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Impact of Supply Chain Management in Organized Apparel Retail Outlets on sales & pricing: A study in selected cities of India Thesis Submitted to the Padmashree Dr. D. Y. Patil University, Department of Business Management, in partial fulfillment of the requirements for the award of the Degree of DOCTOR OF PHILOSOPHY In BUSINESS MANAGEMENT Submitted by Anurag Shrivastava (Enrollment No. DYP-PhD-10610017) Research Guide Prof.Dr.Pradip Manjrekar DEAN PADMASHREE DR. D.Y. PATIL UNIVERSITY, DEPARTMENT OF BUSINESS MANAGEMENT, Sector 4, Plot No. 10, CBD Belapur, Navi Mumbai - 400 614 March - 2014 Impact of Supply Chain Management in Organized Apparel Retail Outlets on sales & pricing: A study in selected cities of India DECLARATION I hereby declare that the thesis entitled “Impact of Supply Chain Management in Organized Apparel Retail Outlets on sales & pricing: A study in selected cities of India" submitted for the Award of Doctor of Philosophy in Business Management at the Padmashree Dr. D.Y. Patil University, Department of Business Management is my original work and the thesis has not formed the basis for the award of any degree, associate ship, fellowship or any other similar titles. The material borrowed from other sources and incorporated in the thesis has been duly acknowledged. The research papers published based on the research conducted out of and in the course of the study are also based on the study and not borrowed from other sources. Place: Navi Mumbai Date: Signature of the student Anurag Shrivastava Enrollment No. DYP-PhD-10610017 i CERTIFICATE This is to certify that the thesis entitled “Impact of Supply Chain Management in Organized Apparel Retail Outlets on sales & pricing: A study in selected cities of India” submitted by Mr. Anurag Shrivastava is a bonafide research work for the award of the Doctor of Philosophy in Business Management at the Padmashree Dr. D. Y. Patil University Department of Business Management in partial fulfillment of the requirements for the award of the Degree of Doctor of Philosophy in Business Management and that the thesis has not formed the basis for the award previously of any degree, diploma, associate ship, fellowship or any other similar title of any University or Institution. Also certified that the thesis represents an independent work on the part of the candidate. Place: Navi Mumbai Date: Prof. Dr. R. Gopal Director & Head of The Department Prof. Dr. Pradip Manjrekar Dean & Research Guide ii ACKNOWLEDGEMENT In the first place, I am indebted to the Padmashree Dr. D.Y. Patil University Department of Business Management, which has accepted me for Doctorate program and provided me with an excellent opportunity to carry out the present research project. I wish to express my deep sense of gratitude to my Guide, Dr.Pradip Manjrekar, Dean Department of Business Management for his guidance and useful suggestions, which helped me in completing the project. The thesis could not have been completed, if not for the help and encouragement from various people. I would like to take this opportunity to thank Dr. R. Gopal, Director and Head of The Department of Padmashree Dr. D. Y. Patil University Department of Business Management for constantly motivating me and giving valuable suggestions during the development of this thesis. Words are inadequate in offering my thanks to my wife Mrs.Priti & my Daughter Ms.Ria for their encouragement during the research work. Place: Navi Mumbai Date: Signature of the student iii Table of Contents Chapter No. 1. Sub section Contents Page No. Declaration i Certificate ii Acknowledgement iii Table of Contents iv List of Tables xiii List of Figures xv List of Abbreviations xvi Executive Summary xvii INTRODUCTION 1.1 Role of Organized apparel retailing in marketing channels 1.2 Organized apparel Retailing functions in Distribution 1.3 The Relationship of Organized apparel Retailers and Suppliers 1.4 Indian Organized apparel Retail Industry: 1.5 The wheel of supply chain in Organized apparel Retailing 1.6 Managing the supply chain as frameworkeffective supply chain management 1.7 Supply chain management 1.8 Influence of supply chain management 1.9 Supply chain vis-a vis organized retail outlets 1.9.1 Cost Based Competition 1.9.2 Just in Time Logistics 1 4 10 13 17 17 17 1.10 Enterprise Resource Planning 19 1.10.1 Activity Map with the cost based theme 20 5 5 6 6 7 (Value Proposition) 2 1.10.2 Time-based competition 1.10.3 Why Time is Important 1.11 The Lead Time Gap 1.12 Product Flow Analysis 1.13 Purpose of Study LITERATURE REVIEW 20 21 22 24 24 26 iv 2.1 Supply chain management 26 2.2 Success of Online Retailing 41 2.3 Factors to consider 41 In Internet Retailing 2.4 Items sold through 41 Internet Retailing 2.5 Present and future Internet 42 Retailing areas 2.6 Information technology in Retailing 42 2.7 Types of technology used in Retailing 42 2.8 Interactive kiosks 43 2.9 Types of Retail theft 44 2.10 STRENGTH 46 2.10.1 Raw material base 46 2.10.2 Labour 46 2.10.3 Flexibility 46 2.10.4 Rich Heritage 46 2.10.5 Domestic market 47 2.11. WEAKNESS 47 2.11.1 More dependence on cotton 47 2.11.2 Spinning Sector 47 2.11.3 Fabric Processing 47 2.11.4 Poor Infrastructure 48 2.11.5 Low Labour Productivity 48 v 2.12 OTHER WEAKNESS 48 2.13 OPPORTUNITIES 48 2.13.1 Growing Industry 48 2.13.2 Market access through bilateral negotiation 49 2.13.3 Integration of Information technology 49 2.13.4 Opportunity in High Value Items 49 2.14 THREATS 49 2.14.1 Decreasing Fashion Cycle 49 2.14.2 Formation of Trading Blocks 50 2.14.3 Phasing out of Quotas 50 2.15 Food and apparel show the way 57 2.16 Shoppers don‟t stop 60 2.17 IT essential for growth 60 2.18 At the point of sale 64 2.19 Networking and Security 66 2.20 RFID for inventory control 68 2.21 Other technologies 69 2.22 Effective SCM: 76 2.22.1 Realistic ordering lead-times: 76 2.22.2 Averting problems 76 2.22.3 Facilitating resource planning and allocation 76 2.22.4 Four R‟s of SCM 76 2.22.5 Aggressive Expansion 78 2.22.6 Food Supply Chain Management 79 vi 2.22.7 Employee training and retention 79 2.22.8 Managing working capital 80 2.22.9 Diversifying into untapped rural areas 80 2.22.10 Backward Integration 81 2.22.11 Importance of Supply Chain and 82 Logistics Management 3 4. 2.22.12 Aggressive Expansion 93 2.22.13 Four Supply Chain Management 93 2.22.14 Employee training and retention 94 2.22.15 Managing working capital 94 2.22.16 Inversifying into untapped rural areas 95 2.22.17 Backward Integration 95 2.22.18 Betting on Domestic Markets: 97 2.23 The Hidden Challenges 102 2.24 Strong Supply Chain 104 2.25 Gap Analysis 111 OBJECTIVES AND RESEARCH ETHODOLOGY 112 3.1 Objectives 113 3.2 Hypothesis 114 3.3 Research Methodology 115 3.3.1 Secondary Study 115 3.3.2 Primary study 115 3.3.3 Data Collection & Data Analysis 116 GROWTH AND DEVELOPMENT OF ORGANIZED APPARELS OUTLETS MALLS 118 vii 4.1 Introduction 118 4.2 Mall development in India 120 4.3 Characteristics of a shopping mall 121 4.4 TATA Group 133 4.5 RPG Group 133 4.6 Reliance 133 4.7 AV Birla Group 134 4.8 Retail formats in India 134 4.9 Challenges facing Indian retail industry 135 4.10 The Future 135 4.11 Drivers of Growth in Retail: 136 4.12 Dynamic spaces 138 4.13 E - Retailing in India 139 4.14 Problems with Shipping 140 4.15 Offline presence 140 4.16 Products offered at discounted rates 140 4.17 Luggage Problem 140 4.18 Some online retailing sites in India: 141 4.19 Future of E-retailing in India 142 4.20 Niche retailing opportunities in India 142 4.21 Discount Retailing in India 143 4.22 Organized Retailing Growth In Semi-urban, Rural 144 Areas 4.23 Child‟s Play: Kids Apparel Retailing 146 viii 4.24 „Kidfluence‟ or „Pester Power‟ 147 4.25 Influence of Films on Fashion 147 4.26 Current scenario 147 4.27 Accessories 148 4.28 Apparel Retailing 149 4.29 Strategies in Apparel Retail Segment 151 4.30 Challenges Faced in Retail Segment 153 4.31 Promotion of Apparel Brand through 154 Private Labels and Mall Spaces 4.32 Private Labels 154 4.33 Malls 156 4.34 Evolution of Apparel Retailing 159 4.35 The Global Retail Scenario 160 4.36 Indian Apparel Retail Scenario 161 4.37 Retail Concept Development 164 4.38 Economic Development 165 4.39 Improvements in Civic Situation 166 4.40 Changes in Consumer Needs, 166 Attitudes and Behaviour 4.41 Influence of Fashion 168 4.42 Changes in Government Policies 168 4.43 Increased Investment in Retailing 169 4.44 Increase in Power of Organized Retail 171 4.45 Retail Branding Versus Product Branding 172 ix 5 SUPPLY CHAIN MANAGEMENT 5.1 Introduction – Basic concepts 176 176 of distribution system 5.2 Setting Distribution Objective 177 5.3 Developing Channel Design 180 5.4 Developing Physical Networking Strategy 182 5.5 Reviewing Distribution Processes 182 5.6 Flows in Channels of Distribution 183 5.7 Patterns of Distribution 184 5.8 Participants in the channel system 185 5.9 Key Issues in Determining Channel Requirement 186 5.10 Logistics for Retail Operations 187 5.11 Functional areas of logistics 188 5.12 Information Technology 188 5.13 Transportation 189 5.14 Inventory Management 190 5.15 Economic Order Quantity (E.O.Q.) 192 5.16 Mathematical Formulate 192 5.17 Warehousing 193 5.18 Types of Warehouses 194 5.19 Factors affecting Warehousing Choice 194 5.20 Materials Handing Equipments 195 5.21 Classification of Materials Handling Systems 196 5.22 Packaging 197 x 5.23 Logistical Integration 197 5.24 Supply Chain Management for operations 199 5.25 Information Access 200 Training 201 5.27 Confidence Building 201 5.28 Successful Indian Case Studies 202 5.29 Distribution Intensive Supply Chain 204 5.30 Supply chain strategy 206 5.31 Customer Value Proposition 206 5.32 Cost of the System 208 5.33 Customer Service Level 208 5.34 Supply Chain Efficiencies 209 5.35 Efficient Consumer Response (ECR) 210 5.36 The meaning of ECR 210 5.37 Uses Of ECR 212 5.38 Efficient Inventory Planning 213 5.39 per-Purchase Order (PPO) and Purchase Order (OP 213 5.26 5.40 Integrated Supply Chain 214 5.41 Vendor Management 214 5.42 Electronic Data Interchange (EDI) 215 5.43 warehouse Management 215 5.44 A Goods Received Note (GRN 215 5.45 Inter Transfer Note (ITN): 216 5.46 Value Chain 216 xi 6 7 5.47 Automaton and supply chain manage 217 5.48 SHOPPER‟S STOP 218 5.49 Globalization and Competitiveness 222 5.50 Advantages of ERP SAP 223 DATA ANALYSIS 6.1 Demographic factors 6.2 City and Nature of shop Cross tabulation 6.3 Importance of supply chain management 225 225 229 236 6.4 6.5 Supplier Performance: Customer demand 250 263 6.6 Price Effectiveness 268 6.7 Testing of hypothesis: RESEARCH FINDINGS AND INTERPRETATION 280 293 8 CONCLUSIONS 296 9 RECOMMENDATIONS 303 9.01 Recommendation 304 9.2 Create the logistics vision. 308 9.3 Supplier performance 309 9.4 Distribution channel 309 9.5 Customer demand 310 10 Limitations of Study /Further scope of Work 311 BIBLIOGRAPHY 313 Annexure – 1 Questionnaire 335 Annexure – 2 SPSS Outputs 339 xii LIST OF TABLES Sr. Table No. No. 1. 2.1 Description Page no. Eight Supply Chain Processes Proposed by 27 Lambert and Cooper (2000). 2. 2.2 Definitions of Supply Chain Management. 29 Reproduced from Croom, 3. 5.1 Supply Chain Methods 180 4. 5.2 Selecting Inventory Control Techniques 191 5. 5.3 Decision Variables in Choosing among Types of 194 Warehouses 6. 5.4 Supply Chain Process 204 7. 6.1 City wise analysis 227 8. 6.2.1 Nature of shop and SCM 228 9. 6.2.2 Nature of shop 229 10. 6.3 supply chain management mentioned and recognized by your company 230 11. 6.4 Supply chain management is different from value chain management. 12. 6.5 13. 6.6 Supply chain management has an impact on pricing There is close relation between supply chain management and organized apparel retail business. 231 231 232 xiii 14. 6.7 233 6.8 Supply chain is the network of organization that are involved in different process and activities that produces value in the form of product and services in the hands of consumer. Recognition of supply chain management 15. 16. 6.9 Descriptive Statistics 235 17. 6.10 High recognition 235 18. 6.11 236 19. 6.12 20. 6.13 21. 6.14 22. 6.15 There is need to implement supply chain management Supply chain management will Improve company's competitive advantage. Better supply chain management leads to increased sales The supply chain in the organized retail apparel business extends to various levels of company- supplier relationship Effective supply chain will lead to long term performance improvement.(better pricing of apparels) 234 237 238 239 240 xiv LIST OF FIGURES Sr. No. Figure Page no. 1. Distribution Chain 178 2. Distribution Development Index. 179 3. Marketing Flows in a Channel System 184 4. Pie diagram 227 5. Respondents according to city 277 6. Nature of shop 229 7. No. of respondents 270 8. Diagram of respondents according to performs of SMC 272 9. Results of chi square test 274 10. Diagram of respondents accordant to city performs 275 11. Diagram of respondents according city and customer demand level Diagram of respondents according SMC and price effectiveness level Diagram of respondents according to importance of SCM 276 12. 13 281 282 and price effect 14. Suppliers performs level 283 15. Distribution chain level 284 16. Customer demand level 286 17. City wise importance of SCM level 287 18. Results of chi square test 288 19. Performance of SCM 290 20. ERP and its impact 291 xv List of Abbreviations B2B Business to Business CAGR Compounded Annual Growth Rate CST Consumer Satisfaction Total PDS Public Distribution System POS Point of Sale OOS Out of Stock OSA On shelf availability SCM Supply Chain Management SCT Supply Chain Total SKU Stock keeping Unit xvi Executive Summary Supply chain management today is as important for success in the digital economy as it was for Roman Empire world dominance.” Douglas M. Lambert (2009) “Successful supply chain management requires cross-functional integration within the firm and across the network of firms that comprise the supply chain.” Many companies initially focus on supply chain management as a way to improve customer satisfaction and reduce operational inefficiencies. While doing this, the company improves visibility and control over its supply chain, which also leads to better financial performance. Supply chain management is essential to the company‟s competitive capacity. Nowadays, especially with the globalization and IT industry development, companies are not competing as individuals but as part of the supply chain in the global environment. How to cut cost, improve quality and also operate effectively is every company‟s principle through the supply chain management. With substantially cheaper labor and cost, many companies in the developed countries have started sourcing in the booming economics in China and some other countries. This is also the trend of global supply chain. However, low product price in emerging economics comes together with more communication efforts, longer delivery time, bigger purchase quantities and high inventory level. A minor company therefore finds it rather difficult sometimes to optimize their strategies, and resolve the quality problems. Benefit and cost are closely linked with supplier performance Supply chain management is no longer in its infancy, and the benefits related to managing the supply network as a whole rather than as a group of autonomous companies have been discussed extensively in the literature. In particular, the positive influence of xvii supply chain management practices on the dynamics of the system have been highlighted, putting forward the opportunity for better end-customer service at lower cost Lee et al. (1997). First, improving transparency with end-customer demand was seen to reduce uncertainty in supply chains. Consequently, the upstream amplification of demand variability that is often observed in supply network (the bullwhip effect can be better controlled. Second, evidence has shown that centralized decision making confers the chain with opportunities to reduce the strategic misalignment of partners' capabilities. Companies' practices and interaction policies require the company to be well coordinated in order to achieve supply chain objectives effectively and efficiently. Above all, the level of flexibility should be specifically aligned to the uncertainty of both the demand and the supply processes. Without the ability to answer to uncertainty, the resulting unreliability of the system leads to more variability in supply chain ows. As observed by Hopp et al.(2001), increased variability in processes always damages the performance of the systems. Organized apparel Retailing is the final connection in the marketing channel that brings goods from Manufactures to consumers. In other word, retailing is the combination of activities involved in selling or renting consumer goods and services directly to ultimate consumers for their personal or household use. In addition to selling, retiling includes different and diverse activities like buying, advertising, data processing and maintaining inventory. xviii A supply chain is a sequence of suppliers, warehouses, operations, and retail outletss. Different companies may not have identical supply chains due to the nature of their operations, and whether they are primarily a manufacturing operation or a service operation (Stevenson, 1999). The supply chain is the network of organizations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate consumer (Christopher, 2004:15). Thus for example a shirt manufacture is a part of a supply chain that extends upstream through the weavers of fabrics to the manufacturers of fibers, and downstream through distributors and retailers to the final consumer. Each of these organizations in the chain are dependent upon each other by definition and yet closely link and relate each other in practical operation processes. Some retailers carry primarily the products of a product manufacturer only. for Eg : Ford dealership may carry a variety of cars but nearly all are made by Ford. Most of the time, however merchants are not owned by manufacturer, which allows them to order from various manufacturers to create the product mix they believe will fill the needs of their customers. Businesses that sell organized apparel goods and services are departmental stores, discount stores, specially stores and even seasonal retailers. Modern organized apparel retailing is increasingly an expression of consciousness in society. Societies however xix differ in expression of that consumer consciousness.Organised apparel Retailing has developed a more international flavor because of closer cultural and social interactions between various countries.. In some parts of the world, the retail business is dominated by small family run or regionally – targeted stores, but more and more of this market is takes over by billion dollar multinational conglomerates like Wal-Mart, Sears, Carrefour and the like. The larger organized apparel retailers have managed to set up huge supply / distribution chains, Inventory Management Systems, financing pacts and wide scale marketing plans. Role of Organized apparel retailing in marketing channels: In organization‟s marketing, producers often sell directly to their final buyers and so are linked to their final buyers in marketing channels. These types of direct channels are much less common in consumer product marketing. Ultimate consumers make most of their purchases in retail stores that are independent of the producer. Organized apparel Retailing therefore, is the final stage in marketing channels for consumers‟ product marketing. Organized apparel Retailers provide the important link between the producer and the ultimate consumer. Organized apparel Retailing is a lot more than simply buying and selling. It is important to consumers because it creates economic utility. It is important to manufacturers because it is the major connection in the marketing channel between manufacturer and end users. And it is important because of its contribution to the economy. xx Organized apparel Retailing functions in Distribution: In general organized apparel retailers perform four distinct functions. They participate in the sorting process by collecting an assortment of goods and services from a wide variety of suppliers and offering them for sale. They provide information to consumers through advertising, displays, and signs and sales personnel. Marketing research support is given to other channel members. They store merchandise, mark prices on it, place items on the selling floor and otherwise handle products. Generally, they pay suppliers for items before selling them to final consumers. They complete transactions by using appropriate store locations and hours, credit policies and other services. The Relationship of Organized apparel Retailers and Suppliers: Organized apparel Retailers deal with two broad categories of suppliers: (1) those who are selling goods and services for use by the retailers, and (2) those selling goods and services that are resold by the retailers.Store fixtures, data processing equipment, management consulting and insurance are examples of goods or services used by the retailers. Suppliers must have knowledge of their retailer‟s goods, strategies, and methods of business operation in order to sell and service accounts affectively. xxi Indian Organized apparel Retail Industry: History of organized apparel retailing is very old small stores play key role in the nation‟s economy. Generally most of the organized apparel retailers are small one-man or proprietary stores. In some developed countries one man or small stores are disappearing and have been replaced by other forms such as department and discount stores and they are found in abundance in urban markets. But in India such stores are sometimes found in urban areas only. In rural areas, only general stores are existing in India. Most of the retailers in Indian suburban and rural markets are of the form of general stores. For explaining the continuous evolution in organized apparel retailing, few theories have been proposed, including the wheel of organized apparel retailing, The wheel of supply chain in Organized apparel Retailing: Harvard professor Malcolm P. McNair developed a theory in 1958 to explain the continuous evolution of organized apparel retailing. His theory is known as the wheel of organised apparel retailing. This theory divides the cyclical patterns of organized apparel retail evolution, According to this theory a new organized apparel retailer enters the market place with low prices, low margins and limited product line. As the innovator succeeds in attracting customer from more established organised apparel retailers, new competitors arise to copy the innovator. These new competitors start to take customers away from the original store, putting pressure on the first organized apparel xxii retailer to trade up by adding more services, expanding product lines, and opening fancier stores. But in trading up, the innovator more like the established stores faces initially challenges. Trading-up makes the innovator valuable to new customers because it leaves a gap at the lower end of the market place for new competitors. These new entrants, who are willing to accept lower profit initially, may now challenge the original innovator. And, the newest entrants start the wheels of retailing turning once again in a new round of evolution. .Managing the supply chain as framework - effective supply chain management. The framework of effective supply chain management is provided through literature study and practical experiences. The effective supply chain management stresses the need to extend logistics integration upstream to suppliers and downstream to distributors and customers (Christopher,2008). The problems and ineffective phenomenon can be outlined to facilitate the development of integrated end-to-end supply chain processes. Review of Literature One of the most relevant evolutions of modern business management is that companies compete as networks of partners, rather than as single autonomous companies. Traditionally composed of suppliers, manufacturers, wholesalers, and customers, these partners form a network of relationships that is known as a supply chain." Closely related to supply chains is the concept of supply chain management" which emerged from the xxiii natural intuition that adequate management of supply chain products, information, and funds will improve supply chain competitiveness and profitability (Chopra and Meindl, 2001). Christopher (1998) defined supply chain management as: the management of upstream and downstream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole." (Christopher, 1998) The foundation of supply chain management is underscored in this definition in that supply chain management focuses on the optimization of system-wide performance, not the narrow interests of single partners. There is a significant amount of evidence in the literature that networks' bottom-line performance can be improved by counterintuitive decisions at the retail level. For instance, Billington et al. (2004) detailed how HewlettPackard Company saved $80 million in desk printer supply costs by switching transoceanic freight lanes from air to sea. Shanthi Venkataraman (2004) states that Strict inventory control, backward integration and the use of private labels are some of the measures that have been taken by many organized retailers to improve margins, for Example Pantaloon has a stock conversion period of about 90 days. This is moderate, considering that it retails a wide range of products with divergent inventory policies. Pantaloon is integrated backwards in the organized apparel business, with its group company, Pantaloon Industries - supplying fabric. This enables it to have some control over the cost and quality of its organised apparel. It markets most of its products under private labels, thus offering products that cost 20-25 per cent lower than branded items, owing to an absence of advertising and other related expenses. xxiv Mike Kilgore, Abraham Joseph and Jeff Meterskyy (2007) argue that India‟s supply chains will not be highly reliable. Shippers accustomed to reliability and speed will have to reset expectations. To reduce the impact of highly-variable transportation, brought about by inadequate logistical infrastructure, firms must adopt inventory strategies similar to those used in small-part service industries. While service parts industries use inventory to buffer demand versus transportation variability, the resulting network structure is the same. Firms will need to stage inventory throughout multiple echelons to reduce the impact of transportation variability and high transportation costs. This multiechelon Staging will create networks with many distribution points and double-handling of products. Vyas Preeta and Sharma Ankush (2007) Decision Support Systems (DSS) provide timely and accurate information & it can be viewed as an integrated entity providing management with the tools and information to assist their decision making. This study which is exploratory in nature, adopts a case study approach to understand practices of organized retailers in organised apparel outlets regarding applications of various DSS tools. Conceptual overview of DSS is undertaken by reviewing the literature. The study describes practices and usage of DSS in operational decisions in organized retail organised apparel outlets and managerial issues in design and implementation of DSS. A multi brand local chain and multi brand national chain of organised apparel was chosen for the study. Varied tools were found to be used by them. It was also found that for sales xxv forecasting and visual merchandising decisions, prior experience rather than any DSS tool was used. Badal Choudhury (2008), head, Organised apparel and Lifestyle Business, Safexpress, observes: “One needs to outsource the backend operations to outsourcing experts in the industry. It should be a very specialized practice, and if not followed in the way, the execution process could be in question.” The growth in the domestic jeans and casual wear market is attracting an increasing number of multinationals into the organized retail organised apparel segment in India. In fact, the Indian jeans wear market is growing at 12 per cent per annum(2010,from www.retailindianews.com). In an interview with Catalyst, Duncan Wilson (2004), Managing Director of the UK-based denim wear company Lee Cooper International, shares his view on the growth potential of the market, the factors that are egging it on and how significant the Indian market is for his company.For global giants looking at newer markets, India presents exciting opportunities on account of its vast middle-class and a virtually untapped organized retail organised apparel industry. Vineet Agarwal (2007) states the Indian organized retail apparel outlets has seen unprecedented growth in the last few years. The KPMG report, „Consumer Markets in India: the next big thing has predicted that the organized apparel retail outlets is expected to grow at rate higher than India‟s GDP growth in the next five years. xxvi The organized organised apparel retail boom promises to give an impetus to a host of allied outletss and the logistics industry, as the backbone of the retail outlets, stands to gain the maximum. In India, the logistics market is mainly thought to mean transportation. But the major elements of logistics cost for industries include transportation, warehousing, inventory management, courier and other valued-added services such as packaging. With the expansion of organized organised apparel retail, supply chain will take on an increasingly important role. With the end consumer becoming more demanding and time conscious, the need for just-in-time services is increasing. In organized retail organised apparel, where competition is intense and stakes are high, customer satisfaction is paramount. Mansi Batra, M.S. and Linda S. Niehm, (2009) argues that Despite seemingly large market potential, little is known about the scope of opportunities and threats for international organized apparel retailers seeking to enter the growing Indian organized organized apparel retail arena. A low level of organized retail penetration, coupled with an ineffective supply chain, characterizes the infrastructure of the Indian retail industry. Analysis of the current state of Indian retail, along with opportunities and threats to growth, would have immense significance for international retailers vying to enter the Indian market. This paper presents a conceptual framework that offers advice for international corporations regarding successful entry and sustainability in India. Using a metatheory approach, a series of testable propositions are presented in relation to opportunities for international organized apparel retail development in the Indian organized apparel retail outlets. xxvii Dr. S.L Gupta (2012) states that Re-engineering of product sourcing philosophies aligned more towards collaborative planning and replishmentis important. The message, therefore, for the existing small and medium independent organised apparel retailers is to closely examine what changes are taking place in their immediate vicinity, and analyze whether their current market offers potential redevelopment of the area into more modern multi-option destination. If it does, and most commercial areas in India to have this potential, it would be very useful to form a consortium of other such small retailers in that vicinity and take a pro-active approach to pool in resources and improve the overall infrastructure. The next effort should be to encourage retailers to make some investment in improving the interiors of their respective establishments to make outletsping and enjoyable experience for the customer. Debasis Daspal (2010) states that among the various reasons gravitated the transition from vertical to horizontal structure, there are the emphasis on greater organizational and process flexibility to cater to volatile markets. Many organised apparel retail organizations worldwide have restructured themselves from vertically integrated composite set-up to horizontally aligned configuration Drawing a parallel between brands across diverse categories such as automobiles, consumer electronics, apparel and jewellery, Mr. Arvind Singhal, Chairman, KSA Technopak, threw light on the Indian consumer‟s willingness to now experiment with products with the element of contemporary design. “The new value drivers for xxviii consumers today are quality and contemporary design. While price was the predominant purchase determinant in the pre-1980s, quality coupled with price assumed importance in the mid-1980s. The 1990s witnessed an assortment of quality, range and price. Now it‟s contemporary design coupled with quality that‟s determining purchase decisions across some 30 million Indian consumers, he said. what is also favoring the domestic market to warm up to the return and apparel fashion industry, is the current demographic profile. “The largest number of population in India will be in the 20-44 year age group in the next few years. This profile does not exit even in a huge market such as “China”. The downside was that while the market was ready, and the customers were willing to pay, there were not enough suppliers. Very few marketers have pumped in sustained investments and efforts in their business. This needs to change, investments in technology, quality control and training as the required focus areas for the industry. “Investment in superior and efficient technology, and not fancy buildings, is what the industry needs. Also, manufacturing has to take a leap jump to survive. Defining the Problem The concept of supply chain management" which emerged from the natural intuition that adequate management of supply chain products, information, and funds will improve supply chain competitiveness and profitability (Chopra and Meindl, 2001). Christopher (1998) defined supply chain management as: the management of upstream and downstream relationships with suppliers and customers to deliver superior customer xxix value at less cost to the supply chain as a whole." The foundation of supply chain management is underscored in this definition in that supply chain management focuses on the optimization of system-wide performance, not the narrow interests of single partners. There is a significant amount of evidence in the literature that networks' bottom-line performance can be improved by counterintuitive decisions at the retail level. For instance, Billington et al. (2004) detailed how Hewlett-Packard Company saved $80 million in desk printer supply costs by switching transoceanic freight lanes from air to sea. To avoid expensive air shipment charges without affecting its customer service level, Hewlett-Packard had to resize upward inventory at the distribution centers, which was against the trend of inventory reduction generally found in manufacturing companies. So long, the chain of movement of the product from the manufacturer to the customer is by rules and years of experience, supply chain management (SCM) gives a ready referendum whereby entrepreneurs competing globally can streamline their businesses so as to deliver the right product, at the right time, place, cost and quality. Such a system can exist successfully in India if due care is given to inventory management thereby increasing the profitability of all the stake holders in the supply chain cycle of organized apparel industry. Most of the loop holes appearing in an ideal supply chain management are infrastructure facilities in India. The study tries to identify these road blocks and try to give fairly acceptable solution to the organized retail apparel industry with regards to SCM. xxx Significance of The Study Supply chain management has been identified and researched in many industries including automobile, food service, healthcare, information technology, and retailing outlets. However, limited information is available about the functions and practical experiences of the supply chain management in the retail clothing business. The study will focus on the importance of the supply chain management and framework of an effective supply chain management in the clothing retail business. The real meaning of supply chain management will be defined. The related practical skills and effective management issues will be discussed. The research specially focuses on the retail clothing business in India. The organized apparel retail businesses are spread all over the country. The size and scale of the businesses are various. Also the target customer and markets are quite different. Therefore, supply chain, as a dynamic is difficult to be covered in all the aspects in the study. The study will focus on the selected organized apparel retail business in India. Objectives of the study 1. To study the tools and techniques with regards to supply chain management in organized apparel outlets and its impact on pricing. 2. To study the impact of economies of scale of retailers with respect to optimum inventory management in the supply chain cycle. xxxi 3. To study the impact of marketing and supply chain interface on an integrated basis In “Organized apparel and clothing” category of the retail outlets. 4. To study the impact of infrastructure related factors on improvement of sales of the organized retail apparel outlets. 5. To study the impact of backend merchandize management on the sales of the organized retail apparel outlets. 6. To study the impact of ERP on improving the value proposition of the retail “Organized apparel outlets.” . Hypothesis H01: The tools and techniques with regards to supply chain management in organized apparel outlets has no impact on pricing. H11: The tools and techniques with regards to supply chain management in organized apparel outlets has an impact on pricing. H02: The impact of economies of scale with respect to optimum inventory management has no impact on supply chain cycle. H12: The impact of economies of scale with respect to optimum inventory management has an impact on supply chain cycle. H03: There is no impact of marketing and supply chain management on an integrated basis on organized apparel retail outlets. xxxii H13: There is an impact of marketing and supply chain management on an integrated basis on organized apparel retail outlets. H04: The infrastructure related factors have no impact the sales improvement of retail organized apparel outlets. H14: The infrastructure related factors have an impact on the sales improvement of retail organized apparel outlets. H05: There is no impact of backend merchandise on sales of retail organized apparel outlets. H15: There is an impact of backend merchandise on sales of retail organized apparel outlets. H06: There is no impact of ERP implementation on improving the value proposition of retail organized apparel outlets H16: There is an impact of ERP implementation on improving the value proposition of retail organized apparel outlets. Research Methodology The Research Methodology adopted for the study comprises of several steps, such as 1. Secondary Study xxxiii A study of several research papers/books and other reports were identified and studied, with the objective of finding out the gaps in the study, the factors that have a bearing on the objectives of the study. 2. Primary study A primary study confining of discussions with various Mall Managers of Mumbai, Indore and Delhi was initiated and conducted. The discussions were held using a questionnaire The questionnaire comprises of several parts such as a) Recognition of supply chain management b) Importance of supply chain management c) Performance of supply chain management d) Supplier Performance e) Distribution channel f) Customer demand The questionnaire was further tested for Cronbach Alpha reliability to test the internal consistency of the items. According to Aiken,(2003) This is a general formula for estimating the reliability of a test consisting of items on which different scoring weights may be assigned to different responses. Alpha reliability coefficient for the respondent‟s questionnaire was found to be 0.740 which is within the acceptable range. Reliability refers to the consistency of scores obtained by the same person when reexamined with the same test on different occasions or with different sets of equivalent items or under variable examining conditions. xxxiv Data Collection & Data Analysis For the purpose of the study Delhi, Indore and Mumbai were chosen as the area where the study will be conducted. The preliminary study indicates that the impact of supply chain management and its effect was felt to be high in Mumbai. A pilot study was conducted in Mumbai with the objective of checking the reliability of the study. Sample Size The sample size calculator indicated that a sample of around 864 respondents would be required. The basis of this is as fallows Method to find sample size (source of formula is sample size calculator) Sample size for this study Consider z = 1.96 ( it is standard for 95% level of confidence) Standard deviation calculated from pilot study = 11.25 ( app) Margin of error = 0.75 xxxv Sample size = ( 1.96 * 11.25/0 .75)^2 = 864(approximate) Minimum requirement of data is of 864 respondents To have uniform proportion sample size is finalized as under. 3 cities * 300 respondents from each city= 900 respondents. The actual sample used was 900 comprising of 300 respondents in each of the 3 cities. The 300 respondents were than further stratified to take into consideration the number of outlets for each city. Thus S.No. Nature of outlet Mumbai Delhi Indore Total 1 Single outlet 100 100 100 300 2 Less than 5 100 100 100 300 than 5 100 100 100 300 300 300 300 900 outlets 3 More outlets 4 Data Analysis The data collected was then curetted and analyzed using SPSS 20. Statistical tools like ANNOVA, Chi Square etc were used. xxxvi Limitations of the study Researcher has assumed that the information provided by the retail executives and managers is transparent and accurate. However there can be constraints while sharing information by the retailers for general and academic survey. Hence more accurate information can be gathered only if such survey is commissioned by large retailers for their own use. The Indian apparel organized retail scenario is evolving and is in dynamic state with all retail chains expanding aggressively. However many of them could not sustain this growth because of liquidity problems and debt related issues. Therefore care has been taken to include only those retailers who have stabilized operations. The scenario can change in the future. Thus this research work can only be used as a reference for conducting a similar study on organized retail. But the sampling frame will have to be decided as appropriate at the time of conducting any future study. Findings During the survey and data collection some useful insights were obtained, both from retailers as well as consumers which are useful for practical application by the retailers in improving their overall business efficiency. xxxvii Some of the important findings are summarized below: 52 percent of the respondents are strongly agreeing that supply chain management is mentioned and recognized by their company where as 9 percent of the respondents are strongly disagreeing that supply chain management is mentioned and recognized by their company11 percent of the respondents are having neutral opinion that supply chain management is mentioned and recognized by their company 42 percent respondents are strongly agreeing to the fact that supply chain management is different from value chain managemnt.8 percent respondents are strongly disagreeing to the fact that supply chain management is different from value chain management and 6 percent respondents are not having any opinion that supply chain management is different from value chain management 7 percent of the respondents strongly disagree that supply chain management has an impact on pricing.19 percent of the respondents strongly disagree that supply chain management has an impact on pricing,30 percent of the respondents strongly are neutral that supply chain management has an impact on pricing,37 percent of the respondents agree that supply chain management has an impact on pricing,6 percent of the respondents strongly agree that supply chain management has an impact on pricing 5 percent respondents strongly disagree that there is close relation between supply chain management and organized apparel retail business.22 percent respondents disagree that xxxviii there is close relation between supply chain management and organized apparel retail business,56 percent respondents are neutral that there is close relation between supply chain management and organized apparel retail business,11 percent respondents agree that there is close relation between supply chain management and organized organised apparel retail business and 7 percent respondents strongly agree that there is close relation between supply chain management and organized apparel retail business. 5 percent of respondents strongly disagree that there is a need to implement supply chain management,8 percent of respondents disagree that there is a need to implement supply chain management,23 percent of respondents strongly are neutral towards the need to implement supply chain management,17 percent of respondents agree that there is a need to implement supply chain management and 47 percent of respondents strongly disagree that there is a need to implement supply chain management. Conclusions and Recommendations Indian Retail industry has witnessed the entry of many large corporate houses and growing acceptance of modern formats. Though modern retail is relatively new in India. It is heartening to note that they have quickly adopted required processes in their operations. Given the industry's changing landscape and emerging challenges, the focus of retail industry players too is changing. They are concentrating on strengthening the existing operations and assessing options for profitable growth through enhancing efficiency in Supply chain, embracing appropriate technology, upgrading skills of employees and xxxix are moving towards consolidation and innovation of processes. In today's world of Internet and wide media reach and connectivity, consumers are well informed and are able to exercise their option in deciding their preferred store for shopping. One of the major challenge modern retail outlets are facing is in attracting and retaining new customers. This explains the reason why all store formats be it convenience store, mid sized store and hypermarket are working on improving supply chain alignment with sales and pricing of organized apparel retail outlets. Only happy customers come back for repeat and regularly buying and help in consolidating base of loyal customers. Further the study reveals that retailers are focusing on enhancing employee productivity and operational efficiency and outsourcing of logistics to improve delivery of goods and services and managing inventory to remain profitable. However, the focus differs among different formats and mid sized stores in general barring few exceptions has still a lot of ground to cover in adapting to their processes modern retail practices. The study also showed that though a lot of data is collected on items like wastage, slow moving items, customer complaints, there is no structured approach in processing this data and comparing it with any set target. Retailers have to move to the next phase and make use of this information in achieving measurable targets for operational efficiency improvement. xl The study reveals that still complete outsourcing of inwards logistics is not being significantly practiced by retailers in any format be it Hypermarkets, Mid sized stores and convenience stores. Most of the stores are optimizing this process by partially outsourcing. This could be because there is still no large dependable logistics service providers for retailers whose services these retailer can avail. This is a big business opportunity and large retail chains are themselves planning to enter into this area. Once this is implemented it is expected to have a major impact on procurement of apparels for the organized retailers. Recommendation Decision support systems are seldom passive instruments and are often applied to support Supply Chain Management via feedback mechanisms that instigate corrective actions. The direction and particularly the amplitude of the likely management action/response however have not been defined. There exists a recognized need for some universally accepted strategic model to coordinate the organizations within the supply chain, integrating, measuring and controlling key business processes effectively, but to date any measured impact of the performance measurement element within such a systems, on the dynamic behavior within the supply chain, has yet to be examined. In Indian organized retail scenario it appears that all three formats viz Hypermarket, Midsized Store and convenience store are here to stay. Hence in order to make each of these format's commercially viable, some innovative business models specifically valid xli to Indian situations will have to be developed. This will entail particularly back end of supply chain. Thus, it is recommended that retailers should consider sharing of facilities like logistics service provider for inward logistics and godown space. This would help in reducing the operational cost and make the enterprise viable business proposition. It was observed during the study that price display particularly for apparels is not streamlined and unsatisfactory. It is a major source of irritant to the customer. It is recommended that properly designed placard displaying facilities should be installed which should show the correct price of the item in the shelves. Many times shopper drops the item from his list resulting in the loss of sale when he is not able to know the exact price of the item that he wants to buy. By implementing this recommendation the retailers will be able to resolve this problem. Also promotional offers which are displayed on the shelves should be valid. Sometimes the offer is still displayed when the Sales promotional scheme is over and offer is no more valid. The results of this study hopefully will provide organized apparel retail outlets with additional knowledge to peruse collaborative opportunities aimed to benefit supply chain management in organized apparel retail outlets. xlii CHAPTER 1 INTRODUCTION Supply chain management is as important for success in the digital economy as it was for Roman Empire world dominance.‖ Douglas M. Lambert (2009) ―Successful supply chain management requires cross-functional integration within the firm and across the network of firms that comprise the supply chain.‖ Many companies initially focus on supply chain management as a way to improve customer satisfaction and reduce operational inefficiencies. While doing this, the company improves visibility and control over its supply chain, which also leads to better financial performance. Supply chain management is essential to the company‘s competitive capacity. Nowadays, especially with the globalization and IT industry development, companies are not competing as individuals but as part of the supply chain in the global environment. How to cut cost, improve quality and also operate effectively is every company‘s principle through the supply chain management. With substantially cheaper labor and cost, many companies in the developed countries have started sourcing in the booming economics in China and some other countries. This is also the trend of global supply chain. However, low product price in emerging economics comes together with more communication efforts, longer delivery time, bigger purchase quantities and high inventory level. A minor company therefore finds it rather difficult sometimes to optimize their strategies, and resolve the quality problems. Benefit and cost are closely linked with supplier performance. Supply chain management is no longer in its infancy, and the benefits related to managing the supply network as a whole rather than as a group of autonomous 1 companies have been discussed extensively in the literature. In particular, the positive influence of supply chain management practices on the dynamics of the system have been highlighted, putting forward the opportunity for better end-customer service at lower cost (Lee et al., 1997). First, improving transparency with end-customer demand was seen to reduce uncertainty in supply chains. Consequently, the upstream amplification of demand variability that is often observed in supply network (the bullwhip effect can be better controlled. Second, evidence has shown that centralized decision making confers the chain with opportunities to reduce the strategic misalignment of partners' capabilities. Companies' practices and interaction policies require the company to be well coordinated in order to achieve supply chain objectives effectively and efficiently. Above all, the level of flexibility should be specifically aligned to the uncertainty of both the demand and the supply processes. Without the ability to answer to uncertainty, the resulting unreliability of the system leads to more variability in supply chain ows. As observed by Hopp et al.(2001), increased variability in processes always damages the performance of the systems. Organized apparel Retailing is the final connection in the marketing channel that brings goods from Manufactures to consumers. In other word, retailing is the combination of activities involved in selling or renting consumer goods and services directly to ultimate consumers for their personal or household use. In addition to selling, retiling includes different and diverse activities like buying, advertising, data processing and maintaining inventory. A supply chain is a sequence of suppliers, warehouses, operations, and retail outletss. Different companies may not have identical supply chains due to the nature of their 2 operations, and whether they are primarily a manufacturing operation or a service operation (Stevenson, 1999). The supply chain is the network of organizations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate consumer (Christopher, 2004). Thus for example a shirt manufacture is a part of a supply chain that extends upstream through the weavers of fabrics to the manufacturers of fibers, and downstream through distributors and retailers to the final consumer. Each of these organizations in the chain are dependent upon each other by definition and yet closely linked and relate each other in practical operation processes. Some retailers carry primarily the products of a product manufacturer only. for Eg : Ford dealership may carry a variety of cars but nearly all are made by Ford. Most of the time, however merchants are not owned by manufacturer, which allows them to order from various manufacturers to create the product mix they believe will fill the needs of their customers. Businesses that sell organized apparel goods and services are departmental stores, discount stores, specially stores and even seasonal retailers. Modern organized apparel retailing is increasingly an expression of consciousness in society. Societies however differ in expression of that consumer consciousness.Organised apparel Retailing has developed a more international flavor because of closer cultural and social interactions between various countries. Organized apparel Retailing is a vibrant part of our challenging society and a major source of employment. Over the past couple of decades, there has been sweeping changes in organized apparel retailing business. In 3 some parts of the world, the retail business is dominated by small family run or regionally – targeted stores, but more and more of this market is takes over by billion dollar multinational conglomerates like Wal-Mart, Sears, Carrefour and the like. The larger organized apparel retailers have managed to set up huge supply / distribution chains, Inventory Management Systems, financing pacts and wide scale marketing plans. 1.1 Role of Organized apparel retailing in marketing channels: In organization‘s marketing, producers often sell directly to their final buyers and so are linked to their final buyers in marketing channels. These types of direct channels are much less common in consumer product marketing. Ultimate consumers make most of their purchases in retail stores that are independent of the producer. Organised apparel Retailing therefore, is the final stage in marketing channels for consumers‘ product marketing. Organized apparel Retailers provide the important link between the producer and the ultimate consumer. Organized apparel Retailing is a lot more than simply buying and selling. It is important to consumers because it creates economic utility. It is important to manufacturers because it is the major connection in the marketing channel between manufacturer and end users. And it is important because of its contribution to the economy. Organized apparel Retailers deal with two broad categories of suppliers: (1) those who are selling goods and services for use by the retailers, and (2) those selling goods and services that are resold by the retailers. 4 1.2 Organized apparel Retailing functions in Distribution: In general organized apparel retailers perform four distinct functions. They participate in the sorting process by collecting an assortment of goods and services from a wide variety of suppliers and offering them for sale. They provide information to consumers through advertising, displays, and signs and sales personnel. Marketing research support is given to other channel members. They store merchandise, mark prices on it, place items on the selling floor and otherwise handle products. Generally, they pay suppliers for items before selling them to final consumers. They complete transactions by using appropriate store locations and hours, credit policies and other services. 1.3 The Relationship of Organized apparel Retailers and Suppliers: Organized apparel Retailers deal with two broad categories of suppliers: (1) those who are selling goods and services for use by the retailers, and (2) those selling goods and services that are resold by the retailers. Store fixtures, data processing equipment, management consulting and insurance are examples of goods or services used by the retailers. Suppliers must have knowledge of their retailer‘s goods, strategies, and methods of business operation in order to sell and service accounts affectively. Most of the retailers in Indian suburban and rural markets are of the form of general stores. For explaining the continuous evolution in organized apparel retailing, few theories have been proposed, including the wheel of organized apparel retailing. 5 1.4 Indian Organized apparel Retail Industry: History of organized apparel retailing is very old small stores play key role in the nation‘s economy. Generally most of the organized apparel retailers are small oneman or proprietary stores. In some developed countries one man or small stores are disappearing and have been replaced by other forms such as department and discount stores and they are found in abundance in urban markets. But in India such stores are sometimes found in urban areas only. In rural areas, only general stores are existing in India. Most of the retailers in Indian suburban and rural markets are of the form of general stores. For explaining the continuous evolution in organized apparel retailing, few theories have been proposed, including the wheel of organized apparel retailing, 1.5 The wheel of supply chain in Organized apparel Retailing: Harvard professor Malcolm P. McNair developed a theory in 1958 to explain the continuous evolution of organized apparel retailing. His theory is known as the wheel of organized apparel retailing. This theory divides the cyclical patterns of organized apparel retail evolution. According to this theory a new organized apparel retailer enters the market place with low prices, low margins and limited product line. As the innovator succeeds in attracting customer from more established organised apparel retailers, new competitors arise to copy the innovator. These new competitors start to take customers away from the original store, putting pressure on the first organized apparel retailer to trade up by adding more services, expanding product lines, and opening fancier stores. But in trading up, the innovator more like the 6 established stores faces initially challenges. Trading-up makes the innovator valuable to new customers because it leaves a gap at the lower end of the market place for new competitors. These new entrants, who are willing to accept lower profit initially, may now challenge the original innovator. And, the newest entrants start the wheels of retailing turning once again in a new round of evolution. 