vishal mega mart final report

7/29/2019 Vishal Mega Mart Final Report

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FIELD WORK RESEARCH PROJECT REPORT

On

Supply Chain in Vishal Mega Mart

Submitted in Partial Fulfillment of

Master of Business Administration (MBA)

Programme : 2011 -13

Of

Gautam Buddh Technical University, Lucknow

Under the Supervision of : Submitted By:

Mr. Anubhav Saxena Group - 6Karishma Joshi

Pravin Kumar

Ekta Singh

Sameera Naaz

Keshav Gupta

Rohit KumarGaurav Shrivastava

Faculty of Management Science


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Shri Ram Murti Smarak College of Engineering & Technology, Bareilly


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EXECUTIVE SUMMARY

The Retail Sector is the largest sector in India after agriculture, accounting for over 10

per cent of the countrys GDP and around 8 per cent of the employment. India has the

most unorganized retail market in the world. Most retailers of the unorganized retail

market have their shop in the front and house at the back. Retail industry is booming all

around the globe at a very fast pace. Vishal Retail is a known and strong competitor in

the retail industry since 23 years. When we talk about Indian market, the demands of

every thing which you can find in every retail store are increasing every year. Indians are

famous for their traditions and festivals and exchanging gifts with friends and relatives is

a part of it.

VISHAL MEGAMART is a retail house in India. As it operates more than 1000 retail

stores, including stores which are operated by their franchisees. These stores are spread

over about 1,282,000 square feet and are located in 18 states across India. In its efforts to

strengthen thier supply chain, it has set up seven regional distributions centres and an

apparel manufacturing plant.

It started as a retailer of ready-made apparels in Kolkata in 2001. At the time ofincorporation, the registered office of thier Company was situated at 4, R. N. Mukherjee

Road, Kolkata 700 001. In 2003, it acquired the manufacturing facilities from Vishal

Fashions Private Limited and M/s Vishal Apparels.

It follows the concept of value retail in India. In other words, their business approach is to

sell quality goods at reasonable prices by either manufacturing themself or directly

procuring from manufacturers (primarily from small and medium size vendors and

manufacturers). It facilitate one-stop-shop convenience for their customers and to cater

to the needs of the entire family. It believes this concept has helped them grow to thier

current size within a short time frame of their years. Mr. Ram Chandra Agarwal has been

ranked as the 28th most pitiful person in the Indian retail industry.


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INDEX

Introduction about the topic Scope of study Objective Finding Interpretation Conclusion Suggestion Questionnaire for interview References


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INTRODUCTION ABOUT THE TOPIC

In the background of high consumerism and income of the urban consumers, in recent

year there are a number of companies have expressed their interest towards retail sector

outlets. As a result numbers of shopping malls have started their operations in metro and

urban areas. Pantaloon, big bazaar, Vishal Mega Mart, Reliance Fresh are the best known

examples of retail sector outlets in India.

Retailing is the interface between the producer and the individual consumer buying for

personal consumption. This excludes direct interface between the manufacturer and

institutional buyers such as the government and other bulk customers. A retailer is one

who stocks the producers goods and is involved in the act of selling it to the individual

consumer, at a margin of profit. As such, retailing is the last link that connects the

individual consumer with the manufacturing and distribution chain. Some of the key

features of retailing include:

Selling directly to customers with out having any intermediaries Selling in smaller units / quantities, breaking the bulk Present in neighborhood or in the location which is quite convenient to the

customers.

Very high in numbers Recognized by their service levels Fitting any size and or location

It is assumed that due to the entry of a number of retail outlets in the urban and semi

urban areas, the mindset of the existing customers have undergone drastic changes.

Besides it is also reported that the traditional retailing such an age old Grocery shops

have directly faced competition with the organized retailing sector. In some parts of the

country, it is reported that the traditional retails are resisting the entry of organized

shopping malls. For instance the traditional retails of Bhubaneswar with the active

support of the consumers at large didnt allow reliance Fresh to start outlet initially.


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SCOPE OF STUDY

1. Opportunity to understand the Supply chain of Vishal Mega Mart2. Able to know the Inventory management.3. Get to know the ideal time between ordering & getting the goods.

