INTERNSHIP REPORT

ON

COST OPTIMISATION IN RETAIL

Submitted in partial fulfillment of the requirement of

Summer Internship Programme

By

Sujith.V.S

Under the guidance of:

Sivakami Karthik

Deputy Manager – Finance

Reliance Retail Ltd

Chennai

Declaration

I hereby declare that the project report entitled “Cost Optimisation in Retail” submitted for the PGPM Diploma is my original work, undertaken at Reliance Retail Ltd

Place: Signature

Date:

Executive Summary: The operational cost can be classified as follows,

Fixed cost, Variable cost, Semi variable cost (or)

Relevant cost, Sunk/Historical cost (or)

Controllable cost, Non controllable cost etc.

Since classifying cost as controllable and non controllable will help in optimizing the expenses, thereby increasing the net earnings, I had analyzed the cost in this fashion.

Non controllable costs are the cost which cannot be influenced by the involvement of management in normal course of business.

Controllable costs are the cost which can be controlled by the involvement of management and helps in cost optimization. Hence controllable cost were taken for analysis. The major components of controllable costs in retail are consumables and utilities. Hence these heads were taken for analysis.

AcknowledgementWithout a proper combination of inspection and perspiration, it’s not easy to achieve

anything. There is always a sense of gratitude, which we express to others for the help

and the needy services they render during the different phases of our lives. I too would

like to do it as I really wish to express my gratitude toward all those who have been

helpful to me directly or indirectly during the development of this project.

First of all I wish to express my profound gratitude and sincere

thanks to Mr. R.S. Ashok Kumar(Zonal Finance Head) Reliance Retail Chennai, for

giving me an opportunity to do the project at Reliance Retail.

I would like to thank Mrs. Sivakami Karthik (Deputy Manager-

Finance) Reliance Retail at Chennai. I am thankful to her for her encouraging and

valuable support. Working under her was an extremely knowledgeable and enriching

experience for me. I am very thankful to her for all the value addition and enhancement

done to me. I would like to thank my mentor Prof. Harihara Subramanian who was

always there to help and guide me when I needed help.

Sujith.

V.S

Introduction:

Retailing is the combination of activities involved

in selling or renting consumer goods and services directly to ultimate consumers for

their personal or household use. In addition to selling, retailing includes such diverse

activities as, buying, advertising, data processing, maintaining inventory etc. The Indian

Retail industry is witnessing a huge revamping exercise as traditional markets make

way for new formats such as Departmental stores, hypermarkets, supermarkets and

specialty stores. The Food Retail Industry in India dominates the shopping basket. The

Mobile phone Retail Industry in India is already a US$ 16.7 billion business, growing at

over 20 per cent per year. The Indian Retail industry which is the fifth largest in the

world is expected to go up to US$ 833 billion by the year 2013.The organised retail will

have a market share of 14-18 percent by 2015.The Indian organised retail industry is

expected to grow to $427 billion in 2010 and $637 billion in 2015. . The future of the

India Retail Industry looks promising with the growing of the market, with the

government policies becoming more favorable and the emerging technologies

facilitating operations.

The importance of Retailing:

Organized retailing in India is expected to grow to $427 billion in 2010 and 637 $

billion in 2015.

Retailing has a tremendous impact on the economy. It is expected to have share of

22% in the gdp by 2010. As a major source of employment retailing offers a wide

range of career opportunities including; store management, merchandising and

owning a retail business.

The consumers will have access to a wide variety of goods and services at a single

place. The width and depth of assortment depends on the individual Retailer’s

strategy.

They pull the consumers through advertising, displays & signs, sales personnel etc.

Retailing in a way, is the final stage in marketing channels for consumer products.

Retailers provide the vital link between producers and ultimate consumers.

Retail Strategy and Structure:

Successful retail operations depend largely on two main dimensions: margin and

turnover. How far a retail enterprise can reach in margin and turnover depends

essentially on the type of business (product lines) and the style and scale of the

operations. In addition the turnover also depends upon the professional

competence of the enterprise.

In a given business two retail companies may choose two different margin levels,

and yet both may be successful, provided the strategy and style of management are

appropriate.

Margin Turnover Model:

Ronald R. Gist "Suggested a conceptual frame work, using margin and turnover,

for understanding the retail structure and evolving a retail strategy."

