PROJECT REPORT ON GREEN PRACTICES ADOPTED BY INDIAN RETAIL INDUSTRY IN SUPPLY CHAIN MANGEMENT

PROJECT REPORT ON

GREEN PRACTICES ADOPTED BY INDIAN RETAIL INDUSTRY IN SUPPLY CHAIN MANGEMENT

IN THE PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARDOFTHE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

1

EXECUTIVE SUMMARY This project involves the use of the marketing technique of Green practices adopted by Indian Retailers in Supply chain management to reduce wastage by using eco-friendly techniques and substantially increase in their profit margin and also in Corporate Social Responsibility (CSR).

The Indian retail market, which is the fifth largest retail destination globally, has been ranked as the most attractive emerging market for investment in the retail sector. India has emerged the third most attractive market destination for apparel retailers. Experts agree that apparel, along with food and grocery, is leading the growth of organized retailing in India. "Green Marketing" refers to holistic marketing concept wherein the production, marketing consumption an disposal of products and services happen in a manner that is less detrimental to the environment with growing awareness about the implications of global warming, nonbiodegradable solid waste, harmful impact of pollutants etc., both marketers and consumers are becoming increasingly sensitive to the need for switch in to green products and services.

As resources are limited and human wants are unlimited, it is important for the marketers to utilize the resources efficiently without waste as well as to achieve the organization's objective. So green marketing is inevitable. Thus the growing awareness among the consumers all over the world regarding protection of the environment in which they live, People do want to bequeath a clean earth to their offspring. Various studies by environmentalists indicate that people are concerned about the environment and are changing their behaviour pattern so as to be less hostile towards it. Now we see that most of the consumers, both individual and industrial, are becoming more concerned about environmentfriendly products. Most of them feel that environment-friendly products are safe to use. As a result, green marketing has emerged, which aims at marketing sustainable and sociallyresponsible products and services. Now is the era of recyclable, non-toxic and environmentfriendly goods. This has become the new mantra for marketers to satisfy the needs of consumers and earn better profits.

2

It effects the environment very badly. The effects on the environment divide into few categories: •

Pollution (strictly defined, leaving out "thermal pollution" ) such as SO2 contributing to acid rain, nitrous oxides contributing to smog and particulate emissions all contributing to respiratory difficulties for people.

•

Fluorochemicals (such as Freon) contributing to the diminution of the ozone layer in the upper atmosphere that provides shielding from ultraviolet rays that are bad for people.

•

It is claimed on insubstantial evidence that global warming is due to human factors such as the generation of carbon dioxide.

•

Anthropogenic origin of current global warming is the seemingly simultaneous warming of the planet Mars (obviously devoid of any anthropogenic effect ) and the failure to account for the absence of hurricane activity in 2006 despite predictions of disaster after the hurricanes of 2005.

The Indian retail sector has seen unprecedented growth in the last few years. The success in this competitive and dynamic sector depends on achieving an efficient logistics and supply chain, which can be provided by professionals, as they combine the best systems and expertise to manage a ready flow of goods and services. In India, the logistics market is mainly thought to mean transportation. But the major elements of logistics cost for industries include transportation, warehousing, inventory management, courier and other valued-added services such as packaging.

To achieve real financial benefits, Indian companies, like those elsewhere, need to follow certain key practices. Above all, they must commit to a green philosophy and incorporate environmentally sustainable practices into their product lifecycle and supply chain operations. There are many ways to ‘greenify’ a supply chain. Companies can reconfigure parts of the physical network to locate suppliers, manufacturing and customers near each other to reduce fuel consumption and other environmental costs. These companies eliminating waste can also lead to reduced material usage and energy bills.

3

Nokia, for example, has set up ‘green boxes’ across all Nokia dealers in India, where customers can deposit old mobile phones for recycling.

Further I have mention 10 various ways to go green. This concept will be clearer by three big players’ activities of adopting green practices. These three big players include Shopper stop, Wal-mart, Westside.

As conclusion, I would like to conclude that by implementing a green supply chain and supporting it with sound, automated processes, you will benefit from greater control and visibility into the Purchase-to-Pay operations. Purchasing and accounts payable professionals will have more time to focus on spend management and cash flow and provide key financial information to business units. These corporate benefits, combined with the positive impact on the environment and on your corporate reputation, offer a strong value proposition.

The green supply chain not only raises the stakes in corporate responsibility, but it is also a winning business strategy for companies in the 21st Century.

4

TABLE OF CONTENT

SR. NO.

TOPIC

PAGE NO.

1.

OBJECTIVE OF THE RESEARCH

1

2.

LITERATURE REVIEW

2

♦ Indian retail overview

sector-

♦ Environment impact different retail operations

an 2-8 of 9-11

♦ supply chain management in 12-26 Indian Retail Industry

♦ Major players in Indian retail 27-31 industry

♦ Green practices adopted by 32-54

major players in supply chain management

3.

RESEARCH METHODOLOGY

55

4.

RECOMMENDATION

56-58

5.

CONCLUSION

59-60

6.

REFERENCES

61-63

7.

BIBLEOGRAPHY

5

OBJECTIVE OF THE RESEARCH

6

Retail Industry has been the key profit driver for India’s growth in recent times. Nowadays, retail is the buzzword in India. It has emerged as the most exciting and most glamorous segment of business or trade.

Efficient management of green practices has assumed greater significance as it is the largest asset of the Indian retailers and its supply chain management having direct impact on its profitability. In the wake of the continued tightening of norms regarding environmental issues, increased competition and emergence of new types of risks in the manufacturing sector, it has become imperative that the retail sector should go for these various green practices.

With a view to ensuring a healthy green environment, Indian Retailers has taken various steps to bring these policies and procedures in line with the changing scenario which also aims at effective management dispersal of waste management, strengthening of pre-preparation of suitability atmosphere and post-execution results by monitoring system.

Therefore the purpose of the study is to study the procedure of the retail sector of India that follows for green practices adoption in supply chain management. To study the criteria which act as a decision making tool for the retailers, this project explains how the retailers appraises the green practices on the basis of various criteria.

LETRATURE REVIEW INDIAN RETAIL SECTOR: AN OVERVIEW

7

The Indian retail market, which is the fifth largest retail destination globally, has been ranked as the most attractive emerging market for investment in the retail sector by AT Kearney's eighth annual Global Retail Development Index (GRDI), in 2009. As per a study conducted by the Indian Council for Research on International Economic Relations (ICRIER), the retail sector is expected to contribute to 22 per cent of India's GDP by 2010.

With rising consumer demand and greater disposable income, the US$ 400 billion Indian retail sector is clocking an annual growth rate of 30 per cent. It is projected to grow to US$ 700 billion by 2010, according to a report by global consultancy Northbridge Capital.

The organized business is expected to be 20 per cent of the total market by then. In 2008, the share of organized retail was 7.5 per cent or US$ 300 million of the total retail market.

A McKinsey report, 'The rise of Indian Consumer Market', estimates that the Indian consumer market is likely to grow four times by 2025. Commercial real estate services company, CB Richard Ellis' findings state that India's retail market has moved up to the 39th most preferred retail destination in the world in 2009, up from 44 last year.

Banks, capital goods, engineering, fast moving consumer goods (FMCG), software services, oil, marketing, power, two-wheelers and telecom companies are leading the sales and profit growth of India Inc in the fourth quarter of 2008-09. India continues to be among the most attractive countries for global retailers. Foreign direct investment (FDI) inflows as on September 2009, in single-brand retail trading, stood at approximately US$ 47.43 million, according to the Department of Industrial Policy and Promotion (DIPP).

India's overall retail sector is expected to rise to US$ 833 billion by 2013 and to US$ 1.3 trillion by 2018, at a compound annual growth rate (CAGR) of 10 per cent. As a democratic country with high growth rates, consumer spending has risen sharply as the youth population (more than 33 percent of the country is below the age of 15) has seen a significant increase in its disposable income. Consumer spending rose an impressive 75 per cent in the past four years alone. Also, organized retail, which is pegged at around US$ 8.14 billion, is expected to grow at a CAGR of 40 per cent to touch US$ 107 billion by 2013.

The organized retail sector, which currently accounts for around 5 per cent of the Indian retail market, is all set to witness maximum number of large format malls and branded retail stores in South India, followed by North, West and the East in the next two years. Tier II cities like 8

Noida, Amritsar, Kochi and Gurgaon, are emerging as the favoured destinations for the retail sector with their huge growth potential.

Further, this sector is expected to invest around US$ 503.2 million in retail technology service solutions in the current financial year. This could go further up to US$ 1.26 billion in the next four to five years, at a CAGR of 40 per cent.

India has emerged the third most attractive market destination for apparel retailers, according to a study by global management consulting firm AT Kearney. The Northbridge Capital report states that apparel is the "largest organized retail category", accounting for 39 per cent of the organized market. It is growing at the rate of 12 to 15 per cent annually.

Organized apparel retail is projected to touch US$ 200 million by 2010 from the current worth of US$ 120 million, the report noted.

Experts agree that apparel, along with food and grocery, is leading the growth of organized retailing in India. The results of the past quarter support these findings.

Buoyed by improved consumer spending, sales of listed retailers increased by 12 per cent in the September 2009 quarter compared with the same period in 2008. This is higher than the 8.2 per cent posted in the June 2009 quarter. While the previous quarter saw value retailers such as Koutons Retail and Pantaloon leading sales recovery, this time around, sales of lifestyle and premium retailers led the growth trend. Two out of every three retailers managed an increase of at least 10 per cent, compared to about one in three in the June 2009 quarter.

Premium players such as Shoppers' Stop and Gitanjali Gems clocked strong growth of 11 and 31.7 per cent, respectively. Shoppers' Stop saw same-store sales growth move back into positive territory at 1.8 per cent. Operating profit margins moved up steadily to 9.93 per cent, almost a 122 per cent improvement since the December 2008 quarter.

Luxury Goods Retail, which currently sells its products in India under a franchise agreement, has been allowed to directly retail Gucci products in the country. Gucci Group NV, Netherlands is investing US$ 225,867 to pick up 51 per cent stake in the venture.

Australia's Retail Food Group is planning to enter the Indian market in 2010. It has ambitious investment plans which aim to clock revenue of US$ 87 million from the country 9

within five years from start of operations. In 20 years, they expect the Indian operations to be bigger than their Australian business.

Lifestyle International, part of the Dubai-based US$ 1.5 billion Landmark Group, plans to have over 50 stores across India by 2012–13. These will include 35 Lifestyle stores for retailing apparel, cosmetics and footwear, besides 15 Home Centres that sell home furnishing goods.

Watch maker, Timex India, is looking at increasing its presence in the country by adding another 52 stores by March 2011 at an investment of US$ 1.3 million taking its total store count to 120. The company has recorded revenue of US$ 15.9 million and a net profit of US$ 1.2 million, during the first six months of the current fiscal, ending September 30, 2009.

Wills Lifestyle plans to expand its operations by opening 100 new stores in the next three years. It also plans to concentrate on online buyers.

Pantaloon Retail India (PRIL) is planning to invest US$ 77.88 million this fiscal to add up to 2.4 million sq ft retail space at its existing operations. Pantaloon Retail is also looking to hive off its value retail chain, Big Bazaar, into a separate subsidiary, which may eventually go for an initial public offer (IPO). PRIL proposes to open 155 Big Bazaar stores by 2014, increasing its total network to 275 stores.

