Hypercity Argos to begin catalogue retailing in India

untitled9.jpg Hypercity’s catalogue retailing is a very good business idea.

The Tier-2 and Tier-3 cities are growing. The consumers in the Tier-2 and Tier-3 cities demand the same products as the consumers in the metros.Catalogue retailing meets this demand in the most effective way.

The retail space requirements for catalogue retailing is minimal. Rent of the retail space and cost of running a store, are the biggest chunk of the costs, in running a retail business. Catalogue retailing minimizes the requirement for prime retail space.

Catalogue retailing has a fast startup. This is because stores do not have to be opened. Hypercity, if required, can have a pan -India presence in weeks.

The Indian logistics industry is matured enough to meet the logistics demands of Hypercity..

The logistics
Hypercity could choose to outsource the logistics to 3rd party or choose to do it in house. The trade-off is costs versus control on service quality. When volumes are low, 3rd party is a cheaper option. As volumes pick-up it becomes cheaper to do the logistics in-house. In terms of service it is better to have the delivery in-house. After all the only Hypercity employee that the consumer can potentially interact with , is the delivery person. To ensure that this sole interaction between Hypercity and the consumer, is pleasant and leads to repeat sales, it is better to have more control over the delivery person and hence have the delivery person as a Hypercity employee.

The supply chain
In terms of the supply chain network, initially Hypercity could service demand from a single DC { Distribution Centre]. As Hypercity expands coverage, it could open a DC in each region – North, South, East West. When demand trends stabilize more DC could be opened in the larger demand centers. What could also be done is to have a tiered-distribution; low cost, high volume items can be stocked at local DCs, while high cost items [ watches, jewellery, electronics] could be stored at regional or national DCs.

The reverse-logistics
Hypercity will also have to setup a process for the reverse logistics. This is to take care of returns. The key here is to be prompt and empower the person on the ground to take a decision. Most retailers – brick and mortar, web and catalogue- do not pay sufficient attention to this. This can lead to customer dissatisfaction and loss of business.

It will be interesting to see how Hypercity’s catalogue business pans out!.

For the complete story click here; Hypercity Argos unveils catalogue retailing plans

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Indian government to modernize mandis

farmers.jpgCorrect intentions, incorrect action steps!

The Indian government, specifically the Ministry of Agriculture and Cooperation, is planning to modernize the mandis by providing ‘electronic auctioning’, gradation and standardization. These objective of the Indian governmenti, in modernizing the mandis is to (i) benefit the seller and the buyer and (ii) reduce the price the consumer pays for the produce.

However, the government is wasting it’s effort, money and time..

These initiatives will not ;

  • reduce the cost of the supply chain
  • benefit the seller and the buyer

The seller wants a good price and a quick sales-to cash turnaround time. The electronic mandis would have electronic displays showing the price of commodities thereby reducing the farmer’s dependence on middlemen, agents to get the latest price. This could lead to the farmer getting a marginally better price. But this does not reduce the supply chain costs and hence would not lead to a great benefit. to the seller.

The buyer wants a good price and reliable supplies of consistent quality. The electronic mandi would be of marginal help to the buyer.

The government has no stake or motivation to make a success of the mandis. They have no KPIs or scorecard measures to determine if the electronic mandi is a success or failure.Government agencies cannot help in the buying and selling process,.

What should the government do to benefit the seller and buyer?

  • Help, form cooperatives.If the government is serious about helping the farmers and buyers it should encourage the farmers to form cooperatives. The cooperatives will have a bargaining power for transportation, cold-storage rates. The cooperatives will also make it financially viable for buyers to pick up the product from the cooperative’s location/’mandi’ rather than the farmers spending time and money to come to the mandi. It will be financially viable because the quantity aggregated in the mandi will be larger than that of a single farmer.

One example of a successful cooperative is Amul. The Amul model is successful because the milk is aggregated at myriad collection centres from where the milk is collected and brought to the factory for processing.

  • Setup cold chains: The government should setup cold chains. This will enable the farmer to store the product and give him the choice of selling when he gets the best price.

