admin
September 14, 2006
admin
September 14, 2006
When I was contacted for an article on supply chain management, for publication towards the end of 2002, two topics came to mind. One of them was a good one to begin a year with, and could form the basis of a “new year resolution” article. The other topic forms the basis of this article.
Just as you would introspect about and evaluate a number of other things at the end of the “old” year, how about evaluating your supply chain? Admittedly, it takes a little more time than the six days between Christmas and New Year, but we can certainly try to lay the foundation here. Remember, you cannot hope to improve what you cannot measure, and since the buzzword is supply chain improvement / optimisation / effectiveness, we do need to look at the measures as well.
Traditional Measures Will Not Get You There
In their efforts to improve profitability or just to sustain the businesses, most companies face a dichotomy in satisfying each customer’s needs and in keeping costs under control. In this context supply chain management is mainly seen as a means to contain costs. Thus, the traditional key measure many managers apply to effective supply chain management is the cost of their supply chain operations – the lower the cost, the better the supply chain looks to them.
However, even the most hard-nosed manager will acknowledge that it is virtually impossible to do this on a sustained basis – cutting “fat” too deeply can lead you to cutting muscle – similarly profitability, market positioning, competitive advantage can be whittled away if supply chain management only focuses on cutting costs.
Even if you just focus on costs, what costs will best indicate supply chain effectiveness? The cost of inbound and outbound logistics? How about the costs of inventory carried in the various distribution centres? What about work-in-progress? While we are looking at costs, let us not forget the other costs associated with sourcing, and distribution, including manpower costs which do not get covered elsewhere. And finally, if goods hit the market late due to a poor supply chain performance, discounts and markdowns need to be considered as well in the costs incurred by the supply chain. So the thinking that cost is a straightforward measure is, in itself, an incorrect assumption – if you think so, you are probably over-simplifying or under-estimating the costs involved.
Let us then look what other measures might be available. In a previous article I mentioned the need to integrate supply chain management with the company’s business strategy, rather than treating it as a back-office function with dirty fingernails and greasy elbows. In my view effective supply chain management must work backwards from the customer needs in mind. Adopting this approach can enable companies to add financial and business value not only in the long term but sometimes immediately.
Once you look at supply chain management this way, as emanating from customer needs and being integrated into every other function of the business, you begin to realise that there needs to be another way to measure its success as well as taking the key decisions related to supply chains: location, production, inventory and transportation .
Time and space will not permit me to detail the various methodologies, but I believe it is worthwhile highlighting one as the most comprehensive, if not complete, method. Even within this there are several detailed layers, which can only be briefly touched upon here.
“From Your Supplier’s Supplier to Your Customer’s Customer”
The Supply-Chain Council’s Supply Chain Operations Reference (SCOR) model is a method of benchmarking and measuring improvements in supply chain performance. The Supply-Chain Council was formed in 1996-1997 as a grassroots initiative by individuals representing companies including AMR Research, Bayer, Compaq Computer, Pittiglio Rabin Todd & McGrath (PRTM), Procter & Gamble, Lockheed Martin, Nortel, Rockwell Semiconductor, Texas Instruments etc.
SCOR, now in its fifth version, is a cross-industry reference model that contains standard process definitions, standard terminology, standard metrics, supply-chain best practices, and enabling information technology. The SCOR model defines common supply chain management process, and matches them against “best practices”. The model was designed to enable companies to communicate, compare and learn from competitors and companies both within and outside of their industry.
SCOR includes all customer interactions from order entry through paid invoice, all product transactions (whether physical or service) and all market interactions from understanding demand to fulfilling it at each individual order level.
The model works primarily with a three-level pyramid.
admin
September 12, 2006
By Justine Doody
The Indian call centre has become an international cliché. Its employees are young, educated, English-speaking and compared with their compatriots, well-off – and their disposable income, along with that of the rest of India’s fast-growing middle class, is driving extraordinary growth in the country’s consumer goods market. Retail sales in India were worth US$455 billion in 2008, making up 38% of the country’s GDP, which leaves plenty of room for growth when compared with developed markets, and that growth is well under way: in spite of recession troubles in 2008, the retail market grew by an annual average of 11.4% valued in US dollars between 2004 and 2008.
