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How to Build a Large Format  CDIT /  Specialty Store business How to Build a Large Format CDIT / Specialty Store business Presentation Transcript

  • How to Conceptualize , plan and build a Large Format Pan India , Speciality Retail CDIT / Technology buisness Prepared by Peshwa Acharya, CMO Reliance Retail 1
  • Building a Retail OrganizationAs Reliance is building the CDIT Retail Organizational Infrastructure; following are key sequential steps in the formative stage of growth: n  Build/Construct Functional Structure (this refers to the ENTIRE organization..our proposal will touch three core areas (Retail, Supply Chain, & Merchandising/Product Mgmt)n  Define each Function’s Purpose & Mission (ex. Supply Chain mission is to link and integrate all steps in product movement from components to delivery to the store or customer). n  Determine each Functions Core Responsibilities (ex D&L is responsible for getting product to the right place at an efficient cost) n  Construct /Map core business processes within each Function. From this will come staffing needs, IT requirements (systems, reporting), cross functional dependencies & linkages, n  Finally, determine functional performance expectations, key metrics & measurements 2
  • Project Summary Statement (Scope & Objectives)n  Build/Construct Functional Structuren  Define each Function’s Purpose & Missionè  Determine each Functions Core Responsibilities (ex D&L is responsible for getting product to the right place at an efficient cost)è  Construct /Map core business processes within each Function. From this will come staffing needs, IT requirements (systems, reporting), cross functional dependencies & linkages,è  Finally,determine functional performance expectations, key metrics & measurements Our Proposed Scope 3
  • Project Summary Statement (Scope & Objectives) We propose our Functional Project Scope to be Supply Chain, Retail Operations, Merchandising & Product Management. 4
  • Project Scope Core Functional Areas Supply Chain Retail Operations Merchandising/Product Management 5
  • 3 Core Competencies Focus We propose our Functional Project Scope to be Supply Chain, Retail Operations, Merchandising & Product Management. Merchandising/ Retail Operations Supply Chain Product Mgmt Inventory planning & Buyers/Merchants Sales Development Control Space & Assortment Retail Operations (Stores,Distribution & Logistics NSO, Delivery, and ResQ) OptimizationProcurement & Sourcing Retail Field Management Procurement & Sourcing 6
  • Operating Model Guiding Principles The importance of establishing an Operating Model Mission cannot be understated. Further, we believe based on US experience coupled with our understanding of the evolving India marketplace; the model MUST be built around the customer needs & expectations.Reliance has a short term advantage of being one of the first established organized retailers in what will soon be a very crowded field. In order to continue to lead and garner market share as others establish retail locations, we KNOW that there are two core tenants of differentiating for success. See next slide for 2 Key Guiding Principles 7
  • Operating Model Development – Two Focuses1) Customer Driven Model The Operating Model must be built around customer expectations and needs. See slide # 8 for a visual depiction of this. Reliance must deliver a profitable return on shareholder investment. This is assumed. HOW Reliance does this determines the ultimate rate of return and growth on investment. Customer Centricity has largely been over touted and under delivered in the US. Reliance has a rare opportunity to deliver this “secret sauce” to a marketplace that REQUIRES it based on it’s unique attributes. Importantly, deliver it faster, more effectively and profitably that current and future competitors2) Tailored Operating Model The Operating Model will differ by business category ( this is simply operating with the understanding that there are major differences in products that begs different strategies) See slide # 9 & 10 for a visual explanation. Building process, organization and IT around these differences drives customer satisfaction, optimal inventory investment, and efficiency throughout the Supply Chain. 8
  • Customer Driven Model 9
  • The CDIT Business model (Mass or Boutique) Consumer Electronics must focus on targeted consumers. The Integrated Operating Model must be constructed around the critical make or break moments with the customer (customer has to be at the table at every decision) The “Make or Break” Customer Touch pointsAssortment Store Sales Team Transactional Home Home After Sale Pricing Experience & Layout Facilitation Fulfillment Delivery Installation Service Inventory We believe the single most important success factor in Reliance achieving stated goals is the need to build business process around customer requirements & expectations 10