Aditya Birla Retail which operates the more chain of supermarkets and hypermarkets is scaling up its private labels business as an independent strategic business unit (SBU) and profit centre. This may be spun off as a separate entity as private labels business account for over 19-20 per cent sales of more supermarkets and hypermarkets.

Policy Initiatives: •

100 per cent FDI is allowed in cash-and-carry wholesale formats. Franchisee arrangements are also permitted in retail trade.

•

51 per cent FDI is allowed in single-brand retailing.

10

ROAD AHEAD: According to industry experts, the next phase of growth is expected to come from rural markets. According to a new market research report by RNCOS titled, 'Booming Retail Sector in India', organized retail market in India is expected to reach US$ 50 billion by 2011.

Number of shopping malls is expected to increase at a CAGR of more than 18.9 per cent from 2007 to 2015. Rural market is projected to dominate the retail industry landscape in India by 2012 with total market share of above 50 per cent.

Organized retailing of mobile handset and accessories is expected to reach close to US$ 990 million by 2010. Driven by the expanding retail market, the third party logistics market is forecasted to reach US$ 20 billion by 2011. The Indian retail industry is valued at $270 billion, with organised retail cornering 4.5 %. The organized pie is expected to see a growth at a CAGR of 37 % (India Retail Report 2007)

Green Marketing: Introduction

Introduction: According to the American Marketing Association, green marketing is the marketing of products that are presumed to be environmentally safe. Thus green marketing incorporates a broad range of activities, including product modification, changes to the production process, packaging changes, as well as modifying advertising. Yet defining green marketing is not a simple task where several meanings intersect and contradict each other; an example of this will be the existence of varying social, environmental and retail definitions attached to this term. Other similar terms used are Environmental Marketing and Ecological Marketing. Thus "Green Marketing" refers to holistic marketing concept wherein the production, marketing consumption an disposal of products and services happen in a 11

manner that is less detrimental to the environment with growing awareness about the implications of global warming, non-biodegradable solid waste, harmful impact of pollutants etc., both marketers and consumers are becoming increasingly sensitive to the need for switch in to green products and services. While the shift to "green" may appear to be expensive in the short term, it will definitely prove to be indispensable and advantageous, cost-wise too, in the long run.

Why Green Marketing?

It is really scary to read these pieces of information as reported in the Times recently: "Air pollution damage to people, crops and wildlife in he US totals tens of billions of dollars each year". "More than 12 other studies in the US, Brazil Europe , Mexico , South Korea and Taiwan have established links between air pollutants and low birth weight premature birth still birth and infant death".

As resources are limited and human wants are unlimited, it is important for the marketers to utilize the resources efficiently without waste as well as to achieve the organization's objective. So green marketing is inevitable.

There is growing interest among the consumers all over the world regarding protection of environment. Worldwide evidence indicates people are concerned about the environment and are changing their behaviour. As a result of this, green marketing has emerged which speaks for growing market for sustainable and socially responsible products and services.

Thus the growing awareness among the consumers all over the world regarding protection of the environment in which they live, People do want to bequeath a clean earth to their offspring. Various studies by environmentalists indicate that people are concerned about the environment and are changing their behaviour pattern so as to be less hostile towards it. Now we see that most of the consumers, both individual and industrial, are becoming more concerned about environment-friendly products. Most of them feel that environment-friendly products are safe to use. As a result, green marketing has emerged, which aims at marketing sustainable and socially-responsible products and services. Now is the era of recyclable, nontoxic and environment-friendly goods. This has become the new mantra for marketers to satisfy the needs of consumers and earn better profits.

12

Green marketing is the process of developing products and services and promoting them to satisfy the customers who prefer products of good quality, performance and convenience at affordable cost, which at the same time do not have a detrimental impact on the environment.

It includes a broad range of activities like product modification, changing the production process, modified advertising, change in packaging, etc., aimed at reducing the detrimental impact of products and their consumption and disposal on the environment. Companies all over the world are striving to reduce the impact of products and services on the climate and other environmental parameters. Marketers are taking the cue and are going green.

Green marketing was given prominence in the late 1980s and 1990s after the proceedings of the first workshop on Ecological marketing held in Austin, Texas (US), in 1975. Several books on green marketing began to be published thereafter. According to the Joel makeover (a writer, speaker and strategist on clean technology and green marketing), green marketing faces a lot of challenges because of lack of standards and public consensus to what constitutes "Green". The green marketing has evolved over a period of time. According to Peattie (2001), the evolution of green marketing has three phases. First phase was termed as "Ecological" green marketing, and during this period all marketing activities were concerned to help environment problems and provide remedies for environmental problems. Second phase was "Environmental" green marketing and the focus shifted on clean technology that involved designing of innovative new products, which take care of pollution and waste issues. Third phase was "Sustainable" green marketing. It came into prominence in the late 1990s and early 2000.

Green marketing is a vital constituent of the holistic marketing concept. It is particularly applicable to businesses that are directly dependent on the physical environment; for example, industries like fishing, processed foods, tourism and adventure sports. Changes in the physical environment may pose a threat to such industries. Many global players in diverse businesses are now successfully implementing green marketing practices.

Problems of green marketing: Many organizations want to turn green, as an increasing number of consumers' ant to associate themselves with environmental-friendly products. Alongside, one also witnesses confusion among the consumers regarding the products. In particular, one often finds distrust 13

regarding the credibility of green products. Therefore, to ensure consumer confidence, marketers of green products need to be much more transparent, and refrain from breaching any law or standards relating to products or business practices.

Paths to greenness: Green marketing involves focusing on promoting the consumption of green products.

Therefore, it becomes the responsibility of the companies to adopt creativity and insight, and be committed to the development of environment-friendly products. This will help the society in the long run. Companies which embark on green marketing should adopt the following principles in their path towards "greenness."

•

Adopt new technology/process or modify existing technology/process so as to reduce environmental impact.

•

Establish a management and control system that will make sure the fulfilment of stringent environmental safety norms.

•

Using more environment-friendly raw materials at the production stage itself.

•

Explore of possibilities of recycling the used products so that it can be used to offer similar or other benefits with less wastage.

Marketing Strategies: The marketing strategies for green marketing include: •

Marketing Audit (including internal and external situation analysis).

•

Develop a marketing plan outlining strategies with regard to 4 P's.

•

Implement marketing strategies.

•

Plan results evaluation 14

ENVIRONMENTAL IMPACT OF DIFFERENT RETAIL OPERATIONS: The effects on the environment divide into few categories: 1. Pollution ( strictly defined, leaving out "thermal pollution" ) such as SO2 contributing to acid rain, nitrous oxides contributing to smog and particulate emissions all contributing to respiratory difficulties for people. Also in this category are the fluorochemicals (such as Freon) contributing to the diminution of the ozone layer in the upper atmosphere that provides shielding from ultraviolet rays that are bad for people.

2. Global warming: There is global warming, which is not surprising since we are emerging from the Little Ice Age. However, it is claimed on insubstantial evidence that global warming is due to human factors such as the generation of carbon dioxide.

That this is problematic is demonstrated by some widely-believed but incorrect assertions. First, CO2 is NOT the primary greenhouse gas. Water vapor is more important in both quantity and effectiveness by a factor of perhaps 20X. The only "evidence" linking CO2 to global warming is a number of computer climate MODELS that are not based on anything other than assumptions and, importantly, fail to account for such past periods of warming as the Medieval Climate Optimum and cooling as the Little Ice Age. The latter seems to have been correlated with the Maunder Minimum in sunspot activity so the solar origin of global warming and cooling seems important and is not accounted for in the models. Also, the models that purport to blame human production of CO2 fail to account properly for water vapor and, importantly, the formation of clouds, which have a significant effect on reflection of solar radiation.

15

3. Also contributing to the doubts about the anthropogenic origin of current global warming is the seemingly simultaneous warming of the planet Mars (obviously devoid of any anthropogenic effect ) and the failure to account for the absence of hurricane activity in 2006 despite predictions of disaster after the hurricanes of 2005.

Interestingly, violating Occam's razor requiring that one not ADD hypotheses to explain phenomena, the Mars effect has been ascribed to dust in Mars absorbing extra radiation and making Mars warmer while the erroneous prediction of 2006 is ascribed to dust, this time producing a special COOLING on earth. Not too credible as a disclaimer of the observed phenomena indicating non-anthropogenic warming effects.

Examples form textile section of retail industry: In today's competitive world, domestic and export markets in textiles are progressing at a rapid pace. Exponential growth in global industrialization is noticed in the west and rest of the world. Innovations in the use of electronics information technology, computers and automation are needed to achieve a high quality standard. Textile and apparel, being labor intensive industries, code of conduct at the work place is hard to overlook. But the main challenge before the textile production industry is as to how to produce a product at a competitive price by using environment friendly process and by reducing emissions and pollution treatment cost.

Biosphere is under serious trouble and impact on its atmosphere, hydrosphere and lithosphere by human cannot be ignored. Man made activities on water by domestic, industrial, agriculture, shipping, radio-active, aquaculture wastes; on air by industrial pollutants, mobile combustion, burning of fuels, agricultural activities, ionization radiation, cosmic radiation, suspended particulate matter; on land by domestic wastes, industrial waste, agricultural chemicals and fertilizers, acid rain, animal waste have negative influence over biotic and abiotic components on different natural eco-systems.

Global warming, rising of sea level, abnormal climatic change, loss in bio-diversity, deforestation, ozone layer depletion are some of the adverse effects on environment.

Textile accounts for 30% of India's export. There is no doubt that price, quality, turn around time and social compliance are the essential elements of export. Of late, clean processing has become an additional requirement. Unfortunately, in comparison to other 16

branches of engineering and technology, environmental pollution of textile industry seems to be the least studied area.

Eco degradation in textile industry: Textile industry contributes 30% of India's export. It produces over 400 million meters of cloth and around 1000 million kg of yarn per annum. Textile sector is labor intensive and nearly a million of workers are associated in various unit operations of about 700 mills.

Textile wet processing activity contributes about 70% of pollution in textile industry. It is estimated that there are around 12,500 textile processing units wherein the requirement of water ranges from 10 liters with an average of 100 liters per kg. Right from cotton cultivation and manufacture of fibers, spinning, weaving, processing and finishing, more than 14,000 dyes and chemicals are used and a significant quantity of these goes in the solid, liquid and air wastes, thereby impart pollution of air, land and surface water.

Towards the end of 20th century, world has become more ecology consciousness and thus green textile concept is emerged to facilitate eco-management in textile arena. Different unit operations, which contribute to eco degradation, are described and analyzed in this chapter.

Noise Pollution Noise is one of the most pervasive environmental problems. There is no doubt that it has adverse effect on human beings, and their surroundings.

The ISO defines noise intensity level [2] as: L = 20 log10 (P / P0) = 10 log10 (I / I0) (1) Where P and P0 are the sound pressures of the noise present at a place and the reference sound pressure at 1000 Hz at the threshold of hearing which is given by 20 micro Pascal’s.

I is the sound intensity level being measured and I0 is the reference sound intensity at 1000 Hz at the threshold of hearing and is given by 10-12 w/m2.

