Description
The Retail Operations Benchmarking and Excellence Survey (ROBES) 2015 focuses on Measuring Supply Chain Performance. This report seeks to build on the foundations laid in the past two years by the Retailers Association of India's (RAI) 'Excellence' agenda.
Measuring Supply Chain Performance
Retail Operations Benchmarking
and Excellence Survey 2015
Contents
1. Introduction: Supply Chains Make or Break Retailers 1
2. Scope of This Study 8
3. Methodology Used for This Study 12
4. Executive Summary 16
5. Retailers’ Strategic Focus Areas for FY 2015-16 24
6. Detailed Survey Findings: Process and KPI Benchmarks 32
Fashion 32
Department Stores 46
Food and Grocery 60
Consumer Durables and Information Technology (CDIT) 74
Other Retailers – Books, Gifts, and Pharmacy 88
7. Multichannel Readiness 100
8. Views of 3PL Providers 104
9. Benchmarks from Global Retailers 106
10. Appendix 110
1
Foreword
Dear colleagues,
The Retail Operations Benchmarking and Excellence Survey (ROBES) 2015
focuses on Measuring Supply Chain Performance. This report seeks to
build on the foundations laid in the past two years by the Retailers
Association of India’s (RAI) ‘Excellence’ agenda. It follows the
groundbreaking knowledge initiative undertaken in collaboration with
Tata Consultancy Services (TCS) in earlier years.
While ROBES 2013 focused on retail store operations, ROBES 2014 looked
at retailers’ multichannel strategy and their progress towards delivering a
seamless customer experience across channels. This year’s report focuses
on retail supply chains. The advent of digital commerce and
corresponding heavy investments by online retailers in their back-end
operations have renewed awareness about the critical role supply chains
play in shaping retailers’ success, whether they operate offline, online, or
on multiple channels.
Based on our conversations with leading retailers, we identified four
imperatives for both offline and online retailers today:
1. They can never be out of stock
2. They need to deliver orders to customers within 1-2 days
3. They need to synchronize all channels (store, self-online, third-party
online, and others)
4. They need to deliver a seamless customer experience, including back-
end customer services
These changes in the ecosystem show that a retailer’s effectiveness is only
as good as its supply chain management (SCM) practices. Investment in
this area becomes imperative.
RAI and TCS have looked at developments in SCM capabilities to gauge
the maturity of current practices, identify best-in-class KPIs and processes,
and recommend opportunities for improvement.
The report includes inputs from 50 Indian retail brands across five
segments and draws on global best practices gleaned from TCS’
experience in the US and European markets. It highlights the actions a
company must pursue to achieve efficient supply chain operations and
build a sustainable competitive advantage.
Supply Chains Make or Break Retailers
3
[1 ] Business Insider India, This Is What It Looks Like When A Company Sells $8 Billion In Merchandise In A Single Day,http://www.businessinsider.com/alibaba-singles-day-sales-2014-11
Alibaba’s 11/11 Success: Not Sales, but SCM Capability
This online marketplace based in China clocked record sales of $9.3 billion
on Singles’ Day (11/11) in November 2014. It fulfilled 278 million orders in
24 hours.
The key to Alibaba’s success lies in its investments in the less glamorous
aspect of online retailing – efficient supply chains. Behind the scenes, the
company had developed analytics capabilities as well as strong
partnerships that allowed it to meet this unprecedented demand.
Cloud computing plays its part and Alibaba’s cloud platform handles
95 percent of all incoming orders.
Apart from traditional sales analytics, Alibaba captures data from Alipay
Money Deposit, the hugely successful mobile wallet business it grew and
earlier spun off. Data on amounts transferred from bank accounts to the
wallet allow Alibaba to predict sales trends. It also receives vast amounts
of data from the sellers who use the marketplace and whose queries
provide insights into likely volumes and products.
Alibaba has partnerships with logistics providers such as YTO Express and
China Post. In advance of 11/11, YTO Express undertook a massive
upscaling exercise, adding 600 trucks to its fleet and recruiting 30,000
additional employees. Its route planning in advance of the mega sale day
was comprehensive and considered multiple routes down to the county
level. YTO Express can handle 17 million packages per day, while China
Smart Logistics Network, Alibaba’s collaboration with China Post, can
[1]
handle an additional 25 million packages per day.
Supply Chains Make or Break Retailers
Indian Online Retailers’ Investments in Supply Chain
5
[2] Business Today, Profitable business model is a must for e-commerce firms, says PwC Director,http://businesstoday.intoday.in/sto...-business-model-flipkart-jabong/1/209399.html
[3] The Economic Times, Will spend over $100 million on supply chain this year: Rohit Bansal, Snapdeal,http://articles.economictimes.india...1_1_supply-chain-ecommerce-logistics-snapdeal
[4] Business Standard, Where will Flipkart spend its $1 billion?,http://www.business-standard.com/ar...pkart-spend-its-1-billion-114072400152_1.html
Supply Chains Make or Break Retailers
n The Indian e-commerce industry is expected to have an aggregated
spend of $950 to $1,900 million each year between 2017-2020 on
infrastructure, logistics, and warehousing, according to a study by
[2]
ASSOCHAM and PwC.
n Snapdeal is making an estimated supply chain investment
[3]
of $100-125 million in FY 2014-15.
n After successfully raising $1 billion, Flipkart is expected to invest in
[4]
warehouse automation technologies such as Robotics.
