RIL buys into Deccan 360 to bolster logistics support for retail chain

RIL buys into Deccan 360 to bolster logistics support for retail chain

By fe Bureau

Mukesh Ambani-led Reliance Industries (RELIANCE.NS : 1084.25 -6.45) (RIL) on Friday said it has stepped into the aviation space as a "strategic investor" by picking up over 26% stake in Captain GS Gopinath-founded cargo airline, Deccan 360.

Though both the companies did not quantify the investment, reports speculated the deal to be in the $20 million-$30 million range (Rs 90 crore to Rs 130 crore). RIL's stake would be 'over 26% but below 50%'.

RIL said one of its wholly-owned subsidiaries would provide the growth capital for the new cargo airline, though it did not name the subsidiary. The investment will help RIL secure a logistics support to its retail network. Reliance Retail Ltd, an arm of RIL, operates 900 stores in 80 cities across 14 states in India, according to the company's annual report of March 2009. Although Reliance Retail operates stores across various retail segments, the air cargo foray would specially help the company in its perishables business that it runs through the 'Reliance Fresh' brand of stores.

Perishables have to be transported across cities without time lapse, and the company can keep its costs under control by operating its own cargo flights rather than lease out other aircraft. Most of the aircraft available on lease are old and are fuel-guzzlers, calling for high operating costs. On the other hand, buying a new aircraft can be expensive, and the delivery would take at least three years. Significantly, among the assets of Deccan 360 are 60 warehouses spread across various cities.

In a statement, RIL's chairman and managing director Mukesh Ambani said, "We believe that our collaboration with Deccan 360 will see a transformation in the logistics domain in India."

The company further said that RIL's investment would help Deccan 360 increase its air and surface network coverage across the country. RIL's share dipped 0.64% to close the day at Rs 1,083.30 on the Bombay Stock Exchange (^BSESN : 17591.18 -48.08) on Friday.

Gopinath, who founded the low-cost airline Air Deccan in 2003, but subsequently sold it to Vijay Mallya-led Kingfisher Airlines in 2007, said, "We want to make it clear that it is not a share sale. We would rather say they (RIL) have invested in the company via a fresh issue and RIL would have two nominees on Deccan 360's five-member board of directors." Gopinath launched Deccan 360 in 2009 with its hub in Nagpur.

Deccan 360 has an employee strength of 300, and a network of 60 franchises with an additional workforce of 1,500. It is present in 50 cities and would expand to 100 cities in the next 12-18 month, Gopinath said. The air freight business in India has grown 10% by volume in the first three quarters of 2009-10, year-on-year, according to government data.

Diamond makers ask DTC to widen supply chain

MUMBAI: Encouraged by the economic revival, Indian diamond manufacturers have urged Diamond Trading Company (DTC) — the distribution arm of diamond mining giant De Beers and the world’s largest supplier of rough diamonds — to widen its supply pipeline to the country. However, DTC, while acknowledging that its major markets are emerging out of the woods, has said it prefers to remain cautious, as the global consumer demand for luxury goods has not fully recovered from the pre-crisis levels.

“We have asked DTC to increase India’s share of rough diamonds supplies and it has agreed to do so, albeit in a measured manner so as not to flood the market at a time when it believes demand is yet to recover to the pre-crisis high levels,” said Sanjay Kothari, former chairman of Gems & Jewellery Export Promotion Council (GJEPC) and currently a convener for marketing and promotions of the industry body.

Earlier, Varda Shine, CEO of DTC, whose Indian itinerary comprised back-to-back meetings with the company’s sight holders this week, told ET: “De Beers is encouraged by much stronger levels of demand (for rough diamonds) than it witnessed at this time in 2009, and history has shown that the demand generally rebounds strongly in the post-recessionary period, as manufacturers and retailers look to re-build their inventories. We will continue to take a prudent approach to production in 2010. Whilst production is planned to increase over 2009 levels, it is not expected to return to historic highs for the forseeable future.”

