SUPPLY CHAIN MANAGEMENT

A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. Supply chains exist in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry and firm to firm. Traditionally, marketing, distribution, planning, manufacturing, and the purchasing organizations along the supply chain operated independently. These organizations have their own objectives and these are often conflicting. Marketing's objective of high customer service and maximum sales dollars conflict with manufacturing and distribution goals. Many manufacturing operations are designed to maximize throughput and lower costs with little consideration for the impact on inventory levels and distribution capabilities. Purchasing contracts are often negotiated with very little information beyond historical buying patterns. The result of these factors is that there is not a single, integrated plan for the organization--there were as many plans as businesses. Clearly, there is a need for a mechanism through which these different functions can be integrated together. Supply chain management is a strategy through which such an integration can be achieved. Supply chain management is typically viewed to lie between fully vertically integrated firms, where the entire material flow is owned by a single firm, and those where each channel member operates independently. Therefore coordination between the various players in the chain is key in its effective management. Cooper and Ellram [1993] compare supply chain management to a well-balanced and well-practiced relay team. Such a team is more competitive when each player knows how to be positioned for the hand-off. The relationships are the strongest between players who directly pass the baton, but the entire team needs to make a coordinated effort to win the race. Supply Chain Decisions We classify the decisions for supply chain management into two broad categories -- strategic and operational. As the term implies, strategic decisions are made typically over a longer time horizon. These are closely linked to the corporate strategy (they sometimes {\it are} the corporate strategy), and guide supply chain policies from a design perspective. On the other hand, operational decisions are short term, and focus on activities over a day-to-day basis. The effort in these type of decisions is to effectively and efficiently manage the product flow in the "strategically" planned supply chain. There are four major decision areas in supply chain management: 1) location, 2) production, 3) inventory, and 4) transportation (distribution), and there are both strategic and operational elements in each of these decision areas. Location Decisions The geographic placement of production facilities, stocking points, and sourcing points is the natural first step in creating a supply chain. The location of facilities involves a commitment of resources to a long-term plan. Once the size, number, and location of these are determined,
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so are the possible paths by which the product flows through to the final customer. These decisions are of great significance to a firm since they represent the basic strategy for accessing customer markets, and will have a considerable impact on revenue, cost, and level of service. These decisions should be determined by an optimization routine that considers production costs, taxes, duties and duty drawback, tariffs, local content, distribution costs, production limitations, etc. (See Arntzen, Brown, Harrison and Trafton [1995] for a thorough discussion of these aspects.) Although location decisions are primarily strategic, they also have implications on an operational level. Production Decisions The strategic decisions include what products to produce, and which plants to produce them in, allocation of suppliers to plants, plants to DC's, and DC's to customer markets. As before, these decisions have a big impact on the revenues, costs and customer service levels of the firm. These decisions assume the existence of the facilities, but determine the exact path(s) through which a product flows to and from these facilities. Another critical issue is the capacity of the manufacturing facilities--and this largely depends the degree of vertical integration within the firm. Operational decisions focus on detailed production scheduling. These decisions include the construction of the master production schedules, scheduling production on machines, and equipment maintenance. Other considerations include workload balancing, and quality control measures at a production facility. Inventory Decisions These refer to means by which inventories are managed. Inventories exist at every stage of the supply chain as either raw materials, semi-finished or finished goods. They can also be inprocess between locations. Their primary purpose to buffer against any uncertainty that might exist in the supply chain. Since holding of inventories can cost anywhere between 20 to 40 percent of their value, their efficient management is critical in supply chain operations. It is strategic in the sense that top management sets goals. However, most researchers have approached the management of inventory from an operational perspective. These include deployment strategies (push versus pull), control policies --- the determination of the optimal levels of order quantities and reorder points, and setting safety stock levels, at each stocking location. These levels are critical, since they are primary determinants of customer service levels. Transportation Decisions The mode choice aspect of these decisions are the more strategic ones. These are closely linked to the inventory decisions, since the best choice of mode is often found by trading-off the cost of using the particular mode of transport with the indirect cost of inventory associated with that mode. While air shipments may be fast, reliable, and warrant lesser safety stocks, they are expensive. Meanwhile shipping by sea or rail may be much cheaper, but they necessitate holding relatively large amounts of inventory to buffer against the inherent uncertainty associated with them. Therefore customer service levels, and geographic location play vital roles in such decisions. Since transportation is more than 30 percent of the logistics costs, operating efficiently makes good economic sense. Shipment sizes

