By Pritha Dey
Devadas Nair, Customer Care Associate and Head Supply Chain and Mission Control, Shoppers Stop Limited, has been overseeing the supply chain functions of the company for almost two decades now, ensuring growth in ways more than one, find out Jayashree Mendes and Pritha Dey.
In July 1991, the then Finance Minister, Mr. Manmohan Singh, set the ball rolling by freeing the economy of the country from the shackles of Licence Raj and socialism. This watershed decision changed the business landscape of the country and opened the doors to liberalization of the economy.
In another sector, in October of the same year, another landmark decision would change the way Indian consumers shopped and viewed shopping. The K. Raheja Group, one of India’s largest players in the hospitality and real estate sector, established Shoppers Stop. Today Shoppers Stop has come a long way, from the time it opened its first store selling only menswear, to the current 51 stores across 22 cities selling hundreds of brands. Its products range from apparel, shoes, bags, accessories, cosmetics, home and travel wear, among other things. Over the years, the retailer has tied up with hundreds of brand owners, some exclusive to Shoppers Stop, with meticulous planning and precision. The precision factor is important, considering that after introduction of the brand, the supply chain team of Shoppers Stop has to correspond with hundreds of suppliers across the country and even globally maintain the smooth flow of numerous brands and products.
Considering that it is only a team of ten people in the supply chain who ensure smooth coordination with 1,000 suppliers, numerous transporters, not to forget the 51 stores, for its hundreds of brands, one could understand the worries the head of department would carry. But when Devadas Nair, Customer Care Associate and Head Supply Chain and Mission Control, Shoppers Stop Limited, walked into the meeting, he was not only affable, but very often broke into chuckles and was unfazed when interrupted by team personnel at regular intervals. After all, he has been handling the supply-chain function for 16 years at Shoppers Stop.
Mr. Nair begins with saying, “Retailing is detailing. When you have stores running into 60-70,000 sq. ft and hundreds of brands, you need a wide range, besides a kind of width and depth.” And with quiet pride lets us know that of the thousands of footfalls, 73 percent are loyal customers, who purchase products all through the year, irrespective of seasons or sales.
The Mission Control department, headed by Mr. Nair, is unique to Shoppers Stop. Some of the controlling aspects like the number of goods of a particular brand to be ordered and purchased lie with the team. As head of the team, Mr. Nair is responsible for overseeing the purchases made by the merchandising team and decides what they are eligible to buy and whether they are meeting the permissible limit or not. Giving a brief overview, Mr. Nair says, “Every store will have a fixed fill, plus the DC stocks. The fill rate at Shoppers Stop is between 90 and 95 percent. That is the total capacity we have. So when we sell goods worth Rs 1 lakh, we buy goods equivalent to that and not more.”
Another retail concept that Shoppers Stop adopts is Open To Buy (OTB). Used effectively on a weekly basis, the idea is to ensure that the Buying and Merchandising Team limits overbuying and under buying, prevents loss of sales due to unavailability of required stocks, maintains purchases within budgeted limits and reduces markdowns which normally arise due to overbuying. Based on the previous week’s sales and closing stock, the supply chain team prepares a department-wise fill-plan and based on OTB, releases Delivery Authorization to the respective vendors. Distribution Centre (DC) accepts stocks only if both purchase order and delivery authorization is valid. The Delivery authorization process keeps the track on inventory and thus facilitates its control which in turn helps to maintain the Net Week’s Cover of the company to the required number of weeks.
Demand forecasting is predominantly budget-driven. About four months before a financial year, the supply chain team prepares budgets in terms of growth, purchase, and expansion. This reveals the extent of growth expected in the next fiscal. The budget also allows the team to plan inventory for the next year. Mr. Nair says, “There are two things that drive a supplier—firstly, Like to Like Stores, and secondly, upcoming stores. It also determines the volume Shoppers Stop can buy.”