Production of rough diamonds by De Beers reduced by half from 2008 levels to 24 million carats in 2009 due to the recession, which caused prices to hit rock bottom. Thanks to rough prices, which had gone up by 3 times in the January-March quarter this year from the same period in 2009.

De Beers plans to increase production to 31 mn carats this year.

According to a source, DTC recently extended its three-year supply contracts with sight holders by a year without changing the terms of the contracts.

The extension will start on March 31, 2011, and run until March 30, 2012. A new three-year supply contract will now come into effect in 2012.

DTC handles nearly half of the world’s supply of roughs by value, supplying the diamonds to 74 sight holders under Supplier of Choice contracts worldwide, of which 28 are based in India. De Beers mines rough diamonds from Botswana, Namibia, South Africa and Canada. India is a global hub for the manufacture of polished diamonds, with 11 out of 12 diamonds sold in the world market being cut and polished in the country. DTC sells the rough diamonds to its sight holders or clients based in India, who, in turn, cut and polish the diamonds and sell them to retailers. DTC sight holders based in India, include Rosy Blue, Shrenuj, Dimexon and Blue Star.

The diamond industry’s call for an increase in roughs supply from De Beers could not have come at a more appropriate time, as cut and polished diamond exports from India have grown by 20.11% to $17.54 billion in FY10 from a year earlier, according to the GJEPC, which released the FY10 export data in New Delhi on Friday.

Cut and polished diamond exports were the main drivers of the 16% growth in gems and jewellery exports to $28.41 billion in FY10. Against the close to 62% share by value of diamonds in the total gems and jewellery basket, gold jewellery accounted for 31.17%. In value terms, India’s diamond share in the world market also witnessed an increase in FY10 from 60% to 70%. According to GJEPC, the performance of this industry is critical, as it contributes 13% to India’s total merchandise exports.

Other Supply Chain blog

http://lean-supply-chain.blogspot.com/

Keep Your Demand Forecasts Up-to-Date

The reorder point world for a moment, it’s easy to understand why keeping an up-to-date forecast wasn’t of paramount importance. After all, once the order has been created, the forecast has done its job. If things start to change quickly, there’s no point in changing the forecast because you’re within the lead-time. Your only option is to change the order quantity or attempt to expedite. If things do go according to plan, you won’t need to take any action until the item comes up for order review again, at which time you’ll just be accepting or rejecting the resulting order quantities anyway. Contrast this with a time-phased planning environment. Ideally, there is no order review. The system is constantly re-calibrating itself and making necessary adjustments on a daily basis. Put another way, the system automatically conducts an order review for every item every day. In addition, the demand forecast is used to plan activities well beyond the lead-time – changes that are happening today will affect the entire planning horizon. Because the forecast has a greater purpose than just making order suggestions, the ordering lead-time is irrelevant in the demand planning process. And while it may be too late for a forecast change within the lead-time to impact purchase orders that are in transit, the entire forecast horizon should be managed the same way to protect the integrity of the entire plan.

2. Use the Operational Forecast to Validate the Sales Plan

Few people will dispute the value of having a sales plan. It’s a great tool for
focusing and motivating marketing efforts to achieve a goal. Although a lot of
work and analysis goes into formulating this plan, it must be recognized that the assumptions that went into its creation become more outdated with each passing week. By contrast, the 52-week operational forecast is constantly updated with new information from the market at item level. This gives the marketing department an unprecedented ability to directly compare the operational forecast (rather than just history) to the budget. Variances can be continually tracked to identify root causes and take action to get the plan back on track: Which of the original budget assumptions aren’t coming true? Do I need to schedule more promotions for a category or beef up the assortment in another? The decisions made would feed back into the operational demand planning process (in the form of promotional or new item forecasts, for example) and cycle through again. While it may be tempting to want to stick with the original plan, it’s always a wise practice to defer to the most recent information from the market. Hoping for the plan to come true is not really a strategy. By always using up-to-date information to make course corrections, the sales plan has a greater chance of becoming a
reality.