Objective

1) To analyze the complexities involved in management of a supermarket.2) To know the current suppliers.3) To understand criteria of supplier selection.4) To understand the key areas of company through which its tries to maintain

the good supplier relation hence to have the strong supply chain.

5)To recommend the strategies for future to increase the supplier satisfaction

and to have the strong supply chain.


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Finding

VRPLs business process can be summarized as below:

Establishment of Stores:

Selection of locationIn selecting location for a new store, VRPL start by identifying the city/town. VRPL

target primarily cities/towns which may be classified as Tier II or Tier III cities. In this

regard, an analysis of the demography, literacy levels, nature of occupation and income

levels. Within a city/town, VRPL target locations with good infrastructural facilities such

as easy accessibility, provision for water, electricity, parking, security and other basic

amenities. VRPL prefer to locate their stores in areas where real estate is available at

reasonable prices. The efforts of VRPLs retail business are targe ted towards families

having total income which can be classified under the lower middle and middle

income groups. Accordingly, VRPL plan their strategy to search for areas within cities

where such customers are domiciled in large numbers and make efforts to locate

themselves within the reach of such customers.

VRPL believe that adoption of standard formats for their stores has led to their brand

establishment and identification among their customers and will increase their base of

loyal customers. In pursuance of this, they have adopted standard parameters for store

planning and establishment. For ensuring standardized formats of their stores, VRPL

consider various factors, such as internal and external dcor and colour schemes,

allocation of store space, stock mix and pricing and accounting methods.


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InsuranceVRPL maintain comprehensive insurance coverage with Tata AIG, Bajaj Allianz, Royal

Sundaram and IFFCO-TOKIO for their existing stores, distribution centers,

manufacturing facilities and trucks. VRPL insurance policies include comprehensive

coverage for electronic equipment, fire and special perils and burglary. Further, VRPL

has filed a claim of Rs. 22.50 million on account of fire in their store at Meerut as on July

7, 2006. In this regard, they have received Rs. 7.50 million as an interim payment.

Factories

VRPLs existing manufacturing facilities are located at Plot No. 224, Phase 1 UdyogVihar, Gurgaon, for which they have leasehold interest until May 4, 2009. In addition,

VRPL have recently acquired freehold interest in relation to a land admeasuring 7.24

acres in Dehradun, Uttaranchal, where they are exploring the possibilities for

establishment of another manufacturing facility.

Other PropertiesVRPL have recently acquired freehold interest in relation to a land admeasuring 82,830

square feet in Hubli, Dharwad.

Merchandise PlanningVRPLs merchandise planning is based on the concept of category management rather

than traditional brand management practices.

Apparels and Non ApparelsUnder category management for, say, apparels, VRPL create and cater to products across

length and breadth of a category at different price points, fabrics, designs, shapes,

seasons, colors and sizes. VRPL formulate annual merchandising plan for each division


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of merchandise taking into consideration factors such as past sales data, regional

customer tastes and preferences, number of stores (established and proposed), likely

fashion and trends, in-house production resources, vendor management and price. Each

division is further divided into major categories (for instance, mens apparel as a divisionis further divided into three major categories, namely, upper, lowers and sports and ethnic

wear). These major categories are in turn segregated into various subcategories. For

example, mens upper as a major category would be further divided into several sub-

categories such as formal shirts, casual shirts, party wear etc. Each sub-category consists

of pre-defined SKUs, which are classified on the basis of price point, brand, style, pattern

and size.

VRPL draw annual sales projections for different SKUs and, accordingly, ascertain their

sourcing requirements. Based on such information and lead time estimates for supplies,

purchase orders with delivery schedules are issued. The inventory position for each SKU

is reviewed fortnightly taking into account the actual sales and variations from the

budgeted plans. Regular visits to the stores are made by the category merchandising team

to identify the slow-moving-SKUs and explore the options to expeditiously dispose of

them.

For certain non apparel categories, their merchandise planning and scheduling also

depends on introduction of new products and schemes by the vendors. For instance, if a

branded home appliance manufacturer replaces a product with a new version, then their

planning for the product would need to be reviewed based on the acceptability of the new

version.