1.6 Managing the supply chain as framework-effective supply chain management. The framework of effective supply chain management is provided through literature study and practical experiences. The effective supply chain management stresses the need to extend logistics integration upstream to suppliers and downstream to distributors and customers (Christopher,2008). The problems and ineffective phenomenon can be outlined to facilitate the development of integrated end-to-end supply chain processes. Reduced prices, superior product quality, excellent customer service, expanded variety, and exceptional value are examples of the ever-increasing demands being placed on businesses by their customers. How will companies satisfy the increasing number of customer requirements? Many believe that the answer lies in supply chain management. Supply chain management (SCM) has become an important topic of discussion among managers and academicians alike. One definition for SCM is ―the integration of key business processes from end user through original suppliers that provides products, services and information that add value for customers and other stakeholders‖ (Lambert and Cooper 2000). Improved SCM can enhance customer 7 service while maintaining low costs. Having recognized these benefits of SCM, many successful firms are implementing SCM principles to create and sustain their competitive advantage. What should companies do to maximize the benefits offered by SCM? One answer lies in choosing the appropriate supply chain strategy. The appropriate supply chain strategy should match the corporate strategy in order to ―fit‖ within the company. In addition, the supply chain strategy should complement the logistics and manufacturing strategies in order to achieve superior performance. A dissonance among these strategies could lead to building conflicting capabilities. As a result, companies will not realize the complete benefits of SCM. Strategic alignment between the corporate and supply chain strategies is essential for the success of a company. A survey conducted by Ernst and Young LLP and Stevens Institute of Technology revealed that only 13% of the respondents believed that their supply chain practices were fully aligned with their business unit strategy. Only 47% said that they were "somewhat" aligned with their business unit strategy (Tamas, 2000).There are many reasons as to why a company might fail. One important reason according to Chopra and Meindl (2001) is: ―A company may fail either because of a lack of strategic fit or because its processes and resources do not provide the capabilities to support the desired strategic fit.‖ What exactly is meant by strategic fit? Chopra and Meindl (2001) give the following definition―Strategic fit means that both the competitive and supply chain strategies have the same goal. It refers to consistency between the customer priorities that competitive strategy is designed to satisfy and the supply chain capabilities that the supply chain strategy aims to build.‖ 8 The above definition of strategic fit can be expanded to include the manufacturing and logistics strategies. The logistics and manufacturing strategies should be aligned with the supply chain strategy in order to build the necessary capabilities to address customer priorities. Thus, a lack of strategic fit can mean that a company wastes time and valuable resources developing capabilities that will not satisfy current customers nor win new customers. Before choosing what type of supply chain strategy to pursue, a firm must first evaluate the type of supply chain(s) in which it participates. One paradigm that has evolved over the years consists of two types of supply chains: the lean and the agile. Naylor, Naim and Berry (1999) define agility as ―using market knowledge and a virtual corporation to exploit profitable opportunities in a volatile market place‖. They define leanness as ―developing a value stream to eliminate all waste, including time, and to ensure a level schedule‖ Manufacturing strategy has been defined as the pattern of decisions that, over time, enables a business unit to achieve a desired manufacturing structure, infrastructure and set of specific capabilities. Typical manufacturing competitive priorities or strategies are low cost, delivery, flexibility and quality (Hayes and Wheelwright 1984). Unlike manufacturing strategy, logistics strategy literature has varying views on what constitutes the typical logistics strategies. Bowersox and Daugherty (1987) proposed a framework for logistics strategy classification. The three strategies they articulated were the process, market, and channel strategies. McGinnis and Kohn (1990) performed a factor analysis of logistics strategy where they identified four strategies: 9 (1) Intensive logistics strategy; (2) Integrated logistics strategy; (3) Low integration strategy; (4) Low effectiveness logistics strategy. The research presented in this dissertation suggests a logistics strategy framework that parallels that of manufacturing strategy – cost, quality, delivery and flexibility – and incorporates several of the scales previously developed by logistics researchers. This framework attempts to designate the competitive priorities and capabilities that a firm attempts to build through their logistics operations. Providing such a framework for logistics strategy is an expected contribution of this research. 1.7 Supply Chain Given the previously mentioned functional strategies and supply chain characteristics, it follows that certain manufacturing and logistics strategies are more appropriately used within certain supply chains. For example, it can be hypothesized that given a lean supply chain, cost leadership manufacturing and logistics strategies are more appropriate. Aimed at minimizing costs, the cost leadership strategies result in the same efficiency capabilities that are valued in a lean supply chain. Firms exhibiting consistency among the logistics strategy, manufacturing strategy and the type of supply chain should experience higher levels of performance and competitive advantage than firms whose strategies are not consistent with supply chain type. Improved performance should result from the three entities guiding the firm‘s actions toward the same objectives and goals instead of toward conflicting goals. Therefore, the following research questions are posed. 10 1. Are there distinct supply chain types? 2. What characteristics contribute most to supply chain type determination? 3. Among the supply chain types, do firms differ in the competitive priorities that they choose to emphasize in their logistics and manufacturing operations? 4. Given a specific supply chain type, do higher performing companies emphasize different competitive priorities than lower performing companies? A web survey of logistics and supply chain executives who are members of the Council of Logistics Management (CLM) and employed manufacturing firms was used to gather the needed data. Because CLM is often considered to be the premier logistics organization, it is believed that members have sufficient working knowledge of supply chain, logistics and manufacturing issues within their organization to accurately complete the survey. In addition, executives (possessing the title manager or above) were chosen because their high-ranking position should afford them a fairly comprehensive view of the firm and its functional priorities. The sampling frame includes manufacturing firms from multiple industries. Scales from previous studies and articles were used to compose the survey. The respondents were divided into two initial groups, those participating in lean supply chains and those participating in agile supply chains. Once the supply chain type was determined, members of each type of supply chain were divided into high and low performers. Multivariate analysis of variance (MANOVA) was performed to detect differences in relative emphasis for the competitive priorities among the groups. Contributions. 11 This study makes several contributions to the literature. First, the characteristics of lean and agile supply chains can be empirically supported to further the development of supply chain management theory. Much of the literature to date is conceptual with little empirical support. Secondly, an alternative framework for logistics strategy is presented. The framework parallels that of manufacturing strategy and encourages integrative research using the two strategies. In addition, the framework will enable advanced understanding of logistics strategy and priorities. Lastly, the relationships among the type of supply chain, logistics and manufacturing strategies and their relation to perceived performance can be empirically examined, thereby advancing supply chain theory development as well. This study imparts several managerial implications as well. First, the financial impact of choosing logistics and manufacturing priorities that complement their type of supply As our economy is booming and every organization is facing severe competition in the market whether it may be local or an international market. The traditional corporate model of organization was based on vertical integration, hierarchy, and functional management. There is a drastic change in the traditional and modern business world, where in the modern world, when demand became unpredictable in both quality and quantity, when the domestic and international markets became too diversified and thereby difficult to forecast, and when there is a dynamic change in the technology which made single-purpose production equipments obsolete, the mass production system became too costly and too rigid. Emerging technologies now allow for the transformation of assembly main characteristic of the large corporation into easy-to-program production units with product flexibility sensitive to market variations, and process flexibility sensitive to changes in technology. 12 Most of the modern organizations have adapted the new environment and the main shift is featured as the shift from the vertical bureaucracies to horizontal corporations. There are seven major modern trends which features such corporations and they are as organizing around process, not tasks; a flat hierarchy; team management; measuring performance by customer satisfaction, maximization of contacts with suppliers and customers; information, training and retraining of employees at all levels and rewards based on team performance. Contemporary business life cycle is process driven and chain oriented hence integration has become a core-question for companies. The problems and challenges with the traditional vertical co-operation between organizations are costly and time consuming, instead of co-operating, there is also no scope of cost reductions or profit improvements at the expenses of someone else in the supply chain. 1.8 INFLUENCE OF SUPPLY CHAIN MANAGEMENT There are various ways to look at supply chain. One can say that it starts from the raw material vendor and ends with the customer; thus, it includes purchasing, marketing and even consumer buying the product. Therefore all the processes involved in the entire spectrum from demand generation to demand satisfaction can be called as supply chain management. Today, in some advanced companies supply chain extend right from the vendor procuring his raw material to the point of sale where the last sale of the product takes place. This implies that there is transparency and information flow in the entire chain resulting in appropriate action at each point. This action by each entity contributes to the smooth functioning of supply chain. 13 In some companies supply chain could only be internal that is across the manufacturing facilities to company owned depots. One can always choose a part of the supply chain that is most relevant and focus resources to achieve increased productivity. The objective of every supply chain should be to maximize the overall value generated. The value a supply chain generates is the difference between what the final product is worth to the customer and the costs the supply chain incurs in filling the customer's request. For most commercial supply chains, value will be strongly correlated with supply chain profitability (also known as supply chain surplus), the difference between the revenue generated from the customer and the overall cost across the supply chain. For example, a customer purchasing a mobile Best Buy pays Rs.1800, which represents the revenue the supply chain receives. Best Buy and other stages of the supply chain incur costs to convey information, produce components, store them, transport them, transfer funds, and so on.The difference between the Rs.1800 that the customer paid and the sum of all costs incurred by the supply chain to produce and distribute the router represents the supply chain profitability or surplus. Supply chain profitability or surplus is the total profit to be shared across all supply chain stages and intermediaries. The higher the supply chain profitability, the more successful is the supply chain. Supply chain success should be measured in terms of supply chain profitability and not in terms of the profits at an individual stage. 14 Having defined the success of a supply chain in terms of supply chain profitability, the next logical step is to look for sources of revenue and cost. For any supply chain, there is only one source of revenue: the customer. Thus, the appropriate management of these flows is a key to supply chain success. Effective supply chain management involves the management of supply chain assets and product, information, and fund flows to maximize total supply chain profitability. Retailing is largely consolidated, with large chains buying consumer goods from most manufacturers. This consolidation gives retailers sufficient scale that the introduction of an intermediary such as a distributor does little to reduce costs and may actually increase costs because of an additional transaction. In contrast, India has millions of small retail outlets. The only way for a manufacturer to keep transportation costs low is to bring full truckloads of product close to the market and then distribute locally using "milk runs" with smaller vehicles. The presence of an intermediary who can receive a full truckload shipment, break bulk, and then make smaller deliveries to the retailers is crucial if transportation costs are to be kept low. Most Indian distributors are one-stop shops, stocking everything from cooking oil to soaps and detergents made by a variety of manufacturers. Besides the convenience provided by one-stop shopping, distributors in India are also able to reduce transportation costs for outbound delivery to the retailer by aggregating products across multiple manufacturers during the delivery runs. 15 Distributors in Mumbai also handle collections, because their cost of collection is significantly lower than each manufacturer collecting from retailers on its own. Thus, the important role of distributors in Mumbai can be explained by the growth in supply chain surplus that results from their presence. The supply chain surplus argument implies that as retailing in Mumbai begins to consolidate, the role of distributors will diminish. Due to the purchasing power that comes with control over consumer contacts, retailers are often dominant in a supply chain. Closeness to end consumer markets gives retailers fast and precise information about matters such as shifting fashion preferences and attractiveness of competitor‘s offerings, comparable to continuous market research. Even though power is no end in itself, it does include the opportunity to organize the supply chain in a suitable way. Many challenges face retailers today. Expanding product variety, greater fluctuations in demand, and shorter and shorter product life cycles make time-to-market reductions essential. The ever-increasing need for reduced lead times continues. Maximum coordination of work in and between companies is therefore necessary, as otherwise it will lead to higher costs as well as to longer lead times. There is however no single best way to manage a supply chain, the way retailers compete in consumer markets influence what should be focused on. As no company can be everything for everyone, there is interdependence between what a company sets out to be for a consumer, i.e. the company‘s value proposition, and that company‘s supply chain. 16 1.9 Supply Chain Management Vis-a -Vis Sales and pricing 1.9.1 COST-BASED COMPETITION Before going into the study‘s two cost-based case studies, will bring in logistics related just-in time management and the umbrella term for supply chain cooperation in the organized apparel sector efficient 1.9.2 JUST-IN-TIME LOGISTICS One of the most significant concepts in business management in past decades has been just-in time (JIT), originating in Japan, it is a philosophy as much as a technique based upon the idea that wherever possible no activity should take place until there is a need for it, i.e. no products should be made or ordered until there is a requirement for them. According to this requirement. JIT is a pull concept where demand pulls goods towards the market. In contrast, traditional push systems carry manufactured goods in batches in anticipation of demand, and are stored in the supply chain as buffers between various functions. In such a conventional approach, reordering takes place when inventory falls to a certain predetermined point - the reorder point which is based upon the expected length of the replenishment lead time. At this point, the amount to be ordered may be based upon the economic order quantity (EOQ) principle, hence balancing the cost of holding inventory against the costs of placing replenishment orders. The dilemma with the EOQ model is that it is assumed that there is an optimum amount to order 17 (amount to hold in inventory), thus arriving at the core problem as the reorder quantity force a corporation to carry more inventory than is actually demanded per day over the entire order cycle. As maximized batch quantities were conventional insights in production before the introduction of JIT, similar insights could be found in the rest of the supply chain. For example, companies used to ship by container or truck load and therefore customers who ordered smaller quantities faced price penalties, as well as delivery schedules that were expected to be optimized through efficiency of routes. Contradicting this approach, JIT favors small shipments to be made more frequently and to meet time requirements of the customer; without uneconomic escalations of cost of course, which in itself argues there may have to be certain tradeoffs in order to achieve total supply chain cost effectiveness. The greater the demand for variety and the higher the value, the more JIT and synchronized delivery becomes preferable. The prerequisites for successful JIT logistics would be: A disciplined approach to planning and scheduling of inbound requirements. A high degree of communication and planning linkage between supply chain partners. More often than not the use of third parties or logistics partners to manage the inbound consolidation and sequencing of deliveries. The design of vehicles and physical facilities to make small shipment quantities easy to load and unload rapidly. The value and variety of the materials tend to be higher than average. 18 Summarizing this, the basic requirement for JIT logistics to function properly is to make sure that all activities and involved parties of the supply chain are synchronized, with each and everyone receiving early information about shipping and replenishment requirements. With the emergence of enterprise resource planning (ERP) systems, it is possible to have integrated logistics systems linking replenishment of products in the marketplace with their own and their supplier‘s activities through the use of shared information. This way it is possible to convert the supply chain from a push to a pull system, enabling companies to respond to known demand rather than having to anticipate that demand through forecasting. 1.10 ENTERPRISE RESOURSE PLANNING Enterprise resource planning (ERP) has become the umbrella term for supply chain cooperation the organized apparel sector. It began in the US in the beginning of the 1990‘s, focusing on four main areas that had great improvement potential: Continuous replenishment programs, passing point-of-sales data back to suppliers. This requires standardization of bar codes and methods and implementation of EDI. Efficient pricing and promotion, aiming at reducing self caused demand spikes and inventory swings. Changes in product introduction. Combined market research by channel members in order to forecast new-product success better. Changes in merchandising for the purpose of finding better ways to merchandise brands and categories of products. 19 One operational practice that has developed from the JIT and ERP ideas is continuous replenishment. The idea is that consumer‘s purchases, or withdrawals, of goods are the base for that which should be delivered. Point-of sales data turns the supply chain into a pull system, as retailer‘s stock is replenished based on actual sales. By automating the replenishment system the goal is also to reduce errors and processing costs. 1.10.1 Activity map with a cost-based theme (value proposition) It is belive supply chains are affected by retail strategies and the value chain is tailored to deliver a company‘s value proposition, to see how activities fit together and what tradeoffs companies need to make. We believe that a good way to analyze the configuration of activities that companies perform is by drawing activity maps. Such maps show how a company‘s value proposition is contained in a set of tailored activities designed to deliver it. 1.10.2 Time-based competition Having detected the patterns outlining competition based on cost and physical efficiency, the purpose is to explore the supply chain variables significant for time and market responsiveness. The actual time that can be saved while performing these activities becomes crucial as late market entrances increase the risk for obsolete stock. 20 1.10.3 Why time is important There are three areas in which the importance of time as a competitive variable are increasing according to the need to meet the fast changing markets of today: Shortening life cycles The drive for reduced inventories Volatile markets making reliance on forecasts dangerous. In accordance with technological improvements as well as societal changes, product life cycles have been radically shortened the last few decades. It is within this time to market scenario companies must be able to capture an opportunity, develop, manufacture and distribute products in accordance with the existing market pace, and if successful, the actual time that can be saved while performing these activities becomes crucial as late market entrances increase the risk for obsolete stock. Regarding the drive for reduced inventories, many companies have realized the need to release inventory holding costs. Time to serve, i.e. order to delivery time is also important as companies need to be able to respond to demand of products that are already on the market, i.e. the lead time to resupply a product determines the organizations ability to meet demand during the life cycle, which is also the base for the concept of quick response which will be discussed later on. The volatility of markets is a popular topic to discuss and as forecasting is becoming increasingly crucial due to companies‘ attempts to reduce lead times, managers seek new methods to reduce forecast errors; still the real problem would be that forecast errors increases as lead time increases. Time to react, i.e. responsiveness, is 21 essentially achieved through time compression in the supply chain and the costs should be lower at the same time. Still, the system of having suppliers able to deliver a complete order at required time might simply shift the cost burden from one part of the supply chain to another. There is a direct relationship between the length (measured in time) of a supply chain and the inventory carrying cost, but the declared truism ―time is money‖ is arguably more true for companies supplying innovative products with unpredictable demand than it is for others. Besides the release of capital, shorter lead times also mean higher service level because of the faster response to consumer demand. Higher flexibility in meeting demand also makes companies less vulnerable to market volatility. Reducing lead times generally means higher distribution costs; benefits must be weighed against costs. High volatility in demand for innovative products motivates high distribution costs, but more important on time sensitive markets where time-to-market reductions are extremely important, shorter lead times not only mean lower cost but also higher sales. This, together with avoidance of market mediation costs, is the biggest difference between cost-based and time-based competition. 1.11 The lead-time gap The lead-time gap is based upon the problem that the time it takes to produce and deliver a product is longer than a retailer is willing to wait. The traditional way to meet the lead-time gap is to hold inventory, hence forecasting need to be used and as the accuracy of such actions are prone to errors the whole idea 22 will more likely end up in an inventory problem. Therefore, a company that achieves a perfect match between the logistics lead-time and the retailer‘s order cycle will have no usage for forecasts and no need for inventory. Whether or not the above statement is of a utopian character, closing this lead-time gap might be possible by: shortening the logistics lead time moving the retailer‘s order cycle closer by attaining earlier warning of requirements through improved visibility of demand When improving visibility of demand, opportunities can be found at the interface between suppliers and retailers as retailers rarely share routine data with suppliers, hence suppliers are forced to use forecasting and carry inventory. Producers need to extend the customer‘s order cycles, i.e. finding approaches how to capture earlier warnings of the customer‘s requirements. Considering the fact that real demand is hidden from view except from already made orders, the idea behind the demand penetration point becomes useful in this case. The demand penetration point could be described as the point in the supply chain where real demand meets the projected plan; upstream from this point everything is driven by a forecast. Therefore, new ways should be invented on how the penetration point might be pushed as far as possible upstream; one way would be to improve the speed and accuracy of information from the market place to manufacturers. 23 Another way to push the order penetration point upstream would be to postpone the final commitment of the product to its final form. A frequently used example of a postponement strategy is Benetton, who makes knitwear and then dyes everything the last thing they do, according to customer requirements collected during and after production. 1.12 Product Flow Analysis Processes as a way to analyze product flows As processes are abstract concepts they need to be modeled in some way to be understood. Among the most widely accepted definitions of a process is ―a set of interrelated activities‖ and― a chain of activities‖. In this respect, processes are seen as activity flows, or workflows, consisting of activities that have some kind of relationship to each other. Thus, if activities are not perceived interrelated, they are not part of the same process. 1.13 Purpose of the study. No similar research initiative has been undertaken in India that has focused on retail competitiveness through improved supply chain management, use of technology and its impact on sales and pricing of apparels in organized retail outlets, for scheduling and optimizing inventory while ensuring no stock outs. The wastage levels for apparels are as high as 18 percent because of a large number of intermediaries, loss during transportation, unpredictable demand forecast and 24 inadequate storage facilities. Therefore there is an urgent need to look at a holistic picture of supply chain and logistics. In India Organized Retail is in its nascent stage hence there is not enough literature available on efficiency measuring mechanism in different format of organized apparel retail outlets in India. Therefore there is a need to study variation in the efficiency practices in different formats. 25 CHAPTER 2 LITERATURE REVIEW The following chapter will discuss the relevant literature concerning supply chain management, manufacturing strategy and logistics strategy.As the importance of managing a proper Inventory control has grown investors with an appetite for risk can consider exposures in the stock of Retailing of Apparels. 2.1 Supply Chain Management Researchers and managers have debated for approximately the last 15 years about the definition of supply chain management. Some believe that SCM is just integrated logistics properly implemented. Others view SCM as the integration of more functions that just logistics (e.g. manufacturing with marketing and R&D, etc.). Cooper, et al. (1997) point out the need for ―the integration of business operations in the supply chain that goes beyond logistics.‖ Discussion with members of the Global Supply Chain Forum (GSCF) resulted in the following definition of SCM: ―Supply Chain Management is the integration of key business processes from end user through original suppliers that provides products, services and information that add value for customers and other stakeholders‖ Lambert and Cooper (2000). The eight key processes identified are shown in Table 2.1. Each process is customerfocused and aims to achieve product flows through the efficient use of information along the supply chain. 26 Table 2.1 Process Customer management Description of Process relationship In the customer relationship management process, key customers are identified and worked with closely to establish product and service agreements that specify the levels of expected performance. Also, customer service teams work with customers to further identify and eliminate sources of demand variability. Customer service management A single source of customer information is provided in this process. A key point of contact for administering the product/service agreement is established. Demand management Point-of-sale and ―key‖ customer data is used to reduce uncertainty and provide efficient flows throughout the supply chain. Order fulfillment Integration of the firm‘s manufacturing distribution and transportation plans is performed in this process in order to guarantee timely and accurately filled orders. Manufacturing flow management Ideally, orders are processed on a just-in-time (JIT) basis where required delivery dates drive production priorities. Furthermore, manufacturing processes must be flexible enough to respond quickly to market changes. Procurement Long-term strategic alliances with a small core group of suppliers are utilized in conjunction with rapid communication mechanism (e.g. EDI, Internet, etc.) Product development and Customer Relationship Management is coordinated commercialization with this process to identify customer-articulated and unarticulated needs. Procurement is involved in this process as well to select materials and suppliers. Coordination with Manufacturing Flow Management is needed to develop production technology and integrate into the best supply chain flow for the product / market combination. Returns The Returns process enables identification of productivity improvement opportunities. Table 2.1: Eight Supply Chain Processes Proposed by Lambert and Cooper (2000). Taking a slightly different perspective, Ballou, et al. (2000) identifies three dimensions of supply chain management. They are intra-functional coordination, inter-functional coordination and inter-organizational coordination. Intra-functional 27 coordination refers to the administration of the activities and processes within the logistics function of a firm. Inter-functional coordination refers to the coordination of activities among the functional areas of the firm while inter-organizational coordination refers to the coordination of supply chain activities that take place between legally separate firms within the product-flow channel. Hence, the following definition for supply chain management was proposed. ―The supply chain refers to all those activities associated with the transformation and flow of goods and services, including their attendant information flows, from the sources of raw materials to end users. Management refers to the integration of all these activities, both internal and external to the firm. Also emphasizing the importance of functional coordination and strategic congruence, Mentzer, DeWitt, Keebler, Min, Nix, Smith and Zacharia (2001) define supply chain management as ―The systemic, strategic coordination of the traditional functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole.‖ 28 Other definitions of supply chain management are offered in Table 2.2 Authors Definition Tan et.al.(1998) SCM encompasses materials / supply management from the supply of basic raw materials to final product (and possible recycling and re-use). SCM focuses on how firms utilize their suppliers‘ processes, technology and capability to enhance competitive advantage. It is a management philosophy that extends traditional intraenterprise activities by bringing trading partners together with the common goal of optimization and efficiency. Berry et al. (1994) SCM aims at building trust, exchanging information on market needs, developing new products, and reducing the supplier base to a particular OEM so as to release management resources for developing meaningful, long term relationship. Jones and Riley (1985) An integrative approach to dealing with the planning and control of the material flow from suppliers to end-users. Saunders (1995) External Chain is the total chain of exchange from original sources of raw material, through the various firms involved in extracting and processing raw materials, manufacturing, assembling, distributing and relating to ultimate and customers. Ellrams (1995) External Chain is the total chain of exchange from 29 original source of raw material, through the various firms involved in extracting and processing raw materials, manufacturing, assembling, distributing and retailing to ultimate and customers. Ellram (1991) A network of firms interacting to deliver product or service to the end customer, linking flows from raw material supply to final delivery. Christopher(1992) Network of organizations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate consumer. Lee and Billington(1992) Networks of manufacturing and distribution sites that procure raw materials, transform them into intermediate and finished products, and distribute the finished products to customers. Kopezak(1997) The set of entities, including suppliers, logistics services providers, manufacturers, distributors and resellers, through which materials, products and information flow. Lee and Ng (1997) A network of entities that starts with the suppliers‘ supplier and ends with the customers‘ custom production and delivery of goods and services. Table 2.2: Definitions of Supply Chain Management. Reproduced from Croom, Simon, Pietro Romano and Mihalis Giannakis, ―Supply Chain Management: An 30 Analytical Framework for Critical Literature Review,‖ European Journal of Purchasing and Supply Management, Vol.6, 2000, pp. 67-83 Though these definition differ slightly in wording, all communicate the importance of integration, communication and coordination between functions and organizations that will create value for the customer. Other researchers have attempted to develop math models to address coordination in the supply chain. Many of these models attempt to minimize inventory in the supply chain. However, these analyses are dyadic in nature, examining the interaction of only to supply chain members, a buyer and a supplier. Thus, the entire supply chain as given by the previous definitions is not modeled using these analytical methods. In addition, inventory is not the only consideration or motivation for supply chain coordination. Thomas and Griffin (1996) reviewed the literature that uses math models to address supply chain coordination issues. Several authors have proposed frameworks for the design and control of supply chains (Davis 1993). Beamon and Ware 1998; Boman 1997, Sengupta and Turnbull 1996). However, much of this work is geared toward the manager and does not give theoretical insights as to how supply chain management relates to functional strategies. One of the goals of this study is to examine the relationship among the type of supply chain a firm participates in and two of the firm‘s functional strategies, namely their manufacturing and logistics strategies. One of the seminal papers on supply chain management provides a framework for determining what type of supply chain is appropriate for a particular product. Fisher 31 (1997) recommends first examining a product‘s demand nature in order to determine what type of supply chain to use. Product fall into one of two categories according to Enterprise Resource Planning (ERP) system software packages are highly integrated, complex systems for businesses, and thousands of businesses are running them successfully worldwide (Koch,1996). Wallace and Kremzar (2001) described ERP as an enterprise-wide set of management tools that balances demand and supply, containing the ability to link customers and suppliers into a complete supply chain, employing proven business processes for decision-making, and providing high degrees of cross-functional integration among sales, marketing, manufacturing, operations, logistics, purchasing, finance, new product development, and human resources, thereby enabling people to run their business with high levels of customer service and productivity, and simultaneously lower costs and inventories, and providing the foundation for effective e-commerce. ERP evolution started with MRP (Material Requirement Planning) as universal manufacturing equation (Wallace and Kremzar, 2001). Its logic applies wherever things are being produced whether they are jet aircraft, tin cans, machine tools, chemicals, cosmetics... or a dinner. MRP improved to Closed-loop MRP. Further, tools were developed such as Sales & Operations Planning. Master scheduling. Demand management and Rough-Cut Capacity Planning (Wallace and Kremzar, 2001). The next step in this evolution is called Manufacturing Resource Planning or MRP II. It involves three additional elements (Wallace and Kremzar, 2001):a) Sales & Operations Planning, b) Financial interface and c) Simulation. 32 The fundamentals of ERP are the same as with MRP II. However, thanks in large measure to enterprise software, ERP as a set of business processes is broader in scope, and more effective in dealing with multiple business units. Financial integration is more robust. In order to understand the attraction of enterprise systems, as well as their potential dangers, we first need to understand the problem they‘re designed to solve: ―the fragmentation of information in large business organization‖ (Davenport, 1998). At its core is a single comprehensive database. The database collects data from and feeds data into modular applications supporting virtually all of a company‘s business activities-across functions, across business units, across the world. Maintaining many different computer systems leads to enormous costs-for storing and rationalizing redundant data, for re-keying and reformatting data from one system for use in another, for updating and debugging obsolete software code, for programming communication links between systems to automate the transfer of data (Davenport, 1998). ERP goals include high levels of customer service, productivity, cost reduction, and inventory turnover, and it provides the foundation for effective supply chain management and e-commerce. It does this by developing plans and schedules so that the high resources – manpower, materials, machinery, and money – are available in the right amount when needed (Wallace and Kremzar, 2001). Enterprises Resource Planning is a direct outgrowth and extension of Manufacturing Resource Planning and, as such, includes all of MRP II‘s capabilities ERP is more powerful in that it:a) applies a single set of resource planning tools across the entire enterprise, b) provide real-time integration of sales, operating, and financial data, and 33 c) connects resource planning approaches to the extended supply chain of customers and suppliers (Wallace and Kremzar, 2001). The primary purpose of implementing Enterprise Resource Planning is to run the business, in a rapidly changing and highly competitive environment, far better than before. An effective business strategy centers on an aggressive, efficient use of information technology, for this reason the ERP systems have emerged as the core of successful information management, and the enterprise backbone of the organization (Nash, 2000a, b). A successful ERP system will streamline processes within a company and improve its overall effectiveness, while providing a means to externally enhance competitive performance, increase responsiveness to customers, and support strategic initiatives (Sandoe et al. 2001). ERP implementation is a socio-technical challenge that requires a fundamentally different outlook from technologically-driven innovation, and will depend on a balanced perspective where the organization as a total system is considered ERP implementation is considered to rely on behaviour processes and actions (AlMudimigh et al:2001). Lucas(1981) defined implementation as the whole process of introducing a system into an organization, from conception of an idea, to analysis, design, installation and operation. Olson and Davis (1984) defined implementation as preparing an organization to receive an information system for its effective use. 34 Shanthi Venkataraman (2004) in her Article ―Pantaloon Retail – Buy‖, Strict inventory control, backward integration and the use of private labels are some of the measures that have been taken by many organized retailers to improve margins, for Example, Pantaloon has a stock conversion period of about 90 days. This is moderate, considering that it retails a wide range of product with divergent inventory policies. Pantaloon is integrated backwards in the apparel business, with its group company, Pantaloon Industries – supplying fabric. This enables it to have some control over the cost and quality of its apparel. It markets most of its products under private labels, thus offering products that cost 20-25 per cent lower than branded items, owing to an absence of advertising and other related expenses. Mike Kilgore, Abraham Joseph and Jeff Meterskyy (2007) in their Article on ―Logistics Management in Apparels Supply Chain‖ argue that India‘s supply chains will not be highly reliable. Shippers accustomed to reliability and speed will have to reset expectations. To reduce the impact of highly variable transportation, brought about by inadequate logistical infrastructure, firm must adopt inventory strategies similar to those used in small part service industries. While service parts industries use inventory to buffer demand versus transportation variability, the resulting network structure is the same. Firms will need to stage inventory throughout multiple echelons to reduce the impact of transportation variability and high transportation costs. This multi-echelon staging will create networks with many distribution points and doublehandling of products. 35 Indian apparel retail sector poses interesting challenges to a manager as it is evolving and closely linked to fashions. Vyuas Preeta and Sharma Ankush (2007) in the write up on ―Indian Organised Apparel Retail Sector and DSS (Decision Support System‖. Appealing mainly to youth, the sector has typical information requirements to manage its operations. DSS (Decision Support Systems) provide timely and accurate information & it can be viewed as an integrated entity providing management with the tools and information to assist their decision making. The study exploratory in nature, adopts a case study approach to understand practices of organized retailers in apparel sector regarding applications of various DSS tools. Conceptual overview of DSS is undertaken by reviewing the literature. The study describes practices and usage of DSS in operational decisions in apparel sector and managerial issues in design and implementation of DSS. A multi brand local chain and multi brand national chain of apparel was chosen for the study. Varied tools were found to be used by them. It was also found that for sales forecasting and visual merchandising decisions, prior experience rather than any DSS tool was used. Badal Choudhury (2008), head, Apparel and Lifestyle Business, Safexpress, observes: ―One needs to outsource the backend operations to experts in the industry. It should be knowledge and research based arm of the industry itself and a very specialized practice, and if not followed in the way, the execution process could be in question.‖ The growth in the domestic jeans and casual wear market is attracting an increasing number of multinationals into the segment. In fact, the Indian jeans were market is estimated at Rs. 1,700 crore at present and is growing at 12 per cent per annum. In an 36 interview with Catalyst, Duncan Wilson (2004) Business Line, Managing Director of the UK based denim wear company Lee Cooper International; share his view on the growth potential of the market, the factors that are egging it on and how significant the Indian market is for the $300-million company. A retail revolution is happening in the country. For global giants looking at newer markets, India presents exciting opportunities on account of its vast middle-class and a virtually untapped retail industry. Vineet Agarwal (2007) in his article on the Topic of ―Supply chain and retail: The means to the end‖ in the Hindu Business Line. The Indian retail sector has seen unprecedented growth in the last few years. The KPMG report. Consumer Markets in India the next big thing has predicted that the organized retail sector is expected to grow at rate higher than GDP growth in the next five years. The AT Kearneys 2006 Global Retail Development Index positions India as a leading destination for retail investments. The retail boom promises to give an impetus to a host of allied sectors and the logistics industry as the backbone of the retail sector, stands to gain the maximum. In India the logistics market is mainly thought to mean transportation. But in the major elements of logistics cost for industries include transportation warehousing inventory management, courier and other valued-added services such as packaging. The logistics costs account for 13 percent of GDP. The industry is currently on an upswing and is poised for a growth of 20 per cent in the coming years. 37 With the expansion of retail, supply chain will take on an increasingly important role, With the end consumer becoming more demanding and time conscious, the need for just-in-time services is increasing. In retail, where competition is intense and stakes are high, customer satisfaction is paramount. Mansi Batra M.S. and Linda S. Niehm, (2009) on ―An Opportunity Analysis Framework for Apparel Retailing in India: Economic, Social, and Cultural Considerations for International Retail Firms‖ in clothing and Textiles Research Journal argues that Despite seemingly large market potential, little is known about the scope of opportunities and threats for international apparel retailers seeking to enter the growing Indian retail arena. A low level of organized retail penetration, coupled with an ineffective supply chain, characterizes the infrastructure of the Indian retail industry. Analysis of the current state of Indian retail, along with opportunities and threats to growth, would have immense significance for international retailers vying to enter the Indian market. This paper presents a conceptual framework that offers advice for international corporations regarding successful entry and sustainability in India. Using a met theory approach, a series of testable propositions are represented in relation to opportunities for international development in the Indian apparel retail sector. Understanding computer psychology is equally important to maintain the Inventory level According to Dr. S.L. Gupta (2007) in his book Retail Management the retailer need to invest much more to capture more specific market intelligence as well as almost real-time customer purchase behavior information. The retailers need to make substantial investments in understanding / acquiring some advanced expertise in 38 developing more accurate and scuebtufuce demand forecasting models. Re- engineering of product sourcing philosophies aligned more towards collaborative planning and replacement should then be next on their agenda. The message, therefore, for the existing small and medium independent Retailers is to closely examine what changes are taking place in their immediate vicinity, and analyze whether their current market offers potential redevelopment of the area into more modern multi-option destination. If it does, and most commercial areas in India to have this potential, it would be very useful to form a consortium of other such small retailers in that vicinity and take a pro-active approach to pool in resources and improve the overall infrastructure. The next effort should be to encourage retailers to make some investment in improving the interiors of their respective establishments to make shopping and enjoyable experience for the customer.Many apparel organizations worldwide have restructured themselves from vertically integrated composite set-up to horizontally aligned configuration. Debasis Daspal in his Article on ―Powering the supply chain with E-technology‖ (March 2010) Among the various reasons gravitated the transition from vertical to horizontal structure, there are the emphasis on greater organizational and process flexibility to care volatile market demand. Also, remarkable improvement in productivity and cost of machinery make it increasingly risky to underutilize the entire range of production equipments from spinning to processing machines kept under one roof. Cost cutting arising out of heavy debt associated with increasing acquisition also influence management to keep organization lean and horizontally aligned. 39 However, this splitting up of once vertically aligned organization into many independently working apparel companies, each having a separate operation, makes efficient coordination among them a must to sustain increased competition. Also large, vertically oriented organizations, which still exist, need to coordinate their entire supply in light of growing inter-unit competition for productivity, often disregarding market priority. This stimulate apparel organization to manage their various activities under a new paradigm, supply chain management. Increasing market competition forces apparel companies become efficient in managing their supply chain by reducing inventory, yet maintain the super responsiveness to volatile market demand. Effective supply chain management, cutting across functional silos and organization boundaries has provided integrated solution to this challenge. The article describes different types of demand patterns and inventory found in apparel sector, and a typical apparel supply chain. Different types of supply chains are discussed with reference to historical perspective and their current practice among leading apparel organization in India . The key findings from these practice are analyzed. Prime feature of any supply chain is the balancing the flow of demand by strategically positioning inventory at various nodes of supply chain. Therefore, two major components of supply chain-demand and inventory are discussed with respect to demand variability and inventory characteristics, before explaining various types of supply chain. This is the impact of positive are negative campaigning in the E-retailing. As narrated by Ms. J. P. Bharathi on the theme of ―E-Tailing‖ in March (2010). E-Retailing was 40 first developed in the European countries. E-retailing has both passive and interactive retail system while all e-tailing is generally limited to passive, are ticketing and other entertainment booking is designed in interactive system. The common features for both are debit and credit cards usage. 2.2 Success of online retailing purely depends on: 1. Fully loaded custom website 2. Step by step action plan 3. Low cost and no cost advertisement methods 4. Automated prospect and customer follow up system 5. No experience necessary 6. Live weekly coaching 2.3 Factors to consider in Internet Retailing : 1. Goodwill of retailer. 2. Merchandise characteristics 3. Website effectiveness 4. Ease to access the website 5. Consumer access towards Internet buying 2.4 Items sold through Internet Retailing : 1. Computer parts and accessories 2. Computer software and hard wares 3. Gift items including electronic toys 4. Books and magazines 41 5. Travel products 6. Branded appliances 2.5 Present and future Internet retailing areas : 1. Real estate retailing 2. Petro retailing 3. Catering retailing 4. Pharma retailing 2.6 Information technology in Retailing Providing value for customers has become a challenge for retailers. Access to large amount of information shrunk the world into a global village and the market to a local market. Customers want value, price, ambience, appearance, relaxation, information, entertainment, selection, convenience, service and many more under one roof. I tools, mathematical models and use of technology enhance shopping experience, convenience, better service, speed and value to customers. 2.7 Types of Technology used in Retailing In store and online technology These technologies are used for information, display, identification, Checkouts, point of sale (POS), signage, and hand-held shopping assistance and body scanning especially for physical store. In store Technology is used as Kiosks, virtual display cases, RFID (radio frequency identification tags) Electronic point of sale (POS), hand 42 held assistance devises, body scanning systems, self scanning and self check-out systems. 2.8 Interactive Kiosks With touch screen display customer can identify and select products. Kiosks help retailers in offering and expanded selection of items. Video kiosks and print a map of the store reduces time and energy.Frequent shopper card, choice of goods, past purchases display recipes, special offers, samples, and sweep stakes opportunities. Even interactive kiosks like movie videos, CDS, albums, artists list of songs enable a hassle free shopping experience. Kiosks are useful for mom and pop stores in arranging for home delivery of goods. E retailing also helps in low inventory costs. It is a great boon for self-employment with very little investment. Kiosks fulfill the purpose of registry creation, retrieval, updating, uploading, product selection from palm type scanning device. Kiosks are used for gift card dispensing, collect and redeem points, awards, discounts, savings, and retrieve special offers. Loyalty kiosks are helpful in tracking and collecting information about customers. With kiosks there is no need to have every single product in store. Vehicle options, interiors, exteriors, color selection, designing, paints, optional features can be tried in the virtual designing. 43 In entertainment even online sporting, gaming, mountain biking, and snow-bowling can also be experienced in interactive kiosks. Kiosks also help in color selection in interiors, inspirational palettes, virtual rooms receive instant color co-ordination tips, provides paint calculator and supply list.Airlines have started using check-in kiosks especially for frequent travelers. Consumers find product information, ordering kiosks, and frequent shopper kiosks useful. This customers rated kiosks as advantage 60% likely to shop at stores with aid of technology 80% used technology at some time when they shopped Kiosks make shopping interesting, easier and faster, get current product information, special deals, and offer and avoid carrying documents. Opinion about Kiosks is mixed, though it takes time to bring major changes, kiosks is still experimental. Ways and means to strengthen the position of the relating industry, doing away with the causes for the inefficiencies, therefore, are to be taken up in an urgent manner. Such measures may include establishment of retailer‘s co-operative, merger and buy-out, use of technology to the greatest possible extent, setting up of non-store retailing centers and increase in franchisee network which can predict return on investment. 2.9 Types of Retail theft: Employee theft accounts to 50% of loss in retail units. Broadly retail thefts are of three types. 1. Shop lifting 44 2. Employee theft 3. Card theft, without proper checking According to Efficient Customer Response (ECR) in Europe, the top six measures used by retailers to reduce shrinkage are 1. Cash protection equipments 2. Electronic article surveillance equipment 3. Employee integrity checks 4. Intruder alarm systems live closed circuit television (CCTV) 5. Mystery shoppers This Indian Textile industry adds 14% to the industrial production and 8% to the GDP of India. It provides employment to 38 million people and thus, is the second largest employment provider after agriculture. The Indian Apparel & Textile Industry is one of the largest sources of foreign exchange flow into the country with the apparel exports accounting for almost 21% of the total exports of the country. The better understanding of this concept is as explained by Mr. Pradeep Joshi in his article on Apparel and Textile Exports on 11th April 2009. India has high self sufficiency for raw material particularly natural fibres. India‘s cotton crop is the third largest in the world. Indian textile Industry produces and handles all types of fibers. Due to over specialization in cotton, the bulk of the international market is missed out, synthetic product in India are expensive and fabric required for items like swimsuit, sky-wear and industrial apparel is relatively unavailable. 45 A systematic SWOT analysis of the textile and apparel industry indicates the following:- 2.10 STRENGTH 2.10.1 Raw material base India has high self sufficiency for raw material particularly natural fibres. India‘s cotton crop is the third largest in the world. Indian textile Industry produces and handles all types of fibers. 2.10.2 Labour Cheap labour and strong entrepreneurial skills have always been the backbone of the Indian Apparel and textile Industry. 2.10.3 Flexibility The small size of manufacturing which is predominant in the apparel industry allows for greater flexibility to service smaller and specialized orders. 2.10.4 Rich Heritage The cultural diversity and rich heritage of the country offers good inspiration base for designers. 46 2.10.5 Domestic market Natural demand drivers including rising income levels, increasing urbanisation and growth of the purchasing population drive domestic demand. 2.11. WEAKNESS 2.11.1 More dependence on cotton Due to over specialization in cotton, the bulk of the international market is missed out, synhetic product in India are expensive and fabric required for items like swimsuit, sky-wear and industrial apparel is relatively unavailable. 2.11.2 Spinning Sector Spinning sector lacks modernization and there is a need of introducing new technology. Weaving Sector India has relatively less number of shuttle-less loom. 2.11.3 Fabric Processing Processing is the weaker link, in the Indian textile value chain, adversely affecting its ability to compete in exports. 2.11.4 Poor Infrastructure 47 High power costs and long export lead times are eroding India‘s export competitiveness across the textile chain. 