained through simulated models. Hence ever individual associated in the

supply chain network is trained in correct practices for delivering best quality

products and service in the quickest possible time and at the least cost.

5.26 Confidence Building

All the human beings involved the supply chain are taken into complete confidence

through both transparency of operations as well as long-term relationship. Developing

alternate supply sources is not encouraged and the existing supplier is continuously

motivated to improve his quality, product/process technologies and cycle-time. The

savings accrued are shared by all the players throughout the life cycle of the product.

Internally also continuous organizational growth results in better promotional

opportunities for human resources.

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5.27 Successful Indian Case Studies

There are several Indian success stories on SCM. An Indian paint major has made his

paints available in multiple shades and sizes to the customers within 10 km radius of

his residence. Conventional inventory theory suggests that variety lead to more

inventory and associated costs. However, the paint major has reduced inventory to

half as compared to his competitors and his sales have grown much above the industry

average.Similarly, a large paper manufacturer in the country felt raw material was a

problem area both from supply and cost angle and started educating the farmers with

better seeds and crop protection techniques. Simultaneously, they also interacted with

major customers directly and offered custom-built solutions to their problems. Even

though paper industry is has achieved much better financial performance as compared

to his competitors.

An Indian pharmaceutical major had problems with his plastic packaging material

supplier situated 1,500 km away. The CEO of the pharma major personally visited the

supplier and offered to provide site and organise funds provided he was willing to

shift his operations near his pharma unit. The package not only succeeded but the

pharma major adopted the same technique with his other suppliers. Suppliers were

redesignated as ―Supplu Partners‖ and the purchase manager was redesignated as

supplier Relations Manager.

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Such success stories will percolate to more corporate.

The salient features of a typical SCM are:

1. Customer is the focus of all operations.

2. Retaining existing customers and adding value to them on a continuous basis

through closer interaction and understanding their problems.

3. All the operations are streamlined and all roadblocks are removed between

ultimate customers and raw material suppliers.

4. Most of the non-core activities are outsourced and hence fixed costs are kept

minimal.

5. Implementing S.C.M. in an ERP environment eliminates paper work.

6. Reduces inventory and facilitates just-in-time.

7. Transparency is ensured at all levels so that the entire organisation operates as

a single integrated unit instead of different blocks.

8. S.C.M. is a customer synchronized positive technique and hence

implementation is a painless compared to other techniques.

9. Developing multiple supply sources for a single component is avoided and

long-term contracts are signed with the suppliers resulting in confidence

building.

10. Close interaction between the corporate R & D and the suppliers facilitates

continuous improvements in product design, process methodologies, ect.

resulting in customer value enhancement and cost reduction.

One need not do Activity-Based Costing to find out whether retaining an existing

customer is a than creating a new customer. It is common knowledge that a happy

customer will recommend product or service to several other customers. An

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 effective S.C.M. eliminates most of the activities in between customers and raw

material suppliers along with environment will replace the present euphoria of

cost management.

Table 5.4

Supply Chain Process

Supply Chain Supply Chain Planning Supply Chain Execution

Process

Source Material Planning Spot Buying/ Virtual Marketplace

Make Production planning Production Scheduling

Move Logistics Planning Warehouse Management

Store Distribution Planning Advance Order Management

Sell Demand Planning Available to Promise

Source : The Management Accountant – January 1999.

5.28 Distribution Intensive Supply Chain

Distribution intensive supply chain manufacturers include consumer packaged goods

producers who must meet the demands of large retailers, or else lose business. In

recent years there has been a fundamental shift in market power from manufacturers

to retailers. Historically, manufactures dictated the terms of trade with retailers and

organised their business primarily to increase manufacturing efficiency and output.

Today, large chain retailers increasingly are choosing suppliers based on their

efficiency and output. Today, large chain retailers increasingly are choosing suppliers
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based on their ability to match product flow to actual customer demand.As a result,

manufactures are reorganizing their business to focus on satisfying retail demands by

reducing delivery response times, engaging in frequent and retailer specific product

promotions, delivering products packaged according to retailer requirements, and

lowering retail inventory levels through more frequent deliveries, quick response, or

vendor managed inventory programmers. Retail customers are now penalising

suppliers not only for deliveries that are late, but also for those that are incomplete or

early.

Vendor Managed Inventory is a concept is a whereby the manufacturer has ownership

of inventory, as opposed to the retailer, and the manufacturer maintains a high degree

of responsibility to stock appropriate levels of product at the retailer‘s distribution

centers or stores. Quick Response is an initiative to increase customers satisfaction by

ensuring that proper quantity and style/size/colors of product is available to the

consumer on the retailer‘s shelf. Manufacturers in this segment should consider

buying an SCP system with state of the art functionality in demand management and

distribution planning.

Advanced Order Management (AOM), Transporatation Management and Warehouse

Management System should be used by most manufacturers in this segment. AOM

systems that allow manufacturer may have divisions hat produce multiple multiple

consumer products, but the retailer wants to deal with a single contact person, have

the diverse goods delivered on the same truck, and be invoiced only once for the

shipment.

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5.29 Supply chain strategy

Today‘s business conditions are rapidly changing, thereby affecting the way business

is done, these changes dictate an organisations work in a more integrated manner.

People are generally accustomed to work in wateright compartments where every

department works in isolation. But current (business conditions have forced

companies to system, entire logistics is grouped under one tree. All components fin

the logistics chain are managed as a part of the same team to optimise collective

efficiency.

Today S.C.M. is the latest focal point of all companies. It is because, if managed

property, supply chain can provide immense competitive advantage to the company.

5% to 25% of total costs are incurred in logistics, depending on the nature of the

industry and a well-designed SCM system significantly boosts the bottom line. Also a

good S.C.M. system can help in creating an enduring relationship with the customer.

5.30 Customer Value Proposition

However, developing an effective SCM system is lot easier said than done. Let us

examine what goes in making an effective SCM system. The objective of the SCM

system is to optimise the value to customer. The customer is generally driven by

following three criteria to make any purchase decision:

Product feature;

Product quality, and

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 Customer service level.

When a product offers better features or superior quality, the customer goods for the

product even when service is not good. Indian customers have long queued to

purchase foreign-made electronic goods even from dubious sources without any

guarantee for service because time, ease of purchase, packaging, support, sales

service, etc. Customer always compares these three criteria (features, quality and

customer service) with the product price and when these benefits match or exceed the

price, the purchase is made. hence to make a sale. a company ties to maximise the

value delivered by these three factors.

As already stated today, when product features and quality is comparable, every

company tries to improve customer service levels. But how do we manage the service

levels? Given the unlimited resources, service levels can be improved to any extent

possible. But does that translate in increased profit for the firm and higher value for

the customer? As the company improves customer service levels, servicing cost

increases. But sales also increase, resulting in better realisation of profits. However,

beyond a certain point, increase in customer service does not result in corresponding

increase in profits as the service costs increase sharply but level valuable enough to

pay the extra price. So beyond a point, customer service levels do not deliver the same

value to the customer. Therefore, it is important to identity the acceptable service

level. Unless an acceptable service level is decided, it is futile to establish a Supply

Chain Management (SCM) system market conditions. But the objective is to operate

within the operational zone to maximise profits as shown in the ablove figure.

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One thing, however, should be kept in mind. Service levels are not static. The

relationship between service level and sales changes every day. As competition

increases, customers get better services and they penalise products with bad service

level chain. Originations need to constantly redefine and innovate their supply chain

to deliver value to the customer. The winner o the supply chain management can wo

can adjusting the chain at these levels.

5.31 Cost of the System

The service level itself is not one distinct unit, but consists of various factors like

delivery time, response time, ease of purchase, packaging, support, sales service, etc.

Companies often waste their efforts doing the things that do not value to customers. In

some cases they end up having service level far below the customer expectation

resulting in lost f opportunity and in other cases, they unnecessarily build the

excellence which is not valued by customers. Organizations therefore, need to

redefine and build the supply chain to align with consumer requirements.

5.32 Customer Service Level.

A clear understanding of customer service level is the key to implement any SCM

system. Customer Service is defined as the activity of providing desired goods or

services with quality and total support to benefit every aspect of usage at a

competitive price and in a timely manner. There are several benefits customers seek

like.
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1. CONVENIENCE in procuring the product; this includes ease with which order are

placed and confirmed, delivery is received. payments are product is set up for usage.

2. FLEXIBITY to respond to special need of the customer.

3. RESPONSIVESS is the speed at which customer which customer problem are

addressed during and after sales.

4. PAKAGING is the way in which products are packed along whit other benefits. In

simple case, it could be various related documents. In complex casese of industrial

salse, good packaging also includes supplier‘s ability to deliver the product in requied

lots, required sub-assembly and at the point of usage.

Design and deployment of the supply chain management system is a difficult task. If

involves creful analysis and diligent implementation. Understanding the customer

requirements and service levels are the first stage of the process.

5.33 Supply Chain Efficiencies

It is a typically beastly, sweltering morning in Chennai, when Ramesh Krisrvnamoorh

a regular shopper at supermarket chain Food World, steps into the cool confines of its

Adyar outlet, breathing a huge sigh of relief. But he‘s soon hot and bothered all over

again when he finds that his favourite brand of shampoo, made by a prominent

multinational, is out of stock n Food World‘s shelves. Sure, he‘s buying other things,

but it‘s the shampoo he wanted, for which he braved the heat to get to Food World.

Would he be interested in a substitute? Stock-outs, an Indian retailing reality, can be

as high as 30-35 per cent, even for a top brand from an MNC with a supposedly well-

oiled distribution system and in a top-notch retail outlet.

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5.34 Efficient Consumer Response (ECR)

This is a demand-driven replenishment system designed to link all parties in the

logistics channel to create a massive flow-through distribution network.

Replenishment depends upon consumer demand and point of sale (POS) information.

In a retail organization, information and consequently merchandise and servies- elicits

the greatest the free flow of consumers since it addresses their needs appropriately.

5.35 The meaning of ECR:

ECR as a concept which ground in the US in 1993 in response to market conditions

there like low growth, high competition, consumer pressure, emergence of new

channels and highly efficient new entrants and the fact that traditional adversarial

relationships resulted in high costs. Moreover, the ECR response was to focus on

consumers and work together-within departments, with partners and with competitors.

This movement quickly gained ground in Europe in 1994, in Asia in 1996 and Latin

America 1998 and now has seeped India.ECR India is an independent joint trade and

industry body ―to promote the use of ECR techniques as a means of removing

unnecessary costs from the supply chain and making the sector, as a whole, more

responsive to consumer demand.‖

Expains Aridam Guha, General Manager, Commercial FoodWorld Supermarkets Ltd.,

―ECR is essentially a practice in the FMCG industry, given the nature of the products.

In India, the push has come from MNC players whose overseas partners have seen the

benefits derived from ECR.‖ For example, HLL, the largest player in the FMCG
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business, is a key player in the ECR movement here. Unilever is an active member of

ECR in most parts of the world-North America, Europe, Asia and LAtin America.

Currently, Unilever‘s Co-Chairman, Antony Burgmans, is the Co-Chair of ECR

Europe. Says an HLL spokesman, ―HLL sees considerable value in the ECR

movement for the initiative.‖ Adds a Nestle spokesman, ―The success of the ECR

intiative will reduce overall waste in the system and benefit not only Nestle but the

entire industry.‖

So, while key constituents of the movement are gung-ho about the movement gaining

ground in India, they are well aware that it is not something that can be transplanted

in toto from the West and imposed on the Indian retailing system, given its

fragmentation and peculiarities. Says J & J‘s Ambwani, ―ECR needs to be re-invented

for India, since Indian is unlike any other country when it comes to the extent of

fragmentation. The hurdles would be communicate these principles, so that the

efficiencies are generated and shared across the supply chain.‖

Nestle too recognizes that it‘s going to be a long haul. Says a Nestle spokesman,

―Since there is very little organised data available, planning becomes difficult and

because there are virtually no organised representative trade bodies, implementation

of initiatives is also very difficult and slow. It is, therefore, necessary to understand

that the results will be slower in the traditional trade environment of the Indian market

compared to, say, the more organised markets of the west.‖

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5.36 Uses Of ECR:

The ECR movement began in the US because US retailers could not digest the fact

that manufactures weren‘t giving special treatment and terms to club stores and mass

merchandisers. Also, many of the methods used to buy, sell and move goods to the

ultimate consumer are inefficient, ineffective ana out touch with new retail formats.

An analysis of the supply chain threw up several inefficiencies in procurement,

distribution and service. In that context, it was felt that manufacturers, wholesalers,

retailers and supply chain providers needed to reinvent their business relationships to

remove excess layers of inventory and non-value added costs.

For example, one bugbear for Indian retailers is the high carrying costs of inventories,

needed because of the inefficiencies in the system and the generally high levels of

stock-cuts.

On an average, Indian grocery retailers need to carry at least 45 days of stocks against

a retailer say in Thailand who carry onl around 12 days of stock.Aggregate stock-out

level is still the benchmark for supply chain efficiencies,‖ says Food World Guha.

An analysis done in select Food World outlets showed that stock-outs were as high as

25-35 per percent even for some of the bigger companies. Each company looked at

the top 10-15 Stock-keeping Units (SKUs) in some ‗A‘ category outlets. ―The

analysis showed that some sensitive products were missing from the portfolio. This

could be a lot higher at non-‗A‘ outlets,‖ says Guha, We as retailers have been able to

see what stock-cuts do-we see loyalty shifts and it‘s an opportunity lost.‖ he adds.