  • Tailored OperatingModel 11
  • Tailored Operating Model Example Large Appliances Attribute AppliancesSelling Rate and Pattern Low Unit sales & unpredictable PatternTechnology Lifecycle & duration Low on Technology innovationVendor structure and capabilities Vendors immature in IndiaCustomer Profile Adoption on upward curveSales Team High TouchD&L realities and requirements Major issues from size of trucks DC requirements, Home Delivery nuances roads, residence access, language differences= difficult to predict delivery time with high customer expectationsStore Experience & Display Only, with very wide assortmentsPresentation NeedsTransactional Needs High number of purchases requiring financingMarket & Marketing Strategy Drive awareness of broad assortmentAfter Sale Service needs HighSize/Cube of Product LargePrice Point High 12
  • Importance of Tailoring Business Process and Management to each Category Operating ModelThe management of each category is key as it considers each of the following key attributes in building the operating plan.:n  Size/Cube of Productn  Price Pointn  Selling Rate and Patternn  Technology Lifecycle and durationn  Vendor structure and capabilitiesn  Customer Profilen  Sales Teamn  D&L realities and requirementsn  Store Experience & Presentation Needsn  Transactional Needsn  Market and Marketing Strategyn  After sale service needs 13
  • Proposed Scope &Objectives 14
  • Project Objectives Mission: strengthen & build core competencies through focusing on high value initiatives that support both scale & business impact•  Construct/Map Core business processes within each function•  Development of reporting to support business model and processes (short term EUC support)•  Construction of business management tools to give business teams visibility to business performance & outcomes•  Identification of organizational structural needs to optimize efficiency and drive business results•  Define functional accountabilities, performance metrics and measurements 15
  • Core Team Importance 16
  • The Core teams (below) work together to deliver the Customer Experience to close the Sale…. Distribution, Logistics, Merchandising Inventory Planning & Control OperationsThe Right Product at In the Right Quantities At the Right Time the Right Price in the Right Locations Retail Sales Proficiency…Loyal customers, consistent Brand experience, market share growth etc 17
  • A critical core competency necessary to achieve your goals….. Merchandising Inventory Planning & Distribution, Logistics, Control Operations In the Right Quantities in the Right LocationsInventory Planning & Control Mission & Objectives: Ensure inventory levels are optimal todrive profitable sales by location. Responsible for maintaining instocks, minimizing end oflife inventory, inventory balance & productivity. All unit planning & forecasting. MaintainsOpen to Buy and partners closely with D&L on product flow and DC fill rate, processingtime. Close partner to Retail on store level and chain wide issues of inventory (basic andpromotional). 18
  • Supply Chain 19
  • Supply Chain comprises 2 functional areas. The goal of Supply Chain is to deliver efficient and predictable product flow to stores to meet customer demandInventory Planning &Control Together they form theDistribution & Integrated Supply ChainLogistics •  See next page for example of fully constructed & integrated Supply Chain Supply Chain 20
  • The Integrated Supply Chain/Operating model (this is what we are building to future state) DC to Stores/ Factory Vendor to DC DC and Network Store Home Supplier Factories Retailer DC’s Supplier to Retailer and Regional DC’s Retailer Customer Fleet/Rail Receipt frequency Procurement processProduct category driven tailored to product Shipping compliancebusiness operating models category operating Inventory SOP model Cross docking Tailored store deliveryIntegrated demand and supply Transition SOP Pipeline visibility Home Delivery/Custom network strategyplanning Transportation operating model Reverse logistics Multi-channel fulfillmentSupplier performance reporting management system E-Commerce network World class home Holiday planningLead time reduction Control of freight delivery / installation Channel tailored throughput and Home Delivery vs StoreWeb-enabled communication International logistics handling Pickup model Service Centerstechnologies Package Staging Integration with .com/ Strategic SourcingMaster vendor contract Commercial sales Vendor Performance Returns processing facility Mgmt 21