17

SUPPLY CHAIN MANAGEMENT IN INDIAN RETAIL INDUSTRY The Indian retail sector has seen unprecedented growth in the last few years. The success in this competitive and dynamic sector depends on achieving an efficient logistics and supply chain, which can be provided by professionals, as they combine the best systems and expertise to manage a ready flow of goods and services.

In India, the logistics market is mainly thought to mean transportation. But the major elements of logistics cost for industries include transportation, warehousing, inventory management, courier and other valued-added services such as packaging.

The logistics costs account for 13 per cent of GDP. The industry is currently on an upswing and is poised for a growth of 20 per cent in the coming years.

With the expansion of retail, supply chain will take on an increasingly important role. With the end consumer becoming more demanding and time conscious, the need for just-in-time services is increasing. In retail, where competition is intense and stakes are high, customer satisfaction is paramount.

18

Network critical: Industry experts opine that in India too the large retail chains will follow the global model of outsourcing their logistics so as to better manage complex supply chains and focus on their core business. For the retail chains in agri-produce, efficiency of logistics is critical and can indeed leverage the brand to a great extent.

The main asset: Retailers realize that knowing what is selling and what is not can improve the inventory processes. Inventory is the biggest cost factor, and if not managed well, it can also be the biggest drain. That's why retailers and their trading partners today set store by the inventory process and its impact.

Effective SCM enables: •

Realistic ordering lead-times: Suppliers are not surprised by the next order. Retailers respond better to demand spikes, minimize forced markdowns and avoid obsoleteinventory costs.

•

Averting problems: Stores easily identify potential stock-outs and request replenishment before the inventory drops to zero. Deciding to de-list or replace a product is easier.

•

Facilitating resource planning and allocation: Product forecasts and supply schedules are easily converted to perform space planning, establish staffing needs and organize inbound/outbound shipments. Financial experts can plan cash flow and analyze margins into the future.

Four `R's Follow the 4 `R's of SCM — Right time, Right place, Right price, Right quantity — to reap the advantages of: •

Sustained inventory reduction by as much as 60 per cent for both the buyer and seller.

•

Improved forecast accuracy by as much as 30 per cent.

19

•

Enhanced store shelf stock rates by as much as 8 per cent.

•

Increased sales by as much as 20 per cent.

•

Reduced logistics costs by as much as 4 per cent.

The key players in the logistics industry are gearing up to meet the challenges by initiating both organic and inorganic growth to leverage the retail opportunity. Logistics firms have also started focusing on related services such as Customs clearing and forwarding, inbound warehousing, labeling and packaging, fleet management, order picking and inventory management.

Cold Chain The booming retail sector has set off growth in the cold chain segment as well. It is a highly specialized service and caters to time sensitive and perishable items. The cold chain industry is growing at 20-25 per cent. However, there is an urgent need to establish the necessary infrastructure for an effective cold chain.

This paper attempts to track Key Performance Indicators (KPIs) in order to figure out the performance of the Supply Chain in the retail sector. It also focuses on inventory replenishment strategies and capacity utilization in the retail sector. In recent years, this sector has spent considerable amount of time and money trying to improve its operations in such a way so as to respond efficiently to customers’ needs. This has led to several developments like: •

Introduction of automated store ordering,

•

Usage of RFID, etc.

The KPIs helps in directly analyzing the performance of every specific activity and operation and hence also helps in zeroing down to the exact root of the problem, if any, and thus helps the managers to rectify them. The Improvement Opportunities are further explained in detail for achieving a better performance.

Inventory: Inventory is a list for goods and materials, or those goods and materials themselves, held available in stock by a business. Inventory are held in order to manage and 20

hide from the customer the fact that supply delay is longer than delivery delay, and also to ease the effect of imperfections in the manufacturing process that lower production efficiencies if production capacity stands idle for lack of materials.

• Independent demand ratio: For manufacturers that also supply replacement parts and consumables this metric helps to define the % mix of demand for an item from independent (outside sources) vs dependent (inside sources). The ratio is calculated by dividing the unit usage for customer orders by the total unit usage of the item from all sources (work orders, sales samples, destructive testing, inventory adjustments, etc.)

• Early receipts to MRP date (required date): Early receipts to MRP date - This is a measure on your Planning efficiencies. Some planners or warehouse personnel may request that the material be brought in long before the plant/operators need the parts. Reasons for doing so may be quality, lead time variance, buffer stock etc. Early receipts to MRP produce higher levels of inventory that are not required yet. In a way, this is at the other end of the scale than JIT. Measure: MRP due date vs. Receive to Dock (stores) date.

• Early PO Receipts to PO due date: Early receipts to PO date - This is a measure on your suppliers and their diligence to supply per the contract date. Early receipts to PO produce unexpected deliveries turning up, congested goods inwards and of course higher that projected inventory levels. Measure: PO due date vs. Receive to Dock (stores) date.

• Sell through %: A percentage of units sold during a period and is equal to Units sold divided by (units sold + on hand inventory). This can also be described as Units sold divided

by Beginning Inventory Quantity.

• Inactive Stock: Products with Stock (in units or Rs.), and without movement-sales in a given period of time (depending on movement of the market). Useful to define continuity of a specific product-size (SKU), or promotion campaigns. Most useful in companies with a big number of SKUs. • Average age of inventory: The (average) age of each product in stock. For example, product received in Jan, but remains until Aug.

21

• Unit Cost per batch: Unit Cost per batch = (Cost/Quantity) for each batch Primarily used in FIFO (First In First Out) Method Assumes an inventory of non-unique goods (that is, every one is similar to every other one) Generally preferred inventory valuation method. Assumes inventory is sold in the order that it is stocked, with the oldest goods sold first and the newest goods sold last. Uses the unit cost per batch of acquired/produced goods, and counts the inventory backwards from the newest batch.

• Inventory Value: Inventory Value = (Average Unit Cost) x (Units of current Inventory).

• Stock cover: Stock cover is the length of time that inventory will last if current usage continues.

• Stock outs in period: Stock outs indicate where a demand cannot be met due to the absence of the required inventory.

• Inventory lead time: Lead time is the length of time it takes to obtain inventory from suppliers.

• Inventory Turnover: The number of times that a company’s inventory cycles or turns over per measurement period (month, quarter, year).

• Inventory months of supply: Inventory On Hand / Avg Monthly Usage.

SCOR: The Supply-Chain Operations Reference-model (SCOR) is a process reference model that has been developed and endorsed by the Supply-Chain Council as the cross-industry standard diagnostic tool for supply-chain management. SCOR enables users to address, improve, and communicate supply-chain management practices within and between all interested parties.

• Order fulfillment cycle time: Order Fulfillment Cycle Time is a continuous measurement defined as the amount of time from customer authorization of a sales order to the customer receipt of product.

• Total supply chain management cost: Total Supply Chain Management Cost is a discrete measurement defined as the fixed and operational costs associated with the Plan, Source, Make, and Deliver supply chain processes.

22

• Upside supply chain flexibility: Upside Supply Chain Flexibility is a discrete measurement defined as the amount of time it takes a supply chain to respond to an unplanned 20% increase in demand without service or cost penalty.

• Direct Product Cost: Sum of costs associated with manufacturing a specific product.

• Direct Labor Cost: Sum of costs associated with payment of the employee insurances, taxes etc.

• Direct Material Cost: Sum of costs associated with acquisition of support material.

• Time needed to recruit/hire/train additional labor: Amount of time required to achieve a certain substantial improvement concerning the number of employees.

• Time needed to obtain additional capital: Amount of time required to achieve a certain substantial improvement concerning capital.

• Time needed to obtain additional equipment: Amount of time required to achieve a certain substantial improvement concerning equipment acquisition.

• Finished product cycle time: Average time associated with finalizing activities, such as: package, stock, etc.

• Test cycle time: Average time associated with testing and trying out activities.

• Cost of managing processes: Periodic costs of managing processes, usually based on the number of FTEs involved in management functions for processes.

• Cost of goods sold (COGS): Cost of Goods Sold includes all expenses directly associated with the production of goods or services the company sells (such as material, labor, overhead, and depreciation). It does not include SG&A. • Perfect Order Measure / Fulfillment: The error-free rate of each stage of an order. Error rates are captured at each stage (order entry, picking, and delivery, shipped without damage, invoiced correctly) and multiplied together.

23

Improvement Opportunities in Retail Logistics: In general, the logistic decisions taken by the retailer can be improved by increasing: •

The level of differentiation when controlling the operations.

•

The level of sophistication in the Decision Support Systems.

•

The level of integration of multiple decisions (made by the retailer company and/or its supply chain partners).

Below, several examples are given to illustrate how each of these general guidelines can be translated into specific solutions, taking into account the fact that different retailers and/or different products need different logistic solutions.

The Level of Differentiation when Controlling the Operations Different types of items are need different ways of replenishment. For example ABC-classification, based on the perception that items with large turnover (A-items) need to be treated differently compared to items with low turnover (C-items). While there is some value in this approach, we propose a different classification for retail-items. We distinguish the following five main product categories: 1. Phasing-in/out items (including items with a short Product Life Cycle) 2. Promotion items 3. Purchasing driven items 4. Capacity driven items 5. Regular items The phasing-in/out items (including items with a short product life cycle) are different from other items since there is either very little demand history available, or it becomes very risky to carry inventory due to obsolescence. Thus, for these items, special attention is given to issues like demand forecasting and inventory management in an environment with high risk of obsolescence and/or markdown policies. Improvement opportunities reported in the literature are: 24

1. Using similarity in forecasts made by different individual people as an indicator of forecast accuracy when no sales data are available yet 2. Using early sales data to improve demand forecasts in the case of style goods 3. Using repeat rate information from customer cards to improve demand forecasts when new products are introduced 4. Using

optimal

markdown

policies

to

reduce

the

risk

of

obsolescence.

The demand forecasts for items with a short product life cycle (like style goods) can be improved substantially in two ways. The first improvement applies when an initial production or buy decision has to be made and no sales data are available yet for the new assortment. When each member of a buying committee makes an independent demand forecast for every product, the variance in these individual forecasts is an almost perfect predictor of the overall demand forecast accuracy. This allows the manufacturer and/or retailer to select the items with a high demand forecast accuracy, which can be manufactured at the beginning of the production season. The production of items with low demand forecast accuracy is postponed until a group of large retailers placed their first orders (called the Early Write program). These first orders typically make up approximately 20% of the total orders. While this procedure was first applied at a manufacturer, a similar procedure may also be used at a retailer, when he/she receives his/her first actual sales data in the new season. Fisher et al.

(2001) report how the inventory replenishment of products with a short product lifecycle can be optimized for a retailer, when the retailer has two buying opportunities: an initial buy and a reorder opportunity.

The promotion items are items that are part of the regular assortment, but are either offered temporarily at a reduced price or offered at the regular price but with additional visibility (e.g. via advertisements or via a special location in the store).

Some of the possible Improvement opportunities are: 1. Using marketing intelligence and/or econometric models to forecast demand for the promotion items and their substitutes 25

2. Using a push-strategy with two waves 3. Coordinating the promotion with the supplier

The purchasing driven items are one-time-items that are not part of the regular assortment, but are bought by the Purchasing department. The reason might be that they spotted a special buying or selling opportunity. The purchasers buy a certain quantity of the product, and when this lot is sold-out, no replenishment from the supplier takes place.