Studies show that reported savings in costs for industry because of ECR was 10 per

cent or $ 30 billion of the $360 billion grocery sector. The asving in Europe could be
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even more or around $ 33 billion. The potential benefits, sasys a study on ECR, are

significant- increased sales of 5-30 per cent because of improved service levels,

elimination of retail stock-outs and a more focused SKU assortment! ECR also

reduces inventories through reduced lead times and better information flows and

reduces obsolete stock and lowers operating costs.

5.37 Efficient Inventory Planning:

Efficient inventory planning enables the retail organization achieve its strategies and

benchmarked standards of customer deliveries, at the same time reducing supply

chain expenses. Inventory planning has already been discussed in the chapter on

merchandising. Forward planning is done by forecasting sales and Beginning of

Month (BOM) and End of Month (EOM) inventories for specific periods, and

preparing the OTB (Open to Buy) plans. Efficient inventory planning optimizes

controls through OTB so that the planned stock turns are achieved for the store with

just-in-time inventories for freshness and achieving customer satisfaction through the

seven ‗rights‘ of merchandising.

5.38 Per-Purchase Order (PPO) and Purchase Order (OP):

The PPO is an instrument through which the tentative plan of order placement to the

vendor is done for the whole season as soon as the inventory planning is completed.

The Purchase Order is the confirmed order (or supply)

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5.39 Integrated Supply Chain

The end-to end integration of the supply chain elements and functions are achieved by

applying interlinked packages for perfect information management. The integrated

supply chain starts form the design stage at the vendor level to the time when there is

response at the retail stage. The benefits of having an integrated supply chain are

many, including achieving the best delivery performance, reduction in inventory,

faster fulfillment of cycle time,-accuracy in forecasts, lower supply chain costs,

improvement in overall productivity, improvement in capacity utilization, and so on.

5.40 Vendor Management:

Efficient vendor management involves the right vendors capable of giving the right

quality of merchandise and meeting delivery deadlines. Besides, they should be able

to deliver the right quantities as well, so that the retailer can get the right ‗hit ratio‘.

The right hit ratio measures the gap between delivery and purchase orders and helps

eliminate backlog in deliveries. In a chain store scenario, vendors directly delivering

to stores is an important element in attaining good supply chain efficiency.

The vendors directly manage inventories in a few retail organizations. Vendor

Managed Inventory (VMI) is ideal for retail organizations as it totally eliminates

inventory-carrying costs. Here, vendors mange the inventory at every store,

monitoring the flow of information and ensuring just-in-time deliveries. The vendors

are able to take back slow-selling and non-moving merchandise, thus reducing the

scope for mark-down losses for the store.

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5.41 Electronic Data Interchange (EDI):

Helps in establishing an efficient information flow on stock movement, and the

vendors get to know of sales and inventories instantaneously. Reorder supplies are

immediately planned and executed by the vendors following acceptable norms. This

process eliminates the time taken to exchange documents for placing orders, thus

achieving just-in-time inventory management. EDI is done through web-enabled

servers or with the help of the organization‘s ERP (Enterprise Resource Planning)

package that interacts with the vendors‖ systems.

5.42 warehouse Management:

The retail warehouse or the distribution centre (DC) performs the functions of

receiving the ordered stock; checking for the right quality, quantity and price;

temporary and docking; tagging the merchandise with both the MRP and security

tags: preparing and readying the merchandise; transporting the merchandise:

receiving goods returned from retail stores, if any ; and sending returned merchandise

to vendors back as returns or refinishing.

5.43 A Goods Received Note (GRN):

Is prepared when the merchandise received at the warehouse from suppliers/vendors

is checked and matched with the relevant purchase order (OP) after certifying all the

elements of quality, quantity, etc. The GRN is then automatically recognized by the

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system after authorization for payment to the vendor by the accounts department.

Then, only the security tagging needs to be done at the warehouse.

5.44 Inter Transfer Note (ITN):

This is made when the prepared and readied merchandise is supplied to the retail

stores. The reverse ITN (ITN out) is prepared when goods are sent back to the

warehouse by the retail store. Goods that are returned to the warehouse are then sent

back to the suppliers and vendors. The system recognizes the same and raises a debit

to he vendors.

Transportation is done according to timely delivery schedules so that replenishments

are delivered as per the plan. Cost efficiency and reduction in delivery time are

critical success factors in transportation. Efficient docking with plan ensures the best

utilization of space. Docking also ensures that the First Out (FIFO) delivery plan is

followed so that ageing of merchandise in the warehouse is kept to the minimum.

Material Handling Equipment in the warehouse should be tailored for specie varieties

of merchandise

5.45 Value Chain:

The entire SCM process is valid where bottlenecks, value- adding facility and liability

factors are identified and addressed, thus enabling the retails organization to have an

efficient supply chain. The entire processes of audits or meet timelines, and may be

reengineered to achieve cost effectiveness.

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5.46 Automaton and supply chain manage

The principal objective of supple chain agreement (SCM) in a retail organization is to

sstisfy the customer at the right time with the right product at the right costs all the

time> Integrated system help bring about efficiencies so that the customer is satisfied

every time. The challenges that a retail organization faces are many; huge stock-

keeping units (SKUs), seasonal variations of product lines necessitating the

introduction of new SKUs,. complex tax structures, the sheer geographic spread of the

country (and hence complex logistics and replenishment periods), changing consumer

demands, etc. Automation - through the implementation of ERP system – has helped

many organizations improve their efficiency and helped them grow.

The discovery of automatic identification technologies has been a boon to retailing:

they were first introduced globally in the 1960 to assist logisticians identify products

in the supply chain. The global development of such SCM technologies has- been

very rapid. There were barcodes, touch memory and multi-dimensional barcodes. In

India the development of SCM technologies has come a loge way. Retailers in the

organized sector are beginning to barcode all their products; organization like Food

World (RPG group) and Shoppers‘ Stop (Raheja group) have urged their vendors to

supply merchandise only with standard barcodes.

The next phase will see the introduction of RFID technology to help track the product

and customers‘ use patterns even post-purchase. P & G currently tags (RFID) a small

number company is currently focusing no the supply chain and has not even begun to

think about what‘s going to happen to the items post-sale. There are privacy concerns
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stemming from the fact that companies will collect data about customers without their

knowledge, and then may misuse that data. Indian organized retailing is just on the

threshold of employing retail automation technologies enabled by UPC ( barcodes of

FAN standards), as they do not now need to re-barcode merchandise supplied from

various vendors (as has been the practice with many organized retailers.)

Most retailers in the organized sector in India have to use retail software in their back

end and front end operations and are constantly looking to upgraded their systems as

they evolve. To half this growing retail sector get the best, many Indian software

companies have developed software packages to suit the different and varied

requirements of these retailers. Among the few who are in the market is Chennai-

based Polaris Retail InfoTech Ltd, a subsidiary of Polaris. which has entered the

market with its software. Retail Excel. The list of those developing retail software is

growing by the day. There are many other packages like MS Retail, Shopper. Retail

Pro Rtail Magik, etc. that help enable the fast implementation of retail automation in

India available in the market. Not mention large ERP packages like JDA, SAP Retail,

BA/N, Island pacific, etc

5.47 SHOPPER’S STOP

Shoppers Stop has implemented the US-based retail ERP system IDA. IDA facilitates

the integration of all retail functions in Shoppers‘ Stop efficiently.

Efficiencies in the buying process: It is JDA‘s merchandise management system that

now performs the buying process and merchandise management control practices.

pursuant to range width and assortment plans. purchase orders are issued to suppliers
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through the central merchandising function. The actual delivery of stocks is then

controlled on a weekly basis through the delivery authorization process mechanism.

The vendors then dispatch the goods to the distribution centre based on the purchase

order and delivery authorization. Every distribution centre gets a copy of the delivery

authorization issued for the week. At the distribution centre support is provided by the

‗warehouse management system‘ (WMS) of IDA. which manages the warehousing

function most efficiently.

The challenges at Shoppers‘ Stop are the spread of the 14 stores across the country in

varying large sizes, ranging from 25,000 sq ft to 55,000 sq ft the large SKU base, etc.

Also, it has more than 300 suppliers who suppliers who supply stocks to three

distribution centers, which then redistribute merchandise to the 14 stores. Variety,

color and size of merchandise play a very important role in delivering a great

shopping experience to the customer.

Profitable Growth: Shoppers‖ Stop views SCM as an enableer of profitable growth; it

firmly believes that ERP, if used well, can cut costs greatly by reducing cycle times

and inventory levels. One of the key drivers of the profit-driven operation is the

significant development in the retailer-supplier information integration in the supply

chain – the emergence of retailer control over the movement of suppliers‘ goods into

the retailers‘ distribution centers. This has led to more complex relationships

involving suppliers, third-party distributors and retailers through supplier-retailer

collaboration on consumer demand and put into practice the most appropriate product

flows.

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SCM at Shoppers‘ Stop: SCM at Shoppers‘ Stop coordinates and integrates all

activities associated with moving products, services and information into seamless

processes linking all the partners in the chain, including the various departments,

vendors, transporters and other service providers. The system facilities perfect supply

chain coordination with an able information system that control all SCM activities.

SCM at Shoppers‘ Stop begins and ends with the customer. The guiding philosophy is

to improve the organization‘s performance by managing constraints and uncertainties

inherent in the earlier system. The focus is on using new tools and techniques. The

first step in SCM is merchandise planning and sourcing .

In Shoppers‘ Stop, SCM is seen form a strategic perspective rather than just as an

operational issue. Core supply chain issues such as month-end sales peaks, forecasting

inaccuracy, constraint-based planning and so on continue to create problems for

Indian retailers even after ERP implementation. Many organization implemented

SCM as a tool to contain costs and identifying means for reducing pressure on

margins due to competition. The mindsets of organization underwent a transformation

when they accepted to consider the use of such integrated SCM from end-to-end. The

planning process starts six months before the actual beginning of the season to fill an

agreed amount of footage with a product that matches customer demand. The

challenge is to develop a balanced range which provides the appropriate mix of

colour, price, styling and fabric so that the customer is given the best possible choice

at all times. Also on the agenda is having, a mix of own-label products and brands in

such a way that it aligns with the company‘s strategic goal of increasing own-label

products and brands in such a way that it loyalty through exclusivity, and

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complementary to overall brand strategy. The buying department then decides on

suppliers who will supply the necessary merchandise as per the plans.

While selecting suppliers, various parameters are considered, such as past history,

quality, hit rates in supplying goods on time, margin and vendor‘s cooperation in

crisis situations. manufacturing capacity, future capacity expansions plans, financial

capabilities to invest for in such a way that the effectiveness of the chain is more

important than that of an individual link of the chain.

Future Plans: Future projects at Shoppers‘ Stop include Automatic Data Capture

(ADC) at the distribution centres. Every product has a different barcode and since

every barcode is number-based, there are chances of errors in operations, resulting in

stock inaccuracy. The company is also in the process of testing a consolidated intake

model, which, in time will add value to the total SCM. For this the company plans to

take the service of 3Pl (third party logistics) company which will do milk-runs on a

daily basis and collect stocks as per delivery authorization and deliver them to the

distribution centres. Another endeavor is to integrate suppliers into Shoppers‘ Stop‘s

supply chain through electronic data interchange (EDI) and the Internet. Shoppers‘

Stop is investing in B2B (web-enabled procurement solutions) to achieve this. The

idea is to disseminate and seek information faster at minima) cost and do online

transactions wit business associates to speed up the transaction processing. The first

phase of this project is already implemented and major vendors are now connected to

Shoppers‘ Stop‘s B2B web site.

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SCM is a key factor in improving overall efficiency, and creates an opportunity for

enhanced sales and customer satisfaction. Shoppers‘ Stop has already initiated

progressive steps in the management of its supply chain in line with its mission of

‗Nothing but the best.

5.48 Globalization and Competitiveness

Michael E Porter (1990) propagated a new theory that suggested moving beyond

comparative advantage to the competitive advantage of a nation. It was to reflect a

rich conception of competition that included segmented markets, differentiated

products/services, technology differences, and economics of scale. This new theory

had gone beyond cost and explains why companies from some nations are better than

others at creating advantages based on quality, features, market responsiveness, speed

and new product innovation.

The Indian apparel industry offered comparative advantage for the low end price point

products, due to some of the factor cost advantages. But, it failed to create those

advantages that could have provided this industry the required competitive advantage.

A successful high-income nation stays successful only by competing with distinctive,

differentiated products of services and that is what helps in making the image for

country. Whereas Indian textile and apparel industries were found to grow many fold

when it could move its pricing southwards, either due to increase in government

subsidies or driven by currency devaluation, which are neither distinctive nor

sustainable capabilities.

222
5.49 Advantages of ERP SAP:

The SRP Retail Expansion Programme provides retailer with access to consulting on a

range of activities, including non-tecnology issues such as law, taxation and product-

lifecycle management.

SAP is the latest enterprise software vendor to turn its attention to the retail sector,

which is still growing despite softening global economic conditions. Retails is

particularly strong in emerging economies in Asia, while many retailers in the US and

Europe are beginning to replace systems after a long period of slow IT investment.

SAP says its new consulting service will provide expert advice and support to retailers

who are looking to expand internationally, particularly in India and China. From the

outset, the service will focus on business issues rather than technology.

SAP‘s retail consultants provides advice on issues such as retail site selection, legal

and tax structuring, inventory financing and identifying appropriate local partners.

In some cases, the consultants may work for a locally licensed partner or for an

existing recognized consulting firm, but many consultants will be directly employed

by SAP

Oracle has more points retail operations than SAP and therefore a larger potential

customer base. But SAP has proven retail experience and a large bank of retail experts

in this favor.

