final om project (2)
TRANSCRIPT
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Operations Management - I
LOGISTICS(AUG 23, 2011)
Submitted To
Prof. Rajesh Jain
Submitted By: -Anshul Kaushik -111105Arihant Ostwal -111107Avinash Jain -111108Rakesh Jain -111144Ram Krishna Pandey -111145
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Introduction
Council of supply Chain Management professional describe logistics as The function that,
plans, implements and services and related information between the point of origin and point of
consumption in order to meet customers requirements .
According to Deloitte & Touche survey 98% of companies consider supply chain management
to be either critical or very important. Earlier logistics are considered as mandatory task and
is not given proper attention but with the rising strategic importance of global sourcing,
logistics planning has gain so much importance company source globally to cut costs down,
and it doesnt make sense to let the rising costs, longer transit times and complexities
associated with global logistics will take away those savings.
The logistics market is mainly thought to mean transportation. But the major elements of
logistics cost for industries include transportation, warehousing etc., and other value added
services such as packaging. The Logistics cost accounts of 10 percentage of GDP (Gross
domestic product). The industry is currently on an upswing and is poised for a growth of 15
percentages in the coming years. In this project we are studying various techniques used by
three major retail players viz. Wal-Mart, Tesco & Big Bazzar.
Retail Logistics
Retail sector is highly competitive in nature and it also has direct contact with final
customer, retailers often place more emphasis on inventory, Warehousing and customer service
activities than do manufacturers. They tend to be more centralized than manufacturers and
wholesalers. Logistical operations of retailers are geographically focused and highly detailed.
Retail distribution warehouses are generally located within one or two days travel distance from
the cluster of store location. Retailers generally ship large numbers of stock keeping units from
their distribution warehouses, creating the need to intricate control systems. The notion of an
inventory pipeline is critical in retailing due to high cost of retail space. Proper timing for store
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deliveries is essential to the maintenance and velocity of store inventory. There are few retail
strategies that combine number of tactics to improve inventory management and efficiency
while speeding inventory flows. Some of them are as follows:-
1. Quick Response: Most of quick response is between manufacturer and retailer only.
When fully implemented Quick response applies Just in time principles throughout the
supply chain, from raw material suppliers through final customer. This is done by
combining EDI with barcode technology. Sales are captured immediately. This
information can be passed on to the manufacturer, who can than notify its raw material
supplier and schedule production and deliveries.
2. Cross Docking: This process involves unloading inbound product storing product for
individual store, and reloading the shipments onto trucks destined for particular store.
3. Floor ready merchandise: It is observed that merchandise routinely spend 3 days in the
distribution center if it does not have retail price tickets and proper hangers. Thus some
suppliers are shipping goods prehung and preticketed.
Inbound and Outbound Logistics:
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Inbound logistics concentrate on arranging and buying of material parts and finished inventory
from suppliers to manufacturing or assembly plant.
Outbound logistics concentrate on storage and movement of final product and information from
end of production line or retailers in this case to end users.
IT and Logistics in Retail:
In Organized retail industry role of IT is prudent and it need to be synchronized with the
logistics. IT and Logistics can be integrated in order to increase Retailer operational Efficiency
and eventually retails profit.
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WALMART:
WalMart is an Americanpublic multinational corporation that runs chains of large discount
department stores and warehouse stores. Walmart has 9667 stores in 28 countries, under 60
different names. In 2010 Walmart recorded sales of about $405 Billion. It employs 2.1 million
associates worldwide.
The logistics infrastructure of Walmart comprises of an in house transportation system which
enabled them to reap the benefits of low-cost in transportation for the delivering of goods to the
different stores and distribution centers. Due to such an efficient and low cost transportation
system Walmart is able to replenishing the shelves in its stores four times faster than its
competitors. The code of conduct that is being imposed to the Wal-Marts drivers boosted more
confidence for Walmart that the goods are being delivered exactly on time and right on the
money. To bring in more efficiency in its distribution system, walmart has applied a logistics
technique called Cross docking. In Cross-docking, materials are unloaded from an
incoming truck, rail etc. and then loaded directly into outbound trucks, trailers, or rail cars, with
little or no storage in between. This may be done to change type of conveyance, to sort material
intended for different destinations, or to combine material from different origins into transport
vehicles with the same, or similar destination.
http://en.wikipedia.org/wiki/Public_companyhttp://en.wikipedia.org/wiki/Multinational_corporationhttp://en.wikipedia.org/wiki/Public_companyhttp://en.wikipedia.org/wiki/Multinational_corporation -
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Walmart emphasizes the need to constantly reduce its purchasing costs and offer the best and
lowest price possible price to its customers. The company procures goods directly from
manufacturers, bypassing all Intermediaries. Wal-Mart is a tough negotiator on prices and
finalizes a purchase deal only when it is fully confident that the products being bought were not
available elsewhere at a lower price.