The amount purchased is often determined by purchasing considerations (e.g. based on discount-opportunities) rather than by demand forecasting. For the distribution of the purchasing driven items to the stores, a push-strategy with two waves, like the alpha-policy, may be adopted.

The capacity driven items are items used by the Operations department to smooth handling and/or transportation capacities. If, for example, the demand for these capacities varies within the

week,

smoothing

may

lead

to

a

reduction

in

the

total

assets

needed.

To smooth handling-capacities in the DC and the stores, the review period for items with sufficient excess shelf space1 may be increased by decreasing the delivery frequency. For example, a store may order part of its assortment on a weekly basis, while another part of its assortment is ordered on a daily basis. The items ordered on a weekly basis can be ordered in the quiet part of the week, in order to smooth the handling capacity in the retail supply chain.

Ordering with a lower frequency often leads to higher lot-sizes per item, implying also higher handling efficiency. Another way to benefit from reduced ordering frequencies is to redesign the retailer’s DC. If all items ordered on a weekly basis are stored in a separate part of the DC, the total walking distance for the order pickers per week can be reduced substantially. A pre-requisite for this is that all items in this part of the DC have excess shelf space in all stores.

To smooth transportation capacities, large volume/large sales items may be used. In groceries, these are typically items like soft drinks. On Tuesday and Wednesday, the regular replenishment quantities ordered by the stores may be low, while on Thursday and Friday these quantities may be high. By ordering these items in advance on Tuesday and Wednesday

26

instead of on Thursday and Friday, the capacity load is smoothed. If the retail store has little storage space available, this option may not be feasible.

The regular items are all items that are not phasing in or out, are not on promotion, and are not purchasing or capacity driven. Before discussing the operational control of the regular items in the store, a few notes should be made on the trade-off between inventory holding costs and customer service, and its impact on the control of the entire supply chain. In several projects with retailers, it has been noted that at the operational level (where the size of the store and the assortments are given), the space in the retail store should be considered as a constraint rather than a cost factor. Moreover, handling costs at the retailer’s DC and particularly at the store level usually outweigh the relevant.

In addition; the inventory contributes most to the service level of the final customer, if this inventory is stored mainly downstream in the supply chain. Therefore, the supply chain should often aim to handle goods as long as possible in the most efficient handling units (trucks or pallets (or even layers) when distributed from the manufacturer to the retailer’s DC), and accept the higher inventory levels in the retailer’s DC. The goods can be shipped as soon as they are produced. This concept is called Supply Driven Coordination or Chain Synchronization. Moreover, from the retailer’s DC one might ship inventory as soon as possible to the store, when it fits on the shelves (given the number of facings, determined at the tactical level in the Plano grams).

In current ASO systems, the regular items often follow a traditional (R,s,nQ)-policy2. This means that every review period (R), the inventory position is checked to see whether it is below the reorder level (s). If so, n times Q items are being ordered with Q being the case pack size and n the minimal integer number of case packs needed to make sure that, after reordering, the inventory position is equal to or higher than s. These parameters still leave a number of options open to further differentiate the inventory replenishment strategies within the regular items.

The Level of Sophistication in Reorder Systems Thanks to economies of scale and cheaper and better information technology, large retail chains are trying to distinguish themselves from other retailers by increasing the level of sophistication of their reorder systems. At this moment, the quality of reorder systems varies 27

greatly between retail chains, and, even within retail chains, it may differ substantially per retailer. The level of sophistication of their reorder system may differ with respect to: 1. The level of automation 2. The quality of the input data 3. The intelligence in setting the logistic parameters in the reorder system 4. The ability to visualize economic trade-offs 5. The ability of the personnel to make decisions or to evaluate proposed decisions In some stores, the reorder decisions are still made manually, without any support from a computer. In other stores, the computer may give advice on the timing and the quantity to be ordered for most items. But even in those stores, part of the assortment may still be ordered without the help of a computer. At a grocer’s for example, we noted that the majority of nonperishables were ordered via an ASO system, while certain perishables were ordered manually, since they either required additional intelligence (like a judgment on the quality of the inventory for vegetables), or they had to be ordered via a separate ordering system (belonging to a particular supplier).

Even when automated store ordering is implemented, the data quality has a large impact on the success of the system. It is known from empirical research that inventory data are highly inaccurate. To increase the sales data accuracy retailers may either apply more strict rules on how to register sales, or they may attach an electronic identification device to each individual product, which is scanned automatically at the cash register.The intelligence in setting the logistic parameters in the system (i.e. the reorder level and the order quantity) also differs a great deal. Sometimes, a fixed reorder level is applied, and sometimes the reorder level varies over time, taking into account weekly sales patterns, seasonality and/or trends in sales. In some cases, the determination of the reorder level depends on many different variables like the weather, substitution effects, the review period, the price, etc. These more complex situations are often not dealt with by the ASO systems, but are often handled by store clerks who have considerable experience in their product category.

28

Also the order quantity is determined in many different ways. The simplest case is when the supplier determines the order quantity by fixing the case pack size (typically for most items in the supermarket). If, however, the item is made for one particular retailer only, the retailer can optimize the case pack size. This optimization should not only include the minimization of the inventory holding costs and the fixed ordering costs, but also take into account operational constraints like the maximum shelf capacity. Ideally, the computer should not only calculate the optimal solution, but also offer insight to the decision maker on the economic trade-offs between important performances indicators. In the example of the case pack size, we can think of the following performance indicators: the number of orders per year, the total handling time needed, the expected total number of refills needed (if the case pack size is too big to put on the shelf), the total inventory and the resulting service level to the customers To be able to make this trade-offs the personnel needs good training. Purchasers for example, who are often responsible for setting the case pack size in cooperation with the supplier, may be more focused on and trained in getting the lowest price than in making an overall evaluation of the impact of the case pack size on all performance indicators. In addition, at the store level, where store managers or store clerks are responsible for the determination of the order quantities, the level of education may differ greatly. The Level of Integration of Multiple Decisions (Made by the Retail Company and/or Its Supply Chain Partners) The decisions with respect to inventory and capacity management are often affecting many different performance indicators, organizational units and hierarchical levels within these organizational units at the same time. Often, in practice only partial effects are taken into account when decisions are being made. As a result, the quality of the decision-making can be improved by increasing the level of integration. We distinguish three types of integration: 1. Integration of all relevant performance indicators in the supply chain.

2. Integration of decisions made at different organizational units.

3. Integration or coordination of decisions made at different hierarchical levels.

Below some examples are given, which are related to inventory and capacity management and which were encountered in retail supply chains. Each example includes one or more types of integration.

29

Examples 1. When deciding on the case pack size, a non-food-retailer used the classical Economic Order Quantity formula. This formula is almost a hundred years old and applied successfully at many companies in multiple industries. The formula is derived from a model, which only considers the inventory holding costs and the fixed ordering costs.

Cost analysis in several retail supply chains (including this one) showed that, in fact, handling costs are often far more important than inventory holding costs, and should, therefore, be included in the decision-making. As a matter of fact, not only handling costs in the store, but also handling costs at the retailers’ DC and/or the supplier may be significant and affected by the decision on the case pack size. In this case, the handling at the retailer’s DC had to be taken into account as well, whereas the implications for the supplier were only minor. Finally, note that even a focus on total relevant costs in the entire supply chain may be too narrow-minded. The customer service level for example may also be affected by the case pack size.

2. Within retail chains, Marketing and Operations are often separate departments.

Marketing typically decides on issues like the marketing strategy, target customer service level, the store layout, depth and breadth of the assortment, pricing, promotions and shelf space allocation (via planograms). Operations typically decide on issues like (in) direct delivery, delivery frequencies, replenishment strategies (pull/push), reorder levels, minimum lot-sizes, etc.

Sometimes the decisions from both departments are interdependent, but this is not always taken into account when the actual decisions are being made. For example, planograms and reorder levels should be matched. If the space allocated to a product is less than the space required for operations (which is mainly based on the reorder level and the case pack size), inefficient handling may be the result: if an order arrives at the store, it may not fit on the shelves, leading to leftovers, which are sent to the backroom and have to be taken back to the shelves again later on 30

A retailer typically aims for a particular market segment and designs his logistics strategy to meet the requirements of this market segment. For example, some retailers aim for high customer service, while others primarily aim for low costs. To make their strategies work, the retail companies have to ensure that their long-term marketing and logistics strategies are in line with the replenishment strategies applied at the store level every day. If, e.g. at the shop floor, the replenishment strategy is to fill the shelves completely as soon as a new case pack fits in, this would be in line with a high customer service objective, but not with a low cost strategy. In case the inventory replenishment strategy is determined locally (at the store level) by individual people, there is a serious risk that either these people have different objectives, or they are simply not aware of the link between their decisions and the strategy of the retail chain.

The role of supply chain management: The role of supply chain in the organized retail sector in India should be a shelf- centric partnership between the retailer and the manufacture for this will create supply chains that are loss free. This will also give rise to top and bottom line growth. In the organized retail sector in India the presence of fresh produce (vegetables and fruits) is very small. This is so for the nature of supply chain is very fragmented. This shows the important role of supply chain in the organized retail sector in India.

In the organized retail market in India the role of supply chain is very important for the Indian customer demands at affordable prices a variety of product mix. It is the supply chain that ensures to the customer in all the various offerings that company decide for its customers, be it cost, service, or the quickness in responding to ever changing tastes of the customer.

The infrastructure in India in terms of road, rail, and air links are not sufficient. And so warehousing plays a major role as an aspect of supply chain operations. To overcome these problems, the Indian retailer is trying to reduce transportation costs and is investing in logistics through partnership or directly. The Indian organized retail sector is growing so the role of supply chain becomes all the more important. It should become all the more responsive and adaptive to customers demand. There is also need for the supply chain to be more cost efficient and collaborative to win the immense competition in this sector.

31

The role of supply chain in Indian organized retail has expanded over the years with the boom in this industry. The growth of the Indian retail industry to a large extent depends on supply chain, so efforts must be made by the Indian retailers to maintain it properly.

India can position itself as a lead player in Asia, if the retail sector here attains the competitive strengths by responding to the changing markets. "In today's highly competitive environment, as companies are under intense pressure to reduce costs, expand into fresh markets and develop new products, every manufacturer's supply chain is expanding and becoming increasingly complex. Effectively managing complexity can be a manufacturer's greatest asset," he said. Experts from the retail business affirmed that the current retail boom in India could only sustain its momentum if supply chain management is given the top priority by the retail players. The supply chain has a key role to play in the expansion and profitability of many companies, but it has rarely been adapted to meet the new demands placed upon it

32

MAJOR PLAYERS-COMPANY PROFILE:

1. Pantaloon Retail: Company profile: It is headquartered in Mumbai with 450 stores across the country employing more than 18,000 people. It can boast of launching the first hypermarket Big Bazaar in India in 2001. All-India retail space of 5 million sq. ft. which is expected to reach 30 mn by 2010. It is the largest retailer in India with a turnover of over Rs. 20 billion.

