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"ASM’s International E-Journal on Ongoing Research in Management and IT"

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A STUDY ON ADAPTIVE SUPPLY CHAIN MANAGEMENT SYSTEM (With special reference to BIG BAZAAR, Pune).

Mrs. Vidyut Kaustubh Deshpande Assistant Professor, Sinhgad Business School, Pune Email-id:mrsvkd@gmail.com, dvidyullata@sinhgad.edu

Contact:9371628915

ABSTRACT:

Supply chain management (SCM) is a kind of information system for the flow of goods. It includes the movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption. Interconnected or interlinked networks, channels and node businesses are involved in the provision of products and services required by end customers in a supply chain. Retailers face many challenges time- to- market reductions are necessary due to Shorter and shorter product life cycles, Greater product variety causing more fluctuations in demand calls for high responsiveness in supply chains, and the ever increasing need for the shorter lead times continues. However, as a result of the power that comes with control over consumer contacts, retailers today have the opportunity to organize the work in their supply chains in suitable ways.

Adaptive Supply chain management has been defined as the "design, planning, execution, control, and monitoring and prediction and optimization of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally. Supply Chain Management consist of all parties (Including Manufacture, Suppliers, Transporters, Warehouses, Retailers and even consumers) directly or indirectly involved in fulfillment of a customer. The main objectives of Supply Chain management are to improve the overall organization performance and customer satisfaction by improving product or service delivery to consumer. Supply Chain Management involves movement and storage of all materials including Raw material, WIP (Work in Progress) and Finished Goods. Big Bazar, a part of the Pantaloons Group, is a hypermarket offering a huge array of goods of good quality for all at affordable prices. Big Bazar with over 50 outlets in different parts of India is present in both the metro cities as well as in the small towns. Big Bazar has no doubt made a big name in the retail industry of India; moreover shopping here is further made a memorable experience with the varied rates of discounts on products as well as discount vouchers available in a variety of amounts, on all Big Bazar products and accessories

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"ASM’s International E-Journal on Ongoing Research in Management and IT"

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The objective of this paper is to shows broad view of Supply Chain Management and how the adaptive supply chain helps in retail sector in managing their inventory with better decision making and by reducing their losses. It also helps to evaluate the performance of the suppliers and which suppliers will be best for the organization for long term business.

Keywords:Supply Chain Management System (SCM), Material Requirement Planning (MRP), Capacity Requirement Planning (CRP), Enterprise Resource Planning (ERP),

1. Introduction:

Traditionally, many supply chain activities were managed with paper transactions. Since early business utilization of information technology, attention has been given to the Automation of processes along the supply chain. The first software programs appeared in the 1950s and the early 1960s and supported short segments along the supply chain. Typical examples are inventory management systems, scheduling and billing. The major objective was to reduce costs, expedite processing and decrease errors. Such applications were developed in the functional areas independently of each other. During 1960s Material Requirement Planning (MRP) model was devised as it requires daily updating. Later Capacity Requirement Planning (CRP) was developed to smooth out the MRP plan. Followed by enhanced MRP methodology and software called manufacturing requirements planning or MRP II. During this evolution, information systems became more and more integrated. This led to the concept Enterprise Resource Planning (ERP), which concentrated on integrating enterprise transaction processing activities. Later ERP was expanded to include internal suppliers and customers and then external suppliers and customers which is known as extended ERP/SCM. Thus SCM systems have emerged as a complement to ERP systems to provide intelligent decision support capabilities. Most crucial factor in ERP failure is that the organization’s business processes do not match those modeled in the ERP. Effective SCM requires that suppliers and customers work together in a coordinated manner by sharing and communicating the information necessary for decision making. In order to get better SCM, it is necessary to reengineer its supply chain processes and hence to change the role of basic management functions into intelligent Planning, Organizing, Directing, Controlling, and Reporting with the help of adaptive business intelligent systems.

A supply chain is dynamic and involves the constant flow of information, product and funds between different stages. The primary purpose from the existence of any supply chain is to satisfy customer needs, in the process generating profits for itself. Supply chain activities being with a customer order and end when a satisfied customer has paid for his or her purchase. The term supply chain conjures up images of product or supply moving from supplier to manufactures to distributors to retailers to customers along a chain. It is

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"ASM’s International E-Journ al on Ongoing Research in Manag ement and IT"

E-ISSN-2320-0065

important to visualize info rmation, funds and product flows along bot h directions of this chain. The term supply c hain may also imply that only one player i s involved at each

suppliers and then

supply several distributors . Thus, most supply chain arte actually ne tworks. It may be

more accurate to use the t erm adaptive SCM or supply web to descri be the structure of most supply chains.

stage. In reality, a manuf acture may receive material from several

A typical supply chain may following stakeholders.

