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Procurement for

Departmental Stores

Submitted by

Dnyaneshwari N (95)

Majid Khatib (84)

Wasim Tolkar (115)


Procurement - Meaning
Complete process of obtaining goods and services from preparation and
processing of a requisition through to receipt and approval of the
invoice for payment. Commonly involves
(1) purchase planning
(2) standards determination
(3) specifications development
(4) supplier research and selection
(5) value analysis
(6) financing
(7) price negotiation
(8) making the purchase
(9) supply contract administration
(10) inventory control and stores

(11) disposals and other related functions


Objectives

• To understand Procurement pattern of shoppers stop


• One of the fastest growing departmental stores
• One of the stores to implement ERP and Supply chain
management
• To Understand the Procurement pattern of Akbarally’s –the
oldest departmental store in Mumbai
• To compare and contrast the two models and identify
problem areas
• Give suggestions to Akbarally’s by benchmarking
Shoppers’ Stop
Methodology

Interviews were conducted with the following designated individuals


• Purchase Manager
• Merchandise manager
• Logistics Manager

References
• Mr.Devdas- Logistics Head – Shoppers’ Stop
• Mr.Gopal – Head Men’s Division – Shoppers’ Stop
• Mr.Yunus – Purchase Manager – Akbarally’s
Shopper’s Stop Profile

• 1991 – First flagship store in Andheri, Mumbai


• Shoppers’ Stop is a member of the K. Raheja Corp. of Companies
• Shoppers' Stop is the first retail venture by the K. Raheja Corp.
• K. Raheja Corp. have been leaders in the construction business for over 48 years
• Expanding its operations to Bangalore, Hyderabad, Jaipur, Delhi, Chennai,
Ghatkopar, Pune (Mumbai) and most recently Calcutta, Shoppers' Stop is today
recognised as India's premier shopping destination
• It was awarded the "Most Admired Apparel Retailer" at the Images Fashion
Awards 2008
Shopper’s Stop Profile

• Customer Profile - age group of 16 to 40, SEC - A and B+, young


couples with a monthly household income above Rs. 15,000
• Range of Merchandise - apparel and lifestyle accessories for the
entire family
• From apparel brands like Provogue, Colour Plus, Arrow, Levi's,
Scullers, Zodiac to cosmetic brands like Lakme, Chambor, Le Teint
Ricci etc., Shoppers' Stop caters to every lifestyle need.
• Shoppers' Stop has also introduced its own line of clothing in the
classic, value classic and value fashion segments - LIFE, STOP,
KARROT and KASHISH that are available across different categories
Shopper’s Stop Profile
• Shoppers’ Stop has 4 divisions - the Men’s apparels, ladies
apparels, kids wear and the Non-apparels
• Following is their contribution to the turnover
Men’s 43% of sales
Women’s 18% of sales
Kids 8% of sales
Non-Apparels 31% of sales
Shoppers’ Stop Motto: "We are responsible for the goods we sell".
Logistics

• Planning, execution, and control of the procurement,


movement, and stationing of personnel, material, and other
resources to achieve the objectives of a campaign, plan, project,
or strategy
• It may be defined as the 'management of inventory in motion
and at rest.‘
• Reverse Logistics - Flow of surplus or unwanted material,
goods, or equipment back to the firm, through its logistics chain,
for reuse, recycling, or disposal
Hierarchy – Logistics Dept.
Director Buying and Merchandising

Supply chain management head

Manager logistics and distribution

Distribution Coordinator (link between SS and DC’s)

Four Distribution Centers

Operating Costs - The logistics cost equals to 1% of the total turnover and includes
the follow expenses Warehousing (OH, rents, staff, facilities), Transportation,
Handling charges, Allocated Expenses, Re-packaging
Supply Chain
• Entire network of entities, directly or indirectly interlinked and interdependent in
serving the same consumer or customer
• It comprises of
• vendors that supply raw material
• producers who convert the material into products
• warehouses that store
• distribution centers that deliver to the retailers
• retailers who bring the product to the ultimate user
• Supply chains underlie value-chains because, without them, no producer has the ability
to give customers what they want, when and where they want, at the price they want
• Producers compete with each other only through their supply chains, and no degree of
improvement at the producer's end can make up for the deficiencies in a supply chain
which reduce the producer's ability to compete
SWOT – Supply Chain