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(consolidated bulk shipments versus Lot-for-Lot), routing and scheduling of equipment are key in effective management of the firm's transport strategy. Supply Chain Modeling Approaches

Clearly, each of the above two levels of decisions require a different perspective. The strategic decisions are, for the most part, global or "all encompassing" in that they try to integrate various aspects of the supply chain. Consequently, the models that describe these decisions are huge, and require a considerable amount of data. Often due to the enormity of data requirements, and the broad scope of decisions, these models provide approximate solutions to the decisions they describe. The operational decisions, meanwhile, address the day to day operation of the supply chain. Therefore the models that describe them are often very specific in nature. Due to their narrow perspective, these models often consider great detail and provide very good, if not optimal, solutions to the operational decisions. To facilitate a concise review of the literature, and at the same time attempting to accommodate the above polarity in modelling, we divide the modelling approaches into three areas --- Network Design, ``Rough Cut" methods, and simulation based methods. The network design methods, for the most part, provide normative models for the more strategic decisions. These models typically cover the four major decision areas described earlier, and focus more on the design aspect of the supply chain; the establishment of the network and the associated flows on them. "Rough cut" methods, on the other hand, give guiding policies for the operational decisions. These models typically assume a "single site" (i.e., ignore the network) and add supply chain characteristics to it, such as explicitly considering the site's relation to the others in the network. Simulation methods is a method by which a comprehensive supply chain model can be analyzed, considering both strategic and operational elements. However, as with all simulation models, one can only evaluate the effectiveness of a pre-specified policy rather than develop new ones. It is the traditional question of "What If?" versus "What's Best?" INTEGRATION OF FOOD INDUSTRY THE KEY DRIVER OF FOOD RETAIL IN INDIA India is worlds second largest grower of fruits and vegetables after Brazil and China. While the agriculture sector has witnessed several leaps of innovation and technological advancements, the processing sector is still in its infancy. Even with less than 4% processing of fruits and vegetables, the Food Processing Industry sector in India is one of the largest in terms of production, consumption within India, export and growth prospects. The government has accorded it a high priority, with a number of fiscal reliefs and incentives, to encourage commercialisation and value addition to agricultural produce; for minimising pre/post harvest wastage, generating employment and export growth. As a result of several policy initiatives undertaken since liberalisation in early 90s, the industry has witnessed fast growth in most of the segments. In the following few paragraphs, it can be noted that the processed food market for India is vast and the amount of scope that retail chains would be exposed to is phenomenal taking into consideration the demographics and raise in standards of living. Retailers could throng the market with all these processed and packaged foods with their private labels.
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EVOLUTION OF ORGANIZED RETAILING