Product profile: It is present across most retail segments - Food & grocery (Big bazaar, Food bazaar), Home solutions (Hometown, furniture bazaar, collection-i), consumer electronics (e-zone), shoes (shoe factory), Books: music & gifts (Depot), Health & Beauty care services (Star, Sitara and Health village in the pipeline), e-tailing (Futurbazaar.com), entertainment (Bowling co.)

One of their recent innovations include e-commerce’ hybrid format of ’small’ shops , the area for these stores will be 150 sq. ft. fitted with 40 digital screens. Customers will be encouraged to browse through the entire range of products on digital screen. They will be able to place the order, the delivery of which will be arranged by the shop to their homes within a few hours.

2. K Raheja Group: Company Profile: They forayed into retail with Shopper’s Stop, India’s first departmental store in 2001. It is the only retailer from India to become a member of the prestigious Intercontinental Group of Departmental Stores (IGDS). They have signed a 50:50 joint venture with the Nuance Group for Airport Retailing. Shoppers Stop has 7, 52, 00 sq ft of retail space with a turnover of Rs 6.75 billion.

33

The first Hyper-city opened in Mumbai in 2006 with an area of 1, 20,000 sq. ft. clocking gross sales of Rs. 1 bn in its first year.

Product Profile: Crossword brand of book stores, Homes stop a store for home solutions, Mothercare a concept stocking merchandise related to childcare are also owned by them.

Recently, Raheja’s have signed an MoU with the Home Retail Group of UK to enter into a franchise arrangement for the Argos formats of catalogue & internet retailing.

The group has announced plans to establish a network of 55 hypermarkets across India with sales expected to cross the US$100 million mark by 2010.

3. Tata group: Company Profile: Established in 1998, Trent - one of the subsidiaries of Tata Group operates Westside, a lifestyle retail chain and Star India Bazaar - a hypermarket with a large assortment of products at the lowest prices. In 2005, it acquired Landmark, India's largest book and music retailer. Trent has more than 4 lakh sq. ft. space across the country. Westside registered a turnover of Rs 3.58 mn in 2006.

Tata’s has also formed a subsidiary named Infiniti retail which consists of Croma, a consumer electronics chain. It is a 15000-17000 sq. ft. format with 8 stores as of September 2007.

Another subsidiary, Titan Industries, owns brands like “Titan”, the watch of India has 200 exclusive outlets the country and Tanishq, the jewellery brand, has 87 exclusive outlets. Their combined turnover is Rs 6.55 billion.

Trent plans to open 27 more stores across its retail formats adding 1.5 mn sq ft of space in the next 12 DLF malls.

Product Profile: Starting from garments to books to music to electronic items to watches to jewellery to food items and many more.

4. RPG group: 34

Company Profile: One of the first entrants into organised food & grocery retail with Foodworld stores in 1996 and then formed an alliance with Dairy farm International and launched health & glow (pharmacy & beauty care) outlets. Now the alliance has dissolved and RPG has Spencer’s Hyper, Super, Daily and Express formats and Music World stores across the country.

RPG has 6 lakh sq. ft. of retail space and has registered a turnover of Rs 4.5 billion in 2006.

It is planning to venture into books retail, with the launch of its own bookstores “Books and Beyond” by the end of 2007. An IPO is also in the offering, with expansion to 450+ MusicWorld, 50+ Spencer's hyper outlets covering 4 million sq. ft. by 2010.

5. Landmark group: Company Profile: It was launched in 1998 in India. Lifestyle is spread across six cities, covering 4.6 lakh sq. ft. with a turnover of Rs 3.5 billion in 2005.

Product Profile: A new division named Lifestyle International has emerged for their international brands business comprising Bossino, Kappa and Springfield in their portfolio.

Their retail mix includes Home solutions (Home centre), fashion (lifestyle, landmark International), value retailing (max retail), hypermarkets & supermarkets (Max), kids entertainment (Funcity).

They plan to invest Rs. 300 crores in the next two years to expand on Max chain, and Rs 100 crores on Citymax 3 star hotel chain. They have already instituted a separate company christened Citymax Hotels (India).

6. Piramal Group

Company Profile: In September 1999, Piramal Enterprises announced their arrival into retail with the launch of three retail concepts: India's first true shopping mall of international standards, called Crossroads; a lifestyle department store named Piramyd Megastore; and a 35

family entertainment centre known as Jammin. Piramyd Megastore and Jammin were anchor tenants for Crossroads (recently sold to Pantaloon for Rs 4 billion). In 2001, the group entered the business of food & grocery retail with the launch of TruMart supermarkets in Pune.

They have around 18 TruMart stores covering 1.90 lakh sq. ft. registering a turnover of Rs 37.6 mn in 2005. Piraymd Megatsore’s contributes more than 70 % to their retail mix with a turnover of Rs 112.8 mn. They plan to open 150 stores covering 75 mn sq ft of retail space in the next 5 years.

7. Subhiksha:

Company Profile: Subhiksha is a Chennai-based, decade old, no frills, food, grocery, pharma and telecom, discount retail chain. ICICI Venture Capital holds 24% in the equity capital of Subhiksha. It has more than 500 stores across the country covering a retail space of more than 1 million sq ft with a registered turnover of Rs 3.34 bn in 2006. It has a planned investment of Rs.300 crores to ramp up its operations to 1200 stores by 2008.

8. Bharti-Walmart:

Company Profile: Their plans include US$ 7 bn investment in creating retail network in the country including 100 hypermarkets and several hundred small stores. They have signed a 50:50 percent joint venture agreement with Walmart. Wal-Mart will do the cash & carry while Bharti will do the front-end.

9. Reliance:

36

Company profile: India’s most ambitious retail plans are by reliance, with investments to the tune of Rs. 30,000 cr ($ 6.67 bn) to set up multiple formats with expected sales of Rs 90,000 crores ($20 bn) by 2009-10.

There are already more than 300 Reliance Fresh stores and the first Reliance Mart Hypermart has opened in Ahmedabad. The next ones are slated to open at Jamnagar, followed by marts in Delhi / NCR, Hyderabad, Vijaywada, Pune and Ludhiana.

10. AV Birla Group

Company Profile: They have a strong presence in apparel retailing through Madura garments which is subsidiary of Aditya Birla Nuvo Ltd. They own brands like Louis Phillipe, Van Heusen, Allen Solly, Peter England, Trouser town.

In other segments of retail, AV Birla Group has announced investment plans of Rs 8000 9000 crores in the first 3 years till 2010.

The acquisition of Trinethra (food & grocery) chain in the south has moved their tally to 400 stores in the country. Their “More” range of 15 supermarkets are slated to open at Nashik, Pune and other tier II cities in Western India in 2007.

37

GREEN PRACTICES ADOPTED BY MAJOR PLAYERS IN SUPPLY CHAIN MANAGEMENT Green Retail: Green Retail merges Business growth with environmental sustainability, economic development and innovation for achieving sustainable development of a Business enterprise.

This will also cover socially amicable enterprise models, that “triple bottom line� together with bringing positive impact of environment in retail space.

By implementing sustainable practices, retail businesses can become more efficient and are saving big bucks in the process. Each eco-friendly idea that a retailer adopts makes a huge difference to our planet.

The process: After making the decision to go green, the retailers contact a local utility company for an energy audit. Many companies offer an audit, free of cost and recommend ways to 38

reduce costs. Some of you may not be well-versed with the energy audit companies and IT companies that provide environmental friendly retail solutions, for instance, IBM’s green retail solutions that help retailers create and leverage environmentally responsible options for their enterprise and supply chain management. There are innumerable options to better the retail services. To learn more about such initiatives, strategies, and methods and to understand the levels in the entire retail eco-system, there cannot be a better platform than Franchise India 2009, which will be held on November 26-27, 2009 at Hotel Ashok, New Delhi. Once the recommendations-list is obtained; a plan of action is created.

Following are the ways through which retailers reduce, reuse and recycle for improved social-responsibility: •

They recycle paper, aluminium, plastic, ink cartridges.

•

They reuse packing materials.

•

They choose double-sided printing when possible.

•

They go digital for bill payment, invoice, online banking etc to minimise paper transactions.

•

They replace disposable articles with permanent dishware.

•

They switch to rechargeable batteries.

•

They emphasise on the use of biodegradable and non-toxic cleaning products.

•

They deploy energy-efficient PCs, printers, AC, servers, and other equipments.

•

They regularly maintain all mechanical equipments.

•

They employ some indirect ways to conserve energy like using fans instead of AC, compact fluorescent bulbs etc.

Shopping bags: The biggest environmental issue that concerns a retailer is the use of plastic bags. Paper bag is also not the best choice. Some retailers provide shoppers with a low-cost, green 39

solution, by selling reusable bags. The other options can be best learnt at the Retail Knowledge Series, conducted at the event. Avail of the opportunity of the lifetime, to meet the stalwarts, from the retail industry, like Marie Louise Jacobsen, MD, Retail Management Solutions Pte Ltd, Singapore; Harminder Sahni, MD, Wazir Advisors, India, and Brendan Dorrian, CEO, Global Retail Networks, UK, Hemchandra Javeri, Retail Expert, Yuri Bolotin, Design Portfolio, Australia, Sonia Manchanda, IDIOM and many others.

Grass can be greener on your side of the fence too!

Indian Companies are feeling the pressure to go green, as many of their Western counterparts are building environmental sustainability into their business practices. For example, Wal-Mart, which annually imports over $3 billion in goods from Indian suppliers, recently asked them to adopt green practices or risk losing the retail giant as a customer.

For Indian companies, there are other compelling reasons to develop environmentally conscious practices. As leading companies know, going green, if done right, helps companies bolster their fortunes. Here are a few instances: When mounting electricity costs were eating into the profits of Tulsi Tanti’s textile business, he developed a wind energy system. Today, his company, Suzlon Energy, is one of the largest wind-turbine makers in the world.

Sensing a need in the market, the Maini Group launched Reva, an electric car that has an increasing customer adoption in India today. Reva has had a good response in Europe too.

Rahul Bajaj set up a wind-power generation system that today provides 90% of his plants’ energy needs, while realising savings of $5 million annually.

Committing To Green: While going green can prove a critical source of competitive advantage, it’s easier said than done. To achieve real financial benefits, Indian companies, like those elsewhere, need to follow certain key practices. Above all, they must commit to a green philosophy and incorporate environmentally sustainable practices into their product lifecycle and supply chain operations.

40

In order to go green, a company’s senior management and employees must believe in the philosophy, and commit themselves to implementing it. For example, at Cisco, CEO John Chambers and team are pushing in various green initiatives such as ‘let’s talk Cisco green’, bike-to-work day, preferred parking for hybrid cars, educational videos and green websites. These programmes have helped Cisco build a sustainable culture and formulate a strong green policy.

Leading companies in India are also committing themselves to the green cause. For example, Wipro recently launched Eco Eye, an ecological sustainability initiative that, among other things, ensures that the firm does not do business at the cost of ecology.

Wipro is increasingly focusing on energy efficiency and effective e-waste management.

For a company wanting to develop greener products, it’s important to put on a ‘green cap’ during idea generation and conception. These decisions affect the carbon footprint of an entire product lifecycle. Such an approach is far more efficient and cost-effective than making incremental improvements later. Nokia is an example. It is making eco-friendly phones with biodegradable phone covers and recyclable batteries. The company is also working towards reducing up to 50% of the energy consumed by mobile chargers. MRF, one of India’s largest tyre manufacturers, has created an eco-friendly tubeless rubber tyre that reduces rolling resistance and fuel consumption.

