What are the chal­lenges that In­dian re­tail­ers face their sup­ply chain? What are the key trends im­pact­ing the In­dian re­tail in­dus­try and sup­ply chain process in re­tail? How can ware­hous­ing au­to­ma­tion help re­tail­ers address chal­lenges?

Progressive Grocer (India) - - News -

A re­port by Grey Or­ange– Zin­noy Study* looks at th­ese prob­lems and of­fers the right so­lu­tions that can help rein­vent the re­tailer’s sup­ply chain to sup­port the chang­ing mar­ket dy­nam­ics.

The re­tail in­dus­try in In­dia is emerg­ing as one of the largest in­dus­tries in the econ­omy. It ac­counts for over 10 per cent of the coun­try’s Gross Do­mes­tic Prod­uct (GDP) and around 8 per cent of the em­ploy­ment. In­dia’s re­tail­ing in­dus­try mostly con­sists of the lo­cal mom and pop store, owner manned shops and street ven­dors. Or­gan­ised re­tail su­per­mar­kets are small but grow­ing. The re­tail mar­ket in In­dia un­der­go­ing fun­da­men­tal change driven by the de­mo­graphic shift with more than 50% of its pop­u­la­tion be­low the age of 25, ris­ing dis­pos­able in­come, ur­ban­iza­tion and blur­ring bound­aries be­tween off­line and on­line worlds. The re­tail re­forms and changes in the FDI pol­icy have

The re­tail in­dus­try is ex­pected to reach to US$ 1 tril­lion by 2020, at­tain­ing a CAGR of 10.76 per cent be­tween 2015-2020.

opened the In­dian re­tail mar­ket for in­ter­na­tional be­he­moths. With 100% FDI al­lowed in sin­gle-brand re­tail and go-ahead to start on­line chan­nel with­out any ap­provals, the com­pe­ti­tion from in­ter­na­tional play­ers to home-grown re­tail­ers has fur­ther in­ten­si­fied.

There’s a grow­ing need to rein­vent the re­tailer’s sup­ply chain to sup­port the chang­ing mar­ket dy­nam­ics, specif­i­cally in ware­hous­ing with sig­nif­i­cant tech­no­log­i­cal ad­vance­ments hap­pen­ing in the au­to­ma­tion space. What chal­lenges In­dian re­tail­ers face in their sup­ply chain? What are the key trends im­pact­ing the In­dian re­tail in­dus­try and sup­ply chain process in re­tail? How can ware­hous­ing au­to­ma­tion help re­tail­ers address chal­lenges?

All the above trends have led to highly com­plex sup­ply chain and ware­hous­ing pro­cesses that have in­creased chal­lenges and costs of man­ag­ing sup­ply chain for re­tail­ers.

Com­po­nents of a typ­i­cal sup­ply chain

• Ven­dor - Sup­plier of raw ma­te­rial, semi-fin­ished goods or fin­ished goods • Fac­tory - Fin­ished goods are man­u­fac­tured in the fac­tory

• Pri­mary Ware­house/dis­tri­bu­tion Cen­tre - Fin­ished goods are stored in this ware­house and are ready for dis­tri­bu­tion.

• Sec­ondary Ware­house/de­pots - Fin­ished goods ar­rive at re­gional ware­houses (through stock trans­fer) and are ready for sales or­der dis­patches to dis­trib­u­tors/stores

• Stores - Ac­tual sales of nished goods hap­pens at the store

Sce­nario 1: In this case, ven­dors man­u­fac­ture the fin­ished goods as per the re­tail­ers spec­i­fi­ca­tions and sup­ply the fin­ished goods to the re­tail­ers (ready for sale).

Sce­nario 2: In this case, the ven­dors pro­vide the raw ma­te­ri­als for pro­duc­ing the fin­ished goods to the re­tail­ers at their fac­tory. There could be mul­ti­ple ven­dors pro­vid­ing raw ma­te­ri­als to the fac­tory. The fac­to­ries then process the raw ma­te­ri­als and man­u­fac­ture the fin­ished goods that are ready for sale.

