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Retail & Consumer Industry - page 27 / 88





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The Indian retail supply chain typically faces the following issues—

Presence of multiple intermediaries Supply chains in India involve multiple intermediaries.

  • The agri-produce supply chain in India typically has five players compared to three in mature markets; this leads to higher lead times, costs and wastage.

  • Intermediaries hoard margins and reduce both the price paid to producers and the margins for retailers. Indian farmers typically receive approximately 30 percent of the retail price compared to average 50 percent globally. Some of the major players in the Indian retail sector are addressing this issue through disintermediation and approaching wholesale markets directly.

The presence of multiple intermediaries leads to: High lead times, High costs and High wastage. Lack of suitable infrastructure

Despite increased investments in infrastructure development, the availability of infrastructure in terms of good roads, cold chains, etc. remains limited.

  • Infrastructure is a point of concern since the quality of roads requires major improvement.

  • Logistics costs, as a component of total costs, are very high.

  • Quality transportation partners are rare, given the fragmented truckers market.

  • The third-party logistics industry is at a nascent stage with limited capabilities leading to only 30 percent of retailers outsourcing logistics completely compared to more than 50 percent globally.

  • The absence of a suitable cold chain infrastructure leads to wastage levels of around 20 to 40 percent of agricultural produce and perishables.

Lack of adequate infrastructure and elements leads to: High logistics costs, High lead times and High wastage.

Lack of integration with suppliers Operations of retailers and their suppliers are not adequately integrated in India.

  • Best practices like vendor-managed inventory and cross docking are in the early stages of being adopted.

  • Innovative methods to aggregate the fragmented supplier base need to evolve to enable better integration of suppliers into supply chains.

Lack of integration among supply chain leads to: high lead times, high costs and limited supplier flexibility.

Increased demand from consumers

In addition to growing briskly, the Indian retail sector is experiencing increasing demand from customers for product variety, shorter lead times, etc. which, when coupled with intense competition, is leading to increased supply chain complexities and mandating a new focus on developing world- class supply chains. Key aspects contributing to supply chain complexity include:

  • Geographically spread market

  • Fragmented market (especially rural markets)

  • Regional variances in demand patterns, and hence a need for information visibility and need to

understand nuances of the local markets

  • Value driven consumer, hence need for cost efficiency

To create strong customer value propositions, retail chains need to: be more cost effective, provide fresher products (reduce lead times), provide better product assortment (high product variety) and have better reach.



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