The people responsible for this boom are a new breed in India. Liberalisation of India’s economy in 1991 gave rise to the economic success story that the world has marvelled at – and as the economy grew, a new middle class grew up alongside. The Indian middle class has more than tripled in size in the last 20 years, and today numbers between 150 and 250 million people. And like the population as a whole, the middle class skews young: around half of India’s population is below 30 years of age.
Thinking global, buying local
Raised on Western TV and media, many of them English-speaking, these young up-and-comers should make natural consumers of Western brands. But Synovate’s research shows that instead of aspiring to owning the latest international must-haves, India’s consumers are happy with their home-grown products.
In a Synovate survey, 68% agreed that locally manufactured brands are just as good as international brands, with only 13% thinking that international brands were significantly better than local brands. And for these consumers, buying Indian is not just a matter of quality comparison – 56% of those surveyed said that if a local and international brand were of equal quality and price, they would prefer to take home the local brand. Given the choice of equally good products, only 27% would favour international brands.
It wasn’t always so. Between the exit of most multinationals during India’s self-sufficiency drive in the 1960s and their return after 1991, people looked at Western brands with covetous eyes. Synovate India’s Executive Director Paru Minocha says ‘There used to be a fascination for “west” and “foreign” goods. Fifteen or twenty years ago, one cherished and sparingly used even a shampoo a visiting relative from US would bring. Besides the origin, the feel of the product was very different – right from the packaging, sensorials etc.’
But times have changed. The quality of local offerings has improved, leaving less to make international products stand out. And even as the standard of Indian products has risen, so too has the self-assurance of the Indian buying public.
Gunjan Bagla, Managing Director of Los Angeles based consultancy, Amritt, Inc. and author of Doing Business in 21st Century India, says: ‘In 2009, eighteen years after liberalisation began, Indian consumers no longer carry vestigial prejudices for or against “imported” brands. They want the best product for their needs and desires. Subway sells sandwiches because they are good, not because they are American. Titan sells watches because they are good, not because they are American. Indian consumers will buy a Nokia phone with Reliance service not thinking of Finland or India as opposed to say a Vodafone (UK) service with Samsung (Korea) handsets.’
Poised to play
While recession has cut a swathe through the economies of the West, India has come out comparatively well – the country remains the fastest growing major economy in the world after China, and average annual growth is set to be 7.8% between now and 2012. For India’s emerging middle class, many of whom are too young to remember the days before liberalisation brought economic development, the country’s achievements are a fact of life, and the future is something to be cheerful about. As many as 91% of those surveyed by Synovate were proud of what the country has achieved, with 82% agreeing that India has a bright future and 85% considering the country to be innovative.
This national optimism is not rooted in political satisfaction – of all the criteria offered in Synovate’s survey on factors important to Indians’ lifestyles, political stability ranked the lowest with respondents, with family, education and health topping the list. The Indian middle class is largely disengaged from politics. Their personal aspirations are professional, not political, and they see the country’s influence on the world stage coming through its industry; national pride is fuelled not by nuclear testing or by regional dominance but by the success of new Indian multinationals like Tata and Reliance. Incidents like the purchase of British prestige car-maker Jaguar by Tata in 2008 have fed this new economic self-confidence: in this new order, the former colony feels ready to take its place alongside, or even eclipse, the former imperial power.
Paru Minocha says ‘There is a strong sense of pride and a conviction that we are poised to become significant players (if not leaders) on the global map. And this reflects in consumer buying behaviour.’ If today’s Indian cultural pride is based not on political but on economic triumphs, it makes sense that it should be expressed not in political but in economic solidarity. As India begins to see itself as a peer of the other major players in the world economy, its new self-confidence comes out in satisfaction with Indian goods, whose quality, like the country’s, is seen to be a match for any international competitor.
Foreign affairs
Some foreign brands have managed to get Indian buyers to take them to heart. In among the local brands that scored highly in Synovate’s studies on brand image, McDonald’s, Pizza Hut, Coca-Cola, Pepsi, Nokia, Sony and Samsung all found favour with Indian consumers. However, counter-intuitive though it might seem, the greater availability of Western goods could possibly have driven desire for them down. Paru Minocha says that the once ubiquitous yearning for Western items ‘has started changing primarily due to access to these products via product launches in India. So the products one desired from abroad, like a Sony in electronics, Pantene in shampoos, Lancôme for cosmetics, Kit Kat in chocolates and so on are now very available in India, and that lust for the West has decreased.’ At the same time, local brands are being measured against the competition and bearing the comparison. Devangshu Dutta, Chief Executive of India based consultancy Third Eyesight, says ‘expressing a desire to buy local brands if the international brands are of equivalent quality and price does have something to do with pride in local manufacturing. But more than pride, there is a fundamental confidence being expressed in the strength of locally manufactured brands.’
