Logistics At Big Bazzar

ABSTRACT

"Interdependence is a higher value than Independence" Stephen R. Covey As rightly said by Stephen Covey the value of interdependence is as much important in the business of Retail as it is important in the business of life. Standing on the threshold of a retail revolution and witnessing a fast changing retail landscape, the retail sector is poised for a big leap. 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 crores ($270 billion). With the potential of crossing Rs 2, 00,000 crores ($45 billion) business by the Year 2010, generating employment for some 2.5 million people in various retail operations and over 10 million additional 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 this DSBS-PGDM(AICTE)

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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.

1.INTRODUCTION TO LOGISTICS 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 organized retail is pegged at $50 million and is growing at 16%. It is expected to reach $120-$130 million by 2010. Organized 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 Procurement Co and ACM China (the greenhouse specialist) is also eying the opportunity for managing the supplies. DSBS-PGDM(AICTE)

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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, and 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 oversees 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 enables an organized retailer to move or store products more effectively. Efficient logistics management not only prevents needless movement of goods, vehicles transferring products back and forth; but also frees up storage space for more productive use. Retail analysts say on-time order replenishments will become even more critical once the Wal-Mart/ Bharti combine begins operations - the American retailer works almost entirely on cross-docking and is likely to demand higher service levels, including potential levies for delays in shipment. DSBS-PGDM(AICTE)

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The efficiency and effectiveness of supply chain and logistics management can also be understood by the fact that modern retail stores 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 Bazaar. 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. their availability on a relatively large scale and supplying them to customers on a relatively small scale. Retailer is a Person or Agent or Agency or Company or Organization who is instrumental in reaching the Goods or Merchandise or Services to the End User or Ultimate Consumer.

2 SCENARIO OF LOGISTICS IN INDIA The logistics industry in India is evolving rapidly and it is the interplay of infrastructure, technology and new types of service providers that will define whether the industry is able to help its customers reduce their logistics costs and provide effective services (which are also growing). DSBS-PGDM(AICTE)

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Changing government policies on taxation and regulation of service providers are going to play an important role in this process. Coordination across various government agencies requires approval from multiple ministries and is a road block for multi modal transport in India. At the firm level, the logistics focus is moving towards reducing cycle times in order to add value to their customers. Consequently, better tools and strategies are being sought by firms in order to enhance their decision making. In this paper, we provide a perspective on these issues, outline some of the key challenges with the help of secondary information, and describe some interesting initiatives that some firms & industries are taking to compete through excellence in managing their logistic. .2.1 Some

Chains

Peculiarities of the Indian Supply

The Indian logistics sector has typically been driven by the objective of reducing transportation costs that were (and often continue to be) inordinately high due to regional concentration of manufacturing and geographically diversified distribution activities as well as inefficiencies in infrastructure and accompanying technology. Freight movement has slowly been shifting from rail to road with implications on quality of transfer, timeliness of delivery and consequently costs except for commodities which over long distances, predominantly, DSBS-PGDM(AICTE)

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move through the extensive rail network. More on the nfrastructure issues later. Figure 1 shows the relative value of transportation costs vis-à-vis other elements of the logistics costs in India. The transportation industry is fragmented and largely unorganized – a large number of independent players with regional or national permits that carry freight, often with small fleet size of one or two single-axle trucks. This segment carries a large percent of the national load andalmost all of the regional load. This fragmented segment comprises owners and employees with inadequate skills, perspectives or abilities to organize or manage their operations effectively. Low cost has been traditionally achieved by employing low level of technology, low wages (due to lower education levels), poor maintenance of equipment, overloading of the truck beyond capacity, and price competition amongst a large number of service providers in the industry. Often, one finds transportation cartels that regulate supply of trucks and transport costs. However, the long run average cost of transport operations across th entire supply chain may not turn out to be low

Figure 1: Elements of Logistics Cost in India

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3 PROFILE OF THE COMPANY Name of the company

:-

Area

:- Retailing

Product

:- DEPARTMENTAL STORES AND GROCERY SHOP

Background :Big Bazaar is a unique chain, currently more than 75 stores in all around the India . Owned by pantaloon retail (INDIA) limited , future group . Headquarter is situated in Jogeshwari – Mumbai, Idea was pioneered by entrepreneur KISHORE BIYANI, the DSBS-PGDM(AICTE)

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CEO of future group, born in middle class Marwari family, began career with selling stonewash fabric to small shops in Mumbai . He Launched Pantaloon , biggest listed retailer of the country .

