INTERNSHIP REPORT

ON
COST OPTIMISATION IN RETAIL

Submitted in partial fulfillment of the requirement of

Summer Internship Programme

By
Sujith.V.S

Under the guidance of:

Sivakami Karthik
Deputy Manager – Finance
Reliance Retail Ltd
Chennai
 Declaration

I hereby declare that the project report entitled “Cost Optimisation in Retail” submitted
for the PGPM Diploma is my original work, undertaken at Reliance Retail Ltd

Place:
Signature

Date:
Executive Summary:
The operational cost can be classified as follows,

• Fixed cost, Variable cost, Semi variable cost (or)

• Relevant cost, Sunk/Historical cost (or)

• Controllable cost, Non controllable cost etc.

Since classifying cost as controllable and non controllable will help in optimizing the
expenses, thereby increasing the net earnings, I had analyzed the cost in this fashion.

Non controllable costs are the cost which cannot be influenced by the involvement of
management in normal course of business.

Controllable costs are the cost which can be controlled by the involvement of
management and helps in cost optimization. Hence controllable cost were taken for
analysis. The major components of controllable costs in retail are consumables and
utilities. Hence these heads were taken for analysis.
 Acknowledgement
Without a proper combination of inspection and perspiration, it’s not easy to achieve
anything. There is always a sense of gratitude, which we express to others for the help
and the needy services they render during the different phases of our lives. I too would
like to do it as I really wish to express my gratitude toward all those who have been
helpful to me directly or indirectly during the development of this project.
First of all I wish to express my profound gratitude and sincere
thanks to Mr. R.S. Ashok Kumar(Zonal Finance Head) Reliance Retail Chennai, for
giving me an opportunity to do the project at Reliance Retail.
I would like to thank Mrs. Sivakami Karthik (Deputy Manager-
Finance) Reliance Retail at Chennai. I am thankful to her for her encouraging and
valuable support. Working under her was an extremely knowledgeable and enriching
experience for me. I am very thankful to her for all the value addition and enhancement
done to me. I would like to thank my mentor Prof. Harihara Subramanian who was
always there to help and guide me when I needed help.

Sujith.
V.S
Introduction:

Retailing is the combination of activities involved

in selling or renting consumer goods and services directly to ultimate consumers for
their personal or household use. In addition to selling, retailing includes such diverse
activities as, buying, advertising, data processing, maintaining inventory etc. The Indian
Retail industry is witnessing a huge revamping exercise as traditional markets make
way for new formats such as Departmental stores, hypermarkets, supermarkets and
specialty stores. The Food Retail Industry in India dominates the shopping basket. The
Mobile phone Retail Industry in India is already a US$ 16.7 billion business, growing at
over 20 per cent per year. The Indian Retail industry which is the fifth largest in the
world is expected to go up to US$ 833 billion by the year 2013.The organised retail will
have a market share of 14-18 percent by 2015.The Indian organised retail industry is
expected to grow to $427 billion in 2010 and $637 billion in 2015. . The future of the
India Retail Industry looks promising with the growing of the market, with the
government policies becoming more favorable and the emerging technologies
facilitating operations.

The importance of Retailing:

• Organized retailing in India is expected to grow to $427 billion in 2010 and 637 $
billion in 2015.
• Retailing has a tremendous impact on the economy. It is expected to have share of
22% in the gdp by 2010. As a major source of employment retailing offers a wide
range of career opportunities including; store management, merchandising and
owning a retail business.
• The consumers will have access to a wide variety of goods and services at a single
place. The width and depth of assortment depends on the individual Retailer’s
strategy.
• They pull the consumers through advertising, displays & signs, sales personnel etc.
 • Retailing in a way, is the final stage in marketing channels for consumer products.
Retailers provide the vital link between producers and ultimate consumers.

Retail Strategy and Structure:

• Successful retail operations depend largely on two main dimensions: margin and
turnover. How far a retail enterprise can reach in margin and turnover depends
essentially on the type of business (product lines) and the style and scale of the
operations. In addition the turnover also depends upon the professional
competence of the enterprise.
• In a given business two retail companies may choose two different margin levels,
and yet both may be successful, provided the strategy and style of management are
appropriate.