Customers

Retailers

Wholesalers/ Distributo rs

Manufactures

Components/ Raw mate rials suppliers

involve a variety of stages. These supply ch ain stages include

a variety of stages. These supply ch ain stages include Figure 1: Basic concepts of SCM

Figure 1: Basic concepts of SCM

Each stage need not b e presented in a supply chain. The approp riate design of the

on both the customer’s needs and the r oles of the stages

supply chain will depend involved.

The purpose of Supply

Chain Management is to add value to the bus iness by:-

Ensuring that all p rocurement is made from suppliers who hav e been assessed as being able to delive r that specified technical and quality require ments.

Reducing the cost base, controlling quality, improving operati onal efficiency and protecting the com mercial position of the company.

Optimizing the deci sion to source internally from the external su pply chain.

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Optimizing the size of the supplier base.

Delivering controlled and predicable supply outcomes.

Applying a common graded approach to quality management in the supply chain.

Aligning sub-contracts and processes with customer requirements.

2 Traditional SCM & SCM as a information system:

There is a difference between the concept of supply chain management and the traditional concept of logistics. Logistics typically refers to activities that occur within the boundaries of a single organization and supply chains refer to networks of companies that work together and co-ordinate their actions to deliver a product to market. Also traditional logistics focuses its attention on activities such as procurement, distribution and maintenance and inventory management. Supply chain management acknowledges all of traditional logistics and also includes activities such as marketing, new product development, finance and customer service. In the wider view of supply chain thinking these additional activities are now seen as part of the work need to fulfill customer requests. Supply chain management views the supply chain and the organizations in it as a single entity. It brings a system approach to understanding and managing the different activities needed to co-ordinate the flow of products and services to best serve the ultimate customer. This systems approach provides the framework in which to best respond to business requirements that otherwise would seem to be in conflict with each other. Taken individually, different supply chain requirements often have conflicting needs. For instance the requirement of maintaining high levels of customer service calls for maintaining high levels of inventory, but then the requirement to operate efficiently calls for reducing inventory levels. It is only when these requirements are seen together as parts of larger picture that ways can be found to effectively balance their different demands. Effective supply chain management requires simultaneous improvements in both customer service levels and the internal operating efficiencies of the companies in the supply chain. Most basis level means consistently high order fill rates, high on time delivery rates and a very low rate of products returned by customers for whatever reason. Internal efficiency for organizations in a supply chain means that these organizations get an attractive rate of return on their investments in inventory and other assets and those they find ways to lower their operating and sales expenses.

3 Retail Industry Supply Chain System Overview:

General Retail Trends:

The retail industry can be defined generally as the composition of companies that sell Merchandise to customers. When studying the supply chain practices of retail industry, we study the retailers and customer relationship, which in turn drives the activities between retailers and suppliers. In retail supply chains, the network consists of many suppliers that

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serve multiple retailers and retailers that are served by multiple suppliers. Between the suppliers and the retailers, wholesalers and other intermediaries often reside and provide the link between retailers and suppliers. There have been changes in the dynamics of the relationship between these three key players in the supply chain due to the fourth major player that drives these changes, the retail customer. Through their spending habits, retail consumers drive the level customer service that is expected. The strategy behind each retailer is focused on being able to fulfill that demanded service. Because of recent changes in consumer spending, the focus in the retail supply chain has shifted from handling customer demands through inventory levels to handling customer demand through changes in trading partner relationship and the use of technology in their supply chain. Griffith and Krampf (1997) address some of the trends that are driving these changes in the retail industry supply chain by looking at the changes in the way consumers shop. For example, consumers are now shopping in retail stores that appeal to consumer convenience and price sensitivity. The time that consumers spend in certain stores is declining and therefore, retailers are realizing that on-shelf availability is becoming more critical. Due to the change in consumer spending habits, on which we will elaborate further in this thesis, general merchandise stores that include a wide range of product segments are emerging as revenue leaders in the retail industry. These general or mass merchandisers are creating retail stores that provide all merchandise that a consumer needs in one convenient location. Consumer habits changes are contributing factor driving retail supply chain changes.

