Check this article from Business World, its about Spencer's retail and their efforts to survive (and then probably thrive). The article has impressive numbers and graphs about Indian retail scenario.
http://www.rpggroup.com/images/News/shopping_bw_5_10_09.pdf
The most important point for me is that Spencer's will be shutting down three formats and focus on hypermarket and supermarket. I believe this is a very very smart move. The so called organised players of Indian retail have chosen to dabble in all formats simultaneously. Every format served a different customer but they were served by the same supply chain. This was a sure way to ensure dissatisfied customers and high operating costs.
A small store like Spencer's Express or Spinach needs frequent deliveries and in small quantities. Every delivery assortment would have different types of items. However, A large format Big Bazaar could easily store and accept deliveries of full truck loads. Every aspect of inventory planning and distribution would be different. We cannot expect the same supply chain to serve both needs.
It is good to see that Spencer's has seen the light. Am sure with the realisation that the fabled growth of Indian (so called) organised retail not happening, others have no option but to join in.
Monday, October 26, 2009
Wednesday, October 21, 2009
Promotions and change of jobs
Two incidents -
In a faculty meeting at NMIMS we were waiting for the tea to be served. The person manning the tea arrangements outside refused to serve us as he was the 'supervisor' and person supposed to serve tea had gone down.
At a Pizza Hut outlet at Borivali, peak time, the staff were trying to clear and re arrange tables as fast as they could. There was a rush of customers waiting outside. As soon as the table next to us became empty, the supervisor started collecting the tissues strewn on the table. Till the waiter arrived a lot of the table was clean. Both of them together cleared and cleaned the table.
I am sure all of us can take our own lessons. Job roles in processes are sometimes defined very narrowly. The definitions are also internally oriented and have nothing to do with the customer. Internally oriented job roles may lead to some hypothetical efficiency calculation, but they may be detrimental to customer service.
I am not looking at criticizing individuals. Of course a point could also be made that the faculty could have taken tea on their own. An employee behaves in a manner that is defined in his job role. In an era of less competition job roles and processes defined to create high efficiencies were okay, but in the current competitive scenario they are a sure way to ruin.
Sunday, October 18, 2009
Clean technologies - CSR or business?
I was invited to take a session at an small MBA institute in Gujarat. I had given then a few pages of reading material. I saw that the institute had edited the layout of my material so that it fit in only four pages and printed it on both sides of the paper. I began my session by appreciating the editing that saved lot of paper, an environmentally conscious action. A student stood up to reply that she was responsible for this and her prime motivation was to save money. Printing on both sides was obviously cheaper than two sheets with one side printed.
This incident reemphasized my concern that we had a wrong approach to clean technologies and sustainable environment based practices. Many companies had a special department that looked at these initiatives and these were paraded to the world as CSR (Corporate Social responsibility) initiatives. Firms used such actions to occupy high moral ground among consumers and the society.
A better way to look at these initiatives would be to assess them as normal business projects. They would have an investment and a straight monetary return. This would be the only way to ensure that the projects are taken up willingly by many companies. Businesses should be convinced that clean technologies save money and that they save the environment is a by product.
Saturday, September 26, 2009
try forecasting this
In the 1976 edition of the Sunday league, the last playing day had three matches scheduled. The winner of the league would be decided only after all three matches were over. The problem was that there was only one trophy and it had to be given to the winner immediately after the match. All the three grounds (Cardiff, Edgbaston and Maidstone) were approximately 200 kms from each other.
BBC, the sponsor, hired a helicopter, and kept the trophy at their Birmingham studio and very close to Edgbaston. They decided to fly the trophy to Cardiff but changed plans and sent it to Maidstone. In a thrilling game, that went to the last ball, Somerset lost at Cardiff and the winner was Kent at Maidstone.
Read here for the complete article:
http://www.cricinfo.com/magazine/content/story/426659.html
Luckily, BBC's decision to send the trophy to Kent turned out to be right. Read the previous sentence again - the reason for the right decision was 'luck.' The last ball could easily have nicked to the third man for four runs and Somerset would have been the winner. They would then have to wait for almost 3 hours to get the trophy back from Maidstone. It could very well been a disastrous decision. Cricket experts would have surely written reports of how BBC should have sent the trophy to Cardiff and not to Maidstone.
In business, we face so many situations like this everyday. Every decision has some assumptions. If those assumptions come true the decision is hailed. If the decision does not come true, academicians like me will write a case study on how 'elementary business principles' had been violated.
