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Subhiksha Case Study Solutions

1. What were the major decisions which Subhiksha made regarding various drivers
of supply chain management?

Ans. The various drivers of supply chain management are:

a. Inventory
b. Facilities
c. Transportation
d. Information
e. Sourcing
f. Pricing

The major decisions which Subhiksha made in regard to the above mentioned
Supply Chain Management are as follows:

a. Inventory – “Subhiksha had maintained their minimum inventory at a static level


throughout the month. Their inventory for mobiles and grocery were close to zero.
It had huge inventory for FMCG products that had varying service levels. This
increased their overhead costs. Subhiksha had huge warehouses functioning on the
hub & spoke model storing excess inventory & increasing expenses for the
company.”
b. Facilities - Subhiksha had worked on the un-planned expansion and opened its
stores in large number of locations. Subhiksha tried to be the 1 st organized retail
stores across India. Most of the stores of Subhiksha were in the residential areas.
Smaller stores were located to reach closer to the consumer.
c. Transportation – “As the stores were opened in large numbers, the transportation
of the goods was very costly. Transportation was sourced to a third party who had
minimum commitment & extra Rs./km clause.”
d. Information – Subhiksha did not work any data analysis for formulating its
competitive strategy,
e. Sourcing – Subhiksha used to outsource the transportation services which were
low in commitment and extra for expenses were incurred for an extra kilometer.
f. Pricing – Pricing strategy adopted was “Everyday Low Pricing (ELDP)” Strategy
due to which 8%-10% discount was offered in the stores. Pricing was done to
target the middle class and lower middle-class strata of the society.

These were decisions taken by Subhiksha in relation to the drivers of Supply Chain
Management.

2. Many decisions which Subhiksha took w.r.t. drivers did not align its competitive
strategy with supply chain strategy i.e. strategic fit was not achieved. In your
view, what was wrong with many of Subhiksha’s decisions regarding different
drivers of Supply Chain Management? Critique the same.

Ans. The wrong decisions which were made by Subhiksha regarding different drivers of
Supply Chain Management are as follows:

a. Inventory – Subhiksha had adopted a poor inventory management strategy. They


have adopted the hub and spoke model and had large warehouses where they
stored large inventory. This led them to incurring huge storage cost.
b. Transportation – Subhiksha tried to be the first organized retail store in almost
all cities to take the 1st mover advantage. So they opened large number of stores,
which increased the transportation costs. They also made outsourced the
transportation which were less committed and charged extra Rs. Per kilometers.
c. Information – Subhiksha did not work on any data analysis or any learnt any
ways strategic ways to expand their operations like Walmart.
d. Sourcing – Subhiksha outsourced the transportation facility which made their
transportation cost high. So, increase in transportation cost caused an increase in
operational cost.
e. Over Expenditure on Advertising--Subhiksha Trading Services has come under
fire from television channels for not clearing advertising dues that run around RS
8 crore.”
f. Over Expenditure on Wages and Rent- Subhiksha is believed to owe Rs 35
crore against wages and Rs 20 crore against lease rents. The company, according
to the report, is also carrying a debt of Rs 700 crore at an average interest cost of
12% annum.”
g. Expansion of Stores without adequate system control and IT support
Expansion of stores without adequate system control and IT support. That is why
there was a huge Audit and abnormal losses in the system. And when they have
started implement ion of SAP the time has gone for survival of Subhiksha”
3. Give your recommendations i.e. what decisions Subhiksha could have taken
w.r.t. to its supply chain drivers to avoid losses?

Ans. The decisions that Subhiksha could have taken with respect to its supply chain
drivers to avoid losses are follows:

a. Inventory – In order to manage inventory, Subhiksha could have used the


Vendor-managed Inventory Model like Walmart. In this model, inventory is
managed by the supplier. The supplier sends the additional supply whenever it
is needed by looking at the inventory level.
b. Transportation – For transportation, Subhiksha could have made
arrangements for vertically integrating into the transportation and saved a lot
of money. They could have also made the use of Cross Docking systems for
seamless flow goods from one end to the other end.
c. Information – For capturing information, Subhiksha could have made use of
Point of Sale Capturing of Data (POS). They could have also made use of data
and analysis for getting the view of the internal and external customers.
d. Sourcing – They could have rejected the decision of outsourcing the
transportation and saved a lot of money. They would have made vertical
integration for transportation services.