Margin Turnover Model:

• Ronald R. Gist "Suggested a conceptual frame work, using margin and turnover,
for understanding the retail structure and evolving a retail strategy."
• Margin is defined as the amount of gross profit made when an item is sold. This is
a diagrammatic representation of the frame work and can be applied to almost any
type of retail business.
• Depending upon the, combination of the two parameters, a retail business will fall
into one of the four quadrants. For instance L-L signifies a position which is low
on both margin and turnover; H-L indicates high margin and low turnover, L-H
indicates low margin and high turnover and H-H indicates high margin and high
turnover..

Low Margin High Turnover Stores :

• Such an operation assumes that low price is the most significant determinant of
customer patronage. The stores in this category price their products below the
market level. Marketing communication focuses mainly on price. They provide
very few services; if any, and they normally entail an extra charge whenever they
do. The merchandise in these stores are generally pre-sold or self sold. This means
that the customers buy the product, rather than the store selling them.

• These stores are typically located in isolated locations and usually stock a wide.
Range of fast moving goods in several merchandise lines. The inventory consists
of well known brands for which a consumer pull is created by the manufacturer
through national advertising. Local promotion focuses on low price. Wal-mart in
the United States is an example and Pantaloon Chain or Subhiksha are Indian
examples of such stores.

High Margin Low Turnover Stores:

• This operation is based on the premise that distinctive merchandise, service and
sales approach are the most important factors for attracting customers. Stores in
this category price their products higher than those in the market, but not
necessarily higher than those in similar outlets. The focus in marketing
communication is on product quality and uniqueness.

• Merchandise is primarily sold in store and not pre-sold. These stores provide a
large number of services and sell selected categories of products. They do not
stock national brands which are nationally advertised. Typically, a store in this
category is located in a down town area or a major shopping center. Sales depend
largely on salesmanship and image of the outlet.

High Margin High Turnover Stores:

These stores generally stock a narrow line of products with turnover of reasonably high
frequency. They could be situated in a non commercial area but not too far from a major
thoroughfare. Their location advantage allows them to charge a higher price. High over
head costs and, low volumes also necessitate a higher price.

Low margin Low Turnover Stores:

Retail enterprises in this category are pushed to maintain low margins because of
price wars. Compounding this problem is the low volume of sales, which is
probably a result of poor management, unsuitable location etc. such businesses,
normally get wiped out over a period of time.

RETAILING FORMATS (CLASSIFYING RETAIL

FIRMS)
Regardless of the particular type of retailer (such as a supermarket or a department
store), retailers can be categorized by (a) Ownership, (b) Store strategy mix, and
(c) Non store operations.

Types of ownership:
A retail business like any other type of business,
can be owned by a sole proprietor, partners or a corporation. A majority of retail
business in India are sole proprietorships and partnerships.

Independent Retailer:
In this format the manager has direct contact with
the customers and can quickly respond to their needs. Small retailers are also very
flexible and can react quickly to market changes and customer needs. They aren’t
bound by bureaucracies inherent in large retail organizations. This requires low
investment and little technical knowledge and hence faces a high degree of
competition. Roughly 98% of all the retail businesses in India are managed and run
by independents, including barber shops, drycleaners, furniture stores, bookshops,
LPG Gas Agencies and neighborhood stores.

Corporate Retail Chains:

 A Retail chain is a company operating
multiple retail units under common ownership and is usually has centralized
decision making for defining and implementing its strategy. Retail chains can
range from a drug store with two stores to retailers with over 1,000 stores such as
Wal-Mart, Target. The corporate chains can more effectively negotiate lower
prices for merchandise and advertising due to their larger size. They also have a
broader management base, with people who specialize in specific retail activities.
 Franchising:
Franchising is a contractual agreement a
franchisor and a franchisee that allows the franchisee to operate a retail outlet using a name and
format developed and supported by the franchisor. In frachise contract, the franchisee pays a
lump sum plus royalty on all sales for the right to operate a store in a specific location. The
franchise ownership format attempts to combine advantages of owner managed businesses with
efficiencies of centralized decision making in chain store operations.

Cooperatives:
A retail cooperative is a group of independent
retailers that have combined their financial resources and their expertise in order to
effectively control their wholesaling needs. They share purchases, storage, shopping
facilities, advertising planning and other functions. The individual retailers retain their
independence, but agree on broad common policies. Amul is a typical example of a
cooperative in India.