• Strengths – Suppliers, Efficient logistics, partners


• Weakness – Less control over inbound logistics
• Opportunities – Floor ready, Ready to sell garments
• Threats – Competitors, rapidly changing systems
Buying Channel

Manufacturer

Mumbai DC Delhi DC Bangalore DC Calcutta DC

6 stores 3 stores 3 stores 1 store


Procurement Strategy
Procurement Strategy - procedure used in converting
requirements or requisitions into purchase orders or contracts

Centralized Procurement and no regional buying


• Target profile same across the country
• Better Cost Controls
• Better Bargaining Power
• Better inventory management
• 100% inventory control
• 100% tracking of inventory – (what’s selling what’s not?)
Buying Process

Purchase Order Sent to the


manufacturer

Delivery Authorization

Manufacturer Dispatches merchandise to


the DC

DC’s check the merchandise and confirms through


its systems

Accounts Department receives the DC transports weekly req. to the


confirmation store

Payment to manufacturer
Stocks updated in-store

Pre-retailing team displays the


merchandise
Illustration

A) Purchase order for 5000 shirts of Arrow


Vendor ABC gets 4 Purchase orders from shoppers stop, for 4 DC’s
• Mumbai DC - 2500 shirts - 6 stores
• Banglore DC - 1000 Shirts - 3 stores
• Delhi DC - 1000 shirts - 3 stores
• Calcutta DC - 500 shirts - 1 store

B) Delivery Authorisation for 500 Shirts

• DA is prepared on the projected sales for that week

• if the PO (6monthly for 2 seasons) for all 13 stores is 5000 and for a

particular week shoppers stop sells 500 shirts, it will send a DA for 500 shirts
Illustration

C) Manufacturer dispatches the weekly requirements to the 4 DC’s


according to the DA’s

D) DC’s check the details (date, number) of the product and match it with the
invoice

E) Accounts department receives confirmation

F) Once the confirmation is sent by the DC, the stocks are transported to the

stores, Dispatches are always made early morning

G) Pre – retailing team - Stocks are updated in the store


Warehousing
Warehousing - Performance of administrative and physical functions
associated with storage of goods and materials. These functions include
receipt, identification, inspection, verification, putting away, retrieval for
issue, etc

• Regional Warehouses
• No in-store warehouses
• Number of warehouses - 4
• Location – Metros (Mumbai, Delhi, Banglore, Calcutta)
• Floor Area – 20,000 to 22,000 sq.ft
• Transportation from warehouse to Store – Done by the DC’s
Distribution Centers
Distribution Center - Facility that is usually smaller than a firm's main
warehouse and is used for receipt, temporary storage, and redistribution of goods
according to the customer orders as they are received

• Distribution centers for SS are 100% outsourced (internal supplier)

• Each of the distributions centers has a floor area of around 22000 sq.ft

• The DC is divided in to zones based on the brands or vendors

• . When a delivery comes in the person in-charge feeds in the details like
merchandise type, brand name, size, color, batch number, date, etc. the system
give him a ticket describing where the merchandise has to be kept

• It gives a detailed description of the pile and rack number

• delivery transportation from the DC to the stores is the DC’s task


Distribution Centers

Advantages of having outsourced the activities


• Cost benefit
• No Labor problems – handling labor unions
• No liability for pilferage by own staff and damages
• Specialized expertise of the company
• Dictate terms to the outsourced company – 24 hours delivery, etc
Inventory Management
• Policies, procedures, and techniques employed in maintaining the
optimum number or amount of each inventory item

• The objective of inventory management is to provide


uninterrupted production, sales, and/or customer-service levels at the
minimum cost

• Since, for many firms, inventory is the largest item in the current
assets category, inventory problems can and do contribute to losses
or even business failures

