2010
Operation Management
Submitted by: Derrick Vijayan
January 1, 2010
Operations Management Project Report, PGP14/Group 1
SUPPLY CHAIN & DISTRIBUTION
INTRODUCTION The traditional model of vegetable retailing in India involved vegetables being sold in small stores on the roadside, and there were no formal rules regarding weighing, bargaining and quality issues, let alone cold storage and sophisticated supply chains. Produce travelled slowly and inefficiently through a series of intermediaries before reaching the hands of customers, suffering mark-ups, wastages and quality losses along the way. Reliance Fresh marketing model operates on affordability and a hygienic ambience along with a good shopping experience , said MukeshAmbani, the Chairman of RIL. Reliance Fresh intended to bring high quality fresh food to the customers at an affordable price. Reliance Fresh also wanted to establish a benchmark of hygiene and quality in their sales. It thus sought to provide the consumer affordable and quality produce in a congenial and pleasing environment and enforced stringent quality and hygiene guidelines which would help it bring high value to the consumer. The Rationale behind the Supply Chain Strategy adopted by Reliance Fresh as given by Reliance officials: We will always buy from the farmer, almost never from the mandi (wholesalers), said a group official. For example, the leafy vegetables, aubergines, tomatoes and green chillies in the one of the outlets in Mumbai were sourced directly from farmers in nearby districts. This in effect got translated into lower prices by at least 15% to 20%. We'll be very affordable and competitive in the market, but we aren t playing a price game here. The full effort is to deliver value to the customer, said Chief Executive, Customer Operations, KSVenugopal. Produce from the farmers came to Reliance's city distribution centre, which connected two very different sides of India, the poverty-ridden countryside, steeped in tradition, and the wealthy city centers. Already, a few hundred farmers have been hooked on to the
Operations Management Project Report PGP14/Group 1
Reliance Retail supply chain. In the next five years, that number will grow to millions. Even contract farming by assisting farmers in procuring high-quality seeds, fertilizers and other essential raw materials is on the cards. By going to the farmer directly, Reliance Retail hoped to disinter mediate the supply chain and eliminate waste. This meant fresher products at lower cost , reasoned the same group official. PROCUREMENT PROCESS Reliance fresh obtains its goods locally and nationally so as to derive the best possible mileage in terms of quality, price and ease of logistics. Fruits, vegetables, grains and other agricultural items come from Palakkad, Kerala. All other FMCG comes from central hub of Reliance, Thrissur. Fruits etc are thrown away 2 days after they are brought, while other FMCG are kept till the expiry date. For vegetables Reliance Fresh enters into contract farming with farmers where it provides the farmers with high quality seeds technical knowhow and guarantees assured market for their produce at price higher than prevalent in the mandi. There are 2 warehouses. One of them in located in Calicut city and the other in Kozhinjampara These warehouses supply goods to 6 stores. As true with reliance it has tried to backward integration so as to secure its supply and bring in efficiency in the supply chain for this it has. Wholesale centres not only supply to its store but also to other business concerns. This was done so as the farmers get assured market and Reliance is able to lock in its suppliers by offering them assured market. Other features: Higher prices and on-spot payment for the produce to farmers A sophisticated cold chain facility and several trucks which are used to preserve and supply the vegetables as demand A huge processing complex in Kochi has been built which can supply up to 120 stores
Reliance is already the largest single Big Retail buyer of fresh vegetables and fruits in Kerala. Soon, if not already, there could be other such big players too, with their leaner, meaner tentacles digging deep into the rural landscape of a food-, vegetable- and fruit-deficit State. THE BASIC PROCUREMENT PROCESS
*grading and standardization takes place here
Operations Management Project Report PGP14/Group 1
Reliance fresh procures different products from different vendors depending upon two main factors: Quality and price. The products are not procured by individual stores, but are procured at district or state level depending on the type of product. Perishable items such as vegetables, fruits, dairy products, bakery items etc are procured at a district level. This ensures that each district has the authority to procure the products quickly at the cheapest rates possible. Other products which are non-perishable with long shelf life are procured by the Reliance Fresh merchandising department which work at the state level. The state level placement of the merchandising departments although are not as quick as the district level procurers, it ensures that bulk purchases for the entire state give the merchandising department price negotiation powers. The merchandising department placed at the state level is helpful in providing lower prices for the products to the consumers. PROCUREMENT STRATEGY Procuring fruits and vegetables (agricultural perishables) Reliance is the largest single big retail buyer of fresh vegetables and fruits in Kerala. Reliance fresh has an aim to procure vegetables and other farm products directly from farmers. By cutting out middlemen, their [10 per cent] commission, loading, unloading and transportation charges are reduced. Thus they follow a philosophy to pay farmers more and sell fresh vegetables at ever lower prices to urban customers. They also implement contract farming to ensure stable supplies of fruits, vegetables and dairy products.
Contract Farmers
Collection Centre
Distribution Centre/ Warehouse
Store
Sales (Wastage 5-7%)
Supply Chain for Fruits and Vegetables
The produce from farmers is collected at the Collection Centres (CC). The CC for the Kunnamangalam Store is at a place called Kozhinjapara. A preliminary Quality Check is done here. From the CC, the goods are sent to Distribution Centres (DC), where they are sorted and graded. Here, all data is entered into the SAP system for easy tracking. Every day, the store manager of each store raises a purchase order for the next day s requirements based on estimated demand. The total order for all the stores in an area is collected by the Area/Cluster Manager. Based on the availability of goods, the ordered items are delivered to each store by the Area Manager daily.
Operations Management Project Report PGP14/Group 1
Procuring Non Fruits and Vegetables
Manufacturers
Distribution Centre/ Warehouse
Sales Store (Wastage 2-3%)
Supply Chain for Non Fruits and Vegetables
Items directly collected from Manufacturer or National level Distributor and delivered to the local DC. Each store has a Minimum Base Quantity (reorder level) for all items Whenever the stock goes lesser than the MBQ, the SAP system automatically reorders
A Closer Look at Contract Farming It involves a pre-agreed price between the company and the farmer, along with measures of quality, quantity, acreage to be farmed, and/or duration of the contract. It provides secure supplies. Reliance, through these contracts is giving farmers information about how can farmers improve their productivity, making them aware of market rates of different crops so that farmers can choose crops they want to sow to become profitably and also providing technical help like information about quality of seeds and fertilizers. Reliance Fresh currently procures different kinds of vegetables like carrots, onions, cabbage, cauliflower etc. Advantages and Disadvantages of Contract Farming ADVANTAGES Reduce load on central and state level procurement system Bring about a market focus in terms of crop selection by Indian farmers Generate a steady source of income at the individual farmer level Promote processing & value addition, thereby generating gainful rural employment. DISADVANTAGES Fears have been expressed ,that the rejection rate of agricultural produce by retail chains was high. The farmers then have to bear the extra cost Unsuitable technology and crop incompatibility
Manipulation of quotas and quality specifications;
Land availability constraints, Social and cultural constraints, Farmer discontent, Extra-contractual marketing & Input diversion poses a problem for corporates
Access to reliable markets.