Globally, customers now expect an 'Alibaba shopping
performance' every day, from all retailers.
Supply Chain is the Unglamorous Backbone of Retail
7
Observations
Manual processes in warehouse
although warehouse management
is a high focus area
Imperatives
Automation initiatives such as use of
robotics, conveyer belts, sorting techniques,
WMS, and WCS to overcome manual process
constraints should be looked into
Implications
Meeting the expectations of a
multichannel customer of low order
fulfillment time is a challenge
Supplier management is very low on
maturity with 75 percent relying on
informal connect, 15 percent having fill rates
of over 90 percent and 12 percent using
ASNs
Increase supplier collaboration
by sharing of inventory data and delivery
plans, adherence to delivery and quality
standards, forecast accuracy, technology
integration
This adversely impacts customer service,
quality, sales, and multichannel integration
Order (purchase) management is a
challenge between buyers, vendors, and
logistics providers
Online dashboard for order
management allows buyers to announce
orders, vendors to finalize orders,
transport companies to pick up orders
This is vital in the digital era
with smaller order sizes and faster
fulfillment cycles
Multichannel retail initiatives remain
slow, but the advent of e-commerce
has added urgency for digital
experiments in SCM
Investment in supply chain
infrastructure and systems will enable
real-time inventory visibility, forecast
accuracy, and flexible returns
Poor channel integration, OOS, and
higher markdowns along with loss of
customers preferring multichannel
options
New KPIs are barely tracked – examples
are cost per order, same day delivery, and
channel specific days of inventory
Data-centric supply chain
with focus on digital era metrics need to
be adopted by retailers
Online costs need to be measured or
else this might amplify inefficiencies in
both offline and online models
Supply Chain is the Unglamorous Backbone of Retail
Scope of This Study
9
This comprehensive retail supply chain benchmarking study is the first of its kind in India and considers the following parameters:
Strategic Focus
Areas
Key Performance
Indicators (KPIs)
1
Process
Maturity
2 3
Inventory
Warehouse
People
Transportation Suppliers
Process
Maturity
Scope of This Study
10
The objective of our study was to understand the current status of retail
supply chains. We have taken a three-dimensional view to answer three
key questions for the Indian retailer.
n What are the industry benchmarks?
n What should the best practices be?
n In what direction is the industry moving?
The report considers these specific areas:
n Areas of strategic focus areas for FY 2015-16
n KPIs and process in five functional areas: Inventory, Warehouse,
Suppliers, Transportation, People
11
The respondents represent a cross-section of the retail industry in India.
Varied in size, segment, and multichannel contribution, they offer a
snapshot of the current dynamics of the retail sector and suggest what its
future may look like. The research sample included senior management
(CXOs and MDs), heads of operations, and directors. 50 retail organizations
provided over 1,500 data points.
The survey was conducted across five broad retail segments:
n Fashion, including apparel, footwear, and accessories
n Department stores
n Food and grocery
n Consumer durables and information technology (CDIT)
n Other retailers including books, gifts, pharmacy formats
The survey also captures, through interviews, the views and best practices
of third-party logistics (3PL) providers.
Methodology Used for This Study
13
Data for the Retail Operations Benchmarking and Excellence Study was
gathered through a survey designed and conducted by TCS in
collaboration with RAI. This survey is based on TCS’ framework for
operations benchmarking.
The survey was conducted in both online and offline modes, which
included personal interviews conducted by TCS’ retail consultants with
retail CXOs, most of whom are RAI members. Data was collected based on
retail segments. Vertical segmentation in the study provided a cross-
sectional view of the retail landscape. Fashion was the largest segment at
48 percent of the sample. The survey also included interviews with 3PL
players to capture their views.
Findings from TCS’ survey - ‘Interconnected Retail: Transforming Retail
Supply Chain for Omnichannel Retailing’ at Handelskongress 2014, Berlin,
with more than 100 responses, are also included to provide a global
perspective.
All company-specific data remains strictly confidential and only industry
aggregates are discussed in this report. The numbers and percentages quoted
in the report have been rounded off to the nearest integer.
Methodology Used for This Study
14
n TCS’ Process Maturity Framework was used:
n Process maturity was defined from Level 1 (L1), being lowest
maturity, to Level 4 (L4), being highest maturity or ‘Gold Standard’.
n Scores were allocated to each level of maturity, which ranged from
25 to 100 percent.
n Based on their overall performance, survey respondents were
categorized as laggards (below average score) or leaders (above
average score).
n One-to-one, in-depth interactions with CXOs captured data and
insights.
The research sample included senior management (CXOs and MDs), heads
of operations, and directors. 50 retail brands provided over 1,500 data
points.
TCS Process Maturity Framework
100%
75%
50%
25%
Level 4
Level 3
Level 2
Level 1
Unified customer
marketing and
relationship program
Overlapping
programs
(common promotions)
Channel-specific
programs
Store-based
CRM program
S
c
o
r
e
s
Example:
Customer Experience
Executive Summary
17
The survey results suggest that supply chain maturity in the Indian retail
industry is low. All the five processes covered in this report score
64 percent or less. While warehouse management is more mature in
comparison to other functions, areas such as supplier integration and
inventory management present significant scope for improvement.