Margin is defined as the amount of gross profit made when an item is sold. This is

a diagrammatic representation of the frame work and can be applied to almost any

type of retail business.

Depending upon the, combination of the two parameters, a retail business will fall

into one of the four quadrants. For instance L-L signifies a position which is low

on both margin and turnover; H-L indicates high margin and low turnover, L-H

indicates low margin and high turnover and H-H indicates high margin and high

turnover..

Low Margin High Turnover Stores :

Such an operation assumes that low price is the most significant determinant of

customer patronage. The stores in this category price their products below the

market level. Marketing communication focuses mainly on price. They provide

very few services; if any, and they normally entail an extra charge whenever they

do. The merchandise in these stores are generally pre-sold or self sold. This means

that the customers buy the product, rather than the store selling them.

These stores are typically located in isolated locations and usually stock a wide.

Range of fast moving goods in several merchandise lines. The inventory consists

of well known brands for which a consumer pull is created by the manufacturer

through national advertising. Local promotion focuses on low price. Wal-mart in

the United States is an example and Pantaloon Chain or Subhiksha are Indian

examples of such stores.

High Margin Low Turnover Stores:

This operation is based on the premise that distinctive merchandise, service and

sales approach are the most important factors for attracting customers. Stores in

this category price their products higher than those in the market, but not

necessarily higher than those in similar outlets. The focus in marketing

communication is on product quality and uniqueness.

Merchandise is primarily sold in store and not pre-sold. These stores provide a

large number of services and sell selected categories of products. They do not

stock national brands which are nationally advertised. Typically, a store in this

category is located in a down town area or a major shopping center. Sales depend

largely on salesmanship and image of the outlet.

High Margin High Turnover Stores:These stores generally stock a narrow line of products with turnover of reasonably high

frequency. They could be situated in a non commercial area but not too far from a major

thoroughfare. Their location advantage allows them to charge a higher price. High over

head costs and, low volumes also necessitate a higher price.

Low margin Low Turnover Stores: Retail enterprises in this category are pushed to maintain low margins because of

price wars. Compounding this problem is the low volume of sales, which is

probably a result of poor management, unsuitable location etc. such businesses,

normally get wiped out over a period of time.

RETAILING FORMATS (CLASSIFYING RETAIL

FIRMS) Regardless of the particular type of retailer (such as a supermarket or a department

store), retailers can be categorized by (a) Ownership, (b) Store strategy mix, and

(c) Non store operations.

Types of ownership: A retail business like any other type of business,

can be owned by a sole proprietor, partners or a corporation. A majority of retail

business in India are sole proprietorships and partnerships.

Independent Retailer: In this format the manager has direct contact with

the customers and can quickly respond to their needs. Small retailers are also very

flexible and can react quickly to market changes and customer needs. They aren’t

bound by bureaucracies inherent in large retail organizations. This requires low

investment and little technical knowledge and hence faces a high degree of

competition. Roughly 98% of all the retail businesses in India are managed and run

by independents, including barber shops, drycleaners, furniture stores, bookshops,

LPG Gas Agencies and neighborhood stores.

Corporate Retail Chains: A Retail chain is a company operating

multiple retail units under common ownership and is usually has centralized

decision making for defining and implementing its strategy. Retail chains can

range from a drug store with two stores to retailers with over 1,000 stores such as

Wal-Mart, Target. The corporate chains can more effectively negotiate lower

prices for merchandise and advertising due to their larger size. They also have a

broader management base, with people who specialize in specific retail activities.

Franchising: Franchising is a contractual agreement a

franchisor and a franchisee that allows the franchisee to operate a retail outlet using a name and

format developed and supported by the franchisor. In frachise contract, the franchisee pays a

lump sum plus royalty on all sales for the right to operate a store in a specific location. The

franchise ownership format attempts to combine advantages of owner managed businesses with

efficiencies of centralized decision making in chain store operations.

Cooperatives: A retail cooperative is a group of independent

retailers that have combined their financial resources and their expertise in order to

effectively control their wholesaling needs. They share purchases, storage, shopping

facilities, advertising planning and other functions. The individual retailers retain their

independence, but agree on broad common policies. Amul is a typical example of a

cooperative in India.

Store Strategy Mix: Retailers can be classified by retail store

strategy mix, which is an integrated combination of hours, location, assortment, service,

advertising, and prices etc. The various categories are:

Convenience Store:

Is generally a well situated, food oriented store

with long operating house and a limited number of items. Consumers use a

convenience store; for fill in items such as bread, milk, eggs, chocolates and candy

etc.