Operations Management Project Report PGP14/Group 1
Advantages and Disadvantages of Farm to Fork Model ADVANTAGES Leads to removal of non-value adding intermediaries from supply chain Cost reduction Reduction in lead time Reduction in intermediaries leads to lesser wastage DISADVANTAGES Loss of employment (intermediaries Need for large investments
Items stocked They stock goods of both private labels and other labels. The margins on private labels , known as Reliance Select, is obviously higher to the tune of approximately 30%. The products of other brands have a sales margin in the range of 20-22%. Therefore it is more profitable for Reliance Fresh to promote its own private labels. With a strong Reliance brand name, the stores have very effectively taken advantage of it. They promote the private labels well in the stores by giving them sufficient shelf space. The restocking of the shelves takes place as and when the requirements call for it. The consumer behavior is studied, the macro-economic factors analyzed and the demand is thus forecasted.
Operations Management Project Report PGP14/Group 1
Depending on the forecasted demand, the stocks are placed in the shelves. For most items, the shelves are replenished as and when they seem to get exhausted with their stocks. Usage of IT for procurement The usage of IT systems has not penetrated deep into Reliance fresh, especially at the individual store levels. Almost all of the procurement requirements are inspected and calculated manually. However they have Implemented SAP solution on their systems.
Reliance Fresh: Wastage
As a supermarket serving customers with variety of item, Reliance fresh also have wastages on varying levels amongst different items. The percentage wastage for some of these are as follows: Non fruits & vegetables have a shelf life dependent on product s expiry date: 0.5- 1% Fruits and vegetables having a shelf life of 1-3 days: 5 7% Shrinkage due to dryness in fruits and vegetables having a shelf life of 1-2 days: 3% Therefore the major sources of wastages are fruits and vegetables. Being extremely perishable items, they need to be kept in refrigerated environment. The inventory levels are kept at minimum level so that the wastages are reduced. Supply Relations Perishable Items: Fruits & Vegetables Contract Farming Arms length supplier relationship Perishable Items: Dairy Products Partner supplier relationship Milk is directly procured from MILMA Dairy products from Amul&Milma Perishable Items: Bakery Items Multiple Suppliers Arms Length supplier relationship Non-Perishable: FMCG Goods HUL & P&G, Durable arms length
Operations Management Project Report PGP14/Group 1
STORE LAYOUT The store floor space is --------------sq. ft. It is spread on only 1 floor (ground floor) of the complex. The inside view of the store plan is depicted in the block diagram. The layout is based on the similar category of products stacked together. Analysis There are two mail gates to the store. One is meant for entry and the other for exit. In multiproduct retail stores, one has to surrender all the articles while getting into the store through the entrance and get the purchased articles verified at the exit. But this practice is not religiously followed in this store. Consequently there is a high probability of shop lifting. 1. A manager s counter and a refrigerator at the entry door serve no much purpose and reduce the aesthetic value of the store. 2. There are 3 cash counters just at the entrance. There is little space for the customers to stand in the queue due to the presence of shelves very near to the cash counter. 3. There is a large open fridge on the right bay of the store. This is used for storing perishable items like butter, cheese, milk, fruits etc. In the front of the fridge, there are large containers filled with fruits and vegetables. There is a lot of rotten fruits and vegetable lying in the containers. This leaves a negative impression on the customer, as the term FRESHin the store name appears as a misnomer. 4. Going further from the fruits/vegetable bay, there is a huge space devoted to groceries. This is well arranged and serves the customer needs well. Also a new rack has been added which displays packaged groceries by RELIANCE itself. This is a good move to promote self-owned brands. 5. The end of the left bay has a huge rack containing edible oil packets. This is done to safeguard other products from oil spillage. 6. As we move from the grocery space to the next bay on the right, we can find FMCGs like chips, noodles, chocolates, namkeen, etc. These are highly sold items and are strategically placed at the center of the store. The shelf space devoted to potato chips and stuff like that seems too much though. 7. The next bay on the right is devoted to FMCG daily care products like shaving accessories, talc, deodorant, soap, gels, shampoo etc. All the brands are kept together due to limitation of space.
Operations Management Project Report PGP14/Group 1
This area is one of the most crowded due to the nature of the products. The back side bay consists of household products like brooms, buckets, doormats etc. 8. The last bay is highly unorganized and carries products varying from utensils to cloth to foot ware to ice-cream. This bay is one of the least visited in the store. The space devoted to products here is too much. 9. Near one of the billing counters, there is a rack containing hosiery items. This gives the store a very poor look. The garments are not well arranged and are often hanging around the shelf. 10. There is a magazine stand and chocolate shelf near one of the billing counters. This is good as people usually end up buying such stuff while going out. 11. A lot of loose containers containing material for sale are found lying here and there in the store. This is hugely due to limited floor space. 12. The outer parking space is very inconvenient due to unevenness of the land. Recommendations 1. We suggest a proper entry exit mechanism with guard always on duty. 2. The manager s counter should be removed from near the entry gate and placed at the end of the store. 3. Some space has to be created for billing queue formation. 4. It has to be ensured that the fruits and vegetable should be of better quality and rotten material is immediately removed from the shelf. 5. Beverages, cheese, butter, milk etc. should be arranged in a visually appealing manner. 6. Instead of providing too much shelf space to chips and namkeen, a mechanism can be deviced to hand these packets. 7. The toiletries should be segregated based on brands and arranged accordingly. 8. The last bay needs complete restructuring. A shoe displaying rack should be installed. 9. Ice-cream section should be brought near the counter, inducing more sale while exit. 10. The hosiery rack from near the exit door should be removed and placed in the last bay. 11. Frequent cleaning of the floor space is suggested to avoid dirty look of the store. 12. The parking area should be leveled to cause convenience. 13. A baggage counter with token system should be installed. The entry gate guard can take care of transactions.
Operations Management Project Report PGP14/Group 1
G R O CE RI ES
PACKAGED GROCERIES
LOOSE GROCERIES WT.