Green Supply Chain: For many companies, the supply chain is likely to be the operational area that impacts the environment. And that provides many opportunities for improvement. Recently, twothirds of the 300 organisations that responded to our Global Supply Chain Trends 200810 surveys have put environmental sustainability as a key factor in their global supply chain strategy.

There are many ways to ‘greenify’ a supply chain. Companies can reconfigure parts of the physical network to locate suppliers, manufacturing and customers near each other to reduce fuel consumption and other environmental costs. For greener sourcing, they can select suppliers with a green mindset. When it comes to manufacturing, these companies must know that lean often means green, since eliminating waste can also lead to reduced material usage and energy bills. For end-use and disposal, companies can develop after-life product recycling and take-back 41

programmes. Nokia, for example, has set up ‘green boxes’ across all Nokia dealers in India, where customers can deposit old mobile phones for recycling.

All these instances point to a green movement emerging in the country. And the right approach can turn this into a sustainable source of competitive advantage.

Indian retail sector all set to witness accelerated growth, says PwC-RAI study India’s robust macro and microeconomic fundamentals such as its GDP growth, higher income levels, increasing personal consumption, etc will accelerate the growth of the retail sector, according to a joint thought leadership study by PricewaterhouseCoopers (PwC) and Retailers Association of India (RAI) titled “Strategic Issues for Retail CEOs”.

The study looks at top-of-mind issues affecting retail CEOs. NV Sivakumar, Leader, Consumer and Industrial Products, PricewaterhouseCoopers said, “Retail CEOs' top-of-mind issues pertain to supply chain and operations, strategy and innovation, private labels, tax issues, workforce management, and sustainability and green marketing. Our study addresses the current thinking and practices on these issues."

The study, based on interviews with 20 CEOs and MDs at leading Indian and global organizations, secondary research and internal insights, explores six discussion themes mentioned below and presents relevant case studies for each of these themes: •

Supply chain and operations: Improving supply chains and operations will enable retailers in India to enhance competitiveness and successfully deploy growth initiatives.

•

Strategy and innovation: Strategy and innovation is a holistic concept involving the launch of new products, the creation of unique marketing strategies, the development of new distribution channels, the customization of products, etc.

Retailers are now embarking on innovative practices such as creating Indiainspired product lines, offering private label products and selecting, and accordingly, customizing the global product assortment for the Indian market.

•

Private label offerings: Retailers are launching a range of private labels products to meet the demands of value conscious consumers, to develop product portfolios

42

and to improve margins in an environment where efficiency and competitiveness are imperative.

•

Tax issues: Goods and Service Tax (GST) is likely to benefit retailers. The nation-wide implementation of a dual GST signals the next generation of tax reforms designed to address the barriers to trade and expand the tax base.

•

Workforce management: Workforce management practices are in the nascent stages of being developed in the Indian retail sector. Hiring in the retail sector is projected to increase in the future due to several new global and domestic entrants and the range of formats they plan to offer. Growth in the Indian retail sector and the corresponding demand for talent has highlighted the need for effective workforce management systems.

•

Sustainability and green marketing: Sustainability and green marketing initiatives will need to be addressed, as influences (such as government mandates, consumer awareness, competitor actions, etc.) converge and heighten. Green marketing and other sustainability practices are in the initial stages of being incorporated into modern trade.

Kumar Rajagopalan, Chief Executive Officer, RAI said, “While every top business house in India has recognized retail as the big sector to invest in and be a big player in this sector, retail CEOs are working with great enthusiasm to meet the exacting detail requirements of this challenging business. Opportunities are apparent; however the pitfalls are just as possible.”

Rajagopalan further added, “In a business wherein the competitive landscape changes every day and customer preferences are re-defined often, retailers have to keep perfecting their capabilities around place, people, price, product, communication, supply chain, vendors and processes. Every CEO knows that there are lots of areas for strategic investments and many are making active trade-offs to achieve supremacy on some of the aspects of retail business. Our study shows the various aspects that retailers are trying to master and win in the market place.”

43

Over the last couple of years, retail firms have steadily sought to reduce their carbon impact on the environment. Initiatives have come in the form of energy efficient buildings, reducing the amount of packaging materials used in the products, introducing bio-degradable carry bags, reducing the number of carbon miles of its products (partly by stocking products that are manufactured or produced in that particular region).

Retail firms and especially the big firms like Wal-Mart, Tesco have the power to influence its suppliers and thereby bring about a permanent change in the way our environment is affected.

According to a recent survey by Management Consulting Firm Capgemini, 87% of global customers stated that a sustainability factor will have a major influence in their buying behaviour. And this percentage is only going to increase with sustainable products costing as much as their non-sustainable counterparts.

Going green can be profitable for corporations while serving its corporate social responsibilities For a whole new generation being “green� is much more than being part of the hippy culture and for corporations it is a matter of running businesses consciously. Our planet is getting fragile by the day due to less availability of portable water, increased landfill by non-recyclable garbage and global warming due to increase in green house gases.

According to a research by Industrial ecologist Sangwon Suh of the University of Minnesota, service sector--such as banking, hospitals, computers and retail stores, amongst other businesses account for more than one third of industrial greenhouse gas emissions in the U.S. and this might be the case around the world. With such a big stake, it is time for the retail sector to adopt green practices. Currently retail companies have not focused much on such initiatives as it involves upfront investments in new recycling units, researching for bio-degradable packaging materials, overhauling existing structural materials for a more efficient building materials and introducing energy saving lighting systems and cooling systems.

But the benefits that accrue by going green will far outweigh the costs in the long run.

44

For one, a new generation of people that consists of Generation Y and Generation Z are more conscious of the environment and are prone to buy eco-friendly products. According to a survey by AMP Insights, 69% of Gen Y will consider a company's social and environmental commitment when deciding where to shop, and 83% will trust a company more if it is socially/environmentally responsible.

In fact they will be willing to pay a little extra as well. Research by Maritz designed to track Gen Y’s brand awareness among several popular clothing retailers predicts that 47% percent of the respondents are willing to pay more for environmentally friendly services, products or brands. Out of this percentage, the vast majority (77 percent) cited their “care about the environment” as the reason behind their willingness to pay more, with other qualifiers, such as “it’s the right thing to do” (21 percent) or “so that people know I’m environmentally aware” (2 percent) trailing behind. No wonder Wal-Mart consumer’s adoption for green products increased by 66% in 2008 compared to 2007.

Apart from tapping into a new segment of consumers, some retailers have improved their bottom-line (profits) by employing eco-friendly practices as well. IKEA Canada has reduced its energy consumption in its stores by 25 percent by implementing new energy management practices and technologies while Wal-Mart stores cut its energy use by 30% by incorporating energy-management systems. Aldi the fastest growing discount retailer is opening up environmentally friendly stores with the aim of a 30% reduction in its utility footprint.

Not to be left alone, major consumer product companies like Estee Lauder, Whole Foods, ConAgra, Procter & Gamble, and Unilever have also teamed up with packaging providers to develop sustainable packaging that uses recycled and renewable content, to reduce raw materials in weight and volume, and promote the use of biodegradable materials. The reduced size and use of lesser quantity of materials will help manufactures reduce the cost of products sold. According to Carbon Trust, an independent company set up by UK government, a 20% cut in energy costs represents the same bottom line benefit as a 5% increase in sales. No wonder, Wal-Mart has asked its suppliers to cut packaging by 5% by 2013. This they 45

say will take the equivalent of 213,000 trucks off the road saving 66.7 million gallons of diesel besides improving their profitability.

With such monetary benefits, it is the right time for retailers to take the green initiatives.

Materials some of the areas where retailers can focus are: •

Implementing energy management systems that offers control and monitoring of building services performances and allows for settings to be changed quickly and easily.

•

Going for LED lighting.

•

Using advanced refrigeration systems that require less conventional refrigerant and experience lower rates of emission.

•

Increasing overall recycling of solid waste from stores apart from reducing reliance on plastic and paper grocery bags.

•

Use of building that reduces leakage of heated or cooled air from the store.

For retailers, social responsibility and green initiatives can go hand-in-hand resulting in more loyal customers while managing costs. It is important that as responsible citizens retailers take a pledge to go green and what a better day to do so than today being the World Environment Day TEN Business Practices to GO GREEN!

1. Printing Less Stuff = Using Less Paper Paper makes up about 35% of our waste stream - even though it’s one of the easiest materials to re-use and recycle! You can help reduce this waste by using as little paper as possible, and being smart about the paper you do use. First of all, you don’t need to print every e-mail. Just organize your inbox to make e-mails easier to find and reference. You can encourage others not to print your e-mails as well. Make back-up copies of important files and e-mails and keep them on an external drive, instead of 46

storing boxes of paper files. When you do need to print important documents, make sure you use a sustainable paper, and set your printer or copier to print on both sides of the page.

2. Go Digital with Your Documents

A great way to reduce paper use and get contracts and documents signed more quickly is to use electronic signatures. Adobe Acrobat Professional allows you to sign PDF files digitally, as well as create PDF documents with signature fields for clients to sign. Or you could use software such as DocuSign or e-signature to securely sign documents and get signatures from clients and vendors. I send proposals, contracts, and invoices entirely through e-mail as PDF attachments. Clients can then e-sign the documents and send them back, and we both have a signed copy without having to print anything. I also use PayPal to send invoices, which gives me the ability to accept credit cards and receive instant payment.

3. Pull that Plug

You aren’t working all hours of the night (at least I hope not), so why does your computer need to be on? Turn off everything you possibly can before you leave the office each day. I plug my computer, printer, external hard drive, and other office gadgets into one power strip, so I can just turn it off to make sure none of my appliances are secretly pilfering energy. I also program my computer to turn off automatically at a certain time each night, just in case I forget. You can also set your monitor to turn off after a few minutes of inactivity. And never leave things like cell phone chargers plugged in when you’re not using them. They still draw energy, regardless of whether there’s anything plugged into them. Speaking of energy efficiency, make sure you stock your office with energy-saving appliances and compact florescent light bulbs.

4. Get Waste Wise

Recycling is never a chore when it’s easier than throwing something away. Place paper recycling bins in convenient locations all over the office, like right next to copiers and mail 47

boxes. Keep clearly labelled bins in several central locations such as break rooms.

Everywhere there is a trash can, there should be a recycling bin. If you have a cafeteria or break room in your office, consider adding a compost bin. An employee or neighbour with a garden wouldn’t mind the free plant food, and worm bins are compact with very little odour.

5. Work With Like-Minded Companies

Chances are, there are businesses in your area that are also going green or certified green.

Network with them and use their services when you need them. Part of being a green business is making sure that you do your best to ensure that your supply chain is green, too.

Seek out green vendors for your business needs, whether it be printing business cards, hosting your web site, or cleaning your office building.

6. One Word: Freecycle!

Need some shelves for your office and don’t have a budget for new furnishings? You never know what you might find on freecycle. One person’s junk is definitely another’s treasure. If you have a large company, you could even organize an office-wide barter party, where everyone brings items they don’t use any more to swap for things they might need from others. When you upgrade your office equipment after years of use, pass it on if it’s still useful. List it on freecycle or donate it to a charity that may need it.

