Subhiksha

History 

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March 1997, first store started in Thiruvamiyoor  in Chennai (4-5 lacs) First year company opened 10 stores across Chennai and by 2000 it had expanded to 50 stores By 2002 it had 120-130 stores across Tamil Tamil Nadu In 2004 it decided to open 420 stores across states like Gujarat, A.P., Delhi and Karnataka In 2005 , it started selling Mobile phones

Contd… In 2008, a typical Subhiksha store had supermarket, pharmacy and telecom section   Acc to R. S. “ I wanted to do the things in the Indian way”  Targeted lower, lower middle and middle class  “Everyday low pricing” and “supply chain efficiency” 

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Contd… In 2008, a typical Subhiksha store had supermarket, pharmacy and telecom section   Acc to R. S. “ I wanted to do the things in the Indian way”  Targeted lower, lower middle and middle class  “Everyday low pricing” and “supply chain efficiency” 

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The Indiranagar  Supermarket 

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It was strategically located just 50 m away from the 100 ft road It was an 2000 square feet stores, 150 sq feet fro pharmacy, 200 sq feet for backend and rest for  supermarket Pharmacy -3 lacs, mobile -60-80 lacs, FMCG- 1012, Fruits and vegetables-3 lacs Pharmacy- continuous patient like diabetes and cardiac telecom  –handset ,accessories, recharge coupons Sold both branded and pvt labels. ,F&V- 30 %, FMCG- 70%

Managing Supermarket Operation 1.

Category management:    

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Marketing :  

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1200 SKU , stock product of top 3 brands In FMCG- 950 brands In grocery- 150 brands Pvt. label like Tatwa, Aaharam, Subhiksha “Everyday low pricing model”

Displayed comparative price structure and total discount on the bill of customer  Centralized pricing and sourcing strategy  Advertisement through local radio channel like „Radio Mirchi‟

Contd…

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3. The Crew:  Operated by 13 people  2 cashiers,2CSR,2 sales assistants and a person for home delivery  OJT , Sales incentive 4. Management:  One ROM and Ass. ROM  Managing category wise sales , increase customer  interaction , store hygiene, F&V wastage reduction etc. 5. Customer Service:  Bar code technology, technology to minimize bill process time

Logistics and supply chain management 

SKU‟s were divided into A to K classes:  Descending order of sales Value

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Each classes having 100-125 SKUs Greater attention for A to D (80% of total sales) Saving benefits to the customers are based on these categories

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Inventory management (Stores) 

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MBQ was based on the peak demand observed during the last three months e.g. Maggie Dynamic MBQ for Chennai stores Hub stores may have stock higher than MBQ levels in order to reduce lead time, subject to availability of storage space. Review information was sent electronically to the central MIS department in afternoon

Contd… MIS raised indents for each store and electronically send them to the Hoskote warehouse in the evening  Inter-store inventory transfer at relevant stores  On an average each store has inventory worth of  6 lakh with inventory turnover of 20-25 cost-.25%, less than the industry  Shrinkage average of 1.5%   Audit of the store inventory was carried out every month 

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Contd…

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Category

Review period

Maximum batch quantity (MBQ) level

 A class

Daily basis

3 days of demand

B,C and D

Twice a week

6 days of demand

E to K

Twice a month

15 days of demand

The Hoskote Warehouse  

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25 km from Bangalore, at old Madras road Served Bangalore (55 stores), and Mysore(4 stores) Enjoyed synergies associated with the “warehouse atmosphere” Total area of 66000 square feet, with around 200 employees Capacity to serve around 80 stores

Contd… Did not have any fancy fitting, flooring, and airconditioning unit on a lease contract of 15 years  Opened (renewable), open 24 hrs a day   Average business volume per year was Rs. 80 crores, with total managing cost of 2.4 crores  Each SBU had its own storage location  Separate area for segregation and batch making, private label processing, and loading and unloading operations 

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Warehouse Operations Process Involved

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1

Receive indent from MIS department in the late evening

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Detailed SKU list is given to Segregation and batch making unit