Pantaloon is credited with launching many retails formats in value and lifestyle retailing brand names in country, including big bazaar, food bazaar , central , e-zone and home town .

In 1993, he experimented with a small store format , and Pantaloon Shoppe was launched in Panjim , Goa . Then a large family’s store in 1998 in Kolkata , after a great success he launch a BIG BAZAAR “ Is se sasta aur accha kahi nahi ” in the year of 2001. Now total revenue of the company was $249 million in the year,

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Group’s vision to to deliver everything , everywhere , everytime to every Indian consumer in most profitable manner” . The group considered ‘Indianness’ as a core value and its corporate code is Rewrite rules , Retain values.

3.1 SWOT ANALYSIS Strengths

Weakness

Low cost

Low customer loyalty

Cost cutting by reducing

Time gap between order and processing

intermediaries

Low internal warehouse capacity

Promotional offers on Wednesday

Employees not trained.

Location

Less Conversion level

Home delivery facility

Frauds in Retail

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Opportunities

Threats

Percolating down

Shopping Culture

Rural Retailing

Uncertainty in market position

kids and teens retailing segment.

New entrants like reliance

Organized retail is only 3% of the total retailing market in India

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4 TITLE OF PROJECT

:-

Study of Logistics and Distribution in “Big Bazaar” stores Big bazzar is a part of future group so most of its logistics and distribution is done by future logistics.

Logistics • Logistics is the art and science of managing and controlling the flow of goods , energy, information and other resources like products, services and people from the source of production to the marketplace. marketplace. • It’s Important to have professional logistical support logistical • The operating responsibility of logistics is the geographical repositioning of raw materials, work in process and finished inventories where required at the lowest cost possible.

Distribution Distribution is one of the 4 aspects of marketing.marketing. • Traditionally, distribution has been seen as dealing with how to get the product or service to the customer. the customer • Distribution is done by distributor who is is the DSBS-PGDM(AICTE)

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middleman between the manufacturer and retailer the manufacturer and retailer. Supply Chain • Supply chain, is a coordinated system of organizations, people, activities, information and resources involved in moving a product or service in physical or virtual manner from supplier to customer. • Supply chain activities transform raw materials and components into a finished product that is delivered to the end customer.

Warehouses Warehouses of big bazzar are located at Boomanahalli and Hasketta. Suppliers of various products to warehouses from warehouses goods supplied to internal warehouses. In some cases as in food items vendors directly sell to retailers.

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Logistics helps a lot in maintaining 4Ps

The four Ps of marketing mix Product mix :- A product has both tangible and intangible components . Customers view product as “ boundless of satisfaction ” rather then just physical things . • • • • • • • • • •

Quality , technology Packaging Labelling Branding Trademark Merchandising Size, design , colour , features Service Warranty Product line and range

Price Mix :- Price is an important consideration in buying decisions . Price also denotes quality in the costumers’ mind – a psychological factor. For some product

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• • • • • •

Pricing policies Credit terms Cost and profit Allowances and discounts Competition Terms of delivery

Place Mix :-The marketer has the responsibility of making his product available near the place of consumption so that consumer can easily by it. If the brand proffered by the consumer is not easily available at the convenient location. • • • •

Distribution Channels Transportation Warehousing and Storage Inventory level • Positioning • Promotion mix • Advertising • Sales promotion • Personal relations • Publicity • Direct responses DSBS-PGDM(AICTE)

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Promotiom Mix :- Marketing promotion is a management process through which an organisation develops, presents, and evaluates a series of messages to an identified audience. So, effective promotion depends on :

• The nature of communication • The target audience • The environment in which it is received • The receivers’ perception of the source as. eg., friends, reference group, etc. • The medium used to transmit the message

5. RESEARCH OBJECTIVE The research objective is to ○

Study of Logistics and Distribution of Marketing

○

Knowing how logistics is done in Big Bazzar.