Retailing, one of the largest sectors in the global economy, is going through a transition phase in India. For a long time, the corner grocery store was the only choice available to the consumer, especially in the urban areas. This is slowly giving way to international formats of retailing. The traditional food and grocery segment has seen the emergence of supermarkets/grocery chains, convenience stores and fast-food chains. The traditional grocers, by introducing self-service formats as well as value-added services such as credit and home delivery, have tried to redefine themselves. However, the boom in retailing has been confined primarily to the urban markets in the country. Even there, large chunks are yet to feel the impact of organized retailing. There are two primary reasons for this. First, the modern retailer is yet to feel the saturation' effect in the urban market and has, therefore, probably not looked at the other markets as seriously. Second, the modern retailing trend, despite its cost-effectiveness, has come to be identified with lifestyles. Impact of Organized Retail Organized retailing is spreading and making its presence felt in different parts of the country. The trend in grocery retailing, however, has been slightly different with a growth concentration in the South. Though there were traditional family owned retail chains in South India such as Nilgiris as early as 1905, the retail revolution happened with the RPG group starting the Foodworld chain of food retail outlets in South India with focus on Chennai, Hyderabad and Bangalore markets, preliminarily. The experiment has reaped rich dividends and the group is now foraying into other territories as well. Owing to the success of Foodworld model of RPG group, several new models such as Trinethra, Subhiksha, Margin Free and others have made their foray into this sector albeit at regional levels. Today the food retail sector in India is about Rupees Ten Lakh Crores (USD 200 billions) of which the organised food retail segment is about 1 per cent and increasing at a pace of over 20% y-o-y. In the organized retail industry, the gestation periods are long, institutional funding is difficult, and there is none or little Government support. But the belief among top retailer chains in the country is that the industry will see large investments coming once the current ban on foreign direct investment is lifted. But that could be two-three years away. Food and grocery retailing is a tough business in India with margins being very low, and consumers not dissatisfied with existing shops where they buy. For example, the next-door grocery shopkeeper is smart and delivers good customer service, though not value. Pantaloon Retail (India) Ltd, which operates two types of retail formats, made its maiden foray in food and grocery retailing in North India in mid-2003. Big Bazaar, Pantaloon group's discount store chain, has taken off to a roaring start in Delhi. The Pantaloon Big Bazaar in Delhi is the sixth for the group, and the first in North India. It has been found that existing Big Bazaar stores in cities such as Hyderabad, Bangalore and Mumbai attract average footfalls of 20,000 to 25,000 per day, more so during weekends. While Big Bazaar is essentially a discount store retailing product categories ranging from food and grocery to apparel to footwear to home and interior products, food and grocery retailing forms a significant part of the chain's business. Typically, while food and grocery retailing does well at the beginning of the month, the apparel sector sees maximum off take during festivals.

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Likely Transformation of the Supply Chain: To counter the unbeatable advantages of convenience of a hop, skip and a jump access and home delivery, organized retailers seem to have just one option - offer attractive prices to the consumer. A successful retailer's winning edge will therefore come from sourcing - how best it can leverage its scale to drive merchandise costs down, increase stock turns and get better credit terms from its vendors. There are obvious and hidden areas where costs can be pruned and the benefits of this lower cost of retailing can be passed on to customers as lower prices, which in turn should fuel demand. One way of trimming costs is if the pressure points in the long, often unnecessary, supply chain for produce and staples can be identified and suitably dealt with. The food supply chain in India is full of inefficiencies - a result of inadequate infrastructure, too many middlemen, complicated laws and an indifferent attitude. Corporate and NGO interventions at the farm end in the form of Farm Management Services are emerging to ensure quality and timely supply of produce for the operations. The FarmerCorporate relationship has helped both the farmers and the corporates in bringing the high quality low cost product to the retail shelf. To ease the burden of the corporate in setting up farm management services, several leading NGO bodies have taken up this activity essentially due to the fact that their operations are mostly at the farm end. We feel that these farmer-corporate models would be replicated and extended to all the farm end products. With the emergence of Private Label, we would soon find even the retail chains to work with the farm community in developing a efficient supply chain and to leverage on the cost advantage at both ends.