Walmart spends a significant amount of time meeting vendors and understanding their cost
structure. By making the processes transparent, the retailer could be assured that the
manufacturers are doing their best to cut down costs. Once satisfied, Walmart establishes a
long- term relationship with the vendor. In its attempt to drive hard bargains, Walmart does not
even spare big manufacturers like Procter & Gamble (P&G). However, the company, generally,
prefers local and regional vendors and suppliers due to lower costs.
A Walmart Green truck
Walmart has one of the largest private distribution operations in the world with more than 40
Regional Distribution Centers. Each one is over 1 million square feet in size. They operate 24/7
to keep their fleet of tractors and trailers rolling. Inside each DC, more than five miles of
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conveyor belts move over 9,000 different lines of merchandise. Each DC supports between 75
and 100 stores within a 250-mile radius.
Each distribution center is divided into different sections on the basis of the quantity of goods
received and is managed the same way for both cases and palletized goods. The inventory
turnover rate is very high, about once every two weeks.
The distribution centers ensure a steady and consistent supply of products to support the supply
function. As Walmart used sophisticated barcode technology and hand-held computer systems,
effectively managing operations at store became easier and more economical. Every employee
had an access to real-time information regarding the inventory levels of all the products in the
store. They had to just make two scans one to identify the pallet, and the other to identify the
location from where the stock had to be picked up. Different barcodes were used to label
different products, shelves and bins in a center. The hand-held computer guided an employee
with regard to the location of a particular product from a particular bin or shelf in the center.
When the computer verified the bin and picked up a product, the employee confirmed whether
it was the right product or not. The quantity of the product required from the center was entered
into the hand-held computer by the employee and then the computer updated the information on
the main server.
The hand-held computer also enabled the packaging department to get accurate information
about the products to be packed. It displayed all information about the storage, packaging and
shipping of a particular product thus, saving time on unnecessary paperwork. It also enabled the
center supervisors to monitor their employees closely enabling them to give directions and even
guide them even on the move. This enabled the company to satisfy customer needs quickly and
improve the level of efficiency of the distribution center management operations
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TESCO
Tesco is the UKs largest food retailer, with a Group sales turnover of more than 67 billion.
It is among the leading international retailers with a total of more than 3,000 outlets and
approximately 600 planned store openings in more than 10 countries. This number has
increased rapidly as Tesco entered the convenience store market with its Tesco Express store
format. The product range held by the stores has grown rapidly in recent years a larger store
can hold up to 20,000 products as Tesco broadens its presence in the non-food market for
electrical goods, stationery, clothing and the like. This massive range is supported by thousands
of suppliers, who are expected to meet agreed service levels (correct time and quantities) by
delivering to Tesco within specific time windows. Volumes are impressive. In a year, some
2.1 billion cases of product are shipped from suppliers to the stores. Mindful of its
responsibilities, Tesco is the UKs market leader in the use of bio fuels and works hard to
reduce its CO2 emissions per case delivered, through initiatives including rail, barge and
alternative fuels. The company also buys considerable numbers of double-deck trailers to
move more cases per trip. Tesco states that its core purpose is to create value for customers
to earn their lifetime loyalty. An early reform for supermarket operation was to have suppliers
deliver to a depot rather than to every store. During the 1980s, distribution to retail stores was
handled by 26 depots. These operated on a single-temperature basis, and were small and
relatively inefficient. Delivery volumes to each store were also relatively low, and it was not
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economic to deliver to all stores each day. Goods that required temperature-controlled
environments had to be carried on separate vehicles. Each product group had different ordering
systems. The network of depots simply could not handle the growth in volumes and the
increasingly high standards of temperature control. A new distribution strategy was needed.