6. RESEARCH METHODOLOGY: Data was collected using two approaches: DSBS-PGDM(AICTE)

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1. Observational method Observations were made in the Big Bazaar store regarding the customer groups present there, retail formats adopted by the store, various verticals inside the store for each category of product, ambience, services provided to buyers and discount techniques 2.Survey method Personal meeting with store manager and assistants. Questinnare was prepared for the staffa at Big Bazaar which included several open-ended and close-ended questions aimed at knowing the following: • Why Big Bazaar • Loyalty level Effect of logistics

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7. Indian Retail Industry Indian retail industry is going through a transition phase. Most of the retailing in our country is still in the unorganized sector. The spread out of the retails in US and India shows a wide gap between the two countries. Though retailing in India is undergoing an exponential growth, the road ahead is full of challenges.

What is retailing? The word "Retail" originates from a French-Italian word. Retailer-someone who cuts off or sheds a small piece from something. Retailing is the set of activities that markets products or services to final consumers for their own personal or household use. It does this by organizing their availability on a relatively large scale and supplying them to customers on a relatively small scale. Retailer is a Person or Agent or Agency or Company or Organization who is instrumental in reaching the Goods or Merchandise or Services to the End User or Ultimate Consumer. DSBS-PGDM(AICTE)

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8 SCENARIO OF RETAILING IN INDIA :Retailing is the most active and attractive sector of last decade. While the retailing industry itself has been present since ages in our country, it is only the recent past that it has witnessed so much dynamism. The emergence of retailing in India has more to do with the increased purchasing power of buyers, especially post-liberalization, increase in product variety, and increase in economies of scale, with the aid of modern supply and distributions solution. Indian retailing today is at an interesting crossroads. The retail sales are at the highest point it position and new technologies are improving retail productivity. Though there are many opportunities to start a new retail business retailers are facing numerous

BIG BAZAAR FOR THE INDIAN MIDDLE CLASS FAMILY DSBS-PGDM(AICTE)

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It is a unit of Pantaloon Retail (India) Ltd and caters to the Great Indian Middle Class. It was started as a hypermarket format in Mumbai with approx. 50,000 sqft of space. Its values and missions are to be the best in Value Retailing by providing the cheapest prices and hence goes the tag-line

“Is se sasta aur achcha kahin nahin”

It sells variety of merchandise at affordable rates, the prices of which it claims are lowest in the city but the level of services offered is also very low. Usually the items are clubbed together for offers as on the lines of Wal-mart and Carrefour and it also offers weekend discounts. It currently operates out of 64 stores and top 15 stores register a cumulative footfall of 27 lakh a month on an average.

The following graph shows the retail life cycle and we can say that Big Bazaar is currently at the Growth Stage. DSBS-PGDM(AICTE)

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Time Introducti Grow Maturi Declin Cash on th ty e flow Flows

Fig.

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:- Showing Retail life cycle

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9 OBSERVATIONS There were various observations made from the time I entered the store. They can be summed up as follows: Verticals inside the store relates to each category of product Food Bazaar Depot- books M-bazaar Electronic Bazaar Furniture Bazaar Footwear Bazaar • Trolleys are not easily available, especially on other than ground floor. • Little attention to cleanliness. Dust on shelves as well as some product items. • In-house packaging not efficiently done. DSBS-PGDM(AICTE)

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• Crowded store interiors. Items are arranged in a cluttered way. Tried to stock maximum number in limited area. • Sign boards are not prominent. Lack of direction creates confusion. • Family crowd is evident. Youth comprises of only around 10% of the crowd. • Food Bazaar very efficiently managed. It is a bit overstaffed but layout is very good. Shelf space is used very well to stock products with clear distinction.

Supply chain

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Supply in big bazzar occurs by two methods: 1.

Suppliers

Warehouse

Internal Warehouse

This type of supply chain is used in crockery items and other durable goods.

2. Vendors

Big bazzar

This type of supply chain is used in food items and other fmcgs.

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10 PROBLEMS LOGISTICS.

AT

BIG

BAZZAR

.

Significant losses/damages during shipping. The next problem in setting up organized retail operations is that of supply chain logistics. India lacks a strong supply chain when compared to Europe or the USA. The existing supply chain has too many intermediaries: Typical supply chain looks like:- Manufacturer - National distributor DSBS-PGDM(AICTE)