Super markets: Is a diversified store which sells a broad range of

food and non food items. A supermarket typically carries small house hold

appliances, some apparel items, bakery, film developing, jams, pickles, books,

audio/video CD's etc. The Govt. run Super bazaar and Kendriya Bhandar in Delhi

are good examples of a super market. Similarly in Mumbai, we have Apna Bazar

and Sahakari Bhandar.

Department Stores: A department store usually sells a general line

of apparel for the family, household linens, home furnishings and appliances.

Large format apparel department stores include Pantaloon, Ebony and Pyramid.

Others in this category are: Shoppers Stop and Westside.

Speciality Store: Concentrates on the sale of a single line of

products or services, such as Audio equipment, Jewellery, Beauty and Health Care,

etc. Consumers are not confronted with racks of unrelated merchandise. Successful

speciality stores in India include, Music World for audio needs, Tanishq for

jewellery and McDonalds, Pizza Hut and Nirula's for food services.

Hyper Markets: Is a special kind of combination store which

integrates an economy super market with a discount department store. A hyper

market generally has an ambience which attracts the family as whole. Pantaloon

Retail India Ltd. (PRIL) through its hypermarket "Big Bazar", offers products at

prices which are 25% - 30% lower than the market price.

Non Store Retailing: In non store retailing, customers do not go to a

store to buy. This type of retailing is growing very fast. Among the reasons are;

the ability to buy merchandise not available in local stores, the increasing number

of women workers, and the presence of unskilled retail workers who cannot

provide information to help shoppers make buying decisions.

The major type of non store retailing are

(A)In Home Retailing:

Where, a sales transaction takes place in a

home setting - including door-door selling. It gives the sales person an opportunity

to demonstrate products in a very personal manner. He/She has the prospect's

attention and there are fewer distractions as compared to a store setting. Examples

of in home retailing include, Eureka Forbes vaccum cleaners and water filters.

(B)Telesales/Telephone Retailing:

This involves contact between the prospect

and the retailer over the phone, for the purpose of making a sale or purchase. A

large number of mobile phone service providers use this method. Other examples

are private insurance companies, and credit companies etc.

(C)Catalog Retailing:

This is a type of non store retailing in which

the retailers offers the merchandise in a catalogue, which includes ordering

instructions and customer orders by mail. The basic attraction for shoppers is

convenience. The advantages to the retailers include lover operating costs, lower

rents, smaller sales staff and absence of shop lifting. This trend is catching up fast

in India. Burlington's catalogue shopping was quite popular in recent times. Some

multi level marketing companies like Oriflame also resort to catalogue retailing.

(D)Direct Response Retailing:

Here the marketers advertise these products/ services in magazines, newspapers, radio

and/or television offering an address or telephone number so that consumers can write or

call to place an order. It is also sometimes referred to as "Direct response advertising." The

availability of credit cards and toll free numbers stimulate direct response by telephone.

The goal is to induce the customer to make an immediate and direct response to the

advertisement to "order now." Telebrands is a classic example of direct response retailing.

Times shopping India is another example.

(E)Automatic Vending:

Although in a very nascent stage in India, is the ultimate in non personal, non store

retailing. Products are sold directly to customers/buyers from machines. These machines

dispense products which enable customers to buy after closing hours. ATM's dispensing

cash at odd hours represent this form of non store retailing. Apart from all the

multinational banks, a large number of Indian banks also provide ATM services,

countrywide.

(F)Electronic Retailing:

In this format the retailers communicate with customers and offer products and services

for sale over the internet. The rapid diffusion of internet access and usage and the

perceived low cost entry stimulated the creation of large number entrepreneurial electronic

ventures. These electronic retailers ranged in size from Amazon.com, with over $3 billion

annual sales, to niche retailers such as Dilmah’s which sells teas from the plantations in

the high lands of Srilanka. While the electronic retail innovators had superior skills in

using the new technology, they lacked retailing expertise and a deep understanding of

customer needs.

The Wheel Of Retailing:

Is a hypothesis that attempts to explain the emergence of new retailing institutions

and their eventual decline and replacement by newer retailing institutions? Like

products retailing institutions also have a life cycle.