Typ­i­cal Re­tail Ware­house Op­er­a­tions

In­bound Process

• Un­load­ing from truck

• Pal­leti­za­tion & Ex­ter­nal Ver­i­fi­ca­tion

• Move to Stag­ing Area

• 100% Units Stan

• Ap­ply LPN

• Put-away

• Scan Lo­ca­tion, LPN & Con­firm Put-away/grn

Out­bound Process

• HHT Al­lo­ca­tion to Picker – (Or­der Based Pick­ing)

• HHT Nav­i­gates picker to Pick lo­ca­tion

• Picker Scans lo­ca­tion, SKU & Picks Qty dis­played on HHT

• 100% Units Scan

• Tape, Strap & Out­bound VAS

• Bring ma­te­rial to Pro­cess­ing Area on each level

• Move to dis­patch bay –Zone wise Stag­ing

Re­turn Process

• Un­load­ing from truck

• Pal­leti­za­tion & Ex­ter­nal Ver­i­fi­ca­tion

• Qual­ity Check

• 100% Units Scan & Sort­ing

• Sys­tem Guided Put-away based on QC

• Put-away Con­fir­ma­tion

Chal­lenges in Re­tail Sup­ply Chain

• High Number of Touch points

• Frag­mented Sup­ply Chain

• SKU Vol­ume and Vari­abil­ity

• Un­fa­vor­able Reg­u­la­tory En­vi­ron­ment

• Short­age of skilled Man­power

Short­age of Skilled Man­power

While In­dia is the sec­ond largest pop­u­lated coun­try in the world, short­age of skilled man­power is a big chal­lenge for In­dian re­tail­ers. The high at­tri­tion rate within the re­tail sec­tor fur­ther in­creases prob­lems

The re­tail sup­ply chain is highly frag­mented. This leads to re­tail­ers hav­ing lim­ited vis­i­bil­ity over in­ven­tory and fac­ing is­sues with de­mand fore­casts and in­ven­tory man­age­ment. Large number of in­ter­me­di­aries be­tween man­u­fac­tur­ers and re­tail­ers fur­ther in­crease com­plex­ity in man­ag­ing re­tail sup­ply chain.

for the re­tail­ers, as there is time and cost in­volved in train­ing the man­power. The so­cio-cul­tural mind­set makes a career in the re­tail ware­houses and dis­tri­bu­tion cen­ters an unattrac­tive op­tion for skilled youth. The poor work­ing con­di­tions within the ware­houses also make it an un­ap­peal­ing career choice. Non-avail­abil­ity of niche cour­ses and ab­sence of in­sti­tu­tion­al­ized train­ing in­fra­struc­ture in re­tail sup­ply chain has re­sulted in sig­nif­i­cant skill gap within the re­tail in­dus­try.

Frag­mented Sup­ply Chain

The re­tail sup­ply chain is highly frag­mented. This leads to re­tail­ers hav­ing lim­ited vis­i­bil­ity over in­ven­tory and fac­ing is­sues with de­mand fore­casts and in­ven­tory man­age­ment. Large number of in­ter­me­di­aries be­tween man­u­fac­tur­ers and re­tail­ers fur­ther in­crease com­plex­ity in man­ag­ing re­tail sup­ply chain. This of­ten leads to ex­cess in­ven­tory and stock losses, re­sult­ing in high costs of sup­ply chain.

SKU Vol­ume and Vari­abil­ity

Most re­tail­ers have to deal with huge vol­umes of thou­sand of SKUS. Vari­abil­ity in SKU de­mand fur­ther adds to the com­plex­ity of re­tail­ers’ sup­ply chains. This leads to sev­eral chal­lenges for the re­tail­ers in­clud­ing in­cor­rect fore­casts, in­suf­fi­cient or ex­ces­sive in­ven­tory and poor cus­tomer ex­pe­ri­ence due to non-avail­abil­ity of prod­ucts at the right place at the right time. For multi-brand re­tail­ers, the prob­lem is even more com­plex, re­quir­ing co­or­di­na­tion with mul­ti­ple sup­pli­ers and ven­dors.