V E G E T A B L E S
OPEN REFRIGERATOR VEGETABLE/ FRUIT CONTAINERS
G I L L E T T E
MANAGER S COUNTER
ENTERANCE
E D I B L E O I L
PACKAGED GROCERIES
RELIANCE PRODUCTS
VEGETABLES
BILLING SECTION
LOCAL FOOD PRODUCTS
BRANDED FOOD
C H O C O L A T E S
C H O C O L A T E S
WT.
SOAP/COSMETICS
SOAP/COSMETICS
EX IT MI SC MAGAZINES
UTENILS/ BROOMS
PACKAGED
E L E C T R I C R O O M
H O M E C A R E
C L O T H I N G
F O O T W A R E
ICE-CREAMS
H O S I E R Y S H E L F
Operations Management Project Report PGP14/Group 1
EMPLOYEE SCHEDULING Reliance Fresh in Kunnamangalam follows a very rigid employee scheduling system. The reason is that they cannot keep employees on variable rates and wages. Time 7:30-16:00 13:00-21:30 13:00-16:00 No. of Employees in the store 1 Manager + 7 sales people 1 ASM + 7 Sales people Inventory unloading time
PAYMENT OPTIONS 90% transactions are on cash. Very few transactions take place on card.The workers have fixed monthly salary based payment system.
POINT OF SALE SYSTEM Point of sale (POS) or checkout is the location where a transaction occurs. A "checkout" refers to a POS terminal or more generally to the hardware and software used for checkouts, the equivalent of an electronic cash register. A POS terminal manages the selling process by a salesperson accessible interface. The same system allows the creation and printing of the receipt. There is 1 billing counter in the store. The second one is employed during prime time i.e. 5:30 to 7. The third one is also opened up in case the queue gets bigger. They use SAP for their billing activities. The billing system gives details of product sold to the central server and the central server forecasts the products to be supplied. This helps in keeping track of available inventory in the store. Such compiled data helps in generating status reports, logs in the rate of sale of the products which helps in analyzing information for other purposes. The process involved in billing is as follows: y y Customer puts the basket onto the counter The billing associate uses the bar-code reader to upload the information of the lot no., batch no. and price of the item into the store s SAP. This information is also used to prepare the customer s invoice. Simultaneously, he keeps putting the items into a plastic carry bag in order to reduce waiting time For payment of bill the customer is given 2 options- cash or credit/debit card payment The customer is given a copy of the bill invoice and the packed items The customer gets the bill invoice and items verified by the guard standing at the exit who stamps the bill upon verification
y y y
Operations Management Project Report PGP14/Group 1
BOTTLENECK AT BILLING COUNTER Billing Counter Queue: The customer wait time is around 2-3 minutes during normal times. However at peak time, it increases to 5-6 minutes. RECOMMENDATIONS Customers can be provided with portable bar readers and hence the time taken to serve a customer will get reduced PROS: It is a time saving process. Customers need not wait in long queues getting their items checked It helps in maintaining accurate inventory control CONS: The customers might not be aware of how to use the scanner and thus can cause a lot of problems and eventually add to the delay. Operate two billing counters at all times and employ the third one during peak time PROS: Easiest way to reduce waiting time CONS: Additional staff member is required to be present at the additional billing counter Sales promotion tools should be advertised at the billing counters- While the customer is waiting for the bill to be prepared, he can be provided with sales promotion tools such as coupons which can be redeemed by him during the next visit. In case of any doubts, he can get them cleared at that point of time itself by the billing associate.
INVENTORY MANAGEMENT
Storage Area A small storage area is available per store depending upon the forecast provided by the manager of the store. The forecast needs to be accurate as: o Large inventory can add to the storage cost o Way too much of inventory can also add to wastage if perishable items are high in quantity o Less inventory may add to disadvantage as sales figures would go down The forecast has to be given two days prior by the store manager to the supervisor, and then supplies of goods take place.
Thus, time lag between demand and supply of goods = 2 days
Operations Management Project Report PGP14/Group 1
Distribution Area Fruit and vegetables Perishable Items o Distributor : Pallakad o Entry at store : 9:00AM o Unloading time : 15-20 minutes o Inventory prediction from sales and decided by Head Office Other products- Non Perishable o Distributor : Trissur o Entry at store : between 10 AM to 4PM, o Unloading time : 30 Minutes
Cycle of replenishment The cycle of replenishment of stores with the products from the warehouses happens on a daily basis. Fruits etc are thrown away 2 days after they are brought (provided they perish), while other FMCG are kept till the expiry date has come. This is called the Fresh model and leads to faster turnover of the inventory since the expected customer visit to stores for replenishment of items is twice a week and twice in a month in case of students of IIM K. Thus, the store should maintain inventory requirement of one day. The small storage area is replenished in the morning. The shelves are stocked during working hours as and when required. The entire staff at Reliance Fresh works as a cohesive teamworking for customer satisfaction. The perishable items such as vegetables, fruits, dairy products and bakery items are stocked fresh daily into the shelves. Other FMCG goods with longer shelf life are replenished as and when required. The rate of replenishment varies for each product.
Expired goods and items Many a times, the perishable and non-perishable items expire without being sold. Reliance Fresh always strives to maintain good quality fresh products for customer satisfaction,hence any expired stock is dumped. On an average, 8% of the food items are dumped by the Reliance Fresh store at Kunnamangalam, Calicut. Certain items which reach their expiry date are taken back by the suppliers. These include items such as bakery items, and certain dairy products. In other cases, the stockis dumped. Hence, Reliance Fresh ensures that the products in the stores are of good quality and hence Freshness stands as their USP
Operations Management Project Report PGP14/Group 1
CLASSIFICATION OF CUSTOMERS The source of revenue for reliance fresh is customers and a study based on classification of various customers is necessary to have an understanding about the operations associated with it. So Customers may be classified on the basis of
Time of arrival
We have observed a larger number of customers coming between 5 to 7:30 pm. Some customers are more interested in coming during holidays. These customers are working people and are earning members of their family, which is the reason why they do not come in office hours. This category does maximum purchase at the shop.
Loyal Customers
Even though the shop is new, some customers are loyal to the shop since the beginning. But loyalty is challenged by the fact that the largest chunk of customers are students of IIM-K. So every year around 300 of customers are lost (after they pass out of the institute) and a prospective 300 customers (new students )are in available to be made loyal customers. In other words Reliance Fresh kunnamangalam cannot sit back, considering that they have a set of loyal customers. So regular large scale marketing like distribution of pamphlets and other works needs to be done.To tap more loyal customers Reliance fresh have offered loyaly cards, when ever new purchases is done using loyalty cards some points are redeemed to each card depending upon the purchase he did.Upon reaching a particular level the customer is alloweed to make a free purchase worth 250 Rs.