BIG BAZAAR Big Bazaar is consumer goods retail chain of Future Group Pvt Ltd. Future Group also runs Pantaloons, Lifestyle, EZone, Book Depot, Future Bazaar, Food Bazaar, Home Town, Fair Price, Brand Factory and Central Hypermarket. Future group is a subsidiary of Pantaloon Retail India Limited which is listed in NSE and BSE the most established Stock Markets in India. Mr. Kishore Biyani is the person behind Big Bazaar. He is CEO and MD of Pantaloon Retail India Limited. Big Bazaar is based on the concept of Hypermarket or Mega stores. In this kind of Hypermarket consumer get all the daily routine products under single roof. Big bazaar is having more than 215 stores in more than 95 cities and towns. Big Bazaar launched in India with a bang by opening its 4 stores in 4 major cities Bengaluru, Indore, Hyderabad and Kolkata within a time span of just 22 days. Big Bazaar was started in India in September 2001. It is now 10 years when big bazaar was started and has a huge number of stores all over India. Big Bazaar was started as a fashion hypermarket which had Apparels, Accessories, Cosmetics and General Merchandise on sale. Later on a huge range of other products was added to the list. This list includes FMCG products, Electronics, furniture, Stationery, etc. These stores are established on big areas having huge displays and providing cool and

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comfortable shopping experience to consumers. These stores are based on the concept of Walmart USA. The starting Tag Line of Big Bazaar was Isse Sasta Aur Accha Kahin Nahin. After completion of its 10 years in Retail market the company has given a new tag line Naye India Ka Bazaar. In these 10 years Big Bazaar has become favorites among housewives and other group of consumers too. In overall it has become the favorite retail store of every Indian family. Most of outlets of Big Bazaar are on an area of minimum 50,000 square feet. In bigger metropolis there are some huge stores on an area of 160,000 square feet. Big Bazaar express stores in small towns are also on 30,000 square feet area only. Big Bazaar also has its own house brand also which it promote in its stores. The most famous of them are Clean Mate, Tasty treat, Sensei etc. Big bazaar has some great promotional schemes too. It offers Buy 1 Get 1 Free on many products. There are huge discounts on MRP of many products. Big Bazaar also has special schemes on weekends and weekdays. They keep on promoting products by having special display of products. Sampling and testing of many products is available in store. Many small companies even launch their products through Big bazaar. There are many schemes by various companies which are available in Big Bazaar only. Big bazaar also provides consumer durables on Low EMI and interest free installments also Big Bazaar operates at 3 levels Super market, Hyper market and Express stores. Express stores are running in high traffic areas too. It stared in developing areas to take advantage of Real estate Boom. Big Bazaar has changed the face of Indian consumer market a lot by giving consumer a lot of alternatives to choose from.

Big Bazaars Commitment Our commitment is to deliver sustained growth, through empowered people, acting with responsibility and building trust with customers. Heres I am explaining what this means: Sustained Growth is fundamental to motivating and measuring our success. Big Bazaarsquest for sustained growth stimulates innovation, places a value on results, and helps usunderstand whether todays actions will contribute to our future. It is about growth of people and company performance. It prioritizes making a difference and getting things done. Empowered People means we have the freedom to act and think in ways that you feel will get the job done, while being consistent with the processes that ensure proper governance and being mindful of the rest of the companys needs. Responsibility and Trust Form the foundation for healthy growth. Its about earning the confidence that other people place in us as individuals and as a company. Our responsibility means we take personal and corporate ownership for all we do, to be good stewards of the resources entrusted to us. We build trust between ourselves and customers by talking not by mouth but by our superior customer service and being committed to succeeding together.
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FUTURE STRATEGIES AT BIG BAZAAR