The top supply chain challenges for retailers in FY 2015-16 will be in the
areas of inventory reduction, and warehouse and transportation efficiency.
This is also reflected in their technology investment plans.
More than 50 percent of respondents stated their readiness for the
introduction of a Goods and Services Tax (GST), where new legislation is
expected soon.
Multichannel readiness is still lacking, with only 10 percent reporting it as
a focus area. Retailers do not seem to have real-time inventory and order
visibility on their radar for the coming year despite the phenomenal
growth of online retail in India.
Sustainability practices are low among the priorities of Indian retailers,
while performance improvement and efficiency are higher priorities.
Technology integration with suppliers is low and is seen as low priority by
most respondents. Supplier fill rates and quality are still perceived as
challenges. Only 10 percent of respondents have mandatory certifications
for their suppliers and conduct quality audits. Lack of supplier evolution is
cited as a reason for this.
Inventory norms and policies are still not mature. Nearly half of the
respondents do not use systems to manage their inventory scientifically.
Department stores show greater maturity than other retail segments.
Executive Summary – Key Takeaways
18
Process Maturity – Industry Benchmark Scores
49%
64%
54%
37%
50%
0%
20%
40%
60%
80%
Inventory
Warehouse
Transport
Supplier
People
Executive Summary – Industry Maturity
The retail industry’s supply chain maturity is low, with each of the five
processes covered scoring less than 64 percent.
Warehouse management is the most mature function, scoring 64 percent,
and is viewed as the top strategic priority by most retailers.
Transport management is second at 54 percent, but its maturity can be
attributed to 3PL partners, as this function is usually outsourced.
People management at 50 percent, inventory management at 49 percent,
and supplier management scoring 37 percent are all low on maturity,
though retailers consider inventory management a strategic priority area.
19
Retail supply chain exhibits low maturity compared to other retail functions.
“The current supply chain maturity in the retail industry can be
well compared to the diversity of the country demographics and
the digital divide. This means the technologically advanced,
financially rich are moving at a very fast pace; the followers are
learning fast and taking measures to catch up to speed and
maturity; while the laggards may run out of time to catch up and
need support right from strategic to financial aspects."
Amit Gourwar,
Head - Logistics, Infinity Retail Limited (Croma)
[5] Indian Retail Operations Benchmarking and Excellence Survey 2013, www.tcs.com/SiteCollectionDocuments/White%20Papers/Consulting-Whitepaper-Indian-Retail-Operations
Benchmarking-Excellence-Survey-0113-1.pdf; Retail Operations Benchmarking and Excellence Survey 2014, The State of Multichannel Retail,
www.tcs.com/SiteCollectionDocuments/White%20Papers/Retail-Operations-Benchmarking-Excellence-Survey-2014_State-of-Multichannel-Retail_02-14-2.pdf
“The current supply chain maturity in the retail industry can be
well compared to the diversity of the country demographics and
the digital divide. This means the technologically advanced,
financially rich are moving at a very fast pace; the followers are
learning fast and taking measures to catch up to speed and
maturity; while the laggards may run out of time to catch up and
need support right from strategic to financial aspects.’’
Amit Gourwar,
Head – Logistics, Infiniti Retail Limited (Croma)
Executive Summary – Industry Maturity
Poor integration and limited collaboration with suppliers indicates that
supplier management remains a challenge, and retailers do not view this
as a near-term priority.
Comparisons drawn between supply chain maturity and other retail areas
such as store operations and multichannel (evaluated as part of ROBES
2013 and 2014 studies respectively), show that supply chain processes are
low in maturity although they are considered the backbone of retail.
Whereas the highest score in supply chain is 64 percent, the highest
process maturity in store operations was 82 percent and in multichannel,
[5]
75 percent.
Inventory
Leaders
Laggards
67%
33%
49%
Benchmark
Transportation
Leaders
Laggards
56%
44%
54%
Benchmark
Supplier
Leaders
Laggards
54%
46%
37%
Benchmark
Warehouse
Leaders
Laggards
69%
31%
64%
Benchmark
People
Leaders
Laggards
54%
46%
50%
Benchmark
Scope for Sharing
of Best Practices
Medium
High Medium
Low Medium
Executive Summary – Supply Chain Process Maturity Is Low
Average score
of a function
% of respondents
scoring above average
% of respondents
scoring below average
20
21
Food and Grocery are performing well in almost all the supply chain processes.
Inventory
Fashion Department Stores Food and Grocery CDIT Others Overall Retail
Warehouse
Transport
Supplier
People
Executive Summary – Segment-wise Process Maturity
22
Days of Inventory
in the Warehouse
% Respondents
>120
18%
90-120 10%
60-90 23%
30-60 28%
=60 hours 14%
>=36 and =24 and =8 and 10% 2%
6-10% 12%
4-6% 12%
2.5-4% 23%
20% 2%
15-20% 5%
10-15% 7%
5-10% 18%
0-5% 68%
Shrinkage in
Supply Chain
% Respondents
>3% 2%
2-3% 7%
1-2% 2%
0.5-1% 19%
30 days 32%
10-30 days 27%
3-10 days 25%
1-3 days 11%
120 24%
90-120 14%
60-90 24%
30-60 19%
20% 5%
15-20% 5%
10-15% 5%
5-10% 29%
0-5% 57%
80 percent of fashion retailers report shrinkage in the supply chain at less
than 0.5 percent of sales.