Basket segmentation
Customers can also be segregated on the basis of the amount of products they purchase- Wide market customers (depend on the store or all purchases), and narrow market customers (they
Operations Management Project Report PGP14/Group 1
purchase only a few items from the shop). Main agenda of the firm is to retain all wide market customers and convert all narrow basket customers to wide market customers.
Age group segmentation
Customers who are older than 30 are called old age customers, while others are called new-age customers. New age customers want a variety of brands and their demand cannot be predicted easily, while old- age customers are comfortable with their brands. Predicting their demand is quite easy. New age customers however are comfortable in testing new products and often they are the ones who determine the amount of shelf space given to new products.. With a large chain of outlets, reliance fresh can even help the manufacturers predict the viability of products.
COST BENEFIT ANALYSIS The product mix at reliance fresh consists mainly of fruits and vegetables, FMCG(Ready-to-eats, toiletries) , staples and other non-FMCG goods. The reliance-fresh outlets are being used by reliance to promote their in-house private label Reliance Select . This is a growing trend across all major retail chains like More (Aditya Birla Group), Big Bazaar(PRIL) etc. a) Reliance Fresh provides lesser space to well known brands which are industry leaders in the staples category which includes rice, tea, coffee, sugar and other agro products. b) They provide huge shelf-space to Reliance-Select c) They provide these staples at a rate slightly lower than the popular brands and give tough competition. d) In this way, they are getting higher margins on their products. e) The customers who come to do bulk shopping are enticed to buy these products from Reliance Fresh. The end-result is the growth of in-house brand, higher margin and an entry into the market share of ever-expanding and lucrative food retail sector. The FMCG products such as provide better to super-stores than to small retailers. This makes it profitable to store in a much larger quantity. Thus offers like Buy One Get one, Discounts etc are possible in this category. Maximum shelf space is dedicated to ready-to-eat category to cater to the community at IIMK. The maximum revenue comes from this category. The fruits and vegetables are procured directly from farmers eliminating the middle men to the maximum extent possible and increase the margin. However, the freshness is heavily compromised during the procurement and most of the fruits available at store are rotten. Ultimately, the rotten fruits are disposed without any benefit to the store.The cost can be progressively reduced as the fruits become stale. Instead of keeping 10Kg of rotten apples for 100Rs per Kg, it can be sold for 10 to 5 Rs less everyday to keep the inventory moving.
Operations Management Project Report PGP14/Group 1
The other non-FMCG items include hosiery, footwear, clothes etc which are totally unrelated to the food retail industry which is primary focus of Reliance Fresh. The sales of this section are unimaginably low while it continues to occupy unjustifiably significant amount of shelf space. This space can be utilised for more FMCG products or spreading out the existing layout to occupy this space. This would make it comfortable to walk around the store and also help earn better profits per unit shelf space available.
SWOT ANALYSIS
Strength
Only supermarket within 5 kilometers of Kunnamangalam. It has a strong presence among young people who are brand conscious. Due to the technological advancement of Reliance, they also have most modern software like SAP which can predict the demand on the basis of purchases. The shop also sells fruits, vegetables, Confectionaries, stationeries and other all household items. Quality is maintained with utmost care, fruits and vegetables are refrigerated.
Weakness
Inability to purchase items based on local demand has been an issue, as most items are delivered on the basis of SAP output. Also the queuing of payment counter is not done scientifically. Certain items like local snacks are sold at a price determined by the district office and not the shop, and it is always found to be more than that compared to a typical neighborhood bakery.
Opportunity
650 students and another 100 staff members of IIMK are a group of brand conscious people, and their demand cannot be satisfied by other shops in the area. So they are compelled to come to reliance fresh for all their purchases.
Threats
The shop has no visibility as it is in a sub road. Also there is no board on the road for new people to find it. Another problem is the presence of socialist and communist parties in the region. There is lot of mass organized agitation and rallies against shops run by corporate, since people perceive it as a Bourgeois attempt to unemploy small shop keepers. So for political reasons, the operations of shop may be disrupted or even the shop could be in a danger.
RECOMMENDATION & CONCLUSION There is a need to rework the farm to fork model. Perishable goods need a strategy that combines responsiveness with efficiency as 15% losses are observed globally in perishable items within the supply chain. Demand forecast needs to be more accurate in this case. Discount selling is viewed negatively by
Operations Management Project Report PGP14/Group 1
customers who find this against the Fresh motto of Reliance Fresh. They have been unable to achieve sufficient volumes which have led them to limit the number of offerings. Use local suppliers to reduce losses from spoilage. This will allow them to order more frequently and allow management of variations in demand. In addition, gradation and standardization of the produce is also a challenge Prime driver of operational strategy was Farm-to-Fork plan of Reliance. It depends upon selling the whole FMCG products at lower price than the market, providing complete F&B (foods and beverages) range to the consumers, providing a mix of convenience and good ambience to shoppers, sourcing the vegetables nationally and selling at lower prices than market (this strategy has changed significantly over the years to move to local sourcing), obtaining aggressive discounts by promising huge volumes to the FMCG goods producers and securing the supply chain for food (vegetables and cereals) by entering into contract directly with the farmers eliminating middle man Introduction of IT in sourcing, ordering, billing and report generation. The organized retail sector in India is set to grow exponentially in the coming months and years. Streamlining the supply chain is a major key in successes of retail players. Procurement strategy must be streamlined according to market and demand. Inventory management is a key issue for all retail chains. IT serves as a great enabler for supply chain optimization. Supplier relationships are critical in the long term. Private labels should be nurtured as a growth driver through supplier partnerships REFERENCES Information provided by Reliance Fresh store manager of Kunnamangalam Mr. Sameer http://www.london.edu/assets/documents/facultyandresearch/Reliance_Fresh.pdf Reliance: Fresh and Small, M. Ananda and SunithaNatti, Business World Reliance Fresh Stores in Food Retailing, Dr. DebasisPradhan& Dr. B.K. Mangaraj, London Business School reference CS 08-029 http://www.ril.com/html/business/business_retail.html http://www.portal.euromonitor.com/PORTAL/ResultsList.aspx http://economictimes.indiatimes.com/News/News-By-Company/R-Companies-/RelianceRetail/Reliance-retail-juggernaut-rolls-out-aims-to-link-farm-to-fork/articleshow/312673.cms http://economictimes.indiatimes.com/News/News-By-Industry/Services/Retailing/Fromgrocery-Reliance-Retail-plans-shift-to-supply/articleshow/2635827.cms http://www.hinduonnet.com/fline/fl2513/stories/20080704251303300.htm http://businesstoday.intoday.in/index.php?option=com_content&task=view&id=5410
Operations Management Project Report PGP14/Group 1
doc_560054136.pdf
Operation Management
Submitted by: Derrick Vijayan
January 1, 2010
Operations Management Project Report, PGP14/Group 1
SUPPLY CHAIN & DISTRIBUTION