According to this theory new retailers enter the market as, low margin, low price,

low status institutions. The cycle begins with retailers attracting customers by

offering low price and low service. Over a period of time these retailers want to

expand their markets and begin to stock more merchandise, provide more services,

and open more convenient locations. This trading up process increases the

retailers’ costs and prices, creating opportunities for new low price retailers to

enter the market.

The evolution of the department store illustrates the "wheel of retailing" theory. In

its entry phase, the department store was a low cost-low service venture. With time

it moved up into the trading-up phase. It upgraded its facilities, stock selection,

advertising and service. The same department store then moves into the

vulnerability phase, because it becomes vulnerable to low cost/low service

formats, such as full line discount stores and category specialists. While the wheel

hypothesis has a great deal of intuitive appeal and has been borne out in general by

many studies of retail development, it only reflects a pattern. It is not a sure

indicator of every change, nor was it ever intended to describe the development of

every individual retailer.

Retailing Strategy:

(1).Target Market:

Retail market can be defined as a group of consumers with similar needs and a

group of retailers using a similar retail format to satisfy those consumer needs. Each

format offers a different retail mix to the customers. Through a careful definition of target

markets, retailers can use their resources and capabilities to position themselves more

effectively and achieve differential advantage. The tremendous growth in number of

specialty stores in recent years is largely due to their ability to define precisely the type of

customers, they want to serve.

(2) Location:

Location is the critical factor in consumer selection of a store. It is also a

competitive advantage that is not easily duplicated. Factors affecting the site

include, traffic patterns, accessibility, competitors' location, availability and cost

and population shifts within the area.

(3) Human Resource Management:

Retailing is a labour intensive business. Employees play a major role in

providing services for customers and building customer loyalty. Knowledgeable

and skilled employees committed to the retailer’s objectives are critical assets that

support the success of companies

(4) Distribution and Information Systems:

Sophisticated distribution and information systems helps the retailer to

provide their customers the merchandise they want, when they want it, in the

quantities that are required, at a lower delivered cost than their competitors. For

instance merchandise sales information flows seamlessly from Wal-Mart to its

Vendors like Procter & Gamble to facilitate quick and efficient merchandise

replenishment. Wal-Mart has the largest data base in the world enabling the

company to fine tune merchandise assortment on a store-by-store, category-by-

category basis.

(5)Vendor relations:

By developing strong relations with vendors, retailers may gain exclusive

rights (1) to sell merchandise in a region,(2) to obtain special terms of purchase

that are not available to competitors who lack such relations, or(3) to receive

popular merchandise in short supply.

(6)Customer service:

Retailers also build a sustainable competitive advantage by offering

excellent customer service. Customer service is provided by retail employees- and

humans are less consistent than machines. Retailer’s that offer good customer

service instill its importance in their employees over a long period of time. Once a

retailer has earned a service reputation, it can sustain this advantage for a long

time because it’s hard for a competitor to develop a comparable reputation.

Functions performed by Retailers: Providing an assortment of products and services

Breaking bulk

Holding Inventory

Providing services

Reliance Company Profile

RELIANCE GROUP

The Reliance Group, founded by Dhirubhai H. Ambani (1932-2002), is India's largest

private sector enterprise, with businesses in the energy and materials value chain. Group's

annual revenues are in excess of USD 44 billion. The flagship company, Reliance

Industries Limited, is a Fortune Global 500 company and is the largest private sector

company in India.

Backward vertical integration has been the cornerstone of the evolution and growth of

Reliance. Starting with textiles in the late seventies, Reliance pursued a strategy of

backward vertical integration - in polyester, fibre intermediates, plastics, petrochemicals,

petroleum refining and oil and gas exploration and production - to be fully integrated

along the materials and energy value chain.

The Group's activities span exploration and production of oil and gas, petroleum refining

and marketing, petrochemicals (polyester, fibre intermediates, plastics and chemicals),

textiles and retail.

Reliance enjoys global leadership in its businesses. The Group exports products in excess

of USD 15 billion to more than 100 countries in the world. Major Group Companies are

Reliance Industries Limited (including main subsidiaries Reliance Petroleum Limited and

Reliance Retail Limited) and Reliance Industrial Infrastructure Limited.