More than 50 percent respondents in the fashion segment have an
inventory count accuracy of more than 98 percent.
A quarter of fashion retailers hold inventory for more than 120 days.
Inventory Management in Fashion
36
Warehouse Management in Fashion
Warehouse management is the most mature process for fashion retailers.
There is scope for improvement in automation. 75 percent of fashion
retailers have partial automation in the warehouse (with some processes
being manual and others technology-enabled). Processes are followed
consistently and they deploy at least two of the following technologies:
WMS, warehouse control system (WCS), Wi-Fi, and bar code scanners and
radio frequency (RF) scanners.
This is consistent with the fact that a majority of the fashion retailers
reported undertaking strategic initiatives like WMS deployment and
automation.
None of the fashion retailers have full automation (wherein all processes are system-enabled) in the warehouse.
Automation in Warehouse – Fashion (% Respondents)
Low Maturity
10%
15%
75%
0%
L1 = Manual processes not
followed consistently
L2 = Manual processes
followed consistently
L3 = Processes followed consistently and
at least two technologies such as WMS,
WCS, Wi-Fi, and bar code and
RF scanners are present
L4 = Processes followed consistently;
full automation; complete IT
infrastructure including WMS and WCS
High Maturity
37
Around 70 percent of retailers generate pick lists from WMS indicating a high level of maturity.
However, 75 to 80 percent are still conducting a physical inventory count instead of cycle counts based on ABC classification.
Warehouse Management in Fashion
Low Maturity
High Maturity
10%
25%
50%
15%
L1 = Manual picking; sta? not trained
L2 = Manual rules for picking; MHE
used; partially trained sta?
L3 = Pick list generation through WMS
but no automation; fully trained sta?
L4 = Pick list generation in the RF
device; use of rules such as wave
picking; fully trained sta?
Picking in the Warehouse – Fashion (% Respondents)
10%
24%
48%
19%
L1 = No cycle count done
L2 = Physical inventory count matched
against system inventory randomly
L3 = Physical inventory count
matched with system inventory at
periodic intervals
L4 = Cycle count based on ABC
classi?cation
Cycle Count – Fashion (% Respondents)
Low Maturity
High Maturity
38
Warehouse Management in Fashion
Warehouse capacity utilization is higher than 80 percent for the majority of fashion retailers.
“When GST is implemented, the warehousing networks are going to
be optimized and the number of smaller warehouses will be replaced
by bigger ones at the regional level.”
S Kumar Anavangot,
Manager, Special Projects – CEOs Office – Supply Chain, Pantaloons
Order Ful?llment
Cycle Time
% Respondents
>= 60 hours 25%
>=36 and =24 and =8 and 10% 0%
6-10% 5%
4-6% 14%
2.5-4% 29%
30 days 45%
10-30 days 35%
3-10 days 10%
1-3 days 10%
30 Days 14%
0%
58%
14%
120 14%
90-120 0%
60-90 29%
30-60 43%
3% 25%
2-3% 0%
1-2% 0%
0.5-1% 25%
20% 0%
15-20% 0%
10-15% 14%
5-10% 0%
0- 5% 86%
92
Warehouse Management in Other Retailers
43 percent of respondents have adopted advanced tools for warehousing
processes, although none of them are completely automated.
58 percent have no automation and processes are also not followed
consistently.
The majority of respondents in this segment have a low maturity level in warehouse automation.
Automation in Warehouse – Other Retailers
(% Respondents)
0%
71%
L1 = Manual processes not followed
consistently
L2 = Manual processes followed
consistently
L3 = Processes followed consistently and
at least two technologies such as
WMS, WCS, Wi-Fi, and bar code and
RF scanners are present
L4 = Processes followed consistently; full
automation; complete IT infrastructure
including WMS and WCS
14%
14%
Low Maturity
High Maturity
93
Warehouse Management in Other Retailers
Approximately 60 percent of respondents are engaged in manual processes for picking.
More than 40 percent of other retailers use WMS but the level of automation is not significant.
None of the retailers in this segment perform cycle count based on ABC classification.
Picking in the Warehouse – Other Retailers
(% Respondents)
29%
0%
29%
43%
L1 = Manual picking; sta? not trained
L2 = Manual rules for picking; MHE
used; partially trained sta?
L3 =Pick list generation through WMS
but no automation; fully trained sta?
L4 = Pick list generation in the RF
device; use of rules such as wave
picking; fully trained sta?
Cycle Count – Other Retailers
(% Respondents)
29%
0%
71%
L1 = No cycle count done
L2 = Physical inventory count matched
against system inventory
randomly
L3 = Physical inventory count matched
with system inventory at periodic
intervals
L4 = Cycle count based on ABC
classi?cation
0%
Low Maturity
High Maturity
Low Maturity
High Maturity
94
14 percent of the respondents have a warehousing cost less than
2.5 percent of net sales value. 28 percent have warehouse capacity
utilization of more than 85 percent.
43 percent of respondents have an order fulfillment time of less than
24 hours.
Warehouse Management in Other Retailers
Order Ful?llment
Cycle Time
% Respondents
>=60 hours 14%
>=36 and =24 and =8 and 10% 14%
6-10% 14%
4-6% 14%
2.5- 4% 43%
30 days 0%
10-30 days 38%
3-10 days 38%
1-3 days 25%
The Retail Operations Benchmarking and Excellence Survey (ROBES) 2015 focuses on Measuring Supply Chain Performance. This report seeks to build on the foundations laid in the past two years by the Retailers Association of India's (RAI) 'Excellence' agenda.
