logistics at big bazzar.docx

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logisticsatbigbazzar

ABSTRACT

"InterdependenceisahighervaluethanIndependence"

StephenR.Covey

AsrightlysaidbyStephenCoveythevalueofinterdependenceisasmuchimportantinthebusinessofRetailasitisimportantinthebusinessoflife.Standingonthethresholdofaretailrevolutionandwitnessingafastchangingretaillandscape,theretailsectorispoisedforabigleap.CurrentlyretailsectorinIndiaaccountsforRs.55,000crore（$12.4billion）businessatcurrentpricesinthecalendaryear2006,increasingitsshareto4.6%ofthetotalIndianRetailValuethatstoodatRs.12,00,000crores（$270billion）.WiththepotentialofcrossingRs2,00,000crores（$45billion）businessbytheYear2010,generatingemploymentforsome2.5millionpeopleinvariousretailoperationsandover10millionadditionalworkforceinretailsupportactivitiesincludingcontractproduction&processing,supplychain&logistics,retailrealestatedevelopment&managementetc.;theretailsectorisgrowingatascorchingpaceofabout37percentin2007andexpectedtogrowby42percentin2008.Withthisenormousgrowth,theretailsectorisalsofacingchallengesonthefrontsofescalatingrealestatecost,scarcityofskilledworkforceandstructuredsupplyofmerchandise.

1.INTRODUCTIONTOLOGISTICS

OneofthemostimportantchallengeinorganizedretailinIndiaisfacedbypoorsupplychainandlogisticsmanagement.TheimportancecanbeunderstoodbythefactthatthelogisticsmanagementcostcomponentinIndiaisashighas7%-10%againsttheglobalaverageof4%-5%ofthetotalretailprice.Therefore,themarginsintheretailsectorcanbeimprovedby3%-5%byjustimprovingthesupplychainandlogisticsmanagement.

InIndia,withdemandforend-to-endlogisticssolutionsfaroutstrippingsupply,thelogisticsmarketfororganizedretailispeggedat$50millionandisgrowingat16%.Itisexpectedtoreach$120-$130millionby2010.Organizedretailontheotherhandisgrowingat400%andisexpectedtoreacharound$30billionby2010.EvensupplychainandlogisticsfirmslikeHongKongbasedHengTaiConsumablesandABSProcurementCoandACMChina（thegreenhousespecialist）isalsoeyingtheopportunityformanagingthesupplies.

Thesupplychainmanagementislogisticsaspectofavaluedeliverychain.Itcomprisesallofthepartiesthatparticipateintheretaillogisticsprocess:

Manufacturers,Wholesalers,andThirdPartySpecialistslikeShippers,OrderFulfillmentHouseetc.andtheRetailer.Here,logisticsisthetotalprocessofplanning,implementingandcoordinatingthephysicalmovementofmerchandisefrommanufacturertoretailertocustomerinthetimeliest,effectiveandcostefficientmannerpossible.Logisticsregardsorderprocessingandfulfillment,transportation,warehousing,customerserviceandinventorymanagementasinterdependentfunctionsinthevaluedeliverychain.Itoverseesinventorymanagementdecisionsasitemstravelthrougharetailsupplychain.Ifalogisticssystemworkswell,theretailfirmreducesstockouts,holddowninventoriesandimprovecustomerservice–allatthesametime.

LogisticsandSupplyChainenablesanorganizedretailertomoveorstoreproductsmoreeffectively.Efficientlogisticsmanagementnotonlypreventsneedlessmovementofgoods,vehiclestransferringproductsbackandforth;butalsofreesupstoragespaceformoreproductiveuse.

Retailanalystssayon-timeorderreplenishmentswillbecomeevenmorecriticaloncetheWal-Mart/Bharticombinebeginsoperations-theAmericanretailerworksalmostentirelyoncross-dockingandislikelytodemandhigherservicelevels,includingpotentialleviesfordelaysinshipment.

Theefficiencyandeffectivenessofsupplychainandlogisticsmanagementcanalsobeunderstoodbythefactthatmodernretailstoresmaintainlowerinventoriesthantraditionalretail.InIndia,generallyinthetraditionalkiranastores,threeweeksinventoriesarekept;whileinamodernretailstorelikeHypercity,it'sninedaysandit's undertwoweeksforFoodBazaar.Now,itisbeneficialforboththemanufactureraswellastheretailer.IfwegothroughthefollowingfoodsupplychaininIndia,wefindthatalotcanbeimprovedbymaintainingthesupplychainandlogistics.

theiravailabilityonarelativelylargescaleandsupplyingthemtocustomersonarelativelysmallscale.RetailerisaPersonorAgentorAgencyorCompanyorOrganizationwhoisinstrumentalinreachingtheGoodsorMerchandiseorServicestotheEndUserorUltimateConsumer.