Many small depots with limited temperature control facilities were replaced by Fresh
Food depots which can handle many products at several temperature ranges. The
opportunity is to provide a cost-effective daily delivery service to all stores.
Typically, a Fresh Food depot can handle over 80 million cases per year on a 40-acre site. The
warehouse building comprises 36,000 square meters divided into three temperature zones:
-25C (frozen), 1C (chilled) and 12C (semi-ambient). Each depot serves a group of
between 48 and 335 retail stores. Delivery vehicles for Fresh Food depots use insulated
trailers divided into chambers by means of movable bulkheads so they can operate at different
temperatures. Deliveries are made at agreed, scheduled times. Grocery and Non-Food
goods such as cans and clothing are delivered separately.
Tescos Food items delivery truck Tescos Non food items delivery truck
With such a huge product range today, it is impossible for the individual store to reorder across
the whole range (store-based ordering). Instead, sales of each product line are tracked
continuously through the till by means of electronic point of sale (EPOS) systems. As a
customers purchases are scanned through the bar code reader at the till, the sale is
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automatically recorded for each stock-keeping unit (SKU). Cumulative sales are updated every
four hours on Tesco Information Exchange (TIE). This is a system based on internet technology
that allows Tesco and its suppliers to communicate trading information. The aim of improved
communication is to reduce response times from manufacturer to stores and to ensure product
availability on the shelf. Among other things, TIE aims to improve processes for introducing
new products and promotions, and to monitor service levels.
Based on cumulative sales, Tesco places orders with its suppliers by means of electronic data
interchange (EDI). As volumes and product ranges increased during the 1990s, food retailers
such as Tesco aimed to de-stock their depots by ordering only what were needed to meet next
days forecast sales. For fast-moving products such as types of cheese and washing powders,
the aim is day 1 for day 2: that is, to order today what is needed for next day. For fast-moving
products, the aim is to pick to zero in the depot: no stock is left after store orders have been
fulfilled. This means that the same space in the depot can be used several times over. Deliveries
to stores are made in two waves, at specific times and within defined windows. This helps to
improve product availability at stores throughout the day, and thus support changes in demand.
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FUTURE GROUP
Logistics and Supply Chain
Retail logistics is a critical business activity in a highly competitive retail market with changing
consumer choices, different formats and geographical diversity like India.
In Future Group, the retail operation success depends much on achieving efficient and effective
logistics and supply chain.
A continuous logistics function to move the products from the manufacturer to the retail store
shelves is most significant process of the retail operations. The robust presence of future group
in logistics and supply chain helps it move millions of products to consumers each day across
India in the most efficient and cost-effective manner.
Future Supply Chains
Future Supply Chains is a specialized subsidiary of the Future Group. It offers a focused and
consolidated approach to cope with the groups large supply chain requirements .It also meets
the requirements of suppliers and business partners.
It provides complete end-to-end supply chain management, warehousing and distribution,
multi-modal transportation and container freight stations.
Future Supply Chains is distinct because it is an end - to - end supply chain which delivers
millions of pieces to millions of consumers on a daily basis. It manages the entire supply chain
enabling its clients to concentrate on their core business.
KEY FEATURES:
It operates on 4 major processes: Warehousing, Transportation, Reverse Logistics
International Logistics.
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The current warehouse area coverage is over 3.5 million square feet having 67
warehouses across 32 locations.
It has full-time dedicated fleet of over 400 vehicles and an outsourced fleet of 400
trucks that helps to move goods across the country in the most efficient and cost-
effective manner.
It caters to over 2600 retail outlets across the country.
The major processes are:-
1. Warehousing:The Storage & fulfilment process of Future Supply Chains providesstorage & handling services through a current warehouse coverage area of over 3.5
million sqft across 67 locations.
The key differentiatorsin warehousing are:
Its ability to operate on low cost using modern mechanization and leasing large space.
Service efficiency has been enhanced manifold using multi level storage and continuous
integration with customer ERP.
Service efficiency has improved a lot due the companys ability to handle multiple
SKUs.
It handles widely differentiated product range across various seasons, cycles and
demand patterns.
It has been successful in minimising obsolescence.
Continuous process i.e 24x7 operations.
It value added services like testing, packaging, refurbishing, bar coding.