In-house ManufacturingVRPL benefit from backward integration and in-house manufacturing of part of the

apparel products sold in their stores. Through their manufacturing capabilities, VRPL is

able to attain relative independence from intermediaries with a competitive advantage in


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terms of value and cost. VRPL use their manufacturing strengths to focus on enhancing

product knowledge and their experiences from manufacturing enable them to negotiate

better terms from the vendors and job workers.

VRPL currently have an apparels manufacturing plant at Gurgaon, Haryana. The

manufacturing plant is well-equipped with fully automatic machines for fusing,

buttoning, embroidery and welt pocket-making operations. The factory has a capacity to

manufacture 5,000 pieces per day. The plant was commissioned in 2004 and achieved a

capacity utilization of 80%. It has 450 machines and is operated by 500 workers. Further,

VRPL are exploring the possibilities for establishment of another manufacturing facility,

for the purposes of which they have acquired certain portions of land admeasuring 7.24

acres in Dehradun, Uttaranchal.

In addition to in-house manufacturing, they have outsourced some parts of the

manufacturing to job workers who work in their factory premises. VRPL undertake

quality control measures by way of random sampling to ensure the pre-determined

quality standards are met. To verify that the quantity of supplies is as per the order, they

undertake count-check for every receipt of the goods.

VRPLs manufacturing team works closely with their design team to understand trends,

develop products, value engineer and finally create season wise collection that cater to

regional tastes.

Purchasing

Purchasing or vendor management assumes critical importance in retail business where

one has to deal with multiple products. VRPL have in place a vendor management

system, under which they identify vendors all over the country and overseas and seek to

develop alliances and arrangements with them. They regularly interact with the vendors

and share information such that the vendors remain familiar with their goals and targets.

It has been their strategy to procure goods from small and medium sized vendors and


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manufacturers, which they believe has led to reduction in the cost of goods they sell and

increase in their profitability.

Upon ascertaining the procurements needs based on each SKU, VRPL explore the

various options for sourcing the products. They continuously strive to procure goods

from the place of origin to reduce the costs and control the quality. For identifying the

vendors, VRPL assess the various possible options on factors such as capacity, credibility

in the market, quality awareness and experience.

After identifying the vendors for the goods, VRPL place purchase orders based on their

SKU-wise plan, estimated lead time of each vendor and quantity to be procured from

each vendor. VRPL follow a policy of payment on delivery to negotiate better prices

with the vendors and in certain cases they also release payments in advance. To ensure

quality of supplies, VRPL check quality by way of random sampling at the time of

receipt of the goods. To verify that the quantity of supplies is as ordered, they undertake

count-check for every receipt of the goods. For FMCG products, VRPL procure from

large as well as small and medium size manufacturers. For procurement from the large

manufacturers or their distributors, they endeavor to enter into formal arrangements for

supply of products to all

VRPL stores, such that they are able to derive fixed margins from sales of such products,

irrespective of the locations. Under these agreements, they benefit from special

discretionary discounts and offers directly from the manufacturers or their distributors.


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VISHAL Apparels Brand

Apparel Manufacture

The basic raw materials required for the manufacturing process of apparels includesfabrics and accessories. VRPL merchandising teams source fabrics from local

manufacturers in India depending upon their production plan. VRPL also source fabrics

from the place of origin. VRPL source various other components and accessories from

vendors in various parts of the country and also import them from China.

Inventory Management, Distribution Network and Logistics

VRPLs distribution network and logistics encompasses all activities to ensure that goods

are dispatched in right quantities and at right time to reach stores with sufficient time in

hand to promptly cater to customer demands and optimization of inventory position.

They have built a system to monitor the inventory position on a real-time basis at each

store, under which a stock requisition or delivery order is generated when pre-determined

stock or re-order levels are reached. The re-order levels for stores are determined based

on factors such as display levels, lead time for replenishment and average daily sales.

VRPL review these re-order levels on continuous basis to factor in variances in demand

based on seasons, trends and promotional schemes.