On the fresh supply chain there are two very good initiatives that have recently been implemented. One is by Reliance which has started it’s own mandis and the other is by CONCOR [ Container Corporation of India] subsidiary Fresh and Healthy Enterprise Ltd. which buys apples from growers and uses it’s cold chain to supply to customers throughout the country.

Net, net do not expect any supply chain benefit from the government’s initiative to create ‘modern mandis’!

For the full story click here; Modern Mandis

Indian railways announces new wagon policy

untitled8.jpgWill reduce supply chain costs!

The new wagon policy will reduce the entry barriers for customers to use the railways as a transport medium. Is this going to lead to a rush of customers queuing up to lease wagons? The answer is NO.

What is the change in the wagon policy?
Earlier, only IRFC [ Indian Railways Finance Corporation], a dedicated finance arm of the Indian Railways could lease wagons to customers. Now, private players too can lease wagons to customers. The new wagon policy will bring in customized and more efficient wagons. IRFC would focus on leasing general purpose wagons.

What does this mean for the supply chain?
This will reduce the supply chain costs, by reducing the cost of transportation. This is because rail transportation become cheaper than road for distances greater than 700kms. Also customized wagons would mean more efficient use of the wagon. Efficient use of wagons would imply more goods carried per wagon, faster loading/unloading and lesser damages.

An example of a customized wagon on the Indian Railways is the milk wagons developed for the NDDB [ National Dairy Development Board]. These wagons were designed to transport milk from Gujarat to Calcutta and helped the spread of the white revolution.These wagons were designed so that the milk temperature increases by less than 5oC per 24 hours.

Is the new wagon policy going to see the market share of rail transportation increase?
It is a step in the right direction. It will reduce the entry barrier for customers. So customers will of rail transportation as an option. Customers will look at the financial aspects;leasing costs, transportation rates. Customers will also look at the service aspects; do they have to wait for getting the wagons/rakes, what are the transit times. Customers will then do a financial analysis and compare the total costs of the rail and road option before making a decision

Who would be the first customers to lease wagons?
The cement industry, oil companies, automobile manufacturers would be the among the first to lease wagons. They are already using rail and would opt to lease wagons rather than buy the wagons or use general purpose wagons.

What is the future direction of rail transportation?
You will see many more customer friendly initiatives from the Indian Railways. The Indian Railways just announced the road railer programme.The intent is to grab market share from the road transporters.

For the Indian Economy, this move is very good one. It reduces the cost of the supply chain, thereby reducing the cost of doing business.

For the complete article click on the link; New Wagon Policy

Chennai Port mega terminal – connectivity still an issue

untitled7.jpg ‘Supply Chain solution ‘ thinking!

I was pleasantly surprised to read about the Chennai Port Authorities taking a complete system view of the mega terminal coming up at Chennai Port.

The capacity of Chennai port will increase, from 8 lakhs TEU per annum today, to 50 lakhs TEU by 2012. The authorities are not only thinking of the port but also road connectivity, rail connectivity so that customers of Chennai Port get a complete solution .The Chennai Port authorities are already working with the concerned departments to provide connectivity to the major highways bypassing Chennai city.

It is of no use to the customers of the port if the cargo can be handled and cleared quickly, but the container is going to be stuck in a massive traffic jam just outside the port. The gain in one part of the supply chain is wasted in another part!

This system thinking, is a big change in mindset. Usually infrastructure is developed, removing the bottleneck or constraint at one point, only to transfer it to another point in the chain. Examples;

  • at our airports, the immigration authorities have done a great job of speeding the passport checking, but the baggage carousels still take a lot of time to disburse our luggage.so the passenger still ends up taking a long time to get out of the airport
  • you can tele-check-in, get your boarding pass on the internet, yet you get stuck in long queues at security. So passengers have to come in early to ensure they board the flight.

We hope to see more such visionary and holistic thinking.

For the complete story see the link; Chennai Port mega terminal – connectivity still an issue