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Regional distributor - Local wholesaler - Retailer Consumer. This implies that global retail chains will have to build a supply chain network from scratch. This might run foul with the existing supply chain operators. In addition to fragmented supply chain, the trucking and transportation system is antiquated. The concept of container trucks, automated warehousing is yet to take root in India Inadequate infrastructure The lack of proper infrastructure and distribution channels in the country results in inefficient processes. This is a major hindrance for retailers as a non-efficient distribution channel is very difficult to handle and can result in huge losses. Infrastructure does not have a strong base in India. Urbanization and globalization are compelling companies to develop infrastructure facilities. The storage infrastructure, too, is severely restricted. In 2006, India had a total warehousing capacity of 81 million tonne. Like the rest of the infrastructure sector, warehousing is highly fragmented and unorganised Transportation, including railway systems, has to be more efficient. Highways have to meet global standards. Airport capacities and power supply have to be enhanced. Warehouse facilities and timely distribution are other areas of challenge. To fully utilize India's potential in retail sector, these major obstacles have to be removed DSBS-PGDM(AICTE)

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Almost 78% of total freight is transported by road. Almost 78% of total freight is transported by road . But, according to the FICCI-E&Y retail report, roads connect less than half of the half a million Indian villages. The normal distance covered by trucks and trailers in India are 250-300 km a day, whereas the international norm is 600800 km a day. Most roads in India are designed to carry a maximum gross weight of 16.2 tonnes, which allows for a maximum loading of about 9 tonnes. This severely restricts the ability to transport goods on larger vehicles.

Warehouses located far from city: Some of the warehouse are located in villages and are far from the city so it takes time for goods to reach mall.

11 RECOMMENDATIONS DSBS-PGDM(AICTE)

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Improvement in supply chains:Big bazzar should use more better techniques for improvising its supply chains. The organisational structure and the business model of Wal-Mart are its winningformula for some markets. But this also dooms it to failure in others. The heart of the matter is high-volume-low-cost strategy, which made it a success in cost-conscious smaller, everybody-knows-everybody cities in the US. But this very strategy doomed it to failure in larger (anonymity, high consumerism) cities in the US. A very high real estate cost in big cities was also detrimental to its strategy in such cities. Warehouse location :Though it is a cost cutting formula of big bazzar, but now the Indian scenario has changed. Though it has its own logistics called Future logistics, it should try some other ways to improve its in housing of goods. Many a times it happens that goods are not available to customers as the time taken between ordering and processing is very long. Improvement in packaging:Big Bazzar should ask suppliers to send goods with good packaging so that losses due to breakage should be avoided. Moreover its own handling and carrying should be improved. DSBS-PGDM(AICTE)

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Infrastructure Internal ware house of big bazzar has very low capacity. Its completely hoch- poch. Due to insufficient space of storage losses are very frequent. Shop lifting especially internal is very high. It should allow its suppliers to have a track of their goods so that when stock finishes they will automatically supply. Use of RayMedi Head Quarter RayMedi HQ is designed to manage your chain of shops more easily. RayMedi HQ is a web-based, easy-to-use software which gives you more control in managing your chain of shops. It works seamlessly with your individual shops data (RayMedi RPOS/RE/DE data) and gives you a consolidated and centralized way of managing your chain bett RayMedi HQ gives you the Real-time business status at HQ from about every point of sale. From the head office, you can monitor sales & inventory position at each one of your store. The software helps you in consolidating the data from your various branches into one system and do an integrated analysis of sales, inventory and purchase. RayMedi HQ primarily focuses on managing your branch wide sales, purchase, inventory, receivables and profits. It helps in controlling expenses, decreasing costs and increasing your profits. DSBS-PGDM(AICTE)

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12 Conclusion Big bazzar is having its own logistics called future logistics but in near future to cope up with changes it have to do a lot.The logistics companies at present provide services from transportation to warehousing and inventory management. But, in the near future, they will have to expand their products basket to include new value-added services, such as packaging, labelling and reverse logistics. The biggest challenge that faces these companies is that they should quickly imbibe latest technologies, such as GPC/GIS tracking of consignments, and uncork new services to cater to corporates seeking to outsource their logistics needs. Also, the Government should come out with a sound policy that facilitates the operations of the logistics companies.

13 BIBLIOGRAPHY 1. Company annual report 2. Journals (a) http://search.ebscohost.com DSBS-PGDM(AICTE)

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1. Magazines (a) Business Today (b) Business World (c) Bazaar.com 2. News papers (a) Standard Charted (b) Economics Times (c) Business Line (d) Financial Express 3. Websites (a)http://pantaloon.com (b)http://bigbazaar.com (c)http://retailbiz.com 6. Marketing Management Philip Kotler, PEASON PUBLICATION

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