VRPL have seven distribution centers over approximately 385,033 square feet. These


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distribution centers are located around Kolkata (West Bengal), Thane (Maharashtra),

Jaipur (Rajasthan), Ghaziabad (Uttar Pradesh), Ludhiana (Punjab), Gurgaon (Haryana)

and Mahipalpur (New Delhi). VRPL have clearly demarcated the stores which will be

serviced by each distribution centre. The reorder levels for distribution centers areascertained on the basis of factors like average daily sales of all the stores services, lead

time for replenishment and buffer stock, which caters to both the existing and proposed

stores to be fed. As for the stores, they regularly review these re-order levels.

VRPLs distribution centers and stores are connected through company-wide virtual

network connection through broadband which helps to efficiently manage their network

of stores and distribution centers throughout the country.

They primarily utilise their own vehicles to transport the inventory to their stores from

the distribution centers. In addition, VRPL use the services of logistic solution providers

including low cost transport service providers in order to deliver products on time to

VRPL stores and optimize transportation costs. Distribution centers operations have been

streamlined through the standardisation of racking system, layouts and implementation of

automatic replenishment system.

Under arrangements with some of their merchandise manufacturers, they receive

payment on account of display of their products.


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Interpretation

Supply chain management

Their supply chain management involves planning, merchandizing sthiercing,

standardization, vendor management, production, logistics, quality control, pilferage

control replacement and replenishment. Their supply chain management provides us

flexibility to adapt to changing patterns in consumer behavithier and their ability to add

value at various steps/levels. In particular, thier supply chain management gains strength

from their ability to undertake in-house manufacture, design and development of

apparels.

Strong and efficient logistics and distribution network

VRPLs distribution and logistics network comprises seven distribution centers. Besides,

VRPL have their own fleet of 31 trucks, which helps VRPL to transport and deliver their

products in a cost and time efficient manner. VRPL believe that their distribution and

logistics set up is well networked and allows them to fulfill the store requisition within

short time period of generation and receipt of order, which has helped VRPL to optimize

in-store availability of merchandise and minimize transportation costs. Their strong

distribution and logistics network has enabled them to dispense with the requirement of a

dedicated storage space at every store, which is an industry practice, and instead

undertake periodical replenishment of depleted stock. Due to adoption of an efficient

racking system, they are able to benefit from optimum utilization of the space allocated

for display in their stores. This provides them assistance in maintaining a low working

capital requirement and less carrying cost.


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Geographical spread

Thier stores and distribution centres are spread in various parts and regions of the

country. This has not only enabled us to build thier brand value but also facilitated us to

explore cost-effective sthiercing from different locations, identify potential markets and

efficiently establish new stores in different locations. An aggregate of 43 of 50 of thier

existing stores are located in Tier II and Tier III cities, which, It believe, enables us to

capture market share in locations where a majority of thier target customers are located.

Identifying new locations

It believe that It possess the ability to identify locations with potential for growth, in

particular in Tier II and Tier III cities. It has an exclusive site identification and

assessment team, which undertakes systematic analysis of the business prospects, taking

into account factors such as population, literacy levels, nature of occupation, income

levels, accessibility, basic infrastructure and establishment and running costs. Further, it

has a dedicated warehouse for the purposes of storing the materials essential for setting

up of new stores.

Private labels

It has a number of private labels for apparels (i.e. apparels manufactured by us) such as

Zeppelin, Paranoia, Chlorine, Katina Studio, Famine, Flthierier Women and Roseau. In

fiscal 2007, thier income from thier private labels was Rs. 583.60 million, which

accounts for 9.68% of thier total sales for fiscal 2007. It believes that their focus on thier

private labels and their recognition in thier customer segment enables us to differentiate

themselves from thier competitors.


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Their Strategy

It intends to pursue the following strategies in order to consolidate thier position as an

operator in the value Retail segment in India. Thier growth strategy is based on:

Increasing thier penetration in the country by leveraging thier supply chain,distribution and logistics network

It intends to increase thier penetration in the country by setting up new stores in cities

where it already have Presence, as also entering into new areas in the country. In

particular, it intends to focus on expansion in Tier II and Tier III cities. It believe that

thier existing infrastructure have been designed for a higher scale of operations than thier

current size, and can help us grow without the need to significantly increase costs.