Measuring Supply Chain Performance
Retail Operations Benchmarking
and Excellence Survey 2015
Contents
1. Introduction: Supply Chains Make or Break Retailers 1
2. Scope of This Study 8
3. Methodology Used for This Study 12
4. Executive Summary 16
5. Retailers’ Strategic Focus Areas for FY 2015-16 24
6. Detailed Survey Findings: Process and KPI Benchmarks 32
Fashion 32
Department Stores 46
Food and Grocery 60
Consumer Durables and Information Technology (CDIT) 74
Other Retailers – Books, Gifts, and Pharmacy 88
7. Multichannel Readiness 100
8. Views of 3PL Providers 104
9. Benchmarks from Global Retailers 106
10. Appendix 110
1
Foreword
Dear colleagues,
The Retail Operations Benchmarking and Excellence Survey (ROBES) 2015
focuses on Measuring Supply Chain Performance. This report seeks to
build on the foundations laid in the past two years by the Retailers
Association of India’s (RAI) ‘Excellence’ agenda. It follows the
groundbreaking knowledge initiative undertaken in collaboration with
Tata Consultancy Services (TCS) in earlier years.
While ROBES 2013 focused on retail store operations, ROBES 2014 looked
at retailers’ multichannel strategy and their progress towards delivering a
seamless customer experience across channels. This year’s report focuses
on retail supply chains. The advent of digital commerce and
corresponding heavy investments by online retailers in their back-end
operations have renewed awareness about the critical role supply chains
play in shaping retailers’ success, whether they operate offline, online, or
on multiple channels.
Based on our conversations with leading retailers, we identified four
imperatives for both offline and online retailers today:
1. They can never be out of stock
2. They need to deliver orders to customers within 1-2 days
3. They need to synchronize all channels (store, self-online, third-party
online, and others)
4. They need to deliver a seamless customer experience, including back-
end customer services
These changes in the ecosystem show that a retailer’s effectiveness is only
as good as its supply chain management (SCM) practices. Investment in
this area becomes imperative.
RAI and TCS have looked at developments in SCM capabilities to gauge
the maturity of current practices, identify best-in-class KPIs and processes,
and recommend opportunities for improvement.
The report includes inputs from 50 Indian retail brands across five
segments and draws on global best practices gleaned from TCS’
experience in the US and European markets. It highlights the actions a
company must pursue to achieve efficient supply chain operations and
build a sustainable competitive advantage.
Supply Chains Make or Break Retailers
3
[1 ] Business Insider India, This Is What It Looks Like When A Company Sells $8 Billion In Merchandise In A Single Day,http://www.businessinsider.com/alibaba-singles-day-sales-2014-11
Alibaba’s 11/11 Success: Not Sales, but SCM Capability
This online marketplace based in China clocked record sales of $9.3 billion
on Singles’ Day (11/11) in November 2014. It fulfilled 278 million orders in
24 hours.
The key to Alibaba’s success lies in its investments in the less glamorous
aspect of online retailing – efficient supply chains. Behind the scenes, the
company had developed analytics capabilities as well as strong
partnerships that allowed it to meet this unprecedented demand.
Cloud computing plays its part and Alibaba’s cloud platform handles
95 percent of all incoming orders.
Apart from traditional sales analytics, Alibaba captures data from Alipay
Money Deposit, the hugely successful mobile wallet business it grew and
earlier spun off. Data on amounts transferred from bank accounts to the
wallet allow Alibaba to predict sales trends. It also receives vast amounts
of data from the sellers who use the marketplace and whose queries
provide insights into likely volumes and products.
Alibaba has partnerships with logistics providers such as YTO Express and
China Post. In advance of 11/11, YTO Express undertook a massive
upscaling exercise, adding 600 trucks to its fleet and recruiting 30,000
additional employees. Its route planning in advance of the mega sale day
was comprehensive and considered multiple routes down to the county
level. YTO Express can handle 17 million packages per day, while China
Smart Logistics Network, Alibaba’s collaboration with China Post, can
[1]
handle an additional 25 million packages per day.
Supply Chains Make or Break Retailers
Indian Online Retailers’ Investments in Supply Chain
5
[2] Business Today, Profitable business model is a must for e-commerce firms, says PwC Director,http://businesstoday.intoday.in/sto...-business-model-flipkart-jabong/1/209399.html
[3] The Economic Times, Will spend over $100 million on supply chain this year: Rohit Bansal, Snapdeal,http://articles.economictimes.india...1_1_supply-chain-ecommerce-logistics-snapdeal
[4] Business Standard, Where will Flipkart spend its $1 billion?,http://www.business-standard.com/ar...pkart-spend-its-1-billion-114072400152_1.html
Supply Chains Make or Break Retailers
n The Indian e-commerce industry is expected to have an aggregated
spend of $950 to $1,900 million each year between 2017-2020 on
infrastructure, logistics, and warehousing, according to a study by
[2]
ASSOCHAM and PwC.
n Snapdeal is making an estimated supply chain investment
[3]
of $100-125 million in FY 2014-15.
n After successfully raising $1 billion, Flipkart is expected to invest in
[4]
warehouse automation technologies such as Robotics.