As w e k no w s upp l y ch ai n i s t h e ba c k bo ne o f an y i n dust r y. A su ppl y c h ai n co ns i s t s o f al l p a r t i e s i nvo l v ed di r e ct l y o r i n di re ct l y i n f ul fi l l i n g a cu s t om e r re qu es t . T he s up pl y ch ai n i n c l ud es n ot o nl y t h e m an u fa ct u re r o r s up pl i e r pa rt but a l so t ra ns po rt er , w a r e ho us e a nd customer part. In retail especially supply chain begins with the customer and his or her need for the product. In retail supply chain involved in receiving and filling a customer request. As w e kno w c ust o m e r i s an i nt e gr al pa rt o f t he s upp l y ch ai n. In fa ct t h e pri m a r y p a rt o f an y s upp l y c ha i n i s t o s at i s f y c ust om er n ee ds a nd i n pr o c e s s gen e r at e p r ofi t f or i t s el f. Th e t e rm s u p p l y c h a i n c o n j u r e s u [ images of product or supply moving from to manufacturer to distributer to retailer to customer along a chain. This is certainly part of supply chain, but it is al s o i m po rt an t t o v i su al i z e i nf o rm at i o n, fu nds and p ro du ct s f l o ws al on g bot h d i r e ct i ons o f this chain. In reality a manufacturer may receive material from several suppliers and then supply several distributers. A supply chain may include a variety of stages. 1. 2. 3. 4. 5. Customer Retailer Wholesaler/distributor Manufacturer Component/raw material supplier Supply chain Process at BIG BAZAAR
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Procurement cycle

Manufacturing cycle

Replenishement cycle

Customer order cycle

The supply chain Big Bazaar is managed by Future Supply chain, which has developed expertise in supply chain management of consumer product categories such as fashion food, home and General Merchandise. The company operates from 60 strategically located hubs, servicing more than 2600 retail outlets spread across the length and breadth of the country. Its network of facilities and specialised expertise enable it to manage more than 3 million SKUs. This requires 30 million supply chains to be managed simultaneously, with their own specific requirements that need customized solutions. Big Bazaars Supply Chains transportation capability enables it to implement FactoryGatelogistics involving pick-up of goods from vendors across the country, national distribution of goods, and city logistics that includes store deliveries and home deliveries. Big Bazaars Supply Chains is the first organized intra-city transportation services company in India -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. Big Bazaar is also working on the vendor network as well as the logistics network. The company has identified up to 40 anchor vendors, each with turnovers of US$45 million, to achieve economies of scale. The group is also keen to ensure that its smaller vendors are able to reach turnovers of around US$1 million and a growth rate of 40% annually, to be able to pass on the benefits of scales. The company is also working towards bringing its 1,200vendors online, like Wal-Mart. In India, Big Bazaar derives significant economies of scale in managing their supply chain. With more than 170000 products, the company maintains a strong supplier relationship in a partnership mode, avoiding the
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exploitative supplier buyer transactional philosophy. The IT enabled back-end operations and supply chain management increases the reliability and efficiency of the business. As part of the operation, Big Bazaar is also undertaking to reduce its warehousing costs through a consolidation process. In a country like India, where most retail stores are located in the heart of the citywhere rents are high and storage space is scarcesupply chain management has even more serious business implications. Future Logistics now handles twoand-a-half million SKUs (or stock keeping units) a day across the Future Groups various retail formats around the country. By 2010, this number is expected to increase to more than 30 million SKUs a day. Even with 98% accuracy, some 600,000 pieces will not be delivered correctly, resulting in an estimated sales loss of more than Rs 4 crore a day. Big Bazaars four main consumer sectors: Fashion, Food, Home and General Merchandise have varied product lines, each with their own unique needs that require 30 distinct supply chain solutions. Food Supply Chain In the present competitive environment customers have become more demanding and asking for quality food which guarantees the safety. n time delivery is becoming a norm to reduce the inventory holding costs. The food industry is facing challenges due to increasing operational complexity, frequently changing consumer needs, government regulations and short product life cycles. It requires a very smart, efficient and agile supply chain to manage the ever changing needs of the end customers. Why managing Food Supply Chain is a challenge? 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 supply chains like electronics, home needs, consumer durables etc. It also requires a robust infrastructure of warehouses and transportation network connecting suppliers, manufacturers, distributors and retailers. The complexity of food supply chain increases further because of the below mentioned parameters 1.Food safety requirements 2.Regulatory requirements 3.Short shelflife of products leading to expiryand wastage 4.Product recalls 5.Product traceability requirements 6.Effective handling of customer complaints 7.High order frequencyand lowvolumes

