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Modern Trade
Opportunities?
Team ACES
NITIE Mumbai
Aritra Saha - IE17 - aritra.saha.nitie2015@gmail.com
Gourav Chellani - IE111 - gourav.chellani.nitie@gmail.com
Mohit Assudani - IE51 - mohit.assudani.nitie@gmail.com
Swati Premchandani - IE95 - swati.premchandani.nitie@gmail.com
EXECUTIVE SUMMARY
Problem Statement:
To study the existing processes in the supply chain, identify the key issues which are hindering the fill rate
performance of ITC for modern trade and recommend changes in the supply chain strategy/processes so as to
achieve a fill rate of > 95%.
Background:
Organized retail is still in the nascent stage in India (Rs. 14,536 Cr per annum) but it is growing at a commendable
13.2% per annum. MT contributes to 21 % (industry average is 9.7 %) of ITCs other FMCG business, but as
compared to last year it has grown at a whopping rate of 35 %. The contribution of premium products in ITCs
MT portfolio is extremely high (>70 % for 8 product lines), but at the same time the MT environment is famous
for frequent price discounts. Hence it is of paramount importance to revisit and redesign the supply chain
strategy to focus on efficiency and responsiveness.
Methodology:
Initially, we have identified the pain areas in the order fulfillment process and their underlying causes, by means
of an Ishikawa diagram, so that these causes can be addressed in a focused manner. Next, we have documented
the ideal flow of the order fulfillment process, incorporating changes in the as-is process that are immediately
implementable. The changes that need time in implementing have also been mentioned. The present order
fulfillment processes involves a lot of ambiguity and have specific Reason Codes tagged with them. But they
might not be sharply defined in SAP. So we have suggested a new set of Reason Codes to do away with the
ambiguities. Implementing this will require IT integration and People Change Management.
In order to reduce our dependency on forecasting, which is not much reliable owing to frequent promotions,
we have suggested to shift the Customer Order Decoupling Point from the WSP to the Hub. This will reduce
the total safety stock in the supply chain and make it more responsive. Moreover, in order to enable the
customization of the MT supply chain, we have suggested the code conversion for MT inventory in SAP (at hub).
Stocks will flow to lower nodes as per Allocation Report based on Norms & Penetration Levels. The MT outlets
have been categorized into platinum, gold & silver so as to formulate specific service offerings for each type.
In keeping with the strategy of making the supply chain more responsive, we have suggested the shift from Push
based Distribution Requirement Planning to Pull based Multi Echelon Distribution Planning. This will nullify
the Bullwhip Effect by synchronizing the demand across all echelons. In order to support this strategy further,
we have introduced the concept of zonal buffers, which will enable the inventory reduction at the hub.
Automatic
Replenishment
Zonal Buffers
Multi Echelon
Distribution
Planning
SC
Customisation
SAP Code
Conversion
Shifting of
CODP
Reason Code
Revamp
Ideal Order
Fulfillment Process
Root Cause
Analysis
Last, but not the least, we have suggested the introduction of Automatic Replenishment Process through
implementation of Vendor Managed Inventory. This will ensure cost benefit through inventory rationalization
owing to better visibility into retailers demand and service improvement through better scheduling of
deliveries.
80.00%
Are No Stocks real No
Stocks?
A
B
A
x%
y% B
z%
a%
b%
c%
A
0.00%
No stocks
Regular SKU's
Discontinued
5.00%
x%
p%
q%
10.00%
r%
Promotional
ITCs current fill rate levels for MT are about 80%. But does
this necessarily mean that for 20% of the times, the stock has
not reached the retail outlet? There might be other reasons
for the stock unavailability at the retailer. So, we need to
track these reasons and target them individually.
*KA Key Account
Reason Codes in SAP - To find out why a difference existed in the flowing line item, reason codes are
assigned to these items. Reason codes are indicated by keys that we define in customizing.
The new reason codes might require the following two changes:
IT Change
Reason codes created in SAP
Only available for MT
Field created for PO expiry date
Auto exception report - 24 Hrs. prior PO expiry
BIW report on fill rates with reason codes
People Change
Deatiled presentation on Reason Codes
Billing officers trained
Business & Supply Chain sensitized on Actionables
Trigger ongoing MIS on Reason Code Report
Better information flow from KAMs to Billing
Office
Code Conversion
Plant
Segmented Supply Chain will ensure Stock Availability for MT based on Auto Replenishment
The same-zone WSPs must belong to the same region with similar Segments
Lead Time for delivery among same-zone WSPs
Estimated Demand in each WSP and hence the total cumulative demand of the Zone
Proximity of Hub from each Zone
Trans-Shipment
Current Scenario
A WSP can source from only a Hub. In case of a
stock out at WSP, only its HUB can come to rescue.
In case of a stock out at both WSP and its Hub,
no stock is available
Stock Outs are thus happening in WSPs when
other WSPs are maintaining high Inventory levels
Future Scenario
A WSP can source not only from a Hub but
from another WSP belonging to the same Zone
In case of stock non-availability at both WSP
and its Hub, stock might still be made available
by transferring from other WSPs with local
buffer