Organised retail’s biggest obstacle: Unorganised supply chains

Even as the retail pundits spell a bright future for organised retailing in India – at an annual growth rate of 9.5 per cent -to double its presence to $30 billion by 2010, there are some key supply chain issues which are impeding its growth, reveals a report Winning with Intelligent Supply Chains.

According to the report, which was released by the Federation of Indian Chambers of Commerce and Industry (FICCI) and Ernst & Young, “the most significant challenge that impedes the development of an efficient and modern retail sector is an underdeveloped supply chain”. Commenting on traditional supply chain networks, it says that the chain, a partially informed push/ pipeline model with a unidirectional flow, is expected to transform into a fully informed network model with bi-directional flow of information.

The report also points out to the huge shortage of experts in this area, coupled with the fact that only 64 per cent of organisations have a full fledged independent department to manage the supply chain. Commenting on the importance of supply chains, Bharti Enterprises managing director Rajan Bharti Mittal said, “If the front end has to grow, you need a completely stitched back-end. There is a loss of 3 per cent GDP growth if we do not invest in infrastructure.”

Of the existing domestic retailers in the organised sector, the Future Group, promoters of Big Bazaar and Food Bazaar, has a separate branch – Future Logistics- to look into its supply chain logistics. Speaking to The Indian Express, Pantaloon Retail chief executive officer (food business) Arvind Chaudhary said, “The cold infrastructure in the country is missing. Moreover, one can’t have cold infrastructure in parts; it has to be present for the entire logistics. Otherwise there will be a thermal shock.”

To bring a balance between the supply chain practices adopted so far and emerging futuristic technologies, the report suggests adoption of an “intelligent supply chain”. It speaks of a paradigm shift from traditional supply chains towards adaptive and real-time supply networks. “To achieve profitable growth over the next few years, supply chains need to be realigned into efficient, agile and adaptable networks,” says the report. This, in turn would help manage costs, ensure product availability and be highly responsive.

Agrees Chaudhary, as he points out that transporting perishables through cold infrastructure will increase the costs of basic commodities like tomato and potato by at least nine times. “Currently, barring fruits and vegetables, everything is transported under ambient (natural) conditions. We have to evaluate the wastage versus cost of transporting through cold infrastructure. In effect, the real wastage is minimal as the lesser produce is sent for processing,” adds Chaudhary. He suggests alternatives suitable for Indian conditions, such as encouraging farmers to harvest perishables early in the morning, transporting then quickly to local markets and sourcing from them.

The report calls for informational and technological intervention to tackle the current bottlenecks by using supply chain technologies like Radio Frequency Identification, barcode scanners, Point Of Sales terminals, handheld devices and software packages. It reveals that 85 per cent companies use IT to capture and analyse real-time information for effective decision making.

As Yes Bank country head (food and agri-business strategic advisory & research) Kalyan Chakravarthy GKD earlier told The Indian Express,