The diagram below depicts the structure of the internet retail supply chain.

chain changes. The diagram below depicts the structure of the internet retail supply chain. INCON –

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Figure 2: Internet Retailing

Internet Retail Supply Chain Overview:

The internet retail industry is a segment of the overall retail industry. The industry consists of existing retailers with physical stores that also sell products over the internet, and companies that do not operate retail stores and utilize only a website to sell products to customers. The retailers that primarily sell product through their network of physical store locations are commonly referred to as “brick-and-mortar” in retail literature. If these traditional retailers sell through an online channel, that activity is known as “click-and- mortar” or ”pure-play” internet retailers are companies that only sell through product through an online channel.

The lack of retail stores in pure-play environments requires a supply chain that can service the needs of customers through a combination of shipping from distribution centers and sourcing from partners. Retail industry- conceptual review:

The analysis to uncover the key components of an excellent supply chain in the retail industry is multi-faceted. The definition of an excellent supply chain differs by company and is highly dependent on a particular company’s business strategy. The opening portion of this conceptual review focused on the importance of strategy in evaluating a supply chain, including focus and fit on the activities that differentiate a company from competitors. Additionally when looking at supply practices, opportunities for innovation should be addressed as well as opportunities for improved efficiency, these factors, in addition to understanding the functional or innovative nature of the products being sold, illustrative the ideas that will constitute an excellent supply chain that supports a retailer’s business strategy. In analyzing the retail industry and the internet retail segment, many areas are taken into account, including collaboration efforts, use of technology, supply chain design, and operational efficiency. From the analysis of the current trends in retail show that collaboration is increasing with initiatives such as collaborative planning, forecasting and replenishment (CPFR) and vendor managed inventory (VMI). Information technology has enabled these efforts and continues to drive increased communication across all parties in the supply chain. An analysis of internet retail illustrated the importance of supply chain to business survival. An analysis of network design, supply chain echelon co-ordination and various inventory and transportation tradeoffs show the complex nature of a supply chain designed to meet internet retail requirements. In summary strategic, collaboration, technology, operational innovation and efficiency are all essential to maintaining an excellent supply chain in the retail industry.

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4. Outline of the problem:

Supply chain process was not proper.

Vendor rating needed some improvements.

Supply chain needed more integration and collaboration.

Supply chain needed help of IT enabled system so that its demand forecasting and capacity planning.

5. Objectives:-

To study supply chain management system at Big Bazaar Pune.

To study vendor rating system at Big Bazaar Pune.

6. Theorotical background

Supply Chain Elements:

Strategic

Supply chain design

Resource

acquisition

Long term planning (1+ year)

Resource acquisition Long term planning (1+ year) Tactical Production/ distribution planning Resource

Tactical

Production/

distribution

planning

Resource Allocation

Medium term planning (Quaterly/ monthly)

Allocation Medium term planning (Quaterly/ monthly) Operational Shipment sheduling Resource sheduling

Operational

Shipment

sheduling

Resource

sheduling

Short term planning (Weekly/ daily)

Resource sheduling Short term planning (Weekly/ daily) Strategic: At this level, company management will be looking

Strategic:

At this level, company management will be looking to high level strategic decisions concerning the whole organization, such as the size and location of manufacturing sites, partnerships with suppliers, products to be manufactured and sales markets.

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Strategic activities include building relationships with suppliers and customers, and integrating information technology (IT) within the supply chain. Tactical:

Tactical decisions focus on adopting measures that will produce cost benefits such as using industry best practices, developing a purchasing strategy with favored suppliers, working with logistics companies to develop cost effect transportation and developing warehouse strategies to reduce the cost of storing inventory. Studying competitors and making decisions regarding production and delivery would fall under the tactical category. Operational:

Decisions at this level are made each day in businesses that affect how the products move along the supply chain. Operational decisions involve making schedule changes to production, purchasing agreements with suppliers, taking orders from customers and moving products in the warehouse. The operational category includes the daily management of the supply chain, including the making of production schedules. Macro Processes in Big Bazaar supply chain:

1. C.R.M. – Customer Relationship Management

Market

Price

Sell

2. I.S.C.M. – Internal Supply Chain Management

Strategic Planning Demand Planning

Supply Planning Fulfillment Field Service

3. S.R.M.- Supplier Relationship Management

Source Negotiate Buy Design Collaboration Supply Collaboration

Operational Transactions:

Few operational transactions are listed below.

Create excel sheet for PO.

Check the various registers.

Updating the received materials in register and system.

Sending daily received PO, transporter details, Suppliers details to HO.

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Checking home brands details.

Cross checking the PO and supplied quantities.

Sending goods for in warding.