2SCENARIOOFLOGISTICSININDIA

ThelogisticsindustryinIndiaisevolvingrapidlyanditistheinterplayofinfrastructure,technologyandnewtypesofserviceprovidersthatwilldefinewhethertheindustryisabletohelpitscustomersreducetheirlogisticscostsandprovideeffectiveservices（whicharealsogrowing）.Changinggovernmentpoliciesontaxationandregulationofserviceprovidersaregoingtoplayanimportantroleinthisprocess.CoordinationacrossvariousgovernmentagenciesrequiresapprovalfrommultipleministriesandisaroadblockformultimodaltransportinIndia.Atthefirmlevel,thelogisticsfocusismovingtowardsreducingcycletimesinordertoaddvaluetotheircustomers.Consequently,bettertoolsandstrategiesarebeingsoughtbyfirmsinordertoenhancetheirdecisionmaking.Inthispaper,weprovideaperspectiveontheseissues,outlinesomeofthekeychallengeswiththehelpofsecondaryinformation,anddescribesomeinterestinginitiativesthatsomefirms&industriesaretakingtocompetethroughexcellenceinmanagingtheirlogistic.

.2.1SomePeculiaritiesoftheIndianSupplyChains

TheIndianlogisticssectorhastypicallybeendrivenbytheobjectiveofreducingtransportationcoststhatwere（andoftencontinuetobe）inordinatelyhighduetoregionalconcentrationofmanufacturingandgeographicallydiversifieddistributionactivitiesaswellasinefficienciesininfrastructureandaccompanyingtechnology.Freightmovementhasslowlybeenshiftingfromrailtoroadwithimplicationsonqualityoftransfer,

timelinessofdeliveryandconsequentlycostsexceptforcommoditieswhichoverlongdistances,predominantly,movethroughtheextensiverailnetwork.Moreonthenfrastructureissueslater.

Figure1showstherelativevalueoftransportationcostsvis-à-visotherelementsofthelogisticscostsinIndia.Thetransportationindustryisfragmentedandlargelyun-organized–alargenumberofindependentplayerswithregionalornationalpermitsthatcarryfreight,oftenwithsmallfleetsizeofoneortwosingle-axletrucks.Thissegment

carriesalargepercentofthenationalloadandalmostalloftheregionalload.Thisfragmentedsegmentcomprisesownersandemployeeswithinadequateskills,perspectivesorabilitiestoorganizeormanagetheiroperationseffectively.Lowcosthasbeentraditionallyachievedbyemployinglowleveloftechnology,lowwages（duetolowereducationlevels）,poormaintenanceofequipment,overloadingofthetruckbeyond

capacity,andpricecompetitionamongstalargenumberofserviceprovidersintheindustry.Often,onefindstransportationcartelsthatregulatesupplyoftrucksandtransportcosts.However,thelongrunaveragecostoftransportoperationsacrossthentiresupplychainmaynotturnouttobelow

Figure1:

ElementsofLogisticsCostinIndia

3PROFILEOFTHECOMPANY

Nameofthecompany:

-

Area:

-Retailing

Product:

-DEPARTMENTALSTORESANDGROCERYSHOP

Background:

-BigBazaarisauniquechain,currentlymorethan75storesinallaroundtheIndia.Ownedbypantaloonretail（INDIA）limited,futuregroup.HeadquarterissituatedinJogeshwari–Mumbai,IdeawaspioneeredbyentrepreneurKISHOREBIYANI,theCEOoffuturegroup,borninmiddleclassMarwarifamily,begancareerwithsellingstonewashfabrictosmallshopsinMumbai.HeLaunchedPantaloon,biggestlistedretailerofthecountry.

Pantalooniscreditedwithlaunchingmanyretailsformatsinvalueandlifestyleretailingbrandnamesincountry,includingbigbazaar,foodbazaar,central,e-zoneandhometown.

In1993,heexperimentedwithasmallstoreformat,andPantaloonShoppewaslaunchedinPanjim,Goa.Thenalargefamily’sstorein1998inKolkata,afteragreatsuccesshelaunchaBIGBAZAAR“Issesastaauracchakahinahi”intheyearof2001.Nowtotalrevenueofthecompanywas$249millionintheyear,

Group’svisionto

todelivereverything,everywhere,everytimetoeveryIndianconsumerinmostprofitablemanner”.Thegroupconsidered‘Indianness’asacorevalueanditscorporatecodeisRewriterules,Retainvalues.

3.1SWOTANALYSIS

Strengths

Lowcost

Costcuttingbyreducingintermediaries

PromotionaloffersonWednesday

Location

Homedeliveryfacility

Weakness

Lowcustomerloyalty

Timegapbetweenorderandprocessing

Lowinternalwarehousecapacity

Employeesnottrained.

LessConversionlevel

FraudsinRetail

Opportunities

Percolatingdown 

RuralRetailing

kidsandteensretailingsegment.

Organizedretailisonly3%ofthetotalretailingmarketinIndia

Threats

ShoppingCulture

Uncertaintyinmarketposition

Newentrantslikereliance

4TITLEOFPROJECT:

-

StudyofLogisticsandDistributionin“BigBazaar”stores

Bigbazzarisapartoffuturegroupsomostofitslogisticsanddistributionisdonebyfuturelogistics.

Logistics

•Logisticsistheartandscienceofmanagingandcontrollingtheflowofgoods,energy,informationandotherresourceslikeproducts,servicesandpeoplefromthesourceofproductiontothemarketplace.marketplace.

•It’sImportanttohav