Globally, customers now expect an 'Alibaba shopping
performance' every day, from all retailers.
Supply Chain is the Unglamorous Backbone of Retail
7
Observations
Manual processes in warehouse
although warehouse management
is a high focus area
Imperatives
Automation initiatives such as use of
robotics, conveyer belts, sorting techniques,
WMS, and WCS to overcome manual process
constraints should be looked into
Implications
Meeting the expectations of a
multichannel customer of low order
fulfillment time is a challenge
Supplier management is very low on
maturity with 75 percent relying on
informal connect, 15 percent having fill rates
of over 90 percent and 12 percent using
ASNs
Increase supplier collaboration
by sharing of inventory data and delivery
plans, adherence to delivery and quality
standards, forecast accuracy, technology
integration
This adversely impacts customer service,
quality, sales, and multichannel integration
Order (purchase) management is a
challenge between buyers, vendors, and
logistics providers
Online dashboard for order
management allows buyers to announce
orders, vendors to finalize orders,
transport companies to pick up orders
This is vital in the digital era
with smaller order sizes and faster
fulfillment cycles
Multichannel retail initiatives remain
slow, but the advent of e-commerce
has added urgency for digital
experiments in SCM
Investment in supply chain
infrastructure and systems will enable
real-time inventory visibility, forecast
accuracy, and flexible returns
Poor channel integration, OOS, and
higher markdowns along with loss of
customers preferring multichannel
options
New KPIs are barely tracked – examples
are cost per order, same day delivery, and
channel specific days of inventory
Data-centric supply chain
with focus on digital era metrics need to
be adopted by retailers
Online costs need to be measured or
else this might amplify inefficiencies in
both offline and online models
Supply Chain is the Unglamorous Backbone of Retail
Scope of This Study
9
This comprehensive retail supply chain benchmarking study is the first of its kind in India and considers the following parameters:
Strategic Focus
Areas
Key Performance
Indicators (KPIs)
1
Process
Maturity
2 3
Inventory
Warehouse
People
Transportation Suppliers
Process
Maturity
Scope of This Study
10
The objective of our study was to understand the current status of retail
supply chains. We have taken a three-dimensional view to answer three
key questions for the Indian retailer.
n What are the industry benchmarks?
n What should the best practices be?
n In what direction is the industry moving?
The report considers these specific areas:
n Areas of strategic focus areas for FY 2015-16
n KPIs and process in five functional areas: Inventory, Warehouse,
Suppliers, Transportation, People
11
The respondents represent a cross-section of the retail industry in India.
Varied in size, segment, and multichannel contribution, they offer a
snapshot of the current dynamics of the retail sector and suggest what its
future may look like. The research sample included senior management
(CXOs and MDs), heads of operations, and directors. 50 retail organizations
provided over 1,500 data points.
The survey was conducted across five broad retail segments:
n Fashion, including apparel, footwear, and accessories
n Department stores
n Food and grocery
n Consumer durables and information technology (CDIT)
n Other retailers including books, gifts, pharmacy formats
The survey also captures, through interviews, the views and best practices
of third-party logistics (3PL) providers.
Methodology Used for This Study
13
Data for the Retail Operations Benchmarking and Excellence Study was
gathered through a survey designed and conducted by TCS in
collaboration with RAI. This survey is based on TCS’ framework for
operations benchmarking.
The survey was conducted in both online and offline modes, which
included personal interviews conducted by TCS’ retail consultants with
retail CXOs, most of whom are RAI members. Data was collected based on
retail segments. Vertical segmentation in the study provided a cross-
sectional view of the retail landscape. Fashion was the largest segment at
48 percent of the sample. The survey also included interviews with 3PL
players to capture their views.
Findings from TCS’ survey - ‘Interconnected Retail: Transforming Retail
Supply Chain for Omnichannel Retailing’ at Handelskongress 2014, Berlin,
with more than 100 responses, are also included to provide a global
perspective.
All company-specific data remains strictly confidential and only industry
aggregates are discussed in this report. The numbers and percentages quoted
in the report have been rounded off to the nearest integer.
Methodology Used for This Study
14
n TCS’ Process Maturity Framework was used:
n Process maturity was defined from Level 1 (L1), being lowest
maturity, to Level 4 (L4), being highest maturity or ‘Gold Standard’.
n Scores were allocated to each level of maturity, which ranged from
25 to 100 percent.
n Based on their overall performance, survey respondents were
categorized as laggards (below average score) or leaders (above
average score).
n One-to-one, in-depth interactions with CXOs captured data and
insights.
The research sample included senior management (CXOs and MDs), heads
of operations, and directors. 50 retail brands provided over 1,500 data
points.
TCS Process Maturity Framework
100%
75%
50%
25%
Level 4
Level 3
Level 2
Level 1
Unified customer
marketing and
relationship program
Overlapping
programs
(common promotions)
Channel-specific
programs
Store-based
CRM program
S
c
o
r
e
s
Example:
Customer Experience
Executive Summary
17
The survey results suggest that supply chain maturity in the Indian retail
industry is low. All the five processes covered in this report score
64 percent or less. While warehouse management is more mature in
comparison to other functions, areas such as supplier integration and
inventory management present significant scope for improvement.