RELIANCE FRESH

APKA KUSHI HAMARA KUSHI

India’s Fortune 500 private sector giant, Reliance Industries Ltd, has, in fact, been first

off the blocks by launching its first Reliance Fresh outlets in Hyderabad. Reliance fresh is

the retail chain division of reliance industries of India which is headed by Mukesh

Ambani. Reliance has entered into this segment by opening new retail stores into almost

every metropolitan and regional area of India. The reliance fresh plans to add more stores

across different, and eventually have a pan-India footprint by year 2011. The super marts

will sell fresh fruits and vegetables, staples, groceries, fresh juice bars and dairy products

and also will sport a separate enclosure and supply-chain for non-vegetarian products.

The company also has plans to train students and housewives in customer care and

quality services for part-time jobs.

Reliance Fresh will…

• Forge strong and lasting bonds with millions of farmers and will transform the

Relationship with customers to a new level

• Offer unmatched affordability, quality, convenience, service and choice

• Offer our customers the widest range of fruit and vegetables at the best prices in

the neighborhood

• Provide for the daily needs of our customers by offering staples, grocery and

household products at great prices

• Offer consistent high quality, unbeatable freshness and great service so that our

Customers know that we can be trusted every day.

Cost Optimisation

In all forms of Business, the ultimate aim is to make Profit. One among the major component that influence Profit is the Operational Cost. The following are the different heads in which the operational costs are grouped in Retail

Staff Cost

Rental Cost

Consumables Cost

Utilities Cost

Marketing Cost

Communication Cost

Securities Cost

Other Cost

In the above the Rental Cost is of Non – Controllable nature. Hence analyzing this will not help in Cost reduction. The Staff Cost is the first major component. The Consumables and Utilities are the other two major component of controllable cost.

Adequate Staffing is and their cost optimization are taken care by HR Department. Hence Consumables and Utilities were taken for analysis aiming at optimizing the same, thereby helping the management in cost reduction and profit maximization

Analysis of Consumables

Objective: To analyze the existing Cost Structure of consumables and to find the optimum cost.

Need of study:

Since Consumables forms part of the major component of Controllable

cost, optimization of the same will result in profit maximization. The study focuses primarily

on the intending & consumption pattern of consumables. This will help the company to

identify the stores which spend more on consumables and also to find out an optimum

cost for these items which will help the stores to improve their profits.

Types and collection of data used:

The data collected can be classified into primary and secondary data

(1).Primary data:

The primary data can be collected by

Observation

Interview

This involves store visits to analyse

How the store places an intend for an item in SAP

The quantity they intend for each item

The periodicity of intending

The lead time of delivery

(2) Secondary data:

This involves the analysis of data which is already present.

The source of this data is SAP and the employees in the company. The quantity supplied

details given by DC ( The supplying site).

Primary Data Collected:

Store visits:

In the Course of collecting the information and understanding the retail and its cost structure, I had visited 3 Stores in Chennai. The data collected from stores are listed below,

Store name: Teynampet

Store code:2039

Item

Quantity intended in a month

No. of intends in a month

Reorder level

Per day consumption

Lead time

Carry Bag 240kg 2 5kg 7-8kg 1 dayBag on Rolls 200kg 2 7-8kg 5-6kg 1 dayPos Rolls 150 pieces 2 10 pieces 4 pieces 1 day

Other items:

Garbage cover—Once in 2 months(25 Kg)

A4 sheet—Monthly

Dump note—Once in 3 months

Cash declaration—Monthly(3)

Reasons for wastage:

1. Carry Bags:

Unnecessary demand from customers

Carelessness from workers

2. Bag on Rolls:

The material used for making Bag on Rolls is very delicate and because of this the

customers will make error will tearing it.

3. Pos Rolls:

Whenever the person at the billing counter makes a wrong bill the

length of the bill will increase and the paper is wasted.

Store name:Thiruvamiyur

Store code: 2038

Item

Quantity intended in a month

No. of intends in a month

Reorder level

Per day consumption

Lead time

Carry Bag 300kg 2 5kg 10kg 1 dayBag on Rolls 250kg 2 2kg 5kg 1 dayPos Rolls 150 pieces 2 10 pieces 4 pieces 1 day

Other items:

Most of the items are purchased locally

SEL(Stickers)—4000 inch(1 roll per week—1000 labels)

Store name:Royapettah

Store code:2051

Item

Quantity intended in a month

No. of intends in a month

Reorder level

Per day consumption

Lead time

Carry Bag 700kg 2 25kg 20kg 1 dayBag on Rolls 400kg 2 25kg 14kg 1 dayPos Rolls 200 pieces 2 15 pieces 6 pieces 1 day

Other items:

Most of the items are purchased locally. The quantity of

garbage bags purchased is 50Kg

Process of Intending:

Each store will place the indent for different

consumables to the distribution centres – DC and the distribution centre procures the

consumables from suppliers and delivers to the stores. The store will place the required

quantity for each item in SAP and they have to specify the item code, location code and

the required quantity.