Store Strategy Mix:

Retailers can be classified by retail store
strategy mix, which is an integrated combination of hours, location, assortment, service,
advertising, and prices etc. The various categories are:

Convenience Store:
Is generally a well situated, food oriented store
with long operating house and a limited number of items. Consumers use a
convenience store; for fill in items such as bread, milk, eggs, chocolates and candy
etc.
Super markets:
Is a diversified store which sells a broad range of
food and non food items. A supermarket typically carries small house hold
appliances, some apparel items, bakery, film developing, jams, pickles, books,
audio/video CD's etc. The Govt. run Super bazaar and Kendriya Bhandar in Delhi
are good examples of a super market. Similarly in Mumbai, we have Apna Bazar
and Sahakari Bhandar.

Department Stores:
A department store usually sells a general line
of apparel for the family, household linens, home furnishings and appliances.
Large format apparel department stores include Pantaloon, Ebony and Pyramid.
Others in this category are: Shoppers Stop and Westside.

Speciality Store:
Concentrates on the sale of a single line of
products or services, such as Audio equipment, Jewellery, Beauty and Health Care,
etc. Consumers are not confronted with racks of unrelated merchandise. Successful
speciality stores in India include, Music World for audio needs, Tanishq for
jewellery and McDonalds, Pizza Hut and Nirula's for food services.

Hyper Markets:
Is a special kind of combination store which
integrates an economy super market with a discount department store. A hyper
market generally has an ambience which attracts the family as whole. Pantaloon
Retail India Ltd. (PRIL) through its hypermarket "Big Bazar", offers products at
prices which are 25% - 30% lower than the market price.
Non Store Retailing:
In non store retailing, customers do not go to a
store to buy. This type of retailing is growing very fast. Among the reasons are;
the ability to buy merchandise not available in local stores, the increasing number
of women workers, and the presence of unskilled retail workers who cannot
provide information to help shoppers make buying decisions.
The major type of non store retailing are

(A)In Home Retailing:

Where, a sales transaction takes place in a
home setting - including door-door selling. It gives the sales person an opportunity
to demonstrate products in a very personal manner. He/She has the prospect's
attention and there are fewer distractions as compared to a store setting. Examples
of in home retailing include, Eureka Forbes vaccum cleaners and water filters.

(B)Telesales/Telephone Retailing:
This involves contact between the prospect
and the retailer over the phone, for the purpose of making a sale or purchase. A
large number of mobile phone service providers use this method. Other examples
are private insurance companies, and credit companies etc.

(C)Catalog Retailing:
This is a type of non store retailing in which
the retailers offers the merchandise in a catalogue, which includes ordering
instructions and customer orders by mail. The basic attraction for shoppers is
convenience. The advantages to the retailers include lover operating costs, lower
rents, smaller sales staff and absence of shop lifting. This trend is catching up fast
in India. Burlington's catalogue shopping was quite popular in recent times. Some
multi level marketing companies like Oriflame also resort to catalogue retailing.

(D)Direct Response Retailing:

Here the marketers advertise these products/ services in magazines, newspapers, radio
and/or television offering an address or telephone number so that consumers can write or
call to place an order. It is also sometimes referred to as "Direct response advertising." The
availability of credit cards and toll free numbers stimulate direct response by telephone.
The goal is to induce the customer to make an immediate and direct response to the
advertisement to "order now." Telebrands is a classic example of direct response retailing.
Times shopping India is another example.

(E)Automatic Vending:

Although in a very nascent stage in India, is the ultimate in non personal, non store
retailing. Products are sold directly to customers/buyers from machines. These machines
dispense products which enable customers to buy after closing hours. ATM's dispensing
cash at odd hours represent this form of non store retailing. Apart from all the
multinational banks, a large number of Indian banks also provide ATM services,
countrywide.

(F)Electronic Retailing:

In this format the retailers communicate with customers and offer products and services
for sale over the internet. The rapid diffusion of internet access and usage and the
perceived low cost entry stimulated the creation of large number entrepreneurial electronic
ventures. These electronic retailers ranged in size from Amazon.com, with over $3 billion
annual sales, to niche retailers such as Dilmah’s which sells teas from the plantations in
the high lands of Srilanka. While the electronic retail innovators had superior skills in
using the new technology, they lacked retailing expertise and a deep understanding of
customer needs.
The Wheel Of Retailing:

Is a hypothesis that attempts to explain the emergence of new retailing institutions

and their eventual decline and replacement by newer retailing institutions? Like
products retailing institutions also have a life cycle.

According to this theory new retailers enter the market as, low margin, low price,
low status institutions. The cycle begins with retailers attracting customers by
offering low price and low service. Over a period of time these retailers want to
expand their markets and begin to stock more merchandise, provide more services,
and open more convenient locations. This trading up process increases the
retailers’ costs and prices, creating opportunities for new low price retailers to
enter the market.