223
Retailing is in a rapid state of change due to speedy technological developments,

changing competitive positions, varying consumer behavior as well as their

expectations and liberalized regulatory environment. In such a scenario, information

is crucial to planned control profitable retail businesses and it can be an important

source 2 of competitive advantage so long as it is affordable and readily available.

DSS (Decision Support System) which provide timely and accurate information can

be viewed as an integrated entity providing management with the tools and

information to assist their decision marking. There is a constant need capture accurate

information and make it available not only within the store but send it to warehouse,

distributors and manufacturers.

Modern advancements in ITES (Information Technology Enabled Services) and

communication has permitted deployment of DSS (Decision Support Systems). DSS

can be defined as computer based systems that help decision makers to confront ill

structured problems through direct interaction with data and analysis models.

224
 CHAPTER 6

DATA ANALYSIS

The researcher collected data from 3 major cities Mumbai, Delhi and Indore from

900 organized retail outlets comprising all three formats of organized retail viz.

Hypermarket, Midsized and Convenience store. Statistics from this data give very

useful insight into how the organized apparel retailers are aligning and focusing on

the supply chain so that the stocks are always available and visible to the

consumers, the level of technology that is being used in supply chain management

and how efficiency is monitored and its impact on sales and pricing on organized

apparel retail outlets.

6.1 Demographic factors:

Researcher has collected equal number of respondents from each city so that there is

symmetry in the study and biasness is minimized. Indian cities like Delhi, Mumbai

and Indore are chosen because Delhi represents northern part of India and has mixed

consumers from all walks of life, Mumbai being commercial capital of India also has

consumers from a varied range and finally Indore represents central India and known

for its business and trade.Mumbai was chosen for study because it is the most

important economic and commercial Centre. In addition to this it is among the top 10

preferred location for organized retail in India. (www.dnb.co.in/IndianRetailIndustry)

Further, Organised retailers from (Mumbai, Delhi and Indore have the highest share

(67.1%) in the total floor space in India. (www.dnb.co.in/IndianRetailIndustry)

Mumbai's retail system is the most advanced, with the largest number of

225
supermarketschainsthebiggestdepartmentstoresandthelargestdiversifiedretailconglom

eratesinIndia.(www.cbreindia.co.in,www.dnb.co.in/IndianRetailIndustry)

Organized retailing is growing parallel with real estate development in Mumbai.

With new residential complexes coming up, there is ample opportunity for the Retail

chains to open new outlets in these locations catering to cluster of nearby residential

complexes. With middleclass population living in these areas who would like to shop

in modern retail outlets, these stores quickly gain the needed critical mass of the

customers for the commercial viability of the enterprise.

Diversified residential complexes in the city of Mumbai truly represent the urban

middle class in India with scope for all three retail formats to co-exist. Also retailers

in Mumbai, Delhi and Indore have attained a certain level of maturity in to life cycle

and hence data can be relied upon to understand the current scenario of organized

retail and make future projections. It may be mentioned that Mumbai, Delhi and

Indore are trend setters in organized retail which is being emulated by other cities.

Respondents from these cities are well informed consumers and the local

supermarket chains showed willingness and co-operation.

226
 1. City:
Table 6.1

Location of No. of Shops Percent

Malls

Delhi 300 33.3

Indore 300 33.3
Mumbai 300 33.4
Total 900 100.0

Above table indicates that out of total 900 shops, 300 belong to Delhi, another
300 are located in Indore and remaining 300 are from Mumbai.

This information is represented using pie diagram as follows.

Figure 6.1

227
2. Nature of shop:
Table 6.2

Nature of Shop No. of shops Percent

Single Shop 300 33.3

Two to Five shop 300 33.3
Chain of shops 300 33.3
Total 900 100.0

Above table indicates that out of 900 shops, 300 shops belong to single
shop category, another 300 belong to 2 to 5 shops category and remaining 300
belong to chain of shops.
This information is represented using pie diagram as follows.

Figure 6.2

228
6.2 City and Nature of shop Cross tabulation:

Researcher has purposely selected 100 samples from single shops, 100

samples from two to five shop category and 100 samples from chain of shops

category from Delhi , 100 samples from single shops, 100 samples from two

to five shop category and 100 samples from chain of shops category from

Mumbai and 100 samples from single shops, 100 samples from two to five

shop category and 100 samples from chain of shops category from Indore city

to make the study symmetric and unbiased.

Table 6.3

City Nature of shop Total

Single Shop Two to Five Chain of Shops
shop
Delhi 100 100 100 300
Indore 100 100 100 300
Mumbai 100 100 100 300
Total 300 300 300 900

Figure 6.3

229
 1. Recognition of supply chain management.
This part of the research is focused to identify weather the supply chain
management mentioned and recognized by respondents company.

Questions which have been asked in questionnaire are analyzed as per the
response given by respondents.

6.1 the supply chain management mentioned and recognized by your company

Table 6.3

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 8 .9 .9 .9
Disagree 108 12.0 12.0 12.9
Neutral 100 11.1 11.1 24.0
Valid
Agree 222 24.7 24.7 48.7
Strongly Agree 462 51.3 51.3 100.0
Total 900 100.0 100.0

52 percent of the respondents are strongly agreeing that supply chain management is

mentioned and recognized by their company,25 percent of the respondents are

agreeing that supply chain management is mentioned and recognized by their

company,12 percent of the respondents are agreeing that supply chain management is

mentioned and recognized by their company where as 9 percent of the respondents

are strongly disagreeing that supply chain management is mentioned and recognized

by their company11 percent of the respondents are having neutral opinion that supply

chain management is mentioned and recognized by their company

230
 6.2 supply chain management is different from value chain management.

Table 6.4

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 7 .8 .8 .8
Disagree 59 6.6 6.6 7.3
Neutral 47 5.2 5.2 12.6
Valid
Agree 406 45.1 45.1 57.7
Strongly Agree 381 42.3 42.3 100.0
Total 900 100.0 100.0

42 percent respondents are strongly agreeing to the fact that supply chain management

is different from value chain management percent respondents are strongly

disagreeing to the fact that supply chain management is different from value chain

management and 6 percent respondents are not having any opinion that supply chain

management is different from value chain management

6.3 Do you think that supply chain management has an impact on pricing?

Table 6.5

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 66 7.3 7.3 7.3
Disagree 172 19.1 19.1 26.4
Neutral 275 30.6 30.6 57.0
Valid
Agree 335 37.2 37.2 94.2
Strongly Agree 52 5.8 5.8 100.0
Total 900 100.0 100.0

231
7 percent of the respondents strongly disagree that supply chain management has an

impact on pricing.19 percent of the respondents strongly disagree that supply chain

management has an impact on pricing, 30 percent of the respondents strongly are

neutral that supply chain management has an impact on pricing,37 percent of the

respondents agree that supply chain management has an impact on pricing,6 percent

of the respondents strongly agree that supply chain management has an impact on

pricing.

6.4 There is close relation between supply chain management and organized apparel
retail business.

Table 6.6

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 42 4.7 4.7 4.7
Disagree 202 22.4 22.4 27.1
Neutral 504 56.0 56.0 83.1
Valid
Agree 93 10.3 10.3 93.4
Strongly Agree 59 6.6 6.6 100.0
Total 900 100.0 100.0

5 percent respondents strongly disagree that there is close relation between supply

chain management and organized apparel retail business.22 percent respondents

disagree that there is close relation between supply chain management and organized

apparel retail business,56 percent respondents are nutral that there is close relation

between supply chain management and organized apparel retail business,11 percent

respondents agree that there is close relation between supply chain management and

organized apparel retail business and 7 percent respondents strongly agree that there is

close relation between supply chain management and organized apparel retail

business

232
 6.5 Supply chain is the network of organization that are involved in different process
and activities that produces value in the form of product and services in the hands of
consumer.

Table 6.7

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 156 17.3 17.3 17.3
Disagree 222 24.7 24.7 42.0
Neutral 315 35.0 35.0 77.0
Valid
Agree 148 16.4 16.4 93.4
Strongly Agree 59 6.6 6.6 100.0
Total 900 100.0 100.0

35 percent of respondents are having neutral opinion that Supply chain is the network

of organization that are involved in different process and activities that produces value

in the form of product and services in the hands of consumer.6 percent of respondents

strongly agree that Supply chain is the network of organization that are involved in

different process and activities that produces value in the form of product and services

in the hands of consumer,16 percent of respondents agree that Supply chain is the

network of organization that are involved in different process and activities that

produces value in the form of product and services in the hands of consumer,24

percent of respondents disagree that Supply chain is the network of organization that

are involved in different process and activities that produces value in the form of

product and services in the hands of consumer,17percent of respondents strongly

disagree that Supply chain is the network of organization that are involved in different

process and activities that produces value in the form of product and services in the

hands of consumer
233
 Table 6.8

A Recognition of supply chain management

Str
on
gly
Sr
Agree Neutral Disagree Di
no
sa
Strongly gre
Question agree e
Is the supply chain management
1 mentioned and recognised by your 462 222 100 108 8
company
Do you think that supply chain
2 management is different from value 381 406 47 59 7
chain management.
Do you think that supply chain
3 management is different from 52 335 275 172 66
supplier management.
There is close relation between
4 supply chain management and 59 93 504 202 42
clothing retail business.
Supply chain is the network of
organisation that are involved
different process and activities that
5
produces value in the form of
product and services in the hands of 15
consumer. 59 148 315 222 6

Response given to above mentioned question is rated as follows.

Strongly disagree : 1
Disagree : 2
Neutral : 3
Agree : 4
Strongly agree : 5
Using rating of these questions, score of recognition of SCM is calculated for
each respondent using formula given below.

Score of recognition of SCM = Sum of scores of all questions * 100

Maximum score of all questions

234
Descriptive statistics calculated is as given below.

Descriptive Statistics

Table 6.9

N Minimu Maximu Mean Std.

m m Deviation
Recognition_of_SCM_
900 32.00 100.00 68.48 10.34
score

Above table indicate that mean recognition score of SCM is 68.48 with

standard deviation 10.34. Respondents are classified in to three group according to

their score of recognition. If score is less than 58.14 then respondent is classified as

‗low recognition‘. If score is from 58.14 to 78.82 then respondent is classified as

‗Medium recognition‘. If score is more than 78.82 then respondent is classified as

‗High recognition‘. Table of classification is as shown below.

Table 6.10

Recognition of Number of Percent

SCM level respondents
High 146 16.2
Low 133 14.8
Medium 621 69.0
Total 900 100.0

235
6.03 Importance of supply chain management:

Researcher has analyzed the data to understand the importance of supply chain
management.This part of the study deals with the need to implement supply chain
management in organized apparel retail outlets.

6.6 There is need to implement supply chain management

Table 6.11

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 45 5.0 5.0 5.0
Disagree 72 8.0 8.0 13.0
Neutral 206 22.9 22.9 35.9
Valid
Agree 153 17.0 17.0 52.9
Strongly Agree 424 47.1 47.1 100.0
Total 900 100.0 100.0

5 percent of respondents strongly disagree that there is a need to implement supply

chain management,8 percent of respondents disagree that there is a need to implement

supply chain management,23 percent of respondents strongly are neutral towards the

need to implement supply chain management,17 percent of respondents agree that

there is a need to to implement supply chain management and 47 percent of

respondents strongly disagree that there is a need to to implement supply chain

management

236
6.7 There is an impact of marketing and supply chain interface on an integrated

basis In ―Organized apparel and clothing‖ category of the retail outlets.

Table 6.12

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 89 9.9 9.9 9.9
Disagree 142 15.8 15.8 25.7
Neutral 214 23.8 23.8 49.4
Valid
Agree 131 14.6 14.6 64.0
Strongly Agree 324 36.0 36.0 100.0
Total 900 100.0 100.0

10 percent of respondents strongly disagree that there is an impact of marketing and

supply chain interface on an integrated basis in ―Organized apparel and clothing‖

category of the retail outlets.16 percent of respondents disagree that there is an impact

of marketing and supply chain interface on an integrated basis in ―Organized apparel

and clothing‖ category of the retail outlets.24 percent of respondents have no opinion

that there is an impact of marketing and supply chain interface on an integrated basis

in ―Organized apparel and clothing‖ category of the retail outlets.15 percent of

respondents agree that there is an impact of marketing and supply chain interface on

an integrated basis in ―Organized apparel and clothing‖ category of the retail

outlets.36 percent of respondents strongly agree that there is an impact of marketing

and supply chain interface on an integrated basis in ―Organized apparel and clothing‖

category of the retail outlets.

237
 6.8 Better supply chain management leads to increased sales

Table 6.13

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 183 20.3 20.3 20.3
Disagree 94 10.4 10.4 30.8
Neutral 204 22.7 22.7 53.4
Valid
Agree 285 31.7 31.7 85.1
Strongly Agree 134 14.9 14.9 100.0
Total 900 100.0 100.0

23 percent of the respondents are neutral towards better supply chain management

leads to increased sales,20 percent of the respondents are strongly disagreeing that

better supply chain management leads to increased sales,10 percent of the respondents

are disagreeing that better supply chain management leads to increased sales,31

percent of the respondents are agreeing that better supply chain management leads to

increased sales and 15 percent of the respondents are strongly agree that better supply

chain management leads to increased sales.

238
 6.9 The supply chain in the retail apparel business has an impact on economies of scale of
retailers with respect to optimum inventory management in the supply chain cycle.