2.11.5 Low Labour Productivity Productivity levels for manufacturing various apparel items are far lower in India in comparison with its competitors. 2.12 OTHER WEAKNESSES: VII. Less attention on man power training VIII. Poor quality standards IX. Distance of the potential market X. Lower average consumption in domestic market XI. Lack of professionalism and integration of supply chain XII. Dependence on quota system XIII. Very low investment on R & D XIV. Limited exploitation of economies of scale 2.13 OPPORTUNITIES 2.13.1 Growing Industry World textile trade would continue to grow at a rate of 3-4% to reach $200-210 billion by 2010. 48 2.13.2 Market access through bilateral negotiation The trade is growing between regional trade blocs due to bilateral agreement between participating countries. 2.13.3 Integration of Information technology Supply Chain Management and Information Technology has a crucial role in apparel manufacturing. Availability of EDI (Electronic Data Interchange) makes communication fast, easy, transparent and reduces duplication. 2.13.4 Opportunity in High Value Items (India has the opportunity to increase its UVR‘s Value Realization) through moving up the value chain by producing value added products and by producing more and more technologically superior products. 2.14 THREATS 2.14.1 Decreasing Fashion Cycle There has been an increase in seasons per year which has resulted in shortening of the fashion cycle. 2.14.2 Formation of Trading Blocks 49 Formation of trading blocks like NAFTA, SAPTA etc., has resulted in a chance in the world trade scenario. Existence of bilateral agreements would result in significant disadvantage for Indian exports. 2.14.3 Phasing out of Quotas India will have to open its protected domestic market for foreign player thus domestic market will suffer.The fashionista dream is alive and kicking. But it‘s no longer strictly elitist With the US and Europe still grappling with recession, global luxury apparel retailers are eyeing markets like India, which has put itself firmly on the path of recovery. According to the Article published in Economic Times-Mumbai, November (2009)” Reworking their business model by focusing on affordable luxury, international majors are in talks with Indian players to target aspirational but value conscious consumers. While retail chain major Shopper Stop is all set to launch Playboy brand of unisex wear, textile conglomerate S. Kumars group is bringing in three international brands by the end of this fiscal.Several high priced international apparel brands were earlier forced to close shop due to sluggish demand. Few other brands like Jimmy Choo and Bottega Veneta changed hands from the Murjanis to Genesis Colors and Springfield in order to sustain growth. Now global brands are relying on Indian retailer‘s 50 understanding of the local market while Indian retailers are reworking the price in accordance with preference of the consumers. Shoppers Stop, which had launched foreign brands like MAC, Mother care and Austin Reed among dozen of global brands, and now plans to add about half-a-dozen international labels soon. S.Kumars group, which tied up with Italian brand Oviesse this year, is in talks with other international brands. Brandhouse Retails, aparel retail arm of SKNL, will look after the retail expansion and marking of these brands in the country. Arvind Brands, which has a licence to market segment men‘s wear brands such as Arrow and Gant, has launched ‗Izod‘ in India, a label of global apparel firm Van Heusen. In line with others, Murjani Group that brought brands like Calvin Klein. Tommy Hilfiger, Gloria Vanderbilt and French connection funky wears for youngsters FCUK, has also launched as on line sales service for the brand. Industry analysts contend that earlier the global luxury brands, which came in India, were highly priced for the Indian consumers. Now, in order to sustain in the market, most of them have started discount selling. The big brands Mega Carnival in Mumbai recently offered almost 80% on international brands like Roberto Cavall, Givenchy, Davidoff, Choard and Calvin Klein, to name a few. According to industry, analysis, the market for luxury and premium brands in India is estimated at about Rs. 6,000 crore – Rs. 7,000 crore and growing at about 25-30%. However, luxury is still in its nascent stages as only 8-10% of the Indian population in 51 metros to such brands. Overall, organied retailed contributed more than 35% of the entire organised retail market aggregating over $ 60 billion. Many retailers in high branded clothing has started adopting the latest methods of 11 based supply chain management in order to increase in efficiency to cater to the high rising demands of customer as added by Mr. Salman Noorani, managing director, Zodiac Clothing Company Ltd to FE on Saturday December (2009). As part of its supply chain management initiative, Zodiac Clothing Company Ltd., is now in the process of setting up new ILS web-based software at its head office at Worli, Mumbai, soon.With the move, the company, will be able to link its Zodiac headquarter to Zodiac offices, its three factories in Bangalore, one in Gujarat, and, one in Dubai to its design and sales offices in three of the five fashion capitals of the world – New York, London and Dusseldorf. In addition, the connectivity will reach Zodiac‘s distribution centre in Bangalore, and its existing 80 Zodiac retail stores, 300 multi branded outlets as well. The objective behind the move is to shorten the lead time for order processing of Zodiac shirts from the customers end till the Zodiac Design Studio, and, thereby create customer pull based on their needs and preferences. Prior to the move, Zodiac‘s0 overall entities were connected to each other through e-mail. After having acquired the apparel unit of Noida based company called Niriyat Sam Apparels, Zodiac Clothing Company will no move the manufacturing assets to its facilities in Bangalore. This so-called green field project plant is stated to go on52 stream in April 2004 in Bangalore. This will help Zodiac Clothing company to make an entry into the suits market, and, enhance, its trousers manufacturing capacity from a few numbers to about 1100 trouser per day, he explained. Same strategies are been planned by other players in Apparel Retailing segments as in case of Bangalore based Madura Garments.Madura Garments has mega retail plans – To focus on supply chain management, product innovation as narrated by Mr. Boby Kurian on February (2001) in Hindu Business Line‘s‖ The Catalyst‖ The retail presence of Madura Garments is poised to touch 200 urban markets in the country. The branded readymade apparel major has indicated that it may continue the ongoing frenetic expansion in the next financial year as well. The Indian Rayon-acquired Madura Garments is said to have increased its retail trade space in the domestic market by 40 per cent in the current financial year. This would mean approximately 75000 sq.ft. of new retailing space. The company‘s five menswear brands are being sold from about 2500 outlets across the country. Madura‘s retail distribution presence would soon cover 200 urban centres in the country. Industry information suggests that this would give Madura Garments a clear lead in domestic branded apparel retailing Raymond, the nearest competition, has its store appeal in 110 cities. Madura Garments, after its acquisition by Indian Rayon in January 2000, has placed special emphasis on retailing along with sprucing up its supply chain management and product innovation. The company‘s turnover is expected to register a 30-per cent growth in the current financial year and close in the region of Rs. 340 cores. Exports will constitute nearly 10 per cent of the turnover. 53 The company has remained active on the retailing from and has made substantial investments to set up mega shops like Planet Fashion, Trouser Town and Peter England Megastore.Planet Fashion, which is a new branded retailing format for Madura‘s premium fashion brands such as Louis Philippe. Van Heusen and Allen Solly, is operational in Mumbai, Bangalore and Dubai. Madura plans to open its second Planet Fashion store in Dubai towards February and Trouser Town, an exclusive concept store for trouser labels from the Madura stable, is operational in Chennai, Bangalore, Ahmedabad, Mumbai and Pune.Madura‘s turnover from trousers alone in the first half of the current financial year has been pegged at Rs. 7.6 crore as against Rs. 3.6 crore in 1999-2000.Peter England, the largest selling shirt brand in India, is expected to enhance its overseas presence, especially in the Gulf and in the neighboring South Asian markets, through the setting up of Peter England Megastore. Not even apparels but also food retailing has started adopting IT infrastructure to bring further revolution in Retailing as an Industry. Although the organized retail sector accounts for just 3 percent of the Indian retail market, big players are using IT to prepare themselves for global competition, says Shivani Shinde August (2005) in her write up on ―Retail IT Loaded‖. In a recent report by A T Kearney, India displaced Russia as the most attractive destination for overseas mass product and food retailers. One of the bigger factors driving this was a greatly improved investment climate following the relaxation of direct ownership restrictions on foreign retailers (at the time of writing this article, 54 there is opposition from the CPI) According to the report, the country‘s retail market total $ 330 billion, and has grown by 10 percent on average over the past five years. Retail growth is visible everywhere, especially in the metros. Almost every other day we come across a new mall opening or a new food superstore being inaugurated. The report states that global retailers such as Walmart and Tesco are warming up to the favourable FDI rules, and are looking for partnerships with local retailers. With a growing market for hi-tech retail establishments and increasing global competition, India retailers are gearing up for the same with the help of IT. One instance is RFID adoption. Although it has yet to gain patronage among global players, many big retail outlets in India have already piloted this technology. According to a recent survey carried out by IMRB for Express Computer on IT deployment in various verticals, retail is fast realising the importance of IT. The survey pointed out that growing business means bringing in practice that make systems more organised in terms of IT and solve some sector-specific problems. 42 percent of respondents stated that their top IT priority was to redesign or rationalise their IT architecture. They have also started using IT for solving age-old problems and are getting their systems more organised. For instance, one of the biggest problems faced by companies in this sector is keeping track of the supply chain, this helps them check stocks which in turn aids in issues such as pilfering and the shelf life of products. This becomes particularly important after a chain of outlets has been established. 55 In a country that has so many kirana (grocery) shops, how can IT really help ? K.V.S. Seshasai, Head, IT & Corporate Quality, Trent, explains. ―This is precisely why the concept of retail chains is seeing the light of the day.‖ There are outlets within the same geography, and owned by a single family, so members can physically visit each outlet. However, the more recent ones such as Pantaloon and Shoppers‘ Stop have outlets spread across the country due to their technological advancement. According to analysis, chain stores are growing at 22 percent and are expected to overtake other store formats in sales. So as kirana stores start branching out to different locales, the need for IT will be felt.The role of IT in retail comes when one store multiples to become two or three and starts spreading across cities. A few essential IT applications for a chain of stores are a robust pointed-of-sale (POS) system, telecom network for transfer of data, merchandise management systems, financial systems, and at a later stage, a CRM system, Seshasai believes that these systems allow one to take better business decisions based on analysis. Inventory is one of the most critical cost components in retail. As the scale of retail increases, the complexity, of managing inventory boils down to understanding the smaller details of inventory which becomes almost impossible without an IT system. Many agree that IT deployment is based more on the volume of business. Pantaloon is one such case which has been using technology to increase its business. It is in the process of revamping its systems to address the growing demands of customers. The company, is now in the final stages of deploying SAP for its entire retail encompassing the apparel outlet (Pantaloon) and grocery business (Food Bazaar) 56 Along with this, Pantaloon has also introduced some innovative methods to enrich customer experience. One of them is the use of handheld scanners. At some Big Bazaar outlets, employees have been provided with such scanners to reduce the time taken for the customer to check out. ―We found that during special offers and festivals, queues at cash counters tended to be long which resulted in people leaving behind trolley full of unpurchased goods—this was business lost.‖ points out Chinar Deshpande, CIO of the company. The system is now being used in 22 outlets and, according to Deshpande, the advantage include saving time, avoiding queues and gaining business. 2.15 Food and apparel show the way The Indian retail segment has two sectors that are growing rapidly—food and apparel. According to estimates by Cygnus Economic and Business Research, the Indian apparel Industry will grow 4 to 5 percents a year in volume, and 13 percent a year in value.Although the demand for technology in retail is growing, most retailers opt for application and tools from vendors abroad rather than sourcing the same from the domestic market. One of the biggest chains of foodstores, Foodworld, is an example, (Foodworld is run by the RPG group, today the group has 93 outlets of Foodworld, 74 Music World outlets, 3 Spencer Hypermarkets, and 32 Health and Glow stores).Foodworld started in 1996, and right from the beginning had plans of diversifying. Because Indian vendors did not have the required expertise, they bought Norwegian solutions that suited the group‘s supermarket layout. These solutions had features such as cash 57 management, promotition-related details and POS. However, with the growing demands of the business, they realised that they would have to upgrade their systems. Foodworld had a home-made solution on FoxPro which was later changed to a solution offered by Zensar Technologies. This, the company reckons, gave them a solution that is scalable with time. ―We looked at solutions such as SAP, but there was nothing specific to our needs.‖ says Rajatdas Gupta, Head, IT, Foodworld. The other aspect of the retail segment is supply chain management and customer care management. One major pain area for these companies is gathering data from locations across the country and making the same available in real-time. Realising the importance of sales data, investment in IT applications for sales force automation and supply chain management are getting top priority. Sifty, with its Fortum SCM product, has managed to make inroads in the retail space. Chennai based Sri Lakshmi Agro Foods, which produces and supplies pulses to over 30,000 retailers in Tamil Nadu, uses Forum for managing invoicing, debtors, inventory and sales order booking at its head office. This was the company‘s first phase of implementation, in the second phase. Forum has been installed on the sales force‘s laptops. ―We currently run a night shift to manually enter details about orders and collection receipts. There was no escaping the night shift since the next day‘s dispatches had to be scheduled on time‖ says Sudhakar, Director at Sri Lakshmi. This company felt that once the sales force was empowered, it would be able to take order and even issue cheque and cash collection receipts, thus speeding up the whole process. The ideas was that the sales reps could periodically connect to the internet and upload details about the status of cheque and cash collection to the head office. 58 Sri Lakshmi felt that this would do away with one of the biggest bottlenecks in its supply chain. Forum will also be deployed by retail organisations. Inside Trading, which deals in apparel and fashion accessories, is already using it. Says Glenn Trotman, Director at the company. ―We use Forum in six of our retail stores, a warehouse in Hon Kong, and the head office in Delhi. It is used as a PPS tool, to manage inventory, and to communicate with the head office and warehouse.‖ This is one area where technologies such as RFID are also being looked at. Although RFID is still at an evolutionary stage, initiative such as a common barcode have been gaining ground. Recently, some leading manufacturers and retailers came together to launch Global Data synchronisation. This is a Web-based system that will be a data pool service to manufactuerers and suppliers. It will be a database with current information about all products retailed, stock levels, products out-of-stock, overstocking, new product initiatives, changes in products, change in description, product-withdrawals, etc. Abel Correa, Assistant General Manager, Systems, Crossroads, believes that for an efficient supply chain integration of data is necessary. This will involve synchronisation of product code and description, price lists, and to some extent inventory lists. This data needs to be available to suppliers, retailers, logistics providers, and manufacturers. As with all business, after a certain amount of growth there is a need for IT. For consolidating growth, the retail segment in India is also doing the same. 59 2.16 Shoppers don’t stop The Indian retail business is quite different from its international counterpart, both in terms of maturity and volume. States Unni Krishnan T.M.CTO, Shoppers‘ Stop. IT is a critical part of retailing. If one has to effectively manage a large number of outlets, he has to use IT.‖ The organisation has been at the forefront of delivering IT applications to its business with its entire focus being on providing a customer friendly, environment. He explains, ―Recently, when Mumbai was hit by heavy rains, all our outlets were functioning absolutely fine, and as soon as we opened the shutters at Mumbai all our systems were up and ready with the latest data.‖ Indian retail is still at a nascent stage. With the kind of innovation that IT can bring, these outlets are making sure they are fully geared up for any competition—foreign or Indian. 2.17 It essential for growth As with all business, after a certain amount of growth there is a need for IT. For consolidating growth, the retail segment in India is also doing the same. The recently formed Retail Association of India‘s first annual national conference had the theme of IT as an enabler to the retail business. Quality, Design Value drivers for Apparel, Retail Industry now it is contemporary design coupled with quality that‘s determining purchase decisions across some 30 million consumers as coined by Mr. Ratna Bhushan, in his report on ―Quality design value drivers for apparel retail industry‖ January (2003). WHAT‘S common to the 60 Hyundai Santro, LG Televisions, Tanishq jewellery, Hidesign bags and ColorPlus shirts? Certainly not their product profiles or balance sheets. The answer:design.‖ That, more or less, set the tone for the Images Fashion, Forum seminar being held in Mumbai involving some of the country‘s top-notch retailers, apparel marketers and fashion forecasters. Drawing a parallel between brands across diverse categories such as automobiles, consumer electronics, apparel and jewellery, Mr. Arvind Singhal, Chairman, KSA Technopak, threw light on the Indian consumer‘s willingness to now experiment with products with the element of contemporary design. ―The new value drivers for consumers today are quality and contemporary design. While price was the predominant purchase determinant in the pre-1980s, quality coupled with price assumed importance in the mid-1980s. The 1990s witnessed an assortment of quality, range and price. Now it‘s contemporary design coupled with quality that‘s determining purchase decisions across some 30 million Indian consumers, ―he said. What is also favoring the domestic market to warm up to the return and apparel fashion industry, is the current demographic profile. ―The largest number of population in India will be in the 20-44 year age group in the next few years. This profile does not exit even in a huge market such as ―China‖. The downside was that while the market was ready, and the customers were willing to pay, there were not enough suppliers. Very few marketers have pumped in sustained investments and efforts in their business. This needs to change, investments in technology, quality control and training as the required focus areas for the industry. 61 ―Investment in superior and efficient technology, and not fancy buildings, is what the industry needs. Also, manufacturing has to take a leap jump to survive, ―she said. In order to be more efficient in Supply Chain most of the retailer have come up with the software based technology for a better way of handling inventory and one of them is Shopper‘s Stop as Explained by Mr. B.S.Nagesh, CEO, Shopper‘s Stop to Financial Express September (2003). In an attempt to streamline its supply chain. Shopper‘s Stop has begun initiating dialogue with its suppliers for a common barcode for all apparel. In a step towards that the apparel retail convened a meeting last month with its suppliers under the partnership of progress program.Shoppers Stop CEO BS Nagesh told that last month the company met the CEOs of 60 top suppliers as a first step towards arriving at a common barcode for all apparel at Shoppers‘ Stop.We met suppliers under the partnership of progress programme and the agenda was to emphasis the necessity for a common barcode for all apparel to attain more efficiency in supply chain. Though the response was encouraging, it is a long way to go before the initiative is accepted by all the suppliers. Within the next two months, we will be able to get a better picture of where we stand on this. On the larger issue of the retail industry employing integrated supply chain practice, he said a small beginning needs to be made before arriving at common practice for the industry. Shoppers‘ Stop is a lifestyle retail outlet and presently has 13 stores in nine cities across the country. The company plans to be present in 25 cities with around 35-50 stores in the next four years and is aiming for a turnover of Rs. 750-800 crore in the same time frame. 62 The importance of arriving at an efficient supply chain management (SCM) gains impetus from the fact that as retail players grow their operations all over the country. SC, would be one of the most important determinants of success in the competitive retail landscape as proper practices would mean cost savings leading to better margin and efficient customer service through better lead time. Fitch Ratings director R Jayakumar said cost savings can be achieved the supply chain largely by cutting inventory by lowering the turnaround time. ―Proper SCM also ensures availability of the right type of product at the right time in a store, which would result in increased sales. Retail companies have to walk a thin line between keeping their stock at the optimum level (due to space constraints and inventory costs) and ensuring higher sales. In fact Fitch Ratings, in its India-retailing special report said players still lag behind in adopting efficient supply chain practices. ―While a part of this has been on account of lack of proper infrastructure, a large part is also due to the basic inertia and haphazard initiatives taken by the company,‖ the report states.On this, Mr.Nagesh admitted that the players still have to realise the enormous benefits which one can accrue if proper supply chain practices are in place.―There is still lack of common understanding between retailer, distributor and manufacturer. It can happen through sharing of information and data, which enables each participant in the entire supply chain to manage inventory efficiently. Citing an example of packets of shirts, Mr. Nagesh said by the time the shirts reach the retailer and is sold, the packet is discarded, which leads to loss. ―Let‘s say the 63 packets cost Rs. 10 when they are discarded they are sold for 40 paise. This means the customer has to incur the additional burden because of the cost incurred due to packaging. So one has to arrive at efficient supply chain practices to ensure such things are avoided. Technology and innovation seem to be the only saviours for the highly competitive Indian retail industry as it now faces up to global competition as mentioned by Varun Aggarwal in his Article on ―Retail Hardware‖ (2009). The Indian organised retail segment is seeing companies like Globus, Pantaloon and Reliance gearing up to fend off the challenge of foreign players who are poised to enter the Indian market. However, it is not going to be that easy for Indian retailers to handle the competition. Indian companies, need a sound infrastructure something that foreign companies already possess. Today, a shopper needs much more than just a wide range of products. He needs convenience and quick cash out all at a competitive price. Technology plays an important role in overcoming such hurdles. Cost savings through technology can help garner a competitive price for a retail vendor. 2.18 At the point of sale Instead of a PC or cash register, a growing number of Point of Sale (POS) solutions take advantage of a colour touch screen at the sales counter. Many POS systems connect to in-store computer that, in turn, link to computers at the company‘s headquarters. With well-designed software, touch screen can provide a simple, easyto-use mechanism for cashiers to handle just about any transactions—reducing training while improving productivity and customer service. Touch screens are 64 popular in the hospitality and convenience store industries and are rapidly gaining acceptance in other retail markets. Some businesses choose to combine other options with a touch screen POS. For example, full motion video and integrated stereo speakers (or optional headphones) provide a multi-media platform that allows these workstations to do double duty as Web-or computer based training during non-business hours. Add a swivel base and your associates will be able to use a workstation to review services or products with customers. Bar code scanners enable you to collect detailed data regarding products that your customers purchase—information that is useful for inventory management, merchandising and marketing decisions. Successful retailers use this information in data warehousing applications to fine-tune store assortments and help assure that consumers find the products that they want on the shelves, when they shop. A quality scanner that reads bar codes on the first try will speed checkout and lead to cashiers who are more comfortable and less frustrated. A pleasant cashier will transfer this positive energy to customers. On the customer side of the counter, most POS workstations are available with a choice of customer displays, ranging from simple one or two line read outs to full colour screen that display. Web-based colour graphics. The latter devices allow your customers to learn more about your store, merchandise, or special promotions while they view details of their transaction. 65 Electronic payment peripherals enable you to readily and efficiently handle credit and debit card transaction. Among these are terminals that not only process electronic payment but also capture signature electronically. A signature capture terminal incorporate a credit / debit card reader, provides means to enter a PIN number, and includes a display for other customer input (e.g. for market surveys and graphicsbased advertising). Retail POS printers, especially thermal printers, deliver fast, quiet printing of receipts and paper forms at the point of service. A quality thermal printer can have a positive impact on store productivity through intelligent design and operator-friendly features. Because of their speed, thermal printers can produce a record of most transactions in a fraction of a second. This makes it possible to add information and graphics, such as a company‘s logo, to the customer receipt, or to print multiple receipts for credit authorisation for coupons, rebate offers or gift receipts, without adding to the transaction time. 2.19 Networking and Security With standalone networking systems, retailers run the risk of not getting information quickly enough. Problems such lack of visibility into inventory, weaker relationships with partners, poor forecasting, lost sales opportunities, or inconsistent customer service can materialize. Globus understood this and implemented VPN. According to Meheriar Patel, DGM & Head IT, Globus stores Pvt.Ltd., ―We are using LAN and WAN setup connected by MPLS, VPN. All our stores are connected through RF VPN.‖ 66 Many retailers lack instant lines of communication between workers, customers, managers, vendor partners and stores. This shortage of real time information exchange often comprises service, inventory, policy changes, and management decision making. A solution that maximise responsiveness by offering full networking of data, voice, and video communications is essential. This can include mobile communications, providing information access to workers at every level, from stockroom to store to executive offices. Retailers still often rely on older processes that increase operational costs and lowest productivity such as outdated point-of-sale systems and technologies, ineffective employee-management and training practices, or outdated inventory management and partner policies. The hurdles can be overcome using products from vendors such as Cisco that improve store operations and productivity with offering in mobile and telephony communications, collaborative technologies. In-store broadcasting and training and integration with inventory management and supply chain applications. Many retailers have set up data centers. Raymond has a data centre at Thane at its HO. According to Anil Arora, Sr. Manager, IT, Raymond Limited. ―The stores are not interconnected but they are connected through a bulletin board which is a collaboration Web Site, where the stores exchange information.‖ The company also has a DR site to ensure business continuity. This site is also located at the HO. Though security solutions such as IP surveillance and automation remain a pipedream, most retailers take other measures to ensure a secure network. For instance, Globus, uses a SonicWALL 4060 UTM box, which works as firewall, content filter-device, gateway antivirus, IPSee VPN appliance, spam filter. Intrusion 67 prevention system, antispyware etc. Pantaloon on the other hand chose to deploy Fortinet‘s FG500A after an intensive evaluation process. The device allows unified capabilities and is easy to manage and monitor. It is used at the perimeter‖ said Vishak Raman, Country Manager, India, Fortune. 2.20 RFID for inventory control In the retail industry, RFID assists in inventory control. All stocked items in a retail outlet sport an inexpensive read-only tag that stores the product code and its description, including the manufacturer, brand, batch number, expiry date and price. The shelves, exit gates and warehouses are fitted with a small antenna that senses the RFID tag and read the information on it to update the inventory system in real-time. The benefits of such a system are that it provides for total asset visibility, full inventory history with tracking and reduced inventory stocking levels that facilities just-in-time deliveries. It also ensures better process control for products in the facility, reduced shelf space and lead-time that shorten across docking time, higherlevel security, fewer errors and better visibility of goods. In warehouses and container depots, pallets and containers are market with read-write RFID chips that contain details of origin, destination and other material details. Entry and exit gates, vehicles and cranes are fitted with an antenna that senses the RFID tags and records and updates the system to check for any deviation in the schedule. With precise tracking of the location of pallets and containers within the warehouse, it is easy to pinpoint unscheduled movements. The system also considerably helps reduce costs and time for check in and check out. 68 While Globus has already begun testing RFID, Madura Garments has implemented the technology at its newly opened retail store. Planet Fashion in Bangalore RFID tags help automate dispatches from one factory and inventory at the warehouse. Pantaloon Retail (India) has piloted an RFID project at one its warehouses in Tarapur using a thousand RFID tags. The company is starting by implementing the technology at its warehouse. It has selected a few lines of apparel, primarily shirts and trousers, for the RFID pilot. The RFID application developed by Wipro Infotech fits to the overall solution in line with Pantaloon‘s business processes and IT landscape (from the factory outward to the warehouse inward and from life warehouse outward) in order to capture real-time data. The application integrates with Oracle database 10g and middleware along with an implementation of the RFID hardware. It integrates with the existing IT infrastructure, the in-house developed Retail Enterprise Manager. The primary objectives are a smoother product lifecycle and item-level tagging for identification. The pilot was also an opportunity to do a feasibility study regarding additional uses for RFID. 2.21 Other technologies An interesting technology deployed at HyperCITY is the I-Scan (Symbol Technologies-New York) that allows the customer to scan merchandise as they pick products off-the-shelf, thus saving them significant amount of shopping time. Once he finishes shopping, the customer can hand the device over to the customer service desk and cash-out quickly. 69 The I-Scan hardware supports applications such as inventory scanning, price check, self-check, self-check-out PoS and Warehousing receiving.The rising scale of organised retail distribution network and increasing competition will force players to focus on restructuring the whole supply chain to improve productivity and provide a better deal to customers, says Chetan Ahya in his commentary on the retail supply chain Revolution in (2006) Even as the government continues to delay the decision to allow FD in multi-product retail chains, the fast-emerging Indian retail sector is becoming widely recognized amongst domestic entrepreneurs and investors as one of the biggest opportunities in India. Apart from existing players (such as Pantaloon) ramping up their retail chain store operations, many large business groups, including Reliance Industries, Birla group, and Tata group have announced their intention to cumulatively invest over $10 billion over the next five years to capture a share in the fast growing pie of the organised retail sector. In addition, various foreign players like Wal-Mart are entering the market via a joint venture with a domestic Indian player. We estimate that India‘s organised retail market is likely to grow from the current $4 billion (2.1% of total relevant consumer spending to $64 billion (10.8%) by FY2015. In the first phase of the retail revolution, the focus of entrepreneur has been largely on capturing the consumers attention and providing them with a new shopping experience. However, the retail revolution is not just about the new shopping ambience. Going forward, the rising scale of organised retail distribution network and increasing competition will force players to focus on restructuring the whole supply chain to improve productivity and provide a better deal to customers. The retail 70 revolution will restructure the economy‘s two lagging segments including agriculture and manufacturing by small and medium scale enterprises. For the first time since India initiated its liberalisation programme in 1991, there is now a potential for reforming these two important sectors of the economy, which can increase productive job opportunities for the middle class. The agriculture related supply chain segment suffer from maximum inefficiency. Cumulative wastage in this supply chain is estimated to be about $11 billion, or 9.8% of agriculture component of GDP. Over the years, owing to government intervention in the input and output pricing, there has been little incentive for farmers to improve efficiency. Moreover, in the past few years, public investment in agricultural as a percentage of GDP has also been gradually declining. The archaic infrastructure for reaching the agricultural produce from farm-gate to consumers has meant huge losses in transit and large markups in pricing due to extra layers of intermediation. However, the outlook, for the agricultural sector is finally turning around. Thirteen states and three UTs have amended the laws allowing private sector participation in direct purchases of farm produce. The rise in presence of the organized retail sector will accelerate reform in the agriculture. Farmers will be incentives to adopt improved management techniques to increase efficiency, better quality output and also provide the needed variety to consumers. Increased commercial opportunity should attract the private sector in agriculture logistics management, reducing the number of intermediaries. The plans announced by some of the likely large retail players reflect the potential food-chain restructuring that could take place. 71 Similarly, SME manufacturing which accounts for 13% of GDP ($104 billion), will get also major demand boost and also face pressure to increase efficiency. Two major segments in the small and medium scale manufacturing sector that could get a boost from the emergence of the retail chain stores are textiles & clothing and food processing industries. Indeed, we believe the emergence of organized retailing will bring about a transcending impact on macro by way of accelerating productivity growth and lower inflation, increased export competitiveness, and higher productive job opportunities. The risk is that political parties get overly concerned by the adverse impact on the welfare of a specific segment of the population dependent on momand-pop shops versus the overall big picture positive impact on the lower middle income group. The sensitivity of the retail sector restructuring on the lower middle class is very high. The retail and wholesale trade sector contributes to 13% of GDP and employs about 40 million people (9% of workforce). A majority of mom and pop shops are very small in size (below 50 sq.ft.) and are being used as a last resort job opportunity by many of the low skilled working age population. In the medium term, as the reach of chain stores increases, some adverse impact on mom-and-pop shops in inevitable. However, opposition to evolvement of organised sector retail chain stores is no less legitimate than opposition to removal of protection provided to many sectors in the early 1990s liberalisation programme. Restructuring of an economy that is still at a developing stage in today‘s globalising, competitive world is inevitable. 72 The issue of employment should not only be assessed from the perspective of welfare of the specific of lower middle income group (LMIG) population dependent on momand-pop shops but also from the welfare of the overall LMIG population. Although the specific section of LMIG already employed in mom-and-pop shops may be adversely affected the emergence of the organised retail sector will create new jobs for a different section of lower middle class in low and modern retailing distribution, small-scale manufacturing packaging infrastructure and transport sector. Moreover, LMIG population also stands to gain from the higher productivity (in the form of lower inflation) benefit that the organised retail sector offers. The quality of employment will also see a vast improvement as larger institution will be able to provide better social security, training and growth opportunities. Indeed, increased organised sector activity should help increase aggregate tax to GDP that would allow the government to initiate measure for direct intervention for reducing the adverse impact on any specific section of the population. To be sure, the political class needs to respond to the emergence of modern retailing but not by restraining its growth but by enabling this transition by initiating constructive measures.The role of supply chain in Indian organized retail is very significant for on it depends the growth of this sector. The Indian Supply Chain Council have been formed to explore the challenges that a retailer faces and to find possible solutions for India. According to Mr. Shivani Parasad (2009). The role of supply chain in the organized retail sector in India should be a shelf-centric partnership between the retailer and the 73 manufacture for this will create supply chains that are loss free. This will also give rise to top and bottom line growth. In the organized retail sector in India the presence of fresh produce (vegetables and fruits) is very small. This is so for the nature of supply chain is very fragmented. This shows the important role of supply chain in the organized retail sector in India. In the organized retail market in India, the role of supply chain is very important for the Indian customer demands at affordable prices a variety of product mix. It is the supply chain that ensures to the customer in all the various offering that a company decides for its customers, be it cost, service, or the quickness in responding to ever changing tastes of the customer. The infrastructure in India in terms of road, rail, and air links are not sufficient. And so warehousing plays a major role as an aspect of supply chain operations. To overcome these problems, the Indian retailer is trying to reduce transportation costs and is investing in logistics through partnership or directly. The Indian organized retail sector is growing so the role of supply chain becomes all the more important. It should become all the more responsive and adaptive to customers demand. There is also need for the supply chain to be more cost efficient and collaborative to win the immense competition in this sector.The role of supply chain in Indians organized retail has expanded over the years with the boom in this industry. The growth of the Indian retail industry to a large extent depends on supply chain, so efforts must be made by the Indian retailer to maintain it properly. A retail revolution is happening in the country. For global giants looking at newer markets, India presents exciting opportunities on account of its vast middle class and a virtually untapped retail industry, Explains Ms. Savitha in her article on ―Role of 74 Supply Chin in Indian Organized Retail Sector.‖ on April (2010).The Indian retail sector has seen unprecedented growth in the last few years. The KPMG report, Consumer Markets in India the next big thing has predicted that the organized retail sector is expected to grow at rate higher than GDP growth in the next five years. The AT Kearney‘s 2006 Global Retail Development Index position India as a leading destination for retail investment. The success in this competitive and dynamic sector depends on achieving an efficient logistics and supply chain, which can be provided by professionals, as they combine the best systems and expertise to manage a ready flow of goods and services. The retail boom promises to give an impetus to a host of allied sectors and the logistics industry, as the backbone of the retail sector, stands to gain the maximum. In India, the logistics market is mainly thought to mean transportation. But the major elements of logistics cost for industries include transportation, warehousing, inventory management, courier and other valued added services such as packaging. The logistics costs account for 13 per cent of GDP. The industry is currently on an upswing and is posed for a growth of 20 per cent in the coming years.With the expansion of retail, supply chain will take on an increasingly important role. With the end consumer becoming more demanding and time conscious, the need for just-intime services is increasing. In retail, where competition is intense and stakes are high, customer satisfaction is paramount. Logistics firms have also started focusing on related services such as Customs clearing and forwarding. Inbound warehousing labeling and packaging, fleet management, order picking and inventory management. 75 2.21 Effective SCM enables: 2.21.1 Realistic ordering lead-times: Suppliers are not surprised by the next order. Retailers respond better to demand spikes, minimize forced markdowns and avoid obsolete-inventory costs. 2.21.2 Averting problems : Stores easily identify potential stock-outs and request replenishment before the inventory drops to zero. Deciding to de-list or replace a product is easier. 2.21.3 Facilitating resource planning and allocation: Product forecasts and supply schedules are easily converted to perform space planning, establish staffing needs and organise inbound / outbound shipments. Financial experts can plan cash flow and analyse margins into the future. 2.21.4 Four R’s of SCM Follow the 4 R‘s of SCM-Right time, Right place, Right price, Right quantity to reap the advantages of the key players in the logistics industry are gearing up to meet the challenges by initiating both organic and inorganic growth to leverage the retail opportunity. Logistics firms have also started focusing on related services such as Customs clearing and forwarding. Inbound warehousing labeling and packaging, fleet management, order picking and inventory management. 76 Everyday, best-in-class retailer all over the world are using 12‘s retail software solution to power strategies that enable a superior, differentiated customer shopping experience, supply chain efficiency, and revenue growth. 12‘s retail solutions are scalable, designed to wrap around a retailers unique business process, and are modularized to enable sensible and rapid implementation. With 12‘s retail solutions, retailers can: Rapidly execute an advanced planning process that enables a differentiated superior shopping experience, customized to the store level and capable of enabling course corrections in-season, while simultaneously driving inventory productivity. Optimize the structure of the supply chain to support global sourcing and lean supply chain strategies, and also execute these strategies in the most cost efficient manner in order to protect and grow margins. Rapidly, and cost effectively, implement and change planning and supply chain business processes that span organizations both inside and outside the four walls of the enterprise in order to stay ahead of the competition. Booming economy, favourable demographic patterns, increasing per capita income and organization gave rise to a new sector in India. Organized Retail. Opening up of retail sector for FDI can be considered as the prime reason behind the blooming organized retail sector. Sensing this opportunity several companies ventured into this sector, including Reliance, Bharti and Pantaloons. As described by Ms. Geetika Sharma in her article on Organized – Retail Challenges ahead for India‘s Organized Retail on Friday December (2009). 77 Despite the Government allowing only 51% of FDI in single format retail segment global retail grants like Tesco, Wal-Mart and Metro AG are making inroads indirectly through franchise agreements and cash and carry wholesale trading thus giving some serious competition to domestic retailers. Nevertheless, growth opportunity in this sector can be judged by the fact that only 3% of the total retail sector is organized and 97% of the sector still consists of total mom and pop stores. Unfortunately, the growth strategy used by all organized retail players of increasing their number of stores backfired when rentals dramatically shot up following the global economic melt down. Profitability is seriously hampered and almost all major retailers are not struggling to maintain their bottom line. Average operating profit margin declined from 9.5% in 2007 to 7.9% in 2008. The worst part is that such a drastic growth in the number of stores was backed by significant leverage which is expected to further hurt these organized retailers liquidity and profitability levels. Retailers are correcting their over enthusiastic strategies of the past and focusing on improving their business model. This section will review some of the challenges these organized retailers are facing on both marco as well as local levels. 2.21.5 Aggressive Expansion Over the last few years indian retalers most preferred mode of expansion was to increase their number of outlets across metros. Outlets were built wherever real estate was available and not where they were actually required, which led to ―Clustering‖ Following credit crunch in 2008, several outlets were cast strapped and had to be closed down simply because they were operating in unfeasible locations/ 78 2.21.6 Food Supply Chain Management One of the major challenges for retailers is to reduce shrinkage which includes shortweighing, pilferage and poor product handling. While the average shrinking percentage of inventory in developed countries is 1% to 2% of Cost of Goods Sold, it is estimated to be much higher for Indian retailers, primarily due to the lack of focus on supply chain management. The existing supply chain is not devoid of inherent weakness of India‘s infrastructure, besides being corrupted along the entire chain. Tracing shrinkage is a Hercules task as almost all the transactions still continue to be based on paper system. This gives rise to the need of third party logistics organizations that can provide services at competitive prices. Third party logistics is a concept still absent from the Indian retailers‘ value chain. A large part of shrinkage takes place within the retailer by its employees. Moreover, tracking an employee‘s track record and background check is difficult. Retailers are now joining hands to fight this battle by creating a database of employees and share it amongst themselves to avoid shrinkage from within. 2.21.7 Employee training and retention The most common strategy applied by retailers to keep labor cost at minimum was to employ fresh graduates with no experience in retail sector. They have now realized that in difficult market situation, experienced and talented employees that have sound understanding of ground realities could give retailers a competitive advantage. 79 Despite a downturn, need for skilled manpower still continues to be a major concern across the sector. 2.21.8 Managing working capital One of the most important factors affecting a retailer‘s profitability is the way it handles its working capital. Lower footfalls, resulting into lower sales has directly impacted Indians retailers working capital position. Discounting is now the most common technique used to turn slow moving inventory.Besides lower footfalls, another factor which is hurting retailers, liquidity position is the significant amount of leverage they are carrying which was used earlier for aggressive expansion. Banks are now reluctant to finance retailer given the falling demand and plummeting profitability. Retailers are therefore finding it difficult to finance their working capital requirements. 2.21.9 Diversifying into untapped rural areas Experts believe that the next phase of growth for organized retail sector will come from rural areas that account for half of the $300 billion domestic retail market. Retailers will have to focus on the previously untapped lower income strata by providing them access to credit facilities. On the back of sourcing commodity prices and improving productivity, rural economy is set to boom in the next decade. To improve rural economy, Indian Government approved Contract farming and Leasing. this will bring about technology transfer, increase capital inflow and assure market for crop production, 80 2.21.10 Backward Integration One way to improve efficiency and profitability is to remove unwanted intermediaries which eat into the already margins. To improve rural economy, Indian Government approved Contract farming and Leasing. According to KPMG, this will bring about technology transfer, increase capital inflow and assure market for crop production, besides eliminating intermediaries. Pepsico and ITC‘s E-chaupal are already benefiting from contract farming in Northern India. Despite the above mentioned challenges, long term prospects of organized retailers are still very attractive. Important consolidations and partnerships can be expected soon for improving operating and cost efficiency. Focusing on supply chain management and partnering seem to be the need for any hour for organized retailers so as to leverage their expertise and financial muscle.There is a famous saying by Stephen R. Covey in ―The 7 habits of highly effective people‖ that Interdependence is higher Value than Independence. Standing on the threshold of a retail revolution and witnessing a fast changing retail landscape, the retail sector is poised for a big leap. As Explained by Mr. Vijay Prakash Anand in his review on ―Supply Chain and Logistics Management Key to Success in Retailing on December (2007)‖, Currently retail sector in India accounts for Rs. 55,000 crore ($12.4 billion) business at current prices in the calendar year 2006, increasing its share to 4.6% of the total Indian Retail Value that stood at Rs. 12,00,000 crore ($270 billion). With the potential of crossing Rs. 2,00,000 croe ($45 billion) business by the Year 2010, generating employment for some 2.5 million people in various retail operations and over 10 million additional 81 workforce in retail support activities including contract production & processing, supply chain & logistics, retail real estate development & management etc; the retail sector is growing at a scorching pace of about 37 percent in 2007 and expected to grow by 42 per cent in 2008. With the enormous growth, the retail sector is also facing challenges on the fronts of escalating real estate cost, scarcity of skilled workforce and structured supply of merchandise. 2.21.11 Importance of Supply Chain and Logistics Management One of the most important challenge in organized retail in India is faced by poor supply chain and logistics management. The importance can be understood by the fact that the logistics management cost component in India is as high as 7%-10% against the global average of 4% -5% of the total retail price. Therefore, the margins in the retail sector can be improved by 3% -5% by just improving the supply chain and logistics management. In India, with demand for end-to-end logistics solutions far outstripping supply, the logistics market for organised retail is pegged at $50 million and is growing at 16%. It is expected to reach $120-$130 million by 2010. Organised retail on the other hand is growing at 400% and is expected to reach around $30 billion by 2010. Even supply chain and logistics firms like Hong Kong based Heng Tai Consumables and ABS Procurements Co and ACM China (the greenhouse specialist) is also eying the opportunity for managing the supplies. 82 The supply chain management is logistics aspect of a value delivery chain. It comprises all of the parties that participate in the retail logistics process. Manufacturers, Wholesalers. Third Party specialists like Shippers. Order Fulfillment House etc. and the Retailer. Here, logistics is the total process of planning, implementing and coordinating the physical movement of merchandise from manufacturer to retailer to customer in the timeliest, effective and cost efficient manner possible. Logistics regards order processing and fulfillment transportation, warehousing, customer service and inventory management as interdependent functions in the value delivery chain. It overseas inventory management decisions as items travel through a retail supply chain. If a logistics system works well, the retail firm reduces stock outs, hold down inventories and improve customer service – all at the same time. Logistics and Supply Chain enable an organized retailer to move or store products more effectively. Efficient logistics managment not only prevents needless movement of goods, vehicle transferring products back and forth, but also free up storage space for more productive use.The efficiency and effectiveness of supply, chain, and logistics management, can also be understood by the fact retail store maintain lower inventories than traditional retail in India, generally in the traditional kirana stores, three weeks inventories are kept, while in a modern retail store like Hypercity, it‘s nine days and it‘s under two weeks for Food Baaar. Now, it is beneficial for both the manufacturer as well as the retailer. If we go through the following food supply chain in India, we find that a lot can be improved by maintaining the supply chain and logistics. 83 Organised retail in India is still struggling to find sustainable and profitable business models for most of the formats it has experimental with. This is been noticed by the writer who is the managing director of Interim Business Associate in his Article on Organized Retail: Failure of Human Supply Chain, on April(2010), A survey of most public pronouncements of the retail players and their advisors, which are many, list four areas that they say they are addressing to improve their performance. These are : a) Better merchandise mix b) Improved customer programmes. c) Better sourcing d) Cost control in all aspects of operations. No doubt, improving these areas will have some impact on business performance, but these miss out the core issue that is dogging Indian organised retail-the dismal failure of the ―human supply chain‖. To understand the concept of the ―human supply chain‖, let us look at the traditional retail. For any category of products, whether grocery, apparel, furniture or even durables, the supply chain from base raw material to the product on the shelve passes through many hands. Purists have lamented the multiple intermediaries and have suggested that disintermediation of the middle men will add value to the whole supply chain. What they fail to recognize is that each intermediary is in fact a decision centre who optimizes the use of the key resources material, money, message and men. The much reviled arhtiya, in fact, is a critical bridge between the farm and the wholesaler. The arhtiya has the right skill set to buy very small quantities compared to global norms and aggregate them appropriately for the right market. When 84 organized retail sets up its direct sourcing, its human chain just doesn‘t have these skills. Similarly, if we look at the wholesaler, he takes many critical supplies and price calls, which stabilize markets and optimize availability, at retail. The distribution centers set up by organized retail to replace the wholesaler are not designed to be either decision centers or even entrepreneurial. The human supply chain this gets broken. As a consequence, retail finds that its skills to respond to day-to-day needs are just not there. And it tries to replace it with expensive IT systems and more centralized controls. But without the human skill managing the supply chain, risks rise and failures are high at each point in the supply chain. Even at the front end, a large amount of effort and money is invested in physical hardware. In an experiment, we did with one retailer in the furniture category, one store manager was shifted among three locations ranging from a 5000 ft format to a 400 ft. store, from good locations to bad and with investments in ambience improvements put on hold (some shops didn‘t even have air-conditioners). Wherever he went, sales increased by a factor of three-four times within four months. The difference was that he had the skill to sell trust, not products. Another way to look at successful retail is to see everyone in the chain as both a ‗strategic‘ and a ‗tactical‘ decision maker on a daily basis. This is very different from the manufacturing model. Very factical decision makers are the operations people and strategic calls are taken less often by a different set of people. 