In the previous post we explained Future Group’s effort for consolidation of Distribution Centers and Supply Chain Solutions. We will briefly discuss the impact so far the company has had and the challenges ahead of it in this ambitious project.
Impact of New Supply Chain:
With current initiatives, PRIL has managed to take up its fill rates from Mumbai DC from 70% earlier to ~90% currently. With further stabilization of technologies like PTL, these fill rates are expected to go up to ~98-99% levels. Once the revamp of DCs in Delhi, Kolkata, and Bangalore is also completed, the impact on overall sales of PRIL will be significant and noteworthy.
Reduced inventory – Not yet seen but after a period of stabilization, the confidence of front end on fill rates from backend goes up. Then inventory levels are reduced as the front end cuts down its ‘safety orders’ which it likes to maintain to cover for irregular supplies and minimize loss of sales from stock out.
GST effect to be seen post-implementation by the Government of India.
Challenges in Implementation:
Poor Infrastructure – Roads, Transportation and Cold Storage.
Vendor Management – Vendors continue to be a source of trouble as their fill rates especially for Foods and FMCG remains quite low.
Low value but high volume business model – PRIL for a US$2bn retail company processes as many SKUs as a global retailer of size US$15bn would do.
Scale of stores is still small – For PRIL the stores are still not big enough in terms of throughput and same-store sales growth to accommodate multiple pieces of same SKU. This implies that replenishment of SKUs has to be frequent and recurrent.