INTRODUCTION The traditional model of vegetable retailing in India involved vegetables being sold in small stores on the roadside, and there were no formal rules regarding weighing, bargaining and quality issues, let alone cold storage and sophisticated supply chains. Produce travelled slowly and inefficiently through a series of intermediaries before reaching the hands of customers, suffering mark-ups, wastages and quality losses along the way. Reliance Fresh marketing model operates on affordability and a hygienic ambience along with a good shopping experience , said MukeshAmbani, the Chairman of RIL. Reliance Fresh intended to bring high quality fresh food to the customers at an affordable price. Reliance Fresh also wanted to establish a benchmark of hygiene and quality in their sales. It thus sought to provide the consumer affordable and quality produce in a congenial and pleasing environment and enforced stringent quality and hygiene guidelines which would help it bring high value to the consumer. The Rationale behind the Supply Chain Strategy adopted by Reliance Fresh as given by Reliance officials: We will always buy from the farmer, almost never from the mandi (wholesalers), said a group official. For example, the leafy vegetables, aubergines, tomatoes and green chillies in the one of the outlets in Mumbai were sourced directly from farmers in nearby districts. This in effect got translated into lower prices by at least 15% to 20%. We'll be very affordable and competitive in the market, but we aren t playing a price game here. The full effort is to deliver value to the customer, said Chief Executive, Customer Operations, KSVenugopal. Produce from the farmers came to Reliance's city distribution centre, which connected two very different sides of India, the poverty-ridden countryside, steeped in tradition, and the wealthy city centers. Already, a few hundred farmers have been hooked on to the
Operations Management Project Report PGP14/Group 1
Reliance Retail supply chain. In the next five years, that number will grow to millions. Even contract farming by assisting farmers in procuring high-quality seeds, fertilizers and other essential raw materials is on the cards. By going to the farmer directly, Reliance Retail hoped to disinter mediate the supply chain and eliminate waste. This meant fresher products at lower cost , reasoned the same group official. PROCUREMENT PROCESS Reliance fresh obtains its goods locally and nationally so as to derive the best possible mileage in terms of quality, price and ease of logistics. Fruits, vegetables, grains and other agricultural items come from Palakkad, Kerala. All other FMCG comes from central hub of Reliance, Thrissur. Fruits etc are thrown away 2 days after they are brought, while other FMCG are kept till the expiry date. For vegetables Reliance Fresh enters into contract farming with farmers where it provides the farmers with high quality seeds technical knowhow and guarantees assured market for their produce at price higher than prevalent in the mandi. There are 2 warehouses. One of them in located in Calicut city and the other in Kozhinjampara These warehouses supply goods to 6 stores. As true with reliance it has tried to backward integration so as to secure its supply and bring in efficiency in the supply chain for this it has. Wholesale centres not only supply to its store but also to other business concerns. This was done so as the farmers get assured market and Reliance is able to lock in its suppliers by offering them assured market. Other features: Higher prices and on-spot payment for the produce to farmers A sophisticated cold chain facility and several trucks which are used to preserve and supply the vegetables as demand A huge processing complex in Kochi has been built which can supply up to 120 stores
Reliance is already the largest single Big Retail buyer of fresh vegetables and fruits in Kerala. Soon, if not already, there could be other such big players too, with their leaner, meaner tentacles digging deep into the rural landscape of a food-, vegetable- and fruit-deficit State. THE BASIC PROCUREMENT PROCESS
*grading and standardization takes place here
Operations Management Project Report PGP14/Group 1
Reliance fresh procures different products from different vendors depending upon two main factors: Quality and price. The products are not procured by individual stores, but are procured at district or state level depending on the type of product. Perishable items such as vegetables, fruits, dairy products, bakery items etc are procured at a district level. This ensures that each district has the authority to procure the products quickly at the cheapest rates possible. Other products which are non-perishable with long shelf life are procured by the Reliance Fresh merchandising department which work at the state level. The state level placement of the merchandising departments although are not as quick as the district level procurers, it ensures that bulk purchases for the entire state give the merchandising department price negotiation powers. The merchandising department placed at the state level is helpful in providing lower prices for the products to the consumers. PROCUREMENT STRATEGY Procuring fruits and vegetables (agricultural perishables) Reliance is the largest single big retail buyer of fresh vegetables and fruits in Kerala. Reliance fresh has an aim to procure vegetables and other farm products directly from farmers. By cutting out middlemen, their [10 per cent] commission, loading, unloading and transportation charges are reduced. Thus they follow a philosophy to pay farmers more and sell fresh vegetables at ever lower prices to urban customers. They also implement contract farming to ensure stable supplies of fruits, vegetables and dairy products.
Contract Farmers
Collection Centre
Distribution Centre/ Warehouse
Store
Sales (Wastage 5-7%)
Supply Chain for Fruits and Vegetables
The produce from farmers is collected at the Collection Centres (CC). The CC for the Kunnamangalam Store is at a place called Kozhinjapara. A preliminary Quality Check is done here. From the CC, the goods are sent to Distribution Centres (DC), where they are sorted and graded. Here, all data is entered into the SAP system for easy tracking. Every day, the store manager of each store raises a purchase order for the next day s requirements based on estimated demand. The total order for all the stores in an area is collected by the Area/Cluster Manager. Based on the availability of goods, the ordered items are delivered to each store by the Area Manager daily.
Operations Management Project Report PGP14/Group 1
Procuring Non Fruits and Vegetables
Manufacturers
Distribution Centre/ Warehouse
Sales Store (Wastage 2-3%)
Supply Chain for Non Fruits and Vegetables
Items directly collected from Manufacturer or National level Distributor and delivered to the local DC. Each store has a Minimum Base Quantity (reorder level) for all items Whenever the stock goes lesser than the MBQ, the SAP system automatically reorders
A Closer Look at Contract Farming It involves a pre-agreed price between the company and the farmer, along with measures of quality, quantity, acreage to be farmed, and/or duration of the contract. It provides secure supplies. Reliance, through these contracts is giving farmers information about how can farmers improve their productivity, making them aware of market rates of different crops so that farmers can choose crops they want to sow to become profitably and also providing technical help like information about quality of seeds and fertilizers. Reliance Fresh currently procures different kinds of vegetables like carrots, onions, cabbage, cauliflower etc. Advantages and Disadvantages of Contract Farming ADVANTAGES Reduce load on central and state level procurement system Bring about a market focus in terms of crop selection by Indian farmers Generate a steady source of income at the individual farmer level Promote processing & value addition, thereby generating gainful rural employment. DISADVANTAGES Fears have been expressed ,that the rejection rate of agricultural produce by retail chains was high. The farmers then have to bear the extra cost Unsuitable technology and crop incompatibility
Manipulation of quotas and quality specifications;
Land availability constraints, Social and cultural constraints, Farmer discontent, Extra-contractual marketing & Input diversion poses a problem for corporates
Access to reliable markets.
