Productivity Management in Retailing

Retailing has always been a competitive and challenging industry characterized by fierce competition. There is a need to heavily invest in Information Technology to boost margin, improve customer satisfaction and reduce operating costs. Retailers in recent years have made major investments in improving the supply chain management in order to maintain focus on store operations. Among these investments include modern warehouse management systems (WMS); replenishment systems and inventory management; new processes and technologies for supporting cross-dock and flow-through distribution center operations and recent initiatives such as collaborative planning, forecasting and replenishment (CPFR).

Since retailing is mainly focused on distribution, a retailer’s distribution efficiency level is usually an important determinant in measuring its success in the market. And because distribution and tight margins generally play a critical role in the retailing industry, retailers have seen the importance of distribution as a key core competency measure in maintaining low costs as well as distribution control.

However, despite retailers’ significant investment in Information Technology and the important role of distribution efficiency in measuring overall competitiveness as well as physical assets and material handling systems to support retail distribution operations, many retailing companies are still missing yet another important opportunity to reduce distribution costs, and that is productivity management.

Modern productivity management systems incorporate sophisticated software support with enhanced operational methods and engineered goals settings and standards. This results to productivity management that helps retailers to achieve a simultaneous and significant increase in labor and equipment efficiency, better quality and employee retention.

Productivity management can significantly provide end-line benefits, which are accomplished with accelerated return on investment (ROI) and lesser implementation risk. Retailers today can increase productivity, reduce costs, improve quality and achieve higher operator retention and satisfaction through advanced productivity management solutions.

These are simple to understand. A basic component in productivity management is management buy-in, in which companies should drive lead efforts from the top of the organization and that this should be more than just a mere engineering project in order to maximize success.

Understanding, involvement and support of management are critical in order to eliminate the barriers for improving productivity and establishing an environment where productivity management methods can work effectively.

Labor productivity improvements should be derived from the basic platform of best practice, which is the most ideal overall distribution center process and material flow and preferred approaches, which is a highly favorable way to do a particular task. Most retailing companies recognize the best practice concept but may not be familiar with preferred methods. This results to warehouses having multiple workers doing a specific task in different ways, thus there is inefficiency and low optimal performance.

Setting preferred methods can boost productivity and create a benchmark upon which to base time calculations. The focus in distribution is often on what is being accomplished and not necessarily how it is done. Development of preferred methods involves identifying the most effective approach to do the job within constraints of keeping quality and worker safety overall.

In addition, little ergonomic improvements can also contribute to productivity gains with many workers constantly doing the same task.

Impact of FDI in Retail in India

The opening up of retail trade for foreign direct investment (FDI) promises to usher in revolutionary changes to the Indian consumer market in the days to come.

Recently, in a significant step towards liberalizing India’s retail trade, the government had decided to partially open the retail sector by announcing 51 percent FDI in single brand retailing – a move that should pave way for big names like Nike, Versace, Addidas, Marks & Spencer to set up their own stores in India.

This means that foreign companies willing to enter the Indian market will now be able to invest up to 51 percent in setting up production facilities, distribution network and retail shops and the rest will come from Indian investors. But at the moment, the entry of retail giants of multiple brands like Wal-Mart is not allowed. The government is yet to announce the guidelines that will make the picture more clear.

However, experts are still divided on the problems and prospects of this move. Some say it will shrink employment opportunities, completely alter the retail distributional structure and deal a death blow to the corner shop structure.

The optimists, on the other hand, see a whole range of opportunities — from improved collection, processing and better distribution of farm products to generation of more opportunities for the rural and urban unemployed.

Until now, global retailers were required to sell their products through franchises or wholesale trading. This move will help them setting their own base in India and will attract foreign capital along with better quality products and services for the consumers.

The Indian retail market currently estimated to be worth $250 billion is presently dominated by millions of mom-and-pop stores that cater to 97 percent of the total market.

According to a recent study, the Indian retail Industry is expected to grow at about 36 percent by 2008 and with the increase in foreign investment the industry is expected to do a business of Rs. 1.60 trillion by the year 2008.

With the new regulations in place, the debate is that what will happen to these stores? Will the entry of global retailers wipe out these local stores or will it make no impact? If we take China’s example, the FDI in retail has little or no impact on the local retailers and they still dominate the retail sector.

Secondly, the decision may not trigger the FDI flow as such as single brand retailers who wanted to be in India like Nike and Reebok are already here through franchise and may find it tough to find local partners willing to invest in the business.

Indian retail sector is the second largest employer after agriculture in the country and the entry of foreign companies will not only increase the number of employment opportunities but also exports.

With foreign companies setting up their own stores in India, the consumer will get access to some of the major global brands. Entry of foreign brands would also improve the quality and variety of products, increase competition and expand manufacturing.

Organised retailing holds the promise of lowering the prices of foreign goods sold through these large stores. This also means that some of these retail chains will eventually have to start manufacturing locally or outsource from domestic manufacturers in order to be in the competition.

This is more so considering the fact super and corner markets are very likely to co-exist in the Indian market and it would make the latter more competitive and skilled in terms of operations.

Also, several Indian corporates such as the Tatas, ITC, the RPG Group and the Rahejas have already established their outlet chains. Others such as Viveks in Chennai have established multi-brand stores. Mukesh Ambani’s Reliance, too, is reported to be planning a major foray into retail business.

All this promises to make the Indian retail market a real happening place in the days ahead while at the same time offering immense business opportunities to the domestic entrepreneurs. In fact, this is likely to transform the whole contours of the India market, making it a part of the overall global market.

For reading other articles, please visit at:
http://www.tradeindia.com/newsletters/newsletter_archives.html

Why Pay More Than Necessary For Products and Services? – Retail Distribution VS Direct Selling

The goal of this article is to describe why retails sales and traditional distribution are now being replaced by direct sales and intellectual distribution.

To begin, let me describe what I mean by retail selling and traditional distribution: In traditional distribution, manufactured products are distributed to wholesales. The wholesalers then sell those goods to retailers and the retail outlets sell the products to the customer at a significantly greater price than the purchase price. Retailers have no choice other than to mark up the cost of products, as they have to pay for advertising, staffing costs, utilities, etc. and those costs must be transferred to the customers if the retailers are to make money.

Intellectual distribution is the ability to provide product information to the customer, who then purchases directly from the manufacturer (direct sales).

Have you ever visited a shop to discuss prices, only to return home and identify the product far less expensive on the Internet? The product you are actually getting is exactly the same, but on the Internet you may be receiving it directly from the wholesaler or even the manufacturer. The Internet has revolutionised the way companies promote and educate us about their products and the costs to the customer are significantly lessened as a direct result.

What does this mean for retail sales? Can you see why many retailers and stores are going out of business? Is this trend likely to continue?

I believe that it is the older generations who may be less comfortable using computers, keeping large sections of the retail industry from crisis. Imagine what will happen when the bulk of the population are online and buying directly from the manufacturers. Many people do grocery shopping online, Christmas shopping on the internet, we buy books, CDs and DVDs online! Is there any limit to the products that we can purchase directly from wholesalers or manufacturers?

The reality is that retail distribution is struggling and direct sales is growing. This may be a very bad thing for retail outlets (look what happened to Woolworths in the UK!), but an excellent thing for direct sales companies (i.e. Amazon).

As individuals we can capitalize on these economic trends. Firstly, we can buy products and services from direct sales companies. Also, we may be able to work with a direct sales company, promoting the products and services they distribute. You can be an independent partner and generate income from any sales you generate. This is ideally suited for the Internet and is definitely something worth considering in the 21st century!