Intending Analysis:

In intending analysis four things have to noted.

(1).Average consumptional analysis:

In this analysis the average consumption for each

month is analysed and the stores which have made very high and low orders are

identified.

(2) Monthly analysis of indents:

Here the monthly indents are analysed on basis of

average consumption and store which have made very high and low indents were

identified.

(3)Indenting pattern: Here the pattern of indenting is identified in the following pattern.

The stores which have placed orders continuously for 4

months

The stores which have placed orders continuously for 3

months

The stores which have placed orders continuously for 2

months

The stores which have placed order only for 1 month

(4)Non intending pattern: Here the stores which haven’t made any order in each month is noted.

Methodology:

The different consumables used in the store

include Carry bags, Bag on rolls; Pos rolls and rest of the things are included under other

items. Carry bags and Bag on Rolls are mainly used for carrying fruits and vegetables and

Pos rolls are used for making tickets.

For the analysis of Carry Bags and Bag Rolls

the stores are divided into different classes on the basis of PSPD (Per Store Per Day)

F&V Tonneage handled as they are mainly used to pack the Fruits and Vegetables for the

Customers. Within each class the best and worst cases are noted. For the analysis of Pos

Rolls and other items the stores are divided into different classes on the basis of PSPD

no. of tickets made and PSPD net sales respectively and within each class the best and

worst cases are noted. The intending pattern for the four months, January’10 to April’10

is analysed.

Analysis of Carry Bags:

There are 8 types of carry bags which are used in a

store. The stores are divided into 3 classes on the basis of average PSPD F&V tonneage

handled. From each class the stores with the highest and lowest consumption of carry

bags are found out.

(1). Carry bags Vs. F&V Tonneage (Kerala):

Out of 33 stores only 6 have intended for carry bags from January to April.

Findings:

Range(AVG PSPD) Best in Clause Attention Required Less than 0.8 tonnes 6,084 Thamarassery 6,077 Muvattupuzha Between 0.8 and 1.05 tonnes 6,051 Palai 6,075 Vazhakkala More than 1.05 tonnes 6,050 O Mall 2,539 Jawahar Nagar

(2). Carry bags Vs. F&V Tonneage(Karnataka):

Findings:

Range(AVG PSPD) Best in Clause Attention Required Less than 1 tonnes 2147 Chamarajapuram 6076 Devarachikkanahalli 3083 Centurey Club 2524 Keshavapur Between 1 and 2 tonnes 2131 Hebbal 2796 Tambuchettipalya 2795 Uttarahalli 2141 Vijaynagar Between 2 and 3 tonnes 2125 Kormangala I 2143 Kormangala-2 2126 Srinivas Nagar 2134 Mathikere Between 3 and 4 tonnes 2836 New Thippasandra 6049 Sarla Grand

More than 4 tonnes 2656 BTM Layout 2139 Whitefield

Analysis of Bag on Rolls: There are 3 types of bag

on rolls which are used in a store. The method of analysis is same as that of carry bags.

(1).Bag rolls Vs. F&V Tonneage(Kerala):

Findings:

Range(AVG PSPD) Best in Clause Attention Required Less than 0.4 Tonnees 2,543 Vendormukku 6,084 Thamarassery 3,020 Thodupuzha Between 0.4 and 0.7 Tonnees 2,843 Kunnumangalam 2,551 Peroorkada More than 0.7 Tonnees 2,309 Kalamassery 6,077 Muvattupuzha

(2).Bag Rolls Vs. F&V Tonneage(Karnataka):

Findings:

Range(AVG PSPD) Best in clause Attention required

Less than 1 tonneStore code Store name Store code Store name

3055 Kolhapura Circle 3015 Magadi Road 2524 Keshavapur 3048 AGS Layout Between 1 and 2 tonnes 3053 Ullal Main Road 2128 Malleswaram-I 3086 Ombr Layout 2794 Sarakki Layout Between 2 and 3 tonnes 2126 Srinivas Nagar 2123 Frazer Town 2145 South End 2134 Mathikere Between 3 and 4 tonnes 2512 Sanjay Ngr Bangalore 6049 Sarla Grand More than 4 tonnees 2656 BTM Layout 2139 Whitefield

Analysis of Pos Rolls: Pos rolls are the papers which are used for making tickets

(no of bills). The consumption of Pos rolls are compared against the average PSPD

tickets (no of bills) made in a store. The stores are divided into 3 classes on the basis of

average PSPD tickets made in a store and the store with the highest and least

consumption of Pos rolls are identified.