The evolution of the department store illustrates the "wheel of retailing" theory. In
its entry phase, the department store was a low cost-low service venture. With time
it moved up into the trading-up phase. It upgraded its facilities, stock selection,
advertising and service. The same department store then moves into the
vulnerability phase, because it becomes vulnerable to low cost/low service
formats, such as full line discount stores and category specialists. While the wheel
hypothesis has a great deal of intuitive appeal and has been borne out in general by
many studies of retail development, it only reflects a pattern. It is not a sure
indicator of every change, nor was it ever intended to describe the development of
every individual retailer.
Retailing Strategy:

(1).Target Market:

Retail market can be defined as a group of consumers with similar needs and a
group of retailers using a similar retail format to satisfy those consumer needs. Each
format offers a different retail mix to the customers. Through a careful definition of target
markets, retailers can use their resources and capabilities to position themselves more
effectively and achieve differential advantage. The tremendous growth in number of
specialty stores in recent years is largely due to their ability to define precisely the type of
customers, they want to serve.

(2) Location:

Location is the critical factor in consumer selection of a store. It is also a

competitive advantage that is not easily duplicated. Factors affecting the site
include, traffic patterns, accessibility, competitors' location, availability and cost
and population shifts within the area.

(3) Human Resource Management:

Retailing is a labour intensive business. Employees play a major role in

providing services for customers and building customer loyalty. Knowledgeable
and skilled employees committed to the retailer’s objectives are critical assets that
support the success of companies
(4) Distribution and Information Systems:

Sophisticated distribution and information systems helps the retailer to

provide their customers the merchandise they want, when they want it, in the
quantities that are required, at a lower delivered cost than their competitors. For
instance merchandise sales information flows seamlessly from Wal-Mart to its
Vendors like Procter & Gamble to facilitate quick and efficient merchandise
replenishment. Wal-Mart has the largest data base in the world enabling the
company to fine tune merchandise assortment on a store-by-store, category-by-
category basis.

(5)Vendor relations:

By developing strong relations with vendors, retailers may gain exclusive

rights (1) to sell merchandise in a region,(2) to obtain special terms of purchase
that are not available to competitors who lack such relations, or(3) to receive
popular merchandise in short supply.

(6)Customer service:

Retailers also build a sustainable competitive advantage by offering

excellent customer service. Customer service is provided by retail employees- and
humans are less consistent than machines. Retailer’s that offer good customer
service instill its importance in their employees over a long period of time. Once a
retailer has earned a service reputation, it can sustain this advantage for a long
time because it’s hard for a competitor to develop a comparable reputation.
Functions performed by Retailers:
• Providing an assortment of products and services
• Breaking bulk
• Holding Inventory
• Providing services
 Reliance Company Profile

RELIANCE GROUP
The Reliance Group, founded by Dhirubhai H. Ambani (1932-2002), is India's largest
private sector enterprise, with businesses in the energy and materials value chain. Group's
annual revenues are in excess of USD 44 billion. The flagship company, Reliance
Industries Limited, is a Fortune Global 500 company and is the largest private sector
company in India.

Backward vertical integration has been the cornerstone of the evolution and growth of
Reliance. Starting with textiles in the late seventies, Reliance pursued a strategy of
backward vertical integration - in polyester, fibre intermediates, plastics, petrochemicals,
petroleum refining and oil and gas exploration and production - to be fully integrated
along the materials and energy value chain.

The Group's activities span exploration and production of oil and gas, petroleum refining
and marketing, petrochemicals (polyester, fibre intermediates, plastics and chemicals),
textiles and retail.

Reliance enjoys global leadership in its businesses. The Group exports products in excess
of USD 15 billion to more than 100 countries in the world. Major Group Companies are
Reliance Industries Limited (including main subsidiaries Reliance Petroleum Limited and
Reliance Retail Limited) and Reliance Industrial Infrastructure Limited.
 RELIANCE FRESH
APKA KUSHI HAMARA KUSHI
India’s Fortune 500 private sector giant, Reliance Industries Ltd, has, in fact, been first
off the blocks by launching its first Reliance Fresh outlets in Hyderabad. Reliance fresh is
the retail chain division of reliance industries of India which is headed by Mukesh
Ambani. Reliance has entered into this segment by opening new retail stores into almost
every metropolitan and regional area of India. The reliance fresh plans to add more stores
across different, and eventually have a pan-India footprint by year 2011. The super marts
will sell fresh fruits and vegetables, staples, groceries, fresh juice bars and dairy products
and also will sport a separate enclosure and supply-chain for non-vegetarian products.
The company also has plans to train students and housewives in customer care and
quality services for part-time jobs.