• Also called inventory control


Inventory Management
• SS has a system of checking stocks on a continuous basis

• 90 departments - each day one department is frozen after closing hours and the
staff is made to scan the tags and feed in the stock levels in the system

• The staff is completely unaware of the stock levels according to the system

• The system then compares the actual to the customary and gives a variance
reports

• Thus there is stock matching done everyday and the entire store completes a

cycle in 3 months i.e, 4 cycles of stock taking each year

• has helped them get the pilferage to its minimum


Inventory Management

Every day Auto Replenishment

• Shoppers’ Stop has determined its minimum stock keeping units and as soon as
the stocks in the store touch that level, the DC is triggered to send the
replenishment

• Thus the system automatically checks for stock out and replenishes it

• The lead time for replenishment is 1 day

• Every night data is collated and a store-wise list of merchandise is generated

• During the day the dispatched is made ready and the next day morning 6.00am
the truck leaves reaching the store in an hours time
Inventory Management

Stock Keeping Units (SKUs)

• are determined on the basis of moving averages

• The system generates averages of the required quantities for the


last two weeks

• the process is concurrent to the market conditions they go up with


the demand and fall with the slump

• The minimum units are fixed which are based on the past lows
and highs
Sales Forecast

• Projection of achievable sales revenue, based on


historical sales data, analysis of market surveys and trends,
and salespersons' estimates

• Also called sales budget, it forms the basis of a business


plan because the level of sales revenue affects practically
every aspect of a business
Sales Forecasting
• Sales forecasting is done for each brand then built up to the category then the
division then store and then the entire organization

• Sales forecast for the spring summer season (1st April to 30th September) is
done on 1st October, six months in advance

• Eg - Shoppers’ Stop has targeted a business of 1crore with Arrow for its
Andheri branch for the year 2003-04

For its spring summer business it targets a sale of 50,00,000


Season – 50lakhs
Monthly - 8.33 lakhs
Weekly – 2.08 lakhs

They keep a cover of 7 weeks hence need a stock of 14.56lakhs


Sales Forecasting

• Arrow shirt = Rs.1000/-

• Arrow trouser = Rs.1200/-

• ratio of shirts to trousers is 70:30

• i.e., needs to stock shirts worth 1.46 lakhs & trousers worth 0.62
lakhs of trousers for a week

• This is equivalent to 146 shirts and 52 trousers

• Shirts are in the ratio of 1:2:3:1 for sizes 38:40:42:44


Payment Models

• Outright Model

• Consignment Model

• Concession Model
Systems

• Secondary (Update Records) – ERP – JD


Edwards
• Merchandise Management system and front end
• Warehouse Management system
• B2B website
Supply Chain Management
• Shoppers' Stop has streamlined its supply chain
• has developed process manuals for each part of the logistics chain

• These modules include


• vendor management
• purchase order management
• stock receiving systems
• purchase verification and inventory build up
• generation and fixing of price and store tags
• dispatch of stocks to the retail floor
• forwarding of bills for payment
• Shoppers' Stop has tied up with Sembcorp Logistics (P) Ltd. as its logistics
partner
Transportation

• Manufacture to DC – Manufacturer handles


• DC to Store – DC handles
• DC to Vendor (Reverse Logistics) – AFL
• DC to DC – AFL
• Internal transfers between Stores - AFL
• Modes of Transportation - Tempos
Reverse Logistics

Reverse logistics comes in to action for 3 reason return


due to
1. Manufacturing defects
2. Laying defects
3. Consignment stocks
4. Line defect
Process for Reverse logistics
• Physical transfer of goods from stores to DC’s
• DC makes RTV (return to vendor)
• System Debits the vendor
Company Profile

• India's oldest retailers – more than 100 years old


company
• The management style has been conservative all along
and the core principle on which it reaches out to its
customers is trust
• Number of stores: 3
• No. of departments : 13
• SKUs: Around 12000 in each of the stores.
• No. of employees: 150
• Average footfalls:
Hierarchy – Logistics Dept.
Positioning