Operations Management Project Report PGP14/Group 1
Advantages and Disadvantages of Farm to Fork Model ADVANTAGES Leads to removal of non-value adding intermediaries from supply chain Cost reduction Reduction in lead time Reduction in intermediaries leads to lesser wastage DISADVANTAGES Loss of employment (intermediaries Need for large investments
Items stocked They stock goods of both private labels and other labels. The margins on private labels , known as Reliance Select, is obviously higher to the tune of approximately 30%. The products of other brands have a sales margin in the range of 20-22%. Therefore it is more profitable for Reliance Fresh to promote its own private labels. With a strong Reliance brand name, the stores have very effectively taken advantage of it. They promote the private labels well in the stores by giving them sufficient shelf space. The restocking of the shelves takes place as and when the requirements call for it. The consumer behavior is studied, the macro-economic factors analyzed and the demand is thus forecasted.
Operations Management Project Report PGP14/Group 1
Depending on the forecasted demand, the stocks are placed in the shelves. For most items, the shelves are replenished as and when they seem to get exhausted with their stocks. Usage of IT for procurement The usage of IT systems has not penetrated deep into Reliance fresh, especially at the individual store levels. Almost all of the procurement requirements are inspected and calculated manually. However they have Implemented SAP solution on their systems.
Reliance Fresh: Wastage
As a supermarket serving customers with variety of item, Reliance fresh also have wastages on varying levels amongst different items. The percentage wastage for some of these are as follows: Non fruits & vegetables have a shelf life dependent on product s expiry date: 0.5- 1% Fruits and vegetables having a shelf life of 1-3 days: 5 7% Shrinkage due to dryness in fruits and vegetables having a shelf life of 1-2 days: 3% Therefore the major sources of wastages are fruits and vegetables. Being extremely perishable items, they need to be kept in refrigerated environment. The inventory levels are kept at minimum level so that the wastages are reduced. Supply Relations Perishable Items: Fruits & Vegetables Contract Farming Arms length supplier relationship Perishable Items: Dairy Products Partner supplier relationship Milk is directly procured from MILMA Dairy products from Amul&Milma Perishable Items: Bakery Items Multiple Suppliers Arms Length supplier relationship Non-Perishable: FMCG Goods HUL & P&G, Durable arms length
Operations Management Project Report PGP14/Group 1
STORE LAYOUT The store floor space is --------------sq. ft. It is spread on only 1 floor (ground floor) of the complex. The inside view of the store plan is depicted in the block diagram. The layout is based on the similar category of products stacked together. Analysis There are two mail gates to the store. One is meant for entry and the other for exit. In multiproduct retail stores, one has to surrender all the articles while getting into the store through the entrance and get the purchased articles verified at the exit. But this practice is not religiously followed in this store. Consequently there is a high probability of shop lifting. 1. A manager s counter and a refrigerator at the entry door serve no much purpose and reduce the aesthetic value of the store. 2. There are 3 cash counters just at the entrance. There is little space for the customers to stand in the queue due to the presence of shelves very near to the cash counter. 3. There is a large open fridge on the right bay of the store. This is used for storing perishable items like butter, cheese, milk, fruits etc. In the front of the fridge, there are large containers filled with fruits and vegetables. There is a lot of rotten fruits and vegetable lying in the containers. This leaves a negative impression on the customer, as the term FRESHin the store name appears as a misnomer. 4. Going further from the fruits/vegetable bay, there is a huge space devoted to groceries. This is well arranged and serves the customer needs well. Also a new rack has been added which displays packaged groceries by RELIANCE itself. This is a good move to promote self-owned brands. 5. The end of the left bay has a huge rack containing edible oil packets. This is done to safeguard other products from oil spillage. 6. As we move from the grocery space to the next bay on the right, we can find FMCGs like chips, noodles, chocolates, namkeen, etc. These are highly sold items and are strategically placed at the center of the store. The shelf space devoted to potato chips and stuff like that seems too much though. 7. The next bay on the right is devoted to FMCG daily care products like shaving accessories, talc, deodorant, soap, gels, shampoo etc. All the brands are kept together due to limitation of space.
Operations Management Project Report PGP14/Group 1
This area is one of the most crowded due to the nature of the products. The back side bay consists of household products like brooms, buckets, doormats etc. 8. The last bay is highly unorganized and carries products varying from utensils to cloth to foot ware to ice-cream. This bay is one of the least visited in the store. The space devoted to products here is too much. 9. Near one of the billing counters, there is a rack containing hosiery items. This gives the store a very poor look. The garments are not well arranged and are often hanging around the shelf. 10. There is a magazine stand and chocolate shelf near one of the billing counters. This is good as people usually end up buying such stuff while going out. 11. A lot of loose containers containing material for sale are found lying here and there in the store. This is hugely due to limited floor space. 12. The outer parking space is very inconvenient due to unevenness of the land. Recommendations 1. We suggest a proper entry exit mechanism with guard always on duty. 2. The manager s counter should be removed from near the entry gate and placed at the end of the store. 3. Some space has to be created for billing queue formation. 4. It has to be ensured that the fruits and vegetable should be of better quality and rotten material is immediately removed from the shelf. 5. Beverages, cheese, butter, milk etc. should be arranged in a visually appealing manner. 6. Instead of providing too much shelf space to chips and namkeen, a mechanism can be deviced to hand these packets. 7. The toiletries should be segregated based on brands and arranged accordingly. 8. The last bay needs complete restructuring. A shoe displaying rack should be installed. 9. Ice-cream section should be brought near the counter, inducing more sale while exit. 10. The hosiery rack from near the exit door should be removed and placed in the last bay. 11. Frequent cleaning of the floor space is suggested to avoid dirty look of the store. 12. The parking area should be leveled to cause convenience. 13. A baggage counter with token system should be installed. The entry gate guard can take care of transactions.
Operations Management Project Report PGP14/Group 1
G R O CE RI ES
PACKAGED GROCERIES
LOOSE GROCERIES WT.