3. Measure the Process, Not the People

While it’s important to measure the output of any process, how you use these measures is even more important. A common misconception is that the best path to forecast accuracy is to make demand planners accountable for it. While accountability is a key ingredient for improving any process, you have to make sure that people are only held accountable for things that are within their scope of control. If you think about most supply chain activities, with some concerted effort, near perfection is an attainable goal. Think of inventory record accuracy, data accuracy, on-time delivery – with the exception of unusual circumstances, these things are largely controlled within the process. The only failures that can’t be weeded out through root cause analysis and procedural change are those things that are completely unavoidable. As a result, the processes that produce these outputs can reach for specific goals (98% bin-level accuracy, 95% perfect orders,
95% on-time delivery) and failures can easily be traced back to find the root
cause. Contrast this to the demand planning process – to achieve a perfect result would require predicting the future with 100% accuracy by item by week. While several factors that influence demand can be internally controlled (e.g. pricing, promotion strategy, market penetration), there are countless others that can’t (e.g. weather, geopolitical events, consumer sentiment and plain ol’ randomness!). With so many uncontrollable influences, successful demand planning is not so much about trying to achieve a particular goal for accuracy as it is about:

• Understanding and managing the things you can control to try to
produce a better result and;

• Reacting quickly when one of the uncontrollable influences takes you
by surprise Perhaps a better way to think of measuring (and, by extension, improving) the demand planning process is within the scope of the methods of statistical process control, pioneered by management guru W. Edwards Deming.

i2 - Supply Chain Management For A Better World

http://www.youtube.com/watch?v=6rmV__Yrk7Q&feature=player_embedded#

Queuing Management - Video

Intersting video

http://www.youtube.com/watch?v=zDsb0lGFj-k

Workshop on Supplychain - Yeh dil mange more!!!

http://supplychainstudy.blogspot.com/2009/07/workshop-on-supplychain-yeh-dil-mange.html

Retailers are turning to analytics to tell them where to open new stores, what to sell and how to optimise their supply chains