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Required number of SKU units are withdrawn from bins

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Store-wise dispatch list was made for batch making

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If an SKU was unavailable in sufficient quantity, demand was met in the order of A-B-C (Sales performance) stores such that each store obtained at least five units

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Boxes are packed and sealed, than shifted to the area allocated for the corresponding store in its belt

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A small sheet which displayed name of the store was stapled to each box

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SKUs are dispatched in the next afternoon

Transportation Management 

 About 14 vehicles were used for transport, managed by a third party  A

typical vehicle served the demand of 3-4 stores (called as the belt)  The first unload, last load rule was followed 

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F & V and grocery SKUs were dispatched in two shifts (6 am and 1 pm) Transport agreement consisted of minimum commitment plus additional rupees/km clause Keys of the vehicle shutters were not given to the transport agency

Grocery Processing for  Private Labels Warehouse purchased some grocery as raw material (rice from the mills) and processed it to produce private label products  Raw materials were checked for quality at the warehouse as per the standards(rice cooking)  Some samples were sent to Chennai for quality checks  Bar code technology was not used for private labels grocery items were procured in bulk, it   As contributed to some amount of the inventory 

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Subhiksha Supermarket Supply Chain

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Inventory Management(Warehouse)  According to the Subhiksha philosophy, a warehouse should operate as a cross-docking point and should not keep much inventory  Warehouse inventory for mobiles and F & V products lines was close to zero  Within FMCG products, it maintained stocks for A to D category of items.  For other categories, it acted as a cross-docking point 

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Subhiksha Mobile Retail Supply Chain

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Questions 1. Can Subhiksha (Indiranagar) store retain its existing customers and can increase the no of footfalls and average bill with increasing competition in organized retail ?

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Here are some problems that Subhiksha is facing currentlyLess no of brands & private labels  Attrition of Human Resource  IT Infrastructure  Checkout counters – 3  Lead time to get Inventory  Inventory review  Lack of Inventory at Warehouse  Location of the store 

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Location of Indiranagar  Store Nilgiris Food World 100 ft main road, Indiranagar 

Subhiksh a

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More

2. Is Subhiksha‟s marketing,

category management, and business planning activities heading in the right direction?

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Marketing - Good promotional activities - Excellent display of price comparison - Can go for catalogue mailing

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Manageable No of SKUs - Can increase no of private labels in each SKU

Business Planning Activities  Market Research before selecting the location for  a new store  Layout of the Store

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3. Is Subhiksha‟s SCM really efficient?

Can they further improve? Improvements can be done in the following areas  Lead Time  Service of Suppliers  No connection between hubs in Mobile retailing

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4. Does Subhiksha scheduling and planning their staff in a right manner? Problems   Attrition problem in Retail Store  Untrained staff in Warehouse operations Suggestions  Provide training to the staff to understand the warehouse processes  Increment in Basic Salary

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Wheel of Retailing High end strategy

Medium strategy

Subhiksha Low end strategy

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Low prices Price sensitive consumers

The Sad Story  After spending 12 years in retail business, in February 2009, Subhiksha operations came to an end  The main reason was financial mismanagement  Raised all the money needed through debt rather  than equity (debt equity ratio of 1:0.031)  It went for a corporate debt restructuring exercise 

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Steep Decline

1800

1650 1600

1400

1320

1200

1000 No fo stores 800 670 600

400

200

140 10

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50

0

0

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1997

1999

2000

2003

2007

Mar-08

Sep-08

2009

What went wrong? Heavy focus on food and grocery items  lesser number of private labels   Aggressive expansion in terms of number of  stores  No study done before opening a store  Problems in supply chain management  No proper IT system installed (ERP, SAP …)  Being a low price store, it was giving competition to small kirana stores which have a strong presence in India 

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Recent Developments 

In 2012 Subhiksha announced a comeback after  3 years when Change in the Indian retail sector with FDI coming in  Huge opportunity as Indian retail market is expected to reach $720 billion, with the organized market‟s share expected to be around 9-10% by 2015 

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