85 If the right human supply chain is so crucial getting the retail process right, it is a surprise how little attention is paid to it by retailers. They will do well by developing evidence based competency maps staffing for them and only then rolling out the physical stores. A well implemented human supply chain will deliver all the elements of success, namely leadership in catchment areas, repeat business and responsive merchandise at a lower per unit cost. Although the organized Retailing in India has brought a revolution in Retailing an Industry but at the same time it is diffcult for Indian People to cope up with the Increased competition in a job marker in retailing which requires a skilled base techniques to bring in more efficiency. On October 10, retail protested in Mumbai against organised retail. The reason? Outlets of organised retail are proliferating in India, rendering four crores of people jobless. Their arguments is not based on facts. There is space for all. As described by Mr.Ravi Kant in his critique on ―The Hue and Cry against Organized Retail in Unfair‖ in October (2010). The Argument of the retail traders that proliferation of outlets of organised retail will lead to elimination of the community of retail traders is not plausible. There is enough space in retail trade to accommodate the small traders as well as organised retail.‖ Allowing large corporate, Indians or foreign, into retail can by no stretch of imagination lead to 4 million people losing their livelihood. A decade back, people would get their shirts and trousers stitched by the tailor in their neighborhood. Buying ready-made shirts and trousers was deemed a luxury. Nowadays, in metros 86 and large cities, one seldom comes across people who get their shirts and trousers stitched by the tailor. In a decade, people‘s preference has switched to ready-made shirts and trousers. Did the community of tailors raise a hue and cry when people switched over to ready-made shirts and trousers? No, they did not. What became of the tailors then? Are they on the streets? Nothing of the sort happened. Their services are being made use of by large ready-made garment manufacturers like Raymonds. The middlemen will not be affected if they forego a part of their huge profit, provide improved services and ensured embellishments like interior decoration. The following will convince one and all that these retail traders can survive even if outlets of organised retail proliferate. 1. Locational disadvantage of organised retail: Outlets of organised retail cannot be opened in congested residential areas of each colony because they need huge floor space for stocking as well as parking. The retail trader does not face this problem, they can operate from every building / society. To reach a Pantaloon outlet or Reliance outlet, one has to drive at least 2-3 Km and given the ever rising petrol prices, it makes business sense for the customer to forego the 3-5% discount that organised retail offers because the additional petrol consumed offsets the said discount. 2. One-to-one relation: Another weakness of organised retail is its inability to establish a personal rapport with its customers. Big ticket purchases and small ticket purchases evince the same kind of impersonal and perfunctory greetings from the counter staff. At best the customer may get some membership card, which will prompt them to buy more, but the human gesture that coveys you 87 are important to my shop‖ is missing. The small retailers on the other hand, are ideally placed to exploit this weakness of the customers and flourish. Personal rapport attracts many customers. 3. Improved services : Petty shop owners act the financiers / banks of the salaries class. They offer credit to these people without any documentation. The middle class is a permanent feature in the Indian milieu. It is at least30-crore strong, which is much larger than the population of several countries in Europe and more or less equal to the population of USA! Even the so-called credit cards do not boast of the kind of penetration that the Indian retail trading community boasts of Besides. RBI may place some restrictions on issue of credit cards or other credit card related aspects which may curtail the growth of credit cards. But RBI cannot restrict retail traders from lending to their customers since they do not come under the purview of the organised sector. By offering free home delivery, prompt service, etc. these small shops can definitely prosper. Due to improved supply chain management, organised retail will benefit both the original producers (farmers etc.) and the end users. The producers / growers / farmers get remunerative prices whereas the end-users / customers get discounts and other privileges. Government should think of opening up organised retail to foreign investors also, experience worldwide shows that the retail movement benefits everybody barring an insignificant minority. Our competititors opened by the retail sector to foreign investors way back in 2004 in line with their commitment to the World Trade 88 Organization (WTO). The opening up of the retail sector to foreign investors will expose large industrial houses like Reliance to competition and the customer will be benefited in the bargain. By opening up the retail sector to foreign investment and following other similar proactive measures. China has become the factory of the world. Large retailers have been operating in China for some time and we have not witnessed any protest there after the entry of Wall-Mart or Carrefour. After all, the population of China is much more than that of India and certainly China‘s retail trading community will be much larger than India‘s organised retail today accounts for less than 5% of India‘s retail business, but is bound to grow, forcing choices on the government, and upon itself. According to Mr. K.Sudhir, in his Article on ―Road Ahead for Organized Retail March (2007). China‘s experience and those of other Asian countries that recently modernized their retail sector can provide valuable insight on what choices make sense.Serving local consumer tastes in China with over 1.3 billion people poses a similar challenge in india, with its billion people. Chinese regulations, at both the central and local levels, had created confusion and difficulty for retailer trying to open new businesses or acquire established ones. India‘s regulatory patchwork frequently impedes the efficient flow of products and needs to be coordinated across states and local jurisdictions. Finally, the Chinese transportation infrastructure varies across the country‘s vast expanse. They are modern and highly efficient, especially in urban and coastal areas, and organised retail is most successful here. 89 India needs better transportation and cold-chain supply chain infrastructure across the country. Loosening foreign entry into the retail sector should be based on a strategic quid pro quo, the profit potential of India‘s large retail market for retail operations knowhow and investment that are critical to modernising and improving the efficiency of Indian retail. India is already following China‘s example initially encouraging joint ventures between domestic and foreign retailers before allowing 100% FDI in organised multi brand retail. This gradual opening up should preserve a vibrant domestic retail sector in the long term, and provide India with a solid foundation of domestic expertise and human capital. For long term success, organised retailers should pursue a few key strategies. First, build capabilities and backend logistics infrastructure. Domestic firms should partner with established foreign firms to capitalise on combining foreign retail knowhow with domestic market knowledge. This is happening already. UK-based Tesco is working with the Tatas, US-based Wal-Mart with Bharti, etc. Over time, these joint ventures will dissolve but both the domestic and foreign firms will have the capabilities to establish successful retail business independently. While the government is rapidly investing in transportation infrastructure, organised retailers should either invest in their own supply chain. infrastructure or promote intermediaries that develop and invest in cutting edge supply chain infrastructure.Second, learn local and regional preferences in developing the merchandising mix. One size fits all is not a winning strategy, as Subhiksha, till recently one of India‘s retail success stories, learnt the hard way through bankruptcy 90 when it expanded rapidly into the north from its south Indian roots with little local market knowledge. Merchandising correctly in a diverse country such as India takes time, trial and error, and is critical for success. Third, to deal with the kirana challenge, organised retailers should actively engage customers and local political leaders, to demonstrate the value of their enterprise, especially in the context of political challenges from kirana lobbyists. For example, Bharti has created a retail academy to train thousands of people in Punjab. Creating thousands of jobs over time develops political constituency of employees. But the kirana challenge is not just political, it is also competitive, Given the high customer loyalty to these micro-local outlets, helping kirana become more efficient while allowing them to effectively serve their clients can be both politically expedient and profitable. One way to address this situation is for organised retailers to engage in co-opetition to make customers out of their smaller retail rivals. We already see this taking form in India with cash and carry stores that essentially serve as wholesalers to kiranas and other local establishments, as well as to individual shoppers, Tesco Tata, Bharti Wal Mart and Metro have all created cash and carry formats In fact, the government has recognised the political benefits of co-opetition by allowing 100% FDI in the cash and carry format. Foreign retailers that have positive experience with domestic suppliers sourcing for the Indian market are also likely to source from Indian suppliers for their global operations. Consider this, if a $300-billion American behemoth like Wal-Mart 91 sourced even 10% of its products from India, the potential for Indian farmers and manufacturers is huge. The export potential may even dwarf the direct benefits from organised retail. Booming economy, favourable demographic patterns, increasing per capita income and urbaniation gave rise to a new sector in India Organized Retail Opening up of retail sector for FDI can be considered as the prime reason behind the blooming organized retail sector. As Explained by Ms.Geetika Sharma in the Article on ―Organized Retail – Challenge Ahead For India‘s Organized Retailer‖ in November (2009). Sensing this opportunity several companies ventured into this sector, including Reliance, Bharti and Pantaloons. Despite the Government allowing only 51% of FDI in single format retail segment, global retail giants like Tesco, Wal-Mart and Metro AG are making inroads indirectly through franchise agreements and cash and carry wholesale trading, thus giving some serious competition to domestic retailers. Nevertheless, growth opportunity in this sector can be judged by the fact that only 3% of the total retail sector is organized and 97% of the sector still consists of local mom and pop stores. Unfortunately, the growth strategy, used by all organized retail players of increasing their number of stores backfired when rentals dramatically shot up following the global economic melt down. Profitability is seriously hampered and almost all major retailers are now struggling to maintain their bottom line. Average operating profit margin declined from 9.5% in 2007 to 7.9% in 2008. The worst part is that such a drastic growth in the number of stores was backed by significant leverage which is expected to further hurt these organized retailers liquidity and profitability levels. 92 Retailers are correcting their over enthusiastic strategies of the past and focusing on improving their business model. This section will review some of the challenges these organized retailers are facing on both macro as well as local levels. 2.21.12 Aggressive Expansion Over the last few years Indian retailers most preferred mode of expansion was to increase their number of outlets across metros. Outlets were built wherever retail estate was available and not where they were actually required, which led to ‗Clustering‘. Following credit crunch in 2008, several outlets were cast strapped and had to be closed down simply because they were operating in unfeasible locations. 2.21.13 Four Supply Chain Management One of the major challenges for retailers is to reduce shrinkage which includes shortweighing, pilferage and poor, product handling. While the average shrinking percentage of inventory, in developed countries is 1% to 2% of Cost of Goods Sold, it is estimated to be much higher for Indian retailers, primarily due to the lack of focus on supply chain management. The existing supply chain is not devoid of inherent weakness of India‘s infrastructure, besides being corrupted along the entire chain. Tracing shrinkage is a Hercules task as almost all the transactions still continue to be based on paper system. This gives rise to the need of third party logistics organizations that can provide services at competitive prices. Third party logistics is a concept still absent from the Indian retailers value chain. 93 A large part of shrinkage takes place within the retailers by its employees. Moreover, tracking an employee‘s track record and background checks is difficult. Retailers are now joining hands to fight this battle by creating a database of employees and share it amongst themselves to avoid shrinkage from within. 2.21.14 Employee training and retention The most common strategy applied by retailers to keep labor cost at minimum was to employ fresh graduates with no experience in retail sector. They have now realized that in difficult market situations, experienced and talented employees that have sound understanding of ground realities could give retailers a competitive advantage. Despite a downturn, need for skilled manpower still continue to be a major concern across the sector. 2.21.15 Managing working capital One of the most important factors affecting a retailer‘s profitability is the way it handles its working capital. Lower footfalls, resulting into lower sales has directly impacted Indian retailer‘s working capital position. Discounting is now the most common techniques used to turn slow moving inventory. Besides lower footfalls another factor which is hurting retailers‘ liquidity position is the significant amount of leverage they are carrying which was used earlier for aggressive expansion. Banks are now reluctant to finance retailers given the falling demand and plummeting profitability. Retailers are therefore it difficult to finance their working capital requirements. 94 2.21.16 Inversifying into untapped rural areas Experts believe that the next phase of growth for organied retail sector will come from rural areas that account for half of the $300 billion domestic retail market. Retailers will have to focus on the previously untapped lower income strata by providing them access to credit facilities. On the back of souring commodity prices and improving productivity, rural economy is set to boom in the next decade. 2.21.17 Backward Integration One way to improve efficiency and profitability is to remove unwanted intermediaries which eat into the already stressed margins. To improve rural economy, Indian Government approved Contract farming and Leasing. According to KPMG, this will bring about technology, transfer, increase capital inflow and assure market for crop production, besides eliminating intermediaries. Pepsico and ITC‘s E-chaupal are already benefiting from contract farming in Northern India. Despite the above mentioned challenges, long term prospects of organised retailers are still very attractive. Important consolidations and partnerships can be expected soon for improving operating and cost efficiency. Focusing on supply chain management and partnering seem to be the need for an hour for organized retailers so as to leverage their expertise and financial muscle.Now it‘s contemporary design coupled with quality that‘s determining purchase decisions across some 30 million Indian consumers. 95 According to Mr. Ratna Bhushan in his write up on Quality, Design Value drivers for Apparel, Retail Industry January (2003).What is common to the Hyundai Santro, LG Televisions, Tanishq jewellery, Hidesign bags and ColorPlus Shirts? Certainly not their product profiles or balance sheets. The answer design. That, more or less, set the tone for the Images Fashion Forum seminar being held in Mumbai, involving some of the country‘s top-notch retailers, apparel marketers and fashion forecasters. Drawing a parallel between brands across diverse categories such as automobiles, consumer electronics, apparel and jewellery, Mr. Arvind Singhal. Chairman. KSA Technopak threw light on the Indian consumer‘s willingness to now experiment with product with the element of contemporary design. ―The new value drivers for consumers today are quality and contemporary design. While price was the predominant purchase determinant in the pre-1980s, quality coupled with price assumed importance in the mid-1980s. The 1990s witnessed an assortment of quality, range and price. Now it‘s contemporary design coupled with quality that‘s determining purchase decision across some 30 million Indian consumers,‖ he said. What is also favoring the domestic market to warm up to the retail and apparel fashion industry, Mr. Singhal said, was the current demographic profile. The largest number of population in India will be in the 20-44 year age group in the next few years. This profile does not exist even in a huge market such as China.‖ The downside, Mr Singhal pointed out, was that while the market was ready, and the customers were willing to pay, there were not enough suppliser. ―Very few marketers have pumped in sustained investments and efforts in teir businesses. This needs to change.‖ Ms Simone Tata, Chairperson, Trent, the retail venture of the Tata Group, 96 called upon investments in technology, quality cntrol and training as the required focus areas for the industry.‖ ―Investments in superior and efficient technology, and not fancy buildings, is what the industry needs. Also, manufacturing has to take a leap jump to service,‖ she said.In the race of retailers striving form better supply chain management, Ready made garments as well as has its own niche. As highlighted by Ms. Shanti Venkatraman in her Article on Ready Made Garments – Making the Right Designs, October (2004). Ready Made garment is really becoming big business. With the quota regime on textiles and clothing set to go in 2005, the garment industry should get greater access to international market. The domestic market too presents immense opportunities with consumer spending on the rise and organised retailing growing. But should a garment player go global or sell at home?Some players such as Raymond and Zodiac clothing have chosen to be aggressive in both markets. Even as they plan to improve their retail presence over the next three years, both are expanding their manufacturing facilities in Bangalore to cater to the expected rise in international demand, post-2005. 2.21.18 Betting on Domestic Markets: Once the quotas go, a good number of domestic outfits may look at the export market to augment revenues. Interestingly, major export players such as Ambattur Clothing (Color Plus) and Acme Clothing (Provogue) have, in the past placed their bet on the domestic market. These companies quickly managed to give bigger players a run for their money. But, as Color Plus discovered, further growth could come only from a wider distribution network, which needs deep pockets. Raymond stepped in and acquired the brand.Operating in the domestic market poses an entirely different set of 97 challenges from that of the export market. It requires more than manufacturing expertise and a heightened fashion-consciousness. While these factors help initially, it is an entirely different ball game to emerge as a strong brand. This is borne out by the presence of just a handful of successful brands in an apparel market pegged at Rs. 9,000 crore. Sound branding and positioning, supply chain management and retailing assume greater importance in the domestic than in the export market, where garments are sold under private labels. These elements also involve considerable costs. Established names, however, do not have it easy either. The entry of international brands such as Tommy Hilfiger into the Indian market is likely to be followed by more players. Once quotas go, international manufacturers are likely to set up facilities in India to take advantage of the low-cost base. Moreover, import tariffs are likely to come down, which would also attract international players.Competition is likely to hot up and keep domestic players on their toes. The retail landscape is changing, and the traditional distribution strategy of apparel players is in for an overhaul. Figuring out which price point to operate in is yet another challenge for an apparel maker. Challenging, but interesting, times are ahead for the readymade garment industry. Apparel manufacturers were among the first to foray into organised retailing. Raymond, Arvind Brands, Madura Garments (Indian Rayon) and Zodiac Clothing have built an extensive retail network over the years. 98 Even as they retail through other multi-brand outlets/departmental stores, they also continue to set up their own outlets. Having their own outlets, they believe, would help showcase their entire range of products, as well as build their brand image. Tussle with private labels Manufacturers have found it is advantageous to have their own outlets for another reason. The increasing share of retailers‘ private labels is squeezing the space available for their own brands. The likelihood of private labels emerging a major threat to brands has debated endlessly. Private labels, however, plateau in the boom periods, when brands stand to gain. Players in the branded segment also contend that customers are eventually won over to brands by familiarity and quality assurance.Going one step furhter, private labels can help build markets for brands. For instance, the women‘s apparel segment is yet to take off in a big way, but private labels have managed to do well in this segment. Players such as Madura Garments, which have a presence in the segment through Allen Solly, believe that once women try out private labels and get more accustomed to Western wear, they are likely to upgrade to a more expensive brand. Brands may not even be as expensive as they are today. Leading ones have, in the past, been predominantly positioned in the premium segment.There has been a market for such products; Louis Philippe shirts have sold for Rs. 4,000 and more. Clearly, the promise of high quality has held value for customers.But the strong response to a flurry of price cuts across sectors, ranging from airlines to telecom has shown that the branded apparel segment cannot afford to miss out on the opportunity in mass markets for long.One has to only see the huge response to a Color Plus sale to get an idea of 99 the growing demand for branded clothing at lower prices. Brands have grown to depend upon such sales to drive up their volumes. With the exemption of excise duty on cotton garments (if a manufacturer opts for the convent route he would have to pay 4 per cent against 10 per cent earlier) and the creation of a level-playing filed, branded players now have a good incentive to introduce products at lower price points for the mass market, which, till now has been the preserve of smaller and relatively unknown players.But players may still find it tough to cater to this market. They would have to move towards a low-margin, volume-drive business. This would also need a far larger distribution network than what exists today.Few retail formats in India operate on a truly large scale. Giants such as Walmart and Carrefour, which have the ability to drive volumes, are what industry would need; however, their entry is unlikely till such time FDI is permitted in retailing. The garment sector is considered one of the more promising segments in the textile chain as. after 2005, as there would be greater demand for finished products. the universe of readymade garment stocks is, however, limited. The stocks of Raymond, Indian Rayon and, to some extent, Arvind Mills, have managed to draw investor attention the past couple of months due to their increasing thrust on garments on the domestic and export front. Zodiac, as a pure play garment company, will be able to leverage on the potential in this sector. The company is strongly focused on exports. Capacity expansion plans augur well for its revenue growth; the company recently acquired a shirt100 manufacturing unit in Dubai. It also plans to add 60 retail outlets over the next three years. On the domestic front, Raymond‘s brands cater to the premium segment. Raymond is also a leader in the suits segment. The decision to overhaul its retail outlets and cater to a younger crowd might help spruce up its brand image. Arvind Brands, is no longer a subsidiary of Arvind Mills. The latter is, however, building its export market but the company still derives a chunk of its revenues from its denim business. It would be some time before garments emerge as a major driver of its revenues. Indian Rayon has a presence in a number of businesses. As the owner of Madura Garments, it has a strong presence domestically. The garment division is expected to be one of the major growth drivers The revival of its power brand, Pater England, capacity expansion plans, and retail expansion should boost earnings. The revolution in retailing industry has brought many changes and also opened door for many Indian as well as foreign players. In a market like India there is a constant clash between challenges and opportunities but chances favors those companies that are trying to establish themselves. So to sustain in a market like Indian companies have to bring innovative solutions. Indian market has potential to accommodate many retail players, because still a small proportion of the pie is organized. According to Mr. Aayush in his write up on ―Indian Retail Industry–opportunities, Challenges and Strategies, July (2008). The Indian retail scene has witnessed to many players in too short a time, crowding several categories without looking at their core competencies or having a well though out branding strategy. 101 The growth rate of super market sales has been significant in recent years because greater numbers of higher income Indiand perfer to shop at markets due to higher standards of hygiene and attractive ambience. Here also small, single-outlet retailers dominate the market.In recent years, a few retail specialised products have come into the market. Although these retail chains account for only a small share of the total market, their business is expected to grow significantly in the future due to the growing quality consciousness of buyers for these products. With rapid urbanization, and chaging patterns of consumer tastes and preferences, it is unlike that the traditional outlets will survive the test of time. Despite the large size of this market, very few large and modern retailers have established specialized stores for products. There seems to be a considerable potential for the entry or expansion of specialized retail chains in the country. The Indian durable goods sector has seen the entry of a large number of foreign companies during the post liberalization period. A greater variety of consumer electronic items and household appliances because available to the Indian customer. There are specialized retailer for each category of products (books, music Product etc.) in this sector. Another prominent feature of this sector is popularity of franchising agreements between established manfaurecesand retailers. A strong impetus to the growth of retailer industry is witnessed by economic boom and driver of key trends in urban as well as rural Indian. 2.22 The Hidden Challenges: Modern retailing is all about directly having ―first hand experience‖ with customers, giving them such a satiable experience that they would like to enjoy again and again. 102 Providing great experience to customers can easily be said than done. In Indian, as we are moving to the key observations by customers is that it is very difficult to find the uniqueness of retail stores. the problem, retail differentiation. Merchandising planning is one of the biggest challenges that any multi store retailer faces. Gritting the right mix of product, which is store specific across organization, is a combination of customer insight, allocation and assortment techniques. The private label will continue with brand leaders. So suplier‘s brand will take their Own may because they have a established brand image from last decades and the reasons can be attributed to better customer experience, value vs. Price, aspiration innovation of supplier‘s brand. The effectiveness of the mall developer‘s communication of the offering to the target customers determines how well the mall gets positioned in their minds. At this stage, the communication has to be more relative nature. This implies that the message conveyed to the target customers must be effective enough in differentiating the mall‘s offering from that of its competitors without even naming them. The message should also clearly convey to the target audience that the mall offers them exactly what they all the complete shopping-cum-entertainment point that meets all offers. Once the message is being conveyed through these channels, the mall developer must and a personal touch to his massage by carrying out a door-to-door campaign in order to reinforce the message. A combination of focused merchandising extended colours and sizes and convenience leads to success. In apparel e-tailing, effective communication with customers can help lay the foundation for buyer- loyalty. This implies that the message conveyed to the target customers must be effective enough in 103 differentiating the mall‘s offering from that of its competitors without even naming them. 2.23 Strong Supply Chain Critical components of supply chain planning applications can help manufacturer‘s retailers‘ service levels and maintain profit margins. Retailer has to develop innovative soltion for managing the supply chain problems. lean systems and staff should help retailers to get advantage over competitors. It is really important to choose a proper store location for the convenience of serving to the customers According to the Article mentioned in Economic Times of February (2010), here has to be 10 Questions which retailers need to ask before choosing a store location they are as follows: 1. Is your target market there at the location? If you are too far from customers, business may suffer. 2. Is the location in a growing or dying part of the city? Also, check the local crime local crime levels. 3. Is the store located in a high or low traffic area? 4. Decide if you need a very visible storefront like a garment or a shoe store? 5. Condition of property-will the store need a lot of repairs immediately or even in the near future? Is there any scope for expansion, if necessary? 6. How healthy is the local business climate? 7. Are there other ‗draws‘ nearby that will help attract your customers? 104 8. Compatible businesses like a pizza parlour next to a video store can help can your business grow too. 9. Are there any zoning restrictions set by local authorities? 10. Are the rental costs affordable or will you be paying an unrealistic premium? 11. Last but not the least, how close are your competitors? How do they compare in appearance to your business? How prosperous do they look? Apparel retailing is a success story, thanks to high margins. E-tailing apparels is a different business. As explained by Mr. Prashant Mahesh (2009), in his Article on ―E – Tailing Apparels- will it catch it on?‖ Indians love buying apparels. Whichever part of the globe they are in, Indians have demonstrated that they are great apparel-shoppers. Even though many international brands are locally available, they do not miss an opportunity of buying an imported one. Apparel retailing has been successful in India. Thus, it is not surpring that we have success stories such as Shoppers‘ Stop, Piramyd and Spencers Plaza. In apparel retailing a retailer has two choices: either to create his own brand or sell other brands. Margins in apparel retailing could be anywhere between 40 and 50 per cent. The moot question now is this selling succeed on the web? Analysts argue that though an apparel website may be great, it is not a substitute for the tactile sensation the buyer enjoys. So apparel e-tailors would have to borrow an idea or two from cataloguers who have to borrow an idea or two from cataloguers who have succeeded in selling to people who do apparel shopping not at brick-andmortar stores. That is one reason why cataloguers have been able to deliver the goods. They have the advantage of being used as references or guides to be the Internet and the they work 105 as a complementary channel for moving merchandise. Direct mail catalogues can really drive people to the web. A combination of focused merchandising extended colours and sizes and convenience leads to success.In apparel e-tailing, effective communication with customers can help lay the foundation for buyer- loyalty. The Askeddie allows consumers to typs in questions ans participate in live real-time chats. A good e-tailing communication can make relevant and enticing offers to prospects and bring them back to the site. How to win the loyalty of apparel-buyers on the Net? Apparel e-toilers should consider a liberal return policy, offer instant help and provide exciting range of colours, sizes and styles. Thanks to the popularity of Internet, fashion trends from across the globe. Most apparel e-trailers have been slow on the uptake. Pantaloon.com is sitll under construction.If you were to visit the order large apparel e-tailor Trent, you can find that he does not have a basic website and sketchy information is available on the sitetata.com. ―Buying online things like a which more of a commoditized product is fine. But then one should not expect an Indian to buy a designer suit or a sari.‖As far as apparel e-tailing in the West is concerned, buyers are found to shop at ease with cataloguers with whom they have had pleasant expriences in the past. that trend might catch on here in India too. Probably, very soon we might see Indian cataloguers flocking to the Net. Faced with operational difficulties and pressure to manage costst, apparel retailers are increasingly realising the importance of efficient supply chain management, as explained by Ms. Swetha Kanna in her editorial on Apparel Retailers deck up for efficient supply chain, dated July 2010. For Italian fast fashion brand, OVS Industry (owned by Oviesse SPA, which is part of the Gruppo Coin group), which seeks to replace merchandise very repidly, efficient 106 stock management becomes a critical component of its operations. While the average lifecycly of fashoin products is typically four months, OVS stocks are replenished in just 6-7 weeks. With the growth in retailing the Indian apparel manufacturers and retailers are working towards efficient supply chain management system. Warehousing is gaining ground. Will all this translate into better service to the final and to reduced prices as explained MS. Reena Mital in her article on ― retails Upgrade supply Chain‖ (July – 2006) The retail sector is among the fastest growing sectors in the country, providing the apparel brands, domestic and international, with the much needed contact with the final consumer. And organized retailers in India have begun understanding and adopting international business practices and solutions that go towards providing better service to customers.Shoppers‘ Stop is probably is probably the first retail outlet to adopt warehousing solutions to improve the efficiency of its supply chain systems. We plan to have around 40 outlets within the next three years and theis will make such system ever more sustainable. HE further stated, Our ERP solutions have at any resulted in transparency any given point in the in time.Shopping Stop has four warehouses in the four cities, which are managed by third party logistics (3Pl) company. Once we cross that we may have to increase the distribution centers. ,‖ said Mr. Shrikhande. Warehousing and supply chain management is the area that almost event retailer is looking at today. The retailer has a central warehouse in Mumbai. ―Plans are still at 107 the drawing board stage, we have still to work out the investments that would go in, the kind of infrastrure the warehouse would need to have. It applications would be an integral part of such a distribution network,‖ informed pantaloon officials. RFID is the next IT solution for the industry, but nobody in the industry today uses this. Wal-Mart is one of the few global retailers to introduce RFID. In India, this will take a long time to come. Barcoding has become popular only a few years ago, RFID is a long way away. Also the cost would be an inhibiting factor. We expect that like CDs, mobiles, etc the cost of this technology would also come down in the years to come, and that is when it would get more popular in the country. According to Mr Vilram Rao, group business head (fabrics and branded apparel Indian Rayon And Industries Limited, Madura Garments, ―today, Indian brands spend more on advertising and less on retailing and setting up flagship stores, etc, whereas internationally, it is the other way round. According to Mr Rahul Mehta, director, Creative Outerwear, ―With competition increasing manufacturers will try to bring costs, and the sprucing up the distribution channel is one way of doing this. Moreover, middlemen will get eliminated, and the retailer and manufacturer will deal directly with each other. Similarly, investments in inventory management, etc are being done to ultimately give better service to the customer, while bringing down dead stocks, but certainly not to give lower prices to the consumer.‖ As FDI in the retail sector is being allowed, several apparel majors are expected to join the domestic apparel retail battle. As coined by Mr. Ankush Wadhwa in his write 108 up on ―The Post -2005 role of RFID in the Indian Apparel Retail Sector September (2005)‖. It is a new multi-dimensional implication model that can enable companies to create niches and develop core competence. RFID is an identification or tagging method that functions similar to a barcode on an apparel product or shipping carton. The tags can be read through packaging and cartons without the line of sight necessary for reading barcodes. Cartons or products using RFID technology carry a transponder made from a microchip attached to an antenna. FID can find quite a few applications in the apparel retail industry. Re-stocking and replenishment/ Shelves are monitored to ensure that they remain stocked at appropriate levels. When they fall below the level, an alert is sent to the stockroom or office to bring out or order more merchandise. For stores with stockrooms RFID monitoring alerts employees when stock levels reach the threshold. Depending on how the system is configured, re-orders may be done automatically for items that the store plans to continue selling. Returns are quickly added back to inventory, when any apparel product is returned or exchanged, its RFID tag could be read and automatically added to the inventory database. Employees who do re-stocking could read the RFID for returned items; An application could automatically compare the RFID code of the returned item against recall notifications. Merchandise leveling across stores 109 By monitoring inventories at different stores within a retail chain, the management could make intelligent decisions about how to meet customer demand and reduce discounting by shipping items between stores. For example, Delhi will have a longer season for selling sweaters than Bangalore. If, in February, Bangalore stores are oversupplied for what remains of their season, while sweaters are still selling well in Delhi, will have may decide that enough discounting would be eliminated to justify the cost of shipping items from Bangalore to Delhi. Custom video presentation for merchandise brought into fitting room If fitting rooms are equipped with RFID readers to identify the merchandise brought in, shoppers could see a video in the fitting room describing the features of that apparel and could see a person modeling the garment and suggesting accessories. It can then display the shopper in the RFID-tagged apparel with the recommended accessories. Customer-specific shopping reminders and promotions With RFID on loyalty cards to identify the customer and a customer shopping-history database, items could be priced differently depending on the characteristics of the shopper (e.g. special promotions for first-time shoppers and rewards for frequent shoppers). at kiosks, and by employees receiving prompts on their point-of-sale terminals. When stock levels reach the threshold. Depending on how the system is configured, re-orders may be done automatically for items that the store plans to continue selling. 110 Gap Analysis: Going through literature review researcher has found out that supply chain management has been identified and researched in many industries ilncludeing automobile, food service, healthcare, information tecnology, and retailing outlets. however, limited information is available about the functions and practical experiences of the supply chain management in the retail apparel business. SCM gives a ready referendum whereby entrepreneurs competing globally can streamline their business so as to deliver the right product, at the right time, place cost and quality. Such a system can exist successfully in India if due care is given to inventory management thereby increasing the profitability of all the stake holders in the supply chain cycle of apparel industry. SCM is in the process of being refined to the point where the customer gets what he demands, when he demands and wherever he demands it. With changing times, it is now an environment of "Survival of the Fastest." 111 CHAPTER 3 OBJECTIVES AND RESEARCH METHODOLOGY Supply chain management has been identified and researched in many industries including automobile, food service, healthcare, information technology, and retailing outlets. However, limited information is available about the functions and practical experiences of the supply chain management in the retail apparel business. The study will focus on the importance of the supply chain management and framework of an effective supply chain management in the apparel retail business. The real meaning of supply chain management will be defined. The related practical skills and effective management issues will be discussed. The research specially focuses on the retail apparel business in India. The organized apparel retail businesses are spread all over the country. The size and scale of the businesses are various. Also the target customer and markets are quite different. Therefore, supply chain, as a dynamic is difficult to be covered in all the aspects in the study. The study will focus on the selected organized apparel retail business in India. Having defined the success of a supply chain in terms of supply chain profitability, the next logical step is to look for sources of revenue and cost. For any supply chain, there is only one source of revenue: the customer. Thus, the appropriate management of these flows is a key to supply chain success. Effective supply chain management 112 involves the management of supply chain assets and product, information, and fund flows to maximize total supply chain profitability. Due to the purchasing power that comes with control over consumer contacts, retailers are often dominant in a supply chain. Closeness to end consumer markets gives retailers fast and precise information about matters such as shifting fashion preferences and attractiveness of competitor‘s offerings, comparable to continuous market research. Even though power is no end in itself, it does include the opportunity to organize the supply chain in a suitable way. The objectives and hypothesis formulated are mentioned below: 3.1 Objectives 1. To study the tools and techniques with regards to supply chain management in organized apparel outlets and its impact on pricing. 2. To study the impact of economies of scale of retailers with respect to optimum inventory management in the supply chain cycle. 3. To study the impact of marketing and supply chain interface on an integrated basis In ―Organized apparel and clothing‖ category of the retail outlets. 4. To study the impact of infrastructure related factors on improvement of sales of the organized retail apparel outlets. 5. To study the impact of backend merchandize management on the sales of the organized retail apparel outlets. 6. To study the impact of ERP on improving the value proposition of the retail ―Organized apparel outlets.‖ 113 3.2 Hypothesis H01: The tools and techniques with regards to supply chain management in organized apparel outlets has no impact on pricing. H11: The tools and techniques with regards to supply chain management in organized apparel outlets has an impact on pricing. H02: The impact of economies of scale with respect to optimum inventory management has no impact on supply chain cycle. H12: The impact of economies of scale with respect to optimum inventory management has an impact on supply chain cycle. H03: There is no impact of marketing and supply chain management on an integrated basis on organized apparel retail outlets. H13: There is an impact of marketing and supply chain management on an integrated basis on organized apparel retail outlets. H04: The infrastructure related factors have no impact the sales improvement of retail organized apparel outlets. H14: The infrastructure related factors have an impact on the sales improvement of retail organized apparel outlets. H05: There is no impact of backend merchandise on sales of retail organized apparel outlets. 114 H15: There is an impact of backend merchandise on sales of retail organized apparel outlets. H06: There is no impact of ERP implementation on improving the value proposition of retail organized apparel outlets H16: There is an impact of ERP implementation on improving the value proposition of retail organized apparel outlets. 3.3 Research Methodology The Research Methodology adopted for the study comprises of several steps, such as 3.01 Secondary Study A study of several research papers/books and other reports were identified and studied, with the objective of finding out the gaps in the study, the factors that have a bearing on the objectives of the study. 3.02 Primary study A primary study confining of discussions with various Mall Managers of Mumbai, Indore and Delhi was initiated and conducted. The discussions were held using a questionnaire The questionnaire comprises of several parts such as a) Recognition of supply chain management b) Importance of supply chain management c) Performance of supply chain management d) Supplier Performance e) Distribution channel 115 f) Customer demand The questionnaire was further tested for Cronbach Alpha reliability to test the internal consistency of the items. According to Aiken,(2003) This is a general formula for estimating the reliability of a test consisting of items on which different scoring weights may be assigned to different responses. Alpha reliability coefficient for the respondent‘s questionnaire was found to be 0.740 which is within the acceptable range. Reliability refers to the consistency of scores obtained by the same person when reexamined with the same test on different occasions or with different sets of equivalent items or under variable examining conditions. 3.03 Data Collection & Data Analysis For the purpose of the study Delhi, Indore and Mumbai were chosen as the area where the study will be conducted. The preliminary study indicates that the impact of supply chain management and its effect was felt to be high in Mumbai. A pilot study was conducted in Mumbai with the objective of checking the reliability of the study. Sample Size The sample size calculator indicated that a sample of around 864 respondents would be required. 116 The basis of this is as fallows Method to find sample size (source of formula is sample size calculator) Sample size for this study Consider z = 1.96 ( it is standard for 95% level of confidence) Standard deviation calculated from pilot study = 11.25 ( app) Margin of error = 0.75 Sample size = ( 1.96 * 11.25/0 .75)^2 = 864(approximate) Minimum requirement of data is of 864 respondents To have uniform proportion sample size is finalized as under. 3 cities * 300 respondents from each city= 900 respondents. The actual sample used was 900 comprising of 300 respondents in each of the 3 cities. The 300 respondents were than further stratified to take into consideration the number of outlets for each city. 117 CHAPTER 4 GROWTH AND DEVELOPMENT OF ORGANIZED APPARELS OUTLETS MALLS 4.1 Introduction: Apparel is any piece or object that is used to drape the body. In simple terms it is known as clothing. The clothing can be made of leaves, cloth, leather or any other material. Earlier the term associated with clothing was garment. Garment refers only to the simple clothing - outer and inner - that were not any branded or designer specific but apparel is a broad term that includes not only clothes but the accessories such as belts, bags, shoes. jewellery etc. The consumer perspective has changed drastically over the years. Earlier the Indian market was dominated by readymade players who were already into the production of yarn. Consumers were not brand conscious then and they purchased either readymade garment or just pieces of cloth for their requirement which they converted to dresses or suits according to their need and taste. Their need for appropriate accessories was not felt important at that time. The branded or designer accessories were worn on important occasions only. From the simple garment Indian consumers have moved on to the world of apparel which constitutes, in addition to clothing, the accompanied accessories that completes his or her present ability. The trend of occasional wearing of branded or designer wear and accessories has evolved into casual wears. Now, Indian consumers opt for branded apparel for their daily Wear. 118 India has witnessed frenetic pace of retail development over the past five years. While local shopping centers have always existed in India, their structure ambience and method of doing business served the needs of the local population. The pace of change in retail developments has triggered a frantic pace in the development of malls. A number of factors such as income growth, changing demographic profile and socio- economic environment have driven this have driven this transformation in retail in India. Goldman Sachs has estimated that the Indian economic growth could actually exceed that of China by the year 2015, It is believed that the country has the potential to deliver the fastest growth over the next 50 years. Keeping in mind the rates of growth predicted for India and China, the balance of economic power is poised to tip in favor of two of the world‘s largest populations over the next fifty years. The Global Retail Development Index developed by AT Kearney has ranked India first, among the top 30 emerging markets in the world. Formats new to the Indian marketplace have emerged rapidly over the past five years. There is a little doubt that retail in India is revving up for an exciting phase ahead. Development in retail formats and patterns of shopping have always been influenced by mobility and the lifestyles of the consumer. Typically, the development of shopping centers has followed a pattern, which has always synchronized with the development of the retail sector in that economy and the needs and he wants of the consumers. 119 This case study examines the rapid growth of malls in India and the challenges faced by the mall developers. This primary aim is to examine the feasibility and sustainability. 4.2 Mall development in India It would be perhaps incorrect to say that shopping malls have come into existence in India in the recent pass. While they have always existed in the local and regional markets, the manner in which they now present themselves to the end consumers has changed. Spencer Plaza is Chennai and Crossroads in Mumbai are considered to have pioneered the shopping mall and shopertainment revolution in India. From three malls in the year 2000 to almost 300 malls by the year 2010. The pace of developments is rapid. It is estimated that mall development would spread across 60 cities in he country by the end of the decade. The West and Noah of India are estimated to witness the highest rate of mall development in India. While the NCR has witnessed rapid developments in retail developments all developments have not necessarily been successful. In many cases the supply of retail space has far exceeded the demand of retail space. The tenants in malls in India are also faced with high lease rentals and the payment of high costs towards Common Area Maintenance which eventually affect the retailer‘s profitability. 120 4.3 Characteristics of a shopping mall The development of shopping center has to synchronize with retail development in the country. India while the retail sector may have crossed the initial phase and moved into the second phase of development mall development has moved faster. In most parts of the world entertainment as key components of malls emerged after the decline of department stores, India department stores are skill evolving. Players are still entering the market and that total numbers of players are limited. The keys are also experimenting with the products and services being vided by them. In such a scenario mall developers need to focus to focus on certain key elements of strategy and on where they apprise to be over a period of time. Today, the concept of ‗traditional shopping areas has given way to central business locations and prime retail streets in suburbs. Not surprisingly, the focus has shifted to new locations such as Anna Salai, Nungambakkam High Road and Adyar. And, for retail markets to boom, location is a key factor. However, in Chennai. finding the ―right-sized space‘ on ―right locations and at ―right prices‖ is a challenge. Sopping space in the city falls into two categories: In the city — T. Nagar, Anna Salai, Nungambakkam High Road, Egmore, Cathedral Road, Radhakrishnan Salai and Parrys corner — and in the suburbs — Adyar, Anna Nagar and Purasawakkam. Retail hubs towards the west and south of the city are also fast developing, says Ramesh Nair, senior manager, Corporate Solutions of the global real estate consulting firm, Jones Lang LaSalle. 121 a) Modern malls With the market turning brand conscious, Chennai is seeing an unprecedented growth of supermarkets and mega malls. RPG, a major industrial group, came up with a mega mall — Spencer Plaza — that offers an engaging ambience, car parking facilities, brand variety and entertainment. The mall, very different from the traditional shopping complexes, which are Street-facing and where shops are located on the ground floor, made multi-level shopping possible and provided ample car parking space. People even came to the mall just to spend time in a pleasant environment. Retail outlets located in T. Nagar or Parrys Corner cannot address these issues, says M. Balasubramanian, Director, Mangal Tirth Estate. There are two other rnega malls in the city — Abirami Mega mall and lspahani Centre. And it is likely Lifestyle is going to open an outlet in the ETA mall coming up on Dr. Radhakrishnan Salai. A leading multiplex operator from Mumbai has also signed up for space in this mall. b) Stand-alone malls After Spencer Plaza, many stand-alone malls such as Lifestyle, Globus, and Shoppers Stop have sprung up. However, the concept of stand-alone mall is not new to Chennaites, says V. Kalyanaraman, president, Khivraj Estates. Chennai‘s one of the oldest retail book outlets, Higginbothams, even today, stands tall despite competition from new and modern outlets such as Landmark. 122 Mr. Kalyanaraman claims that Delhi and Mumbai are still in the primitive stage of retailing growth, though they have acquired the cosmopolitan city tags much before Chennai.However, many stand-alone malls are trying to ally with mega malls for their survival. It was noteworthy that in spite of their struggle, there was growth in this segment last year.No doubt, there is a demand for quality retail space. The supply, however, is not there, says Mr. Ramesh Nair. New malls, each at least 2-lakh sqft, could come up in Adyar, Anna Nagar, and on Arcot Road.There is also scope for a small high-end boutique retail mall on Nungambakkam High Road as the place has established itself as a high-end retail destination over the last two years.But, Chennai retailers tend to ignore certain factors for quality growth of modern retail formats. They must consider soft issues such as concept, trade-mix, property management, marketing and Promotion and not just restrict themselves to hard issues such as location, access, catchment areas, demographics, critical mass, layout and design, says Mr. Nair. ―Developers will have to get the product-mix right before they start construction of the mall. If the malls do not have enough car parking space, serious shoppers with large disposable income and spending capacity who come in cars will stay away from the mall.‖ Developers planning retail space in the lover levels and office space in the upper levels of their ;s should make sure that there are separate entrance and exit points for office occupiers and retail shoppers, he says.So, the development of retailing is certainly going to be in the suburbs. Retailing has especially been a driving force for the buoyancy in real estate prices in areas such as Anna Nagar and Adyar, which today are sort of self-contained townships with their own supermarkets and restaurants. 123 Rents in main shopping areas range between Rs. 30 and Rs. 75 per sqft a month for an organised retail development. Suburban rents are generally lower or in line with that for the prime city retai1 space, ranging from Rs. 25 to Rs. 50 per sqft a month. New retail micro market will eventually emerge in areas such as Velachery, Mogappair and Porur. The IT corridor can also be a prime location for retail industry in the future. The need today is for large malls where consumers can step in and get all they need and spend some time along with their family. If shopping is going to evolve as an experience, then retail space will have to develop accordingly. c) Shopping Malls: The Right Destination for Retail Outlets With the up coming concept of organized retailing, now for last few years, the Indian market is witnessing the organized retail giants, capturing the major space even in urban and rural markets. The paradigm shift in the demographic factors, life styles, literacy and better disposable income of the customers, have attracted the major retail players to the urban & rural areas of Indian market. The customers in their local cities have given red carpet welcome to the organized retailing and seem to enjoy their every shopping experience in it. The growth of retail as the sector is phenomenal, in Indian market, the journey of retail from the Super stores to hyper market is acknowledged just in 5 years. Initially, the major factor, come up as a constrained in the growth of organized retailing was the availability of space in market place. The simultaneous growth of the real state addressed the issue of floor space availability for retail out lets. What happened first is 124 difficult envisage but simultaneous growth of retail & real state sectors proved complimentary to each other. Today the major space, in the malls, is occupied by the big brands of retail chains and spatiality stores of the private brands, ensuring the availability of variety of product to satisfy the customers‘ needs & requirements. Even for your everyday grocery buying customers prefer the superstores established in malls. The main attractions for all the customer, are competitive pricing and availability of variety as compared to next door retail grocery shop. (by Arun, published on March 23rd, 2008 and is listed in Growth, India, Trends, consumer.) According to study carried out by Assocham, a whooping Rs.1,31,804 crore has been invested in organised retailing in last 6 months alone. Some of the other related highlights of that study are : Real estate companies like Unitech and DLF draw up plans that cater to growing demand of shopping malls; capex of Rs.65,000 planned to be invested in real estate development for retail space in next four to five years; food and grocery is next big retail segment with investment plan of Rs.22,100 crore. 