Moreover, their continuous effort to improve systems and processes leads us to believe

that it can deal with higher scale of operations

without any hindrance. Higher business volumes will also improve thier negotiating

pouters and help us get further economies of scale in thier buying.

Emphasis on Backward IntegrationIt believes that through backward integration It will continue to substantially control the

cost of production, resulting in such cost benefits being passed on to thier customers. It

intends to increase the in-house manufacture, design and development of thier products

and realizes economies of scale. It intends to manufacture at least 25% of thier

requirement for apparels and may require expansion of thier existing manufacturing

facilities. This will also enable us to reduce thier reliance on external agencies for supply

of thier products and will result in loiter turn-around time.


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In addition, thier focus would be to undertake in-house such functions of the

manufacturing processes, which, in thier view, would add maximum value and would

enable us to reduce their procurement costs.

Expansion of FMCGHistorically, it has derived significant portion of thier revenue from sale of apparels. In

pursuance of their business plan to diversify thier portfolio of offerings, FMCG products

play a key role. FMCG products are usually meant to fulfill the daily needs of consumers

and therefore, It believe retailing of FMCG products will bring customers to thier storeson a frequent basis and this may in-turn lead to consumption of thier apparels. It believe

retailing of FMCG products would help us to eliminate the impact of seasonality of the

apparels market in India, which depends on factors such as change in tether conditions

and festival celebrations. In furtherance of thier endeavthiers to reduce costs, It intend to

procure FMCG products directly from the manufacturers. For this purpose, It has entered

into and will continue to explore the possibilities of entering into certain arrangements

with domestic FMCG majors on such terms and conditions, which are suitable to their

business model.

Procurement from low-cost production centres outside IndiaIn addition to thier strategy to continue procurement of goods from small and medium

size vendors and manufacturers which leads to cost efficiencies, It intend to procure

FMCG and apparels from low-cost production centres located outside India. Towards this

objective, It propose to increase thier procurement of finished and semi-finished goods

from China and thereby realize economies of scale and pass on the benefits so accrued to

thier customers.


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Increasing customer satisfaction and thier base of loyal customersIt believes that understanding the needs of thier customers is of prime importance for the

continuous growth of thier business. In order to continuously provide customer

satisfaction, thier customer management team assimilates customer feedback and it

endeavthier to take necessary steps to address the requirements of thier customers. In

addition, It has introduced, in association with SBI Cards & Payment Services Private

Limited, a co-branded credit card. It proposes to continuously undertake such initiatives

to increase the satisfaction of thier customers.


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Conclusion

During my study of supply chain management of Vishal mega mart i have found that

vishal mega mart is using a different kind of supply chain which is different than other

retailer. Vishal mega mart has its one bigger warehouse where it keeps inventories i.e. all

the supplied good by the different suppliers are kept their and then the goods are supply

to the vishal mega mart stores according to their necessity. I think this kind of supply

chain is very good for vishal mega mart because by having this kind of supply chain they

are able to deliver the goods to their stores in time. Because they have divided supply

chain in two parts that is the half of the chain is completed by their suppliers and half of

the chin is in the hands of vishal mega mart itself. Vishal Mega mart is planning to

introduce a completely outsourced logistics and supply chain management in order to cut

costs and optimise margin.

Suggestion


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Questionnaire For Interview

1. From where do you get your product ?2. Who are the parties involved in your supply chain ?3. Do you get the help of your own transporter or with the help

of third party ?

4. What is mood of transportation of your product ? Why youare choosing this mode ?

5. Have your integration done backward ?


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REFERENCES

http://www.vishalmegamart.net/http://www.vishalmegamart.net/aboutus.htm

STORE MANAGER:

NAME: SUNIL SINGH ADDRESS: PLOT NO. 16, SECTOR-23, SANJAY NAGAR DISTRICT

CENTER, NEAR ALT BUS STAND, GHAZIABAD-201002
http://www.vishalmegamart.net/http://www.vishalmegamart.net/aboutus.htmhttp://www.vishalmegamart.net/aboutus.htmhttp://www.vishalmegamart.net/

vishal mega mart final report

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