Positioning - Marketing strategy that aims to make a brand occupy a distinct 'position,'
relative to the competing brands, in the mind of the customer. Firms apply this strategy
either by emphasizing the distinguishing features of their brand (what it is, what it does
and how, etc.) or try to create a suitable image (inexpensive or premium, utilitarian or
luxurious, entry-level or high-end, etc.) through advertising

Family store, where one can satisfy the needs of the entire family
They have everything, from
• apparels
• gifts
• cosmetics
• appliances
• electronics
• home ware
• kitchenware, etc.
Customer Profile

Customer Profile - Customer description that includes


demographic, geographic, and psychographic characteristics,
buying pattern, creditworthiness, purchase history, etc

• Their departmental stores cater to the upwardly mobile

socio-economic class (A1/A2/B1) of society


Buying Channel

Manufacturer
/Distributor

Godown
Godown Godown
(Crawford)
(Chembur) (Fort)
Market)

Akbarally’s Akbarally’s Akbarallys


(Chembur) (Fort) (Crawford)
Procurement Strategy

• decentralized procurement

• Merchandise is purchased as and when it’s required

• Most of the store procurement is from local players hence they procure just
in time

• Merchandise is transported to the store warehouse by the manufacturer or


distributor following which the merchandise is relabeled and stocked

• Akbarallys does not believe in bulk buying

• Thereby saving on capital blocked in inventory and lower warehousing costs

and also avoid over stocking


Procurement Strategy
Cost Benefit
• Lesser space required to store inventory
• Lower storage costs
• Low investment in a warehouse
• Low capital investments in stocks
• No over stocking
• Inventory management works on a kind of JIT system

Disadvantages
• Loss of sale due to stock out
• No benefits of bulk buying – no discounts & credit period advantages
Buying Process

Manufacturer Approaches Purchase Manager

Purchase Manager & Merchandise Manager’s collective decision

Merchandise Supplied to the store warehouse

Warehouse Checks and confirms

Payment to the Manufacturer


Warehousing

• Akbarallys follows a decentralized warehousing strategy

• Each store has its in-store warehouse

Benefits of in-store warehouse


• Easy access
• No internal transportation cost between warehouse and store
• Low levels of stock at the display counter, providing more area for diff
merchandise

Disadvantages
• High warehousing costs
• Weak logistics systems

• High cost of internal transfers incase of discrepancies


Inventory Management

• The Economic Order Quantity is normally based on the past trends


and experience
• replenishment is decided by the Department head in the store after
consultation with the individual counter sales persons
• For e.g. if it is observed that 6 units of betel fixed line phone brand
sell in a month the stock levels for betel fixed line phones are
maintained at 6 units and accordingly the replenishment is done
• In peak seasons like festival time, the stock replenishment is higher
as compared to other times (also decided on the basis of past trends of
festival seasons)
Replenishment Process

Counter Staff reports


requirement

Store Manager prepares a


memo

Purchase Manager
checks

PM places order with the Manufacturer or


Distributor

Distributor sends merchandise to


the store
1) Payment Models
• Outright Model

2)Systems
3) Transportation
• Mfg /distributor to the Akbarallys Warehouse – Mfg /distributor’s
responsibility
• Warehouse to Store – In store warehouse so no transportation costs
• Inter Store Transfers – Courier

4) Communication between suppliers and stores


Phone
Fax
Problem Identification

• No bulk buying benefits


• Akbarallys buying from distributors
• Loss of sale due to stock out
• Pilferage in the warehouse due to bad handling, shoplifting
• All of Akbarallys warehouses are at Prime Location
• The warehouses being at the prime location demand high rentals and capital
investments.
• Akbarallys has 2 warehouses in an area of 10 kms.
• Once the merchandise reaches the in-store warehouse, the merchandise is
labeled and stocked. There are people appointed for labeling and there is a cost
attached to this re-labeling
Suggestions

1) Buying Channel

Manufacturer

Central WH

Chembur Fort Crawford


Suggestions

1) Buying Channel
2) Centralized Warehousing
3) Outsource Logistics
4) Buying from Manufacturer
5) Inventory Management system