Table 6.14

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 19 2.1 2.1 2.1
Disagree 84 9.3 9.3 11.4
Neutral 209 23.2 23.2 34.7
Valid
Agree 383 42.6 42.6 77.2
Strongly Agree 205 22.8 22.8 100.0
Total 900 100.0 100.0

2 percent of the respondents strongly Disagree that The supply chain in the retail apparel

business has an impact on economies of scale of retailers with respect to optimum inventory

management in the supply chain cycle., 9 percent of the respondents disagree that The

supply chain in the retail apparel business has an impact on economies of scale of retailers

with respect to optimum inventory management in the supply chain cycle.,23 percent of

the respondents are neutral that The supply chain in the retail apparel business has an

impact on economies of scale of retailers with respect to optimum inventory management in

the supply chain cycle.,43 percent of the respondents agree that The supply chain in the

retail apparel business has an impact on economies of scale of retailers with respect to

optimum inventory management in the supply chain cycle and 23 percent of the

respondents strongly agree that The supply chain in the retail apparel business has an

impact on economies of scale of retailers with respect to optimum inventory management in

the supply chain cycle.

239
.

6.10 Effective supply chain will lead to long term performance improvement.(better
pricing of apparels)

Table 6.15

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 39 4.3 4.3 4.3
Disagree 83 9.2 9.2 13.6
Neutral 192 21.3 21.3 34.9
Valid
Agree 336 37.3 37.3 72.2
Strongly Agree 250 27.8 27.8 100.0
Total 900 100.0 100.0

4 percent of the respondents strongly Disagree that Effective supply chain will lead to

long term performance improvement.(better pricing of apparels),9 percent of the

respondents disagree that Effective supply chain will lead to long term performance

improvement.(better pricing of apparels),21 percent of the respondents are neutral that

Effective supply chain will lead to long term performance improvement.(better

pricing of apparels),37 percent of the respondents agree that Effective supply chain

will lead to long term performance improvement.(better pricing of apparels) and 29

percent of the respondents strongly agree that Effective supply chain will lead to long

term performance improvement.(better pricing of apparels),

240
 Table 6.16

B Importance of supply chain management

Sr Strongly Strongly
Agree Neutral Disagree
no Question agree Disagree
There is need to implement supply
6
chain management 424 153 206 72 45
Supply chain management will
7 improve company's competitive
advantage. 324 131 214 142 89
New rules of competition become to
8
supply chain management. 134 285 204 94 183
The supply chain in the retail
clothing business extends to various
9
levels of company- supplier
relationship 205 383 209 84 19
Effective supply chain will lead to
10 long term performance
improvement. 250 336 192 83 39

Response given to above mentioned question is rated as follows.

Strongly disagree : 1
Disagree : 2
Neutral : 3
Agree : 4
Strongly agree : 5
Using rating of these questions, score of satisfaction is calculated for each
respondent using formula given below.

Score of importance of SCM = Sum of scores of all questions * 100

Maximum score of all questions

241
Descriptive statistics calculated is as given below.

Descriptive Statistics

Table 6.17

N Minimu Maximu Mean Std.

m m Deviation
Importance of SCM
900 20.00 100.00 72.16 13.28
score

Above table indicate that mean importance score of SCM is 72.16 with standard

deviation 13.28. Respondents are classified in to three groups according to their score

of importance. If score is less than 58.88 then respondent is classified as ‗low

importance‘. If score is from 58.88 to 85.45 then respondent is classified as ‗Medium

importance‘. If score is more than 85.45 then respondent is classified as ‗High

importance‘. Table of classification is as shown below.

Table 6.18

Importance of Number of Percent

SCM level respondents
High 138 15.3
Low 122 13.6
Medium 640 71.1
Total 900 100.0

242
 2. Performance of supply chain management:

As per the research objective to identify the performance of supply chain

management in organized retail apparel outlets, researcher has collected the

relevant data and analysis results are as fallows.

6.11 Supply chain management is very effective related to operational performance.

Table 6.19

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 42 4.7 4.7 4.7
Disagree 123 13.7 13.7 18.3
Neutral 275 30.6 30.6 48.9
Valid
Agree 364 40.4 40.4 89.3
Strongly Agree 96 10.7 10.7 100.0
Total 900 100.0 100.0

5 percent of the respondents strongly disagree that Supply chain management is very

effective related to operational performance,14 percent of the respondents disagree

that Supply chain management is very effective related to operational performance,31

percent of the respondents are neutral that Supply chain management is very effective

related to operational performance,40 percent of the respondents agree that Supply

chain management is very effective related to operational performance and 11 percent

of the respondents strongly agree that Supply chain management is very effective

related to operational performance,

243
 6.12 Supply chain management can spend on the fashion of the product to follow the
market change.

Table 6.20

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 16 1.8 1.8 1.8
Disagree 303 33.7 33.7 35.4
Neutral 222 24.7 24.7 60.1
Valid
Agree 83 9.2 9.2 69.3
Strongly Agree 276 30.7 30.7 100.0
Total 900 100.0 100.0

2 percent of the respondents strongly disagree that Supply chain management can

spend on the fashion of the product to follow the market change.34 percent of the

respondents disagree that Supply chain management can spend on the fashion of the

product to follow the market change,25 percent of the respondents are neutral that

Supply chain management can spend on the fashion of the product to follow the

market change,9 percent of the respondents agree that Supply chain management can

spend on the fashion of the product to follow the market change and 31 percent of the

respondents strongly agree that Supply chain management can spend on the fashion of

the product to follow the market change

244
 6.13 Infrastructure related factors have an impact on sales of the organized retail
apparel outlets

Table 6.21

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 16 1.8 1.8 1.8
Disagree 225 25.0 25.0 26.8
Neutral 235 26.1 26.1 52.9
Valid
Agree 324 36.0 36.0 88.9
Strongly Agree 100 11.1 11.1 100.0
Total 900 100.0 100.0

2 percent of the respondents strongly disagree that Infrastructure related factors have

an impact on sales of the organized retail apparel outlets 25 percent of the

respondents disagree that Infrastructure related factors have an impact on sales of

the organized retail apparel outlets 26 percent of the respondents are neutral that

Infrastructure related factors have an impact on sales of the organized retail apparel

outlets 36 percent of the respondents agree that Infrastructure related factors have an

impact on sales of the organized retail apparel outlets and 11 percent of the

respondents strongly agree that Infrastructure related factors have an impact on sales

of the organized retail apparel outlets

245
 6.14 There is an impact of backend merchandise management on the sales of the
organized apparel retail outlets.

Table 6.22

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 10 1.1 1.1 1.1
Disagree 187 20.8 20.8 21.9
Neutral 327 36.3 36.3 58.2
Valid
Agree 161 17.9 17.9 76.1
Strongly Agree 215 23.9 23.9 100.0
Total 900 100.0 100.0

1 percent of the respondents strongly disagree that there is an impact of backend

merchandise management on the sales of the organized apparel retail outlets,21

percent of the respondents disagree that there is an impact of backend merchandise

management on the sales of the organized apparel retail outlets.36 percent of the

respondents are neutral that there is an impact of backend merchandise management

on the sales of the organized apparel retail outlets.18 percent of the respondents

agree that there is an impact of backend merchandise management on the sales of

the organized apparel retail outlets and 24 percent of the respondents strongly agree

that there is an impact of backend merchandise management on the sales of the

organized apparel retail outlets.

246
6.15 Effective supply chain management can bring right production in the right
season can attract more customers and improve customer satisfaction.
Table 6.23

Frequency Percent Valid Percent Cumulative

Percent

Strongly Disagree 3 .3 .3 .3
Disagree 378 42.0 42.0 42.3
Neutral 95 10.6 10.6 52.9
Valid
Agree 216 24.0 24.0 76.9
Strongly Agree 208 23.1 23.1 100.0
Total 900 100.0 100.0

3 percent of the respondents strongly disagree that effective supply chain management

can bring right production in the right season can attract more customers and improve

customer satisfaction.42 percent of the respondents disagree that effective supply

chain management can bring right production in the right season can attract more

customers and improve customer satisfaction.11 percent of the respondents are neutral

that effective supply chain management can bring right production in the right season

can attract more customers and improve customer satisfaction.24 percent of the

respondents agree that effective supply chain management can bring right production

in the right season can attract more customers and improve customer satisfaction and

23 percent of the respondents strongly agree that effective supply chain management

can bring right production in the right season can attract more customers and improve

customer satisfaction.

247
 Table 6.24

C Performance of supply chain management

Supply chain management is very effective related to

11
operational performance. 96 364 275 123 42
Supply chain management can spend on the fashion of
12
the product to follow the market change. 276 83 222 303 16
Supplier management can improve the delivery
13
performance and cost effect.
100 324 235 225 16
Effective supply chain management can reduce the
14
inventory and speed the inventory turnover ratio. 215 161 327 187 10
Bring right production in the right season can attract
15
more customers and improve customer satisfaction. 208 216 95 378 3

Response given to above mentioned question is rated as follows.

Strongly disagree : 1
Disagree : 2
Neutral : 3
Agree : 4
Strongly agree : 5

Using rating of these questions, score of satisfaction is calculated for each

respondent using formula given below.

Score of performance of SCM = Sum of scores of all questions * 100

Maximum score of all questions

Descriptive statistics calculated is as given below.

248
 Descriptive Statistics
Table 6.25

N Minimu Maximu Mean Std.

m m Deviation

Performance of SCM
900 32.00 96.00 66.88 8.82
score

Above table indicate that mean performance score of SCM is 66.88 with standard

deviation 8.82. Respondents are classified in to three groups according to their score

of performance. If score is less than 58.06 then respondent is classified as ‗low

performance‘. If score is from 58.06 to 75.70 then respondent is classified as

‗Medium performance‘. If score is more than 75.70 then respondent is classified as

‗High performance‘. Table of classification is as shown below.

249
 Table 6.26

Performance of Number of Percent

SCM level respondents
High 45 5.0
Low 137 15.2
Medium 718 79.8
Total 900 100.0

6.04 Supplier Performance:

This part of the study deals with the supplier performance.

6.16 The lead time for manufacturing forced the company to keep more inventories.

Table 6.27

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 4 .4 .4 .4
Disagree 47 5.2 5.2 5.7
Neutral 219 24.3 24.3 30.0
Valid
Agree 431 47.9 47.9 77.9
Strongly Agree 199 22.1 22.1 100.0
Total 900 100.0 100.0

4 percent of the respondents strongly disagree that lead time for manufacturing forced

the company to keep more inventories,5 percent of the respondents disagree that lead

time for manufacturing forced the company to keep more inventories.24 percent of

the respondents are neutral that lead time for manufacturing forced the company to

keep more inventories,48 percent of the respondents agree that lead time for

manufacturing forced the company to keep more inventories and 22 percent of the

250
respondents strongly agree that lead time for manufacturing forced the company to

keep more inventories

6.17 Lead time influence the fashion level of the production and time to market.

Table 6.28

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 45 5.0 5.0 5.0
Disagree 171 19.0 19.0 24.0
Neutral 270 30.0 30.0 54.0
Valid
Agree 215 23.9 23.9 77.9
Strongly Agree 199 22.1 22.1 100.0
Total 900 100.0 100.0

5 percent of the respondents strongly disagree that Lead time influence the fashion

level of the production and time to market.19 percent of the respondents disagree that

Lead time influence the fashion level of the production and time to market.30 percent

of the respondents are neutral that Lead time influence the fashion level of the

production and time to market.24 percent of the respondents agree that Lead time

influence the fashion level of the production and time to market and 22 percent of the

respondents strongly agree that Lead time influence the fashion level of the

production and time to market.

251
6.18. Lead time effect on the correctness of forecasting in supply chain management.

Table 6.29

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 33 3.7 3.7 3.7
Disagree 379 42.1 42.1 45.8
Neutral 160 17.8 17.8 63.6
Valid
Agree 172 19.1 19.1 82.7
Strongly Agree 156 17.3 17.3 100.0
Total 900 100.0 100.0

4 percent of the respondents strongly disagree that Lead time effect on the correctness

of forecasting in supply chain management,42 percent of the respondents disagree that

Lead time effect on the correctness of forecasting in supply chain managementm18

percent of the respondents are neutral that Lead time effect on the correctness of

forecasting in supply chain management,19 percent of the respondents agree that Lead

time effect on the correctness of forecasting in supply chain management and 17

percent of the respondents strongly agree that Lead time effect on the correctness of

forecasting in supply chain management.

252
6.19 The supplier's productivity influence retail company's supply chain management

Table 6.30

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 12 1.3 1.3 1.3
Disagree 180 20.0 20.0 21.3
Neutral 392 43.6 43.6 64.9
Valid
Agree 203 22.6 22.6 87.4
Strongly Agree 113 12.6 12.6 100.0
Total 900 100.0 100.0

1 percent of the respondents strongly disagree that supplier's productivity influence

retail company's supply chain management,20 percent of the respondents disagree that

supplier's productivity influence retail company's supply chain management.43

percent of the respondents are neutral that supplier's productivity influence retail

company's supply chain management,23 percent of the respondents agree that

supplier's productivity influence retail company's supply chain management and 13

percent of the respondents strongly agree that supplier's productivity influence retail

company's supply chain management.