The top supply chain challenges for retailers in FY 2015-16 will be in the
areas of inventory reduction, and warehouse and transportation efficiency.
This is also reflected in their technology investment plans.
More than 50 percent of respondents stated their readiness for the
introduction of a Goods and Services Tax (GST), where new legislation is
expected soon.
Multichannel readiness is still lacking, with only 10 percent reporting it as
a focus area. Retailers do not seem to have real-time inventory and order
visibility on their radar for the coming year despite the phenomenal
growth of online retail in India.
Sustainability practices are low among the priorities of Indian retailers,
while performance improvement and efficiency are higher priorities.
Technology integration with suppliers is low and is seen as low priority by
most respondents. Supplier fill rates and quality are still perceived as
challenges. Only 10 percent of respondents have mandatory certifications
for their suppliers and conduct quality audits. Lack of supplier evolution is
cited as a reason for this.
Inventory norms and policies are still not mature. Nearly half of the
respondents do not use systems to manage their inventory scientifically.
Department stores show greater maturity than other retail segments.
Executive Summary – Key Takeaways
18
Process Maturity – Industry Benchmark Scores
49%
64%
54%
37%
50%
0%
20%
40%
60%
80%
Inventory
Warehouse
Transport
Supplier
People
Executive Summary – Industry Maturity
The retail industry’s supply chain maturity is low, with each of the five
processes covered scoring less than 64 percent.
Warehouse management is the most mature function, scoring 64 percent,
and is viewed as the top strategic priority by most retailers.
Transport management is second at 54 percent, but its maturity can be
attributed to 3PL partners, as this function is usually outsourced.
People management at 50 percent, inventory management at 49 percent,
and supplier management scoring 37 percent are all low on maturity,
though retailers consider inventory management a strategic priority area.
19
Retail supply chain exhibits low maturity compared to other retail functions.
“The current supply chain maturity in the retail industry can be
well compared to the diversity of the country demographics and
the digital divide. This means the technologically advanced,
financially rich are moving at a very fast pace; the followers are
learning fast and taking measures to catch up to speed and
maturity; while the laggards may run out of time to catch up and
need support right from strategic to financial aspects."
Amit Gourwar,
Head - Logistics, Infinity Retail Limited (Croma)
[5] Indian Retail Operations Benchmarking and Excellence Survey 2013, www.tcs.com/SiteCollectionDocuments/White%20Papers/Consulting-Whitepaper-Indian-Retail-Operations
Benchmarking-Excellence-Survey-0113-1.pdf; Retail Operations Benchmarking and Excellence Survey 2014, The State of Multichannel Retail,
www.tcs.com/SiteCollectionDocuments/White%20Papers/Retail-Operations-Benchmarking-Excellence-Survey-2014_State-of-Multichannel-Retail_02-14-2.pdf
“The current supply chain maturity in the retail industry can be
well compared to the diversity of the country demographics and
the digital divide. This means the technologically advanced,
financially rich are moving at a very fast pace; the followers are
learning fast and taking measures to catch up to speed and
maturity; while the laggards may run out of time to catch up and
need support right from strategic to financial aspects.’’
Amit Gourwar,
Head – Logistics, Infiniti Retail Limited (Croma)
Executive Summary – Industry Maturity
Poor integration and limited collaboration with suppliers indicates that
supplier management remains a challenge, and retailers do not view this
as a near-term priority.
Comparisons drawn between supply chain maturity and other retail areas
such as store operations and multichannel (evaluated as part of ROBES
2013 and 2014 studies respectively), show that supply chain processes are
low in maturity although they are considered the backbone of retail.
Whereas the highest score in supply chain is 64 percent, the highest
process maturity in store operations was 82 percent and in multichannel,
[5]
75 percent.
Inventory
Leaders
Laggards
67%
33%
49%
Benchmark
Transportation
Leaders
Laggards
56%
44%
54%
Benchmark
Supplier
Leaders
Laggards
54%
46%
37%
Benchmark
Warehouse
Leaders
Laggards
69%
31%
64%
Benchmark
People
Leaders
Laggards
54%
46%
50%
Benchmark
Scope for Sharing
of Best Practices
Medium
High Medium
Low Medium
Executive Summary – Supply Chain Process Maturity Is Low
Average score
of a function
% of respondents
scoring above average
% of respondents
scoring below average
20
21
Food and Grocery are performing well in almost all the supply chain processes.
Inventory
Fashion Department Stores Food and Grocery CDIT Others Overall Retail
Warehouse
Transport
Supplier
People
Executive Summary – Segment-wise Process Maturity
22
Days of Inventory
in the Warehouse
% Respondents
>120
18%
90-120 10%
60-90 23%
30-60 28%
=60 hours 14%
>=36 and =24 and =8 and 10% 2%
6-10% 12%
4-6% 12%
2.5-4% 23%
20% 2%
15-20% 5%
10-15% 7%
5-10% 18%
0-5% 68%
Shrinkage in
Supply Chain
% Respondents
>3% 2%
2-3% 7%
1-2% 2%
0.5-1% 19%
30 days 32%
10-30 days 27%
3-10 days 25%
1-3 days 11%
120 24%
90-120 14%
60-90 24%
30-60 19%
20% 5%
15-20% 5%
10-15% 5%
5-10% 29%
0-5% 57%
80 percent of fashion retailers report shrinkage in the supply chain at less
than 0.5 percent of sales.