1. Hyper marts wilt soon dot the Indian retail space with investment announcements of Rs.29,154 crore expected to set them up. 2. With big retail malls in the pipeline, real estate development for organized retail sector attracts maximum investment announcements, amounting to Rs.65.000 crore. 125 3. Unitech with capex of Rs.20,000 crore, outlay of Rs.16,000 crore and 5,000 crore by Parsvnath Developers will strengthen DLF with construction of mega retail store. The effort of real estate and retail companies together, seems to be developing malls as the right destination for retail outlets, fulfilling customers needs under one roof and making their shopping experience memorable.Ma1ls are springing up in every city and are fast becoming sought-after entertainment hotspots, with shopping as the byproduct. From a situation where there were no malls about a decade ago, the country will have over 300 malls translating to over 100 million sq.ft. in available mall space he end of 2007. The Indian Government‘s initiatives to aid growth in the retail sector are showing very visible results. Investment in world-class infrastructure is expected to be close to USD 150 bn. 1. The hitherto restricted retail real estate sector was opened up for Foreign Direct Investment in 2005. As a result, malls of international scale and quality are expected to come up; 2. Mall growth is being seen as a clear indicator of the economic prosperity in India. Significantly, the number of malls in the country has increased at a fast pace. And they are doing brisk business. A trip to the local mall (there will be one in every locality soon!) will bear this out; 3. From almost no malls existing in the country over a decade ago. there were 96 operational malls in August 2005; 126 4. Here‘s more good news. This phenomenon is not restricted to major cities of the country alone. It has percolated to the ―Tier II‖ and ―Tier III‘ cities as well. The contribution of Tier II cities in organized retail sales is expected to be about 20 - 25%. 5. Mumbai, Bangalore, Hyderabad, Pune and New Delhi are expected to have nearly 75% of the retail space in the country 6. Niche, speciality malls, discount malls, highway malls are the new trends mall Mania grips India: d) Mall Mania grips India : From eyeballs to footfalls - the human psyche has taken a complete downward journey in the last years. If it was eyeballs (number of visits to websites) during the dotcom boom of 2000, now it is footfalls (number of visitors to malls). The current mall mania that has gripped a hopping-frenzy nation can only be compared to the dotcom madness five years ago. Today, some 250 malls are already in business and a similar number is going to come up in the next two years. By 2006, a whopping 19.6 million sq. ft of retail space will be made available in six major cities alone. Tier-Il and tier-III cities are not far behind the big cities in attracting Investments in malls. Smaller cities such as Baramula, Ludhiana, Mandya, Thrissur andMidnapore will soon have their own malls. According to Projects Today database, some 195 shopping malls and complexes are coming up in various parts of the country with an estimated investment of Rs 12,747 crore. 127 Most of the world‘s leading brands are now available in India. McDonald‘s, Pizza Hut and KFC are a common sight in many cities Shopping malls with multiple facilities like shopping, entertainment, multiplexes and food courts came to be the next natural thing to happen. To top it a retail market forecast of 30 per cent compounded annual growth rate over the next five s is just the incentive for investors to jump onto the ‗great mall bandwagon‘.In spite of all this, the perpendicular growth in shopping malls is bound to result in oversupply of shopping space and its consequent outcome. The impact is already evident. There is news of rentals falling in shopping malls. Not to speak of the concept of ‗de-mailing‘ that is creeping in. But, those behind India‘s malls are unperturbed. As Dinesh Chauhan, Gurgaon District Town Planner states, ―Sluggish trends are not forever. [Malls] have succeeded everywhere so there is no reason that they won‘t succeed in India. Just wait and watch.‖ Currently, Gurgaon is the hottest spot for shopping mails. In the coming years more than 30 malls will dot Gurgaon‘s skyline, Chauhan said. Interestingly, most of the new malls, completed or under way, are located away from traditional retail zones. Lack of availability of large tracts of land in historically prominent retail areas is the main reason for this. And even if land is available, their prices are exorbitant. No doubt, industry is heading for an overhaul. Says Sanjay Dutt, National Director-Agency, Cushman & Wakefield India. ―A major correction in three to five years from now is expected. Three to five years from now, developers, landlords and financial institutions will have a better understanding of retailers. They will be more open to the revenue sharing model.‖ At present, most of the malls are being developed by real estate developers. According to a Cushman & Wakefield India report, developers are constructing malls as real estate development targeted for sale to investors. The developers don‘t want to retain ownership of the malls. This has affected the confidence of the retailer who 128 wants the mall to be well maintained and managed professionally by a mall operator. Multi-ownership is perceived to be restricting professional management of malls. Remember. Wal-Mart. the largest retailer in the world, is also the largest real estate developer in the world. Further. Wal-Mart also has the dubious distinction of being the largest producer of empty retail stores. Having said that mall developers are evolving with the times, employing new gimmicks to attract customers. Speciality malls are the trend. For instance, Omaxe is building a wedding mall in Gurgaon; an auto mall is also on the anvil in Haryana‘s premier industrial hub. A furnishing mall is coming up in Kolkata, on Elgin road. Now the big question. Are the local authorities geared to meet the ‗threat‘ malls pose to India‘s already ‗mauled‘ cities? In developed countries, before a mall is constructed the developer has to submit a traffic plan to the local authority. Permission is granted only after the authority is satisfied that the mall will not disrupt traffic. Nothing of that kind is happening in India. And nor likely to happen anytime soon. e) India: A home for Vibrant Shopping Malls: Tourists all over the world hake always been attracted towards India as it is known for its cultural heritage. However, since the last two decades the imposing presence of malls all over India has transformed the look of the country. Right from clothes to daily accessories everything is available at the malls. You can shop everything under one roof and the advent of shopping ails has given consumers the ultimate shopping experience. 129 Retail sector in India is booming and growth of shopping malls is the clear indicator of retail growth in the country. Shopping malls provides perfect shopping solutions as consumers can buy anything from a small pin to a luxurious car. It provides all the other facility like multiplexes, entertainment zone, food courts, which attracts the shoppers more. All things are available under e roof; people can shop a variety of a thing from the single shop so it is called ‗one stops lopping‘. It saves time, energy and even money as it offers more discount and sell. With several advantages like walking clubs, free health check-up, discounts, etc. gain more attention to the customers. During festival seasons to attract more customers, it provides few special discounts, sale, and offers, etc... This is the core marketing strategy behind mega malls to Offer sale and discounts at the end of the .ear so that they can clear all out dated stocks by offering them at low prices. Before a decade ago, there were no malls existing in India, but it grows to 90 shopping malls in August 2005 it continues growth up to 300 mega malls in August 2007 and now there are 500 mega malls currently existing in our country. Thus, now it can be said that India: home of vibrant shopping malls. Growth of shopping malls had also been noticed even in small cities to ct small towns. However, mostly 75% of retail malls existed in Mumbai, Bangalore. Pune, New Delhi and Hyderabad. As the large number of malls grows constantly in India, it indicates economic prosperity of our country. India is the land of prosperity, different culture, diversity, festivals. However, now after 63 years of independence it can be said India: home of vibrant shopping malls. 130 Shopping Mall can be described in this sentence, ‗If you have a home then you will find everything in the shopping mall to fill it up with. The craze of shopping malls ventured India in e early 2000‘s and has seen tremendous growth over the years. The government‘s five year tax relief for opening shopping malls and multiplex‘s has also boasted this trend to a great extent. The term ‗window shopping‘ was coined due to the huge spur in shopping malls and the notion at it is made up of expensive stores. With the concept of ‗one stop shop‘ coupled with entertainment options and comfortable shopping experience hoteliers, retailers and brands grabbed this opportunity with both hands. Even individual retailers found shopping malls a beneficiary prospect. e) The Shopping Mall Culture in India: These individual retail outlets started speaking the consumer language and thus altered prices and designs for the popular crowd. Selection of clothes and pricing was related to the location of he mall. An up-market area had a different line of styling and pricing compared to its own chain in not-so lavish vicinity. Thus people living in these mediocre areas were not able to get the same style and fashion found in the posh areas. Though reaching to the mall has been made comfortable with good enough travel options and parking space, but the crowd on weekends is unavoidable. People are exposed to the variety and know the umpteen options available in the market. Now every time traveling to the mall is not necessary because home shopping had evolved. People could see the options available and know the whole market 131 without compromising on anything. The virtual world has served the purpose of home shopping satisfactorily. The growing BPO (Business Process Outsourcing) culture comprising of a huge potential crowd, work in night shifts and at odd hours. Shopping malls in India aren‘t open 24*7 and they aren‘t truly tapping this potential lot and serving their purpose. Thus home shopping becomes logical as the buyer has the flexibility of time and place at his convenience to make the right purchase without compromising on anything. Unlike the mall there is product categorization and the buyer has the option of choosing his seller on the basis of his requirements. Even local stores could be chosen for buying if a product requires heavy after sales service. f) India Retail Industry - The big Players Pantaloon is one of the biggest retailers in India with more than 450 stores across the country. Headquartered in Mumbai, it has more than 5 million sq. ft retail space located across the country. It‘s growing at an enviable pace and is expected to reach 30 million sq. ft by the year 2010. In 2001, Pantaloon launched country‘s first hypermarket ‗Big Bazaar‘. It has the following retail segments: Food & Grocery: Big Bazaar, Food Bazaar Home Solutions: Hometown, Furniture Bazaar. Collection-I Consumer Electronics: e-zone Shoes: Shoe Factory Books, Music & Gifts: Depot Health & Beauty Care: Star. Sitara 132 B-tailing: Futurebazaar.com Entertainment: Bowling Co. 4.4 Tata Group Tata group is another major player in Indian retail industry with its subsidiary Trent. Which operates Westside and Star India Bazaar. Established in 1998, it also acquires the largest book music retailer in India Landmark‘ in 2005. Trent owns over 4 lakh sq. ft retail space across the country. 4.5 RPG Group RPG Group is one of the earlier entrants in the Indian retail market, when it came into food & grocery retailing in 1996 with its retail Foodworld stores. Later it also opened the pharmacy and beauty care outlets Health & Glow. 4.6 Reliance Reliance is one of the biggest players in Indian retail industry. More than 300 Reliance Fresh stores and Reliance Mart are quite popular in the Indian retail market. Its expecting its sales to reach Rs. 90,000 crores by 2010. 133 4.7 AV Birla Group AV Birla Group has a strong presence in Indian apparel retailing. The brands like Louis Phillipe, Allen Solly, Van Heusen. Peter England are quite popular. It‘s also investing in other segments of retail. It will invest Rs. 8000-9000 crores by 2010. 4.8 Retail formats in India Hypermarts/supermarkets: large self-servicing outlets offering products from a variety of categories. 1) Mom-and-pop stores: they are family owned business catering to small sections: they are individually handled retail outlets and have a personal touch. 2) Departmental stores: are general retail merchandisers offering quality products and services. 3) Convenience stores: are located in residential areas with slightly higher prices goods due to the convenience offered. 4) Shopping malls: the biggest form of retail in India, malls offers customers a mix of all types of products and services including entertainment and food under a single roof. 5) E-trailers: are retailers providing online buying and selling of products and services. 6) Discount stores: these are factory outlets that give discount on the MRP. 7) Vending: it is a relatively in entry. in the retail sector. Here beverages snacks and other small items can be bought via vending machine. 134 8) Category killers: small specialty stores that offer a variety of categories. They are known as category killers as they focus on specific categories, such as electronics and sporting goods. This is also known as Multi Brand Outlets or MBO‘s. .9) Specialty stores: are retail chains dealing in specific categories and provide deep assortment. Mumbai‘s Crossword Book Store and RPG‘s Music World are a couple of examples. 4.9 Challenges facing Indian retail industry The tax structure in India favors small retail business Lack of adequate infrastructure facilities High cost of real estate Dissimilarity in consumer groups Restrictions in Foreign Direct Investment Shortage of retail study options Shortage of trained manpower Low retail management skill 4.10 The Future The retail industry in India is currently growing at a great pace and is expected to go up to US$ 833 billion by‘ the year 2013. It is further expected to reach US$ 1.3 trillion by the year 2018 at a CAGR of 10%. As the country has got a high growth rates, the consumer spending has also gone Up and is also expected to go up further in 135 the future. In the last four year, the consumer spending in India climbed up to 75%. As a result, the India retail industry is expected to grow further in the future days. By the year 2013, the organized sector is also expected to grow at a CAGR of 40%. 4.11 Drivers of Growth in Retail: The greater availability of personal credit and a growing vehicle population to improve mobility contribute to a trend towards annual retail sales growth of 11.4 per cent. Mass grocery retail (MGR) sales in India are forecast to undergo enormous growth over the forecast period. This is a consequence of India‘s dramatic and rapid shift from small independent retailers to large, modern outlets. As more malls are coming up with the best infrastructure prevalent, it enhances the retail experience of the customer to a higher level, and thereby also results in better conversion in relation to time spent. Manish Karsija, Manager. Governance, Risk and Compliance Services, KPMG adds, ―It‘s a chicken and egg situation. Whereas on one hand, malls are required to be set up for deriving premium price for housing projects; on the other hand without parallel/simultaneous housing projects, retailers/investors don‘t find the mall a lucrative business investment. Though malls boost realty growth, there are other factors such as schools, hospitals, utilities and infrastructure general, which gain more importance when one selects a place to live.‖ Past experience demonstrates that the residential property rates spike after a mall project is announced in the vicinity because it is considered as a matter of convenience for residents. As the real estate industry matures, there is a more 136 scientific approach to the development of malls. ―Developers are increasingly circumspect about committing to a mall and are giving considered attention to the needs of consumers and retailers and have begun to understand their Catchments and scale better. Unlike earlier, merely having a large enough property facing a major/arterial road is not reason enough to build a mall any more. This has led to better planned malls, lower supply and better realisation for the developer.‖ says Jaishankar - CMD Brigade Group. As per the RICS Indian Commercial Property Survey Q2 2010, an upswing in retail demand coupled with an increase in capital values and confidence in future letting activity has been experienced due to improved economic sentiment in the country. The factors or causes for growth are several. ―From a macro perspective fact, organised retailing is addressing only five-six per cent of the total retailing of the country: it indicates the unmet demand and and large scope for growth in the years to come.Secondly, the need for brands to be present in an environment or ambience that seeks to capture money-share and mind-share of the customer is possible only in malls. Given the constraint of the limited time available with the urban customer to fulfill his or her needs, it is logical for a cluster of brands to be present at a single location like mall, which meet their demands. Real estate as an investment medium has its cycles, its relative ‗ups and downs‘. ―Right now. demographic. urbanisation and economic indicators reflect a strong upsurge in retail mall development fundamentals represented through strong retailer growth and a broad middle class support this growth. This leads to retailers developing a keen appetite to grow their chains and is is a keen signal to astute mall 137 developers to plan and build appropriately sized malls where ey are needed.‘ explains Jonathan David Yach, Chief Executive Officer, Mantri Square shopping Mall. With changing demographics, higher disposable incomes and fewer differentiations in consumer spending patterns, smaller towns and cities are now emerging as with engines for retail.Not only do these regions such as Ahmedabad. Aurangabad. Jalandhar, Ludhiana, Mysore and ijayawada have land at affordable prices but they also have a relatively large consumer base, resulting in the creation of more retail space in these areas. Additionally, with the trend gradually moving towards bulk retail, investments are moving towards industrial areas where well located warehouses can be converted into retail space, which Could derive higher rent per square meter. Retailers today face many challenges, including increasing competitive pressures, thin margins, high occupancy costs and unpredictable supply base that come in the day of their attaining rational efficiency and profitability. Malls could support the drive of the realty growth, as reflect the sentiments of the spending power of the consumer. ―While other sectors like residential and commercial drive the sector, malls only compliment that growth. In that sense it comes a key driver for the growth of the sector, because slowly, malls have become convenience centres to support the growth of both the sectors. 4.12 Dynamic spaces Unlike residential and commercial spaces, wherein flow of traffic is by and large in a time bound fashion, a mall is a public space with significant footfalls and movement. It is much more dynamic and hence the real estate has to meet several conditions like roads accessibility, visibility, and proximity to mass transport systems to ensure the 138 offering becomes access. Further, unlike residential and commercial spaces, a mall has to be managed on a continuous basis in order to deliver the experience it stands for.The result is that only developers with deep pockets and long gestation periods are able to taste cess if they run on this model. The rest fall into the trap of selling it to investors in order to cerate cash flows for the construction of the mall. The investor stock typically lies vacant since rents they expect sometimes do not materialize.‖ And for the consumer it‘s mall effect all the way! 4.13 E - Retailing in India E-retailing, most commonly known as e-tailing is nothing but shopping through the Internet and there media forms. There are many things that are common between direct retail stores and the line retail stores. Both have the process of billing of the customers and have to maintain a lationship with the suppliers. Bottlenecks Faced By F-Retailing in India Problems with the Payment System People in India are not used to the online shopping system and moreover the online payment system through the credit card is also totally alien to them. Most of them do not avail of the transaction facilities offered by the credit cards. They are also dubious regarding the online payment system through the credit cards. Hence different payment options should be made available to them like the credit card. cash on delivery and net banking to give them further assurance. 139 4.14 Problems with Shipping The customers using the online shopping channel should be assured that the products that they ye ordered would reach them in due time. For this the retail companies have resorted to private teed courier services as compared to postal services. 4.15 Offline presence The customers should be assured that the online retailers are not only available online but offline well. This gives them the psychological comfort that these companies can be relied upon. 4.16 Products offered at discounted rates The online retailers save on the cost of building and employee salaries. Some part of this benefit could also be enjoyed by the online customers by a reduction in the price of the product. The customers should be conveyed this message that they are getting the products at a discounted price. 4.17 Luggage Problem Most internet retail shops use English as their mode of communication. English may not b comprehensible to the majority of the Indian population . To increase the customer base, content in the online retail shops should be provided in local language. 140 Another reason why the concept of e- retailing or online retailing has not gained prominence in India is that the Indians prefer to touch the products physically before buying them. This facility is provided through the multi-brand outlets, not available online. Studies have revealed the preferences of the customers towards the traditional shopping methods. Hence the retailer online should first make it a point to spot the potential customers and accordingly plan out the product the customers are more open to online shopping, then nothing can be more beneficial. They the time and effort to visit, departmental stores, shopping malls, etc. products can be delivered by a click of the mouse.Another problem is that the retail industry is standing on its point of inflexion and considering its infant stage, it would take time for the new concept of cretailing to take off. 4.18 Some online retailing sites in India: E-Bay is heading the race of online retailers. In this race it has become very difficult to determine he online retail store that makes the products available at convenient and cheap rates. From this very difficulty has cropped up comparison sites. Comparison is done on the basis of an index which is constructed from the data available from different shopping sites. The bechna.com and the ultop.com are such sites though many more sites are entering this zone. The comparison sites not only help to choose the online sites that would be providing the best deal but also offline as well. Sites like Rediff product search, Compare lndia.com have constructed the data that is taken from the conventional local retailers. 141 These sites help the customer in finding out the local retail store that will best suit his purpose. 4.19 Future of E-retailing in India There are divergent views on the future of e-retailing in India. Some experts are of the opinion that the giant, big brand retailers would dominate the small ones due to their wider investment capacities. It would be next to impossible for the small retailers and the kiranas to prove their existence in the battlefield of online retailing. Another viewpoint is that there would be an onential growth in the online retailing business in India. 4.20 Niche retailing opportunities in India Going forward, in India, each broad retail segment is likely to be dominated by large retailers. However, since large players aim for large share of the segment, they are unlikely to tap niche opportunities. Hence, smaller companies aiming for opportunities in niche retailing should not be intimidated by the entry of large players. For example, in food retailing, opportunities in health food retailing, organic food retailing. ethic food retailing and specialty ready to eat/ ready to cook product retailing etc. are not likely to be tapped by large retailers. Likewise, in apparel retailing, kids‘ apparel retailing ladies apparel retailing, ethnic wear retailing etc. can be profitable niches for small players.companies in India could consider retailing as an adjacency to their existing lines of business or completely diversify into niche 142 retail areas. Developing unique value propositions in the tailing model is imperative to capture the opportunity gaps in organized retailing. Across the globe, small retailers have co-existed profitably with their larger counterparts. In India too, ample niche organized retailing opportunities will exist for companies to target. To capitalize on this opportunity, companies will need to focus on creating winning retail models based on superior insights into consumption trends, buying habits, formats and offerings of large organized players. 4.21 Discount Retailing in India: Promotions, sales, price-offs. discounts the by-words of discount retailing have now become part of the Indian shopper‘s vocabulary. With prices soaring, the thrifty Indian consumer out for a gain, is looking at discount retailing in a big ay to stretch her monthly budget. Giving added etus to discount retailing, is the proliferation of discount retailers and the huge amounts of investments pouring into the sector. 1. The report captures the trends of discount retailing in India 2. Analyzes latest news in this sector 3. Predicts future plans of major discount retailers 4. And contains relevant tables 5. Major retailers featured in the report are Pantaloons Big Bazaar and Brand Factory, Megamart, Subiksha, Coupon, Loot amongst others 143 4.22 Organized Retailing Growth In Semi-urban, Rural Areas India will see a growth of organized retailing in semi-urban and rural areas in the next 10 years. The growth will be led by food, fast moving consumer goods (FMCG) durable and home improvement product categories, according to a study commissioned by Confederation of Indian industry (CII). The organised retailing, which is growing at the rate of 40 per cent over last three years. is likely capture 40 per cent of total retail sector in India by 2007, the study conducted by KSA Technopack on behalf of CII stated. The organised retailing has a little less than 2 per cent share of total retail sector. The retailing in India is estimated at Rs 15.000 crore which is likely to grow Rs 35,000 crore by 2005. Organised retailing, which is limited to metros and A class cities, is likely to become a feature of semi-urban and rural areas where disposable income India will see a growth of organized retai1ing in semi-urban and rural areas in the next 10 years. The growth ill he led by food, fast moving consumer goods (FMCG) durable and home improvement product categories, according a study commissioned by Confederation of Indian Industry (C II). The organised retailing, which is growing at the rate of 40 per cent over last three years, is likely to capture 40 per cent of total retail sector in India by 2007, the study conducted by KSA Technopack on behalf of CII stated. The organised retailing has a little less than 2 per cent share of total retail sector. The retailing in India is estimated at Rs 15,000 crore which is likely to grow 35,000 crore by 2005. 144 Organised retailing, which is limited to metros and A class cities, is likely to become a feature of semi-urban and Rural areas where disposable income margins will reduce due to increased competition. The value will be derived from the efficient supply chain management. It said ding that some of the Indian retailers such as Shopper Store, Westside and Piramyd are focusing on better inventory management to increase bottomline.The study has pointed out that healthcare services is emerging as a major growth area, Apolo and Life are cited as two prominent players in this segment. ? Specialist stores are emerging though still there are lot of need gaps that can be served by‘ them like home textiles, mother care, sand modular furniture, it said. Organised retailing in India is still at infancy. The largest retail company. RPG has a turnover of 500 crore whereas the largest in the US. Wal-mart has a turnover of $225 billion.With this the retail sector in India is witnessing rejuvenation as traditional markets make ay for w formats such as departmental stores, hypermarkets. supermarkets and specialty stores. The retailing configuration in India is fast developing as shopping malls are increasingly becoming familiar in large cities. When it comes to development of retail space specially the malls, the Tier II cities are no longer Behind in the race. If development plans till 2007 is studied it shows the projection of 220 shopping malls, with 139 malls in metros and the remaining 81 in the Tier II cities. The government of states like Delhi and National Capital Region (NCR) are very upbeat about Permitting the use of land for commercial development thus increasing the availability of land for retail space: thus making NCR render to 50% of the malls in India. A growing population, a young workforce and zooming consumer confidence will fuel the expansion of the retail sector. As organized retail in rural India awaits the 145 arrival of Reliance retail, current majors like ITC. Godrej and DSCL are expanding their retail operations by setting up more stores, entering new states and offering newer product categories. A shift from selling agri-inputs will help these stores target the non-farming segments.It is a little known fact that, while 25% of the rural population is not engaged in agriculture, it earns 50% of the rural income. The retail market is the next growth frontier for corporate India. If offers an opportunity for a large player to build a Rs. 40,000 Cr retail business spanning multiple categories by 2015 (at current prices). However, to capitalize on the opportunity, a player needs to be aggressive in its outlook and build scale quickly. 4.23 Child’s Play: Kids Apparel Retailing Children today are aware of what they want. Better education levels, media exposure, rising affluence levels and increasing interaction with technology are resulting in kids being more informed than parents in matters pertaining to them. One of the largest markets in India today is that of children‘s apparel retailing, which has shown a strong growth in the past few years.From being a small segment targetted by a few companies, the retailing business of children‘s products has turned into a full-fledged industry. The kids‘ apparel industry is one of the fastest growing industries today in India with about 10 percent growth per annum. It has at least 45 percent share of the entire kids‘ retailing business today.Gone are the days when the primary focus of a retailer used to be men‘s or women‘s wear. Kids‘ wear was then considered nonessential and was always treated as secondary sales by retailers. This secondary market was also only in the non-branded apparel segment. No branded apparel that provided quality products for kids was available. 146 4.24 ‘Kidfluence’ or ‘Pester Power’ Over the years, having identified the influence that children can have on their parents, few brands entered this niche segment of kids‘ apparel and made their mark over time. With time, this pester power‘ emerged as kidfluence‘ there kids, with their tremendous exposure entertainment, media and other sectors became aware of what they want. They acted as consultants by having a direct or indirect influence over all the family‘s purchases and not just ‗ apparel and other children‘s products. 4.25 Influence of Films on Fashion Brands ssuch as Gini & Jony, Lilliput, Weekender, etc. entered this segment years ago and create a benchmark for other brands to follow. They realized that kids today want to be as fashionable and stylish as their adult counterparts. Moreover, Bollywood also has its influence ults‘ clothing trends. 4.26 Current scenario Significant aspect that has emerged due to the current recession is nimbleness. Soon after realsing that there would be a slump in sales. the organised market began restructuring itself. It heartening to see the nimbleness among the Indian retail market. This segment envisaged huge Growth in the market from the year 2000. and has been expanding rapidly. However, in the wake of the ongoing recession, the retail segment has reworked its expansion plans by attempting to ice rentals of property and synergizing businesses more than ever before. I am very hopeful the Indian organised 147 retail sector will bounce back quicker than any other sector in India and any other retail market worldwide. The retail market in India is fast realising that like global retail players, it will also have to start concentrating on children‘s retail segment. There are very attractive niches, in terms of 11dren‘s needs, that can be ventured into. Retailers today are realising that kids are fast Coming spenders rather than savers. Very soon India will be one of the major grounds for of the international players. 4.27 Accessories Accessories form an important component of apparel in the fashion industry. The trends change day by day. Present day in the retail market of apparels customers have a choice of varieties in accessories. Some of the retail chains are providing customers with customized accessories along with the clothing. Many of the retail outlets have a wide range of collections of accessories. These range from the traditional models to the modern one and are made of different materials ranging from terracotta to steel and leather. According to the fashion trends in vogue consumers opt for the right accessories like the jewellery, wallets, belts, footwear. etc., along with the clothing. Jewellery: The jewellery. from a piece used to ward off the evil spirits to the identity of ones‘ status symbol, has traveled a long way. Now it is a part of fashion accessory. Jewellery apart from fashion, will reveal who you are! A jewellery trend lasts longer than the fashion trends. With every piece of jewellery women/ men associate different 148 characteristics like right hand diamond ring signifies women‘s independence and empowerment etc. Footwear. Trends in footwear are changing day by day. The latest being different styles of beach shoes. Footwear also tells about personality of the wearer like any other apparel accessories. The formal leather shoes that are either brown or black in colour are still preferred for corporate executive meetings. But for other occasions the footwear are so chosen that it suits the clothing one is wearing. Footwear is made from different materials like wood, leather, rubber, plastic etc. Belts and Bags/Wallets. Latest fashion trends are for the leather made belts and bags which come in a variety of designs. Consumers choose those that would go along with their clothing and they give importance for the appearance in addition to the quality and price of the product. The retail outlet of apparel, houses the required accompaniments for the customers to avail from. The facility of getting the right clothing and the right accessories under a roof has made the customers come back again for their requirement. The apparel retailing is booming in Indian retail segment because of the demand for the branded clothing and accessories. 4.28 Apparel Retailing The concept of retailing dates back to trading. Traditionally retailing was associated with mom and pop stores that was spotted around the neighborhoods as corner shops 149 or kirana stores. But now a professional tag is being increasingly attached to the retailing concept. The organized retailing is still in its nascent stage in India. The Indian economy is thriving and India stands fourth in terms of purchasing power parity (Ashish Dhir, 2007).‘ In other words Indian consumers have readily available disposable income that has revolutionized the retail market. The outlook of fashion and clothing has changed tremendously in recent years and the younger population has become increasingly conscious and aware of their appearances. The increase in the nuclear families with double income and the availability of liquid cash at their disposal, increase in advertisements and other promotional mediums, Indian consumers are spending more on clothing and accessories and the retail marketers are seizing the opportunity to their full potential. Other factors like growing younger population, the increasing number of working youth and changing roles of women have also contributed to the retail growth. In the organized retail sector, major player is the apparel segment. The domestic players are dominant in this sector. Some of the big business houses like the Tata, Reliance, Raheja, Future group etc., have already made a foray into apparel retailing and some of them have created their own private brands with the use of private or. store labels. The liberalization policy of the Indian economy has thrown open avenues for foreign direct investments in the organized retail sector with an upper cap of 51% for single brand retailing. The industry has attracted foreign investement drastically due to the major activities at consumer level the taste and behavior - and the fashion trends. 150 Retailers along with many private players are impelling money in apparel brands and apparel retailing is showing a northward movement. Though foreign players are keen to enter the Indian retail market of apparel, the economic policy does not allow foreign players to enter directly in the Indian retailing sector. A number of foreign players are venturing into the Indian market through joint- ventures or strategic alliances. Another difficulty for the foreign brands to create a market in India is due to the price-sensitiveness of consumers. Apart from this, the relatively closed economy of India till early 1990s gave the domestic market the advantage of establishing itself This has made the foreign players to adopt the domestic players‘ technique to establish itself into this market. In other words, the foreign players had to adopt strategies similar to domestic players to launch its products. The foreign players as well as the Indian players face a number of issues and challenges in the retail segment if a thorough market study is not clone in the apparel market. Major mistakes are made in wrong estimation of market volume, pricing and distribution structure (Devangshu Dutta, 2003 ). 4.29 Strategies in Apparel Retail Segment The changing trends in fashion and tastes of the consumers made the textile players to venture into apparel retailing. Many followed the acquisition strategy that had helped them enter into the mark-et with an established brand. Rayrnonds‘ acquired Colorplus to venture into casual-wear and added brands like Raymonds‘ Parx and Park Avenue. 151 Indian Rayon, another major player, acquired garments division of Madura Coats, the Madura Garments that already had successful brands like Van Heusen, Peter England, Allen Solly and Louis Philippe. Because of high and ever increasing rent in the real estate market, many brands are opting for franchisee model of retailing and this has also helped them to enter into the retailing foray. This business model has helped many manufacturing firms to go into retailing which earlier they were refraining from because of the cost involved. Some of the giants in retailing like Reliance Retail and Kewal Kiran clothing, manufacturer and owner of Killer and Lawman brands. have adopted this franchise model in addition to operating their own company outlets. Once entered into the apparel segment, the crucial factors that should be considered to sustain itself in the market are the pricing and distribution network. Indian consumers are price conscious and the retail market can sustain only if quality products are offered at a reasonable price. For this the retailers have adopted the store or private label concept that involves less cost. Branded and private label goods are priced in such a way that they attract the middle income group who constitute the major segment of consumers. Major players using private label for their promotion in apparel and accessories segment include Westside. Pantaloon Retail, Shoppers Stop, Lifestyle. The foreign players who enter into the Indian retail segment have to undertake a thorough market research and price the apparels in accordance with the Indian market. 152 India had its own well-developed framework for marketing and distribution channels for consumer and industrial goods even before liberalization. The same system is still in use even after the economy has opened up. The foreign players who enter into Indian market are taking advantage of this framework rather than the ones they adopt in the developed markets.The favourable factors for consumer market like the rationalisation of taxes, reduction in import tariffs and a growing young segment that is willing to spend more area welcome change for the foreign brands in order to establish itself in the Indian market. 4.30 Challenges Faced in Retail Segment The retail differentiation is one of the main challenges faced by the retail outlets. Customers are not able to identify or find any uniqueness about different retail stores. Almost all apparel retail outlets house similar kind of clothes and accessories which does not reflect the uniqueness of the brand or product. One of the reasons being that a single manufacturer produces clothes for different labels like the cloth for different branded jeans is produced by Arvind Mills. Another challenge is in the supply chain system. In India intermediaries play an important role. The agents or brokers or intermediaries as they are called by different names come in between the manufacturer and the retailer. Hence the retailer has to end up paying extra amount for the goods to reach his outlet. The logistics and distribution channel is also not so organized in India as in the developed market. This is another issue that has to be coordinated and sorted out by all retail chains. 153 Merchandising planning is another major concern for retailers. The right merchandising mix has to be arranged in the retail outlets. To identify the right mix of product. a combination of customer insight, allocation and assortment techniques can be used (Chandra Dash P, Dec 2007). The private labels or the retail brands have to face severe competition from the established supplier brand. The better customer experience, value vs. price, aspiration, innovation, accessibility of suppliers brand are some of the reasons that had helped the supplier‘s brand to gain a strong foothold in the market (Chandra Dash P, Dec 2007). 4.31 Promotion of Apparel Brand through Private Labels and Mall Spaces With ever increasing competitors in apparel retailing segment, player are adopting different strategies not only to promote their brands but also to retain customers. One such strategy embraced by them is the use of Private Labels. Big players like Tata, Raheja, Blyani, etc have intensified the competition with their professional retail chains like Westside, Shoppers Stop and Pantaloons that uses private labels to market its apparel. 4.32 Private Labels The word reflects the meaning itself The label is private, denotes it cannot be used by all. It is the property of the person/organization who is a registered user of the label. Private labeling occurs when large business houses use their own brand to promote 154 their products. This is largely applied in garment and food retailing industry. Private label denotes either the retailers‘ or wholesalers‘ brand. As manufacturers‘ label would incur large in but lit cost, private label is usually used by retailers who have more control over pricing. Private label has penetrated deep into the western retail market. In India. it is slowly gaining popularity. Indian retailing industry is adopting its own private labels for the simple reason of boosting its sales. Another reason for the introduction of private labels is to establish their own brand name by retailers or to compete with existing players. It can also be used as a marketing tool for long-term business and when used appropriately can act as a differentiator too i.e., establish a name for its retail store. Great caution has to be taken for designing a private label. A careful analysis of customer needs and wants and the nature of product should be considered first in designing the private label. Consumers are so conscious of quality that the retailer should go in for private label for only those products for which he has a complete know-how . The apparel retail outlets like Pantaloons, Westside have introduced private labels that have not only made garments affordable and profitable but also have established their brand in the minds of the customer in such a way that they revisit the store frequently. According to the CEO of Pantaloon retail, private label accounts for 80% of their total sales. Studies conducted by different researchers reveal that private labels have got advantages over the manufacturer‘s label. The private labels have the advantage of 155 catering to specific demands of the customers where the national/manufacturers brands fail. The retailers being close to the end-user would have advantage over the manufacturer that they can cater according to the needs and wants of the customer. Private label ensures quality and consumers are assured that the product meet retailer‘s specific quality and standard. The quality assured through private label makes the consumer loyal to the brand and hence does not require intensive promotional strategies to retain the customers. The growth of private labels acts as a catalyst for apparel retail segment to enhance its competitive position. The use of private labels helps in bringing down the expense incurred for advertisements. 4.33 Malls In the retail infrastructure development, mall space plays an important role. Many of the International brands like Benetton, Lacoste. Levi Strauss, Crocodile. Dockers, Lee, Wrangler, Nike, Reebok, Adidas, Zegna. Marks & Spencer etc have already established their presence in Indian market with the help of Mall infrastructure. 4 Malls are located at prime location in any part of the city. The inside layout of the malls are designed tastefully according to customer convenience. The arrangements of goods are such that it will attract the attention of buyers and the apparel brands occupies major shop floor area. The mall mania of the realtors have thrown open an avenue for national as well as international apparel retailers the much needed space in the retail marketing segment. The customers do have the advantage of selection from different brands under one roof The elegant and attractive shopping space in malls and the decor and the facilities 156 is giving the consumer an out-of-the-world shopping experience. Malls are giving consumers shopping as an enjoyable experience and pastime. Malls are springing up across major cities in ndia. The National Capital Region (NCR) in Delhi is housing small to big Malls that caters to different segments of consumers. Two of the biggest malls in India, Ambi Mall in Gurgaon and Great India Place in Noida houses International Brands and they have taken immense care to cater to the consumers‘ need. The success of retailing through malls have paved the way for setting-up specialized malls like malls housing wedding collections wherein a customer can choose the clothes as well as the accessories necessary for the function from one place. Various strategies adopted by malls to promote its goods are Right Positioning, Effective Visual Communication, Strong Supply Chain and Changing the Perception. Effective communication is one of the key factors required for the mall owners to position their brand in the minds of the customers. Unless the right positioning is not done then it would be difficult to establish and sustain their retail outlets. Malls should convey the message to the target group about their differentiated products in the right manner so that they can resist the competition. Malls are using various communication tools like advertisement, print media, outdoor and indoor publicity, celebrity endorsement, buzz marketing or word of mouth etc to create its brand name among the target customers. Visual merchandising is an important aspect in promoting the brand. Retailers and the malls have to give due importance to the visual communication techniques. Proper 157 and apt lightings, signage, use of specialized props etc are necessary to communicate with the customers. Malls should have a strong supply chain, logistics and distribution system. Unless the required inventory is not made available in the store, retention of customers would difficult. Retailers and malls should adopt techniques or solitions to improve their supply chain management like performance management demand and supply planning, inventory management, frequent sales operation management etc to gain advantage over the competitor (Chandra Dash P, Dec 2007). It is important for the retailers and mall owners to have good store brand with consistent and comparable quality. This will help customers to come back to the same shop to buy goods from the same place. In other words this would ensure customer retention. Some of the strategies like new product development or good retail mix or discounted pricing will attract the customers and will give the store brand an edge over the manufacturers brand. The urban India has faired well in the retailing segment. The rural consumers are yet to get the taste of branded and designer apparels and opening up of malls in the rural areas can provide the retailers with a good start to enter into the rural market. The untapped rural retail market is more compared to the urban region. It is high time the retailers explore the large niche markets in the rural areas. 158 4.34 Evolution of Apparel Retailing A new focus on the apparel retail sector has attracted attention in recent days. Top exporters have introduced their on brands and are aggressively positioning themselves within segments of the domestic market. The rising importance of branded segments in the domestic market combined with the pressure of import competition is blurring the boundaries between exports and domestic production in countries with large home markets, such as India. With the changing lifestyles, organized retail is playing a key role in structuring the Indian domestic market, reinforced in particular by rising incomes and growing purchasing power among consumers in rapidly growing sectors of the economy such as information technology and business process outsourcing. Retail sector in India is witnessing a huge revamping exercise as traditional markets make way for new formats such as departmental stores, hypermarkets, supermarkets and specialty stores. The branded apparel market represents the largest source of growth. The men‘s branded apparel market is growing at a rate of 2 I .8% and branded women‘s apparel segments represents 35% of the total branded apparel market and is growing at an incredible 23% annually. Leading domestic retailers are becoming more firmly eitrenched, increasing their scale of operations and stabilizing their logistics and technology initiatives. A few significant foreign players have been selling their branded apparel in India for number of years. But, now, just like their India counterparts, global apparel brands are settingup their own apparel outlets, instead of just selling through departmental stores. Though local retailers generally enjoy higher margins, they won‘t he able to keep global retailers at bay for long because of international experience, buying power. IT 159 systems and cash flow to tolerate lower profits. Presence of these brands will make the Indian Consumer become more aware of the international fashion and lifestyle trends leading to a move-up of the industry in the value chain. In this paper, the recent trend and prospect of apparel retail sector in India have been discussed. 4.35 The Global Retail Scenario Retailing has been defined as business activities involved in selling goods and services to consumers for their personal. family or household use (1). Although retailing has been around for millennia. the 20th century witnessed a lot of change in the retail sector, especially in the developed countries. Modern formats such as department stores, discount stores, supermarkets. convenience stores, fast food outlets, specialty stores, warehouse retailers and hypermarkets have emerged. Retailing has become more organized and chain stores have been growing at the expense of independent shops. The chains are utilizing sophisticated information technology and communication to manage their operations and have grown rapidly not only within their home countries like US. UK, France, Germany and Holland but to other developed countries. Walmart Stores, the US retailer. was recognized as the largest firm in terms of sales in 2002 in Fortune magazine‘s list of 500 largest global firms. Modern retail formats have also spread beyond developed countries and are becoming more important in the NICs and developing countries. 160 A Large format retail businesses dominate the retail landscape in the US and across Europe, in terms of retail space, categories. range. brands, and volumes. Indian retail industry cannot hope to learn much by merely looking at the Western success stories in retail. Their scales of operations are very huge, the profit margins that they earn are also much higher an1 they operate in multiple formats like discount stores. warehouses, supermarkets departmental stores, hyper-markets. convenience stores and specialty stores. The economy and lifestyle of the West is not in line with that of India and hence the retailing scene in India has not evolved in the same format as the West nor can we learn valuable lessons from their style of operations. 4.36 Indian Apparel Retail Scenario In its market research report, ―Indian Retail Sector — An Outlook (2005-2010)‖ RNCOS estimated that the Indian apparel retail industry generated revenue of S2.0 billion in 200-I with a growth rate of 8.2% during 2000-0-1. As a result, this industry in India is second largest in the world after China. The Indian apparel retail industry varies within even short distances, as the designs of the outfits are based on the region‘s fashion trends. According to this year‘s Global Retail Development Index, India is positioned as the leading destination for retail investment. This followed from the saturation in western retail markets and we find big retailers like Val-mart and Tesco entering into Indian market. AT Kearney has estimated Indian total retail market at US$ 202.6 billion which is expected to grow at a compounded 30% over the next five years. With the organized retail segment growing at the rate of 25-30% per annum, revenues from the 161 sector are expected to triple from the current US$7.7 billion to (18824 billion by 2010. NICHE foreign retailers are making a beeline for the Indian market. In fact, despite the FDI policy pertaining to retail being unclear, over 10 foreign niche segment retailers have recently set up or announced their intention to set-up shop in India using the franchisee route, with several others waiting in the wings.International brands such as Benemm. Lacoste, Levi Strauss, Crocodile, Dockers. Lee. Wrang‘er. Nike. Reebok. Adidas. Guess. Esprit. Mango. Hugo Boss. Mark & Spencers, and Tommy Hilfiger have already built a retail presence in the country, while market watchers point Out that several more such as Versace, FCUK, Zara, Mother Care. Kkea, Fendi, NEXT, Debenhams, Trussardi, and DKNY have charted out a strategy to enter the Indian market. Most of the brands entering the market are targeted at the premium end. According to estimates, the premium apparel segment in India is valued at about Rs. 1,900 crore and growing at 20 per cent. In addition to the patterns above, four additional factors which are transforming supplier capacities in ways that are blurring the boundaries between firms producing for the domestic market and those producing for exports are as follows: 1. Enhancement of local capabilities in the area of logistics i.e., warehousing and customized tracking systems. 2. Interesting emergence of design as a source of competitive advantage in Indian apparel. 3. Growing importance of local investment by Indian apparel firms as a way to counter the exclusion of India from all major regional trade agreements and 162 the advantage of tariff free entry into major markets that many of India‘s competitors enjoy i.e., Mexico in the US markets, Turkey and Bangladesh in EU markets. 4. Increasing focus on domestic brands. Renowned exporters in the country such as Reliance. Arvind, Raymond. Orient Craft etc., are developing their supply networks and distribution systems, seeking distinctive niches and generally staking out their terrain in the domestic market to consolidate their first mover advantage. Success story has emerged in the domestic apparel garment segments for the local brands and not limited to Pantaloon. Lifestyle and Westside only. No wonder a heavy weight like the Reliance group is planning to do a Wal-Mart in India. Now there is an increasing demand of branded apparel segment in the domestic retail market for the same features that are valued in demanding export markets. These shifts in retail are fuelling the demand for good quality and trendy apparel, which in turn are deepening the importance of aesthetics and design in the domestic market. It is worthwhile to mention that the rise of younger class of middle-class consumers, spawned by the booming BPO and IT sector, has led to burgeoning demand for locally designed, ready to wear clothing in Indian metros. As many surveys have established, with good salaries, strong peer pressure and the growing availability of brands across product categories, spending in retail is being driven by the youth segment‘ in large and mid-sized metros . 