253
 6.20 There are some uncertainty involved for the late supply in the ordering system
such as late delivery, late loading, machine brake down and custom stop-check etc.
Table 6.31

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 15 1.7 1.7 1.7
Disagree 277 30.8 30.8 32.4
Neutral 200 22.2 22.2 54.7
Valid
Agree 280 31.1 31.1 85.8
Strongly Agree 128 14.2 14.2 100.0
Total 900 100.0 100.0

2 percent of the respondents strongly disagree that There are some uncertainty

involved for the late supply in the ordering system such as late delivery, late loading,

machine brake down and custom stop-check etc.,31 percent of the respondents

disagree that There are some uncertainty involved for the late supply in the ordering

system such as late delivery, late loading, machine brake down and custom stop-

check.22 percent of the respondents are neutral that There are some uncertainty

involved for the late supply in the ordering system such as late delivery, late loading,

machine brake down and custom stop-check.31 percent of the respondents agree that

There are some uncertainty involved for the late supply in the ordering system such as

late delivery, late loading, machine brake down and custom stop-check and 14 percent

of the respondents strongly agree that There are some uncertainty involved for the late

supply in the ordering system such as late delivery, late loading, machine brake down

and custom stop-check

254
 Table 6.32

D Supplier Performance
Strongly Strongly
Sr no Agree Neutral Disagree
Question agree Disagree
The lead times for manufacturing forced the
16
company to keep more inventory. 199 431 219 4 4
Lead time influence the fashion level of the
17
production and time to market. 199 215 270 11 45
Lead time effect on the correct of forecasting
18
in supply chain management. 156 172 160 3 33
The supplier's productivity influence retail
19
company's supply chain management. 113 203 392 10 12
There are some uncertainty involved for the
late supply in the ordering system such as late
20
delivery, late loading, machine broke down
and custom stop-check etc. 128 280 200 277 15

Response given to above mentioned question is rated as follows.

Strongly disagree : 1
Disagree : 2
Neutral : 3
Agree : 4
Strongly agree : 5

Using rating of these questions, score of satisfaction is calculated for each

respondent using formula given below.

Score of supplier performance = Sum of scores of all questions * 100

Maximum score of all questions

255
 Descriptive statistics calculated is as given below.

Descriptive Statistics

Table 6.33

N Minimu Maximu Mean Std.

m m Deviation
Suppliers Performance
900 32.00 96.00 67.19 10.77
score

Above table indicate that mean supplier performance score is 66.19 with

standard deviation 10.77. Respondents are classified in to three groups according to

their score of supplier performance. If score is less than 56.42 then respondent is

classified as ‗low supplier performance‘. If score is from 56.42 to 77.97 then

respondent is classified as ‗Medium supplier performance‘. If score is more than

77.97 then respondent is classified as ‗High supplier performance‘. Table of

classification is as shown below.

Table 6.34

Suppliers Number of Percent

Performance Level respondents

High 105 11.7

Low 102 11.3
Medium 693 77.0
Total 900 100.0

256
 3. Distribution channel:
Distribution channel is a vital part of supply chain management and results from data
analysis are interpreted as fallows:

6.21 Your company location is good for your target market

Table 6.35

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 25 2.8 2.8 2.8
Disagree 228 25.3 25.3 28.1
Neutral 220 24.4 24.4 52.6
Valid
Agree 115 12.8 12.8 65.3
Strongly Agree 312 34.7 34.7 100.0
Total 900 100.0 100.0

3 percent of the respondents strongly disagree that company location is good for the

target market.25 percent of the respondents disagree that company location is good

for the target market.24 percent of the respondents are neutral that company location

is good for the target market.13 percent of the respondents agree that company

location is good for the target market,35 percent of the respondents strongly agree

that company location is good for the target market.

257
 6.22 Sales performance is related to good amount of degree to your distribution
channel.

Table 6.36

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 15 1.7 1.7 1.7
Disagree 421 46.8 46.8 48.4
Neutral 166 18.4 18.4 66.9
Valid
Agree 110 12.2 12.2 79.1
Strongly Agree 188 20.9 20.9 100.0
Total 900 100.0 100.0

2 percent of the respondents strongly disagree that Sales performance is related to

good amount of degree to your distribution channel,47 percent of the respondents

strongly disagree that Sales performance is related to good amount of degree to your

distribution channel.18 percent of the respondents are neutral that Sales performance

is related to good amount of degree to your distribution channel,12 percent of the

respondents agree that Sales performance is related to good amount of degree to your

distribution channel and 21 percent of the respondents strongly agree that Sales

performance is related to good amount of degree to your distribution channel.

258
 6.23 The inventory control can be improved through customer service and sales
strategy, such as promotion, membership, credit and clearance sales.

Table 6.37

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 55 6.1 6.1 6.1
Disagree 194 21.6 21.6 27.7
Neutral 306 34.0 34.0 61.7
Valid
Agree 186 20.7 20.7 82.3
Strongly Agree 159 17.7 17.7 100.0
Total 900 100.0 100.0

6 percent of the respondents strongly disagree that inventory control can be improved

through customer service and sales strategy, such as promotion, membership, credit

and clearance sales.22 percent of the respondents strongly disagree that inventory

control can be improved through customer service and sales strategy, such as

promotion, membership, credit and clearance sales.34 percent of the respondents are

neutral that inventory control can be improved through customer service and sales

strategy, such as promotion, membership, credit and clearance sales.21 percent of the

respondents agree that inventory control can be improved through customer service

and sales strategy, such as promotion, membership, credit and clearance sales and 18

percent of the respondents strongly agree that inventory control can be improved

through customer service and sales strategy, such as promotion, membership, credit

and clearance sales.

259
 6.24 Multichannel distribution benefits for the inventory control through inter-
adjustment of the stock.

Table 6.38

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 38 4.2 4.2 4.2
Disagree 206 22.9 22.9 27.1
Neutral 307 34.1 34.1 61.2
Valid
Agree 235 26.1 26.1 87.3
Strongly Agree 114 12.7 12.7 100.0
Total 900 100.0 100.0

4 percent of the respondents strongly disagree that Multichannel distribution benefits

for the inventory control through inter-adjustment of the stock.23 percent of the

respondents disagree that Multichannel distribution benefits for the inventory control

through inter-adjustment of the stock.34 percent of the respondents are neutral that

Multichannel distribution benefits for the inventory control through inter-adjustment

of the stock,26 percent of the respondents agree that Multichannel distribution

benefits for the inventory control through inter-adjustment of the stock,13 percent of

the respondents strongly agree that Multichannel distribution benefits for the

inventory control through inter-adjustment of the stock

260
 Table 6.39

Distribution channel

Sr no Strongly Agree Neutral Disagree Strongly

Question agree Disagree
Your company location is good for your
21
target market 312 115 220 228 25
Sales performance is related to good
22 amount of degree to your distribution
channel. 188 110 166 421 15
The inventory control can be improved
through customer service and sales
23
strategy, such as promotion,
membership, credit and clearance sales. 159 186 306 194 55
Multichannel distribution benefits for the
24 inventory control through inter-
adjustment on the stock. 114 235 307 206 38

Response given to above mentioned question is rated as follows.

Strongly disagree : 1
Disagree : 2
Neutral : 3
Agree : 4
Strongly agree : 5

Using rating of these questions, score of satisfaction is calculated for each

respondent using formula given below.

Score of distribution channel = Sum of scores of all questions * 100

Maximum score of all questions

261
 Descriptive statistics calculated is as given below.

Descriptive Statistics

Table 6.40

N Minimu Maximu Mean Std.

m m Deviation
Distribution Channel
900 20.00 100.00 65.15 16.04
score

Above table indicate that mean distribution channel score is 65.15 with standard

deviation 16.04. Respondents are classified in to three groups according to their score

of distribution channel. If score is less than 49.11 then respondent is classified as ‗low

distribution channel‘. If score is from 49.11 to 81.20 then respondent is classified as

‗Medium distribution channel‘. If score is more than 81.20 then respondent is

classified as ‗High distribution channel.

Table of classification is as shown below.

Table 6.41

Distribution Chain Number of Percent

level respondents

Average 629 69.9

Excellent 125 13.9
Poor 146 16.2
Total 900 100.0

262
6.05 Customer demand:

Researcher has collected the data and its analysis says that customer demand is

influenced by the market information, customer feedback on the production and

communication and information technology is effectively utilized to enable the

information collected from the customers and the market for the inventory control and

forecasting.

6.25 The correctness of the market information is important for the inventory control.

Table 6.42

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 30 3.3 3.3 3.3
Disagree 243 27.0 27.0 30.3
Neutral 199 22.1 22.1 52.4
Valid
Agree 166 18.4 18.4 70.9
Strongly Agree 262 29.1 29.1 100.0
Total 900 100.0 100.0

3 percent of the respondents strongly disagree that The correctness of the market

information is important for the inventory control,27 percent of the respondents

disagree that The correctness of the market information is important for the inventory

control,22 percent of the respondents are neutral that The correctness of the market

information is important for the inventory control,18 percent of the respondents agree

that The correctness of the market information is important for the inventory control

and 29 percent of the respondents strongly agree that The correctness of the market

information is important for the inventory control

263
 Q26 The customer feedback on the production can lead the direction of the fashion
of production.

Table 6.43

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 20 2.2 2.2 2.2
Disagree 83 9.2 9.2 11.4
Neutral 203 22.6 22.6 34.0
Valid
Agree 422 46.9 46.9 80.9
Strongly Agree 172 19.1 19.1 100.0
Total 900 100.0 100.0

2 percent of the respondents strongly disagree that customer feedback on the

production can lead the direction of the fashion of production.9 percent of the

respondents strongly disagree that customer feedback on the production can lead the

direction of the fashion of production,23 percent of the respondents are neutral that

customer feedback on the production can lead the direction of the fashion of

production ,47 percent of the respondents agree that customer feedback on the

production can lead the direction of the fashion of production,19 percent of the

respondents strongly agree that customer feedback on the production can lead the

direction of the fashion of production.

264
6.27 There is a impact of ERP on improving the value preposition of the retail
―Apparel sector‖ in optimizing the economies of scale (bottom line).
Table 6.44

Frequency Percent Valid Percent Cumulative

Percent
Strongly Disagree 17 1.9 1.9 1.9
Disagree 115 12.8 12.8 14.7
Neutral 226 25.1 25.1 39.8
Valid
Agree 336 37.3 37.3 77.1
Strongly Agree 206 22.9 22.9 100.0
Total 900 100.0 100.0

2 percent of the respondents strongly disagree that There is a impact of ERP on

improving the value preposition of the retail ―Apparel sector‖ in optimizing the

economies of scale (bottom line). 13 percent of the respondents disagree that There is

a impact of ERP on improving the value preposition of the retail ―Apparel sector‖ in

optimizing the economies of scale (bottom line).25 percent of the respondents are

neutral that There is a impact of ERP on improving the value preposition of the retail

―Apparel sector‖ in optimizing the economies of scale (bottom line).37 percent of the

respondents agree that There is a impact of ERP on improving the value preposition

of the retail ―Apparel sector‖ in optimizing the economies of scale (bottom line).23

percent of the respondents strongly agree that There is a impact of ERP on improving

the value preposition of the retail ―Apparel sector‖ in optimizing the economies of

scale (bottom line).

265
 Table 6.45

Customer demand

Sr Strongly Agree Neutral Disagree Strongly

no Question agree Disagree
The correctness of the market
25 information is important for the
inventory control. 262 166 199 243 30
The customer feedback on the
26 production can lead the direction of the
fashion of production. 172 422 203 83 20
Communication and information
technology is effectively utilised to
27 enable the information collected from
the customers and the market for the
inventory control and forecasting. 206 336 226 115 17

Response given to above mentioned question is rated as follows.

Strongly disagree : 1
Disagree : 2
Neutral : 3
Agree : 4
Strongly agree : 5

Using rating of these questions, score of satisfaction is calculated for each

respondent using formula given below.

Score of customer demand = Sum of scores of all questions * 100

Maximum score of all questions

266
Descriptive statistics calculated is as given below.

Descriptive Statistics

Table 6.46

N Minimu Maximu Mean Std.

m m Deviation
Customers Demand
900 25.00 95.00 70.05 12.99
score

Above table indicate that mean customer demand score is 70.05 with standard

deviation 12.99. Respondents are classified in to three groups according to their score

of customer demand. If score is less than 57.06 then respondent is classified as ‗low

customer demand‘. If score is from 57.06 to 83.05 then respondent is classified as

‗Medium customer demand‘. If score is more than 83.05 then respondent is classified

as ‗High customer demand.

Table of classification is as shown below.

Table 6.47

Customer demand Number of Percent

Level respondents
High 163 18.1
Low 151 16.8
Medium 586 65.1
Total 900 100.0

267
 6.06 Price Effectiveness: Impact of supply chan management on price effectiveness is
analyzed as fallows
Table 6.48

G Price effectiveness

Sr no Strongly Agree Neutral Disagree Strongly

Question agree Disagree
Supply chain management play
28 important role in reduction of 124 145 210 265 156
transportation cost.
Supply chain management is effective
29 101 183 244 256 116
to control overall price.
Supply chain management is useful
30 108 166 231 257 138
to reduce labour cost.

Response given to above mentioned question is rated as follows.

Strongly disagree : 1
Disagree : 2
Neutral : 3
Agree : 4
Strongly agree : 5

Using rating of these questions, score of satisfaction is calculated for each

respondent using formula given below.

Score of customer demand = Sum of scores of all questions * 100

Maximum score of all questions

Descriptive statistics calculated is as given below.

Descriptive Statistics

Table 6.49

N Minimum Maximum Mean Std. Deviation

Price Effectiveness score 900 20.00 100.00 56.78 16.88

268
Above table indicate that mean price effectiveness score is 56.78 with standard

deviation 16.88. Respondents are classified in to three groups according to their score

of price effectiveness. If score is less than 39.89 then respondent is classified as ‗low

price effectiveness‘. If score is from 57.06 to 83.05 then respondent is classified as

‗Medium customer demand. If score is more than 83.05 then respondent is classified

as ‗High customer demand.