  • Where we will start:It is important to understand that in order to build capability FAST and EFFICIENTLY, many business processes will later be systematized/mechanized will require a manual process for the short term. Thus the systemic solution will mechanize the process. There are some low cost/high payback IT solutions we will recommend that will help bridge the current state to the future state.Below are just some examples of areas of initial opportunity to combine low cost/high payback solutions with development of business process.n  Construct and implement an inventory unit planning capabilityn  Institutionalize a forecasting process with vendorsn  Create a understanding of base inventory planning to support assortment decisionsn  Introduce cross functional business rhythms including transition and holiday planning and solution strategiesn  Develop an open to buy processn  Develop basic Inventory Management/Supply Chain analytics to support decision making 22
  • Core Functional Competencies Inventory MgmtInventory Planning Key Foundational & Control* Processes Alignment & Integration with Specific Initiatives Merchant team * Critical need for separate Inventory Planning and Control function. This Sales History Models IP&C role aligns closely with the Allocation & Replenishment merchants to form the Core Ladder Development Business Team. The need for Unit Planning & Forecasting specialization of this competence Open To Buy Tool cannot be overlooked as this will Open to Buy Mgmt directly contribute to the Vertical’s profitability and successful Inventory Balance customer fulfillment and satisfaction. Inventory Health Inventory Productivity Vendor Forecasting Lifecycle Mgmt driven Inventory Promotional Planning & Forecasting Mgmt Import Mgt EDI Supply Chain 23
  • Core Functional Competencies (Future Phase) Inventory MgmtInventory Planning & Control Future evolution Customer & Market/Store driven Profiles drives optimal inventory by location while minimizing margin obsolescence Multiple versions allow for operating model differences Inventory unit demand rolled up by store (bottoms up vs tops down) Lifecycle driven replenishment model maximize inventory in early lifecycle (Early Read) & minimize at end of life (models mirror differences in operating models ex Computer 8 week lifecycle vs Peripherals ( 6-12 months) Returns & Transfers Supply Chain 24
  • Core Functional CompetenciesD&L Key Foundational Processes Pipeline Visibility Specific Initiatives Whse Mgt EDI Freight Mgt What will be systemically enabled in Vendor Compliance later phase will likely need to Import Mgt be done manually for the time being Labor Planning Location Management DC Processing Real Time check In DC staging InBound/Outbound Transportation Supply Chain 25
  • Core Functional Competencies (Future Phase) D&L Future enhanced Processes* Similar technology solutions to Inventory Mgmt enables same capabilities within DC’s and pipeline. Additionally, TMS (Transportation Management System) and WMS (Warehouse Management system) DC Processing Options (Central Stock, Pick & Pack, Flow thru, DSD Pick and Pack systems Location Management including Virtual Location Mgmt* This is based on US standards, Real Time check In NOT Best practice Supply Chain 26
  • Supply ChainInvestment vs Payback: ExamplesHigh TMS/WMS Inventory Installation Management Team (separate from Merchant team)Investment Vendor Unit forecasting and Ship schedule Procurement Process & Practices Reporting on Key performance Metrics Unit Plng & Fcstg LadderLow EDI Payback High 27
  • Supply Chain Key Performance Measurements & MetricsIn Stocks Inventory Management Inventory Health•  Basic •  Turnover •  Obsolete Inventory•  Promotional •  GMROI •  Unproductive Inventory•  CEI (Customer Encountered •  Owned Inventory •  Non Working Inventory instocks) •  Inventory Balance (Service, Display, etc) •  Days of Supply •  At Risk InventorySupplier management DC management•  Fill Rate •  Fill Rate•  On Time Arrival (+/- 3 days) •  SLA Adherence•  EDI compliance •  Processing time (Receipt•  Lead time to put away to available to•  Transit Time pull)•  Vendor Terms & Dating •  Lead time •  Transit Time 28
  • Retail Sales & Operations 29
  • Operational ExpertiseThere are 2 areas of Operational Capability which must be highly integrated as they are interdependent D & L Operations Store Operations 30
  • Core Functional CompetenciesSalesDevelopment Key Foundational Processes Specific Initiatives Gap Management Store Level Reporting to identify peaks Attachment and valleys in financial performance Strategies Category specific basket goals and Performance Goals strategies to drive sales and margins Merchant/Retail • Weekly conference calls to exchange BPM Process information on sales trends with merchants and retail teams (ie category transitions) Retail 31