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Food Supply Chain categorization It is basically categorized into two broad categories Perishable and non Perishable Perishable Supply Chain In perishable supply chain the shelf life for the products is very low. It requires managing the end to end supply chain with utmost care. The perishable supply chain typically requires a cold chain to manage it properly. The cold chain infrastructure is very capital intensive. The infrastructure consists of pre-coolers, temperature controlled warehouses, refrigerated transport etc. Non- perishable Supply Chain The shelf life for the product is considerable (varying from 3-18 months). Typically FMCG/Processed products, staples etc fall under this category. Although the shelf life of the product is 3-18 months, the products falling under this category requires strict monitoring of FIF at distributors end to ensure that the products reaching the end consumer are left with enough shelf life. What is needed to manage this unique and complex supply chain? 1. A well organized supply chain infrastructure of warehouses and transportation covering all the major cities. 2. Sophisticated cold chain for perishable products which guarantees a cost efficient and safe delivery of products
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3. Warehouse management system to ensure traceability of products and minimize the losses due to product expiry 4.State of the art warehouse infrastructure equipped with the sophisticated material handling equipments to aid cross docking, flow thru which will reduce transit times and inventory 5. Adherence to well documented GMP at the storage locations. This would ensure food safety in storage condition (Warehouses) 6. Vehicle tracking abilities GPS/GPRS to continuously evaluate the time to destination. Now Big Bazaar has, Gained and mastered art of managing the food supply chain due to its association with Food Bazaar. In house expertise to manage perishable ( Fruits and vegetables, dairy ,meat, poultry, Bakery ) and non perishable ( FMCG-Food, Staples, Processed food) State of the art warehouses across the nation which can cater to the customized needs. A strong in-house transportation department with fleet of vehicles for every need and type Availability of most advanced warehouse management system which would ensure all aspects like FIF, 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)

Food supply chain of Big Bazaar can be divided into 3 categories: Farm Fresh-foods supply chain Currently, Food Bazaar stores across the country have concessionaires handling the Farm Fresh section of their stores. The concessionaires ensure that the supply chain complexities are reduced for the store, because theyre in charge of the goods that they bring. ver a period of time Big Bazaar has developed an expertise in managing this farm fresh foods supply chain in the most efficient manner. Big Bazaar has removed the traditional mandi route supply chain that traditionally existed in the Indian market, where fruits and vegetables would come a long and tardy way, right from the farmers to finally reach the customers, as depicted below. Food Bazaar has links with farmers growing potatoes and fruits. It has also sourced produce from farmers growing exotic vegetables like red pepper, mushroom, etc. Earlier, agricultural and farm products, would first be collected by aggregators in different villages, and then they would sell the fruits and vegetables at the agricultural farm yards, who would subsequently sell it to a wholesaler. Now semi or smaller wholesalers will buy these products from the larger wholesalers and sell them to different smaller retailers, from where the customers finally bought the products.

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But Big Bazaar has shortened the supply chain path in such a way that the farm products can now directly reach the stores or take a slightly longer route of first getting collected at a collection centre which is then passed on to the processing and distribution centre, from where they would be delivered to the store for sale to customers. These features has enabled Big Bazaar to efficiently carve it s supply chain, reducing irrelevant delays and fruit s and vegetables wastage. Also farmers are at a benefits since they are selling direct to the retailer, hence cutting out the commission of unnecessary aggregators, wholesalers and farm yards. b) Cold chain A cold chain is a temperature controlled supply chain. An unbroken cold chain is an uninterrupted series of storage and distribution activities which maintain a a given temperature range. It is used to help extend and ensure the shelf life of products such as fresh agricultural produce,[1] seafood, frozen food, photographic film, chemicals and pharmaceutical drugs.