6.07 Testing of hypothesis:

1. City * Recognition_of_SCM_level

To study relationship between Location of shops and recognition of SCM level,

chi-square test is applied. Hypothesis for the test is as follows.
H0: There is no association between city and recognition of SCM level.
H1: There is an association between city and recognition of SCM level.

Table 6.50

City Recognition of SCM level Total

Low Medium High
Delhi 35 220 45 300
Indore 80 196 24 300
Mumbai 18 205 77 300
Total 146 621 146 900

269
 Figure 6.4

Results of chi square test are as follows

Chi-square calculated value = 76.995

Chi-square table value (5% loc) = 9.488
Degree of freedom =4
Result of test = Rejected
Since Chi-square calculated value (76.995) is greater than table value(9.488) hence
test is rejected. Hence null hypothesis H0 is rejected.
Conclusion is there is an association between tools and techniques with regards to
supply chain management in organized apparel retail outlets and its impact on pricing.

2. To study relationship between economies of scale of retailers with respect to

optimum inventory management in the supply chain cycle.

H02: There is no association between economies of scale of retailers with respect to

optimum inventory management in the supply chain cycle.

270
H12: There is an association between economies of scale of retailers with respect to
optimum inventory management in the supply chain cycle.

Table 6.51

City Economies of scale Total

Low Medium High
Delhi 31 248 21 300
Indore 74 205 21 300
Mumbai 17 187 96 300
Total 122 640 138 900

Figure 6.5

Results of chi square test are as follows

Chi-square calculated value = 134.125
Chi-square table value (5% loc) = 9.488
Degree of freedom =4
Result of test = Rejected
Since Chi-square calculated value (134.125) is greater than table value(9.488)hence
test is rejected. Hence null hypothesis H0 is rejected.

271
Conclusion is there is an association between economies of scale of retailers with
respect to optimum inventory management in the supply chain cycle.

3. To study impact of marketing and supply chain interface on an integrated basis in

organized apparel retail outlets. chi-square test is applied. Hypothesis for the test is as

follows.

H03: There is no association between marketing and supply chain interface on an

integrated basis in organized apparel retail outlets.

H13 : There is an association between marketing and supply chain interface on an

integrated basis in organized apparel retail outlets.

Table 6.52

City Performance of SCM level Total

Low Medium High
Delhi 38 247 15 300
Indore 97 203 0 300
Mumbai 2 268 30 300
Total 137 718 45 900
Figure 6.6

272
Results of chi square test are as follows
Chi-square calculated value = 139.940
Chi-square table value (5% loc) = 9.488
Degree of freedom =4
Result of test = Rejected
Since Chi-square calculated value (139.940) is greater than table value(9.488)hence
test is rejected. Hence null hypothesis H0 is rejected.
Conclusion is there is an association between city and performance of SCM level.

4. To study relationship between infrastructure related factors on improvement of

sales of the organized apparel retail outlets.

H04: There is no association between infrastructure related factors on improvement of

sales of the organized apparel retail outlets.
H14: There is an association between infrastructure related factors on improvement
of sales of the organized apparel retail outlets.

Table 6.53

City Suppliers Performance Level Total

Low Medium High
Delhi 15 250 35 300
Indore 79 205 16 300
Mumbai 8 238 54 300
Total 102 693 105 900

273
 Figure 6.7

Results of chi square test are as follows

Chi-square calculated value = 115.389
Chi-square table value (5% loc) = 9.488
Degree of freedom =4
Result of test = Rejected
Since Chi-square calculated value (115.389) is greater than table value(9.488)hence
test is rejected. Hence null hypothesis H0 is rejected.
Conclusion is there is an association between infrastructure related factors on
improvement of sales of the organized apparel retail outlets.

5.To study relationship between backend merchandise management on the sales of the
organized apparel retail outlets.
chi-square test is applied. Hypothesis for the test is as follows.

H05: There is no association between backend merchandise management on the sales

of the organized apparel retail outlets.
H15: There is an association between backend merchandise management on the sales
of the organized apparel retail outlets.

274
 Table 6.54

City Back end Merchandise Total

Poor Average Excellent
Delhi 36 232 32 300
Indore 101 168 31 300
Mumbai 9 229 62 300
Total 146 629 125 900

Figure 6.8

Results of chi square test are as follows

Chi-square calculated value = 119.242

Chi-square table value (5% loc) = 9.488
Degree of freedom =4
Result of test = Rejected
Since Chi-square calculated value (119.242) is greater than table value(9.488)hence
test is rejected. Hence null hypothesis H0 is rejected.

275
Conclusion is there is an association between backend merchandise management on
the sales of the organized apparel retail outlets.

6. To study relationship between ERP and improvement in the value proposition of

the retail organized apparel outlets.
chi-square test is applied. Hypothesis for the test is as follows.

H06: There is no association between ERP and improvement in the value proposition
of the retail organized apparel outlets.
H16: There is an association between ERP and improvement in the value proposition
of the retail organized apparel outlets.

Table 6.55

ERP implementation Total

City Low Medium High
Delhi 50 204 46 300
Indore 80 191 29 300
Mumbai 21 191 88 300
Total 151 586 163 900

Figure 6.9

276
 Results of chi square test are as follows
Chi-square calculated value = 69.110
Chi-square table value (5% loc) = 9.488
Degree of freedom =4
Result of test = Rejected
Since Chi-square calculated value (69.110) is greater than table value(9.488)hence
test is rejected. Hence null hypothesis H0 is rejected.
Conclusion is there is an association between ERP and improvement in the value
proposition of the retail organized apparel outlets.
Test of ANOVA
Table 6.56

ANOVA for City Sum of df Mean Square F Sig.

Squares
Between
9805.476 2 4902.738 50.948 .000
Recognition1_of_SCM_ Groups
score Within Groups 86319.307 897 96.231
Total 96124.782 899
Between
21098.062 2 10549.031 68.809 .000
Importance1_of_SCM_ Groups
score Within Groups 137517.600 897 153.308
Total 158615.662 899
Between
17276.480 2 8638.240 147.124 .000
Performance_of_SCM_ Groups
score1 Within Groups 52666.560 897 58.714
Total 69943.040 899
Between
15179.129 2 7589.564 76.363 .000
Suppliers_Performance Groups
_score Within Groups 89150.453 897 99.387
Total 104329.582 899
Between
28445.541 2 14222.771 62.872 .000
Distribution_Channel_s Groups
core Within Groups 202917.611 897 226.218
Total 231363.152 899
Between
11188.722 2 5594.361 35.676 .000
Customers_Demand_sc Groups
ore Within Groups 140658.500 897 156.810
Total 151847.222 899
277
 ANOVA for Nature of Shop
Table 6.57
Sum of df Mean Square F Sig.
Squares
Between
1875.876 2 937.938 8.927 .000
Recognition1_of_SCM_ Groups
score Within Groups 94248.907 897 105.071
Total 96124.782 899
Between
9243.449 2 4621.724 27.754 .000
Importance1_of_SCM_ Groups
score Within Groups 149372.213 897 166.524
Total 158615.662 899
Between
1520.960 2 760.480 9.970 .000
Performance_of_SCM_ Groups
score1 Within Groups 68422.080 897 76.279
Total 69943.040 899
Between
1906.809 2 953.404 8.350 .000
Suppliers_Performance Groups
_score Within Groups 102422.773 897 114.184
Total 104329.582 899
Between
3057.242 2 1528.621 6.006 .003
Distribution_Channel_s Groups
core Within Groups 228305.910 897 254.522
Total 231363.152 899
Between
1901.389 2 950.694 5.687 .004
Customers_Demand_sc Groups
ore Within Groups 149945.833 897 167.164
Total 151847.222 899

Customer_demand_Level_
Table 6.58
Frequency Percent Valid Percent Cumulative
Percent
High 163 18.1 18.1 18.1
Low 151 16.8 16.8 34.9
Valid
Medium 586 65.1 65.1 100.0
Total 900 100.0 100.0

278
 Correlations
Table 6.59
Recognit Importance Performanc Suppliers_ Distributi Customers
ion1_of_ 1_of_SCM e_of_SCM Performanc on_Chan _Demand_
SCM_sc _score _score1 e_score nel_score score
ore
Pearson
Recognition1 1 .343** .157** .130** .161** .139**
Correlation
_of_SCM_sco
Sig. (2-tailed) .000 .000 .000 .000 .000
re
N 900 900 900 900 900 900
Pearson
Importance1_ .343** 1 .291** .307** .151** .326**
Correlation
of_SCM_scor
Sig. (2-tailed) .000 .000 .000 .000 .000
e
N 900 900 900 900 900 900
Pearson
Performance_ .157** .291** 1 .329** .262** .196**
Correlation
of_SCM_scor
Sig. (2-tailed) .000 .000 .000 .000 .000
e1
N 900 900 900 900 900 900
Pearson
Suppliers_Per .130** .307** .329** 1 .274** .476**
Correlation
formance_sco
Sig. (2-tailed) .000 .000 .000 .000 .000
re
N 900 900 900 900 900 900
Pearson
Distribution_ .161** .151** .262** .274** 1 .128**
Correlation
Channel_scor
Sig. (2-tailed) .000 .000 .000 .000 .000
e
N 900 900 900 900 900 900
Pearson
.139** .326** .196** .476** .128** 1
Customers_D Correlation
emand_score Sig. (2-tailed) .000 .000 .000 .000 .000
N 900 900 900 900 900 900
**. Correlation is significant at the 0.01 level (2-tailed).

279
TESTING OF HYPOTHESIS:

H01: The tools and techniques with regards to supply chain management in
apparel sector has no impact on pricing.

H11: The tools and techniques with regards to supply chain management in
apparel sector has an impact on pricing.

Table 6.60
Recognition of Price Effectiveness level Total
SCM level Low Medium High
Low 43 82 8 133
Medium 152 366 103 621
High 20 108 18 146
Total 215 556 129 900

Above table indicate that out of 900 respondents 215 are of opinion
that SCM has low effect on pricing, 556 respondents indicate that they have medium
effect and remaining 129 respondents saying high impact on pricing.
Out of 215 respondents of low effectiveness 43 respondents are from
low recognition about SCM, 152 having medium recognition and remaining 20
having high recognition.

280
 Figure 6.10

Results of chi square test are as follows

Chi-square calculated value = 23.759

Chi-square table value (5% loc) = 9.488
Degree of freedom =4
Result of test = Rejected
Since Chi-square calculated value (23.759) is greater than table value(9.488) hence
test is rejected. Hence null hypothesis H0 is rejected.

Importance_of_SCM_level * Price_Effectiveness_level

Table 6.61

Importance of SCM Price Effectiveness level Total

level Low Mediu High
m
Low 35 77 10 122
Medium 171 409 60 640
High 9 70 59 138

215 556 129 900

Total
281
 Figure 6.11

Results of chi square test are as follows

Chi-square calculated value = 115.928

Chi-square table value (5% loc) = 9.488
Degree of freedom =4
Result of test = Rejected
Since Chi-square calculated value (115.928) is greater than table value(9.488)hence
test is rejected. Hence null hypothesis H0 is rejected.

Thus it is reveled that the tools and techniques with regards to supply chain
management in apparel sector has an impact on pricing.

282
H02: The impact of economies of scale with respect to optimum inventory
management has no impact on supply chain cycle.

H22: The impact of economies of scale with respect to optimum inventory

management has an impact on supply chain cycle.

Suppliers_Performance_Level and Performance_of_SCM_level

Table 6.62

Suppliers Performance Performance of SCM level Total

Level Low Medium High
Low 44 57 1 102
Medium 88 569 36 693
High 5 92 8 105

137 718 45 900

Total
Figure 6.12

283
Results of chi square test are as follows

Chi-square calculated value = 76.033

Chi-square table value (5% loc) = 9.488
Degree of freedom =4
Result of test = Rejected
Since Chi-square calculated value (76.033) is greater than table value(9.488)hence
test is rejected. Hence null hypothesis H0 is rejected.

Distribution_Chain_level_ * Performance_of_SCM_level

Table 6.63

Distribution Performance of SCM level Total

Chain level Low Medium High
Poor 49 93 4 146
Average 83 510 36 629
Excellent 5 115 5 125
Total 137 718 45 900
Figure 6.13

284
Results of chi square test are as follows

Chi-square calculated value = 53.904

Chi-square table value (5% loc) = 9.488
Degree of freedom =4
Result of test = Rejected
Since Chi-square calculated value (53.904) is greater than table value(9.488)hence
test is rejected. Hence null hypothesis H0 is rejected.

Thus it is reveled that the impact of economies of scale with respect to optimum
inventory management has an impact on supply chain cycle.

H03: There is no impact of marketing and supply chain management on an

integrated basis on apparel retail sector.

H33: There is an impact of marketing and supply chain management on an

integrated basis on apparel retail sector

Suppliers_Performance_Level * Customer_demand_Level_

Table 6.64

Customer demand Level Total

Suppliers Low Medium High
Performance Level
Low 58 43 1 102
Medium 92 466 135 693
High 1 77 27 105

151 586 163 900

Total

285
 Figure 6.14

Results of chi square test are as follows

Chi-square calculated value = 148.850

Chi-square table value (5% loc) = 9.488
Degree of freedom =4
Result of test = Rejected
Since Chi-square calculated value (148.850) is greater than table value (9.488) hence
test is rejected. Hence null hypothesis H0 is rejected.