While the lure of the West has paled a little, the line between international brands and local brands can sometimes be blurred in local perception. Although Hindustan Unilever is majority-owned by multinational Unilever, it has existed in India since 1933, and its products like Lux and Pears soap are ingrained in the national consciousness, routinely topping lists of the country’s most trusted brands. GlaxoSmithKline’s Horlicks, popular in India since the 1930s, is the country’s leading health food drink, and the country provides the brand with its biggest market worldwide.
Adapt or die
But for those Western brands without a long history in India, how can they make headway among the new Indian consumer class? Paru Minocha says ‘it is clear that they cannot just rest on their origin as a selling point. The consumer is clearly seeking value and would demand customisation.’ The Western brands that have met with success in the Indian market mostly have one thing in common – they have adapted their core offering to meet the particular requirements of the Indian consumer. McDonald’s, facing the challenge of making a beef-centred business work in a country that has historically held cows to be sacred, branched out into vegetarian fast food like the McAloo Tikki Burger and the McVeggie. Pizza Hut found a winner with their Tandoori Pizza. But both companies held onto the less tangible elements of their global success: attributes like efficient customer service, air conditioning, cleanliness and quality ingredients are as welcome in Bangalore as they are in Boston.
Synovate’s research shows that customisation is key to getting a foothold in the Indian market. Providing a product for each price point is one way in which companies can take into account the country’s national specificity, and in the country that came up with the ‘one-lakh car’, the US$2500 budget auto launched by Tata in 2008, tapping the low end of the market can open up big opportunities for companies. Nokia, the country’s mobile handset market leader, has launched a range of low-cost mobiles to go along with its high-end offerings, so as to meet the needs of as many of the country’s consumers as possible. Single serving packs of soaps and snack foods are aggressively marketed by companies like Hindustan Unilever and Nestlé, who find the smaller size and cheaper price attracts consumers who would otherwise steer clear of their product lines. Gunjan Bagla says ‘International companies need to appeal to uniquely Indian values and messages to achieve volume in India. You can sell to a few Indians because of Japanese or American appeal. But Levi’s make Spykar jeans for Indian ways of buying. Tropicana sells juices in India for India’s unique needs. The global reach of international brands brings quality, consistency and scale. Local formulation and prices brings sales volume in India.’
To court the Indian consumer, international companies need to embrace flexibility. Devangshu Dutta says ‘global brands that have made themselves relevant to broad segments of their audience have done so not by diluting their international appeal, but by adapting it to the local customer’s needs.’ Well aware of their country’s progress, India’s new consumers expect respect and acknowledgement from the world, and from the international companies that want their business. Recognising and adapting to the individual character and requirements of the rising middle class can be seen as a way of paying tribute to the worth of the Indian consumer – and to make progress in a market that by some measures almost equals the entire US population, international companies might find themselves remembering that the customer is always right.
admin
September 9, 2006
By DEVANGSHU DUTTA, chief executive, Third Eyesight
Since the most recent “mall boom” that began in 1999, with the launch of Ansal’s Plaza in Delhi and Crossroads in Mumbai, much has been written and said about organised retail, the growth of the middle class, and virtually every alternate person you meet professes to be an expert in retail.
What is not acknowledged is the fact that fashion retail began
to get modernized many decades ago, with the authorized dealerships
of textile companies such as DCM, Bombay Dyeing and Raymond.
Among footwear companies, Bata also organized its network of
Bata and BSC outlets. Food companies such as Spencer have operated
as chains even before RPG changed the name to Foodworld, and
now back again to Spencer. So, the new revolution is only a
stage in the 50-year evolution of the retail business in India.
So, why the sudden interest? Third Eyesight believes there are
multiple reasons creating a “tipping point”.