Reliance Fresh will…

• Forge strong and lasting bonds with millions of farmers and will transform the
Relationship with customers to a new level
• Offer unmatched affordability, quality, convenience, service and choice
• Offer our customers the widest range of fruit and vegetables at the best prices in
the neighborhood
• Provide for the daily needs of our customers by offering staples, grocery and
household products at great prices
• Offer consistent high quality, unbeatable freshness and great service so that our
Customers know that we can be trusted every day.
 Cost Optimisation

In all forms of Business, the ultimate aim is to make Profit. One

among the major component that influence Profit is the Operational Cost. The following
are the different heads in which the operational costs are grouped in Retail

• Staff Cost

• Rental Cost
• Consumables Cost
• Utilities Cost
• Marketing Cost
• Communication Cost
• Securities Cost
• Other Cost

In the above the Rental Cost is of Non – Controllable nature. Hence analyzing this will
not help in Cost reduction. The Staff Cost is the first major component. The Consumables
and Utilities are the other two major component of controllable cost.

Adequate Staffing is and their cost optimization are taken care by HR Department.
Hence Consumables and Utilities were taken for analysis aiming at optimizing the same,
thereby helping the management in cost reduction and profit maximization
 Analysis of Consumables

Objective:
To analyze the existing Cost Structure of consumables and to find
the optimum cost.

Need of study:
Since Consumables forms part of the major component of Controllable
cost, optimization of the same will result in profit maximization. The study focuses primarily
on the intending & consumption pattern of consumables. This will help the company to
identify the stores which spend more on consumables and also to find out an optimum
cost for these items which will help the stores to improve their profits.

Types and collection of data used:

The data collected can be classified into primary and secondary data

(1).Primary data:

The primary data can be collected by

• Observation

• Interview

This involves store visits to analyse

• How the store places an intend for an item in SAP

• The quantity they intend for each item

• The periodicity of intending
• The lead time of delivery
(2) Secondary data:

This involves the analysis of data which is already present.

The source of this data is SAP and the employees in the company. The quantity supplied
details given by DC ( The supplying site).

Primary Data Collected:

Store visits:
In the Course of collecting the information and understanding the retail
and its cost structure, I had visited 3 Stores in Chennai. The data collected from stores are
listed below,

Store name: Teynampet

Store code:2039
No. of
Quantity intend Per day
intended in s in a Reorder consumptio Lead
Item a month month level n time
Carry Bag 240kg 2 5kg 7-8kg 1 day
Bag on
Rolls 200kg 2 7-8kg 5-6kg 1 day
10
Pos Rolls 150 pieces 2 pieces 4 pieces 1 day

Other items:

• Garbage cover—Once in 2 months(25 Kg)

• A4 sheet—Monthly
• Dump note—Once in 3 months
 • Cash declaration—Monthly(3)

Reasons for wastage:

1. Carry Bags:

• Unnecessary demand from customers

• Carelessness from workers

2. Bag on Rolls:

The material used for making Bag on Rolls is very delicate and because of this the
customers will make error will tearing it.

3. Pos Rolls:
Whenever the person at the billing counter makes a wrong bill the
length of the bill will increase and the paper is wasted.

Store name:Thiruvamiyur

Store code: 2038

No. of
Quantity intend Per day
intended in s in a Reorder consumptio Lead
Item a month month level n time
Carry Bag 300kg 2 5kg 10kg 1 day
Bag on
Rolls 250kg 2 2kg 5kg 1 day
10
Pos Rolls 150 pieces 2 pieces 4 pieces 1 day

Other items:

Most of the items are purchased locally

• SEL(Stickers)—4000 inch(1 roll per week—1000 labels)

Store name:Royapettah

Store code:2051
No. of
Quantity intend Per day
intended in s in a Reorder consumptio Lead
Item a month month level n time
Carry Bag 700kg 2 25kg 20kg 1 day
Bag on
Rolls 400kg 2 25kg 14kg 1 day
15
Pos Rolls 200 pieces 2 pieces 6 pieces 1 day

Other items:

Most of the items are purchased locally. The quantity of

garbage bags purchased is 50Kg

Process of Intending:

Each store will place the indent for different

consumables to the distribution centres – DC and the distribution centre procures the
consumables from suppliers and delivers to the stores. The store will place the required
quantity for each item in SAP and they have to specify the item code, location code and
the required quantity.

