Competitive Advantage through Supply Chain

Presented by Shoppers Stop

Flow of Presentation
Retail Scenario Shoppers Stop The Pentagon Triangle Model Dimensions of Our Business Supply Chain Objectives Past Situation Strategic Actions based on the Triangle
Systems Logistics Partners

Impact & Benefits

Indian Retail Scenario

Retail Market valued at Rs 900,000 cr Only 2% is organized with a value of Rs 18,000 cr Unorganized independent stores dominate the retail trade structure Highest number of outlets per capita in the world
There are ~ 12 million retail outlets in India

Only 4% stores are larger than 500 sq ft in size

Global Retail Scenario

Worlds largest private industry at $6.6 trillion (25 times the Indian Market) Organized retail market holds 40% of the market 50 of the top Fortune 500 companies and 25 of the top 200 Asian companies are retailers The retail industry is one of the largest employers

We pioneered a revolution.
From 2,800 sq. ft. to over 680,000 sq. ft. From 1 store to 15 international class stores. From unknown customers to creating a relationship programme with over 300,000 loyal customers. From being just a departmental store to being the only Indian store represented in the IGDS. From One company to Group companies.

CROSSWORD

All this has been possible due to our constant endeavour to EXPAND OUR HORIZON and become the No. 1 global retailer in India.

Our Vision.

To be a global retailer in India and maintain its No. 1 position in the Indian Market in the Department Store Category.

Our Mission.

Nothing but the

best.

Snapshot
2003-2004 Annual Turnover Retail Space Number of Stores Customer Care Associates Year Founded Rs 404 cr. 680,000 sq. Ft. 15 1610 1991

Our Sales Performance

Company Performance:1992-2004
450.0 400.0 404

Revenues (Rs Cr.)

350.0 300.0 250.0 200.0 150.0 100.0 50.0 0.0 1992 1 1993 1 1994 1 1995 2 1996 1997 1998 1999 2000 2 2 3 5 No. of Stores 2001 7 2002 8 0.6 4.7 17.0 27.9 76.1 47.2 90.7 127.0 148.4 210.3 249.6

303.8

2003 9

2004 13

Industry Honours
Supply Chain Award for the Second best Supply chain Co. in the Country across all Industries by S.P.Jain Institute of Management in 2004. CMAI industry honours in 2003& 2004 for

CEO of the Year - RetailNagesh Retailer of the Year Retail Outlet of the Year-

Mr. B S

Delhi (2003) & Hyderabad

(2004) Top Management Team of the Year (2003)

In 2003 NASSCOM award for the Best IT User in the retail vertical(2003) Lycra Images Fashion Award to Shoppers Stop for Best Retail Chain of the Year and Mr. B S Nagesh for Retail Professional

The Eight Ways To Win In Retailing

Place

Communication

Systems

Product

Logistics Partners

People

Value

The Pentagon & The Triangle Model

The Pentagon
Size
Place

Location Layout & Design Style & Fashion Intensity Product Assortment

Positional
Communication

Promotional

Service Knowledge Climate

People Value

Price Quality

The Pentagon is customer centric and customer facing The retailer can impact the customers perceptions, by leveraging the above elements

The Triangle

Systems

Logistics

Partners

The Triangle is organization centric A strong and differentiating triangle would result in better service offering to customer

Dimensions of Our Business

2 primary and 6 secondary seasons 85 merchandise categories over 260,000 SKUs 400 vendors 15 stores across India 33,000 customer walk ins everyday

Customer profile
Shoppers Stop caters to consumers who are demanding and discerning Age group: 25 to 50 years (77% of total customers)

Our Positioning
Customer Philosophy

Feel the experience. While you shop.

Service Philosophy

Its Magical. Its Comfortable. Its My Store.