7. Institute a Company Recycling Program for Electronics

In addition to recycling the usual paper, cans, and bottles in the office, don’t forget about the e-waste that is so essential to businesses and so toxic to the environment. When old electronic equipment finally bites the dust, don’t just toss it, but make it company policy to recycle everything you can. Recycling for Charities makes recycling e-waste like cell phones, cameras, and palm pilots a breeze - and you can choose which charity gets the proceeds from your recycled electronics! Many computer manufacturers offer take-back programs for old computers, so make use of them.

48

8. Slow the Flow of Junk Mail

Junk mail may be one of the most wasteful things known to man. When the plague of unwanted mailings seems to never end, there is something you can do about it. There are free services out there that will remove you from mailing lists, and you can also remove your name from the Direct Marketing Association’s member prospect list.

9. Build Your Office Green from the Floor Up

If you’re lucky enough to be able to afford an office remodel, go green from the floor to the skylights. Use eco-friendly flooring options made from renewable or recycled materials. Use sustainable fabrics made from hemp or bamboo for window coverings, or get them second hand. Lengths of bamboo make great curtain rods, too. Get lots of green building ideas at Green Building Elements.

10. Educate Yourself

There is always more you can do to make your business more sustainable. And the only way to make progress is to know where you’re headed. Keep up with environmental news and green business trends to identify areas you can improve on. Make your own checklist of green business practices to implement and set deadlines for crossing them off your list. Share green news and tips with your co-workers, employees, and clients. Making yourself an “expert” on sustainability will not only build your green brand, but it will earn respect from potential clients, customers, and your peers. Of course I’m biased, but I can’t think of a better resource than Ecopreneurist for green business tips, so check back often to learn how to keep your business on the path to sustainability.

Reasons and benefits of green concepts: Reasons: •

Opportunity 49

In India, around 25% of the consumers prefer environmental-friendly products, and around 28% may be considered healthy conscious. Therefore, green marketers have diverse and fairly sizeable segments to cater to. The Surf Excel detergent which saves water (advertised with the message—"do bucket paani roz bachana") and the energysaving LG consumers durables are examples of green marketing. We also have green buildings which are efficient in their use of energy, water and construction materials, and which reduce the impact on human health and the environment through better design, construction, operation, maintenance and waste disposal. In India, the green building movement, spearheaded by the Confederation of Indian industry (CII) Godrej Green business Centre, has gained tremendous impetus over the last few years.

From 20,000 sq ft in 2003, India's green building footprint is now over 25 million sq ft.

•

Social Responsibility Many companies have started realizing that they must behave in an environmentfriendly fashion. They believe both in achieving environmental objectives as well as profit related objectives. The HSBC became the world's first bank to go carbonneutral last year. Other examples include Coca-Cola, which has invested in various recycling activities. Walt Disney World in Florida, US, has an extensive waste management program and infrastructure in place.

•

Governmental Pressure Various regulations rare framed by the government to protect consumers and the society at large. The Indian government too has developed a framework of legislations to reduce the production of harmful goods and by products. These reduce the industry's production and consumers' consumption of harmful goods, including those detrimental to the environment; for example, the ban of plastic bags in Mumbai, prohibition of smoking in public areas, etc.

•

Competitive Pressure Many companies take up green marketing to maintain their competitive edge. The green marketing initiatives by niche companies such as Body Shop and Green & Black have prompted many mainline competitors to follow suit.

50

•

Cost Reduction Reduction of harmful waste may lead to substantial cost savings. Sometimes, many firms develop symbiotic relationship whereby the waste generated by one company is used by another as a cost-effective raw material. For example, the fly ash generated by thermal power plants, which would otherwise contributed to a gigantic quantum of solid waste, is used to manufacture fly ash bricks for construction purposes.

Benefits: Today's consumers are becoming more and more conscious about the environment and are also becoming socially responsible. Therefore, more companies are responsible to consumers' aspirations for environmentally less damaging or neutral products. Many companies want to have an early-mover advantage as they have to eventually move towards becoming green.

Some of the advantages of green marketing are: •

It ensures sustained long-term growth along with profitability.

•

It saves money in the long run, thought initially the cost is more.

•

It helps companies market their products and services keeping the environment aspects in mind. It helps in accessing the new markets and enjoying competitive advantage.

•

Most of the employees also feel proud and responsible to be working for an environmentally responsible company.

Emerging trends However, retailing is still in its infancy in India and it's only a matter of time before these shortcomings get addressed. A study conducted by KSA Technopak showed that while it has taken 15-20 years for organised retail to attain 25 per cent of market share in developed nations, the Indian industry is expected to achieve the same in 10-12 years. This is because domestic players can learn from the experiences and best practices of their Western 51

counterparts. Gupta further explains, "Even in the mature markets there is a fundamental difference in the way retail has developed in Europe and the US. In the US, retail arrived after brands were established. So the capabilities of US retailers mainly revolved around managing supplies and logistics. While in Europe, retail existed even before brands were established. Hence, European retailers have also focused on product development along with supply chain development. Currently, we are seeing European retailers such as Marks & Spencer and Mothercare UK entering India before American retailers. This is good for Indian retail, as we need to develop both supply chain as well as product capabilities. And this will create better skills in Indian retail."

With the presence of established international players in India, new trends are likely to take shape. One trend that is already visible in some quarters is specialty retail. Looking at the consumer electronics segment, there are new brands on the horizon such as Croma by the Tata Group, eZone by Pantaloons and Reliance Digital by Reliance Retail. However, Karwal points out, "These players are mostly selling discounted products, which is a wrong approach.

A specialty retailer need not be a discounter, rather an expert who can explain about a particular product category in depth. Therefore, new players should invest in developing depth of product categories."

Another trend with a lot of promise is multichannel retailing. Shoppers Stop has started with Argos, promoting catalogue shopping; Pantaloons has initiated FutureBazaar, an online equivalent of its Big Bazaar stores; Hindustan Lever has forayed into telephonic retail with Sangam Direct. "A retailer needs to select channels based on the product categories it is offering and see which channel will fit best," suggests Karwal. "Hence, catalogue retail will play a major role in gift items and accessories, which would save the consumer's double effort of buying and then sourcing it to its destination," he predicts. Similarly, the internet can be a powerful channel for products that require specification comparisons, such as consumer electronics.

Looking from the point of view of consumers' convenience, Gupta says, "New players must have the right internet infrastructure, home delivery mechanism and an efficient inventory management." Shrikhande adds, "In order to operate across multiple channels, retailers must have upgraded technology and efficient supply chains."

"So far the focus was to gain presence in the market. Retailers only concentrated on land-grab and talent-grab. However, the current scenario is forcing retailers to look into improving their

52

internal processes and efficiencies. Hopefully, this will ensure that most retailers come out stronger,"

Examples of some retail companies:

SHOPPERS STOP: Location: Navi Mumbai, Mumbai, Delhi, Chennai, Bangluru, Hyderabad, Pune, Kolkata.

Opening date: 1991 Developer: K. Raheja Management: B. S. Nagesh (Customer Care Associate & Vice Chairman) Govind Shrikhande (Customer Care Associate, President & CEO) No. of stores: 27 53

Industry: Retail Website: http://www.shoppersstop.com/ Retail giants such as Shoppers Stop have adopted many of the technologies associated with eco-friendly computing and built governance processes around the management lifecycle from procurement to disposal.

•

Company implemented storage virtualization around two years back, while server consolidation and virtualization gained momentum in 2007-08.

•

Shoppers Stop, asserted, “Eco-friendly computing has gained awareness and momentum since 2008 and going into 2009 we see the positive impact being felt by organizations, according to Arun Gupta, Group CTO.

•

By end 2009, we will virtualize almost all our computing server infrastructure wherever possible.

•

It also implemented policies on end-user computing devices for efficient power management which helps us in reducing power consumption.” Trends in eco-friendly computing.

•

Cloud computing and green IT, arguably the most talked about trends in 2008, will hit mainstream audiences in 2009 as companies look to the pair to help cut costs and raise efficiency.

•

Emergence of next generation, zero carbon data centres, which are powered completely by renewable sources of energy such as wind and hydroelectric power plants.

•

Technology-wise, solid-state disks and storage-class memories are emerging as a viable and greener alternative for disks and tapes.

•

Reduplication and data optimization, which offer a cheaper and still greener alternative for conserving storage space, are expected to be more widely adopted in

54

the next few years, especially by those who are unable to afford costly green IT assets.

•

Technology will be a key enabler of green initiatives—the network can become a platform to transform how global environmental challenges are managed.

•

Concepts such as alternate and renewable sources of energy, re-cycling, e-waste management, green architecture, eco-friendly computing, green data centres, virtualization, power management and reducing the corporate carbon footprint will gain priority on corporate agendas.

WAL-MART Type: Public (NYSE:WMT) Founded: Rogers, Arkansas, U.S. (1962) Founder(s): Sam Walton Headquarters: Latin American headquarters: Miami, Florida, U.S. Area Served: Worldwide Key people: Mike Duke (CEO)

55

H. Lee Scott (Chairmen of the Executive Committee of the Board) S. Robson Walton (Chairman) Industry: Retailing Product: Discount Stores Supercenters Neighborhood Markets Employees: approx 2, 100, 000(2008) Website: http://www.walmartstores.com/ http://www.walmart.com/

Wal-Mart Stores, Inc. is an American public corporation that runs a chain of large, discount department stores. It is the world's largest public corporation by revenue. The company was founded by Sam Walton in 1962, incorporated on October 31, 1969, and listed on the New York Stock Exchange in 1972. Wal-Mart is the largest private employer and the largest grocery retailer in the United States. It also owns and operates the Sam's Club retail warehouses in North America.

Walmart operates in Mexico as Walmex, in the United Kingdom as Asda, in Japan as Seiyu, and in India as Best Price. It has wholly-owned operations in Argentina, Brazil, Canada, and Puerto Rico. Wal-Mart's investments outside North America have had mixed results: its operations in the United Kingdom, South America and China are highly successful, while it was forced to pull out of Germany and South Korea when ventures there were unsuccessful.

Incorporation and growth The company was incorporated as Wal-Mart Stores, Inc. on October 31, 1969. In 1970, it opened its home office and first distribution center in Bentonville, Arkansas. It had 38 stores operating with 1,500 employees and sales of $44.2 million. It began trading stock as a publicly held company on October 1, 1970, and was soon listed on the New York Stock 56

Exchange. By this time, Wal-Mart was operating in five states: Arkansas, Kansas, Louisiana, Missouri, and Oklahoma.By its 25th anniversary in 1987 there were 1,198 stores with sales of $15.9 billion and 200,000 associates.

Key initiatives: In October 2005, Wal-Mart announced it would implement several environmental measures to increase energy efficiency.

The primary goals included spending $500 million a year to increase fuel efficiency in WalMart’s truck fleet by 25% over three years and double it within ten, •

Reduce greenhouse gas emissions by 20% in seven years,

•

Reduce energy use at stores by 30%,

•

Cut solid waste from U.S. stores and Sam’s Clubs by 25% in three years.

•

Use only renewable energy sources and produce zero waste.

•

The company also designed three new experimental stores in McKinney, Texas, Aurora, Colorado, and Las Vegas, Nevada with wind turbines, photovoltaic solar panels, bio-fuel-capable boilers, water-cooled refrigerators, and xeriscape gardens.