V E G E T A B L E S
OPEN REFRIGERATOR VEGETABLE/ FRUIT CONTAINERS
G I L L E T T E
MANAGER S COUNTER
ENTERANCE
E D I B L E O I L
PACKAGED GROCERIES
RELIANCE PRODUCTS
VEGETABLES
BILLING SECTION
LOCAL FOOD PRODUCTS
BRANDED FOOD
C H O C O L A T E S
C H O C O L A T E S
WT.
SOAP/COSMETICS
SOAP/COSMETICS
EX IT MI SC MAGAZINES
UTENILS/ BROOMS
PACKAGED
E L E C T R I C R O O M
H O M E C A R E
C L O T H I N G
F O O T W A R E
ICE-CREAMS
H O S I E R Y S H E L F
Operations Management Project Report PGP14/Group 1
EMPLOYEE SCHEDULING Reliance Fresh in Kunnamangalam follows a very rigid employee scheduling system. The reason is that they cannot keep employees on variable rates and wages. Time 7:30-16:00 13:00-21:30 13:00-16:00 No. of Employees in the store 1 Manager + 7 sales people 1 ASM + 7 Sales people Inventory unloading time
PAYMENT OPTIONS 90% transactions are on cash. Very few transactions take place on card.The workers have fixed monthly salary based payment system.
POINT OF SALE SYSTEM Point of sale (POS) or checkout is the location where a transaction occurs. A "checkout" refers to a POS terminal or more generally to the hardware and software used for checkouts, the equivalent of an electronic cash register. A POS terminal manages the selling process by a salesperson accessible interface. The same system allows the creation and printing of the receipt. There is 1 billing counter in the store. The second one is employed during prime time i.e. 5:30 to 7. The third one is also opened up in case the queue gets bigger. They use SAP for their billing activities. The billing system gives details of product sold to the central server and the central server forecasts the products to be supplied. This helps in keeping track of available inventory in the store. Such compiled data helps in generating status reports, logs in the rate of sale of the products which helps in analyzing information for other purposes. The process involved in billing is as follows: y y Customer puts the basket onto the counter The billing associate uses the bar-code reader to upload the information of the lot no., batch no. and price of the item into the store s SAP. This information is also used to prepare the customer s invoice. Simultaneously, he keeps putting the items into a plastic carry bag in order to reduce waiting time For payment of bill the customer is given 2 options- cash or credit/debit card payment The customer is given a copy of the bill invoice and the packed items The customer gets the bill invoice and items verified by the guard standing at the exit who stamps the bill upon verification
y y y
Operations Management Project Report PGP14/Group 1
BOTTLENECK AT BILLING COUNTER Billing Counter Queue: The customer wait time is around 2-3 minutes during normal times. However at peak time, it increases to 5-6 minutes. RECOMMENDATIONS Customers can be provided with portable bar readers and hence the time taken to serve a customer will get reduced PROS: It is a time saving process. Customers need not wait in long queues getting their items checked It helps in maintaining accurate inventory control CONS: The customers might not be aware of how to use the scanner and thus can cause a lot of problems and eventually add to the delay. Operate two billing counters at all times and employ the third one during peak time PROS: Easiest way to reduce waiting time CONS: Additional staff member is required to be present at the additional billing counter Sales promotion tools should be advertised at the billing counters- While the customer is waiting for the bill to be prepared, he can be provided with sales promotion tools such as coupons which can be redeemed by him during the next visit. In case of any doubts, he can get them cleared at that point of time itself by the billing associate.
INVENTORY MANAGEMENT
Storage Area A small storage area is available per store depending upon the forecast provided by the manager of the store. The forecast needs to be accurate as: o Large inventory can add to the storage cost o Way too much of inventory can also add to wastage if perishable items are high in quantity o Less inventory may add to disadvantage as sales figures would go down The forecast has to be given two days prior by the store manager to the supervisor, and then supplies of goods take place.
Thus, time lag between demand and supply of goods = 2 days
Operations Management Project Report PGP14/Group 1
Distribution Area Fruit and vegetables Perishable Items o Distributor : Pallakad o Entry at store : 9:00AM o Unloading time : 15-20 minutes o Inventory prediction from sales and decided by Head Office Other products- Non Perishable o Distributor : Trissur o Entry at store : between 10 AM to 4PM, o Unloading time : 30 Minutes
Cycle of replenishment The cycle of replenishment of stores with the products from the warehouses happens on a daily basis. Fruits etc are thrown away 2 days after they are brought (provided they perish), while other FMCG are kept till the expiry date has come. This is called the Fresh model and leads to faster turnover of the inventory since the expected customer visit to stores for replenishment of items is twice a week and twice in a month in case of students of IIM K. Thus, the store should maintain inventory requirement of one day. The small storage area is replenished in the morning. The shelves are stocked during working hours as and when required. The entire staff at Reliance Fresh works as a cohesive teamworking for customer satisfaction. The perishable items such as vegetables, fruits, dairy products and bakery items are stocked fresh daily into the shelves. Other FMCG goods with longer shelf life are replenished as and when required. The rate of replenishment varies for each product.
Expired goods and items Many a times, the perishable and non-perishable items expire without being sold. Reliance Fresh always strives to maintain good quality fresh products for customer satisfaction,hence any expired stock is dumped. On an average, 8% of the food items are dumped by the Reliance Fresh store at Kunnamangalam, Calicut. Certain items which reach their expiry date are taken back by the suppliers. These include items such as bakery items, and certain dairy products. In other cases, the stockis dumped. Hence, Reliance Fresh ensures that the products in the stores are of good quality and hence Freshness stands as their USP
Operations Management Project Report PGP14/Group 1
CLASSIFICATION OF CUSTOMERS The source of revenue for reliance fresh is customers and a study based on classification of various customers is necessary to have an understanding about the operations associated with it. So Customers may be classified on the basis of
Time of arrival
We have observed a larger number of customers coming between 5 to 7:30 pm. Some customers are more interested in coming during holidays. These customers are working people and are earning members of their family, which is the reason why they do not come in office hours. This category does maximum purchase at the shop.
Loyal Customers
Even though the shop is new, some customers are loyal to the shop since the beginning. But loyalty is challenged by the fact that the largest chunk of customers are students of IIM-K. So every year around 300 of customers are lost (after they pass out of the institute) and a prospective 300 customers (new students )are in available to be made loyal customers. In other words Reliance Fresh kunnamangalam cannot sit back, considering that they have a set of loyal customers. So regular large scale marketing like distribution of pamphlets and other works needs to be done.To tap more loyal customers Reliance fresh have offered loyaly cards, when ever new purchases is done using loyalty cards some points are redeemed to each card depending upon the purchase he did.Upon reaching a particular level the customer is alloweed to make a free purchase worth 250 Rs.