Bi-annual tracks for Customer Satisfaction Index

Supply Chain Objectives

The Supply Chain Objectives covers 3 main areas Customer Objectives Partner Objectives Organization Objectives

The Customer Objectives

Customer always gets the merchandise of his / her size and choice Merchandise is always presentable and ready before customer entry Customer easily locates price tags and product information Price on the price tag and Point of Sale System always match Timely replenishment of fast moving merchandise

The Partner Objectives

Partners always deliver the right quantities as per schedule Partners are always paid as per credit terms Sharing of information with partners related to sales stocks and purchase orders

Organization Objectives
Customer Response Time Merchandise Availability Distribution Cost Shrinkage Efficiency of executive time Collaboration with Partners

The Past Situation of SCM

In 1999, Shoppers Stop implemented the ERP; JDA MMS, well ahead of time and its capabilities
3 stores and a turnover of Rs 127 cr only

Turnaround time: 4 days Poor hit rate from partners Difficulty in tracking merchandise No sharing of inventory data with partners High Distribution Cost
Contd...

The Past Situation of SCM

High inventory High Shrinkage

contd.

Shutting down all operations for 48 hours for annual stock take High variance between books stock and physical stock Inefficient use of executive time

Strategic Actions

Systems

JDA - MMS - WMS PICS

Infrastructure Delivery Mechanism Intake Consolidation

Logistics

Partners

B2B Source Tagging Receipts Direct Store Delivery

Systems
Systems
JDA - MMS - WMS PICS

Shoppers Stop implemented the JDA Retail Merchandise Management System (MMS) First retailer in Asia to implement the state-of-the-art ERP

Merchandise Management System

An end to end solution for managing merchandise throughout the chain Right from purchase orders, to sales, to replenishment, to markdown and inventory management A integrated online system connected with the back end, front end (stores) and the distribution centers.

MMS Triggers
Auto Purchase Order
Pre-determined level of minimum stocks for core styles at distribution center Drop in level generates an Auto Purchase Order to the vendor

Auto Replenishment
Pre-determined level of minimum stocks for core styles at each store Drop in level generates an Auto Replenishment command at SKU level to the concerned distribution center Daily Auto Replenishment to all 15 stores

The WMS
Warehouse Management System
Prior to WMS, inventory was monitored manually and transfers required more than 96 hours With WMS, entire process controlled electronically Transfers are executed in 24 hours

The WMS Process

Distribution Center mapped onto a rack and bin system Calculates storage capacity Allocates designated area to each product category through PUT AWAY document PICK LIST identifies exact location of merchandise at SKU level Maintains records of perpetual inventory online Minimize shrinkage Reduces turnaround time to 24 hours

Perpetual Inventory Control System

Also known as PICS Distribution Center scans one department per day All departments scanned in a quarter Pre-determined schedule of all departments Operations process not affected Helps in checking pilferage Variances are known everyday Major tool for reducing shrinkage resulting in cost savings

Ability to match physical stock with systems stock on a daily basis without affecting day to day operations

Logistics

Infrastructure Delivery Mechanism Intake Consolidation

Logistics

4 Dedicated Distribution Centers, covering 85,000 sq ft, supply merchandise to 15 stores across the country Distribution Center Management is outsourced to and managed independently by regional service providers Regional Distribution Centers connected online to the central systems.

Shoppers Stop Footprint

Delhi Gurgaon Jaipur Kolkata Locations

33,000 customers per day

Mumbai Locations Pune Andheri Bandra Chembur Kandivili Bangalore Mulund Malad

Elgin Rd. Salt Lake

Chennai Hyderabad

Distribution Centers

Distribution & Logistics

Outbound Logistics

Partner 0 Store Mumbai DC Partner 1 Store Western Region

Delhi DC Partner 2 Kolkata DC

Store

Store

Northern Region

Store Partner 3 Bangalore DC

Store

Eastern Region

Operations Outsourced
Reverse Logistics BConnectB WMS

Store

Store

Southern Region

Win DSS / MMS

New Initiatives
Intake Consolidation
Also known as the Milk Run Currently for Own Brand Partners Delivery Authorization indicating quantity to be received for the week National Transporter to follow up with vendors for merchandise One truck to visit and collect goods from the vendors Distribution center is informed of the ETA Delivery status monitored and tracked through website