163 4.37 Retail Concept Development With the advent of the e-commerce, new retails concepts have also been perceived. It is a necessary component for keeping stores fresh and relevant and for staying ahead of their competitors. This is even more important today when consumers will have considerable choices from new channels available. Now is the-time for retailers to be developing new concepts or, at the very least, rethinking and reenergizing their current formats. An important and compelling reason for innovation is the overall compression of the retail life cycle. Where a concept once had 30 to 40 years to progress through the retail life cycle, the average life cycle is now greatly compressed. In the present scenario, ideas get into market faster, grow more explosively, and face obsolescence in a shorter period. The average retail life cycle looks like any typical bell curve. There is a period of development for an emerging concept, followed by a period of rapid growth, maturity, and eventual decline. This life cycle is still valid but there are major changes in the time periods involved in each stage. Concepts are growing, maturing, and declining faster than ever. Contributing Factors of Modern Retail Boom in India The driving forces towards development of apparel retail in India can be broadly classified into following categories: 1. Economic development 2. Improvements in civic situation 3. Changes in consumer needs, attitudes and behaviour 4. Influence of fashion 164 5. Changes in government policies 6. Increased investment in retailing 7. Rise in power of organized retail. 4.38 Economic Development The development of the Indian economy is a necessary condition for the development of the Indian retail sector. The example of Thailand shows that the impetus to modernization of retail was provided by the economic boom in Thailand. Development increases the disposable income in the hands of consumers and leads to an increase in the proportion of spending on discretionary non-food items. Economic development also enfranchises new households as potential customers for modem retail and leads to increased ownership of personal transportation among consumers, which in turn can increase their willingness to travel longer distances to shop in new format stores. The growth of the economy can also provide gainful employment to those who would otherwise enter retailing in areas like hawking, roadside vending and other similar low cost entries into the retail sector. Rapid economic development may also positively influence the views of international retailing companies about the business prospects and investment attractiveness in a country. A high degree of inflation in the economy is however, not conducive to modernization of the retail sector. In Brazil, the real progress in retail was noticed only\ after the stabilization of the economy and control of inflation (4). Development also has an influence on the regions and cities where modern formats are initially set-up. In the Greek. Thai and Brazilian cases, modern formats initially appeared in the important cities. This has been noticed in India as well as the modern formats first appeared in the metros like 165 Delhi. Mumbai and Chennai and the mini metros like Bangalore and Hyderabad due to the comparatively higher level of disposable incomes available in these cities. 4.39 Improvements in Civic Situation The civic situation includes factors like safety and security in the city and the various municipal regulations governing the opening, location and operation of stores, and the nature of public transport available. A safe and secure environment will encourage the, setting-up of 24 hour convenience stores and the operation of shopping plazas and encourage shopping expeditions for the whole family. The presence of adequate parking -facilities or excellent public transportation will encourage consumers job more mobile E in their choice of store. City or state regulations on opening or closing hours, rent control laws, availability of adequate electrical power and regulations relating to licensing will affect both the time required to set-up a new store as well as the cost of store operation and its viability. Many of the civic factors mentioned above would be dependent on the economic development and administrative policies in the area. The impact of the civic situation may influence the choice of the cities, states. zones in which the modernization investments will be made. 4.40 Changes in Consumer Needs, Attitudes and Behavior The growth of modern retail is linked to consumer needs, attitudes and behavior. Marketing channels including retailing emerge because they receive impetus from both the supply side and the demand side. On the demand side, the marketing channel facilitates to provide service outputs that consumers value. These service outputs may 166 include but are not limited to bulk-breaking, spatial convenience, waiting and delivery time and assortment . In Indian retailing, convenience and merchandise appear to be the most important factors influencing store choice, although ambience and service are also becoming important in some contexts . Modification will have to address convenience issues while presenting strong alternatives to the weaknesses of traditional formats in selection of merchandise available for sale. Modern formats need not be expensive and can offer lower prices to consumers . Lower prices in turn will increase the attractiveness of modern formats and rapid growth in the preference for purchasing from new format stores. Store ambience includes issues such as lighting, cleanliness, store layout and space for movement. Modern stores can offer a far better ambience compared to traditional stores. On the service front, traditional stores offer credit and home delivery. These needs will have to be addressed by new format. Experience from Brazil shows that the combination of entertainment and shopping provided by some shopping centres, is attractive to consumers. This may become important in India as well because of the limited entertainment options currently available in cities. While consumer needs, attitudes and behaviour will influence the development in retail; it is likely that investments in retailing and the creation of new stores offering value will in turn influence consumers. This appears to have happened in Greece. Thailand and Brazil. Another important paradigm shift in Indian apparel retail pertains to the rise of the purchasing power of the younger segment in the modern society. In fact, it is fuelling demand for domestic and oversees branded apparel at a rapid space. This demand is augmented by the arrival on the scene of retailing formats such as malls that are providing ready outlets for goods catering to this growing market niche. Thus, from 167 the demand side, this preference for higher value apparel, and the growing availability of organized distribution channels through which these products can be marketed is creating the conditions for the rise or development of whole new segments of the apparel industry in India with higher value capabilities on the supply side across the value chain. 4.41 Influence of Fashion Fashion has played a key role in shaping apparel consumerism. With the change in lifestyle, fashion in India is becoming more stratified, as in the West. Technology, ideas and lifestyles are moving concurrently and speedily. Companies and brands that offered monotonous, mundane products for years have now tripled their product ranges and new appealing shapes and forms are being launched each season. Top notch professional bodies in fashion trade are now working towards developing the fashion supply chain through backward linkages with suppliers and mills, and forward linkages with the retail and distribution network. 4.42 Changes in Government Policies The Indian government has clarified on a number of occasions that foreign direct investment will not be permitted in India. Major international retailer organizations will be watching for signals of policy change especially because China has permitted foreign investment in retail. In opening up the retail sector, the government may consider various approaches such as insisting on joint ventures, limiting the foreign stake, or pacific the city areas where investment is permitted. Thailand‘s example 168 shows that in case of joint ventures. the local partner can play a significant role in the success of the joint venture. The Brazilian experience shows that local retailing groups can successfully compete against international chains if they adopt innovations and restructure operations in accordance with market needs. Some policy protection can be given to consumer cooperatives which have been providing value to their members and customers. This protection can be in the form of allowing these organizations to access capital from the local market and operate in a more professional manner. The government can also play a positive role in simplifying or eliminating the plethora of regulations governing retailing. Specific laws relating to franchising will also be desirable for foreign and Indian brand owners to adopt the franchise route in a bigger way. According to the new directive of Indian Government foreign chains selling single brands were allowed in January to take up to 5 1 % in Indian joint ventures. 4.43 Increased Investment in Retailing The prospects for significant modernization and development in retailing will depend on the nature of investment in this sector. The investments will be of two types foreign and domestic. The quantum and nature of investment will depend on the factors outlined earlier namely economic development: civic situation; consumer needs, attitudes and behavior; and government policies. Although FDI is been permitted selectively in retailing, a number of global retailers are testing the waters by signing technical agreements and franchises with Indian firms. Fast food chains like McDonalds and Pizza Hut are already operating in the metros. A Marks & Spencer store is already operational in Mumbai. Several global retailers are awaiting a change 169 in policy. However, the development of the Indian retail sector is dependent not just on foreign investment but on Indian investment as well. Since the I980 its industrial groups such as Rehance and Raymonds have been active in encouraging development of well appointed exclusive showrooms for their textile brands. In the 1990s, industrial houses like Rahejas. Piramals, and Tatas have entered retailing. Several Indian and foreign brands have used franchising to establish exclusive outlets for their brands. At present, the new format stores cater mostly to households belonging to the higher income families. The catchment area for these modern stows has to be fairly or large as the number of such. households is small in relation to the total population. This limits the number of stores and constrains the growth of chains. The modern stores have also been plagued by low conversion in relation to the number of footfalls. This means that although a large number of people visit the store, the number of buyers and the average bill amount is small. Due to low sales, the bargaining power of the retailers with suppliers and manufacturers is low and this restricts their average gross margin. On the other hand, the expenses involved in setting-up and maintaining a modern format store tend to be much higher than traditional store due to the additional expenses on larger size, better locations and superior ambience. Therefore, if the returns on investment in the new formats have to be attractive, modern retailers have to develop a strong supply chain that provides them significant gross margins while delivering merchandise at attractive prices to customers. In order to do this, modern retailers will need to eliminate middlemen and buy directly from suppliers and make use of technology to control inventory. These developments will impact the survival and existence of middlemen such as wholesalers and agents who will have to 170 find new business models to survive. Manufacturing firms will also face pressure from strong buyers on price, delivery and service terms. 4.44 Increase in Power of Organized Retail Bargaining power of organized retail translates directly into higher gross margins for the retailers. At present there are a large number of independent retailers with little bargaining power vis-a-vis manufacturers, distributors and wholesalers. Manufacturers have been promoting their brands and generating consumer demand for branded products. This makes it necessary for all varieties of stores especially in urban areas to stock branded products. Manufacturers take advantage of the consumer pull to limit margins to the retailers. Retailers manage their profitability by operating on a very low cost basis. This is possible because of low rental expenses due to historical reasons and low labour costs due to employment of family members in the store. The modern stores have somewhat higher gross margins, but their net margins are not very significant for providing the cash flow required to fuel rapid growth in outlets. Retailers can increase their power in several ways. They can invest efforts in developing their own store brands. The supermarket chain. Food world. has begun doing this in a limited way with food grains and pulses. Secondly they can invest in supply chain, buy directly from the sources and eliminate middlemen. Thirdly they can attempt to obtain volumes in buying by aggregating the requirements of various stores, and bargaining for better prices by placing large orders. Although this strategy suits chain stores, independent grocers may also get together by forming a cooperative or buying club in order to benefit from scale economies in purchasing. Retailers can also obtain several benefits from using information technology. They can monitor 171 their stocks and sales using IT and thus manage their working capital more efficiently. They can also analyse data about customers and their buying habits and be in a position to develop marketing strategies and promotional offers to increase customer purchasing at the outlet. Manufacturing firms will need to develop new strategies for dealing with powerful retailers. The first change required will be one of mind-set. Negotiations with powerful retailers will have to be carried out at much higher executive levels within the firm. New structures such as National Account Managers, Category Managers etc., would need to be deployed. Firms will have to reconsider their brand promise, brand promotion and their brand building policies to deal with store brands that will be introduced by retail chains. Firms will also have to re-engineer their logistics policies to meet the demands of powerful retailers for just in time delivery to their distribution centres or stores. New product introductions will have to be coordinated with the retail chains so that adequate shelf space is available at launch. The firm will need to carefully look at their product cost structures both in terms of variable cost and allocated fixed costs in order to maintain profitability in the face of pressures for price reductions from powerful retailers. 4.45 Retail Branding Versus Product Branding A great difference between product branding and retail branding is that in many‘ cases products have an anonymous or even fictitious presenter, whereas in retail, consumers come in direct contact with the company and/or product. A Cadbury‘s Dairy Milk chocolate bar, for example, is a product made according to a set recipe in 172 a factory that is not open to the public. In addition, the people who work there never come into contact with the consumers because the retail channel lies in between. And those who do sell the ‗CDM‘ to the end-consumer (the retailers) do not have very much to do with it by virtue of their function. Therefore, it is possible to conceive a brand identity for the product. establish it for a specific target group and then fix it in the minds of consumers. Compare the identities of ‗Five Star‘, ‗Perle, ‗Gems‘ and ‗Temptations‘: all very different, yet they come from the same manufacturer. The issue is not of retailers selling brands but branding the retail business itself, like the fashion store. A hypermarket or department store, may offer several well-known brands, but in today‘s competitive world cannot afford to rest on its strategic product assortment and pricing initiatives to bring in the customers. The retailer must attempt to brand himself differently. especially when today‘s product brands are being launched through their product brand‘s own shops. (Examples in the shoe segment - Nike. Adidas and Reebok Jeans segment - Lee and Wrangler. Perfumes - Hugo Boss) Apparel retail will have to ensure that its own brand includes the characteristics of product brands detailed above. Retailers need to work on three dimensions to achieve this: (1)Brand Value The retail brand has to translate and transmit clear values to the customer. For instance, ‗value for money‘. ‗Luxury shopping redefined‘ are some of the slogans. Some companies have attempted to define this in their mission statements but they are often too vague and not actionable. For example the UK Virgin brand has the value of 173 challenging conventions and the US retailer Nordstrom has built the value of customer service. While many Indian product brands have successfully weaved values around their brands (Hamam on ‗trust‘, Godrej on ‗quality and TVS on ‗service‘) retailers are yet to develop a consistent value across their businesses. Some of the brands of domestic apparel retail of Pantaloon and Lifestyle are also attracting attention to the consumers. Pantaloon retail brands include ―Honey‖. ―Bare‖. ―Rig‖. ―UMM‘ and Big Bazar category comprises ―DJ&C‖, ―Knighthood‖. ―Studio NYX‖ etc. Among the Lifestyle brands, ―MAX‖. ―KAPPA‘, ―BOSSINI‖ are becoming increasingly popular to the domestic front. (2) Brand Strategy It is imperative that retailers have a systematic strategy on issues like whether to develop the retail brand or corporate brand and decisions on one product/one brand that they may be selling in their shop. Retailers can also decide to launch high quality retailer brands (‗own labels‘) backed by promotional campaigns. reinforcing clear personalities. Pricing policies, today position retailer brands as good value lines or premium lines (Nilgiris department stores prices its grocery lines above manufacturer brand prices). The view that retailer brands offer a cheaper alternative to manufacturer brand is no longer valid. There is even scope for retailers to develop alternative types of ‗own labels‘ targeted at different consumer groups in their outlets. An essential ingredient for success, in such cases, must be consumer-relevant added values -not just lower prices. It is only a minority of consumers today. who are prepared to trade off added 174 values for lower prices. Experienced consumers are no longer primarily motivated by low prices. There is scope to attempt a retail segmentation strategy. For example, DCM Benetton India redesigned its stores as per its international format and also repositioned the brand from a casual wear brand to a wardrobe option. The company is now attempting to target a niche audience through its concept stores. It launched a ‗Baby-on-Board‘ store which targets mothers-to-be and kids, an ‗Accessories‘ stores that sells luggage, bags, sunglasses and vanity cases and an ‗Adults Only‘ store that showcases Benetton‘s apparel collection for men and women. (3) Brand Structure Operational levels of the retail business have to be held together to integrate the whole brand proposal. At this level, marketing. human resources, distribution, logistics, administration and sales have to work to towards a common brand value that has to be communicated to the consumer. The retail brand‘s messages must be weaved into the ‗everyday experiences that the consumer has with the retail brand. Brand building constitutes a way in which the main value of the retail store 2 shifts to what has been traditionally called an intangible. Indian apparel retailing is coming of age and needs to have a clear brand proposition to offer the discerning Indian consumer. There is no doubt that the apparel retail business is gravitating from high street towards destination shopping (mall development) with enhanced mall space expected to hit the metros and mini-metros across the country. 175 CHAPTER 5 SUPPLY CHAIN MANAGEMENT 5.1 : Introduction – Basic concepts of distribution system The role of distribution in ensuring the success of organizational strategy is often underestimated. Distribution is thought of as a competitive advantage for those organizations, which have built up Distribution clout and economies of distribution through sheer size.The contention is that a well-executed distribution strategy can be a source of competitive advantage for organizations irrespective of size or market share, provided that it is focused on end customer needs and optimized with respect to cost of distribution. There is a robust approach for reviewing distribution strategies industries. This I approach, summarized a in the Andersen Consulting Distribution Strategy Pyramid focuses on answering the following strategic questions. 1. Given the value proposition, who are the end customers and therefore, what are the distribution objectives ? 2. What channel structure will achieve these distribution objectives at the lowest cost to serve ? 3. How do we manage our physical network to achieve objectives at lowest costs ? 4. What processes and organization structure will help sustain the distribution networks performance ? 176 This approach aims to – a. Ensure that a company‘s distribution strategy is based on zero-based distribution objectives derived from end-customer needs. b. Ensures complete integration across channel structure and supporting processes with the zero-based distribution objectives; and c. Results in the lowest cost to serve across product markets. 5.2: Setting Distribution Objective What are distribution objectives ? Distribution objective are defined for a product market in terms of availability of the product (for example, percentage of total outlets reached). Most companies do not explicitly set distribution objectives. Of those that do, distribution objectives often have no linkage to end-customer requirements. Often companies fail to ask questions like, ―How many and what kind of outlets do I need, to be available given target audience and their buyer behavior ?‖ Then, there are regional differences in category development to be taken into account. For instance, will extending distribution in a region with a low level of category development help me boost sales? Finally, the objectives should take note of the marketing initiatives planned for the year. The pyramid recommends explicit setting of distribution objectives based on end-customer needs. In most FMCG categories, distribution objectives are heavily focused on retail availability – how many outlets and what kind of outlets. In prescription drugs, the objectives would include, apart from outlet availability, coverage for doctors. Agrochemicals, on the other hand, may require objectives in terms of share of tonnage by 177 leading wholesalers.What is the basis for this difference ?. The difference lies in the definition of the end customer, which may be different from the end-consumer. The end-customer is the last entity in the supply chain who makes the brand decision. For FMCG industries, where the end-customer is the consumer, retail availability becomes the distribution objectives. In prescription drugs, however, the end customer is the prescribing doctor. Thus, the objectives need to ensure appropriate coverage of doctors, the end customer is the prescribing doctor. Thus, the objectives need to ensure appropriate coverage of doctors, without which no amount of wholesale push will drive volumes. In agro-chemicals, distribution objectives depend largely on the land-holding pattern in the market. Markets with large land holdings and geographic concentration require focus on a smaller number of large wholesalers whereas those with small land holdings and geographical fragmentation require availability to a large number of small traders. Distribution extension decisions depend upon relative category development by the market. Fragmentation require availability to a large number of small traders. Distribution extension decision depends upon relative category development by the market. In a highly – penetrated market, it is not possible to drive off take merely by increasing availability beyond a point. Similarly, in a low penetration market, merely increasing availability without addressing the fundamental drivers of low penetration may not led to volume growth. Figure 5.1 Manufacturer Distributor Malls Retailer Distribution Chain 178 The Distribution Development Index (DDI) is defined as the availability of a brand / category in the market relative to that of a benchmark brand / category. The Category Development Index (GDI) is defined as the per capital consumption of the category in that market relative to the national per capital consumption of the category. The relative level of DDI and GDI will determine the extent of the opportunity to actually extend distribution. Mapping markets in terms of their Distribution Development Index – potential to extend distribution in this market and their Category Development Index – growth potential for the product in this market helps identify distribution priorities. Figure 5.2 Distribution Development Index. Concentrate demand generation activities High Concentrate on quality of distribution, service level, frequency etc. Distribution Development integrated Extend distribution Development sales marketing immediately and package Low Low High The above diagram explains the distribution development index where in the distribution development is been explained with respect to different variables. 179 5.3 Developing Channel Design A number of companies do not develop a channel structure; they inherit it. Channel structures are thus often considered a consequence of the industry. Companies that do review their channel structures do not attempt to do so from the point of view minimizing distribution costs. The Pyramid recommends a comprehensive review of channel structure from the perspective of achieving distribution objectives at the lowest cost. Table 5.1 Supply Chain Methods Distribution Processes Setting / Achieving Controlling Distribution Distribution Objectives Inventory management Setting through strategy with alternatives levels in changing demand Setting Lower inventories a periodic up distribution Consistently lower inventory review of network. Demand forecasting based on network distribution objectives in line with the Lower trade spends (no attempts demand potential to boost Sales where demand) Monitoring of Achieving Controlling trade spends. trade spends. objectives by ensuring the Controlling distributor expenses right mix of direct coverage and service evils Monitoring distributor of distribution to distributors from making An optimal channel design requires the organization to understand the following : 180 prevent a. What activities and functions need to be performed (redistribution, stocking, collections and disbursements to company) ? b. Which channel intermediaries can perform these functions (C and F agents, distributors, wholesalers) ? c. What are the service level requirements that channel intermediaries require from an organization (credit, inventory levels, infrastructure, lead times from order placement to receipt of goods)? d. What are the service levels an organization required from our channel intermediaries (number of outlets covered, frequency of coverage, etc.) ? Given service level requirements of the company and the intermediary, what minimum returns should intermediaries be making for hen to deliver sustainable distribution objectives at the least cost. With C and F agents, it will be per cent commission / flat fees, with distributors / wholesales : it will be gross margins, return on investment. Optimal channel designs are heavily dependent on distribution objectives and the functions that need to be performed to achieve these. For typical FMCG categories, availability in over 5 lakh outlets requires services of credit, readily available stock and redistribution. This would typically require 1,500-2,000 distributors, who in turn would need to be serviced by depots / CG as for inventory freight economies. Multinational FMCG players have thus established that the lowest cost distribution channel is the factory CFA distributor (wholesale) retailer route. For 181 high value medical diagnostic products where the customer base is a few hundred hospitals and diagnostic labs, the key service requirements are high credit, low supply lead times / inventories (since most products have a limited shelf life) and cold chain transportation and stocking. 5.4: Developing Physical Network Strategy: Most companies take the location and capacities of their depots and manufacturing unites as given. The Pyramid recommends a comprehensive optimization exercise for the TDC of distribution. This requires the optimal channel design to be populated with a plan for the flow of goods and information in terms of the following: 1. How many facilities (manufacturing units / depots / CF As) are needed and where? 2. Which customers / regions and which product lines should be served from each facility? 3. How much inventory should be maintained in each facility? The populated network need to be optimized with respect to the total delivered cost of distribution. Using lineal optimization, several companies have managed to cut distribution costs by as mush as 10-15%. 5.5: Reviewing Distribution Processes: Most companies do not monitor ability of the distribution network to achieve distribution objectives or the cost of distribution. 182 The Pyramid recommends continuous monitoring of the ability of the distribution network to achieve objectives at the lowest cost through robust action-oriented monitoring processes. A two-step approach is required to formalize these principles. It is a one-time exercise to bring the distribution: system (strategy, structure, processes) in line with distribution objectives. Subsequently, undertake annual reviews of the distribution system as a part of the annual strategic planning process. 5.6 Flows in Channels of Distribution: A flow is a set of functions performed in sequence by channel members. In the flow process, producers, wholesales, retailers and consumers are linked. The functions that need to be necessarily performed in a channel system include transfer of ownership through transportation, order processing, inventory carrying, storage, sorting negotiations and promotions. The same function in a given channel system may be performed at more than one level and in such a case the workload for the function would need to be shared between channel members. A channel symbolizes the path for movement of title, possession and payment for goods and services. Fig. 5.3 below gives a representation of these marketing flows: 183 Figure 5.3 Produces Title Title Title Promotion Promotion Promotion Negotiation Negotiation Negotiation Managing Risk bearing Managing Risk bearing Managing Risk bearing Ordering Ordering Ordering Payment Payment Payment Information Information Information Source: Adapted from R.S. Valis, JS Grether and R Cox ―Marketing in the American Economy‖ (NY – The Ronad Press). 5.7: Patterns of Distribution: After a producer has selected the type of channel that makes the most sense for his products, the next step is to determine the level of distribution intensity, which specifies the number of marketing intermediaries that will carry the products. Depending on a firm‘s product, objectives and customers, the levels of intensity may differ from case to case. Also, distribution intensity is frequently modified as a product progresses through its life cycle. Marketers have three basic levels of intensity to choose from: intensive, Selective and Exclusive. 184 Consumers Produces Retailers Produces Wholesalers Produces Marketing Flows in a Channel System Intensive Distribution: A channel strategy that seeks to make products available in as many appropriate places as possible. Selective Distribution : A channel strategy that limits availability of products to a few carefully selected outlets in a given market area. Exclusive Distribution : An extreme case of selective distribution in which only one outlet in a market territory is allowed to carry a product or a product line. 5.8: Participants in the channel system The next important stage is channel strategic decision Plan finalization includes the development of a framework to help, analyze and select the most desirable channel structure arrangement. The planning and analysis framework introduces a range of tools available to assist managers in the finalization of a of a channel plan. Primary Participants Primary channel participants are defined as ―participants that acknowledge their dependence upon one another in a channel arrangement and retailers. The process in which materials and components are joined into products is typically called manufacturing. A manufacturer is one who produces the product. Manufacturers represent significant and highly visible channel participants because they produce product that become the primary concern of the overall distribution process. Manufacturing activity create form utility. Manufacturing in combination with agriculture and mining serves to generate a flow of products, services commodities and materials that ultimately become the local concern of marketing channels. The balance of the distribution process serves to provide a variety of 185 different manufactures products for wholesalers, retailers and customers. Manufacturers take a significant risk with the creation of their products. This brief introduction of manufacturers serves to highlight the complex nature of the overall production process that drives many channel arrangements. The specific nature of a manufacturer has a great deal of impact upon the choice of which channel arrangement to use. 5.7 Key Issues in Determining Channel Requirement Which a manufacture faces an agenda of issues related to finance marketing and industrial relations, arrangement. The key issue related to this are : 1. Product Proliferation and dynamics: and 2. Total Quality Initiatives These two issues are significant for a typical firm in determining how channel requirements will be delineated: 1. Product Proliferation and Dynamics: A major concern throughout industry is the rapid expansion that firms are experiencing in the number of stockkeeping units that they maintain in their product list. Fully understanding basic customer needs through marketing research is viewed as a key to a successful new product launch. In practice, few firms have a lightly successful new products fail to remove obsolete inventory. The product life cycle is useful for planning the marketing and distribution strategy. Numerous examples are available from the food industry to illustrate the product proliferation dilemma. The industry is characterized by a constant effort on the part of manufacturers to introduce new products for 186 distribution. Retailers and wholesalers want to enter into an agreement with manufacturers in which they agree to buy all unsold inventory back at the retails price if a product fails. Independent of the fairness of such agreement, the fact remains that the inventory mistakes must be cleansed from the channel. 2. Total Quality Initiatives : Total quality initiatives represent, the primary focus of the revitalization drive. The concept of total quality is ―do it tight the first time‖. The general concept of total quality is to focus managerial attention on the three key concepts manufacturing: People, Process and Design. 5.10: Logistics for Retail Operations Logistics is not a new area of marketing management. It has been performed since the beginning of civilization. It descries the entire process of materials and products moving into, through arid out of the company. The actual work of logistics is supportive in nature. It involve the integration of transportation, inventory, warehousing, materials handling, packaging and information technology. Logistics helps the inflow of materials into the manufacturing process. It also helps in distribution of products to consumers through various marketing channels. Hence, logistical support is a must for marketing and manufacturing operations, and materials handling cannot be avoided in the performance of logistics. Logistics management includes the design and administration of systems to control the flow of material, work-in-process and finished inventory to support business unit strategy. 187 5.11: Functional areas of logistics There are seven important functional areas such as Manufacture plants, warehouses, material handling distribution and after sale services are typical logistics facilities. Network design is one of the prime responsibilities of logistical management. It is required to determine the number and location of all types of facilities required to perform logistics task. The selection of a superior locational network can provide the first step towards competitive advantage. Logistical efficiency directly depends on the proper design of network and infrastructure. 5.12 Information Technology Two major areas that depend on information are: a)Sales Forecasting. Sales forecasting is done to estimate the future requirements of logistics. It helps inventory management to satisfy anticipated customer requirements. b) Order Management: Customer‘s order is very important in logistics. Logistics services are required for external and internal customers. External customers are those that consumer the products or services and any trading partner that purchase products or services for resale. Internal customers are organisational units within a company. 188 The more efficient the design of a company‘s logistical system, the more sensitive it is to information accuracy. Incorrect information and delays in order processing can cripple logistics performance. 5.13 Transportation It helps in positioning inventory geographically. There are three forms of transport, i.e. private carriage, contract carriage and public carriage. There are three fundamental factors to transportation performance. Cost: It is the payment for movement between two locations and expenses related to administration and maintaining in-transit inventory. Hence, logistical systems should be designed to utilize transportation that minimize total system cost Speed: It is the time required to complete a specific movement. Speed and cost of transportation are related in two ways: i) Faster service with higher rates ii) Faster service means shorter time interval Therefore, balancing of speed and cost is necessary The above figure explains the level in transportation system in this it is evident that logistics to consumer satisfaction is dependent on 7 factors which are required to be taken care of. The conflicting objectives of inventory control are reflected in the seemingly conflicting demands which are made on an inventory manager from time to time. 189 Inventory Management The interest of management in better inventory management is much more than it was a few years back. Management knows the need, importance and practicability of scientific inventory management. The conflicting objectives of inventory control are reflected in the seemingly conflicting demands which are made on an inventory manager from time to time. for example, stocks are to be kept at a low level but not too low; turnover is to be increased but only at a satisfactory profit rate; bulk purchases are to be attempted to obtain better prices but over-buying is to be controller, special attention is to be given to the disposal or near obsolete items but not before the point of obsolescence is identified, and so on. 190 Table 5.2 Selecting Inventory Control Techniques Sr. No. 1 Title Bass Main Uses A.B.C. (Always Better Value of To control raw Control) Consumption material components and work in progress inventories in the normal course of business 2 3 H.M.I. (High, Medium Unit price of Mainly to control Low) material purchases X.Y.X. Value of items in To review the storage inventories and their uses at scheduled intervals 4 V.E.D. (Vital Essential Criticality of To determine the Desirable) Component stocking levels of spare parts 5 6 F.N.S.D. (Fast, Consumption To control Nominal, Slow, Dead, pattern of the obsolescence etc.) component S.D.E. (Scarce, Problems faced in Lead time analysis Difficult, Easy to procurement and purchasing obtain) 7 strategies G.O.L.E. (Government, Source of the Procurement Ordinary, Local, material strategies Nature of supplies Procurment / Foreign sources) 8 S.O.S. (Seasonal, Offseasonal) seasonal items like agricultural pdts. 191 The above table explains the inventory control technique selection method by various apparels malls for improving the supply chain. 5.14 Economic Order Quantity (E.O.Q.) Economic order quantity is the quantity for which orders are placed when stock reaches the re-order level. E.O.Q. is the quantity, which is most economic to order. In other words, E.O.Q. is that size of the order, which gives maximum economy in purchasing material and ultimately contributes towards maintaining the material at the optimum level and minimum cost. With E.O.Q. two types of cost should be taken into account : 1) Ordering Cost. This is the cost of placing an order with the supplier. Because of so many factors involved, it is quite difficult to quantify this cost. 2) Inventory Carrying Cost. It includes the following : A) Cost of operating the stores B) The incidence of insurance costs C) Interest on capital locked up in store D) Deterioration and wastage of materials 5.15 Mathematical Formulate E.O.Q. can also be calculated with the help of a formula as given below: 192 Economic order quantity = annual requirement quantity (D) Cost per order (K) Cost per unit (c) Carrying cost percentage (h/c) Annual carrying cost per unit (h) The above mathematical formula helps in identifying the variation inventory carrying cost with reference to ordering cost to have an understanding of the economic order quantity. 5.16 Warehousing: Warehousing provide a key link in the physical distribution chain, and like other stages of distribution, they are being closely scrutinized by today‘s marketing managers. The location size and capabilities of warehouses can profoundly affect a company‘s ability to satisfy its customers and deliver products and services profitably. 5.17 Types of Warehouses The basic purpose of warehousing in distribution logistics is to arrange placement of products and supply storage facility to store them, consolidate them with other and similar products and divide them into smaller quantities on the basis of ownership. 193 There are two types of warehouses, i) private warehouses, and ii) public warehouses. The following decision variables can be considered: Table 5.3 Decision Variables in Choosing among Types of Warehouses Types of Warehousing Arrangement Decision Fixed Private Owned Leased Very high Moderate, depends on the No fixed investment is involved lease‘s terms investment Unit cost Public High High, if volume is low Low, since facilities are on ―for hire as needed‖ and fixed costs are widely distributed among users Control High High Low managerial control Adequate Highly adequate Moderately adequate May not be convenient Low High; termination of usage can be produce line Flexibility Low easily arranged 5.18 Factors affecting Warehousing Choice The warehousing decision is influenced by the difficulty of moving goods directly from the assembly line to buyers or public warehouses. The following factors have to be kept in mind when deciding the location of a warehouse: Product type Transportation cost 194 Markets Rent Labour supply Taxes Geography Competition 5.19 Materials Handing Equipments Material handling is such an important activity that it cannot be avoided in the performance of logistics. Material handling activities should be minimized as it requires a very high capital investment and direct labour cost. The network of facilities forms a structure requirement of customers. Transportation is required for materials handing – for efficient loading and unloading. In warehouse operations, materials handling involves makes products to be received, moved, sorted and assembled to meet customers and distributors requirements. Products in the forms of cans, bottles or boxes are combined into larger units to make master cartons because it protects the products during the logistical process. Materials handling system in logistics is designed under certain guidelines. These are very important to assist management. These are: 1. Equipment for materials handling and storage be standardized. 2. The system should be provide maximum continuous product flow as per the requirements of the company. 3. handling equipment should be property utiliesd 195 5.20 Classification of Materials Handling Systems Materials handling systems in logistics are mainly divided into 3 categories: 1. Mechanized Systems. These systems utilise a combination of labour and handling equipment to facilitate receiving, processing, and/or shipping. Mainly labour constitutes a high percentage of overall cost in mechanized handling. Even then, mechanized handling systems are very common. They employ a wide range of handling equipments. These are: i) Forklift Trucks ii) Walkie-Rider Pallet Trucks iii) Townlines iv) Tow Tractors with Trailers v) Electric Hoists or Cranes vi) Conveyors 2. Semi-automated System: When selected handling functions are performed using automated equipment and the remainder of the handling is completed on a mechanised basis, then the system is said to be semi-automated. It can be called as a mixture of automated and mechnised handling. The main equipments used in semi-automated system are: (i) Automated-Guided Vehicle System (AGVS) Sortations (ii) Robotics 3. Automated System: Automated system attempts to minimise labour as much as practically by substituting capital investment by equipment. 196 5.21 Packaging Packaging includes handling and storage of finished goods. It also emphasizes on protection from loss and damage. Hence, we can say that logistics management is the framework of 7 Rs- Right Quantity of the Right Product or Service to the Right Place in the Right Conditions at the Right Cost and the Right Time with Right Impression. Excellenc in each aspect of functional work is relevant and must be viewed in terms of improving the overall efficincy and effectiveness of integrated logistics. 5.22 Logistical Integration The logistical integration process of two inter-related efforts, i.e., Goods flow and information flow. Information from and about customers flows through the enterprise in the form of sales activity, forecasts and orders. This information is refined into manufacturing and procurement plans. A value-added inventory flow results in transfer of finished products to customers. a) Physical Distribution. Physical distribution refers to those activities, which are related to providing customer service. It requires performing order receipt and processing, deploying inventories, storage and handling and outbound transportation within a channel of distribution. It coordinates with market planning such as pricing, promotional support, customers service levels, delivery standards, handling and life-cycle support. Its main objective is to assist in revenue generation by providing desired customer service levels at the lowest tatl cost. 197 b) b) Manufacturing Support. These activities are related to plannning, scheduling and supporting manufacturing operations. It requires master schedule palnning and performing work-in-progress storage, handling, transportation and time phasing of components. It is responsible for storage of inventory at manufacturing sites and maximum coordination between manufacturing and physical distribution captivities. c) Procurement. It is related to obtaining prosucts and materials from outside suppliers. It performs resource planning, supply sourcing, negotiation, Order placement, inbound transportation, receiving and inspection, storage and handling and quality assurance. It is responsible for coordination with suppliers for better scheduling, supply continuity, and speculation, as well as research leading to new sources or programmers. Its main objective is to support manufacturing or resale organizations by providing timely purchase at the lowest total cost. d) Inventory Flow. It is concerned with the movement and storage of materials and finished products. It starts with the shipment of materials or component parts from a supplier and ends when a manufactured or processed is delivered to a customer. The logistical process adds value by moving inventory when and where needed. Work-in-process inventory must be moved to support final assembly, thereby it gains‘ value at each step of its transformation into finished inventory, e. Information Flow: Information integrates these three operating facilities, coordination of planning and control of day-to day operations. 198 e) Information Flow. Information integrates these three operating components. These components contain the actual logistics work and information facilities, coordination of planning and control of day-to day operations. 5.23 Supply Chain Management for operations Supply Chain Management (SCM) is moving up the corporate agenda. As competitive pressures increase, companies are being forced to rethink how and where they can squeeze costs out of the supply process.But supply chain management should not be seen simply as a means as a means reducing casts, experts warn. It should be regarded as a means of boosting revenue, as a source of competitive advantage. One health care company won a large chunk of the market from an established competitor when it introduced a system allowing overview by investment bankers Morgan Stanley, Dean Witter as ―the integration of the flow of materials, documents, information and finance, which optimises individual shipments‖. improves delivery time, eliminates all non-value-adding and improves quality and after-sale service. Towards achieving this, strategic alliances between various entities in-between the customer and raw-material supplier become critical. The necessary ingredients are: i) Information access; ii) Training; and iii) Confidence building. 199 5.24 Information Access The entire world is transforming itself into a borderless networked economy. The recent developments in information and communication technology have enabled consumers of goods and services from being exploited by unscrupulous intermediaries. Computing and communication costs are falling every day and both will become almost free in the near future. Technology advance is so fast that the present TV screen and connecting cable will not only be able to provide entertainment but also be used for obtaining global information instantaneously for products and services. Once a customer‘s order is entered order is entered into the infonework of an enterprise, relevant information is transferred to all the concerned members of the supply chain through Electronic Data Interchange (EDI). A good information and communication infrastructure consisting of Enterprise Resource Planning (ERP) with Internet and intranet facilities will facilitate the same with ease. Attempts are being made globally to modify the present ERP packages into ―Customer Synchronised Resources Planning‖ packages. In a typical environment, an ancillary supplier logs into the customer‘s ERP and delivers components directly to the concerned shop-floor user on just-in-time basis. He is paid for the actual usage determined based on dispatches effected on the due dates through Electronic Funds Transfer. Only the statutory paper work is handling by the Accounting Department and in some cases the same is also subcontracted. 200 5.25 Training Training both internal and external players in the supply chain is a very important ingredient. Each functionary has to be taught his role very clearly and empowerment is very essential for an effective supply chain management. External suppliers and service and also trained in such a way that the ultimate customer‘s satisfaction is the focus of all the players in the chain. Every individual is a strategic partner in the supply chain and the consequences of failure at stage is explained through simulated models. Hence ever individual associated in the supply chain network is trained in correct practices for delivering best quality products and service in the quickest possible time and at the least cost. 5.26 Confidence Building All the human beings involved the supply chain are taken into complete confidence through both transparency of operations as well as long-term relationship. Developing alternate supply sources is not encouraged and the existing supplier is continuously motivated to improve his quality, product/process technologies and cycle-time. The savings accrued are shared by all the players throughout the life cycle of the product. Internally also continuous organizational growth results in better promotional opportunities for human resources. 201 5.27 Successful Indian Case Studies There are several Indian success stories on SCM. An Indian paint major has made his paints available in multiple shades and sizes to the customers within 10 km radius of his residence. Conventional inventory theory suggests that variety lead to more inventory and associated costs. However, the paint major has reduced inventory to half as compared to his competitors and his sales have grown much above the industry average.Similarly, a large paper manufacturer in the country felt raw material was a problem area both from supply and cost angle and started educating the farmers with better seeds and crop protection techniques. Simultaneously, they also interacted with major customers directly and offered custom-built solutions to their problems. Even though paper industry is has achieved much better financial performance as compared to his competitors. An Indian pharmaceutical major had problems with his plastic packaging material supplier situated 1,500 km away. The CEO of the pharma major personally visited the supplier and offered to provide site and organise funds provided he was willing to shift his operations near his pharma unit. The package not only succeeded but the pharma major adopted the same technique with his other suppliers. Suppliers were redesignated as ―Supplu Partners‖ and the purchase manager was redesignated as supplier Relations Manager. 202 Such success stories will percolate to more corporate. The salient features of a typical SCM are: 1. Customer is the focus of all operations. 2. Retaining existing customers and adding value to them on a continuous basis through closer interaction and understanding their problems. 3. All the operations are streamlined and all roadblocks are removed between ultimate customers and raw material suppliers. 4. Most of the non-core activities are outsourced and hence fixed costs are kept minimal. 5. Implementing S.C.M. in an ERP environment eliminates paper work. 6. Reduces inventory and facilitates just-in-time. 7. Transparency is ensured at all levels so that the entire organisation operates as a single integrated unit instead of different blocks. 8. S.C.M. is a customer synchronized positive technique and hence implementation is a painless compared to other techniques. 9. Developing multiple supply sources for a single component is avoided and long-term contracts are signed with the suppliers resulting in confidence building. 10. Close interaction between the corporate R & D and the suppliers facilitates continuous improvements in product design, process methodologies, ect. resulting in customer value enhancement and cost reduction. One need not do Activity-Based Costing to find out whether retaining an existing customer is a than creating a new customer. It is common knowledge that a happy customer will recommend product or service to several other customers. An 203 effective S.C.M. eliminates most of the activities in between customers and raw material suppliers along with environment will replace the present euphoria of cost management. Table 5.4 Supply Chain Process Supply Chain Supply Chain Planning Supply Chain Execution Source Material Planning Spot Buying/ Virtual Marketplace Make Production planning Production Scheduling Move Logistics Planning Warehouse Management Store Distribution Planning Advance Order Management Sell Demand Planning Available to Promise Process Source : The Management Accountant – January 1999. 5.28 Distribution Intensive Supply Chain Distribution intensive supply chain manufacturers include consumer packaged goods producers who must meet the demands of large retailers, or else lose business. In recent years there has been a fundamental shift in market power from manufacturers to retailers. Historically, manufactures dictated the terms of trade with retailers and organised their business primarily to increase manufacturing efficiency and output. Today, large chain retailers increasingly are choosing suppliers based on their efficiency and output. Today, large chain retailers increasingly are choosing suppliers 204 based on their ability to match product flow to actual customer demand.As a result, manufactures are reorganizing their business to focus on satisfying retail demands by reducing delivery response times, engaging in frequent and retailer specific product promotions, delivering products packaged according to retailer requirements, and lowering retail inventory levels through more frequent deliveries, quick response, or vendor managed inventory programmers. Retail customers are now penalising suppliers not only for deliveries that are late, but also for those that are incomplete or early. Vendor Managed Inventory is a concept is a whereby the manufacturer has ownership of inventory, as opposed to the retailer, and the manufacturer maintains a high degree of responsibility to stock appropriate levels of product at the retailer‘s distribution centers or stores. Quick Response is an initiative to increase customers satisfaction by ensuring that proper quantity and style/size/colors of product is available to the consumer on the retailer‘s shelf. Manufacturers in this segment should consider buying an SCP system with state of the art functionality in demand management and distribution planning. Advanced Order Management (AOM), Transporatation Management and Warehouse Management System should be used by most manufacturers in this segment. AOM systems that allow manufacturer may have divisions hat produce multiple multiple consumer products, but the retailer wants to deal with a single contact person, have the diverse goods delivered on the same truck, and be invoiced only once for the shipment. 205 5.29 Supply chain strategy Today‘s business conditions are rapidly changing, thereby affecting the way business is done, these changes dictate an organisations work in a more integrated manner. People are generally accustomed to work in wateright compartments where every department works in isolation. But current (business conditions have forced companies to system, entire logistics is grouped under one tree. All components fin the logistics chain are managed as a part of the same team to optimise collective efficiency. Today S.C.M. is the latest focal point of all companies. It is because, if managed property, supply chain can provide immense competitive advantage to the company. 5% to 25% of total costs are incurred in logistics, depending on the nature of the industry and a well-designed SCM system significantly boosts the bottom line. Also a good S.C.M. system can help in creating an enduring relationship with the customer. 5.30 Customer Value Proposition However, developing an effective SCM system is lot easier said than done. Let us examine what goes in making an effective SCM system. The objective of the SCM system is to optimise the value to customer. The customer is generally driven by following three criteria to make any purchase decision: Product feature; Product quality, and 206 Customer service level. When a product offers better features or superior quality, the customer goods for the product even when service is not good. Indian customers have long queued to purchase foreign-made electronic goods even from dubious sources without any guarantee for service because time, ease of purchase, packaging, support, sales service, etc. Customer always compares these three criteria (features, quality and customer service) with the product price and when these benefits match or exceed the price, the purchase is made. hence to make a sale. a company ties to maximise the value delivered by these three factors. As already stated today, when product features and quality is comparable, every company tries to improve customer service levels. But how do we manage the service levels? Given the unlimited resources, service levels can be improved to any extent possible. But does that translate in increased profit for the firm and higher value for the customer? As the company improves customer service levels, servicing cost increases. But sales also increase, resulting in better realisation of profits. However, beyond a certain point, increase in customer service does not result in corresponding increase in profits as the service costs increase sharply but level valuable enough to pay the extra price. So beyond a point, customer service levels do not deliver the same value to the customer. Therefore, it is important to identity the acceptable service level. Unless an acceptable service level is decided, it is futile to establish a Supply Chain Management (SCM) system market conditions. But the objective is to operate within the operational zone to maximise profits as shown in the ablove figure. 