INDIA AT A TIPPING POINT
One of the key factors in creating a self-fulfilling growth
cycle is the development in the economy that has seen sustained
high rates of growth for the last one-and-a-half decades. This
has created a virtuous loop of increasing salaries and increase
in disposable income deeper into the population, and this is
spreading beyond just the big cities.
Secondly, billions of dollars and thousands of crore of investment
are being poured into real estate, removing the bottleneck of
good sites for new retail stores, and creating a platform for
brands to roll out their chains.
Thirdly, companies that began growing the larger formats of
retail, such as department stores, in the early 1990s, have
begun to reach critical mass. Retailers such as Shoppers’ Stop
and Pantaloon today provide multiple points of launch for new
brands.
Fourthly, and possibly the most important among these factors,
is the growth of the young consumers. They were born after the
advent of colour television in 1982, have known more choice
than the earlier generation, and are just entering the workforce
amidst soaring salaries, with a freer attitude towards spending
than their parents.
These factors are providing an unprecedented platform for retail
growth in general – very much like the United States andEurope
in the 1950s – and for the fashion retail market, it
is a tremendous opportunity to rejuvenate.
THE MARKET OPPORTUNITY
People from within the industry, as well as analysts, provide
estimates of the total apparel market that vary widely, between
Rs 90,000 crore and Rs 120,000 crore (US $20-27 billion). Annual
growth rates also vary, estimated overall at 13-15 per cent,
but depending on the product category, from 5 per cent in mature
categories to 30-50 per cent in categories that are just emerging.
Given the overall economic growth rate and development of the
consumer base, if a retailer has a strong brand and distinctive
product offer, individual companies are able to gain annual
growth rates that outstrip the overall market many times over.
The opportunity has attracted the attention of both Indian and
international companies, and, increasingly, also of the export
community in India.
Among Indian companies, Liberty is credited with the launch
of the first ready-to-wear shirt brand in the 1950s, and Raymond
with the first ready-to-wear trouser brand in the 1960s. Exporters
such as Intercraft (with brands like FU’s), also tried their
hand, as did corporates such as Indian Organic Chemicals through
the launch of “Little Kingdom” stores. Thereafter,
several other brands launched, most of which have faded into
the lost pages of history.
Among the survivors have been Raymond (through their chain of
around 300 stores and a clutch of brands), as well as relatively
new entrants like Madura Garments (originally a part of the
UK-based Coats Viyella, now wholly owned by the Aditya Birla
Group) and Arvind (formerly a licensee and now a jointand venture
partner for the US-based VF Corporation).
For all the talk of organization, the apparel market remains
highly fragmented. For an idea of just how fragmented the market
is, look at the top two players: Madura Garments and Arvind
Brands. If we assume a market size of Rs 90,000 crore (US $20
billion), the largest player, Madura Garments, only has 0.7
per cent of the market, while the second largest, Arvind Brands,
holds a 0.5-per-cent share.
In the context, differentiating between “branded”
and “unbranded” players is no more than an academic
exercise.
The market is wide open – more open than it has ever been
– and the opportunity is ripe for new companies to enter.
A quick look at a table of some of the largest companies among
fashion retailers and brand distributors includes companies
like Raymond, which has invested cash from divestment of unrelated
businesses into launching or acquiring new brands, as well as
upstarts such as ITC, who launched their first Wills store just
about five years ago. Among the companies that are of a respectable
size, most have spent between 10 and 15 years nurturing the
brand – these include Mohan Clothing (Blackberrys) and
ColorPlus among brand owners, and Shoppers’ Stop and Pantaloon,
who have moulded themselves into constantly evolving retail
models.
INTERNATIONAL BRANDS
Indians have known international brands in apparel and footwear
for as long as those brands have existed, courtesy the historical
British linkages, the erstwhile Indian royalty who were among
the biggest customers for brands such as Louis Vuitton, as well
as the mass brands that made an early entry (such as Bata).
During the late-1980s and through the ’90s, several international
companies entered the Indian market, initially through licensees
or franchisees (with exceptions such as Littlewoods, who set
up their own — and only — Indian store in Bangalore).