Shoppers Stop has roughly 1,000 Indian suppliers who supply stocks to the four regional Distribution Centers (DCs) at Faridabad (supplies goods to stores in the northern region), Bhiwandi (western region), Bangalore (southern region) and Kolkata (eastern region). Mr. Nair says, “Our suppliers send out goods to the DCs. Stocks at the store are replenished from the DC stocks. We keep a minimum of two weeks cover at the DCs.”
The suppliers dispatch stocks based on the four purchase orders received from the four DCs and send out the merchandise accordingly. The retailer employs three models for its suppliers: Outright model, Consignment model, and Concessionaire model.
Under the Outright model, Shoppers Stop makes payments to suppliers as per the terms agreed upon by both parties. In this case, the inventory liability lies with the retailer. The Consignment model makes the supplier liable for the inventory. The retailer makes the payment to suppliers as per the value of the quantities sold at the retail outlets. As per the Concessionaire model, both the inventory and sales are the responsibility of the suppliers.
To enable collaboration with suppliers, Shoppers Stop has deployed a B2B portal, Spandhan B2B, to help its suppliers understand about stocks in hand with the retailer, while at the same time extending its own processes to its partners. All the suppliers of Shoppers Stop are connected to the Spandhan modem. “At the SKU level, the software allows the suppliers to see the stocks sold on the previous day, irrespective of where they are located,” says Mr. Nair. The suppliers get notifications about the SKUs, the color, style and brand of the products as well as sales information and also, stock information across the stores and the DCs. Payment information is also available on Spandhan. It also offers access on a daily basis to account credits, outstanding payments, debit notes and credit notes raised and returned stock information along with the reasons thereof. “Every supplier has been provided with a password. After they log onto shoppersstopb2b.com with their individual passwords, they can avail of detailed information about the brands they supply. This helps our suppliers work productively,” he adds.
The B2B platform is indeed helpful as Colin Pereira, Head-Sourcing and Supply Chain, VF Brands India Pvt Ltd, a supplier for Shoppers Stop, points out, “Our dispatches are regulated by how the brands perform in terms of sales at Shoppers Stop stores. Their B2B portal helps keep us updated on the sales figures which in turn help us manage the brands at our end.” Mr. Pereira added that Shoppers Stop is also planning to implement a system called ASN, wherein the suppliers will come to know of mismatches, if any, before the shipping is done. “That will certainly benefit us and all the other suppliers delivering to Shoppers Stop,” he adds.
As a multi-brand retailer, Shoppers Stop has roughly three lakh active SKUs in the system. Stocks that arrive are stacked on a two-tier racking system. Under the outright model, the arrival of the stocks is checked by the DC which physically matches the stocks mentioned on the purchase order against the invoice. In case of any mismatch, the stocks are rejected, which then go back to the vendor.
The received stocks are entered in Receiver Confirmation. “The system also points out the details of stacking–the isle, the rack, and the slot. All that is recorded in the system. Stock, after being lodged on the respective slot, is approved into the system,” explains Mr. Nair.
The allocation of stock is done in two ways. One way is informing auto replenishment that a particular stock has to be auto-replenished to the stores. While this does not require manual intervention, the parameters have to be set at the SKU level. The system will automatically allocate SKUs as the supply chain team maintains stringency about supplying fixed quantities. For example, each store can stock not more than 1,000 pieces of Levis (various colors notwithstanding) and this number will be maintained.
The other way of replenishing is through manual transfer. Mr. Nair says, “I raise a transfer from the corporate office. The buying and merchandising team will generate a Stock Transfer, from say, the Bhiwandi DC to the Malad store. So the DC will pick from the generated pick list which will direct the warehouse personnel to the exact isle, rack and slot.” While local stores are replenished on a daily basis, the outstation stores are replenished two or three times every week.
Mr. Nair adds, “Retail supply chain is not an easy task because one has to pick the correct SKU. Retail supply chain does not comprise mere movement of cartons. The tough part is to pick that exact medium size which a customer is looking for in a particular store.”