207 One thing, however, should be kept in mind. Service levels are not static. The relationship between service level and sales changes every day. As competition increases, customers get better services and they penalise products with bad service level chain. Originations need to constantly redefine and innovate their supply chain to deliver value to the customer. The winner o the supply chain management can wo can adjusting the chain at these levels. 5.31 Cost of the System The service level itself is not one distinct unit, but consists of various factors like delivery time, response time, ease of purchase, packaging, support, sales service, etc. Companies often waste their efforts doing the things that do not value to customers. In some cases they end up having service level far below the customer expectation resulting in lost f opportunity and in other cases, they unnecessarily build the excellence which is not valued by customers. Organizations therefore, need to redefine and build the supply chain to align with consumer requirements. 5.32 Customer Service Level. A clear understanding of customer service level is the key to implement any SCM system. Customer Service is defined as the activity of providing desired goods or services with quality and total support to benefit every aspect of usage at a competitive price and in a timely manner. There are several benefits customers seek like. 208 1. CONVENIENCE in procuring the product; this includes ease with which order are placed and confirmed, delivery is received. payments are product is set up for usage. 2. FLEXIBITY to respond to special need of the customer. 3. RESPONSIVESS is the speed at which customer which customer problem are addressed during and after sales. 4. PAKAGING is the way in which products are packed along whit other benefits. In simple case, it could be various related documents. In complex casese of industrial salse, good packaging also includes supplier‘s ability to deliver the product in requied lots, required sub-assembly and at the point of usage. Design and deployment of the supply chain management system is a difficult task. If involves creful analysis and diligent implementation. Understanding the customer requirements and service levels are the first stage of the process. 5.33 Supply Chain Efficiencies It is a typically beastly, sweltering morning in Chennai, when Ramesh Krisrvnamoorh a regular shopper at supermarket chain Food World, steps into the cool confines of its Adyar outlet, breathing a huge sigh of relief. But he‘s soon hot and bothered all over again when he finds that his favourite brand of shampoo, made by a prominent multinational, is out of stock n Food World‘s shelves. Sure, he‘s buying other things, but it‘s the shampoo he wanted, for which he braved the heat to get to Food World. Would he be interested in a substitute? Stock-outs, an Indian retailing reality, can be as high as 30-35 per cent, even for a top brand from an MNC with a supposedly welloiled distribution system and in a top-notch retail outlet. 209 5.34 Efficient Consumer Response (ECR) This is a demand-driven replenishment system designed to link all parties in the logistics channel to create a massive flow-through distribution network. Replenishment depends upon consumer demand and point of sale (POS) information. In a retail organization, information and consequently merchandise and servies- elicits the greatest the free flow of consumers since it addresses their needs appropriately. 5.35 The meaning of ECR: ECR as a concept which ground in the US in 1993 in response to market conditions there like low growth, high competition, consumer pressure, emergence of new channels and highly efficient new entrants and the fact that traditional adversarial relationships resulted in high costs. Moreover, the ECR response was to focus on consumers and work together-within departments, with partners and with competitors. This movement quickly gained ground in Europe in 1994, in Asia in 1996 and Latin America 1998 and now has seeped India.ECR India is an independent joint trade and industry body ―to promote the use of ECR techniques as a means of removing unnecessary costs from the supply chain and making the sector, as a whole, more responsive to consumer demand.‖ Expains Aridam Guha, General Manager, Commercial FoodWorld Supermarkets Ltd., ―ECR is essentially a practice in the FMCG industry, given the nature of the products. In India, the push has come from MNC players whose overseas partners have seen the benefits derived from ECR.‖ For example, HLL, the largest player in the FMCG 210 business, is a key player in the ECR movement here. Unilever is an active member of ECR in most parts of the world-North America, Europe, Asia and LAtin America. Currently, Unilever‘s Co-Chairman, Antony Burgmans, is the Co-Chair of ECR Europe. Says an HLL spokesman, ―HLL sees considerable value in the ECR movement for the initiative.‖ Adds a Nestle spokesman, ―The success of the ECR intiative will reduce overall waste in the system and benefit not only Nestle but the entire industry.‖ So, while key constituents of the movement are gung-ho about the movement gaining ground in India, they are well aware that it is not something that can be transplanted in toto from the West and imposed on the Indian retailing system, given its fragmentation and peculiarities. Says J & J‘s Ambwani, ―ECR needs to be re-invented for India, since Indian is unlike any other country when it comes to the extent of fragmentation. The hurdles would be communicate these principles, so that the efficiencies are generated and shared across the supply chain.‖ Nestle too recognizes that it‘s going to be a long haul. Says a Nestle spokesman, ―Since there is very little organised data available, planning becomes difficult and because there are virtually no organised representative trade bodies, implementation of initiatives is also very difficult and slow. It is, therefore, necessary to understand that the results will be slower in the traditional trade environment of the Indian market compared to, say, the more organised markets of the west.‖ 211 5.36 Uses Of ECR: The ECR movement began in the US because US retailers could not digest the fact that manufactures weren‘t giving special treatment and terms to club stores and mass merchandisers. Also, many of the methods used to buy, sell and move goods to the ultimate consumer are inefficient, ineffective ana out touch with new retail formats. An analysis of the supply chain threw up several inefficiencies in procurement, distribution and service. In that context, it was felt that manufacturers, wholesalers, retailers and supply chain providers needed to reinvent their business relationships to remove excess layers of inventory and non-value added costs. For example, one bugbear for Indian retailers is the high carrying costs of inventories, needed because of the inefficiencies in the system and the generally high levels of stock-cuts. On an average, Indian grocery retailers need to carry at least 45 days of stocks against a retailer say in Thailand who carry onl around 12 days of stock.Aggregate stock-out level is still the benchmark for supply chain efficiencies,‖ says Food World Guha. An analysis done in select Food World outlets showed that stock-outs were as high as 25-35 per percent even for some of the bigger companies. Each company looked at the top 10-15 Stock-keeping Units (SKUs) in some ‗A‘ category outlets. ―The analysis showed that some sensitive products were missing from the portfolio. This could be a lot higher at non-‗A‘ outlets,‖ says Guha, We as retailers have been able to see what stock-cuts do-we see loyalty shifts and it‘s an opportunity lost.‖ he adds. Studies show that reported savings in costs for industry because of ECR was 10 per cent or $ 30 billion of the $360 billion grocery sector. The asving in Europe could be 212 even more or around $ 33 billion. The potential benefits, sasys a study on ECR, are significant- increased sales of 5-30 per cent because of improved service levels, elimination of retail stock-outs and a more focused SKU assortment! ECR also reduces inventories through reduced lead times and better information flows and reduces obsolete stock and lowers operating costs. 5.37 Efficient Inventory Planning: Efficient inventory planning enables the retail organization achieve its strategies and benchmarked standards of customer deliveries, at the same time reducing supply chain expenses. Inventory planning has already been discussed in the chapter on merchandising. Forward planning is done by forecasting sales and Beginning of Month (BOM) and End of Month (EOM) inventories for specific periods, and preparing the OTB (Open to Buy) plans. Efficient inventory planning optimizes controls through OTB so that the planned stock turns are achieved for the store with just-in-time inventories for freshness and achieving customer satisfaction through the seven ‗rights‘ of merchandising. 5.38 Per-Purchase Order (PPO) and Purchase Order (OP): The PPO is an instrument through which the tentative plan of order placement to the vendor is done for the whole season as soon as the inventory planning is completed. The Purchase Order is the confirmed order (or supply) 213 5.39 Integrated Supply Chain The end-to end integration of the supply chain elements and functions are achieved by applying interlinked packages for perfect information management. The integrated supply chain starts form the design stage at the vendor level to the time when there is response at the retail stage. The benefits of having an integrated supply chain are many, including achieving the best delivery performance, reduction in inventory, faster fulfillment of cycle time,-accuracy in forecasts, lower supply chain costs, improvement in overall productivity, improvement in capacity utilization, and so on. 5.40 Vendor Management: Efficient vendor management involves the right vendors capable of giving the right quality of merchandise and meeting delivery deadlines. Besides, they should be able to deliver the right quantities as well, so that the retailer can get the right ‗hit ratio‘. The right hit ratio measures the gap between delivery and purchase orders and helps eliminate backlog in deliveries. In a chain store scenario, vendors directly delivering to stores is an important element in attaining good supply chain efficiency. The vendors directly manage inventories in a few retail organizations. Vendor Managed Inventory (VMI) is ideal for retail organizations as it totally eliminates inventory-carrying costs. Here, vendors mange the inventory at every store, monitoring the flow of information and ensuring just-in-time deliveries. The vendors are able to take back slow-selling and non-moving merchandise, thus reducing the scope for mark-down losses for the store. 214 5.41 Electronic Data Interchange (EDI): Helps in establishing an efficient information flow on stock movement, and the vendors get to know of sales and inventories instantaneously. Reorder supplies are immediately planned and executed by the vendors following acceptable norms. This process eliminates the time taken to exchange documents for placing orders, thus achieving just-in-time inventory management. EDI is done through web-enabled servers or with the help of the organization‘s ERP (Enterprise Resource Planning) package that interacts with the vendors‖ systems. 5.42 warehouse Management: The retail warehouse or the distribution centre (DC) performs the functions of receiving the ordered stock; checking for the right quality, quantity and price; temporary and docking; tagging the merchandise with both the MRP and security tags: preparing and readying the merchandise; transporting the merchandise: receiving goods returned from retail stores, if any ; and sending returned merchandise to vendors back as returns or refinishing. 5.43 A Goods Received Note (GRN): Is prepared when the merchandise received at the warehouse from suppliers/vendors is checked and matched with the relevant purchase order (OP) after certifying all the elements of quality, quantity, etc. The GRN is then automatically recognized by the 215 system after authorization for payment to the vendor by the accounts department. Then, only the security tagging needs to be done at the warehouse. 5.44 Inter Transfer Note (ITN): This is made when the prepared and readied merchandise is supplied to the retail stores. The reverse ITN (ITN out) is prepared when goods are sent back to the warehouse by the retail store. Goods that are returned to the warehouse are then sent back to the suppliers and vendors. The system recognizes the same and raises a debit to he vendors. Transportation is done according to timely delivery schedules so that replenishments are delivered as per the plan. Cost efficiency and reduction in delivery time are critical success factors in transportation. Efficient docking with plan ensures the best utilization of space. Docking also ensures that the First Out (FIFO) delivery plan is followed so that ageing of merchandise in the warehouse is kept to the minimum. Material Handling Equipment in the warehouse should be tailored for specie varieties of merchandise . 5.45 Value Chain: The entire SCM process is valid where bottlenecks, value- adding facility and liability factors are identified and addressed, thus enabling the retails organization to have an efficient supply chain. The entire processes of audits or meet timelines, and may be reengineered to achieve cost effectiveness. 216 5.46 Automaton and supply chain manage The principal objective of supple chain agreement (SCM) in a retail organization is to sstisfy the customer at the right time with the right product at the right costs all the time> Integrated system help bring about efficiencies so that the customer is satisfied every time. The challenges that a retail organization faces are many; huge stockkeeping units (SKUs), seasonal variations of product lines necessitating the introduction of new SKUs,. complex tax structures, the sheer geographic spread of the country (and hence complex logistics and replenishment periods), changing consumer demands, etc. Automation - through the implementation of ERP system – has helped many organizations improve their efficiency and helped them grow. The discovery of automatic identification technologies has been a boon to retailing: they were first introduced globally in the 1960 to assist logisticians identify products in the supply chain. The global development of such SCM technologies has- been very rapid. There were barcodes, touch memory and multi-dimensional barcodes. In India the development of SCM technologies has come a loge way. Retailers in the organized sector are beginning to barcode all their products; organization like Food World (RPG group) and Shoppers‘ Stop (Raheja group) have urged their vendors to supply merchandise only with standard barcodes. The next phase will see the introduction of RFID technology to help track the product and customers‘ use patterns even post-purchase. P & G currently tags (RFID) a small number company is currently focusing no the supply chain and has not even begun to think about what‘s going to happen to the items post-sale. There are privacy concerns 217 stemming from the fact that companies will collect data about customers without their knowledge, and then may misuse that data. Indian organized retailing is just on the threshold of employing retail automation technologies enabled by UPC ( barcodes of FAN standards), as they do not now need to re-barcode merchandise supplied from various vendors (as has been the practice with many organized retailers.) Most retailers in the organized sector in India have to use retail software in their back end and front end operations and are constantly looking to upgraded their systems as they evolve. To half this growing retail sector get the best, many Indian software companies have developed software packages to suit the different and varied requirements of these retailers. Among the few who are in the market is Chennaibased Polaris Retail InfoTech Ltd, a subsidiary of Polaris. which has entered the market with its software. Retail Excel. The list of those developing retail software is growing by the day. There are many other packages like MS Retail, Shopper. Retail Pro Rtail Magik, etc. that help enable the fast implementation of retail automation in India available in the market. Not mention large ERP packages like JDA, SAP Retail, BA/N, Island pacific, etc 5.47 SHOPPER’S STOP Shoppers Stop has implemented the US-based retail ERP system IDA. IDA facilitates the integration of all retail functions in Shoppers‘ Stop efficiently. Efficiencies in the buying process: It is JDA‘s merchandise management system that now performs the buying process and merchandise management control practices. pursuant to range width and assortment plans. purchase orders are issued to suppliers 218 through the central merchandising function. The actual delivery of stocks is then controlled on a weekly basis through the delivery authorization process mechanism. The vendors then dispatch the goods to the distribution centre based on the purchase order and delivery authorization. Every distribution centre gets a copy of the delivery authorization issued for the week. At the distribution centre support is provided by the ‗warehouse management system‘ (WMS) of IDA. which manages the warehousing function most efficiently. The challenges at Shoppers‘ Stop are the spread of the 14 stores across the country in varying large sizes, ranging from 25,000 sq ft to 55,000 sq ft the large SKU base, etc. Also, it has more than 300 suppliers who suppliers who supply stocks to three distribution centers, which then redistribute merchandise to the 14 stores. Variety, color and size of merchandise play a very important role in delivering a great shopping experience to the customer. Profitable Growth: Shoppers‖ Stop views SCM as an enableer of profitable growth; it firmly believes that ERP, if used well, can cut costs greatly by reducing cycle times and inventory levels. One of the key drivers of the profit-driven operation is the significant development in the retailer-supplier information integration in the supply chain – the emergence of retailer control over the movement of suppliers‘ goods into the retailers‘ distribution centers. This has led to more complex relationships involving suppliers, third-party distributors and retailers through supplier-retailer collaboration on consumer demand and put into practice the most appropriate product flows. 219 SCM at Shoppers‘ Stop: SCM at Shoppers‘ Stop coordinates and integrates all activities associated with moving products, services and information into seamless processes linking all the partners in the chain, including the various departments, vendors, transporters and other service providers. The system facilities perfect supply chain coordination with an able information system that control all SCM activities. SCM at Shoppers‘ Stop begins and ends with the customer. The guiding philosophy is to improve the organization‘s performance by managing constraints and uncertainties inherent in the earlier system. The focus is on using new tools and techniques. The first step in SCM is merchandise planning and sourcing . In Shoppers‘ Stop, SCM is seen form a strategic perspective rather than just as an operational issue. Core supply chain issues such as month-end sales peaks, forecasting inaccuracy, constraint-based planning and so on continue to create problems for Indian retailers even after ERP implementation. Many organization implemented SCM as a tool to contain costs and identifying means for reducing pressure on margins due to competition. The mindsets of organization underwent a transformation when they accepted to consider the use of such integrated SCM from end-to-end. The planning process starts six months before the actual beginning of the season to fill an agreed amount of footage with a product that matches customer demand. The challenge is to develop a balanced range which provides the appropriate mix of colour, price, styling and fabric so that the customer is given the best possible choice at all times. Also on the agenda is having, a mix of own-label products and brands in such a way that it aligns with the company‘s strategic goal of increasing own-label products and brands in such a way that it loyalty through exclusivity, and 220 complementary to overall brand strategy. The buying department then decides on suppliers who will supply the necessary merchandise as per the plans. While selecting suppliers, various parameters are considered, such as past history, quality, hit rates in supplying goods on time, margin and vendor‘s cooperation in crisis situations. manufacturing capacity, future capacity expansions plans, financial capabilities to invest for in such a way that the effectiveness of the chain is more important than that of an individual link of the chain. Future Plans: Future projects at Shoppers‘ Stop include Automatic Data Capture (ADC) at the distribution centres. Every product has a different barcode and since every barcode is number-based, there are chances of errors in operations, resulting in stock inaccuracy. The company is also in the process of testing a consolidated intake model, which, in time will add value to the total SCM. For this the company plans to take the service of 3Pl (third party logistics) company which will do milk-runs on a daily basis and collect stocks as per delivery authorization and deliver them to the distribution centres. Another endeavor is to integrate suppliers into Shoppers‘ Stop‘s supply chain through electronic data interchange (EDI) and the Internet. Shoppers‘ Stop is investing in B2B (web-enabled procurement solutions) to achieve this. The idea is to disseminate and seek information faster at minima) cost and do online transactions wit business associates to speed up the transaction processing. The first phase of this project is already implemented and major vendors are now connected to Shoppers‘ Stop‘s B2B web site. 221 SCM is a key factor in improving overall efficiency, and creates an opportunity for enhanced sales and customer satisfaction. Shoppers‘ Stop has already initiated progressive steps in the management of its supply chain in line with its mission of ‗Nothing but the best. 5.48 Globalization and Competitiveness Michael E Porter (1990) propagated a new theory that suggested moving beyond comparative advantage to the competitive advantage of a nation. It was to reflect a rich conception of competition that included segmented markets, differentiated products/services, technology differences, and economics of scale. This new theory had gone beyond cost and explains why companies from some nations are better than others at creating advantages based on quality, features, market responsiveness, speed and new product innovation. The Indian apparel industry offered comparative advantage for the low end price point products, due to some of the factor cost advantages. But, it failed to create those advantages that could have provided this industry the required competitive advantage. A successful high-income nation stays successful only by competing with distinctive, differentiated products of services and that is what helps in making the image for country. Whereas Indian textile and apparel industries were found to grow many fold when it could move its pricing southwards, either due to increase in government subsidies or driven by currency devaluation, which are neither distinctive nor sustainable capabilities. 222 5.49 Advantages of ERP SAP: The SRP Retail Expansion Programme provides retailer with access to consulting on a range of activities, including non-tecnology issues such as law, taxation and productlifecycle management. SAP is the latest enterprise software vendor to turn its attention to the retail sector, which is still growing despite softening global economic conditions. Retails is particularly strong in emerging economies in Asia, while many retailers in the US and Europe are beginning to replace systems after a long period of slow IT investment. SAP says its new consulting service will provide expert advice and support to retailers who are looking to expand internationally, particularly in India and China. From the outset, the service will focus on business issues rather than technology. SAP‘s retail consultants provides advice on issues such as retail site selection, legal and tax structuring, inventory financing and identifying appropriate local partners. In some cases, the consultants may work for a locally licensed partner or for an existing recognized consulting firm, but many consultants will be directly employed by SAP Oracle has more points retail operations than SAP and therefore a larger potential customer base. But SAP has proven retail experience and a large bank of retail experts in this favor. 223 Retailing is in a rapid state of change due to speedy technological developments, changing competitive positions, varying consumer behavior as well as their expectations and liberalized regulatory environment. In such a scenario, information is crucial to planned control profitable retail businesses and it can be an important source 2 of competitive advantage so long as it is affordable and readily available. DSS (Decision Support System) which provide timely and accurate information can be viewed as an integrated entity providing management with the tools and information to assist their decision marking. There is a constant need capture accurate information and make it available not only within the store but send it to warehouse, distributors and manufacturers. Modern advancements in ITES (Information Technology Enabled Services) and communication has permitted deployment of DSS (Decision Support Systems). DSS can be defined as computer based systems that help decision makers to confront ill structured problems through direct interaction with data and analysis models. 224 CHAPTER 6 DATA ANALYSIS The researcher collected data from 3 major cities Mumbai, Delhi and Indore from 900 organized retail outlets comprising all three formats of organized retail viz. Hypermarket, Midsized and Convenience store. Statistics from this data give very useful insight into how the organized apparel retailers are aligning and focusing on the supply chain so that the stocks are always available and visible to the consumers, the level of technology that is being used in supply chain management and how efficiency is monitored and its impact on sales and pricing on organized apparel retail outlets. 6.1 Demographic factors: Researcher has collected equal number of respondents from each city so that there is symmetry in the study and biasness is minimized. Indian cities like Delhi, Mumbai and Indore are chosen because Delhi represents northern part of India and has mixed consumers from all walks of life, Mumbai being commercial capital of India also has consumers from a varied range and finally Indore represents central India and known for its business and trade.Mumbai was chosen for study because it is the most important economic and commercial Centre. In addition to this it is among the top 10 preferred location for organized retail in India. (www.dnb.co.in/IndianRetailIndustry) Further, Organised retailers from (Mumbai, Delhi and Indore have the highest share (67.1%) in the total floor space in India. (www.dnb.co.in/IndianRetailIndustry) Mumbai's retail system is the most advanced, with the largest number of 225 supermarketschainsthebiggestdepartmentstoresandthelargestdiversifiedretailconglom eratesinIndia.(www.cbreindia.co.in,www.dnb.co.in/IndianRetailIndustry) Organized retailing is growing parallel with real estate development in Mumbai. With new residential complexes coming up, there is ample opportunity for the Retail chains to open new outlets in these locations catering to cluster of nearby residential complexes. With middleclass population living in these areas who would like to shop in modern retail outlets, these stores quickly gain the needed critical mass of the customers for the commercial viability of the enterprise. Diversified residential complexes in the city of Mumbai truly represent the urban middle class in India with scope for all three retail formats to co-exist. Also retailers in Mumbai, Delhi and Indore have attained a certain level of maturity in to life cycle and hence data can be relied upon to understand the current scenario of organized retail and make future projections. It may be mentioned that Mumbai, Delhi and Indore are trend setters in organized retail which is being emulated by other cities. Respondents from these cities are well informed consumers and the local supermarket chains showed willingness and co-operation. 226 1. City: Table 6.1 Location of Malls No. of Shops Percent Delhi 300 33.3 Indore Mumbai 300 300 33.3 33.4 Total 900 100.0 Above table indicates that out of total 900 shops, 300 belong to Delhi, another 300 are located in Indore and remaining 300 are from Mumbai. This information is represented using pie diagram as follows. Figure 6.1 227 2. Nature of shop: Table 6.2 Nature of Shop No. of shops Percent Single Shop 300 33.3 Two to Five shop 300 33.3 Chain of shops Total 300 900 33.3 100.0 Above table indicates that out of 900 shops, 300 shops belong to single shop category, another 300 belong to 2 to 5 shops category and remaining 300 belong to chain of shops. This information is represented using pie diagram as follows. Figure 6.2 228 6.2 City and Nature of shop Cross tabulation: Researcher has purposely selected 100 samples from single shops, 100 samples from two to five shop category and 100 samples from chain of shops category from Delhi , 100 samples from single shops, 100 samples from two to five shop category and 100 samples from chain of shops category from Mumbai and 100 samples from single shops, 100 samples from two to five shop category and 100 samples from chain of shops category from Indore city to make the study symmetric and unbiased. Table 6.3 City Delhi Indore Mumbai Total Nature of shop Single Shop Two to Five Chain of Shops shop 100 100 100 300 100 100 100 300 100 100 100 300 Total 300 300 300 900 Figure 6.3 229 1. Recognition of supply chain management. This part of the research is focused to identify weather the supply chain management mentioned and recognized by respondents company. Questions which have been asked in questionnaire are analyzed as per the response given by respondents. 6.1 the supply chain management mentioned and recognized by your company Table 6.3 Valid Frequency Percent Valid Percent Cumulative Percent Strongly Disagree Disagree Neutral 8 108 100 .9 12.0 11.1 .9 12.0 11.1 .9 12.9 24.0 Agree Strongly Agree Total 222 462 900 24.7 51.3 100.0 24.7 51.3 100.0 48.7 100.0 52 percent of the respondents are strongly agreeing that supply chain management is mentioned and recognized by their company,25 percent of the respondents are agreeing that supply chain management is mentioned and recognized by their company,12 percent of the respondents are agreeing that supply chain management is mentioned and recognized by their company where as 9 percent of the respondents are strongly disagreeing that supply chain management is mentioned and recognized by their company11 percent of the respondents are having neutral opinion that supply chain management is mentioned and recognized by their company 230 6.2 supply chain management is different from value chain management. Table 6.4 Strongly Disagree Disagree Neutral Valid Agree Strongly Agree Total Frequency Percent Valid Percent 7 59 47 406 .8 6.6 5.2 45.1 .8 6.6 5.2 45.1 381 900 42.3 100.0 42.3 100.0 Cumulative Percent .8 7.3 12.6 57.7 100.0 42 percent respondents are strongly agreeing to the fact that supply chain management is different from value chain management percent respondents are strongly disagreeing to the fact that supply chain management is different from value chain management and 6 percent respondents are not having any opinion that supply chain management is different from value chain management 6.3 Do you think that supply chain management has an impact on pricing? Table 6.5 Valid Frequency Percent Valid Percent Strongly Disagree Disagree Neutral 66 172 275 7.3 19.1 30.6 7.3 19.1 30.6 Agree Strongly Agree Total 335 52 900 37.2 5.8 100.0 37.2 5.8 100.0 Cumulative Percent 7.3 26.4 57.0 94.2 100.0 231 7 percent of the respondents strongly disagree that supply chain management has an impact on pricing.19 percent of the respondents strongly disagree that supply chain management has an impact on pricing, 30 percent of the respondents strongly are neutral that supply chain management has an impact on pricing,37 percent of the respondents agree that supply chain management has an impact on pricing,6 percent of the respondents strongly agree that supply chain management has an impact on pricing. 6.4 There is close relation between supply chain management and organized apparel retail business. Table 6.6 Strongly Disagree Disagree Neutral Valid Agree Strongly Agree Total Frequency Percent Valid Percent Cumulative Percent 42 202 504 93 59 900 4.7 22.4 56.0 10.3 6.6 100.0 4.7 22.4 56.0 10.3 6.6 100.0 4.7 27.1 83.1 93.4 100.0 5 percent respondents strongly disagree that there is close relation between supply chain management and organized apparel retail business.22 percent respondents disagree that there is close relation between supply chain management and organized apparel retail business,56 percent respondents are nutral that there is close relation between supply chain management and organized apparel retail business,11 percent respondents agree that there is close relation between supply chain management and organized apparel retail business and 7 percent respondents strongly agree that there is close relation between supply chain management and organized apparel retail business 232 6.5 Supply chain is the network of organization that are involved in different process and activities that produces value in the form of product and services in the hands of consumer. Table 6.7 Strongly Disagree Disagree Neutral Valid Agree Strongly Agree Total Frequency Percent Valid Percent 156 222 315 148 59 900 17.3 24.7 35.0 16.4 6.6 100.0 17.3 24.7 35.0 16.4 6.6 100.0 Cumulative Percent 17.3 42.0 77.0 93.4 100.0 35 percent of respondents are having neutral opinion that Supply chain is the network of organization that are involved in different process and activities that produces value in the form of product and services in the hands of consumer.6 percent of respondents strongly agree that Supply chain is the network of organization that are involved in different process and activities that produces value in the form of product and services in the hands of consumer,16 percent of respondents agree that Supply chain is the network of organization that are involved in different process and activities that produces value in the form of product and services in the hands of consumer,24 percent of respondents disagree that Supply chain is the network of organization that are involved in different process and activities that produces value in the form of product and services in the hands of consumer,17percent of respondents strongly disagree that Supply chain is the network of organization that are involved in different process and activities that produces value in the form of product and services in the hands of consumer 233 Table 6.8 A Recognition of supply chain management Sr no 1 2 3 4 5 Question Is the supply chain management mentioned and recognised by your company Do you think that supply chain management is different from value chain management. Do you think that supply chain management is different from supplier management. There is close relation between supply chain management and clothing retail business. Supply chain is the network of organisation that are involved different process and activities that produces value in the form of product and services in the hands of consumer. Str on gly Agree Neutral Disagree Di sa Strongly gre agree e 462 222 100 108 8 381 406 47 59 7 52 335 275 172 66 59 93 504 202 42 222 15 6 59 148 315 Response given to above mentioned question is rated as follows. Strongly disagree : 1 Disagree : 2 Neutral : 3 Agree : 4 Strongly agree : 5 Using rating of these questions, score of recognition of SCM is calculated for each respondent using formula given below. Score of recognition of SCM = Sum of scores of all questions * 100 Maximum score of all questions 234 Descriptive statistics calculated is as given below. Descriptive Statistics Table 6.9 Recognition_of_SCM_ score N Minimu m Maximu m Mean Std. Deviation 900 32.00 100.00 68.48 10.34 Above table indicate that mean recognition score of SCM is 68.48 with standard deviation 10.34. Respondents are classified in to three group according to their score of recognition. If score is less than 58.14 then respondent is classified as ‗low recognition‘. If score is from 58.14 to 78.82 then respondent is classified as ‗Medium recognition‘. If score is more than 78.82 then respondent is classified as ‗High recognition‘. Table of classification is as shown below. Table 6.10 Recognition of SCM level Number of respondents Percent High Low Medium Total 146 133 621 900 16.2 14.8 69.0 100.0 235 6.03 Importance of supply chain management: Researcher has analyzed the data to understand the importance of supply chain management.This part of the study deals with the need to implement supply chain management in organized apparel retail outlets. 6.6 There is need to implement supply chain management Table 6.11 Strongly Disagree Disagree Neutral Valid Agree Strongly Agree Total Frequency Percent Valid Percent 45 72 206 153 5.0 8.0 22.9 17.0 5.0 8.0 22.9 17.0 424 900 47.1 100.0 47.1 100.0 Cumulative Percent 5.0 13.0 35.9 52.9 100.0 5 percent of respondents strongly disagree that there is a need to implement supply chain management,8 percent of respondents disagree that there is a need to implement supply chain management,23 percent of respondents strongly are neutral towards the need to implement supply chain management,17 percent of respondents agree that there is a need to to implement supply chain management and 47 percent of respondents strongly disagree that there is a need to to implement supply chain management . 236 6.7 There is an impact of marketing and supply chain interface on an integrated basis In ―Organized apparel and clothing‖ category of the retail outlets. Table 6.12 Strongly Disagree Disagree Neutral Valid Agree Strongly Agree Total Frequency Percent Valid Percent 89 142 214 131 324 900 9.9 15.8 23.8 14.6 36.0 100.0 9.9 15.8 23.8 14.6 36.0 100.0 Cumulative Percent 9.9 25.7 49.4 64.0 100.0 10 percent of respondents strongly disagree that there is an impact of marketing and supply chain interface on an integrated basis in ―Organized apparel and clothing‖ category of the retail outlets.16 percent of respondents disagree that there is an impact of marketing and supply chain interface on an integrated basis in ―Organized apparel and clothing‖ category of the retail outlets.24 percent of respondents have no opinion that there is an impact of marketing and supply chain interface on an integrated basis in ―Organized apparel and clothing‖ category of the retail outlets.15 percent of respondents agree that there is an impact of marketing and supply chain interface on an integrated basis in ―Organized apparel and clothing‖ category of the retail outlets.36 percent of respondents strongly agree that there is an impact of marketing and supply chain interface on an integrated basis in ―Organized apparel and clothing‖ category of the retail outlets. 237 6.8 Better supply chain management leads to increased sales Table 6.13 Valid Frequency Percent Valid Percent Strongly Disagree Disagree 183 94 20.3 10.4 20.3 10.4 Neutral Agree Strongly Agree Total 204 285 134 900 22.7 31.7 14.9 100.0 22.7 31.7 14.9 100.0 Cumulative Percent 20.3 30.8 53.4 85.1 100.0 23 percent of the respondents are neutral towards better supply chain management leads to increased sales,20 percent of the respondents are strongly disagreeing that better supply chain management leads to increased sales,10 percent of the respondents are disagreeing that better supply chain management leads to increased sales,31 percent of the respondents are agreeing that better supply chain management leads to increased sales and 15 percent of the respondents are strongly agree that better supply chain management leads to increased sales. 238 6.9 The supply chain in the retail apparel business has an impact on economies of scale of retailers with respect to optimum inventory management in the supply chain cycle. Table 6.14 Strongly Disagree Disagree Neutral Valid Agree Strongly Agree Total Frequency Percent Valid Percent 19 84 209 383 2.1 9.3 23.2 42.6 2.1 9.3 23.2 42.6 205 900 22.8 100.0 22.8 100.0 Cumulative Percent 2.1 11.4 34.7 77.2 100.0 2 percent of the respondents strongly Disagree that The supply chain in the retail apparel business has an impact on economies of scale of retailers with respect to optimum inventory management in the supply chain cycle., 9 percent of the respondents disagree that The supply chain in the retail apparel business has an impact on economies of scale of retailers with respect to optimum inventory management in the supply chain cycle.,23 percent of the respondents are neutral that The supply chain in the retail apparel business has an impact on economies of scale of retailers with respect to optimum inventory management in the supply chain cycle.,43 percent of the respondents agree that The supply chain in the retail apparel business has an impact on economies of scale of retailers with respect to optimum inventory management in the supply chain cycle and 23 percent of the respondents strongly agree that The supply chain in the retail apparel business has an impact on economies of scale of retailers with respect to optimum inventory management in the supply chain cycle. 239 . 6.10 Effective supply chain will lead to long term performance improvement.(better pricing of apparels) Table 6.15 Valid Frequency Percent Valid Percent Strongly Disagree 39 4.3 4.3 Cumulative Percent 4.3 Disagree Neutral Agree 83 192 336 9.2 21.3 37.3 9.2 21.3 37.3 13.6 34.9 72.2 Strongly Agree Total 250 900 27.8 100.0 27.8 100.0 100.0 4 percent of the respondents strongly Disagree that Effective supply chain will lead to long term performance improvement.(better pricing of apparels),9 percent of the respondents disagree that Effective supply chain will lead to long term performance improvement.(better pricing of apparels),21 percent of the respondents are neutral that Effective supply chain will lead to long term performance improvement.(better pricing of apparels),37 percent of the respondents agree that Effective supply chain will lead to long term performance improvement.(better pricing of apparels) and 29 percent of the respondents strongly agree that Effective supply chain will lead to long term performance improvement.(better pricing of apparels), 240 Table 6.16 B Sr no 6 7 8 9 10 Importance of supply chain management Question There is need to implement supply chain management Supply chain management will improve company's competitive advantage. New rules of competition become to supply chain management. The supply chain in the retail clothing business extends to various levels of company- supplier relationship Effective supply chain will lead to long term performance improvement. Strongly Strongly Agree Neutral Disagree agree Disagree 424 153 206 72 45 324 131 214 142 89 134 285 204 94 183 205 383 209 84 19 250 336 192 83 39 Response given to above mentioned question is rated as follows. Strongly disagree : 1 Disagree : 2 Neutral : 3 Agree : 4 Strongly agree : 5 Using rating of these questions, score of satisfaction is calculated for each respondent using formula given below. Score of importance of SCM = Sum of scores of all questions * 100 Maximum score of all questions 241 Descriptive statistics calculated is as given below. Descriptive Statistics Table 6.17 Importance of SCM score N Minimu m Maximu m Mean Std. Deviation 900 20.00 100.00 72.16 13.28 Above table indicate that mean importance score of SCM is 72.16 with standard deviation 13.28. Respondents are classified in to three groups according to their score of importance. If score is less than 58.88 then respondent is classified as ‗low importance‘. If score is from 58.88 to 85.45 then respondent is classified as ‗Medium importance‘. If score is more than 85.45 then respondent is classified as ‗High importance‘. Table of classification is as shown below. Table 6.18 Number of respondents Percent High 138 15.3 Low Medium Total 122 640 900 13.6 71.1 100.0 Importance of SCM level 242 2. Performance of supply chain management: As per the research objective to identify the performance of supply chain management in organized retail apparel outlets, researcher has collected the relevant data and analysis results are as fallows. 6.11 Supply chain management is very effective related to operational performance. Table 6.19 Valid Frequency Percent Valid Percent Strongly Disagree Disagree Neutral 42 123 275 4.7 13.7 30.6 4.7 13.7 30.6 Agree Strongly Agree Total 364 96 900 40.4 10.7 100.0 40.4 10.7 100.0 Cumulative Percent 4.7 18.3 48.9 89.3 100.0 5 percent of the respondents strongly disagree that Supply chain management is very effective related to operational performance,14 percent of the respondents disagree that Supply chain management is very effective related to operational performance,31 percent of the respondents are neutral that Supply chain management is very effective related to operational performance,40 percent of the respondents agree that Supply chain management is very effective related to operational performance and 11 percent of the respondents strongly agree that Supply chain management is very effective related to operational performance, 243 6.12 Supply chain management can spend on the fashion of the product to follow the market change. Table 6.20 Strongly Disagree Disagree Neutral Valid Agree Strongly Agree Total Frequency Percent Valid Percent 16 303 222 83 1.8 33.7 24.7 9.2 1.8 33.7 24.7 9.2 276 900 30.7 100.0 30.7 100.0 Cumulative Percent 1.8 35.4 60.1 69.3 100.0 2 percent of the respondents strongly disagree that Supply chain management can spend on the fashion of the product to follow the market change.34 percent of the respondents disagree that Supply chain management can spend on the fashion of the product to follow the market change,25 percent of the respondents are neutral that Supply chain management can spend on the fashion of the product to follow the market change,9 percent of the respondents agree that Supply chain management can spend on the fashion of the product to follow the market change and 31 percent of the respondents strongly agree that Supply chain management can spend on the fashion of the product to follow the market change 244 6.13 Infrastructure related factors have an impact on sales of the organized retail apparel outlets Table 6.21 Valid Frequency Percent Valid Percent Strongly Disagree Disagree 16 225 1.8 25.0 1.8 25.0 Neutral Agree Strongly Agree Total 235 324 100 900 26.1 36.0 11.1 100.0 26.1 36.0 11.1 100.0 Cumulative Percent 1.8 26.8 52.9 88.9 100.0 2 percent of the respondents strongly disagree that Infrastructure related factors have an impact on sales of the organized retail apparel outlets 25 percent of the respondents disagree that Infrastructure related factors have an impact on sales of the organized retail apparel outlets 26 percent of the respondents are neutral that Infrastructure related factors have an impact on sales of the organized retail apparel outlets 36 percent of the respondents agree that Infrastructure related factors have an impact on sales of the organized retail apparel outlets and 11 percent of the respondents strongly agree that Infrastructure related factors have an impact on sales of the organized retail apparel outlets 245 6.14 There is an impact of backend merchandise management on the sales of the organized apparel retail outlets. Table 6.22 Frequency Percent Valid Percent 10 187 327 161 1.1 20.8 36.3 17.9 1.1 20.8 36.3 17.9 215 900 23.9 100.0 23.9 100.0 Strongly Disagree Disagree Neutral Valid Agree Strongly Agree Total Cumulative Percent 1.1 21.9 58.2 76.1 100.0 1 percent of the respondents strongly disagree that there is an impact of backend merchandise management on the sales of the organized apparel retail outlets,21 percent of the respondents disagree that there is an impact of backend merchandise management on the sales of the organized apparel retail outlets.36 percent of the respondents are neutral that there is an impact of backend merchandise management on the sales of the organized apparel retail outlets.18 percent of the respondents agree that there is an impact of backend merchandise management on the sales of the organized apparel retail outlets and 24 percent of the respondents strongly agree that there is an impact of backend merchandise management on the sales of the organized apparel retail outlets. 246 6.15 Effective supply chain management can bring right production in the right season can attract more customers and improve customer satisfaction. Table 6.23 Frequency Percent Valid Percent Cumulative Percent Valid Strongly Disagree 3 .3 .3 .3 Disagree Neutral Agree Strongly Agree Total 378 95 216 208 900 42.0 10.6 24.0 23.1 100.0 42.0 10.6 24.0 23.1 100.0 42.3 52.9 76.9 100.0 3 percent of the respondents strongly disagree that effective supply chain management can bring right production in the right season can attract more customers and improve customer satisfaction.42 percent of the respondents disagree that effective supply chain management can bring right production in the right season can attract more customers and improve customer satisfaction.11 percent of the respondents are neutral that effective supply chain management can bring right production in the right season can attract more customers and improve customer satisfaction.24 percent of the respondents agree that effective supply chain management can bring right production in the right season can attract more customers and improve customer satisfaction and 23 percent of the respondents strongly agree that effective supply chain management can bring right production in the right season can attract more customers and improve customer satisfaction. 247 Table 6.24 C Performance of supply chain management Supply chain management is very effective related to operational performance. 96 364 275 123 42 12 Supply chain management can spend on the fashion of the product to follow the market change. 276 83 222 303 16 13 Supplier management can improve the delivery performance and cost effect. 100 324 235 225 16 11 14 Effective supply chain management can reduce the inventory and speed the inventory turnover ratio. 215 161 327 187 10 15 Bring right production in the right season can attract more customers and improve customer satisfaction. 208 216 95 378 3 Response given to above mentioned question is rated as follows. Strongly disagree : 1 Disagree : 2 Neutral : 3 Agree : 4 Strongly agree : 5 Using rating of these questions, score of satisfaction is calculated for each respondent using formula given below. Score of performance of SCM = Sum of scores of all questions * 100 Maximum score of all questions Descriptive statistics calculated is as given below. 248 Descriptive Statistics Table 6.25 N Performance of SCM score 900 Minimu Maximu m m 32.00 96.00 Mean Std. Deviation 66.88 8.82 Above table indicate that mean performance score of SCM is 66.88 with standard deviation 8.82. Respondents are classified in to three groups according to their score of performance. If score is less than 58.06 then respondent is classified as ‗low performance‘. If score is from 58.06 to 75.70 then respondent is classified as ‗Medium performance‘. If score is more than 75.70 then respondent is classified as ‗High performance‘. Table of classification is as shown below. 249 Table 6.26 Performance of Number of Percent SCM level respondents High 45 5.0 Low 137 15.2 Medium 718 79.8 Total 900 100.0 6.04 Supplier Performance: This part of the study deals with the supplier performance. 6.16 The lead time for manufacturing forced the company to keep more inventories. Table 6.27 Strongly Disagree Disagree Neutral Valid Agree Strongly Agree Total Frequency Percent Valid Percent 4 47 219 431 199 .4 5.2 24.3 47.9 22.1 .4 5.2 24.3 47.9 22.1 900 100.0 100.0 Cumulative Percent .4 5.7 30.0 77.9 100.0 4 percent of the respondents strongly disagree that lead time for manufacturing forced the company to keep more inventories,5 percent of the respondents disagree that lead time for manufacturing forced the company to keep more inventories.24 percent of the respondents are neutral that lead time for manufacturing forced the company to keep more inventories,48 percent of the respondents agree that lead time for manufacturing forced the company to keep more inventories and 22 percent of the 250 respondents strongly agree that lead time for manufacturing forced the company to keep more inventories 6.17 Lead time influence the fashion level of the production and time to market. Table 6.28 Valid Frequency Percent Valid Percent Strongly Disagree Disagree 45 171 5.0 19.0 5.0 19.0 Cumulative Percent 5.0 24.0 Neutral Agree Strongly Agree 270 215 199 30.0 23.9 22.1 30.0 23.9 22.1 54.0 77.9 100.0 Total 900 100.0 100.0 5 percent of the respondents strongly disagree that Lead time influence the fashion level of the production and time to market.19 percent of the respondents disagree that Lead time influence the fashion level of the production and time to market.30 percent of the respondents are neutral that Lead time influence the fashion level of the production and time to market.24 percent of the respondents agree that Lead time influence the fashion level of the production and time to market and 22 percent of the respondents strongly agree that Lead time influence the fashion level of the production and time to market. 251 6.18. Lead time effect on the correctness of forecasting in supply chain management. Table 6.29 Strongly Disagree Disagree Neutral Valid Agree Strongly Agree Total Frequency Percent Valid Percent Cumulative Percent 33 379 160 172 156 900 3.7 42.1 17.8 19.1 17.3 100.0 3.7 42.1 17.8 19.1 17.3 100.0 3.7 45.8 63.6 82.7 100.0 4 percent of the respondents strongly disagree that Lead time effect on the correctness of forecasting in supply chain management,42 percent of the respondents disagree that Lead time effect on the correctness of forecasting in supply chain managementm18 percent of the respondents are neutral that Lead time effect on the correctness of forecasting in supply chain management,19 percent of the respondents agree that Lead time effect on the correctness of forecasting in supply chain management and 17 percent of the respondents strongly agree that Lead time effect on the correctness of forecasting in supply chain management. 252 6.19 The supplier's productivity influence retail company's supply chain management Table 6.30 Valid Frequency Percent Valid Percent Strongly Disagree Disagree 12 180 1.3 20.0 1.3 20.0 Neutral Agree Strongly Agree Total 392 203 113 900 43.6 22.6 12.6 100.0 43.6 22.6 12.6 100.0 Cumulative Percent 1.3 21.3 64.9 87.4 100.0 1 percent of the respondents strongly disagree that supplier's productivity influence retail company's supply chain management,20 percent of the respondents disagree that supplier's productivity influence retail company's supply chain management.43 percent of the respondents are neutral that supplier's productivity influence retail company's supply chain management,23 percent of the respondents agree that supplier's productivity influence retail company's supply chain management and 13 percent of the respondents strongly agree that supplier's productivity influence retail company's supply chain management. 253 6.20 There are some uncertainty involved for the late supply in the ordering system such as late delivery, late loading, machine brake down and custom stop-check etc. Table 6.31 Valid Frequency Percent Valid Percent Strongly Disagree Disagree 15 277 1.7 30.8 1.7 30.8 Neutral Agree Strongly Agree Total 200 280 128 900 22.2 31.1 14.2 100.0 22.2 31.1 14.2 100.0 Cumulative Percent 1.7 32.4 54.7 85.8 100.0 2 percent of the respondents strongly disagree that There are some uncertainty involved for the late supply in the ordering system such as late delivery, late loading, machine brake down and custom stop-check etc.,31 percent of the respondents disagree that There are some uncertainty involved for the late supply in the ordering system such as late delivery, late loading, machine brake down and custom stopcheck.22 percent of the respondents are neutral that There are some uncertainty involved for the late supply in the ordering system such as late delivery, late loading, machine brake down and custom stop-check.31 percent of the respondents agree that There are some uncertainty involved for the late supply in the ordering system such as late delivery, late loading, machine brake down and custom stop-check and 14 percent of the respondents strongly agree that There are some uncertainty involved for the late supply in the ordering system such as late delivery, late loading, machine brake down and custom stop-check 254 Table 6.32 D Sr no 16 17 18 19 20 Supplier Performance Question The lead times for manufacturing forced the company to keep more inventory. Lead time influence the fashion level of the production and time to market. Lead time effect on the correct of forecasting in supply chain management. The supplier's productivity influence retail company's supply chain management. There are some uncertainty involved for the late supply in the ordering system such as late delivery, late loading, machine broke down and custom stop-check etc. Strongly Agree Neutral Disagree agree 199 431 219 4 4 199 215 270 11 45 156 172 160 3 33 113 203 392 10 12 128 280 200 277 15 Response given to above mentioned question is rated as follows. Strongly disagree : 1 Disagree : 2 Neutral : 3 Agree : 4 Strongly agree : 5 Using rating of these questions, score of satisfaction is calculated for each respondent using formula given below. Score of supplier performance = Strongly Disagree Sum of scores of all questions * 100 Maximum score of all questions 255 Descriptive statistics calculated is as given below. Descriptive Statistics Table 6.33 Suppliers Performance score N Minimu m Maximu m Mean Std. Deviation 900 32.00 96.00 67.19 10.77 Above table indicate that mean supplier performance score is 66.19 with standard deviation 10.77. Respondents are classified in to three groups according to their score of supplier performance. If score is less than 56.42 then respondent is classified as ‗low supplier performance‘. If score is from 56.42 to 77.97 then respondent is classified as ‗Medium supplier performance‘. If score is more than 77.97 then respondent is classified as ‗High supplier performance‘. Table of classification is as shown below. Table 6.34 Suppliers Performance Level Number of respondents Percent High 105 11.7 Low Medium Total 102 693 900 11.3 77.0 100.0 256 3. Distribution channel: Distribution channel is a vital part of supply chain management and results from data analysis are interpreted as fallows: 6.21 Your company location is good for your target market Table 6.35 Strongly Disagree Disagree Neutral Valid Agree Strongly Agree Total Frequency Percent Valid Percent 25 228 220 115 312 900 2.8 25.3 24.4 12.8 34.7 100.0 2.8 25.3 24.4 12.8 34.7 100.0 Cumulative Percent 2.8 28.1 52.6 65.3 100.0 3 percent of the respondents strongly disagree that company location is good for the target market.25 percent of the respondents disagree that company location is good for the target market.24 percent of the respondents are neutral that company location is good for the target market.13 percent of the respondents agree that company location is good for the target market,35 percent of the respondents strongly agree that company location is good for the target market. 