Some of these companies are beginning to show greater interest
in India – and also a desire to exert more control over
the growth of the brand in this strategic market. Companies
such as VF (owners of Lee, Wrangler, Vanity Fair and Healthtex)
have converted their interests from licenses to joint ventures,
while Benetton has gone from a license relationship in the first
five years (until 1993), to a 50:50 joint-venture, and then
to a 100-per-cent subsidiary in 2005.
In the last couple of years, especially with India being in
the press, interest among international brands has grown to
a new peak, and this is now manifested in the growing list of
brands available in the market.
In early 2006, the government allowed foreign investment again
in the Indian retail sector. Depending on who you speak to,
this is a complete non-event, or at the other extreme, it is
a vital step. The details are the subject of another article,
but one could say that while this is not an earth-shattering
change of policy, it is an important step in the further evolution
of the market, and we will see the evidence within the next
12 months.
WHO DARES, WINS!
It is clear that the Indian market is going through a phase
that is unprecedented in its recent history, and the opportunity
exists for existing producers of garments (including exporters),
Indian companies from other sectors, international brands, as
well as individual entrepreneurs, to create a brand presence
from scratch or grow their existing business.
The qualifying factors for entry into the contest are the desire
to create new brands, and deep pockets to sustain investment
in branding and market-building.
However, the success factors to win in the contest are higher
drive and enthusiasm to take the hits that will invariably come,
an ability to tap the consumer’s sense of adventure and differentiation,
the talent to develop a product-service offer that is distinctive,
and a pool of common sense to minimize the losses during the
initial period of investment, which may be months or years.
With all the challenges that retail offers, to those who have
the courage to venture in, let’s say, “happy retailing!”
admin
September 8, 2006
TIMES NEWS NETWORK, PANAJI, 8 September 2006
Goa, once a haven for holidaymakers looking for a break, is
now set to zoom up top retailers’ charts. The union territory
will soon see an influx of major brands, with real estate giants.
Not surprisingly, land prices are ready to shoot through the
roof.
Goa is going through a ‘revamp’ with companies buying large spaces in its cities with ‘vast potential to grow’ to set up malls and shopping arcades. Builders like Gera developers, Parasvanath and DLF (all first time entrants to Goa) plan to develop offices-cum-shopping malls.
In addition, many branded retailers are mulling exclusive showrooms here. As a result, land value has shot up with average prices of Rs 2,500 to Rs 3, 000 per sq ft having doubled. In places like the capital Panjim, prices have increased five-fold. Land prices are expected to rise further in the next ten years.
“The Goa market is expanding very fast, much beyond our expectations,” says Sudipta Sen Gupta, senior general manager (marketing), Cafe Coffee Day (CCD), which now plans to shift its regional head office for Karnataka and Goa from Mangalore to Goa.
The company, which had initially planned to stay open only for the nine tourist months (late September to May) has received ‘tremendous response from locals’ with sales increasing to 175% of national sales. CCD plans to open more outlets, apart from setting up bases en route to Goa at places like Karwar and Hubli.
Subway too has decided to add six more outlets to its existing one at Baga beach — a stark contrast to a few years back when coffee giant Barista shut shop soon after opening in Goa. The hosting of International Film Festival (IFFI) since December ’04 has created a ‘brand image’ for Goa, say market analysts, adding Goans are brand conscious. So, no time is wasted in ‘educating people about various products’.
IFFI, which brought the state’s only two multiplexes, has created a movie-going culture. Says Manoj Bhatia, CEO, Inox Leisure, “Flexible pricing and attractive schemes has helped sales move from 600 to 800 patrons to over 5,000 on weekends.”
Goa has the highest per capita income in India along with English speaking cosmopolitan set-up that allows people to experiment, thereby making it attractive to businessmen. In addition, the state government’s initiative to start SEZs is expected to move a large chunk of high-spending Indians from large cities to Goa.
Amar Yadav FMCG head of Vishal Mega Mart that recently opened the state’s only retail mall is overwhelmed by the response. “The spending capacity is very high here, we plan to open one more mall in south Goa,” he adds. Market analysts feel that influx of domestic tourists to Goa is driving the state’s growth story (18 lakh Indians visited Goa last year).
Indians’ familiarity with brands, coupled with lower land rates than big cities is attracting investors. But Devangshu Dutta, chief executive, Third Eyesight, feels investments into smaller places is a natural trend since expansion in larger cities has reached near saturation.