Reduced Shrinkage Rate
At a time when retailers caterwaul about the high shrink percentage at warehouses or stores, Shoppers Stop has brought down its shrink rate to less than 0.5 percent, thanks to a robust process implemented across its warehouses and stores. Mr. Nair says, “Our high shrink rate was the lack of proper accounting on our part, and not due to theft. The stocks were earlier scattered and were left unaccounted for. We needed to rectify this problem.”
Swiftly, Mr. Nair and his team took the matter in hand. Taking recourse to technology, the retail company installed the Perpetual Inventory Count System (PICS). Now when stocks arrive at the stores from the DC, every piece is scanned before being accepted. The store also ensures that it hands out bills to the customer for every purchase made.
Although Mr. Nair concedes that some theft and pilferage cannot be avoided, it can be minimized by a daily cycle count. For better results, the supply chain team began stock taking using an assortment of personnel from diverse departments. Now, every day, before closing, stocks are counted, checked and tallied by the respective team and inventory counting is done. In a quarter, the chain’s entire stock taking is completed.
Running such massive operations requires a lynchpin. For Shoppers Stop it is the deployment of numerous technology packages that help it run operations smoothly. Way back in 1999, the retail company adopted the then highly popular retail ERP package, JDA AS 400. “The ERP suite is the merchandise management system (MMS). Close on the heels of that, we implemented the warehouse management system (WMS), then auto replenishment, and later PICS. Our finance team employs Oracle Finance and Arthur Planning for the budgeting,” elucidates Mr. Nair.
At the warehouse, the retail company uses a scanning tool, Distribution Center Management System (DCMS). Using DCMS helps the worker download each picking request on a wireless handheld scanner, which is then used to scan merchandise directly from the storing slot. In the case of a picker reading the wrong merchandise, the scanning device throws up an error beep. This has helped personnel who are picking at the warehouses process requests faster.
Implementation of WMS was a turning point for Shoppers Stop. Mr. Nair says, “Today when I speak of our supply chain, I will speak of two eras – one before JDA AS/400 and one after that.” Before the implementation of JDA AS/400, the company was highly dependent on people. “Previously, if the person responsible for overseeing a particular brand was absent from work, there would be no replenishment of that particular stock. This was because only he knew where the stocks were stored. At that time, we believed in the concept of cartons rather than the slotted angle racks that are used today,” says Mr. Nair.
The WMS maintains a record of every rack and slot in the system. It knows the number of pieces that can be stacked on a rack and within the slot. Different racks are allocated for different brands. “WMS is the key to our supply chain,” says Mr. Nair, adding that the primary aim is to control movement and storage of SKUs, while processing associated transactions such as shipping, receiving and picking. “It provides computerized instruction to handle receipt of stock and returns, manage the logical representation of the racking and stock within the facility and enables seamless links to order processing and logistics management to pick, pack and ship SKUs out,” he adds.
WMS has helped Shoppers Stop reduce the merchandise turnaround time from DC to stores to 24 hours. The Auto Replenishment System minimizes the reaction time and raises a replenishment trigger, while WMS minimizes processing of the replenishment trigger at the Distribution Center to provide 100 percent availability of merchandise. Today, the DCs operate round-the-clock, supplying stock to store much before the first customer has walked in.
The software offers another advantage to the supply chain team. “Sitting in my office in Malad (Mumbai), I have the privilege to view the exact stock (SKU, brand, style and color) at the four DCs. I also know the number of transfers allocated by auto replenishment and those pending. Every morning the team gets an update and the DC is required to offer an explanation for any default,” states Mr. Nair. For administrative purposes, the company has chosen to retain the central WMS server and a standby at the head office in Malad.