c) FMCG Supply Chain Big Bazaar maintains the supply chain of 3 different kinds of FMCG products Food, Non-food, Health & Personal care, with the latter being the latest entry into its product portfolios. While FMCG-Food are again distributed through cold-chain networks, non-food and health and personal care have different supply chain network. The FMCG-non food category items follow usual general merchandise supply chain networks, where products are first stored from the factories to different vendors or distribution centres, from where Big Bazaar replenishes its stock based on demand of the items.

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Whereas, health and personal care products may or may not be subject to refrigerated distribution. They are more or less distributed as non-food FMCG goods too. Future aspects of food retail supply chain Kishore Biyanis Future Group is making a vigorous push to increase its share in the fruit and vegetables business, a category that has traditionally been an Achilles heel for the countrys largest retailer. The group behind supermarket chains such as Food Bazaar and Big Bazaar is empowering the specialised entity, Future Supply Chains which will now totally manage all the efficient supply chain for fruits and vegetables (F&V), marking a shift away from the outsourced model it has followed so far. Mr Biyani is betting that by putting in place new sorting and grading technologies, better cold storage and aggressively cutting out middlemen, he can bring down the prices of fruits and vegetables by about 15-20% across categories. "The efficiencies created by this exercise will be passed on to the consumer," he observed. The Future Group now outsources retailing of fruits and vegetables to vendors, who are allowed to use space in its shops in exchange for a share of their revenue. Mr Biyanis move to take direct control of the fruits and vegetables business brings to focus the challenges faced by organised retailers in selling fresh and perishable goods. India lacks a network of cold storages and refrigerated trucking facilities that can efficiently transport fresh fruits and vegetables from a farm to the shop-floor while retaining its freshness. Future Group has a separate company that handles its dry vegetables supplies as well, but the new entity will have independent profit and loss responsibilities as well. It will rent out space from Future Groups stores and separately branded counters will handle sales of fruits and vegetables. Mr. Biyani has recently announce that he is planning to introduce the concept of freezing fruits and vegetable prices. That means, prices of fruits and vegetables will not fluctuate throughout the year but sold at one fixed price around the year further adding benefits for the customers. If Big Bazaar does implements such a scheme, it will heavily depend and rely on its highly efficient supply chain to deliver seemless supply of products even when demands are very high and cost of products very low, reaping very less profit.. In the process of setting up the retail networks, these large corporations are changing the domestic agricultural landscape. For starters, they are introducing the Indian farmer to better seeds, new technology, supply chain management and food processing. These companies have already brought in technology that increases the shelf life of fruits and vegetables. Primarily, there are three models being worked on by India Inc. First, a model farm like Bhartis Field Fresh. Second, contract farming. Third, contact farming. In contract farming, the farmer is supplied seeds and other ingredients by the company. The contractor buys the entire farm produce at a pre-fixed price.
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However, in case there is a supply shortage and the price offered by the government is higher than the price contracted by the company, the farmer can sell it all to the government. Contact farming is a more complicated. Here, a farmer takes land on lease from other farmers. He is generally paid Rs 15,000 per acre every year, while the marginal farmer is employed to work on his land for which he is paid a monthly salary. But Bharti says it is switching to contract farming because of the complexities of contact or collaborative farming. In Ratnagiri, Maharashtra, farmers have formed cooperatives and regularly supply mangoes to retail chains. We sold 35,000 tonnes of mangoes from Ratnagiri last year. The farmers managed to get 90 per cent of the original cost, says Arvind Chaudhary, CEO Pantaloon Retails food business. If they had gone to a mandi they would have realised only 70 per cent of the cost. This year, Pantaloons Food Bazaar is planning to buy 100,000 tonnes of mangoes. The supply chain is managed such that mangoes are transported to the store a week before they become ripe. Cold chain is used only in the case of potatoes, where 5,000 tonnes are stocked in UP. Pantaloons food business is growing at 25 per cent in the entire Big Bazaar chain, which also sells FMCG products. However, there are certain issues that agro-retail chains will have to address before they can make the farmer smile. Hurdles such as bad infrastructure, high cost logistics management, the middleman and the limiting APMC Act will have to be crossed if retail has to assist the farmer. Since the existing supply chain allows them to connect with only those farms that are nearest to the cities, those living in the hinterland still have no access to markets. Importantly, the best of these stores shy away from commenting on the investments. There has also been a call to set up an exchange market for agricultural produce. This free market principle, CEO s feel, will liberate the farmer in terms of actual price realisation and keep him out of debt for the coming season. The National Spot Exchange Limited, an exchange which is dedicated for agri-produce, is supposed to create a benchmark even for the small farmer who can sell only one quintal. The NSEL is in the process of setting up 117warehouses and cold chains of 700,000 metric tonnes capacity each to make the exchange operational.