Basket segmentation
Customers can also be segregated on the basis of the amount of products they purchase- Wide market customers (depend on the store or all purchases), and narrow market customers (they
Operations Management Project Report PGP14/Group 1
purchase only a few items from the shop). Main agenda of the firm is to retain all wide market customers and convert all narrow basket customers to wide market customers.
Age group segmentation
Customers who are older than 30 are called old age customers, while others are called new-age customers. New age customers want a variety of brands and their demand cannot be predicted easily, while old- age customers are comfortable with their brands. Predicting their demand is quite easy. New age customers however are comfortable in testing new products and often they are the ones who determine the amount of shelf space given to new products.. With a large chain of outlets, reliance fresh can even help the manufacturers predict the viability of products.
COST BENEFIT ANALYSIS The product mix at reliance fresh consists mainly of fruits and vegetables, FMCG(Ready-to-eats, toiletries) , staples and other non-FMCG goods. The reliance-fresh outlets are being used by reliance to promote their in-house private label Reliance Select . This is a growing trend across all major retail chains like More (Aditya Birla Group), Big Bazaar(PRIL) etc. a) Reliance Fresh provides lesser space to well known brands which are industry leaders in the staples category which includes rice, tea, coffee, sugar and other agro products. b) They provide huge shelf-space to Reliance-Select c) They provide these staples at a rate slightly lower than the popular brands and give tough competition. d) In this way, they are getting higher margins on their products. e) The customers who come to do bulk shopping are enticed to buy these products from Reliance Fresh. The end-result is the growth of in-house brand, higher margin and an entry into the market share of ever-expanding and lucrative food retail sector. The FMCG products such as provide better to super-stores than to small retailers. This makes it profitable to store in a much larger quantity. Thus offers like Buy One Get one, Discounts etc are possible in this category. Maximum shelf space is dedicated to ready-to-eat category to cater to the community at IIMK. The maximum revenue comes from this category. The fruits and vegetables are procured directly from farmers eliminating the middle men to the maximum extent possible and increase the margin. However, the freshness is heavily compromised during the procurement and most of the fruits available at store are rotten. Ultimately, the rotten fruits are disposed without any benefit to the store.The cost can be progressively reduced as the fruits become stale. Instead of keeping 10Kg of rotten apples for 100Rs per Kg, it can be sold for 10 to 5 Rs less everyday to keep the inventory moving.
Operations Management Project Report PGP14/Group 1
The other non-FMCG items include hosiery, footwear, clothes etc which are totally unrelated to the food retail industry which is primary focus of Reliance Fresh. The sales of this section are unimaginably low while it continues to occupy unjustifiably significant amount of shelf space. This space can be utilised for more FMCG products or spreading out the existing layout to occupy this space. This would make it comfortable to walk around the store and also help earn better profits per unit shelf space available.
SWOT ANALYSIS
Strength
Only supermarket within 5 kilometers of Kunnamangalam. It has a strong presence among young people who are brand conscious. Due to the technological advancement of Reliance, they also have most modern software like SAP which can predict the demand on the basis of purchases. The shop also sells fruits, vegetables, Confectionaries, stationeries and other all household items. Quality is maintained with utmost care, fruits and vegetables are refrigerated.
Weakness
Inability to purchase items based on local demand has been an issue, as most items are delivered on the basis of SAP output. Also the queuing of payment counter is not done scientifically. Certain items like local snacks are sold at a price determined by the district office and not the shop, and it is always found to be more than that compared to a typical neighborhood bakery.
Opportunity
650 students and another 100 staff members of IIMK are a group of brand conscious people, and their demand cannot be satisfied by other shops in the area. So they are compelled to come to reliance fresh for all their purchases.
Threats
The shop has no visibility as it is in a sub road. Also there is no board on the road for new people to find it. Another problem is the presence of socialist and communist parties in the region. There is lot of mass organized agitation and rallies against shops run by corporate, since people perceive it as a Bourgeois attempt to unemploy small shop keepers. So for political reasons, the operations of shop may be disrupted or even the shop could be in a danger.
RECOMMENDATION & CONCLUSION There is a need to rework the farm to fork model. Perishable goods need a strategy that combines responsiveness with efficiency as 15% losses are observed globally in perishable items within the supply chain. Demand forecast needs to be more accurate in this case. Discount selling is viewed negatively by
Operations Management Project Report PGP14/Group 1
customers who find this against the Fresh motto of Reliance Fresh. They have been unable to achieve sufficient volumes which have led them to limit the number of offerings. Use local suppliers to reduce losses from spoilage. This will allow them to order more frequently and allow management of variations in demand. In addition, gradation and standardization of the produce is also a challenge Prime driver of operational strategy was Farm-to-Fork plan of Reliance. It depends upon selling the whole FMCG products at lower price than the market, providing complete F&B (foods and beverages) range to the consumers, providing a mix of convenience and good ambience to shoppers, sourcing the vegetables nationally and selling at lower prices than market (this strategy has changed significantly over the years to move to local sourcing), obtaining aggressive discounts by promising huge volumes to the FMCG goods producers and securing the supply chain for food (vegetables and cereals) by entering into contract directly with the farmers eliminating middle man Introduction of IT in sourcing, ordering, billing and report generation. The organized retail sector in India is set to grow exponentially in the coming months and years. Streamlining the supply chain is a major key in successes of retail players. Procurement strategy must be streamlined according to market and demand. Inventory management is a key issue for all retail chains. IT serves as a great enabler for supply chain optimization. Supplier relationships are critical in the long term. Private labels should be nurtured as a growth driver through supplier partnerships REFERENCES Information provided by Reliance Fresh store manager of Kunnamangalam Mr. Sameer http://www.london.edu/assets/documents/facultyandresearch/Reliance_Fresh.pdf Reliance: Fresh and Small, M. Ananda and SunithaNatti, Business World Reliance Fresh Stores in Food Retailing, Dr. DebasisPradhan& Dr. B.K. Mangaraj, London Business School reference CS 08-029 http://www.ril.com/html/business/business_retail.html http://www.portal.euromonitor.com/PORTAL/ResultsList.aspx http://economictimes.indiatimes.com/News/News-By-Company/R-Companies-/RelianceRetail/Reliance-retail-juggernaut-rolls-out-aims-to-link-farm-to-fork/articleshow/312673.cms http://economictimes.indiatimes.com/News/News-By-Industry/Services/Retailing/Fromgrocery-Reliance-Retail-plans-shift-to-supply/articleshow/2635827.cms http://www.hinduonnet.com/fline/fl2513/stories/20080704251303300.htm http://businesstoday.intoday.in/index.php?option=com_content&task=view&id=5410
Operations Management Project Report PGP14/Group 1
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