257 6.22 Sales performance is related to good amount of degree to your distribution channel. Table 6.36 Valid Frequency Percent Valid Percent Strongly Disagree Disagree 15 421 1.7 46.8 1.7 46.8 Neutral Agree Strongly Agree Total 166 110 188 900 18.4 12.2 20.9 100.0 18.4 12.2 20.9 100.0 Cumulative Percent 1.7 48.4 66.9 79.1 100.0 2 percent of the respondents strongly disagree that Sales performance is related to good amount of degree to your distribution channel,47 percent of the respondents strongly disagree that Sales performance is related to good amount of degree to your distribution channel.18 percent of the respondents are neutral that Sales performance is related to good amount of degree to your distribution channel,12 percent of the respondents agree that Sales performance is related to good amount of degree to your distribution channel and 21 percent of the respondents strongly agree that Sales performance is related to good amount of degree to your distribution channel. 258 6.23 The inventory control can be improved through customer service and sales strategy, such as promotion, membership, credit and clearance sales. Table 6.37 Valid Frequency Percent Valid Percent Strongly Disagree Disagree 55 194 6.1 21.6 6.1 21.6 Neutral Agree Strongly Agree Total 306 186 159 900 34.0 20.7 17.7 100.0 34.0 20.7 17.7 100.0 Cumulative Percent 6.1 27.7 61.7 82.3 100.0 6 percent of the respondents strongly disagree that inventory control can be improved through customer service and sales strategy, such as promotion, membership, credit and clearance sales.22 percent of the respondents strongly disagree that inventory control can be improved through customer service and sales strategy, such as promotion, membership, credit and clearance sales.34 percent of the respondents are neutral that inventory control can be improved through customer service and sales strategy, such as promotion, membership, credit and clearance sales.21 percent of the respondents agree that inventory control can be improved through customer service and sales strategy, such as promotion, membership, credit and clearance sales and 18 percent of the respondents strongly agree that inventory control can be improved through customer service and sales strategy, such as promotion, membership, credit and clearance sales. 259 6.24 Multichannel distribution benefits for the inventory control through interadjustment of the stock. Table 6.38 Valid Frequency Percent Valid Percent Strongly Disagree Disagree 38 206 4.2 22.9 4.2 22.9 Neutral Agree Strongly Agree Total 307 235 114 900 34.1 26.1 12.7 100.0 34.1 26.1 12.7 100.0 Cumulative Percent 4.2 27.1 61.2 87.3 100.0 4 percent of the respondents strongly disagree that Multichannel distribution benefits for the inventory control through inter-adjustment of the stock.23 percent of the respondents disagree that Multichannel distribution benefits for the inventory control through inter-adjustment of the stock.34 percent of the respondents are neutral that Multichannel distribution benefits for the inventory control through inter-adjustment of the stock,26 percent of the respondents agree that Multichannel distribution benefits for the inventory control through inter-adjustment of the stock,13 percent of the respondents strongly agree that Multichannel distribution benefits for the inventory control through inter-adjustment of the stock 260 Table 6.39 Distribution channel Strongly Agree Neutral Disagree agree Sr no Question 21 22 23 24 Your company location is good for your target market Sales performance is related to good amount of degree to your distribution channel. The inventory control can be improved through customer service and sales strategy, such as promotion, membership, credit and clearance sales. Multichannel distribution benefits for the inventory control through interadjustment on the stock. Strongly Disagree 312 115 220 228 25 188 110 166 421 15 159 186 306 194 55 114 235 307 206 38 Response given to above mentioned question is rated as follows. Strongly disagree : 1 Disagree : 2 Neutral : 3 Agree : 4 Strongly agree : 5 Using rating of these questions, score of satisfaction is calculated for each respondent using formula given below. Score of distribution channel = Sum of scores of all questions Maximum score of all questions * 100 261 Descriptive statistics calculated is as given below. Descriptive Statistics Table 6.40 Distribution Channel score N Minimu m Maximu m Mean Std. Deviation 900 20.00 100.00 65.15 16.04 Above table indicate that mean distribution channel score is 65.15 with standard deviation 16.04. Respondents are classified in to three groups according to their score of distribution channel. If score is less than 49.11 then respondent is classified as ‗low distribution channel‘. If score is from 49.11 to 81.20 then respondent is classified as ‗Medium distribution channel‘. If score is more than 81.20 then respondent is classified as ‗High distribution channel. Table of classification is as shown below. Table 6.41 Distribution Chain level Number of respondents Percent Average 629 69.9 Excellent Poor Total 125 146 900 13.9 16.2 100.0 262 6.05 Customer demand: Researcher has collected the data and its analysis says that customer demand is influenced by the market information, customer feedback on the production and communication and information technology is effectively utilized to enable the information collected from the customers and the market for the inventory control and forecasting. 6.25 The correctness of the market information is important for the inventory control. Table 6.42 Valid Frequency Percent Valid Percent Strongly Disagree 30 3.3 3.3 Disagree Neutral Agree Strongly Agree Total 243 199 166 262 900 27.0 22.1 18.4 29.1 100.0 27.0 22.1 18.4 29.1 100.0 Cumulative Percent 3.3 30.3 52.4 70.9 100.0 3 percent of the respondents strongly disagree that The correctness of the market information is important for the inventory control,27 percent of the respondents disagree that The correctness of the market information is important for the inventory control,22 percent of the respondents are neutral that The correctness of the market information is important for the inventory control,18 percent of the respondents agree that The correctness of the market information is important for the inventory control and 29 percent of the respondents strongly agree that The correctness of the market information is important for the inventory control 263 Q26 The customer feedback on the production can lead the direction of the fashion of production. Table 6.43 Valid Frequency Percent Valid Percent Strongly Disagree Disagree 20 83 2.2 9.2 2.2 9.2 Neutral Agree Strongly Agree Total 203 422 172 900 22.6 46.9 19.1 100.0 22.6 46.9 19.1 100.0 Cumulative Percent 2.2 11.4 34.0 80.9 100.0 2 percent of the respondents strongly disagree that customer feedback on the production can lead the direction of the fashion of production.9 percent of the respondents strongly disagree that customer feedback on the production can lead the direction of the fashion of production,23 percent of the respondents are neutral that customer feedback on the production can lead the direction of the fashion of production ,47 percent of the respondents agree that customer feedback on the production can lead the direction of the fashion of production,19 percent of the respondents strongly agree that customer feedback on the production can lead the direction of the fashion of production. 264 6.27 There is a impact of ERP on improving the value preposition of the retail ―Apparel sector‖ in optimizing the economies of scale (bottom line). Table 6.44 Valid Frequency Percent Valid Percent Strongly Disagree 17 1.9 1.9 Disagree Neutral Agree Strongly Agree Total 115 226 336 206 900 12.8 25.1 37.3 22.9 100.0 12.8 25.1 37.3 22.9 100.0 Cumulative Percent 1.9 14.7 39.8 77.1 100.0 2 percent of the respondents strongly disagree that There is a impact of ERP on improving the value preposition of the retail ―Apparel sector‖ in optimizing the economies of scale (bottom line). 13 percent of the respondents disagree that There is a impact of ERP on improving the value preposition of the retail ―Apparel sector‖ in optimizing the economies of scale (bottom line).25 percent of the respondents are neutral that There is a impact of ERP on improving the value preposition of the retail ―Apparel sector‖ in optimizing the economies of scale (bottom line).37 percent of the respondents agree that There is a impact of ERP on improving the value preposition of the retail ―Apparel sector‖ in optimizing the economies of scale (bottom line).23 percent of the respondents strongly agree that There is a impact of ERP on improving the value preposition of the retail ―Apparel sector‖ in optimizing the economies of scale (bottom line). 265 Table 6.45 Customer demand Sr no 25 26 27 Question The correctness of the market information is important for the inventory control. The customer feedback on the production can lead the direction of the fashion of production. Communication and information technology is effectively utilised to enable the information collected from the customers and the market for the inventory control and forecasting. Strongly Agree Neutral Disagree agree 262 166 199 243 30 172 422 203 83 20 206 336 226 115 17 Response given to above mentioned question is rated as follows. Strongly disagree : 1 Disagree : 2 Neutral : 3 Agree : 4 Strongly agree : 5 Using rating of these questions, score of satisfaction is calculated for each respondent using formula given below. Score of customer demand = Strongly Disagree Sum of scores of all questions * 100 Maximum score of all questions 266 Descriptive statistics calculated is as given below. Descriptive Statistics Table 6.46 Customers Demand score N Minimu m Maximu m Mean Std. Deviation 900 25.00 95.00 70.05 12.99 Above table indicate that mean customer demand score is 70.05 with standard deviation 12.99. Respondents are classified in to three groups according to their score of customer demand. If score is less than 57.06 then respondent is classified as ‗low customer demand‘. If score is from 57.06 to 83.05 then respondent is classified as ‗Medium customer demand‘. If score is more than 83.05 then respondent is classified as ‗High customer demand. Table of classification is as shown below. Table 6.47 Customer demand Level Number of respondents Percent High 163 18.1 Low Medium Total 151 586 900 16.8 65.1 100.0 267 6.06 Price Effectiveness: Impact of supply chan management on price effectiveness is analyzed as fallows Table 6.48 G Price effectiveness Strongly agree Sr no Question 28 29 30 Supply chain management play important role in reduction of transportation cost. Supply chain management is effective to control overall price. Supply chain management is useful to reduce labour cost. Agree Neutral Disagree Strongly Disagree 124 145 210 265 156 101 183 244 256 116 108 166 231 257 138 Response given to above mentioned question is rated as follows. Strongly disagree : 1 Disagree : 2 Neutral : 3 Agree : 4 Strongly agree : 5 Using rating of these questions, score of satisfaction is calculated for each respondent using formula given below. Score of customer demand = Sum of scores of all questions * 100 Maximum score of all questions Descriptive statistics calculated is as given below. Descriptive Statistics Table 6.49 Price Effectiveness score N Minimum Maximum Mean Std. Deviation 900 20.00 100.00 56.78 16.88 268 Above table indicate that mean price effectiveness score is 56.78 with standard deviation 16.88. Respondents are classified in to three groups according to their score of price effectiveness. If score is less than 39.89 then respondent is classified as ‗low price effectiveness‘. If score is from 57.06 to 83.05 then respondent is classified as ‗Medium customer demand. If score is more than 83.05 then respondent is classified as ‗High customer demand. 6.07 Testing of hypothesis: 1. City * Recognition_of_SCM_level To study relationship between Location of shops and recognition of SCM level, chi-square test is applied. Hypothesis for the test is as follows. H0: There is no association between city and recognition of SCM level. H1: There is an association between city and recognition of SCM level. Table 6.50 City Delhi Indore Mumbai Total Recognition of SCM level Low Medium High 35 220 45 80 196 24 18 146 205 621 77 146 Total 300 300 300 900 269 Figure 6.4 Results of chi square test are as follows Chi-square calculated value = 76.995 Chi-square table value (5% loc) = 9.488 Degree of freedom =4 Result of test = Rejected Since Chi-square calculated value (76.995) is greater than table value(9.488) hence test is rejected. Hence null hypothesis H0 is rejected. Conclusion is there is an association between tools and techniques with regards to supply chain management in organized apparel retail outlets and its impact on pricing. 2. To study relationship between economies of scale of retailers with respect to optimum inventory management in the supply chain cycle. H02: There is no association between economies of scale of retailers with respect to optimum inventory management in the supply chain cycle. 270 H12: There is an association between economies of scale of retailers with respect to optimum inventory management in the supply chain cycle. Table 6.51 City Delhi Indore Mumbai Total Economies of scale Low Medium High 31 248 21 Total 74 17 122 300 300 900 205 187 640 21 96 138 300 Figure 6.5 Results of chi square test are as follows Chi-square calculated value = 134.125 Chi-square table value (5% loc) = 9.488 Degree of freedom =4 Result of test = Rejected Since Chi-square calculated value (134.125) is greater than table value(9.488)hence test is rejected. Hence null hypothesis H0 is rejected. 271 Conclusion is there is an association between economies of scale of retailers with respect to optimum inventory management in the supply chain cycle. 3. To study impact of marketing and supply chain interface on an integrated basis in organized apparel retail outlets. chi-square test is applied. Hypothesis for the test is as follows. H03: There is no association between marketing and supply chain interface on an integrated basis in organized apparel retail outlets. H13 : There is an association between marketing and supply chain interface on an integrated basis in organized apparel retail outlets. Table 6.52 City Delhi Indore Mumbai Total Performance of SCM level Low Medium High 38 97 2 137 247 203 268 718 15 0 30 45 Total 300 300 300 900 Figure 6.6 272 Results of chi square test are as follows Chi-square calculated value = 139.940 Chi-square table value (5% loc) = 9.488 Degree of freedom =4 Result of test = Rejected Since Chi-square calculated value (139.940) is greater than table value(9.488)hence test is rejected. Hence null hypothesis H0 is rejected. Conclusion is there is an association between city and performance of SCM level. 4. To study relationship between infrastructure related factors on improvement of sales of the organized apparel retail outlets. H04: There is no association between infrastructure related factors on improvement of sales of the organized apparel retail outlets. H14: There is an association between infrastructure related factors on improvement of sales of the organized apparel retail outlets. Table 6.53 City Delhi Indore Mumbai Total Suppliers Performance Level Low Medium High 15 250 35 79 205 16 8 238 54 102 693 105 Total 300 300 300 900 273 Figure 6.7 Results of chi square test are as follows Chi-square calculated value = 115.389 Chi-square table value (5% loc) = 9.488 Degree of freedom =4 Result of test = Rejected Since Chi-square calculated value (115.389) is greater than table value(9.488)hence test is rejected. Hence null hypothesis H0 is rejected. Conclusion is there is an association between infrastructure related factors on improvement of sales of the organized apparel retail outlets. 5.To study relationship between backend merchandise management on the sales of the organized apparel retail outlets. chi-square test is applied. Hypothesis for the test is as follows. H05: There is no association between backend merchandise management on the sales of the organized apparel retail outlets. H15: There is an association between backend merchandise management on the sales of the organized apparel retail outlets. 274 Table 6.54 City Delhi Indore Mumbai Total Back end Merchandise Poor Average Excellent 36 232 32 101 168 31 9 229 62 146 629 125 Total 300 300 300 900 Figure 6.8 Results of chi square test are as follows Chi-square calculated value = 119.242 Chi-square table value (5% loc) = 9.488 Degree of freedom =4 Result of test = Rejected Since Chi-square calculated value (119.242) is greater than table value(9.488)hence test is rejected. Hence null hypothesis H0 is rejected. 275 Conclusion is there is an association between backend merchandise management on the sales of the organized apparel retail outlets. 6. To study relationship between ERP and improvement in the value proposition of the retail organized apparel outlets. chi-square test is applied. Hypothesis for the test is as follows. H06: There is no association between ERP and improvement in the value proposition of the retail organized apparel outlets. H16: There is an association between ERP and improvement in the value proposition of the retail organized apparel outlets. Table 6.55 City ERP implementation Low Medium High Delhi Indore Mumbai Total 50 80 21 151 204 191 191 586 46 29 88 163 Total 300 300 300 900 Figure 6.9 276 Results of chi square test are as follows Chi-square calculated value = 69.110 Chi-square table value (5% loc) = 9.488 Degree of freedom =4 Result of test = Rejected Since Chi-square calculated value (69.110) is greater than table value(9.488)hence test is rejected. Hence null hypothesis H0 is rejected. Conclusion is there is an association between ERP and improvement in the value proposition of the retail organized apparel outlets. Test of ANOVA Table 6.56 ANOVA for City Between Groups Recognition1_of_SCM_ score Within Groups Total Between Groups Importance1_of_SCM_ score Within Groups Total Between Groups Performance_of_SCM_ score1 Within Groups Total Between Groups Suppliers_Performance _score Within Groups Total Between Groups Distribution_Channel_s core Within Groups Total Between Groups Customers_Demand_sc ore Within Groups Total Sum of Squares df Mean Square F Sig. 9805.476 2 4902.738 50.948 .000 86319.307 96124.782 897 899 96.231 21098.062 2 10549.031 68.809 .000 137517.600 158615.662 897 899 153.308 17276.480 2 8638.240 147.124 .000 52666.560 69943.040 897 899 58.714 15179.129 2 7589.564 76.363 .000 89150.453 104329.582 897 899 99.387 28445.541 2 14222.771 62.872 .000 202917.611 231363.152 897 899 226.218 11188.722 2 5594.361 35.676 .000 140658.500 151847.222 897 899 156.810 277 ANOVA for Nature of Shop Table 6.57 Sum of df Squares Between 1875.876 2 Groups Recognition1_of_SCM_ score Within Groups 94248.907 897 Total 96124.782 899 Between 9243.449 2 Groups Importance1_of_SCM_ score Within Groups 149372.213 897 Total 158615.662 899 Between 1520.960 2 Groups Performance_of_SCM_ score1 Within Groups 68422.080 897 Total 69943.040 899 Between 1906.809 2 Groups Suppliers_Performance _score Within Groups 102422.773 897 Total 104329.582 899 Between 3057.242 2 Groups Distribution_Channel_s core Within Groups 228305.910 897 Total 231363.152 899 Between 1901.389 2 Groups Customers_Demand_sc ore Within Groups 149945.833 897 Total 151847.222 899 Customer_demand_Level_ Table 6.58 Frequency Percent Valid Percent Valid High Low 163 151 18.1 16.8 18.1 16.8 Medium Total 586 900 65.1 100.0 65.1 100.0 Mean Square F Sig. 937.938 8.927 .000 27.754 .000 9.970 .000 8.350 .000 6.006 .003 5.687 .004 105.071 4621.724 166.524 760.480 76.279 953.404 114.184 1528.621 254.522 950.694 167.164 Cumulative Percent 18.1 34.9 100.0 278 Correlations Table 6.59 Recognit Importance Performanc Suppliers_ Distributi Customers ion1_of_ 1_of_SCM e_of_SCM Performanc on_Chan _Demand_ SCM_sc _score _score1 e_score nel_score score ore Recognition1 _of_SCM_sco re Importance1_ of_SCM_scor e Performance_ of_SCM_scor e1 Suppliers_Per formance_sco re Distribution_ Channel_scor e Customers_D emand_score Pearson Correlation 1 .343** .157** .130** Sig. (2-tailed) .000 .000 .000 N 900 900 900 900 Pearson .343** 1 .291** .307** Correlation Sig. (2-tailed) .000 .000 .000 N 900 900 900 900 Pearson .157** .291** 1 .329** Correlation Sig. (2-tailed) .000 .000 .000 N 900 900 900 900 Pearson .130** .307** .329** 1 Correlation Sig. (2-tailed) .000 .000 .000 N 900 900 900 900 Pearson .161** .151** .262** .274** Correlation Sig. (2-tailed) .000 .000 .000 .000 N 900 900 900 900 Pearson .139** .326** .196** .476** Correlation Sig. (2-tailed) .000 .000 .000 .000 N 900 900 900 900 **. Correlation is significant at the 0.01 level (2-tailed). .161** .139** .000 900 .000 900 .151** .326** .000 900 .000 900 .262** .196** .000 900 .000 900 .274** .476** .000 900 .000 900 1 .128** 900 .000 900 .128** 1 .000 900 900 279 TESTING OF HYPOTHESIS: H01: The tools and techniques with regards to supply chain management in apparel sector has no impact on pricing. H11: The tools and techniques with regards to supply chain management in apparel sector has an impact on pricing. Table 6.60 Price Effectiveness level Recognition of SCM level Low Medium High Total Low 43 82 8 133 Medium 152 366 103 621 High Total 20 215 108 556 18 129 146 900 Above table indicate that out of 900 respondents 215 are of opinion that SCM has low effect on pricing, 556 respondents indicate that they have medium effect and remaining 129 respondents saying high impact on pricing. Out of 215 respondents of low effectiveness 43 respondents are from low recognition about SCM, 152 having medium recognition and remaining 20 having high recognition. 280 Figure 6.10 Results of chi square test are as follows Chi-square calculated value = 23.759 Chi-square table value (5% loc) = 9.488 Degree of freedom =4 Result of test = Rejected Since Chi-square calculated value (23.759) is greater than table value(9.488) hence test is rejected. Hence null hypothesis H0 is rejected. Importance_of_SCM_level * Price_Effectiveness_level Table 6.61 Importance of SCM level Price Effectiveness level Low Mediu High m Total Low 35 77 10 122 Medium High 171 9 409 70 60 59 640 138 215 556 129 900 Total 281 Figure 6.11 Results of chi square test are as follows Chi-square calculated value = 115.928 Chi-square table value (5% loc) = 9.488 Degree of freedom =4 Result of test = Rejected Since Chi-square calculated value (115.928) is greater than table value(9.488)hence test is rejected. Hence null hypothesis H0 is rejected. Thus it is reveled that the tools and techniques with regards to supply chain management in apparel sector has an impact on pricing. 282 H02: The impact of economies of scale with respect to optimum inventory management has no impact on supply chain cycle. H22: The impact of economies of scale with respect to optimum inventory management has an impact on supply chain cycle. Suppliers_Performance_Level and Performance_of_SCM_level Table 6.62 Suppliers Performance Level Total Performance of SCM level Low Medium High Total Low Medium 44 88 57 569 1 36 102 693 High 5 92 8 105 137 718 45 900 Figure 6.12 283 Results of chi square test are as follows Chi-square calculated value = 76.033 Chi-square table value (5% loc) = 9.488 Degree of freedom =4 Result of test = Rejected Since Chi-square calculated value (76.033) is greater than table value(9.488)hence test is rejected. Hence null hypothesis H0 is rejected. Distribution_Chain_level_ * Performance_of_SCM_level Table 6.63 Distribution Chain level Performance of SCM level Poor Average Excellent Total Low Medium High 49 83 5 137 93 510 115 718 4 36 5 45 Total 146 629 125 900 Figure 6.13 284 Results of chi square test are as follows Chi-square calculated value = 53.904 Chi-square table value (5% loc) = 9.488 Degree of freedom =4 Result of test = Rejected Since Chi-square calculated value (53.904) is greater than table value(9.488)hence test is rejected. Hence null hypothesis H0 is rejected. Thus it is reveled that the impact of economies of scale with respect to optimum inventory management has an impact on supply chain cycle. H03: There is no impact of marketing and supply chain management on an integrated basis on apparel retail sector. H33: There is an impact of marketing and supply chain management on an integrated basis on apparel retail sector Suppliers_Performance_Level * Customer_demand_Level_ Table 6.64 Suppliers Performance Level Total Customer demand Level Low Medium High Total Low Medium 58 92 43 466 1 135 102 693 High 1 77 27 105 151 586 163 900 285 Figure 6.14 Results of chi square test are as follows Chi-square calculated value = 148.850 Chi-square table value (5% loc) = 9.488 Degree of freedom =4 Result of test = Rejected Since Chi-square calculated value (148.850) is greater than table value (9.488) hence test is rejected. Hence null hypothesis H0 is rejected. Thus it is reveled that there is an impact of marketing and supply chain management on an integrated basis on apparel retail sector H04: The infrastructure related problem does not act as a stumbling block to the development of retail apparel sector. H44: The infrastructure related problem act as a stumbling block to the development of retail apparel sector. 286 To study above hypothesis it is observed that infrastructure level differ in different cities. Cities like Mumbai and Delhi consumer expect to have best infrastructure since they have good paying capacity. City like Indore infrastructure may not be at par with Mumbai and Delhi. To study this hypothesis information related to importance of SCM and city of respondents is classified. Table 6.65 City Delhi Indore Mumbai Total Importance of SCM level Low Medium High 31 74 17 122 248 205 187 640 21 21 96 138 Total 300 300 300 900 Figure 6.15 Results of chi square test are as follows Chi-square calculated value = 134.125 Chi-square table value (5% loc) = 9.488 Degree of freedom =4 Result of test = Rejected 287 Since Chi-square calculated value (134.125) is greater than table value (9.488) hence test is rejected. Hence null hypothesis H0 is rejected. Conclusion : there is an association between city and importance of SCM level. To study relationship between Location of shops and performance of SCM level, chi-square test is applied. Hypothesis for the test is as follows. Table 6.66 City Performance of SCM level Total Delhi Indore Low 38 97 Medium 247 203 High 15 0 300 300 Mumbai Total 2 137 268 718 30 45 300 900 Figure 6.16 Results of chi square test are as follows 288 Chi-square calculated value = 139.940 Chi-square table value (5% loc) = 9.488 Degree of freedom =4 Result of test = Rejected Since Chi-square calculated value (139.940) is greater than table value(9.488)hence test is rejected. Hence null hypothesis H0 is rejected. Conclusion is there is an association between city and performance of SCM level. H05: There is no impact of backend merchandise on sales of retail apparel outlets. H55: There is an impact of backend merchandise on sales of retail apparel outlets. To study this hypothesis information from questionnaire regarding distribution channel is collected. It is tested against performance of SCM. Distribution_Chain_level and Performance_of_SCM_level Crosstabulation Count Table 6.66 Performance_of_SCM_level Distribution_Chain_level_ Total Total High Low Medium Average 36 83 510 629 Excelent 5 5 115 125 Poor 4 49 93 146 45 137 718 900 289 Figure 6.17 Results of chi square test are as follows Chi-square calculated value = 53.904 Chi-square table value (5% loc) = 9.488 Degree of freedom =4 Result of test = Rejected Above results indicate that Chi square calculated value (53.904) is greater than chi-square table value (9.488). Hence test is rejected and null hypothesis is rejected. Therefore alternate hypothesis is accepted. Conclusion is there is impact of backend merchandise on retail apparel outlets. H06: There is no impact of ERP implementation on improving the value proportion of retail organized apparel outlets. H66: There is impact of ERP implementation on improving the value proportion of retail organized apparel outlets. 290 Having ERP and Impact of ERP Crosstabulation Count Table 6.67 Impact of ERP High Low Total Medium No 85 75 54 214 Yes 492 79 115 686 577 154 169 900 Having ERP Total Figure 6.18 Results of chi square test are as follows Chi-square calculated value = 85.068 291 Chi-square table value (5% loc) = 5.99 Degree of freedom =2 Result of test = Rejected Above results indicate that chi-square calculated value (85.068) is greater than chi-square table value(5.99). Hence Null hypothesis is rejected. Alternate hypothesis is accepted. Conclusion is there is impact of ERP implementation on improving the value proportion of retail organized apparel outlets. 292 CHAPTER 7 RESEARCH FINDINGS AND INTERPRETATION During the survey and data collection some useful insights were obtained, both from retailers as well as consumers which are useful for practical application by the retailers in improving their overall business efficiency. Some of the important findings are summarized below: A data analysis and interpretation of results were conducted on the data collected from the research survey. The quantitative research component consisted of a survey instrument that was administered to the inventory and logistics managers of 21 malls in Mumbai.18 malls in Indore and 21 malls in Delhi to ascertain their views on the importance of supply chain management on organized apparel retail outlets 52 percent of the respondents are strongly agreeing that supply chain management is mentioned and recognized by their company where as 9 percent of the respondents are strongly disagreeing that supply chain management is mentioned and recognized by their company11 percent of the respondents are having neutral opinion that supply chain management is mentioned and recognized by their company 42 percent respondents are strongly agreeing to the fact that supply chain management is different from value chain managemnt.8 percent respondents are strongly disagreeing to the fact that supply chain management is different from value chain 293 management and 6 percent respondents are not having any opinion that supply chain management is different from value chain management 7 percent of the respondents strongly disagree that supply chain management has an impact on pricing.19 percent of the respondents strongly disagree that supply chain management has an impact on pricing,30 percent of the respondents strongly are neutral that supply chain management has an impact on pricing,37 percent of the respondents agree that supply chain management has an impact on pricing,6 percent of the respondents strongly agree that supply chain management has an impact on pricing 5 percent respondents strongly disagree that there is close relation between supply chain management and organized apparel retail business.22 percent respondents disagree that there is close relation between supply chain management and organized apparel retail business,56 percent respondents are neutral that there is close relation between supply chain management and organized apparel retail business,11 percent respondents agree that there is close relation between supply chain management and organized organised apparel retail business and 7 percent respondents strongly agree that there is close relation between supply chain management and organized apparel retail business. 5 percent of respondents strongly disagree that there is a need to implement supply chain management,8 percent of respondents disagree that there is a need to implement supply chain management,23 percent of respondents strongly are neutral towards the need to implement supply chain management,17 percent of respondents agree that 294 there is a need to to implement supply chain management and 47 percent of respondents strongly disagree that there is a need to to implement supply chain management In order to know whether outsourcing of logistics is different among the different retail formats, researcher collected Data on this from all the 900 retail outlets and the response was on a five point scale Data was categorized under the three different retail formats viz convenience stores, midsized stores and hypermarkets. Data was then analyzed by subjecting it to one way ANOVA using SPSS version 20. To test whether the sample means are statistically significant at .05 significance level. The chi square coefficient value is 7.563 and this has been found to be statistically significant with the significance of .023. This shows that different retail formats differ in monitoring backend merchandising of their outlet. 295 CHAPTER 8 CONCLUSIONS Aimed at minimizing costs, the cost leadership strategies result in the same efficiency capabilities that are valued in a lean supply chain. Firms exhibiting consistency among the logistics strategy, manufacturing strategy and the type of supply chain should experience higher levels of performance and competitive advantage than firms whose strategies are not consistent with supply chain type. Improved performance should result from the three entities guiding the firm‘s actions toward the same objectives and goals instead of toward conflicting goals. Therefore, the following research questions are posed. 1. Are there distinct supply chain types? 2. What characteristics contribute most to supply chain type determination? 3. Among the supply chain types, do firms differ in the competitive priorities that they choose to emphasize in their logistics and manufacturing operations? 4. Given a specific supply chain type, do higher performing companies emphasize different competitive priorities than lower performing companies? A web survey of logistics and supply chain executives who are members of the Council of Logistics Management (CLM) and employed manufacturing firms was used to gather the needed data. Because CLM is often considered to be the premier logistics organization, it is believed that members have sufficient working knowledge of supply chain, logistics and manufacturing issues within their organization to accurately complete the survey. In addition, executives (possessing the title manager 296 or above) were chosen because their high-ranking position should afford them a fairly comprehensive view of the firm and its functional priorities. The sampling frame includes manufacturing firms from multiple industries. Scales from previous studies and articles were used to compose the survey. The respondents were divided into two initial groups, those participating in lean supply chains and those participating in agile supply chains. Once the supply chain type was determined, members of each type of supply chain were divided into high and low performers. Multivariate analysis of variance (MANOVA) was performed to detect differences in relative emphasis for the competitive priorities among the groups. Contributions This study makes several contributions to the literature. First, the characteristics of lean and agile supply chains can be empirically supported to further the development of supply chain management theory. Much of the literature to date is conceptual with little empirical support. Secondly, an alternative framework for logistics strategy is presented. The framework parallels that of manufacturing strategy and encourages integrative research using the two strategies. In addition, the framework will enable advanced understanding of logistics strategy and priorities. Lastly, the relationships among the type of supply chain, logistics and manufacturing strategies and their relation to perceived performance can be empirically examined, thereby advancing supply chain theory development as well. This study imparts several managerial implications as well. First, the financial impact of choosing logistics and manufacturing priorities that complement their type of supply 297 As our economy is booming and every organization is facing severe competition in the market whether it may be local or an international market. The traditional corporate model of organization was based on vertical integration, hierarchy, and functional management. There is a drastic change in the traditional and modern business world, where in the modern world, when demand became unpredictable in both quality and quantity, when the domestic and international markets became too diversified and thereby difficult to forecast, and when there is a dynamic change in the technology which made single-purpose production equipments obsolete, the mass production system became too costly and too rigid. Emerging technologies now allow for the transformation of assembly main characteristic of the large corporation into easy-to-program production units with product flexibility sensitive to market variations, and process flexibility sensitive to changes in technology. Most of the modern organizations have adapted the new environment and the main shift is featured as the shift from the vertical bureaucracies to horizontal corporations. There are seven major modern trends which features such corporations and they are as organizing around process, not tasks; a flat hierarchy; team management; measuring performance by customer satisfaction, maximization of contacts with suppliers and customers; information, training and retraining of employees at all levels and rewards based on team performance. Contemporary business life cycle is process driven and chain oriented hence integration has become a core-question for companies. The problems and challenges with the traditional vertical co-operation between organizations are costly and time 298 consuming, instead of co-operating, there is also no scope of cost reductions or profit improvements at the expenses of someone else in the supply chain. Due to the purchasing power that comes with control over consumer contacts, retailers are often dominant in a supply chain. Closeness to end consumer markets gives retailers fast and precise information about matters such as shifting fashion preferences and attractiveness of competitor‘s offerings, comparable to continuous market research. Even though power is no end in itself, it does include the opportunity to organize the supply chain in a suitable way. Many challenges face retailers today. Expanding product variety, greater fluctuations in demand, and shorter and shorter product life cycles make time-to-market reductions essential. The ever-increasing need for reduced lead times continues. Maximum coordination of work in and between companies is therefore necessary, as otherwise it will lead to higher costs as well as to longer lead times. This research helps to investigate how supply chains are affected by retail strategies and how the value chain is tailored to deliver a company‘s value proposition, to see how activities fit together and what tradeoffs companies need to make. We believe that a good way to analyze the configuration of activities that companies perform is by drawing activity maps. Such maps show how a company‘s value proposition is contained in a set of tailored activities designed to deliver it. The volatility of markets is a popular topic to discuss and as forecasting is becoming increasingly crucial due to companies‘ attempts to reduce lead times, managers seek new methods to reduce forecast errors; still the real problem would be that forecast 299 errors increases as lead time increases. Time to react, i.e. responsiveness, is essentially achieved through time compression in the supply chain and the costs should be lower at the same time. Still, the system of having suppliers able to mdeliver a complete order at required time might simply shift the cost burden from one part of the supply chain to another. There is a direct relationship between the length (measured in time) of a supply chain and the inventory carrying cost, but the declared truism ―time is money‖ is arguably more true for companies supplying innovative products with unpredictable demand than it is for others. As processes are abstract concepts they need to be modeled in some way to be understood. Among the most widely accepted definitions of a process is ―a set of interrelated activities‖ and― a chain of activities‖. In this respect, processes are seen as activity flows, or workflows, consisting of activities that have some kind of relationship to each other. Thus, if activities are not perceived interrelated, they are not part of the same process. However, processes are not real structures, merely mental abstractions; although flowcharts can show that data or materials flow between activities in a process, the data or material do not actually flow between activities; rather they flow between organizational functions (or roles). Process-focus has been the main idea in many widely adopted management approaches such as total quality management and business process reengineering. 300 A horizontal cross-company process perspective means having a holistic view on the supply chain. The most well known model having this standpoint value chain model, in which a company‘s value chain is set into a larger context – the value system. Having an end customer perspective, all activities that the chain performs should add value, an idea that is also the core of SCM. With such a linear functional view, products, information, and finances flow through channel members towards end customers. When improving visibility of demand, opportunities can be found at the interface between suppliers and retailers as retailers rarely share routine data with suppliers, hence suppliers are forced to use forecasting and carry inventory. Producers need to extend the customer‘s order cycles, i.e. finding approaches how to capture earlier warnings of the customer‘s requirements. Considering the fact that real demand is hidden from view except from already made orders, the idea behind the demand penetration point becomes useful in this case. The demand penetration point could be described as the point in the supply chain where real demand meets the projected plan; upstream from this point everything is driven by a forecast. Therefore, new ways should be invented on how the penetration point might be pushed as far as possible upstream; one way would be to improve the speed and accuracy of information from the market place to manufacturers.Another way to push the order penetration point upstream would be to postpone the final commitment of the product to its final form. A frequently used example of a postponement strategy is 301 Benetton, who makes knitwear and then dyes everything the last thing they do, according to customer requirements collected during and after production. It is reveled that the tools and techniques with regards to supply chain management in apparel sector has an impact on pricing. It is reveled that the impact of economies of scale with respect to optimum inventory management has an impact on supply chain cycle. It is reveled that there is an impact of marketing and supply chain management on an integrated basis on apparel retail sector. It has been concluded that there is an association between city and importance of SCM level. It has been concluded that there is impact of backend merchandise on sales of retail apparel outlets. It has been concluded that there is impact of ERP implementation on improving the value proportion of retail organized apparel outlets. 302 CHAPTER 9 RECOMMENDATIONS Indian Retail industry has witnessed the entry of many large corporate houses and growing acceptance of modern formats. Though modern retail is relatively new in India. It is heartening to note that they have quickly adopted required processes in their operations. Given the industry's changing landscape and emerging challenges, the focus of retail industry players too is changing. They are concentrating on strengthening the existing operations and assessing options for profitable growth through enhancing efficiency in Supply chain, embracing appropriate technology, upgrading skills of employees and are moving towards consolidation and innovation of processes. In today's world of Internet and wide media reach and connectivity, consumers are well informed and are able to exercise their option in deciding their preferred store for shopping. One of the major challenge modern retail outlets are facing is in attracting and retaining new customers. This explains the reason why all store formats be it convenience store, mid sized store and hypermarket are working on improving supply chain alignment with sales and pricing of organized apparel retail outlets. This is a right focus for the retailer as can clearly be concluded from the research that supply chain alignment has important bearing on achieving better sales and pricing of organized apparel retail outlets which is the only way to remain viable and ensure sustainable growth. Only happy customers come back for repeat and regularly buying and help in consolidating base of loyal customers. Further the study reveals that retailers are focusing on enhancing employee productivity and operational efficiency and outsourcing of logistics to improve delivery of goods and services and managing inventory to remain profitable. 303 However, the focus differs among different formats and mid sized stores in general barring few exceptions has still a lot of ground to cover in adapting to their processes modern retail practices. The study also showed that though a lot of data is collected on items like wastage, slow moving items, customer complaints, there is no structured approach in processing this data and comparing it with any set target. Retailers have to move to the next phase and make use of this information in achieving measurable targets for operational efficiency improvement. The study reveals that still complete outsourcing of inwards logistics is not being significantly practiced by retailers in any format be it Hypermarkets, Mid sized stores and convenience stores. Most of the stores are optimizing this process by partially outsourcing. This could be because there is still no large dependable logistics service providers for retailers whose services these retailer can avail. This is a big business opportunity and large retail chains are themselves planning to enter into this area. Once this is implemented it is expected to have a major impact on procurement of apparels for the organised retailers. 9.1 Recommendation Decision support systems are seldom passive instruments and are often applied to support Supply Chain Management via feedback mechanisms that instigate corrective actions. The direction and particularly the amplitude of the likely management action/response however has not been defined. There exists a recognized need for 304 some universally accepted strategic model to coordinate the organizations within the supply chain, integrating, measuring and controlling key business processes effectively, but to date any measured impact of the performance measurement element within such a systems, on the dynamic behavior within the supply chain, has yet to be examined. In Indian organized retail scenario it appears that all three formats viz Hypermarket, Midsized Store and convenience store are here to stay. Hence in order to make each of these format's commercially viable, some innovative business models specifically valid to Indian situations will have to be developed. This will entail particularly back end of supply chain. Thus, it is recommended that retailers should consider sharing of facilities like logistics service provider for inward logistics and godown space. This would help in reducing the operational cost and make the enterprise viable business proposition. It was observed during the study that price display particularly for apparels is not streamlined and unsatisfactory. It is a major source of irritant to the customer. It is recommended that properly designed placard displaying facilities should be installed which should show the correct price of the item in the shelves. Many times shopper drops the item from his list resulting in the loss of sale when he is not able to know the exact price of the item that he wants to buy. By implementing this recommendation the retailers will be able to resolve this problem. Also promotional offers which are displayed on the shelves should be valid. Sometimes the offer is still displayed when the Sales promotional scheme is over and offer is no more valid. 305 The results of this study hopefully will provide organized apparel retail outlets with additional knowledge to peruse collaborative opportunities aimed to benefit supply chain management in organized apparel retail outlets. Research proposes three areas in which the importance of time as a competitive variable are increasing according to the need to meet the fast changing markets of today: Shortening life cycles The drive for reduced inventories Volatile markets making reliance on forecasts dangerous. In accordance with technological improvements as well as societal changes, product life cycles have been radically shortened the last few decades. It is within this time to market scenario companies must be able to capture an opportunity, develop, manufacture and distribute products in accordance with the existing market pace, and if successful, the actual time that can be saved while performing these activities becomes crucial as late market entrances increase the risk for obsolete stock. Regarding the drive for reduced inventories, many companies have realized the need to release inventory holding costs. Time to serve, i.e. order to delivery time is also important as companies need to be able to respond to demand of products that are already on the market, i.e. the lead time to resupply a product determines the organizations ability to meet demand during the life cycle, which is also the base for the concept of quick response which will be discussed later on. The volatility of markets is a popular topic to discuss and as forecasting is becoming increasingly crucial due to companies‘ attempts to reduce lead times, managers seek 306 new methods to reduce forecast errors; still the real problem would be that forecast errors increases as lead time increases. Time to react, i.e. responsiveness, is essentially achieved through time compression in the supply chain and the costs should be lower at the same time. Still, the system of having suppliers able to mdeliver a complete order at required time might simply shift the cost burden from one part of the supply chain to another. The importance of supply chain management in the retail clothing business has been identified without a doubt. It is also evident from this study that effective supply chain management would improve company's competitive advantage and lead to long-term performance improvement, and accuracy and reliability are enhanced by the empirical study. In addition to this, the framework of effective supply chain management becomes the essential of the study. It is necessary to provide some recommendations on how to achieve the effective supply chain management in the retail clothing business. Set up the strategy for supply chain management and get alignment from the top manager. There are many strategies one can adopt to manage the supply chain. Executive management focus is critical. Automation and analysis tools are often ineffective because they are not aligned to the business users, who must feel comfortable with the management and open to learning and thinking in order for a vision to become a reality. 307 9.2 Create the logistics vision. The purpose of the logistics vision statement is to give a clear indication of the basis whereby the business intends to build a position of advantage through closer customer relationships. The criterion for a good logistics vision statement is that it should provide the road map for how to achieve the goals of the company. Do supply chain analysis based on the core competencies and capabilities of the company. Establish supply chain integration not only within the company but also upstream with suppliers and downstream with distributors and customers. Supply chain integration implies process integration, both upstream and downstream. By process integration we mean collaborative working between buyers and suppliers, joint product development, common systems and shared information. Manage the supply chain as a network. To manage in such a radically revised competitive structure clearly requires different skills and priorities to those employed in the traditional model. To achieve market leadership in the world of network competition necessitates a focus on network management as well as upon internal process . Establish communication system The essence of supply chain management is communication, allowing the ultimate consumer to become a partner in the process. The close and real - time communication linkage created through the practices would 308 help all the elements of the supply chain to meet the ever changing demands of the ultimate consumer. Manage effective supply chain through technology. Technology will allow all upstream and downstream trading partnem to share everything from strategic plans to operational data through electronic linkages. Diminish or avoid uncertainties of the supply chain management. As we discussed in this study, the supply chain uncertainties in the clothing retail business focus on supplier performance, distribution channel and customer demand. Some actions can be used to improve supply chain performance. 9.3 Supplier performance: It is been recommended that in order to improve supplier performance organized retail outlets needs to identify and reward good performances, transportation performance should be measured separately, for inbound freight handling sub-contract should be given. A permanent and frequent system of reviewing inventory should be adopted. 9.4 Distribution channel: It is been recommended that in order to improve distribution channel organized retail outlets must establish mutual distribution channel, set up distribution logistic system Use market investigation and analysis andestablish inter-communication system to enable information flow. 309 9.5 Customer demand: It is been recommended that in order to improve customer demand organized retail outlets must establish systems for forecast and adjust safety stocks and change transportation mode. Implement information technology; It is been recommended that in order to improve information technology organized retail outlets must introduce improved forecasting techniques, subcontract distribution operations and build new customers and collect feedback. 310 CHAPTER 10 LIMITATIONS OF THE STUDY / FURTHER SCOPE OF WORK Limitations of the study: Researcher has assumed that the information provided by the retail executives and managers is transparent and accurate. However there can be constraints while sharing information by the retailers for general and academic survey. Hence more accurate information can be gathered only if such survey is commissioned by large retailers for their own use. The Indian apparel organized retail scenario is evolving and is in dynamic state with all retail chains expanding aggressively. However many of them could not sustain this growth because of liquidity problems and debt related issues. Therefore care has been taken to include only those retailers who have stabilized operations. The scenario can change in the future. Thus this research work can only be used as a reference for conducting a similar study on organized retail. But the sampling frame will have to be decided as appropriate at the time of conducting any future study. 311 Future scope of research This research was undertaken mainly to find out the impact of supply chain alignment and use of technology on sales and pricing of apparels in organized retail outlets and this was confined to the city of Mumbai, Delhi and Indore Similar research can be conducted with wider and different target respondents covering diverse geographical locations. The findings from a large survey of this nature will be generalized and applicable to over all operations of retailers in India. 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Your cooperation in the completion of the survey is highly appreciated. Thank you for your participation. Please assess the criteria statements by putting a number/tick in the box that best represents your expectations or opinions of your company. Strongly Disagree - 1 Disagree - 2 Neutral - 3 Agree - 4 Strongly Agree - 5 A. Supply chain Management Recognition 1. Is the supply chain management mentioned and recognized by your company 2. Do you think that supply chain management is different from value chain management. 3. Do you think that supply chain management and its various tools and techniques have an impact on pricing of apparels in organized retail outlets? 4. There is close relation between supply chain management and clothing retail business. 5. The supply chain is the network of organization that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of ultimate consumer Strongly Agree Agree Neutral Disagree Strongly disagree 335 B. Supply chain imperative (the importance of supply chain management) 6. There is a need to implement supply chain management 7. There is an impact of marketing and supply chain interface on an integrated basis In “Organized apparel and clothing” category of the retail outlets. 8. Better supply chain management leads to increased sales 9. The supply chain in the retail apparel business has an impact of economies of scale of retailers with respect to optimum inventory management in the supply chain cycle. Strongly Agree Agree Neutral Disagree Strongly disagree Strongly Agree Agree Neutral Disagree Strongly disagree Strongly Agree Agree Neutral Disagree Strongly disagree 10. Effective supply chain will lead to long term performance improvement.(better pricing of apparels) C Supply chain Management and Performance 11. Supply chain management and marketing has an impact on an integrated basis in organized apparel retail outlets. 12. Supply chain management can spend on the fashion of the product to follow the market change. 13. Infrastructure related factors have an impact on sales of the organized retail apparel outlets. 14. There is an impact of backend merchandise management on the sales of the organized apparel retail outlets. 15 Bring right productions in the right season can attract more customers and improve customer satisfaction D Uncertainty Sources involved Supply Chains Supplier Performance 336 16 The lead times for manufacturing and importing forced the company to keep more inventories. 17. Lead times influence the fashion level of the production and time to market. 18. Lead times effect on the correctness of forecasting in supply chain management 19. The supplier’s productivity influence retails company’s supply chain management 20. There are some uncertainty involved for the late supply n the ordering system such as late delivery, late shipment, machine broke down and custom stop-check etc. Distribution Channel 21 Is your company location good for your target market? 22. To what degree do you think that the sales performance is related with your distribution channel? 23. The inventory control can be improved through customer service and sales strategy, such as promotion, membership, credit and clearance sale 24. Multichannel distribution benefits for the inventory control through inter-adjustment on the stock. Customer Demand 25 The correctness of the market information is important for the inventory control 26. The customer feedback on the production can lead the direction of the fashion of production. 27. There is an impact of ERP on improving the value preposition of the retail “Apparel sector” in optimizing the economies of scale (bottom line). 337 1. Name of the Company:-----------------------------------------------------2. Location of the Company:Mumbai Delhi Indore two to five shops Chain of shops 3. Type of company: Sigle shop 4. If necessary, are you available for a personal interview? �Yes �No 5. Any suggestions/comments: ~ End ~ **Thank you for your kind co-operation** ** All information will be used for academic purposes only** 338
