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History

March 1997, first store started in Thiruvamiyoor

in Chennai (4-5 lacs) First year company opened 10 stores across Chennai and by 2000 it had expanded to 50 stores By 2002 it had 120-130 stores across Tamil Nadu In 2004 it decided to open 420 stores across states like Gujarat, A.P., Delhi and Karnataka In 2005 , it started selling Mobile phones

Contd
In

2008, a typical Subhiksha store had supermarket, pharmacy and telecom section Acc to R. S. I wanted to do the things in the Indian way Targeted lower, lower middle and middle class Everyday low pricing and supply chain efficiency

The Indiranagar Supermarket


It was strategically located just 50 m away from

the 100 ft road It was an 2000 square feet stores, 150 sq feet fro pharmacy, 200 sq feet for backend and rest for supermarket Pharmacy -3 lacs, mobile -60-80 lacs, FMCG- 1012, Fruits and vegetables-3 lacs Pharmacy- continuous patient like diabetes and cardiac telecom handset ,accessories, recharge coupons Sold both branded and pvt labels. ,F&V- 30 %, FMCG- 70%

Managing Supermarket Operation


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Category management:

1200 SKU , stock product of top 3 brands In FMCG- 950 brands In grocery- 150 brands Pvt. label like Tatwa, Aaharam, Subhiksha Everyday low pricing model Displayed comparative price structure and total discount on the bill of customer Centralized pricing and sourcing strategy Advertisement through local radio channel like Radio Mirchi

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Marketing :

Contd
3. The Crew: Operated by 13 people 2 cashiers,2CSR,2 sales assistants and a person for home delivery OJT , Sales incentive 4. Management: One ROM and Ass. ROM Managing category wise sales , increase customer interaction , store hygiene, F&V wastage reduction etc. 5. Customer Service: Bar code technology, technology to minimize bill process time

Logistics and supply chain management


SKUs were divided into A to K classes:
Descending order of sales Value

Each classes having 100-125 SKUs Greater attention for A to D (80% of total sales) Saving benefits to the customers are based on

these categories

Inventory management (Stores)


MBQ was based on the peak demand observed

during the last three months e.g. Maggie Dynamic MBQ for Chennai stores Hub stores may have stock higher than MBQ levels in order to reduce lead time, subject to availability of storage space. Review information was sent electronically to the central MIS department in afternoon

Contd
MIS

raised indents for each store and electronically send them to the Hoskote warehouse in the evening Inter-store inventory transfer at relevant stores On an average each store has inventory worth of 6 lakh with inventory turnover of 20-25 Shrinkage cost-.25%, less than the industry average of 1.5% Audit of the store inventory was carried out every month

Contd
Category A class B,C and D E to K Review period Daily basis Twice a week Twice a month Maximum batch quantity (MBQ) level 3 days of demand 6 days of demand 15 days of demand

The Hoskote Warehouse


25 km from Bangalore, at old Madras road

Served Bangalore (55 stores), and Mysore(4

stores) Enjoyed synergies associated with the warehouse atmosphere Total area of 66000 square feet, with around 200 employees Capacity to serve around 80 stores

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Contd
Did not have any fancy fitting, flooring, and air

conditioning unit Opened on a lease contract of 15 years (renewable), open 24 hrs a day Average business volume per year was Rs. 80 crores, with total managing cost of 2.4 crores Each SBU had its own storage location Separate area for segregation and batch making, private label processing, and loading and unloading operations

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Warehouse Operations
Process Involved 1 2 3 4 5 Receive indent from MIS department in the late evening Detailed SKU list is given to Segregation and batch making unit Required number of SKU units are withdrawn from bins Store-wise dispatch list was made for batch making If an SKU was unavailable in sufficient quantity, demand was met in the order of A-B-C (Sales performance) stores such that each store obtained at least five units Boxes are packed and sealed, than shifted to the area allocated for the corresponding store in its belt A small sheet which displayed name of the store was stapled to each box SKUs are dispatched in the next afternoon

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Transportation Management
About 14 vehicles were used for transport,

managed by a third party


A typical vehicle served the demand of 3-4 stores

(called as the belt) The first unload, last load rule was followed
F & V and grocery SKUs were dispatched in two

shifts (6 am and 1 pm) Transport agreement consisted of minimum commitment plus additional rupees/km clause Keys of the vehicle shutters were not given to the transport agency
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Grocery Processing for Private Labels


Warehouse purchased some grocery as raw


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material (rice from the mills) and processed it to produce private label products Raw materials were checked for quality at the warehouse as per the standards(rice cooking) Some samples were sent to Chennai for quality checks Bar code technology was not used for private labels As grocery items were procured in bulk, it contributed to some amount of the inventory

Subhiksha Supermarket Supply Chain

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Inventory Management(Warehouse)
According

to the Subhiksha philosophy, a warehouse should operate as a cross-docking point and should not keep much inventory Warehouse inventory for mobiles and F & V products lines was close to zero Within FMCG products, it maintained stocks for A to D category of items. For other categories, it acted as a cross-docking point

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Subhiksha Mobile Retail Supply Chain

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Questions
1. Can Subhiksha (Indiranagar) store retain its existing customers and can increase the no of footfalls and average bill with increasing competition in organized retail ?

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Here are some problems that Subhiksha is facing currently Less no of brands & private labels Attrition of Human Resource IT Infrastructure

Checkout counters 3
Lead time to get Inventory Inventory review Lack of Inventory at Warehouse Location of the store

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Location of Indiranagar Store


Nilgiris
Food World 100 ft main road, Indiranagar

Subhiksh a

More

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2. Is Subhikshas marketing, category management, and business planning activities heading in the right direction?

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Marketing

- Good promotional activities - Excellent display of price comparison - Can go for catalogue mailing
Manageable No of SKUs

- Can increase no of private labels in each SKU

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Business Planning Activities Market Research before selecting the location for a new store Layout of the Store

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3. Is Subhikshas SCM really efficient? Can they further improve?


Improvements can be done in the following areas Lead Time Service of Suppliers No connection between hubs in Mobile retailing

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4. Does Subhiksha scheduling and planning their staff in a right manner?


Problems Attrition problem in Retail Store Untrained staff in Warehouse operations Suggestions Provide training to the staff to understand the warehouse processes Increment in Basic Salary

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Wheel of Retailing
High end strategy Medium strategy

Subhiksha
Low end strategy Low prices Price sensitive consumers

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The Sad Story


After spending 12 years in retail business, in

February 2009, Subhiksha operations came to an end The main reason was financial mismanagement Raised all the money needed through debt rather than equity (debt equity ratio of 1:0.031) It went for a corporate debt restructuring exercise

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1800

Steep Decline
1650 1320

1600

1400

1200

1000 No fo stores 800 670 600

400

200 10 0 19 1999 50

140

0
2000 2003 2007 Mar-08 Sep-08 2009

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1997

What went wrong?


Heavy focus on food and grocery items

lesser number of private labels


Aggressive expansion in terms of number of

stores No study done before opening a store Problems in supply chain management No proper IT system installed (ERP, SAP) Being a low price store, it was giving competition to small kirana stores which have a strong presence in India

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Recent Developments
In 2012 Subhiksha announced a comeback after

3 years when
Change in the Indian retail sector with FDI coming

in Huge opportunity as Indian retail market is expected to reach $720 billion, with the organized markets share expected to be around 9-10% by 2015

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Lessons for future


Subhiksha should take care of the following

things in its second innings


Build a business model in accordance to the Indian

present retail industry A proper research is must before taking any new step Avoid the burden of debt on the balance sheet Effective inventory management Proper training of staff

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