Back in 1998, with only three stores, Shoppers Stop had spent a considerable sum of money on WMS and “it was worth it” smiles Mr. Nair. “I think that was the game changer.” Shoppers Stop follows the triangle model which consists of Supplier, IT and Logistics. The Triangular model is a lean design, with the supply chain network spread out evenly between the vendors who supply goods to various logistics players, who in turn using various IT tools, fulfill customer demand. The other model used, the Pentagon model, is what the customers see when they go to the stores. The model comprises Place, Product, Value, People, and Communication. The Pentagon model is dependent on the location of the Distribution Centre, the product, its price and quality, the service skills of staff in the stores, the ambience of the store and the deft positioning of the product and promotion campaigns. However, Mr. Nair emphasizes that, “if you are strong in the Triangular model, you will succeed in the Pentagon model.”
Supply Chain Costs
Commendably, the retail giant has also kept its supply chain costs low—to less than one percent, and one percent of the overall sales. Probably it is the lowest in the country. “Our DCs deliver commendable service levels comparable to the best of the world’s DC operations,” adds Mr. Nair.
Mr. Nair explains, “A reason for the low supply chain costs is because we have opted to outsource those processes that could be outsourced since 1995. Moreover, we have a policy to work with the same partners for a long time. In fact, we have not changed our logistics partners in the last 15 years. This gives us a cutting edge.”
The Logistics Service Providers
The overall logistics operations of Shoppers Stop are managed by three logistics partners—the Bhiwandi and Kolkata DCs are managed by Toll Logistics, while the Delhi and Bangalore DCs are managed by local players with apparel handling experience.
The outsourcing process began in 1995 when the retail company opened its second outlet at Bangalore. “That was the time when we thought of outsourcing, as we realized our expertise lay in retail and not logistics,” says Mr. Nair. Even the 500 people working in DCs are outsourced by the logistics partners. “We renew the contract with the companies frequently,” explains Mr. Nair.
“Shoppers Stop is an excellent retail house to work with. They are fair, law-abiding, transparent, and always open to suggestions. We have spent about 12-13 years together and it has been a wonderful journey,” says Shashwat Raizada, Managing Director, Shashank Steel Industries Pvt Ltd., the LSP for the Delhi DC.
However, the logistics companies have to fulfil certain stipulations in terms of quick delivery. Mr. Nair opines, “From survival of the fittest, it is now survival of the fastest. The challenge for us is the pace at which we can turn around stocks at our DCs. Can we do it in 24 hours from the time I receive the stocks? That is one benchmarking we have done.” Mr. Raizada agrees with Mr. Nair, “Delivering the right products at the right time and in the right quantities – that is the most important part of any agreement.”
Another benchmark which Shoppers Stop has set for itself is sending across atleast 99.9 percent of the stock lying at the DCs to the stores. And, finally, ensuring the lowest shrinkage.
Supply Chain Woes
Dealing with 1,000 suppliers on a regular basis cannot be idyllic. But Mr. Nair finds it manageable. It is the problems outside the ambit of the company that irk him. A prickly problem is the waybill, the road permit form used in several states. Mr. Nair says it is tiresome that to send goods to Kolkata requires filling of several forms. Although the forms can be filled online now, each form has two parts. “For us, supplying forms to 1,000 suppliers for each dispatch is an infliction,” he adds.
Many states in India follow the waybill format. For example, In the NCR region, without furnishing the forms, one cannot transport goods. Add to that poor road conditions and the time taken in transit, not to forget the damage to the goods en route. Disclosing an example of transporting goods of Home Stop that involves importing crockery and cutlery from Turkey, he says, “They come safely from Turkey to India. But it is in transit here that the goods received are found damaged.”
Albeit despite all the supply chain hurdles, Shoppers Stop has emerged as an exceedingly popular retail house in the country, indefatigably beating its way to the top. With more than 20 lakh loyal customers, the backend supply chain works tirelessly to meet buyer demands. With better logistics technologies being implemented, the company is looking forward to a better and brighter future. Not to forget the man heading it all–Mr. Devadas Nair.