More than 50 percent respondents in the fashion segment have an
inventory count accuracy of more than 98 percent.
A quarter of fashion retailers hold inventory for more than 120 days.
Inventory Management in Fashion
36
Warehouse Management in Fashion
Warehouse management is the most mature process for fashion retailers.
There is scope for improvement in automation. 75 percent of fashion
retailers have partial automation in the warehouse (with some processes
being manual and others technology-enabled). Processes are followed
consistently and they deploy at least two of the following technologies:
WMS, warehouse control system (WCS), Wi-Fi, and bar code scanners and
radio frequency (RF) scanners.
This is consistent with the fact that a majority of the fashion retailers
reported undertaking strategic initiatives like WMS deployment and
automation.
None of the fashion retailers have full automation (wherein all processes are system-enabled) in the warehouse.
Automation in Warehouse – Fashion (% Respondents)
Low Maturity
10%
15%
75%
0%
L1 = Manual processes not
followed consistently
L2 = Manual processes
followed consistently
L3 = Processes followed consistently and
at least two technologies such as WMS,
WCS, Wi-Fi, and bar code and
RF scanners are present
L4 = Processes followed consistently;
full automation; complete IT
infrastructure including WMS and WCS
High Maturity
37
Around 70 percent of retailers generate pick lists from WMS indicating a high level of maturity.
However, 75 to 80 percent are still conducting a physical inventory count instead of cycle counts based on ABC classification.
Warehouse Management in Fashion
Low Maturity
High Maturity
10%
25%
50%
15%
L1 = Manual picking; sta? not trained
L2 = Manual rules for picking; MHE
used; partially trained sta?
L3 = Pick list generation through WMS
but no automation; fully trained sta?
L4 = Pick list generation in the RF
device; use of rules such as wave
picking; fully trained sta?
Picking in the Warehouse – Fashion (% Respondents)
10%
24%
48%
19%
L1 = No cycle count done
L2 = Physical inventory count matched
against system inventory randomly
L3 = Physical inventory count
matched with system inventory at
periodic intervals
L4 = Cycle count based on ABC
classi?cation
Cycle Count – Fashion (% Respondents)
Low Maturity
High Maturity
38
Warehouse Management in Fashion
Warehouse capacity utilization is higher than 80 percent for the majority of fashion retailers.
“When GST is implemented, the warehousing networks are going to
be optimized and the number of smaller warehouses will be replaced
by bigger ones at the regional level.”
S Kumar Anavangot,
Manager, Special Projects – CEOs Office – Supply Chain, Pantaloons
Order Ful?llment
Cycle Time
% Respondents
>= 60 hours 25%
>=36 and =24 and =8 and 10% 0%
6-10% 5%
4-6% 14%
2.5-4% 29%
30 days 45%
10-30 days 35%
3-10 days 10%
1-3 days 10%
30 Days 14%
0%
58%
14%
120 14%
90-120 0%
60-90 29%
30-60 43%
3% 25%
2-3% 0%
1-2% 0%
0.5-1% 25%
20% 0%
15-20% 0%
10-15% 14%
5-10% 0%
0- 5% 86%
92
Warehouse Management in Other Retailers
43 percent of respondents have adopted advanced tools for warehousing
processes, although none of them are completely automated.
58 percent have no automation and processes are also not followed
consistently.
The majority of respondents in this segment have a low maturity level in warehouse automation.
Automation in Warehouse – Other Retailers
(% Respondents)
0%
71%
L1 = Manual processes not followed
consistently
L2 = Manual processes followed
consistently
L3 = Processes followed consistently and
at least two technologies such as
WMS, WCS, Wi-Fi, and bar code and
RF scanners are present
L4 = Processes followed consistently; full
automation; complete IT infrastructure
including WMS and WCS
14%
14%
Low Maturity
High Maturity
93
Warehouse Management in Other Retailers
Approximately 60 percent of respondents are engaged in manual processes for picking.
More than 40 percent of other retailers use WMS but the level of automation is not significant.
None of the retailers in this segment perform cycle count based on ABC classification.
Picking in the Warehouse – Other Retailers
(% Respondents)
29%
0%
29%
43%
L1 = Manual picking; sta? not trained
L2 = Manual rules for picking; MHE
used; partially trained sta?
L3 =Pick list generation through WMS
but no automation; fully trained sta?
L4 = Pick list generation in the RF
device; use of rules such as wave
picking; fully trained sta?
Cycle Count – Other Retailers
(% Respondents)
29%
0%
71%
L1 = No cycle count done
L2 = Physical inventory count matched
against system inventory
randomly
L3 = Physical inventory count matched
with system inventory at periodic
intervals
L4 = Cycle count based on ABC
classi?cation
0%
Low Maturity
High Maturity
Low Maturity
High Maturity
94
14 percent of the respondents have a warehousing cost less than
2.5 percent of net sales value. 28 percent have warehouse capacity
utilization of more than 85 percent.
43 percent of respondents have an order fulfillment time of less than
24 hours.
Warehouse Management in Other Retailers
Order Ful?llment
Cycle Time
% Respondents
>=60 hours 14%
>=36 and =24 and =8 and 10% 14%
6-10% 14%
4-6% 14%
2.5- 4% 43%
30 days 0%
10-30 days 38%
3-10 days 38%
1-3 days 25%