Thus it is reveled that there is an impact of marketing and supply chain management
on an integrated basis on apparel retail sector

H04: The infrastructure related problem does not act as a stumbling block to the
development of retail apparel sector.

H44: The infrastructure related problem act as a stumbling block to the

development of retail apparel sector.

286
 To study above hypothesis it is observed that infrastructure level differ in different
cities. Cities like Mumbai and Delhi consumer expect to have best infrastructure
since they have good paying capacity. City like Indore infrastructure may not be at
par with Mumbai and Delhi. To study this hypothesis information related to
importance of SCM and city of respondents is classified.
Table 6.65

City Importance of SCM level Total

Low Medium High
Delhi 31 248 21 300
Indore 74 205 21 300
Mumbai 17 187 96 300
Total 122 640 138 900
Figure 6.15

Results of chi square test are as follows

Chi-square calculated value = 134.125

Chi-square table value (5% loc) = 9.488
Degree of freedom =4
Result of test = Rejected

287
Since Chi-square calculated value (134.125) is greater than table value (9.488)
hence test is rejected. Hence null hypothesis H0 is rejected.
Conclusion : there is an association between city and importance of SCM level.

To study relationship between Location of shops and performance of SCM level,

chi-square test is applied. Hypothesis for the test is as follows.
Table 6.66

City Performance of SCM level Total

Low Medium High
Delhi 38 247 15 300
Indore 97 203 0 300
Mumbai 2 268 30 300
Total 137 718 45 900
Figure 6.16

Results of chi square test are as follows

288
 Chi-square calculated value = 139.940
Chi-square table value (5% loc) = 9.488
Degree of freedom =4
Result of test = Rejected
Since Chi-square calculated value (139.940) is greater than table value(9.488)hence
test is rejected. Hence null hypothesis H0 is rejected.
Conclusion is there is an association between city and performance of SCM level.

H05: There is no impact of backend merchandise on sales of retail apparel

outlets.

H55: There is an impact of backend merchandise on sales of retail apparel

outlets.

To study this hypothesis information from questionnaire regarding distribution

channel is collected. It is tested against performance of SCM.

Distribution_Chain_level and Performance_of_SCM_level Crosstabulation Count

Table 6.66

Performance_of_SCM_level Total

High Low Medium

Average 36 83 510 629

Distribution_Chain_level_ Excelent 5 5 115 125

Poor 4 49 93 146
Total 45 137 718 900

289
 Figure 6.17

Results of chi square test are as follows

Chi-square calculated value = 53.904

Chi-square table value (5% loc) = 9.488
Degree of freedom =4
Result of test = Rejected

Above results indicate that Chi square calculated value (53.904) is

greater than chi-square table value (9.488). Hence test is rejected and null hypothesis
is rejected. Therefore alternate hypothesis is accepted.
Conclusion is there is impact of backend merchandise on retail apparel outlets.

H06: There is no impact of ERP implementation on improving the value

proportion of retail organized apparel outlets.

H66: There is impact of ERP implementation on improving the value proportion

of retail organized apparel outlets.

290
 Having ERP and Impact of ERP Crosstabulation
Count

Table 6.67

Impact of ERP Total

High Low Medium

No 85 75 54 214
Having ERP
Yes 492 79 115 686
Total 577 154 169 900

Figure 6.18

Results of chi square test are as follows

Chi-square calculated value = 85.068

291
 Chi-square table value (5% loc) = 5.99
Degree of freedom =2
Result of test = Rejected

Above results indicate that chi-square calculated value (85.068) is

greater than chi-square table value(5.99). Hence Null hypothesis is rejected. Alternate
hypothesis is accepted.

Conclusion is there is impact of ERP implementation on improving the value

proportion of retail organized apparel outlets.

292
 CHAPTER 7

RESEARCH FINDINGS AND INTERPRETATION

During the survey and data collection some useful insights were obtained, both from

retailers as well as consumers which are useful for practical application by the

retailers in improving their overall business efficiency.

Some of the important findings are summarized below:

A data analysis and interpretation of results were conducted on the data collected

from the research survey.

The quantitative research component consisted of a survey instrument that was

administered to the inventory and logistics managers of 21 malls in Mumbai.18 malls

in Indore and 21 malls in Delhi to ascertain their views on the importance of supply

chain management on organized apparel retail outlets

52 percent of the respondents are strongly agreeing that supply chain management is

mentioned and recognized by their company where as 9 percent of the respondents are

strongly disagreeing that supply chain management is mentioned and recognized by

their company11 percent of the respondents are having neutral opinion that supply

chain management is mentioned and recognized by their company

42 percent respondents are strongly agreeing to the fact that supply chain management

is different from value chain managemnt.8 percent respondents are strongly

disagreeing to the fact that supply chain management is different from value chain

293
management and 6 percent respondents are not having any opinion that supply chain

management is different from value chain management

7 percent of the respondents strongly disagree that supply chain management has an

impact on pricing.19 percent of the respondents strongly disagree that supply chain

management has an impact on pricing,30 percent of the respondents strongly are

neutral that supply chain management has an impact on pricing,37 percent of the

respondents agree that supply chain management has an impact on pricing,6 percent

of the respondents strongly agree that supply chain management has an impact on

pricing

5 percent respondents strongly disagree that there is close relation between supply

chain management and organized apparel retail business.22 percent respondents

disagree that there is close relation between supply chain management and organized

apparel retail business,56 percent respondents are neutral that there is close relation

between supply chain management and organized apparel retail business,11 percent

respondents agree that there is close relation between supply chain management and

organized organised apparel retail business and 7 percent respondents strongly agree

that there is close relation between supply chain management and organized apparel

retail business.

5 percent of respondents strongly disagree that there is a need to implement supply

chain management,8 percent of respondents disagree that there is a need to implement

supply chain management,23 percent of respondents strongly are neutral towards the

need to implement supply chain management,17 percent of respondents agree that

294
there is a need to to implement supply chain management and 47 percent of

respondents strongly disagree that there is a need to to implement supply chain

management

In order to know whether outsourcing of logistics is different among the different

retail formats, researcher collected Data on this from all the 900 retail outlets and the

response was on a five point scale Data was categorized under the three different

retail formats viz convenience stores, midsized stores and hypermarkets. Data was

then analyzed by subjecting it to one way ANOVA using SPSS version 20. To test

whether the sample means are statistically significant at .05 significance level.

The chi square coefficient value is 7.563 and this has been found to be statistically

significant with the significance of .023. This shows that different retail formats

differ in monitoring backend merchandising of their outlet.

295
 CHAPTER 8

CONCLUSIONS

Aimed at minimizing costs, the cost leadership strategies result in the same

efficiency capabilities that are valued in a lean supply chain. Firms exhibiting

consistency among the logistics strategy, manufacturing strategy and the type of

supply chain should experience higher levels of performance and competitive

advantage than firms whose strategies are not consistent with supply chain type.

Improved performance should result from the three entities guiding the firm‘s actions

toward the same objectives and goals instead of toward conflicting goals. Therefore,

the following research questions are posed.

1. Are there distinct supply chain types?

2. What characteristics contribute most to supply chain type determination?

3. Among the supply chain types, do firms differ in the competitive priorities that they

choose to emphasize in their logistics and manufacturing operations?

4. Given a specific supply chain type, do higher performing companies emphasize

different competitive priorities than lower performing companies?

A web survey of logistics and supply chain executives who are members of the

Council of Logistics Management (CLM) and employed manufacturing firms was

used to gather the needed data. Because CLM is often considered to be the premier

logistics organization, it is believed that members have sufficient working knowledge

of supply chain, logistics and manufacturing issues within their organization to

accurately complete the survey. In addition, executives (possessing the title manager

296
or above) were chosen because their high-ranking position should afford them a fairly

comprehensive view of the firm and its functional priorities. The sampling frame

includes manufacturing firms from multiple industries. Scales from previous studies

and articles were used to compose the survey.

The respondents were divided into two initial groups, those participating in lean

supply chains and those participating in agile supply chains. Once the supply chain

type was determined, members of each type of supply chain were divided into high

and low performers. Multivariate analysis of variance (MANOVA) was performed to

detect differences in relative emphasis for the competitive priorities among the

groups. Contributions

This study makes several contributions to the literature. First, the characteristics of

lean and agile supply chains can be empirically supported to further the development

of supply chain management theory. Much of the literature to date is conceptual with

little empirical support. Secondly, an alternative framework for logistics strategy is

presented. The framework parallels that of manufacturing strategy and encourages

integrative research using the two strategies. In addition, the framework will enable

advanced understanding of logistics strategy and priorities. Lastly, the relationships

among the type of supply chain, logistics and manufacturing strategies and their

relation to perceived performance can be empirically examined, thereby advancing

supply chain theory development as well. This study imparts several managerial

implications as well. First, the financial impact of choosing logistics and

manufacturing priorities that complement their type of supply

297
As our economy is booming and every organization is facing severe competition in

the market whether it may be local or an international market. The traditional

corporate model of organization was based on vertical integration, hierarchy, and

functional management. There is a drastic change in the traditional and modern

business world, where in the modern world, when demand became unpredictable in

both quality and quantity, when the domestic and international markets became too

diversified and thereby difficult to forecast, and when there is a dynamic change in

the technology which made single-purpose production equipments obsolete, the mass

production system became too costly and too rigid. Emerging technologies now allow

for the transformation of assembly main characteristic of the large corporation into

easy-to-program production units with product flexibility sensitive to market

variations, and process flexibility sensitive to changes in technology.

Most of the modern organizations have adapted the new environment and the main

shift is featured as the shift from the vertical bureaucracies to horizontal corporations.

There are seven major modern trends which features such corporations and they are as

organizing around process, not tasks; a flat hierarchy; team management; measuring

performance by customer satisfaction, maximization of contacts with suppliers and

customers; information, training and retraining of employees at all levels and rewards

based on team performance.

Contemporary business life cycle is process driven and chain oriented hence

integration has become a core-question for companies. The problems and challenges

with the traditional vertical co-operation between organizations are costly and time

298
consuming, instead of co-operating, there is also no scope of cost reductions or profit

improvements at the expenses of someone else in the supply chain.

Due to the purchasing power that comes with control over consumer contacts,

retailers are often dominant in a supply chain. Closeness to end consumer markets

gives retailers fast and precise information about matters such as shifting fashion

preferences and attractiveness of competitor‘s offerings, comparable to continuous

market research. Even though power is no end in itself, it does include the opportunity

to organize the supply chain in a suitable way. Many challenges face retailers today.

Expanding product variety, greater fluctuations in demand, and shorter and shorter

product life cycles make time-to-market reductions essential. The ever-increasing

need for reduced lead times continues. Maximum coordination of work in and

between companies is therefore necessary, as otherwise it will lead to higher costs as

well as to longer lead times.

This research helps to investigate how supply chains are affected by retail strategies

and how the value chain is tailored to deliver a company‘s value proposition, to see

how activities fit together and what tradeoffs companies need to make. We believe

that a good way to analyze the configuration of activities that companies perform is

by drawing activity maps. Such maps show how a company‘s value proposition is

contained in a set of tailored activities designed to deliver it.

The volatility of markets is a popular topic to discuss and as forecasting is becoming

increasingly crucial due to companies‘ attempts to reduce lead times, managers seek

new methods to reduce forecast errors; still the real problem would be that forecast
299
errors increases as lead time increases. Time to react, i.e. responsiveness, is

essentially achieved through time compression in the supply chain and the costs

should be lower at the same time. Still, the system of having suppliers able to

mdeliver a complete order at required time might simply shift the cost burden from

one part of the supply chain to another.

There is a direct relationship between the length (measured in time) of a supply chain

and the inventory carrying cost, but the declared truism ―time is money‖ is arguably

more true for companies supplying innovative products with unpredictable demand

than it is for others.

As processes are abstract concepts they need to be modeled in some way to be

understood. Among the most widely accepted definitions of a process is ―a set of

interrelated activities‖ and― a chain of activities‖. In this respect, processes are seen as

activity flows, or workflows, consisting of activities that have some kind of

relationship to each other. Thus, if activities are not perceived interrelated, they are

not part of the same process. However, processes are not real structures, merely

mental abstractions; although flowcharts can show that data or materials flow between

activities in a process, the data or material do not actually flow between activities;

rather they flow between organizational functions (or roles). Process-focus has been

the main idea in many widely adopted management approaches such as total quality

management and business process reengineering.

300
A horizontal cross-company process perspective means having a holistic view on the

supply chain. The most well known model having this standpoint value chain model,

in which a company‘s value chain is set into a larger context – the value system.

Having an end customer perspective, all activities that the chain performs should add

value, an idea that is also the core of SCM. With such a linear functional view,

products, information, and finances flow through channel members towards end

customers.

When improving visibility of demand, opportunities can be found at the interface

between suppliers and retailers as retailers rarely share routine data with suppliers,

hence suppliers are forced to use forecasting and carry inventory. Producers need to

extend the customer‘s order cycles, i.e. finding approaches how to capture earlier

warnings of the customer‘s requirements.

Considering the fact that real demand is hidden from view except from already made

orders, the idea behind the demand penetration point becomes useful in this case. The

demand penetration point could be described as the point in the supply chain where

real demand meets the projected plan; upstream from this point everything is driven

by a forecast.