Intending Analysis:
In intending analysis four things have to noted.

(1).Average consumptional analysis:

In this analysis the average consumption for each

month is analysed and the stores which have made very high and low orders are
identified.

(2) Monthly analysis of indents:

 Here the monthly indents are analysed on basis of
average consumption and store which have made very high and low indents were
identified.

(3)Indenting pattern: Here the pattern of indenting is identified in the following pattern.

• The stores which have placed orders continuously for 4

months

• The stores which have placed orders continuously for 3

months
• The stores which have placed orders continuously for 2
months
• The stores which have placed order only for 1 month

(4)Non intending pattern: Here the stores which haven’t made any order in each month is
noted.

Methodology:
The different consumables used in the store
include Carry bags, Bag on rolls; Pos rolls and rest of the things are included under other
items. Carry bags and Bag on Rolls are mainly used for carrying fruits and vegetables and
Pos rolls are used for making tickets.

For the analysis of Carry Bags and Bag Rolls

the stores are divided into different classes on the basis of PSPD (Per Store Per Day)
F&V Tonneage handled as they are mainly used to pack the Fruits and Vegetables for the
Customers. Within each class the best and worst cases are noted. For the analysis of Pos
Rolls and other items the stores are divided into different classes on the basis of PSPD
no. of tickets made and PSPD net sales respectively and within each class the best and
worst cases are noted. The intending pattern for the four months, January’10 to April’10
is analysed.
Analysis of Carry Bags:

There are 8 types of carry bags which are used in a

store. The stores are divided into 3 classes on the basis of average PSPD F&V tonneage
handled. From each class the stores with the highest and lowest consumption of carry
bags are found out.

(1). Carry bags Vs. F&V Tonneage (Kerala):

Out of 33 stores only 6 have intended for carry

bags from January to April.

Findings:

Range(AVG PSPD) Best in Clause Attention Required

6,08
Less than 0.8 tonnes 4 Thamarassery 6,077 Muvattupuzha

Between 0.8 and 1.05 6,05

tonnes 1 Palai 6,075 Vazhakkala

More than 1.05 6,05

tonnes 0 O Mall 2,539 Jawahar Nagar

(2). Carry bags Vs. F&V Tonneage(Karnataka):

Findings:

Range(AVG PSPD) Best in Clause Attention Required

214 607
Less than 1 tonnes 7 Chamarajapuram 6 Devarachikkanahalli
308 252
3 Centurey Club 4 Keshavapur

Between 1 and 2 213 279

tonnes 1 Hebbal 6 Tambuchettipalya
279 214
5 Uttarahalli 1 Vijaynagar
Between 2 and 3 212 214
tonnes 5 Kormangala I 3 Kormangala-2
212 213
6 Srinivas Nagar 4 Mathikere

Between 3 and 4 283 604

tonnes 6 New Thippasandra 9 Sarla Grand

265 213
More than 4 tonnes 6 BTM Layout 9 Whitefield

Analysis of Bag on Rolls:

There are 3
types of bag on rolls which are used in a store. The method of analysis is same as that of
carry bags.

(1).Bag rolls Vs. F&V Tonneage(Kerala):

Findings:

Range(AVG PSPD) Best in Clause Attention Required

Less than 0.4 2,54

Tonnees 3 Vendormukku 6,084 Thamarassery
3,02
0 Thodupuzha

Between 0.4 and 0.7 2,84

Tonnees 3 Kunnumangalam 2,551 Peroorkada

More than 0.7 2,30

Tonnees 9 Kalamassery 6,077 Muvattupuzha

(2).Bag Rolls Vs. F&V Tonneage(Karnataka):

Findings:

Best in Attention
Range(AVG PSPD) clause required
Store
Less than 1 tonne code Store name Store code Store name
3055 Kolhapura Circle 3015 Magadi Road
2524 Keshavapur 3048 AGS Layout
Between 1 and 2
tonnes 3053 Ullal Main Road 2128 Malleswaram-I
3086 Ombr Layout 2794 Sarakki Layout

Between 2 and 3
tonnes 2126 Srinivas Nagar 2123 Frazer Town
2145 South End 2134 Mathikere

Between 3 and 4 Sanjay Ngr

tonnes 2512 Bangalore 6049 Sarla Grand

More than 4
tonnees 2656 BTM Layout 2139 Whitefield
Analysis of Pos Rolls:
Pos rolls are the papers which are used for making tickets
(no of bills). The consumption of Pos rolls are compared against the average PSPD
tickets (no of bills) made in a store. The stores are divided into 3 classes on the basis of
average PSPD tickets made in a store and the store with the highest and least
consumption of Pos rolls are identified.