High Number of Touch­points

Re­tail­ers’ sup­ply chain is a com­plex one with many in­ter­me­di­aries, re­sult­ing in high number of touch­points. Each touch­point means in­creased hu­man in­ter­ven­tion lead­ing to in­creased wait time, pil­fer­age, stock loses and in­ven­tory wastage. Sup­ply chain au­to­ma­tion re­duces the pos­si­ble number of touch­points. It not only ac­cel­er­ates de­liv­ery of prod­uct to the re­tail store and to con­sumers, but also helps in re­duc­ing pil­fer­age and pick­ing er­rors in the sup­ply chain.

Chal­lenges for Big Box re­tail­ers

The changes in the FDI pol­icy have opened up re­tail mar­ket in In­dia to many in­ter­na­tional re­tail brands. Large number of big box re­tail­ers with suc­cess­ful in­ter­na­tional op­er­a­tions have launched or are in the process of launch­ing op­er­a­tions in In­dia. They face some unique set of chal­lenges, while set­ting up their stores here. IKEA is one such lead­ing big box re­tailer. The IKEA Group is the first ma­jor sin­gle brand re­tailer to be given FDI ap­proval to set up re­tail op­er­a­tions in In­dia and is in the process of set­ting up their stores.

How Au­to­ma­tion will Help

Han­dling Large Number of SKUS and Or­ders: Han­dling a large number of SKUS and or­ders

For a multi-brand re­tailer like us, number of SKUS is re­ally large and the SKUS it­self keep on chang­ing and that makes it all the more com­plex. — Ya­keen Gazi Sr. V.P. - IT & Lo­gis­tics - Hyper­city Re­tail (In­dia) Ltd

IKEA is ob­sessed with cre­at­ing low prices and to be af­ford­able for the many peo­ple. Be­ing a sin­gle brand big for­mat re­tailer that pro­duces prod­ucts glob­ally in many coun­tries, adding la­bels with coun­try-spe­cific re­quire­ments (eg. MRPS) man­u­ally adds to costs and is a chal­lenge op­er­a­tionally and in­ter­rupts our global sup­ply chain.

— Bi­mal Pa­tel Dis­tri­bu­tion Es­tab­lish­ment Man­ager In­dia, IKEA

The avail­abil­ity of skilled man­power is one of the key chal­lenges the ware­house in­dus­try faces. — Gur­preet Sandhu Head - Sup­ply Chain & Re­plen­ish­ment, Aditya Birla Re­tail Lim­ited

is typ­i­cally a man­ual process that re­quires large work­force within the ware­house premises. Ab­sen­teeism, at­tri­tion, labour unions and short­age of skilled man­power can ham­per such op­er­a­tions, lead­ing to short­ages, put-away/pick­ing er­rors and loss of profit aris­ing from in­com­plete or­ders. Au­to­ma­tion helps in man­ag­ing large number of SKUS and ful­fill­ing mul­ti­ple or­ders si­mul­ta­ne­ously.

Cut­ting-down Touch Points and Pick­ing Er­rors: A man­ual ware­hous­ing op­er­a­tion has large number of touch­points, and there­fore, is prone to pick­ing er­rors. By adding au­to­ma­tion, the number of touch points can be re­duced with less man­ual in­ter­ven­tion, thereby, re­duc­ing pick­ing er­rors.

In­crease Ware­house Eciency: Au­to­ma­tion helps in­crease the over­all ef­fi­ciency of the ware­house by en­sur­ing all pro­cesses are sys­tem di­rected. It also en­ables car­ry­ing out of si­mul­ta­ne­ous tasks, while stream­lin­ing the pro­cesses in­side a ware­house.

Im­prove Man­power Pro­duc­tiv­ity: Au­to­ma­tion en­ables ex­ist­ing man­power to han­dle mul­ti­ple or­ders ef­fi­ciently thus in­creas­ing their pro­duc­tiv­ity. Since all pro­cesses are sys­tem di­rected, highly trained man­power is not re­quired to man­age the au­to­mated pro­cesses.

Dy­nam­i­cally Man­ag­ing Chang­ing Re­quire­ments: In a tra­di­tional ware­house, stor­age spa­ces are usu­ally static and change in the con­fig­u­ra­tion of the stor­age can lead to a com­plete change in ware­house zon­ing and in back­end sys­tems. Au­to­ma­tion can help store goods dy­nam­i­cally which are man­aged by mo­bile units and a Ware­house Con­trol Sys­tem (WCS), mak­ing it eas­ier to han­dle dy­nam­i­cally chang­ing re­quire­ments that are typ­i­cal to a re­tail op­er­a­tion.

