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Retail Operations Benchmarking & Excellence Survey 2015 - Measuring Supply Chain Performance

The Retail Operations Benchmarking and Excellence Survey (ROBES) 2015
focuses on Measuring Supply Chain Performance. This report seeks to build on the foundations laid in the past two years by the Retailers Association of India’s (RAI) ‘Excellence’ agenda. It follows the groundbreaking knowledge initiative undertaken in collaboration with TCS in earlier years.The survey report was presented at the Retail Leadership Summit 2015 in Mumbai.

While ROBES 2013 focused on retail store operations, ROBES 2014 looked at retailers’ multichannel strategy and their progress towards delivering a seamless customer experience across channels. This year’s report focuses on retail supply chains. The advent of digital commerce and corresponding heavy investments by online retailers in their back-end operations have renewed awareness about the critical role supply chains play in shaping retailers’ success, whether they operate offline, online, or on multiple channels.

Based on our conversations with leading retailers, we identified four imperatives for both offline and online retailers today:

1. They can never be out of stock
2. They need to deliver orders to customers within 1-2 days
3. They need to synchronize all channels (store, self-online, third party online, and others)
4. They need to deliver a seamless customer experience, including back-end customer services

The objective of our study was to understand the current status of retail supply chains. We have taken a three-dimensional view to answer three key questions for the Indian retailer.

  • What are the industry benchmarks?
  • What should the best practices be?
  • In what direction is the industry moving?

The report considers these specific areas:

  • Areas of strategic focus areas for FY 2015-16
  • KPIs and process in five functional areas: Inventory, Warehouse, Suppliers, Transportation, People

Executive Summary: Key Takeaways 
The survey results suggest that supply chain maturity in the Indian retail industry is low. All the five processes covered in this report score 64 percent or less. While warehouse management is more mature in comparison to other functions, areas such as supplier integration and inventory management present significant scope for improvement.

  • The top supply chain challenges for retailers in FY 2015-16 will be in the areas of inventory reduction and warehouse and transportation efficiency. This is also reflected in their technology investment plans.
  • More than 50 percent of respondents stated their readiness for the introduction of a Goods and Services Tax (GST), where new legislation is expected soon.
  • Multichannel readiness is still lacking, with only 10 percent reporting it as a focus area. Retailers do not seem to have real-time inventory and order visibility on their radar for the coming year despite the phenomenal growth of online retail in India.
  • Sustainability practices are low among the priorities of Indian retailers, while performance improvement and efficiency are higher priorities.
  • Technology integration with suppliers is low and is seen as low priority by most respondents. Supplier fill rates and quality are still perceived as challenges. Only 10 percent of respondents have mandatory certifications for their suppliers and conduct quality audits. Lack of supplier evolution is cited as a reason for this.
  • Inventory norms and policies are still not mature. Less than half of the respondents do not use systems to manage their inventory scientifically. Department stores show greater maturity than other retail segments.

Executive Summary: Industry Maturity
The retail industry’s supply chain maturity is moderate, with each of the five processes covered scoring less than 64 percent.

  • Warehouse management is the most mature function, scoring 64 percent, and is viewed as the top strategic priority by most retailers.
  • Transport management is second at 54 percent, but its maturity can be attributed to 3PL partners, as this function is usually outsourced.
  • People management at 50 percent, inventory management at 49 percent, and supplier management scoring 37 percent are all low on maturity, though retailers consider inventory management a strategic priority area.
  • Poor integration and limited collaboration with suppliers indicates that supplier management remains a challenge, and retailers do not view this as a near-term priority.
  • Comparisons drawn between supply chain maturity and other retail areas such as store operations and multichannel (evaluated as part of ROBES 2013 and 2014 studies respectively), show that supply chain processes are low in maturity although they are considered the backbone of retail.
  • Whereas the highest score in supply chain is 64 percent, the highest process maturity in store operations was 82 percent and in multichannel, 75 percent.

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