Right now, companies are mostly dealing with farmers on the periphery of cities but analysts say they would ultimately have to invest in cold chains and move into the interiors. Whether companies except for those with deep pockets like Reliance will have the courage to do that is in question. According to the confederation of Indian industry, if India has to double fruits and vegetables production to 300 million tones by 2012, it would require pumping in close to Rs 20,000 crore. But analysts warn that such investment may not pay dividend since it doubles the cost of transportation. Fung Capital, a private equity investment company of Fung families, has decided to invest around $30 million in the logistics and supply chain arm of Kishore Biyani-led Future group .Future Supply Chain Solutions (proposed new avatar of Future Logistic Solutions Ltd.), in return, has agreed to divest up to 26 per cent of equity stake in favour of the private equity firm. Future Supply Chain Solutions, which presently sevices over 1,100 retail outlets, manages over 2.6 million SKUs and over 3 million sq ft of warehousing network spread over 30centres, and handles a fleet of over 500 vehicles plying across the country, will use the newly raised capital for enhancing logistics infrastructure, strengthening technology platforms, and expanding supply chain network of the company for its Big and Food Bazaar arms.We are building a world class supply chain infrastructure for the consumption products in India which is presently very limited, despite it being a critical support required in Indias rapidly growing economy. We will be investing in physical as well as technology infrastructure that
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will reduce the time-to-market and cost-to-market for fashion and apparel and other consumer categories, said Anshuman Singh, Managing Director of Big Bazaar. Another important future aspect of supply chain rather the biggest driver in consumer logistics is going to be zero defect in managing the supply chain. While infrastructure, technology, automation, processes and people will all play an important role, zero defect can only be achieved through vertical integration across the entire supply chainfrom raw material supply, production, wholesale and retail. The different parts of the supply chain will no longer be able to work in silos as they do today. 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. 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 stockouts, 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. 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
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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. FOR BIG BAZAAR Big Bazaar sells variety of merchandise, a t a f f o r d a b l e r a t e s , t h e 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 o p e r a t e s o u t o f 6 4 s t o r e s a n d t o p 1 5 s t o r e s r e g i s t e r a cumulative footfall of 27 lakh a month on an average. P R O B L E M S A T B I G B A Z Z A R LOGISTICS

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. 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. In2006, 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. 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 are250-300 km a day, whereas the international norm is 600-800 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.

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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.

RECOMMENDATIONS 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 winning-formula for some markets. But this also dooms it to failure in others. The heart of the matter is highvolume-low-cost strategy, which made it a success in cost-conscious smaller, everybodyknows-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. 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.

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REFERENCES http://bigbazaar.net.in/ http://lcm.csa.iisc.ernet.in/scm/supply_chain_intro.html http://www.isb.edu/isbinsight/Insight_June07/ISBInsight_June2007.pdf www.webstatschecker.com

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