Reduction in turnaround time to 24 hrs Savings of Rs 1 Lac per month

Partners

Partners

B2B Source Tagging Receipts Direct Store Delivery

To ensure smooth flow of merchandise through the entire supply chain To improve the visibility and velocity of information through supply chain Partners can proactively improve efficiency and business results

B2B
BConnectB from Siemens Launched in 2002 with less than 10 partners Currently 150 partners connected online with Shoppers Stop Features include Order Processing Purchase Orders Receipt Details Payment Ledger Details Sales & Stock Style-wise / location-wise

B2B Advantages
Reduction in communication expenses Faster information exchange with Business Associates Frees up executive time for other value added activities On line information of sales and stock to vendors which increases service levels

Source Tagging
Bar codes capturing style and price details are attached to the merchandise at the partners premises Ensures smooth flow of merchandise through the supply chain and reduces turnaround time

Reduction in turnaround time from 96 hrs to 24 hrs Reduction in Manpower cost

Receipts & Payments

Payment against Receivers Confirmation
Receivers confirmation report prepared on receipt of goods at the distribution center Report sent to the corporate office against which payment is released

100% reconciliation of receipts ensuring timely payment to vendors

Direct Store Delivery

Ability to receive the merchandise directly at the stores Bypassing the distribution center further reduces turnaround time to 12 hours Reduction in distribution cost

Reduction in lead time

New Initiatives
Auto Style Set-up
Currently Shoppers Stop team creates styles manually The printed barcodes are then sent through courier In Auto Style Setup partner sets up the style codes (based on a standard template) and prints the barcodes at his end The entire file is sent electronically to Shoppers Stop Details of style codes to be uploaded directly into the ERP Shoppers Stop B&M team to only fill in quantities Reduces courier cost and turnaround time

Frees up 30% executive time Error reduction process

Strategic Actions - Summary

JDA - MMS - WMS - Improved Efficient Consumer Response PICS - Shrinkage beats global standards

Systems

Logistics
Infrastructure - Scalability to 50 stores Delivery Mechanism - Turnaround time 24 hrs Intake Consolidation - Cost Savings

Partners
B2B - Seamless Integration Source Tagging - Seamless merchandise flow Receipts - 100% reconciliation Direct Store Delivery - 20% of merchandise

Financial Impact
D&L Expenses TURNOVER Year 2001-02 2003-04 (Rs Crores) 249.5 404.5 (Rs Crores) 2.64 3.35 EXPENSE % to Turnover 1.06% 0.83%

No Shrinkage at Distribution Center

A financial cumulative saving of Rs 1.21 cr

Financial Impact
Shrinkage at Store Level TURNOVER Year 2001-02 2003-04 (Rs Crores) 249.5 404.5 (Rs Crores) 1.65 1.62 Shrinkage % to Turnover 0.66% 0.40%

A financial cumulative saving of Rs 1.2 cr

Service Standards

Shipments Allocated v Shipments Executed Month April-01 April-04 Allocated 2,410 11,537 Shipped 2,187 11,366 Percentage 91% 99%

Competitive Advantages
Customer
Improvement in CSI from 62 to 65 through better availability of merchandise.

Partner
B2B, Auto P.O and Source Tagging ensures faster transactions B2B will drive seamless integration between Shoppers Stop and Partners in the future Partner Satisfaction Index will strengthen partnership

Stakeholder
Leverage SCM strength for multi-fold growth at lower cost Reduction in shrinkage resulting in higher profit

Results of SCM Initiatives

Objective Customer Partner Stakeholder Intangible Benefits
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Tangible Benefits
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Latest merchandise availability

Merchandise Availability Correct Product and Price information Timely Payments Greater Efficiency Growth Profitability Lower distribution cost Greater efficiency in executive time Scalability to 50 stores

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Transparency Partnership

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Higher Customer Satisfaction levels through CSI (Customer Satisfaction Index)

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