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Fig 1.Various Warehouses in India
2. Transportation: The movement vertical includes factory-gate logistics involvingpick-up of goods from vendors across the country, national distribution of goods, and
city logistics that include store deliveries and home deliveries. It is the first organized
intra-city transportation services company - carrying out not only B2B deliveries but
also B2C deliveries in the form of thousands of home deliveries every day across the
country, especially for Furniture and Consumer Durables. Future Supply Chains offers
following uniquely differentiated features:
Metro First- It provides door to door services.
City Express- To provide deliveries within the city.
Intercity trucking
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GPS enabled trucking
3. Reverse Logistics: Reverse flow of merchandise is an integral part of any retail
business. Future Supply Chains is the only organized supply chain company in India
that offers reverse logistic solutions to its customers. It manages the reverse flow of
merchandise from the stores and recycles, repairs and refinishes the merchandise
through its machinery and expertise for garments, carpentry and sheet metal work
shops. Hence, it helps to re-sell their products and once again create value at a small
incremental cost to the consumers.
4. International Logistics: International Logistics process manages the operations
related to freight forwarding and custom clearance that involve international movements
of goods by sea, by air and by road.
Future group Distribution services
Future Supply Chain is introducing an organized distribution which is a first of its kind
service in India. The company is creating a one - stop shop for National distribution
services. The Distribution service will use the existing pan-India operations of Future
Supply Chains. It will provide the customers easy access to approx. 1,100 stores of
Future Group spread across 42 cities in India.
Supply Chain Expertise
The main consumers sectors are Fashion, Food and General Merchandise which have
vast product lines, each with its own unique needs that require many distinct supply
chain solutions. The in-depth understanding of supply chains and the ability to design,
execute, manage and integrate the various operations seamlessly have helped the group
to be successful.
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Fig: VariousConsumer Sectors
Food Items: Customers have becomemore demanding and ask for quality food which
guarantees the safety norms. On time delivery has become a norm to reduce the
inventory holding costs. The food industry is facing challenges due to increasing
operational complexity, ever changing consumer needs, government regulations and
short product life cycles. It requires a very smart, efficient and agile system to manage
the ever changing needs of the end customers.
The food supply chain is complex and difficult to manage due to its perishable nature
and short shelf life of the products as compared to other products like electronics, home
needs, consumer durables etc. It also requires a robust infrastructure of warehouses and
transportation network connecting suppliers, manufacturers, distributors and retailers.
To deal with all such challenges, it used the following strategies:-
It has gained expertise of managing the food supply chain due to its
association with Food Bazaar.
It has state of the art warehouses across the nation which provides according to
the customized needs.
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It has strong in-house transportation department with fleet of vehicles for
ever need and type.
Availability of most advanced warehouse management system which would
ensure all aspects like FIFO, Lot management, product traceability, product
recalls.
Availability of transport management system with vehicle tracking facilities to
track product movement at every stage of transportation ( Real time visibility).
Fashion: Future Supply Chains has the expertise in managing a fast and responsive supply
chain with short time-to- market for high fashion products and separate low-cost supply chain
for value apparels. Future Supply Chains is continuously evolving its fashion supply chain
efficiencies through simple solutions like pre-packs & unitization and auto replenishment
systems implemented in close coordination with its customers.
General Merchandise: Future Supply Chains has designed customized vehicle bodies
specifically to accommodate GM's low-value voluminous cargo, keeping the transportation
costs low. Initiatives like bulk packs, cross-docking and auto replenishment systems lead to
improved supply chain efficiencies and reduced cost.
Bibliography and R eferences:
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www.en.wikipedia .org
Challenges in Retail Innovation Aspects of Innovation in Tesco plcs Market Entry into
the USA (Case study by Joe Tidd, John Bessant 2009)
Creating a Customer-Driven supply chain (ECR Journal Vol 2, No 2 Winter 2002)
Logistics Management and Strategy: Competing Through The Supply Chain (3rd
Edition) (by Alan Harrison and Remko Van Hoek.
www.tesco .com
www.tescplc .com
Global Logistics by Donald waters
Strategic Logistic Management by James R.Stock
http://www.futuresupplychains.com
http://en.wikipedia.org/wiki/Future_group
http://walmartstores.com/AboutUs/7794.aspx
http://en.wikipedia.org/wiki/Walmart
http://mohanchandran.files.wordpress.com/2008/01/wal-mart.pdf
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