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How to Build a Large Format CDIT / Specialty Store business
1. How to Conceptualize , plan and build a Large
Format Pan India , Speciality Retail CDIT /
Technology buisness
Prepared by Peshwa Acharya,
CMO Reliance Retail
1
2. Building a Retail Organization
As 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
3. Project Summary Statement (Scope & Objectives)
n Build/Construct Functional Structure
n Define each Function’s Purpose & Mission
è 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
4. Project Summary Statement (Scope & Objectives)
We propose our Functional Project Scope to be Supply
Chain, Retail Operations, Merchandising & Product
Management.
4
6. 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)
Optimization
Procurement & Sourcing Retail Field Management
Procurement & Sourcing
6
7. 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
8. Operating Model Development – Two Focuses
1) 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 competitors
2) 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
10. 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 points
Assortment 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
12. Tailored Operating Model Example
Large Appliances
Attribute Appliances
Selling Rate and Pattern Low Unit sales & unpredictable Pattern
Technology Lifecycle & duration Low on Technology innovation
Vendor structure and capabilities Vendors immature in India
Customer Profile Adoption on upward curve
Sales Team High Touch
D&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 expectations
Store Experience & Display Only, with very wide assortments
Presentation Needs
Transactional Needs High number of purchases requiring financing
Market & Marketing Strategy Drive awareness of broad assortment
After Sale Service needs High
Size/Cube of Product Large
Price Point High
12
13. Importance of Tailoring Business Process and Management to
each Category Operating Model
The management of each category is key as it considers each of the following key
attributes in building the operating plan.:
n Size/Cube of Product
n Price Point
n Selling Rate and Pattern
n Technology Lifecycle and duration
n Vendor structure and capabilities
n Customer Profile
n Sales Team
n D&L realities and requirements
n Store Experience & Presentation Needs
n Transactional Needs
n Market and Marketing Strategy
n After sale service needs
13
15. 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
17. The Core teams (below) work together to deliver the
Customer Experience to close the Sale….
Distribution, Logistics,
Merchandising Inventory Planning & Control
Operations
The 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
18. A critical core competency necessary to achieve your
goals…..
Merchandising Inventory Planning & Distribution, Logistics,
Control Operations
In the Right Quantities in the Right Locations
Inventory Planning & Control Mission & Objectives: Ensure inventory levels are optimal to
drive profitable sales by location. Responsible for maintaining instocks, minimizing end of
life inventory, inventory balance & productivity. All unit planning & forecasting. Maintains
Open to Buy and partners closely with D&L on product flow and DC fill rate, processing
time. Close partner to Retail on store level and chain wide issues of inventory (basic and
promotional).
18
20. Supply Chain
comprises 2 functional areas. The goal of Supply
Chain is to deliver efficient and predictable
product flow to stores to meet customer demand
Inventory Planning &
Control Together they form the
Distribution & Integrated Supply Chain
Logistics
• See next page for example of fully constructed &
integrated Supply Chain
Supply Chain
20
21. 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 process
Product category driven tailored to product Shipping compliance
business operating models category operating Inventory SOP
model Cross docking Tailored store delivery
Integrated demand and supply Transition SOP
Pipeline visibility Home Delivery/Custom network strategy
planning
Transportation operating model Reverse logistics Multi-channel fulfillment
Supplier performance reporting management system
E-Commerce network World class home Holiday planning
Lead time reduction Control of freight delivery / installation
Channel tailored throughput and Home Delivery vs Store
Web-enabled communication International logistics handling Pickup
model Service Centers
technologies
Package Staging Integration with .com/
Strategic Sourcing
Master vendor contract Commercial sales
Vendor Performance Returns processing facility
Mgmt
21
22. 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 capability
n Institutionalize a forecasting process with vendors
n Create a understanding of base inventory planning to support assortment decisions
n Introduce cross functional business rhythms including transition and holiday planning
and solution strategies
n Develop an open to buy process
n Develop basic Inventory Management/Supply Chain analytics to support decision
making
22
23. Core Functional Competencies
Inventory Mgmt
Inventory 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
24. Core Functional Competencies (Future Phase)
Inventory Mgmt
Inventory 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
25. Core Functional Competencies
D&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
26. 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
27. Supply Chain
Investment vs Payback: Examples
High
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
Ladder
Low EDI
Payback High
27
28. Supply Chain
Key Performance Measurements & Metrics
In 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 Inventory
Supplier 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
30. Operational Expertise
There are 2 areas of Operational Capability which must
be highly integrated as they are interdependent
D & L Operations Store Operations
30
31. Core Functional Competencies
Sales
Development 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
32. Core Functional Competencies
Retail Key Foundational
Operations 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
33. Core Functional Competencies
Retail Field
Management 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
34. Core Functional Competencies (Future Phase)
Retail Sales & Future enhanced Processes
Operations
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
35. Retail Sales & Operations
Key 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
36. Sales Development
n 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
37. Retail Sales & Operations
Investment vs Payback: Examples
High
Delivery
& Install
POS
Investment
Process
BPM
Product Process
Flow
Process Gap &
Performance
Selling Management
Process
Retail
Planning Basket
Strategies &
Low Goals
Payback High
37
42. Core Functional Competencies
Merchandising
Product Mgmt Core Performance
Metrics
Sales
Gross Margin % and $
Inventory Turnover
Attachment rates
Forecast Accuracy
Promotional Effectiveness
GM Return on Space
Merchandising
42
43. Core Functional Competencies (Future Phase)
Merchandising
Product 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
44. Merchandising/Product Mgmt
Investment vs Payback: Examples
High
Forward looking
trend driven sales &
Vendor
Margin projections
Performance
Comprehensive
Performance Vendor Unit
forecasting and Ship Assortment
Investment
schedule Planning Tool
Transition Timing &
Procurement SOP
Process & Practices
Unit Plng & Fcstg Reporting on Key
Ladder performance Metrics
EDI
Low
Payback High
44
45. Some thoughts on the question of business
model scale and timing of construction
45
46. There is an interim solution!
When the organization reaches the pain point associated with growing beyond a “handful of
stores”; there are interim solutions deployable quickly and cost effectively to enable the
company to continue to run and grow the business while maintaining an acceptable SG&A
level.
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
47. Appendix
n 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
49. Process/SOP
n 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 performance
n 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
50. People (The Who)
n Role definition
n Positional accountabilites
n Organizational Structure
n Functional Training & Development
n Performance Objectives
n Performance Management
n Less variability means lower cost and faster response
50
51. Technology/IT Support
n Technology enables Sight & Visibility into all areas of business
planning, forecasting & execution
n Systems and IT driven solutions provide the engine for all key
business processes
n Positional accountabilites
n Organizational Structure
n Functional Training & Development
n Performance Objectives
n Performance Management
n Less variability means lower cost and faster response
51
52. Short Term Initiatives – Example: EDI
Web Enabled Communication Technologies initiative is a key enabler for other critical initiatives & is
low 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
54. Performance Measurement & Key Operating Metrics will
Evolve
A 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
55. Replenishment System Planning, Design and Execution
Goal: Build Base Support Layer
n 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