An interesting article in Economic times

Suchitra and her friends are among the regulars at the Shopper’s Stop store at Inorbit Mall, Mumbai. More often than not during her shopping jaunts, if she opted for an ethnic ensemble, she’d make the trip upstairs to the first floor, to pick out a pair of shoes to go with it. One day, when she walked into the store, she was pleasantly surprised to find that the foot-wear section had been moved to the level below, right next to the Indian wear section She hadn’t planned to buy anything that day, but that’s exactly what she ended up doing. Ethnicwear, shoes, the works.
To Suchitra, it seemed just a coincidence that the footwear section happened to have been moved just where she wanted it. But coincidence, it wasn’t. Rather, the move was the result of an adjacency analysis conducted by Shopper’s Stop, which after sifting through 24 months of customer data, found a pattern wherein it was found that women who buy ethnicwear (salwar-kameez-dupatta) tended to buy footwear as well. Based on this insight, Shoppers Stop moved its footwear section from the first floor to the ground floor where the ethnicwear section was located. Soon enough it found, that this translated into a 25% growth in sales.
Welcome to the world of analytics. Providing retailers valuable insights to decide on where to operate, what to stock, which customers they should try and retain, how to communicate to them and even how to minimise own-store cannibalisation. That’s analytics, the gospel which is increasingly playing a more critical role in the retail business in India.
Most retailers today have revved up on using analytics inside their stores. Shopper’s Stop, for instance, has used analytics to start an internal programme called ‘First Insight’, which leverages its ‘First Citizen’ loyalty database. This has a nine-year historical track of every stock keeping unit (SKU) every First Citizen consumer ever bought from ther retail chain, and in that, reflects the actual buying behaviour of the Indian consumer.
“To benefit from this data we work on models such as analysis of buying behaviour to support merchandise planning,” says Vinay Bhatia, VP - marketing & loyalty, Shopper’s Stop, who also manages the analytics team.
Analytics is being used in the retail sector in three broad areas — studying customers, analysis of transactional data and for predictive modelling. In the first instance, retailers try and track their prime customers, their locations, their lifestyle, socio-economic background and even their level of maturity as buyers. Transactional data throws light on areas like layout planning and adjacencies, where merchandise is moved from one area in the store to another to maximise sales.
The third area is probably the toughest and yet extremely critical — predictive modelling. Using this, retailers can get an idea of how customers’ upgrade their purchase behaviour, categories they might be interested in the future as per changes in lifestyle and where to set up future stores depending on the future lifestyle of consumers in a catchment area. “Retail analytics are very important to ensure the ‘right product, at the right time in the right store’. We have used retail analytics to optimise our supply chain as well,” says Rakesh Biyani, CEO (retail), Future Group. Number Gazing
PRIOR TO opening a Shoppers Stop store at South City Mall in Kolkata, the company studied the buying patterns of ‘First Citizens’ residing in South Kolkata and shopping at the Elgin Road Forum store. This indicated that these customers were shopping for accessories more frequently as compared to apparel. Based on this insight, Shoppers Stop dedicated a much larger space to the beauty section at the new store. “To target better, we have also classified our database into segments — value, premium and bridge-to-luxury shoppers (BTL), and groups based on cultural and occupational affinity,” adds Bhatia.
Like Shopper’s Stop and the Future Group, most retailers can’t stress enough on the importance of analytics in the days to come. Analytics is also a tool likely to be used by retailers to expand their network in the coming time. Therefore, a scientific assessment of the catchment is a departure from the manic retail expansion spree witnessed couple of years back in the market. Says Spencer’s Retail head (consumer insight and consumer intelligence) Pankaj Mishra: “In our future expansion, we would do more of primary research to understand market potential value of the catchment areas. Such analysis helps us in deciding where to open, which format to go for and how many stores to open. Consumption expenditure analysis, category-wise analysis, market potential value analysis are also some of the research exercises undertaken before a robust expansion strategy is drawn up.”
According to Biyani, by monitoring demand rate at stores, the group has been able to push sales in many cases by up to 300%. “Close monitoring on point of sales data coupled with quicker review of the reorder points helped us achieve a new level of consistent sales. Analytics is also playing a
more important role in future store planning,” says Biyani.
Even as there’s bullishness all around, Himanshu Chakrawarti, COO, Landmark Retail says usage of analytics is still at its infancy. “Analytics in Indian retail is still largely limited to studying consumers and transactions. In contrast, sectors like banking in India have matured more in using analytics and even using predictive modelling. But the heartening thing is that Indian retailers have understood the importance of analytics and are now inv e s t i n g significantly,” says C h a k r a w a r t i . Landmark, the book-music-gifts retail chain of the Tata Group has set up an internal team for analytics, which is trying to understand issues like cannibalisation when opening new stores, identifying best locations depending on the address of its regular customers, pinning down consumers who may drop out due to changes in buying habits and come up with strategies to entice them with offers and changes in merchandise.
At Spencer’s, the thrust on analytics recently got all the more stronger, when the retailer used such data analysis to improve sales in some of its low-performing stores. It studied lapses, regular and occasional customers to understand pain points of the stores and the purchase drivers of consumers in those catchment areas. “From the research, we could draw up turnaround strategies for the stores and have seen a success rate of almost 98%,” claims Mishra. For Spencer’s, it may be studying under performing stores, but for Shoppers Stop it’s about dissecting the 1.5 million First Citizen members, identifying BTL and luxury product buyers and then woo them for repeat purchases. “The BTL and luxury segment is growing at over 60% and the frequency of these customers’ visits is significantly higher than normal customers — about three times the industry benchmark. So, rather than communicating to the entire base of First Citizen members for a BTL brand communication, we now target offer, schemes and new launches to this segment.” says Bhatia.
Though use of analytics has begun in right earnest, retailers in India know it will be a while before the players can harness the full potential. So from using analytics to understand consumers shopping trends and category adjacencies, the process is also useful in targetted pricing, merchandise and consumer promotions as well. Like the retail growth story, usage of analytics will also undergo its own learning curve.