(1). Pos Rolls Vs. Tickets (Kerala):

Findings:

Range(AVG PSPD) Best in Clause Attention Required

Less than 260
tickets 4,151 Jawahar Nagar 2,547 Kumarapuram

Between 260 and

400 tickets 2,536 Pottammel 2,546 Paravoor

More than 400

tickets 6,052 East Fort 2,539 Jawahar Nagar

(2). Pos Rolls Vs. Tickets (Karnataka):

Findings:

Range(AVG PSPD) Best in Clause Attention Required

Less than 500 2,79
tickets 3050 Sunkadakatte 5 Uttarahalli
3,01
3052 Deshpande Nagar 4 New BEL Road-1

Between 500 and 2,52 2,51

1000 tickets 8 Kalidasa Road 2 Sanjay Ngr Bangalore
2,85 2,13
2 Konekunte Cross 5 Vidyaranyapura

More than 1000 6,04 2,13

tickets 9 Sarla Grand 9 White field
Analysis of Other Items:

All other such as Lables, Stickers, Tonners, etc are

included under the head other items. The stores are divided into 3 classes on the basis of
average PSPD net sales. In each class the average value of the consumables used by a
store should be compared against the average PSPD net sales in that store. The store with
the lowest ratio is taken as the best one.

(1).Other items Vs. Net Sales(Kerala):

Findings:

RANGE(AVG PSPD
SALES in Rs.) Best in Clause Attention Required

2,53
LESS THAN 50000 3 Ramanattukara 2,534 Nadakkavu

BETWEEN 50000 AND 2,53

100000 1 Beach Road 6,084 Thamarassery

2,53
MORE THAN 100000 9 Jawahar Nagar 6,077 Muvattupuzha

(2).Other items Vs. Net Sales(Karnataka):

Findings:

Range(AVG PSPD Best in Attentio

sale in Rs) clause n Required
305 305
Less than 50000 2 Deshpande Nagar 0 Sunkadakatte
305 305
5 Kolhapura Circle 3 Ullal Main Road

Between 50000 and 285 VijayNagar-2nd 214

100000 3 Stage 0 Amruthahalli
285 279
1 Versova Layout 5 Uttarahalli
 214 251
More than 100000 5 South End 5 Banaswadi Main Rd
265 302
6 Sarla Grand 5 Sahakar Nagar-02

Reasons for wastage:

1. Carry Bags:

• Unnecessary request from the customers

• For giving gifts to the customers during special occasions

• Non availability of carry bags of small sizes in the store, due to this large size
bags are wasted.

2. Bag on rolls:

• Bad quality of the material

• Tearing problems
• Customers take more no. of Carry bags

3. Pos rolls:

• Wrong bills

Recommendations:
• Carry bags of smaller size can be used for packing lesser quantity

• Different Size of Bag on rolls should be placed at appropriate place. Eg. Small
Size Bag near chilly and Ginger
• The quality of the material of Bag on rolls can be improved
• Errors in billing should be avoided to reduce the wastage of Pos rolls
 Analysis of Utilities
Objective:

To analyze the existing cost structure of utilities and to find the optimum cost

Need of study:

Since Utilities forms part of the major component of Controllable cost,

optimization of the same will result in profit maximization.

Types and collection of data used:

The data collected can be classified into primary and secondary data

(1).Primary data:

The primary data can be collected by

• Observation

• Interview

This involves store visits to analyse

• How the utility bill is claimed

• The time taken for bill payment

(2) Secondary data:

This involves the analysis of data which is already present.