  • Core Functional CompetenciesRetail Key FoundationalOperations Processes Specific Initiatives Retail Planning Retail Calendar New Store Online intranet site Opening Teams Separate model developed for the Product Flow new store teams Process Unloading DC shipments & product Selling Process getting to the floor POS Process Coaching selling behaviors Delivery and Transacting the sale quickly and Install (ResQ) efficiently Build and test models to coordinate, communicate and meet customers expectations efficiently Retail 32
  • Core Functional CompetenciesRetail FieldManagement Key Foundational Processes Specific Initiatives Sales Floor leadership Coaching and reinforcing effective selling behaviors Performance Management Monthly performance meetings to discuss financial performance Retail BPM process Finding and sharing best practices Business Design BPM processes for both Rhythms stores and cluster heads with important findings communicated up to corporate. Retail 33
  • Core Functional Competencies (Future Phase)Retail Sales & Future enhanced ProcessesOperations Processes designed to support the customer experience Specific tasks matched to retail capacity Cross functional teamwork in developing category selling strategies Consistent and achievable goal setting Weekly/Monthly Business rhythms that build cross functional teams The ability to move from strategy to retail execution very quickly Customer touch points at Retail, delivery, and install flawlessly executed Retail 34
  • Retail Sales & OperationsKey Performance Measurements & Metrics Revenue Profit Levers Inventory •  Revenue to Budget •  Warranty •  Discontinued inventory •  Revenue Trend •  Accessories aging •  Comp Sales Growth •  Basket Attachment $ • Inventory Non •  Basket Attachment % Movement (90, 180 and Margin •  Financing 360+) GM $ to Budget •  Content GM% (overall and by •  Install category) Price Variance Labor •  Labor % to Revenue (selling vs non selling) Retail 35
  • Sales Developmentn  Architect a functional corporate retail support team.n  Align performance goals across the organization.n  Create measurement tools that support and drive goals.n  Create a performance management process.n  Improve retail productivity thru gatekeeping, editing and prioritizing task management that matches capacity.n  Assist with re-engineering company intranet site to improve retail communication and productivity.n  Help improve asset management/control at the retail level. Retail 36
  • Retail Sales & OperationsInvestment vs Payback: Examples High Delivery & Install POSInvestment Process BPM Product Process Flow Process Gap & Performance Selling Management Process Retail Planning Basket Strategies &Low Goals Payback High 37
  • Business Rhythms 38
  • Core Cross Functional Competencies Essential Business Key Foundational Rhythms Processes BPM (Business Performance Mgmt) Weekly Conference Call (business team with retail) (Develop necessary Business Dashboards& Reporting for Business Performance Management) Planning (Annually) Forecasting (Monthly) 39
  • Merchandising/Product Management 40
  • Core Functional CompetenciesMerchandisingProduct Mgmt Key Foundational Processes Specific Initiatives Planning Financial Planning & Fcsting Tools Assortment Development & Mgmt Ladder Plans (Unit Plng & Fcstg) Space Planning Assortment Optimization (Incl local assortments) Vendor Negotiations & Management Space Analytics Promotion Planning Vendor Relationship Owner Promotional Planning & effectiveness Merchandising 41
  • Core Functional CompetenciesMerchandisingProduct Mgmt Core Performance Metrics Sales Gross Margin % and $ Inventory Turnover Attachment rates Forecast Accuracy Promotional Effectiveness GM Return on Space Merchandising 42
  • Core Functional Competencies (Future Phase)MerchandisingProduct Mgmt Future enhanced Processes Planning & Forecasting (systemically supported & linked to corporate finance) Assortment Development & Mgmt (system & process drives customer driven assortments that match & tie to financial budgets) Space Productivity (system & process applies assortments to floor space based on sales velocity and casepack) Vendor Management (Vendor compliance and Scorecard system & process) Promotion Planning (Utilizing historical promotional performance along with current trend; recommends optimal mode & timing of promotion) Merchandising 43
  • Merchandising/Product MgmtInvestment vs Payback: ExamplesHigh Forward looking trend driven sales & Vendor Margin projections Performance Comprehensive Performance Vendor Unit forecasting and Ship AssortmentInvestment schedule Planning Tool Transition Timing & Procurement SOP Process & Practices Unit Plng & Fcstg Reporting on Key Ladder performance Metrics EDILow Payback High 44