•

Becoming the biggest seller of organic milk and the biggest buyer of organic cotton in the world,

•

Reducing packaging and energy costs.

•

Wal-Mart also spent nearly a year working with outside consultants to discover the company's total environmental impact and find where they could improve. They discovered,

•

Eliminating excess packaging on their toy line Kid Connection, they could not only save $2.4 million a year in shipping costs but also 3,800 trees and a million barrels of oil.

57

•

Walmart has also recently created its own electric company in Texas, Texas Retail Energy, and plans to supply its stores with cheap power purchased at wholesale prices. Through this new venture, the company expects to save $15 million annually and also lays the groundwork and infrastructure to sell electricity to Texas consumers in the future.

Operating divisions Wal-Mart's operations are organized into three divisions: Wal-Mart Stores U.S., Sam's Club, and Wal-Mart International.[40] The company does business in nine different retail formats: supercenters, food and drugs, general merchandise stores, bodegas (small markets), cash and carry stores, membership warehouse clubs, apparel stores, soft discount stores and restaurants.

WESTSIDE: Type:

Private Conglomerate (BSE)

Founded:

1868

Founder(s):

Jamshetji Tata

Headquarter: Mumbai and Navi Mumbai, Maharashtra, India.

58

Key People: Ratan Tata N A Soonawala J J Irani R K Krishna Kumar R Gopalkrishnan Ishaat Hussain Kishor Chaukar Arun Kumar Gandhi Alan Rosling Industry:

Retail

Employees: 350,000 (2008) Website:

http://www.tata.co.in

Concerns over increasing carbon footprints and pressure from regulatory bodies have driven global companies towards green supply chain practices. A study of 335 global enterprises, titled Building a Green Supply Chain, done by the Aberdeen Group in March showed that as many as 87 percent of the respondents have adopted green practices in their supply chain.

Back home, Westside Ltd is among the few early birds who have woken up to the reality.

With its Green Dealer Development Programme and Green Vendor Development Programme, it has tried to address the issue on an end-to-end basis. In conversation with Vikram Kasbekar, Head, Operations and Supply Chain at Hero Honda Motors Ltd, shares his experience in introducing and sustaining the green practices. Excerpts: •

Eco-friendly practices adopted supply chain.

They have taken an initiative to eliminate cardboard packaging for all input materials and replace it with reusable bins, trolleys and pallets. They also ensure that all inward material-bearing trucks carry empty trolleys, bins and pallets on their return trip. This has tremendously helped us in reducing waste as well as saving costs on packaging.

These apart, they are working towards elimination of hazardous materials from their 59

manufacturing process. For example, they have currently attained a completely asbestos-free product line. They are also in the process of replacing toxic hexavalent chrome with non-toxic trivalent chrome for electroplating. In a country that hasn't yet fully awakened to the concept of green practices in business operations.

•

Difficulties facing by an attitudinal change among supply chain partners.

It was indeed very challenging to bring about an attitudinal shift. Initially they did a lot of handholding to implement their green supply chain initiative in its full scope.

One major apprehension on the vendors' and dealers' part was the idea of being saddled with unnecessary management systems, which may not be synergetic with the existing management practices at their end. Part of the action plan was to convince their supply chain partners regarding the effectiveness of the investment in capital and management efforts. The efforts have borne fruit by way of energy savings and resource conservation, not only for them but for others as well.

•

Other roadblocks: A major problem was the mindset that investments beyond the bare minimum in environmental management systems will not yield returns beneficial to any organisation. However, the returns on investments (ROIs) made by them in the environmental management systems in the last three to four years.

•

Alignment with external agents in pursuing green supply chain.

They have actively engaged with the Confederation of Indian Industries (CII) and other supplementary resource agents at different levels for the implementation of their green initiatives. The CII has primarily been involved in the design as well as implementation of the programme with their vendors. In the implementation stage, they have been augmented with other supplementary agencies.

60

•

Benefit supply chain and overall business by green practices.

The eco-friendly practices have benefitted entire supply chain and have also helped in arriving at better management systems. For instance, it helps in attainment of better waste management system through segregation of waste into recyclable and nonrecyclable categories. Similarly, recycling water has helped better water conservation.

Energy conservation has been achieved through installation of energy-efficient devises, such as CFL, natural lighting, etc. Moreover, stack monitoring and emission control have led to pollution control.

•

Plans of expansion of the green supply chain initiative.

They shall be shortly setting out to initiate the phase II of our green supply chain initiative with dealers. Additionally, they shall be initiating their drive to develop and deploy carbon neutral technology and processes.

•

Their viewpoint on future of green supply chain in India.

There is a lot of potential in green supply chain practices in India in the medium to long term.

RESEARCH METHODOLOGY Research Design The project contains the “Descriptive Research Design” i.e. using the available secondary data to gain insight into the Green practices adopted by Indian retailers in Supply Chain Management.

Data collection The objectives of the project are such that secondary data is required to achieve them. So, secondary data is used for the project. The modes of collecting secondary data for this research are magazines, books, newspapers, and websites.

61

RECOMMENDATIONS:

Following are some best practices from world-class organizations in establishing green supply chains: •

Get buy-in throughout the enterprise: As with any change you want to implement within your organization, it’s critical to have buy-in from corporate management as well as business units throughout the organization. Create cross-functional teams to address the green supply chain issue, and establish an action plan and guidelines for instituting changes throughout your organization. Involve users in helping to design a green supply chain.

62

•

Determine which criteria are important in vendor selection: In the cross-functional teams you have established, identify which values-based criteria your organization considers key, such as, green values, corporate social responsibility, etc. Decide the metrics you will use to measure your suppliers against these values.

•

Find efficiencies so purchasing professionals can focus on strategic issues : Purchasing professionals will be the gatekeepers to ensure that your organization is following its procurement goals. Look for ways to streamline processes and use automation to handle transactional operations, so purchasing professionals can focus on strategic issues. Their time will be better and more strategically spent in areas such as evaluating and monitoring vendors and rewarding top vendors.

•

Serve as a role model for the supplier community: Make sure your organization is living the same green values that you are expecting from your suppliers. One easy and effective way to achieve that is to cut down on paper usage in your organization.

Invoices represent the largest number of legally required documents within companies; a typical invoice usually has two to 10 times more supporting paper documents than the invoice itself – documents such as goods received, contracts, etc.

By automating invoice processing, organizations can drastically reduce paper usage as well as benefit from increased efficiencies.

•

Make sure you can support the policies you establish: Before you automate Purchaseto-Pay operations, establish sound procurement and payment processes. These processes should be flexible, easily adaptable and easy to use. Then you can implement a rules-based e-Procurement system to incorporate your procurement criteria – e.g., green standards – into the purchasing process. Look for technology solutions with a high degree of automation to increase ease of use and free up the time that purchasing staff needs to spend on transactions. Also, an automated solution should be agile enough so you can change the business rules along with your changing business requirements and priorities.

•

Encourage broad user adoption: The success of the green supply chain heavily depends on user adoption. Too often organizations are faced with the challenges of maverick direct buying, with employees purchasing off-catalog. Because of this, many companies don’t know the extent of their liabilities and financial exposure.

63

They are not only missing out on volume discounts but they also have little control over or visibility into their purchases and payments. When implementing technology, it is critical to focus on the end-user experience. Automated e-Procurement systems should be extremely easy to use to encourage usage on every desktop.

OTHER RECOMMENDATION:

•

Coordinating the Supply Chain with modern techniques.

•

Collaborative Planning, Forecasting, and Replenishment.

•

Starting Supply Chain Collaboration.

•

Use of Information Systems, internet and latest technology as Distribution Channel for retailers.

•

Develop consistencies in supply chain operations to improve short and long term goals.

•

Understand how Green Supply Chain Analysis can target wasted material, wasted energy, and underutilized resources.

•

Focus on source reduction programs to drive higher value improvements.

•

Overcome executives’ misconceptions of how the green supply chain will impact their costs in operations.

•

Define Green Supply Chain projects to add business value to your organization.

•

Promote alignment through suppliers and customers which result in better alignment of business processes and principles.

•

Integrate Environmental Aspects into Manufacturing Activities.

•

Engaging with suppliers on climate change issues.

•

Understand the importance of measuring your corporate carbon footprint.

64

•

Realize economic benefit of environmental efficiency and packaging.

•

Identify the hidden costs in energy consumption, transportation costs, inventory carry costs and material handling costs

•

Collaborate with distributors to develop more environmentally friendly packaging.

CONCLUSION The green movement has taken hold in organizations across the globe. Companies recognize that green initiatives not only support corporate values but also play a critical role in how an organization is perceived by its customers, employees, partners and the community at large.

65

Over the past few years, companies have been exploring ways to reduce, reuse and recycle, ranging from costly initiatives such as constructing LEED (Leadership in Energy & Environmental Design) certified buildings to establishing energy-efficient data centres and supporting environmental practices in the workplace. An emerging area in corporate environmentalism is the green supply chain. Companies on the leading edge of this trend are interested in selecting suppliers not only based on the traditional criteria of price, quality and reliability, but also based on how well they comply with corporate social responsibility initiatives and environmental issues.

Recognizing that the partners they choose can be a reflection of them, companies have been assessing their suppliers to ensure that they follow fair labor practices, employ ethical behaviours, and use safe materials. Now, companies are also considering their suppliers’ environmental practices. They may soon require that their suppliers comply with environmental practices and other areas of social responsibility.

By implementing a green supply chain and supporting it with sound, automated processes, you will benefit from greater control and visibility into the Purchase-to-Pay operations.

Purchasing and accounts payable professionals will have more time to focus on spend management and cash flow and provide key financial information to business units. These corporate benefits, combined with the positive impact on the environment and on your corporate reputation, offer a strong value proposition. The green supply chain not only raises the stakes in corporate responsibility, but it is also a winning business strategy for companies in the 21st Century.

The Green Supply Chain is almost a case of double think. In a world where global consumerism and mass production strangle the earth of resources, to imply that the supply chain is “green�. The very fact the "green" has almost become a brand in itself. Corporations are the driving force behind mass consumption, forever thinking of new and inventive ways to sell more and more products, making consumers needlessly want. It seems ridiculous that a corporation would promote itself as being green, by making their offices zero carbon etc, in the attempt to make itself more appealing to sell more products to consumers. That extra profit will ultimately use more resources and release more carbon than the "zero carbon" offices could ever hope to save.

66

So instead of anyone doing anything sensible, the population will all believe they are being "green" saving the planet, because they are buying more and more products from corporations that have implemented a few green decoys and tell them their products are "green", probably because they simply painted them that colour.

REFERENCES

Books: 67

•

Gunasekaran A, Patel C, McGaughey RE (2004) A framework for supply chain performance measurement.

•

Gunasekaran A, Tirtiroglu E (2001) Performance measures and metrics in a supply chain environment.

•

Michael Armstrong (3rd Edition) Performance Management: Key Strategies and Practical Guidelines.

•

Peter Meindel, (2007) Supply Chain Management.

•

Schwarz LB (2004) The stat of practice in supply chain management: a research perspective, in-applications of supply chain management and e-commerce research in industry.

Source: India Retail Report

68