I have always taught forecasting from a premise that it could always and easily go wrong. Investing in good forecasting systems is good, but effort also should be invested in creating agile systems that can survive inaccurate forecasts. We must never forget that most forecasting methods, whether time series of regression based have an inherent assumption that the past will repeat itself. Given the dynamic nature of markets, I am not sure if this is a valid suggestion.
And, at the end of the day its okay for forecasts to wrong. We could create a tracking signal and so long as the variation is within limits we should be okay. So, should the forecasting method be reviewed if the tracking signal is violated? As a good academician I will leave this question with a simple answer - "It depends".
One more thing, what would you do if you had to take the trophy decision in 1976.
1. Would you have housed the trophy in Edgbaston?
2. Would you have directed the helicopter to Maidstone on the basis of gut feel?
3. Do you have a third out of the box solution?
BBC, the sponsor, hired a helicopter, and kept the trophy at their Birmingham studio and very close to Edgbaston. They decided to fly the trophy to Cardiff but changed plans and sent it to Maidstone. In a thrilling game, that went to the last ball, Somerset lost at Cardiff and the winner was Kent at Maidstone.
Read here for the complete article:
http://www.cricinfo.com/magazine/content/story/426659.html
Luckily, BBC's decision to send the trophy to Kent turned out to be right. Read the previous sentence again - the reason for the right decision was 'luck.' The last ball could easily have nicked to the third man for four runs and Somerset would have been the winner. They would then have to wait for almost 3 hours to get the trophy back from Maidstone. It could very well been a disastrous decision. Cricket experts would have surely written reports of how BBC should have sent the trophy to Cardiff and not to Maidstone.
In business, we face so many situations like this everyday. Every decision has some assumptions. If those assumptions come true the decision is hailed. If the decision does not come true, academicians like me will write a case study on how 'elementary business principles' had been violated.
I have always taught forecasting from a premise that it could always and easily go wrong. Investing in good forecasting systems is good, but effort also should be invested in creating agile systems that can survive inaccurate forecasts. We must never forget that most forecasting methods, whether time series of regression based have an inherent assumption that the past will repeat itself. Given the dynamic nature of markets, I am not sure if this is a valid suggestion.
And, at the end of the day its okay for forecasts to wrong. We could create a tracking signal and so long as the variation is within limits we should be okay. So, should the forecasting method be reviewed if the tracking signal is violated? As a good academician I will leave this question with a simple answer - "It depends".
One more thing, what would you do if you had to take the trophy decision in 1976.
1. Would you have housed the trophy in Edgbaston?
2. Would you have directed the helicopter to Maidstone on the basis of gut feel?
3. Do you have a third out of the box solution?
Tuesday, August 25, 2009
one more JIT
Fiat Spa. has taken over the management of Chrysler. Fiat is implementing JIT - the system they have at Toyota, at Chrysler. So now, there will be larger teams, less supervisors, error eradication at source, and lots of other things. Check this article here -
http://www.detnews.com/article/20090824/AUTO01/908240334/Fiat-takes-aim-at-waste-in-Chrysler-plant-overhauls
I can bet that this will be a grand failure. It is understandable that Fiat had to start with a bang. They had to show that they are doing something different. This was the only way they could have generated some hope of survival.
Toyota Production System or JIT or Lean, needs willing cooperation from the workers. The system needs everyone in the company to be convinced of the way ahead. Only then can the changes succeed. Pushing in the JIT based changes create a hollow system. Lot of posters are put on the walls, new jargons introduced, but nothing substantial changes.
It is not to say that Chrysler can't be made profitable. There are always many different philosophies. Lean is not the only way to run a company. The only problem is that if Lean is to be implemented then the complete package needs to be spread out. Using just the tools, without introducing the culture can never work. Forcing the people to wear uniforms and keep just one bottle of water at work stations is definitely not how Lean should start.
http://www.detnews.com/article/20090824/AUTO01/908240334/Fiat-takes-aim-at-waste-in-Chrysler-plant-overhauls
I can bet that this will be a grand failure. It is understandable that Fiat had to start with a bang. They had to show that they are doing something different. This was the only way they could have generated some hope of survival.
Toyota Production System or JIT or Lean, needs willing cooperation from the workers. The system needs everyone in the company to be convinced of the way ahead. Only then can the changes succeed. Pushing in the JIT based changes create a hollow system. Lot of posters are put on the walls, new jargons introduced, but nothing substantial changes.