  • Some thoughts on the question of business model scale and timing of construction 45
  • There is an interim solution!When the organization reaches the pain point associated with growing beyond a “handful ofstores”; there are interim solutions deployable quickly and cost effectively to enable thecompany to continue to run and grow the business while maintaining an acceptable SG&Alevel. Key Solution Points •  Clear role definitions with functional business responsibilities, accountabilities, and outcomes •  Performance metrics tied to each accountability •  Cross functional linkages & dependencies clearly defined •  Cross functional effectiveness metrics •  Positional SOP’s (particularly in the Retail, Operations, and Logistics functions) •  Identification of internal customers and commitments •  Key Point: significant EUC emphasis on establishment of performance metrics, retail operating SOP’s and Corporate/Retail communications 46
  • Appendixn  Pleasereview these slides..we put them in an appendix as they did not easily fit in to a category. This in no way diminishes their importance. 47
  • People, Process, & TechnologyThe Great Enablers 48
  • Process/SOPn  Every bit of work that gets done is a process!!!n  Processes vary in efficiency from very organized and well defined, to chaotic, redundant and counter-productive.n  Young organizations often put process development lower on the priority list than is critically needed. Process definition ENABLES speed in business decision making and reaction, drives accountability and performancen  Efficient processes have a low degree of variability. They can achieve the same, optimal results consistently.n  Less variability means lower cost and faster response 49
  • People (The Who)n  Role definitionn  Positional accountabilitesn  Organizational Structuren  Functional Training & Developmentn  Performance Objectivesn  Performance Managementn  Less variability means lower cost and faster response 50
  • Technology/IT Supportn  Technology enables Sight & Visibility into all areas of business planning, forecasting & executionn  Systems and IT driven solutions provide the engine for all key business processesn  Positional accountabilitesn  Organizational Structuren  Functional Training & Developmentn  Performance Objectivesn  Performance Managementn  Less variability means lower cost and faster response 51
  • Short Term Initiatives – Example: EDIWeb Enabled Communication Technologies initiative is a key enabler for other critical initiatives & islow cost with a high speed to execution Web Enabled Communication Technologies Parts Demand Plng Procurement Commit Order & Process Replenishment Manu/Assembly Receiving Vendor/DC Shipping Carrier Appt Carrier Appt DC Appt Accts Receivable Accts Payable Supply Chain 52
  • Business Performance MetricsMetrics will evolve as businesscapability & functionality grow 53
  • Performance Measurement & Key Operating Metrics will EvolveA key understanding is that each Operating Metric reflect the organizational ability to measure it. As the organization grows and a strong foundation of data driven decisions and measurement develops, the metrics used to assess performance will be reflective of this Example – In Stock Metric 90% 90% 90% Customer Encountered Measured based on actual on hand as seen Minimum Presentation Driven by customer by 90% location Measured based on each Velocity Weighted stocking location having Minimum units on hand Measured based on each stocking required by Planogram. Simple location having 1 unit on hand with higher volume skus weighted more Measured based on heavily each stocking location having 1 unit on hand Time/Capability Continuum 54
  • Replenishment System Planning, Design and Execution Goal: Build Base Support Layern  Assist as needed in IT mapping (see attached). Ensure cross functional involvement to ensure IT solution maps back to overall IT architecture.n  In recognition of time requirements to execute IT solutions; develop interim EUC type solutions that offer inexpensive but highly effective outcomes (see attached examples of prior outcomes achieved).n  Develop business requirements; with cascade into technical requirements and specs.n  Establishment of baseline systemic requirements: ¨  Customer demand driven planning, allocation and replenishment ¨  Customized models based on category operating model. (Construction of above will involve diligence in several key areas)n  Identification of data requirements Supply Chain 55
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