Re­duc­ing Ware­house Foot­print: Au­to­ma­tion helps make the stor­age space more ef­fi­cient by bet­ter al­lo­ca­tion of space, denser stor­age and lesser aisle space. It also helps man­age in­ven­tory more ef­fi­ciently and there­fore, helps in re­duc­ing the days of in­ven­tory stored in a ware­house.

Short­en­ing Or­der Ful­fil­ment Time: Au­to­ma­tion can help han­dle mul­ti­ple or­ders thus re­duc­ing the win­dow of or­der han­dling and or­der ful­fil­ment time and help­ing the ware­house in­crease through­put. With GST now in force, ware­houses will typ­i­cally

han­dle a large number of or­ders and this can be en­abled by lever­ag­ing au­to­ma­tion.

Com­plex­i­ties In­volved in Au­to­ma­tion

• Inex­i­ble and Non-ex­pand­able

• Re­turn on In­vet­ment

• Change Man­age­ment

• Lack of aware­ness Lack of Aware­ness: Low aware­ness of avail­able au­to­ma­tion so­lu­tions is one of the pri­mary rea­sons for poor au­to­ma­tion adop­tion within re­tail sup­ply chain in­dus­try in In­dia. There is a strong need for com­pa­nies like Grey Or­ange to in­vest in on­line and off­line mar­ket­ing chan­nels to cre­ate aware­ness of such so­lu­tions and how au­to­ma­tion so­lu­tions can help re­tail­ers over­come sup­ply chain and ware­hous­ing chal­lenges for re­tail­ers. Au­to­ma­tion of repet­i­tive tasks in ware­house al­lows managers and op­er­a­tors to fo­cus on more com­plex, val­uedriven tasks that help or­ga­ni­za­tions meet their busi­ness ob­jec­tive. Change Man­age­ment: Chang­ing peo­ple’s mind­set and driv­ing them to use au­to­ma­tion is an­other big chal­lenge in adopt­ing sup­ply chain au­to­ma­tion in the In­dian re­tail in­dus­try. Many or­ga­ni­za­tions face re­sis­tance from cur­rent em­ploy­ees, who think au­to­ma­tion would take away their jobs. Tech­no­log­i­cal change and au­to­ma­tion so­lu­tions also bring along the cul­tural shift that re­quires peo­ple to change the way they work and train them­selves to use new pro­cesses. The man­age­ment needs to make the staff aware of the ben­e­fits of au­to­ma­tion and how au­to­ma­tion will help them over­come some their chal­lenges. Re­turn on In­vest­ment (ROI): ROI is the most crit­i­cal pa­ram­e­ter for or­ga­ni­za­tions to de­cide whether to go for au­to­ma­tion. With­out a com­pelling ROI, or­ga­ni­za­tions are re­luc­tant to in­vest in au­to­ma­tion. The ex­ec­u­tives ex­pect a pay­back pe­riod of less than 24-36 months for ware­house au­to­ma­tion. In­flex­i­ble and Non-ex­pand­able: Most re­tail or­ga­ni­za­tions think that ware­house au­to­ma­tion so­lu­tions are not scal­able to sup­port the busi­ness growth. Au­to­ma­tion once in­stalled in a ware­house re­mains fixed and can­not change dy­nam­i­cally, as the busi­ness re­quire­ments change. Also, au­to­ma­tion is not flex­i­ble to sup­port peaks in de­mand. How­ever, it’s a myth. Au­to­ma­tion tech­nolo­gies avail­able to­day are ag­ile and scal­able to meet the fu­ture de­mands of or­ga­ni­za­tions.

With the ad­vent of e-com­merce, the only way for­ward to process a high vol­ume of or­ders is to im­ple­ment au­to­ma­tion in the ware­houses us­ing mod­ern sor­ta­tion sys­tems. — Dev­das Nair Head - Lo­gis­tics & SCM, Shoppers Stop

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