The source of this data is SAP and the employees in the company. The expenses for
utilities for each store is obtained from SAP.
Primary Data Collected:

Store visits:
Three stores were visited to get details regarding the process of
utility bill claiming and expenses for diesel as a sample. The details collected are listed
below,

Store name: Teynampet

Store code:2039

1. Electricity:

• Average Per day consumption—350 units

• Time taken for the delivery of cash to a store for bill payment –6 days
• Time available for bill payment—20 days

2. Diesel:

• Per hour consumption by generator –8 litres

• Capacity of generator—100 litres

• Reorder level of diesel—10 litres

3. Equipments:

• Freezers—3

• Chillers—1

Store name:Thiruvamiyur

Store code: 2038

1. Electricity:

• Average cost in a month—Rs.20000

• Time taken for the delivery of cash to a store for bill payment –6 days

2. Diesel:

• Per hour consumption by generator –10 litres

• Capacity of generator—100 litres

• Reorder level of diesel—50 litres(the half mark in the generator)
• The quantity purchased in a month 30 litres

3. Equipments:

• Freezers—3

• Chillers—3

Store name:Royapettah

Store code:2051

1. Electricity:

• Bill payment is made monthly once

2. Diesel:

• Per hour consumption by generator –8 litres

• Capacity of generator—100 litres

• Reorder level of diesel—20 litres

Process of utility bill claiming:

The utilities include Electricity, Diesel and Water. The
expense for Electricity is claimed in the EB portal. The time taken for the store to receive
cash is 6 days. The expense for Water and Diesel are met from petty cash given to the
store.

Methodology:

The different utilities include electricity, water and

diesel. For the purpose of analysis the stores are divided into different classes based on
their area because the usage of utilities depend on the store area, within each class the
best and worst cases are noted. The EB bills from Jan’10 to June’10 are analysed.

1. Analysis of Electricity expenses(Tamil Nadu):

Findings:

Attention
Range(Store area) Best in clause required
Store Store
code Store name Store code name
Thiruvanmiyu
Less than2000 sq/ft 2043 Anna Ngr 6th 2038 r
2035 Adyar

Between 2000 and

3000 sq/ft 2577 A A Road 2165 JK Complex
2788 Chitlapakkam 2032 Ashok Ngr
2031 Anna Ngr 18th 2039 Teynampet

Between 3000 and Purasaivakka

4000 sq/ft 2629 GG Nagar 2033 m
Valasaravakk
2831 VVV Mahal 2030 am
2724 Chandran Nagar 2041 T.Ngr

Between 4000 and

5000 sq/ft 2805 Moolakulam 2034 Chrompet
2804 Avinishi Road 2046 Madipakkam
2265 Saidapet 2421 North Usman

Between 5000 and

6000 sq/ft 2840 Ram nagar 2047 Porur
2579 DOAK Nagar 2734 Pattabhiram

Between 6000 and

7000 sq/ft 2834 PN Road 2822 Perambur
 Ammapet Saradha Mettupalayam
2841 Theatre 2810 Road

Between 7000 and

8000 sq/ft 2743 Padma Theatre 2381 Sai Baba Clny

More than 8000 sq/ft 6089 Mangalam Towers 6068 Kolathur

2. Diesel(Tamil Nadu):
Diesel is used for running the generators. So the expenses for diesel
are analysed in the same manner as that of electricity expenses.

Findings:

Range(Store Best Attentio

area) in clause n required
Store
Store code Store name Store code name
Less than2000 Thiruvanmiy
sq/ft 2053 Arumbakkam 2038 ur

Between 2000
and 3000 sq/ft 2577 A A Road 2823 Avadi
Ashok
2052 Choolaimedu 2032 Ngr
Natesan
2049 Nanganallur 2037 Ngr

Between 3000 Valasaravak

and 4000 sq/ft 2629 GG Nagar 2030 kam
Purasaivakk
2829 KK Nagar 2033 am
2831 VVV Mahal 2828 Ambattur

Between 4000
and 5000 sq/ft 2747 Heber Rd 2034 Chrompet
Avinishi Medavak
2804 Road 2733 kam
North
2578 K K Nagar 2421 Usman

Beween 5000
and 6000 sq/ft 2840 Ram nagar 2047 Porur
Pattabhir
2579 DOAK Nagar 2734 am

Between 6000
and 7000 sq/ft 2834 PN Road 2822 Perambur
Ammapet
Saradha Mettupalay
2841 Theatre 2810 am Road
Between 7000 Padma Sai Baba
and 8000 sq/ft 2743 Theatre 2381 Clny

More than Mangalam

8000 sq/ft 6089 Towers 6068 Kolathur

Reason for Wastage:

• Delay from electricity office in taking EB reading

• Errors in the data entered by Store in Portal for the purpose of EB DD

• Mishandling of the DD received from Head quarters by Stores, results in
unnecessary delay and penalty

Recommendations:
• The space in freezers and chillers can be used efficiently

• The generators can be serviced at appropriate periods to improve their efficiency

• Proper care can be exercised in Portal Claims made and handling the DD’s
received by Store Person