Checking the incoming goods (QTY, damages, No. of boxes, LR.NO).

Checking security activities related supply chain (Register, Gate pass, challans other, and documents).

Generating barcode’s.

Stock entry.

Goods Received Process: (Figure 3)

Security Checked

entry. Goods Received Process: (Figure 3) Security Checked LR No is verified Bill of material checked

LR No is verified

Process: (Figure 3) Security Checked LR No is verified Bill of material checked No of box

Bill of material checked

Security Checked LR No is verified Bill of material checked No of box checked opened and

No of box checked opened and closed

Bill of material checked No of box checked opened and closed Verified and Checked Received Document

Verified and Checked

No of box checked opened and closed Verified and Checked Received Document required for verification: (Figure

Received

Document required for verification: (Figure 4)

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FSC-POD Copy

in Management and IT" E-ISSN-2320-0065 FSC-POD Copy Consign Copy Tax Invoice (Duplicate for Transporter) Tax

Consign Copy

and IT" E-ISSN-2320-0065 FSC-POD Copy Consign Copy Tax Invoice (Duplicate for Transporter) Tax Invoice

Tax Invoice

(Duplicate for Transporter)

Copy Consign Copy Tax Invoice (Duplicate for Transporter) Tax Invoice (octroi on MRP) Tax Invoice (octroi

Tax Invoice (octroi on MRP)

(Duplicate for Transporter) Tax Invoice (octroi on MRP) Tax Invoice (octroi on MRP) Tax Invoice (Original

Tax Invoice (octroi on MRP)

Tax Invoice (octroi on MRP) Tax Invoice (octroi on MRP) Tax Invoice (Original Brand Cost) At

Tax Invoice (Original Brand Cost)

At time of deliver required document: (Figure 5)

List of Transporters

LR (Transporting)

document: (Figure 5) List of Transporters LR (Transporting) Gate pass(Out /In QTY checked DC (Article Description)

Gate pass(Out /In QTY checked

Transporters LR (Transporting) Gate pass(Out /In QTY checked DC (Article Description) Acc. No, MRP, Cost, QTY,

DC (Article Description)

Acc. No, MRP, Cost, QTY, Amt (IRN)

 

Local Transporters

 

Safe Express

Future Logistics

Varanee

Guru

Deluxe

Trans Sptorn

Star Logistic

Gold

AFL

K.P.Transporter

Asian

Sharma transport

I P L Express

DNX

Goldmine

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Speed

Redex

Supreme X

Logic Express

JDT

Tarakom

 

Royal

ERC

New DB

Trackon

SRC

Rematrix

Aviation

DZD

TCT

On. Dot

Prajakta Transport

VXP

V transport

J-Shai

 

National Transporters

 

Gati

Om logistics Pvt. Ltd

VRL

Fast train

TCI Express

Patel Roadways

 

Global Transporters

 

UPS logistics

Blue Dart

DTDC

The professional couriers

   

Figure 6: List of Transporters

7. Decision Making and Supply Chain:

To maximize the value added along the supply chain, it is necessary to make decisions and evaluate their potential impact. In each link of the chain, decision must be made on how to move material, information and money so as to most increase the value. Supply chain management methods are even affecting nonmanufacturing operation. Adaptive Supply chain management software is available for decision support for both primary and secondary activities including optimization of manufacturing processes, scheduling, inventory management and procurement. Special DSS/BI/BA models can determine the costs and benefits of investing in information technologies in an attempt to create value along the supply chain. 8.Data Analysis:

While doing survey it was observed that each and every activity is dependent on previous activity. For strong supply chain and best performance it is important to have an excellent communication and co-ordination. The higher the supply chain profitability or surplus the more successful is the supply chain. The supply chain profitability is the difference between the amount paid by consumer to purchase the product and the cost incurred by organization to produce and supply the product to customer at right time. There is only one source of revenue i.e. customer. Appropriate management of the flow of information, product for funds is a key so as to keep tack on order status. Vendor rating analysis:

As per data obtained from the vendor rating table the (pilot)data is interpreted as per following for each vendor and for overall vendor creation and retention:

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Supplier 1: Remika apparels Pvt. Ltd.: As the composite rating after computing quality rating, quantity rating, price rating, delivery rating and service rating is 89% which is good. But the supplier can improve on their ratings by increasing the quality rating and delivery rating. Supplier 2: Bio merchandising: As the composite rating after computing quality rating, quantity rating, price rating, delivery rating and service rating is 75% which is satisfactory. But the supplier needs to improve to continue working with big bazaar. They can improve their score by improving their product quality mainly. Supplier 3: Titan Industries: As the composite rating after computing quality rating, quantity rating, price rating, delivery rating and service rating is 98% which is very good. Supplier needs to maintain their standards. Supplier 4: Arvind Lifestyle ltd.: As the composite rating after computing quality rating, quantity rating, price rating, delivery rating and service rating is 67% which is satisfactory. But the supplier needs to improve to continue working with big bazaar. They can improve their score by improving their product quality, quantity and delivering goods on scheduled time also the service they are providing. Supplier 5: Triumph: As the composite rating after computing quality rating, quantity rating, price rating, delivery rating and service rating is 55% which is unsatisfactory. The supplier needs to be warned as he is not meeting the company expectation. Supplier needs to mainly work on the product quality and the price of the product. If still the score does not improve in next few orders company might remove the vendor. Supplier 6: Drop clothing Co.: As the composite rating after computing quality rating, quantity rating, price rating, delivery rating and service rating is 65% which is satisfactory. But the supplier mainly needs to improve to continue working with big bazaar. Supplier needs to improve on the quality of the product and the services they offer with them. Supplier 7: Jockey: As the composite rating after computing quality rating, quantity rating, price rating, delivery rating and service rating is 79% which is satisfactory. But the supplier needs to improve to continue working with big bazaar. They can improve their score by improving their product quality mainly. Supplier 8: Indus League: As the composite rating after computing quality rating, quantity rating, price rating, delivery rating and service rating is 85% which is good. But the supplier can improve on their ratings by improving the services provided by them. Supplier 9: Creative Education: As the composite rating after computing quality rating, quantity rating, price rating, delivery rating and service rating is 80% which is good. But the supplier can improve on their ratings by improving the services provided by them.

9. Findings:

Lack of Knowledge of adaptive SCM:

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Some of the members of the functional team don’t have the complete knowledge of the SAP modules hence there are some mistakes made during the updating of the records.

Lack of Co – ordination:

There is lack of co-ordination between the marketing, accounts, and HR teams. This results in improper demand forecasting or lack of employees if there is no co- ordination between the store manager and the HR manager.

Improper documentation handling:

The documents get misplaced while documentation. Some materials are not entered in the registers / systems due to documents misplaced during the process of documentation. Few materials don’t get ordered as the documents were not received by the procurement team.

Improper material handling:

Some of the materials get damaged due to improper handling i.e. the materials are dumped from the trucks or containers. The product like beverages gets damaged during transportation as they are not kept properly.

Effective capacity planning. Sometime the effective capacity planning fails as the demand of a particular product is not determined properly which results in customer returning back without getting the products which leads to customer dissatisfaction which may lead to a customer

10. Conclusion:

The Big Bazaar distribution centers act as warehouses alone, unlike Wal-Mart where these centers act as developers of suppliers.

There is no pull mechanism in order generation and it depends largely on the decisions by individuals category managers on weekly basis whereas in Wal-Mart, it is a daily pull mechanism based on store consumptions.

More collaborative timely product development through enhanced communication between functional departments, suppliers, customers and even regulatory agencies.

Reduction of channel inventory and product obsolescence owning to closer linkage across the supply chain and better insight into demand signals to drive product schedules and ultimately achieve build to order capability

Reduction in communication costs and customer support costs with more interactive tailored support capability inherent with internet technologies.

New channels capabilities to reach different customers segments and further exploit current markets.

Ability to enhance traditional products and customer relationships through customizations driven by internet connectivity and interactivity thus adaptability.

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References:-

Books:

“Supply Chain Management” by V.V.Sople, Pearson Education Ltd.

“ Retailing Management” by Swapna Pradhan, TMG , 2009

“Supply chain & Logistic Management”. By Donald J. Bowersox, David J. Closs & M. Bixby Copper

It Happened In India (11' Edition), Rupa Publications. by Kishore Biyani (2007),

Anthony Robbins (1992),‘Awaken The Giant Within You’ (I Edition), Simon &Schuster UK Ltd.

Robbins, Stephen P. (2004), Organizational Behavior (OW Edition),Prentice-Hall India

Griffith, David A. and Robert F. Krampf (1997), “Emerging Trends in US Retailing,”Long RangePlanning: International Journal of Strategic Managemen 30(6), 847852

Web References:

www.scopeknowledge.com

www.en.wikipedia.org/wiki/Supply_chain_management

http://www.bigbazaar.com/

*****

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