Therefore, new ways should be invented on how the penetration point might be

pushed as far as possible upstream; one way would be to improve the speed and

accuracy of information from the market place to manufacturers.Another way to push

the order penetration point upstream would be to postpone the final commitment of

the product to its final form. A frequently used example of a postponement strategy is
301
Benetton, who makes knitwear and then dyes everything the last thing they do,

according to customer requirements collected during and after production.

It is reveled that the tools and techniques with regards to supply chain management in

apparel sector has an impact on pricing.

It is reveled that the impact of economies of scale with respect to optimum inventory

management has an impact on supply chain cycle.

It is reveled that there is an impact of marketing and supply chain management on an

integrated basis on apparel retail sector.

It has been concluded that there is an association between city and importance of

SCM level.

It has been concluded that there is impact of backend merchandise on sales of retail

apparel outlets.

It has been concluded that there is impact of ERP implementation on improving the

value proportion of retail organized apparel outlets.

302
 CHAPTER 9

RECOMMENDATIONS

Indian Retail industry has witnessed the entry of many large corporate houses and

growing acceptance of modern formats. Though modern retail is relatively new in

India. It is heartening to note that they have quickly adopted required processes in

their operations. Given the industry's changing landscape and emerging challenges,

the focus of retail industry players too is changing. They are concentrating on

strengthening the existing operations and assessing options for profitable growth

through enhancing efficiency in Supply chain, embracing appropriate technology,

upgrading skills of employees and are moving towards consolidation and innovation

of processes. In today's world of Internet and wide media reach and connectivity,

consumers are well informed and are able to exercise their option in deciding their

preferred store for shopping. One of the major challenge modern retail outlets are

facing is in attracting and retaining new customers. This explains the reason why all

store formats be it convenience store, mid sized store and hypermarket are working

on improving supply chain alignment with sales and pricing of organized apparel

retail outlets. This is a right focus for the retailer as can clearly be concluded from the

research that supply chain alignment has important bearing on achieving better

sales and pricing of organized apparel retail outlets which is the only way to remain

viable and ensure sustainable growth. Only happy customers come back for

repeat and regularly buying and help in consolidating base of loyal customers.

Further the study reveals that retailers are focusing on enhancing employee

productivity and operational efficiency and outsourcing of logistics to improve

delivery of goods and services and managing inventory to remain profitable.

303
However, the focus differs among different formats and mid sized stores in general

barring few exceptions has still a lot of ground to cover in adapting to their

processes modern retail practices.

The study also showed that though a lot of data is collected on items like wastage,

slow moving items, customer complaints, there is no structured approach in

processing this data and comparing it with any set target. Retailers have to move to

the next phase and make use of this information in achieving measurable targets for

operational efficiency improvement.

The study reveals that still complete outsourcing of inwards logistics is not being

significantly practiced by retailers in any format be it Hypermarkets, Mid sized

stores and convenience stores. Most of the stores are optimizing this process by

partially outsourcing. This could be because there is still no large dependable logistics

service providers for retailers whose services these retailer can avail. This is a big

business opportunity and large retail chains are themselves planning to enter into

this area. Once this is implemented it is expected to have a major impact on

procurement of apparels for the organised retailers.

9.1 Recommendation

Decision support systems are seldom passive instruments and are often applied to

support Supply Chain Management via feedback mechanisms that instigate corrective

actions. The direction and particularly the amplitude of the likely management

action/response however has not been defined. There exists a recognized need for
304
some universally accepted strategic model to coordinate the organizations within the

supply chain, integrating, measuring and controlling key business processes

effectively, but to date any measured impact of the performance measurement element

within such a systems, on the dynamic behavior within the supply chain, has yet to be

examined.

In Indian organized retail scenario it appears that all three formats viz Hypermarket,

Midsized Store and convenience store are here to stay. Hence in order to make each

of these format's commercially viable, some innovative business models specifically

valid to Indian situations will have to be developed. This will entail particularly back

end of supply chain. Thus, it is recommended that retailers should consider sharing of

facilities like logistics service provider for inward logistics and godown space. This

would help in reducing the operational cost and make the enterprise viable business

proposition.

It was observed during the study that price display particularly for apparels is not

streamlined and unsatisfactory. It is a major source of irritant to the customer. It is

recommended that properly designed placard displaying facilities should be

installed which should show the correct price of the item in the shelves. Many times

shopper drops the item from his list resulting in the loss of sale when he is not able to

know the exact price of the item that he wants to buy. By implementing this

recommendation the retailers will be able to resolve this problem. Also promotional

offers which are displayed on the shelves should be valid. Sometimes the offer is still

displayed when the Sales promotional scheme is over and offer is no more valid.

305
The results of this study hopefully will provide organized apparel retail outlets with

additional knowledge to peruse collaborative opportunities aimed to benefit supply

chain management in organized apparel retail outlets.

Research proposes three areas in which the importance of time as a competitive

variable are increasing according to the need to meet the fast changing markets of

today:

Shortening life cycles

The drive for reduced inventories

Volatile markets making reliance on forecasts dangerous.

In accordance with technological improvements as well as societal changes, product

life cycles have been radically shortened the last few decades. It is within this time to

market scenario companies must be able to capture an opportunity, develop,

manufacture and distribute products in accordance with the existing market pace, and

if successful, the actual time that can be saved while performing these activities

becomes crucial as late market entrances increase the risk for obsolete stock.

Regarding the drive for reduced inventories, many companies have realized the need

to release inventory holding costs. Time to serve, i.e. order to delivery time is also

important as companies need to be able to respond to demand of products that are

already on the market, i.e. the lead time to resupply a product determines the

organizations ability to meet demand during the life cycle, which is also the base for

the concept of quick response which will be discussed later on.

The volatility of markets is a popular topic to discuss and as forecasting is becoming

increasingly crucial due to companies‘ attempts to reduce lead times, managers seek
306
new methods to reduce forecast errors; still the real problem would be that forecast

errors increases as lead time increases. Time to react, i.e. responsiveness, is

essentially achieved through time compression in the supply chain and the costs

should be lower at the same time. Still, the system of having suppliers able to

mdeliver a complete order at required time might simply shift the cost burden from

one part of the supply chain to another.

The importance of supply chain management in the retail clothing business has been

identified without a doubt. It is also evident from this study that effective supply chain

management would improve company's competitive advantage and lead to long-term

performance improvement, and accuracy and reliability are enhanced by the empirical

study. In addition to this, the framework of effective supply chain management

becomes the essential of the study. It is necessary to provide some recommendations

on how to achieve the effective supply chain management in the retail clothing

business.

Set up the strategy for supply chain management and get alignment from the top

manager. There are many strategies one can adopt to manage the supply chain.

Executive management focus is critical. Automation and analysis tools are often

ineffective because they are not aligned to the business users, who must feel

comfortable with the management and open to learning and thinking in order for a

vision to become a reality.

307
9.2 Create the logistics vision.

The purpose of the logistics vision statement is to give a clear indication of the basis

whereby the business intends to build a position of advantage through closer customer

relationships. The criterion for a good logistics vision statement is that it should

provide the road map for how to achieve the goals of the company.

Do supply chain analysis based on the core competencies and capabilities of the

company.

Establish supply chain integration not only within the company but also

upstream with suppliers and downstream with distributors and customers.

Supply chain integration implies process integration, both upstream and downstream.

By process integration we mean collaborative working between buyers and suppliers,

joint product development, common systems and shared information.

Manage the supply chain as a network. To manage in such a radically revised

competitive structure clearly requires different skills and priorities to those employed

in the traditional model. To achieve market leadership in the world of network

competition necessitates a focus on network management as well as upon internal

process .

Establish communication system The essence of supply chain management is

communication, allowing the ultimate consumer to become a partner in the process.

The close and real - time communication linkage created through the practices would

308
help all the elements of the supply chain to meet the ever changing demands of the

ultimate consumer.

Manage effective supply chain through technology. Technology will allow all

upstream and downstream trading partnem to share everything from strategic plans to

operational data through electronic linkages.

Diminish or avoid uncertainties of the supply chain management. As we

discussed in this study, the supply chain uncertainties in the clothing retail business

focus on supplier performance, distribution channel and customer demand. Some

actions can be used to improve supply chain performance.

9.3 Supplier performance:

It is been recommended that in order to improve supplier performance organized retail

outlets needs to identify and reward good performances, transportation performance

should be measured separately, for inbound freight handling sub-contract should be

given. A permanent and frequent system of reviewing inventory should be adopted.

9.4 Distribution channel:

It is been recommended that in order to improve distribution channel organized retail

outlets must establish mutual distribution channel, set up distribution logistic system

Use market investigation and analysis andestablish inter-communication system to

enable information flow.

309
9.5 Customer demand:

It is been recommended that in order to improve customer demand organized retail

outlets must establish systems for forecast and adjust safety stocks and change

transportation mode.

Implement information technology;

It is been recommended that in order to improve information technology organized

retail outlets must introduce improved forecasting techniques, subcontract distribution

operations and build new customers and collect feedback.

310
 CHAPTER 10

LIMITATIONS OF THE STUDY / FURTHER SCOPE OF

WORK

Limitations of the study:

Researcher has assumed that the information provided by the retail

executives and managers is transparent and accurate. However there can

be constraints while sharing information by the retailers for general and

academic survey. Hence more accurate information can be gathered only if

such survey is commissioned by large retailers for their own use.

The Indian apparel organized retail scenario is evolving and is in dynamic

state with all retail chains expanding aggressively. However many of them

could not sustain this growth because of liquidity problems and debt

related issues. Therefore care has been taken to include only those

retailers who have stabilized operations. The scenario can change in the

future. Thus this research work can only be used as a reference for

conducting a similar study on organized retail. But the sampling frame will

have to be decided as appropriate at the time of conducting any future

study.

311
Future scope of research

This research was undertaken mainly to find out the impact of supply chain alignment

and use of technology on sales and pricing of apparels in organized retail outlets and

this was confined to the city of Mumbai, Delhi and Indore Similar research can be

conducted with wider and different target respondents covering diverse geographical

locations. The findings from a large survey of this nature will be generalized and

applicable to over all operations of retailers in India. Similarly studies can be

mounted on newer formats which have recently been introduced in India like B-2-B.

312
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 Questionnaire
Supply Chain Management
In The Organized Apparel Retail Business
All of the information provided will be kept CONFIDENTIAL and used for academic
purposes only.
Your cooperation in the completion of the survey is highly appreciated. Thank you
for your participation.
Please assess the criteria statements by putting a number/tick in the box that best
represents your expectations or opinions of your company.
Strongly Disagree - 1
Disagree - 2
Neutral - 3
Agree - 4
Strongly Agree - 5

A. Supply chain Management Recognition Strongly Agree Neutral Disagree Strongly

Agree disagree

1. Is the supply chain management mentioned

and recognized by your company

2. Do you think that supply chain management is

different from value chain management.

3. Do you think that supply chain management

and its various tools and techniques have an
impact on pricing of apparels in organized
retail outlets?

4. There is close relation between supply chain

management and clothing retail business.

5. The supply chain is the network of

organization that are involved, through
upstream and downstream linkages, in the
different processes and activities that
produce value in the form of products and
services in the hands of ultimate consumer

335
B. Supply chain imperative (the importance Strongly Agree Neutral Disagree Strongly
Agree disagree
of supply chain management)
6. There is a need to implement supply chain
management
7. There is an impact of marketing and supply
chain interface on an integrated basis In
“Organized apparel and clothing” category
of the retail outlets.

8. Better supply chain management leads to

increased sales

9. The supply chain in the retail apparel business

has an impact of economies of scale of retailers
with respect to optimum inventory
management in the supply chain cycle.
10. Effective supply chain will lead to long term
performance improvement.(better pricing of
apparels)

C Supply chain Management and Strongly Agree Neutral Disagree Strongly

Agree disagree
Performance
11. Supply chain management and marketing has
an impact on an integrated basis in organized
apparel retail outlets.

12. Supply chain management can spend on the

fashion of the product to follow the market
change.
13. Infrastructure related factors have an impact
on sales of the organized retail apparel outlets.

14. There is an impact of backend merchandise

management on the sales of the organized
apparel retail outlets.

15 Bring right productions in the right season

can attract more customers and improve
customer satisfaction

D Uncertainty Sources involved Supply Strongly Agree Neutral Disagree Strongly

Agree disagree
Chains
Supplier Performance

336
16 The lead times for manufacturing and
importing forced the company to keep more
inventories.
17. Lead times influence the fashion level of
the production and time to market.
18. Lead times effect on the correctness of
forecasting in supply chain management

19. The supplier’s productivity influence retails

company’s supply chain management
20. There are some uncertainty involved for the
late supply n the ordering system such as
late delivery, late shipment, machine broke
down and custom stop-check etc.

Distribution Channel
21 Is your company location good for your
target market?
22. To what degree do you think that the sales
performance is related with your
distribution channel?
23. The inventory control can be improved
through customer service and sales strategy,
such as promotion, membership, credit and
clearance sale

24. Multichannel distribution benefits for the

inventory control through inter-adjustment on
the stock.

Customer Demand
25 The correctness of the market information
is important for the inventory control
26. The customer feedback on the production can
lead the direction of the fashion of production.
27. There is an impact of ERP on improving the
value preposition of the retail “Apparel sector”
in optimizing the economies of scale (bottom
line).

337
1. Name of the Company:------------------------------------------------------

2. Location of the Company:-

Mumbai Delhi Indore

3. Type of company:

Sigle shop two to five shops Chain of shops

4. If necessary, are you available for a personal interview? �Yes �No

5. Any suggestions/comments:

~ End ~
**Thank you for your kind co-operation**
** All information will be used for academic purposes only**

338