It is not to say that Chrysler can't be made profitable. There are always many different philosophies. Lean is not the only way to run a company. The only problem is that if Lean is to be implemented then the complete package needs to be spread out. Using just the tools, without introducing the culture can never work. Forcing the people to wear uniforms and keep just one bottle of water at work stations is definitely not how Lean should start.
Cash for clunkers
It is not necessary that you make good products. It is however necessary that you can get the government to issue some policy that favours the sale of your product. I have never understood the tax breaks for home loans in India. Most of these loans have been used in urban areas and urbanisation in the already massively infested cities is not at all desirable. If construction industry is necessary for the economy, so is automobiles and every other sector.
One thing that I am happy to note is that this situation is not limited to India. Check this link on "Cash for clunkers program" sponsored by the US government.
http://agmetalminer.com/2009/08/24/cash-for-clunkers-has-burned-through-3b-what-now/
It seems that if a polluting car is exchanged for a less polluting version, the government gives the buyer a certain subsidy. This scheme has caught on and the sales of the automobiles are zooming up. There are three parties here - mother earth (pollution), the automakers and the government.
1. As technology matures, any average new car is better than an old car. So any average person wanting to exchange would be eligible for subsidy.
2. A low pollution car that is being used is more polluting than an old car that is not being used.
3. Car sales now, in this poor economy, may cause future sales to plummet
4. Subsidy money may cause huge deficit to the government
So, who benefits? Everyone seems to lose.
One thing that I am happy to note is that this situation is not limited to India. Check this link on "Cash for clunkers program" sponsored by the US government.
http://agmetalminer.com/2009/08/24/cash-for-clunkers-has-burned-through-3b-what-now/
It seems that if a polluting car is exchanged for a less polluting version, the government gives the buyer a certain subsidy. This scheme has caught on and the sales of the automobiles are zooming up. There are three parties here - mother earth (pollution), the automakers and the government.
1. As technology matures, any average new car is better than an old car. So any average person wanting to exchange would be eligible for subsidy.
2. A low pollution car that is being used is more polluting than an old car that is not being used.
3. Car sales now, in this poor economy, may cause future sales to plummet
4. Subsidy money may cause huge deficit to the government
So, who benefits? Everyone seems to lose.
Wednesday, August 12, 2009
..And this is how SCM does not work
" Indian organised retail is more unorganised than the unorganised retail." I love this statement. and though it may seem shocking it is 100% true. The retail industry has seen reckless expansion. The players have multiple formats of stores and are trying to sell everything to everyone. This goes against the basic tenets of sound SCM. That the organised retail industry in India is not making money is not at all a surprise.
In order to survive from their own wayward ways, the retailers are indulging in further senseless activities. Have a look at this article -
http://epaper.timesofindia.com/Repository/ml.asp?Ref=RVRELzIwMDkvMDgvMTAjQXIwMDEwMA==&Mode=HTML&Locale=english-skin-custom
Of course good capacity utilisation is good. And yes, selling more private labels also help. This will of course save a few crore rupees for everyone. But, was this really part of the problem? The problem with the organised retailers is a top heavy structure (super high man power costs) and a knee jerk reaction based supply chain design. None of these factors are getting addressed by the actions the article suggests. Small savings are not going to save the ship from sinking.
Indian retail industry had a golden chance. They could have used all the learnings of the American and European retail industry, coupled it with local knowledge and avoided the growth pangs. But they seemed to have ignored everything. They started with a bank with an inadequate infrastructure and an ill trained staff. Instead of first creating the systems, the retailers progressed with short cuts. With such management bad results are definite.
In order to survive from their own wayward ways, the retailers are indulging in further senseless activities. Have a look at this article -
http://epaper.timesofindia.com/Repository/ml.asp?Ref=RVRELzIwMDkvMDgvMTAjQXIwMDEwMA==&Mode=HTML&Locale=english-skin-custom
Of course good capacity utilisation is good. And yes, selling more private labels also help. This will of course save a few crore rupees for everyone. But, was this really part of the problem? The problem with the organised retailers is a top heavy structure (super high man power costs) and a knee jerk reaction based supply chain design. None of these factors are getting addressed by the actions the article suggests. Small savings are not going to save the ship from sinking.
Indian retail industry had a golden chance. They could have used all the learnings of the American and European retail industry, coupled it with local knowledge and avoided the growth pangs. But they seemed to have ignored everything. They started with a bank with an inadequate infrastructure and an ill trained staff. Instead of first creating the systems, the retailers progressed with short cuts. With such management bad results are definite.
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