(1). Pos Rolls Vs. Tickets (Kerala):

Findings:

Range(AVG PSPD) Best in Clause Attention RequiredLess than 260 tickets 4,151 Jawahar Nagar 2,547 Kumarapuram Between 260 and 400 tickets 2,536 Pottammel 2,546 Paravoor More than 400 tickets 6,052 East Fort 2,539 Jawahar Nagar

(2). Pos Rolls Vs. Tickets (Karnataka):

Findings:

Range(AVG PSPD) Best in Clause Attention RequiredLess than 500 tickets 3050 Sunkadakatte 2,795 Uttarahalli 3052 Deshpande Nagar 3,014 New BEL Road-1 Between 500 and 1000 tickets 2,528 Kalidasa Road 2,512 Sanjay Ngr Bangalore 2,852 Konekunte Cross 2,135 Vidyaranyapura More than 1000 tickets 6,049 Sarla Grand 2,139 White field

Analysis of Other Items:

All other such as Lables, Stickers, Tonners, etc are

included under the head other items. The stores are divided into 3 classes on the basis of

average PSPD net sales. In each class the average value of the consumables used by a

store should be compared against the average PSPD net sales in that store. The store with

the lowest ratio is taken as the best one.

(1).Other items Vs. Net Sales(Kerala):

Findings:

RANGE(AVG PSPD SALES in Rs.) Best in Clause Attention Required LESS THAN 50000 2,533 Ramanattukara 2,534 Nadakkavu BETWEEN 50000 AND 100000 2,531 Beach Road 6,084 Thamarassery MORE THAN 100000 2,539 Jawahar Nagar 6,077 Muvattupuzha

(2).Other items Vs. Net Sales(Karnataka):

Findings:

Range(AVG PSPD sale in Rs) Best in clause

Attention Required

Less than 50000 3052 Deshpande Nagar 3050 Sunkadakatte 3055 Kolhapura Circle 3053 Ullal Main Road Between 50000 and 100000 2853 VijayNagar-2nd Stage 2140 Amruthahalli 2851 Versova Layout 2795 Uttarahalli More than 100000 2145 South End 2515 Banaswadi Main Rd 2656 Sarla Grand 3025 Sahakar Nagar-02

Reasons for wastage:

1. Carry Bags:

Unnecessary request from the customers

For giving gifts to the customers during special occasions

Non availability of carry bags of small sizes in the store, due to this large size bags are

wasted.

2. Bag on rolls:

Bad quality of the material

Tearing problems

Customers take more no. of Carry bags

3. Pos rolls:

Wrong bills

Recommendations:

Carry bags of smaller size can be used for packing lesser quantity

Different Size of Bag on rolls should be placed at appropriate place. Eg. Small Size Bag near chilly and Ginger

The quality of the material of Bag on rolls can be improved

Errors in billing should be avoided to reduce the wastage of Pos rolls

Analysis of Utilities

Objective:

To analyze the existing cost structure of utilities and to find the optimum cost

Need of study:

Since Utilities forms part of the major component of Controllable cost,

optimization of the same will result in profit maximization.

Types and collection of data used:

The data collected can be classified into primary and secondary data

(1).Primary data:

The primary data can be collected by

Observation

Interview

This involves store visits to analyse

How the utility bill is claimed

The time taken for bill payment

(2) Secondary data:

This involves the analysis of data which is already present.

The source of this data is SAP and the employees in the company. The expenses for

utilities for each store is obtained from SAP.

Primary Data Collected:

Store visits:

Three stores were visited to get details regarding the process of utility bill claiming and expenses for diesel as a sample. The details collected are listed below,

Store name: Teynampet

Store code:2039

1. Electricity:

Average Per day consumption—350 units

Time taken for the delivery of cash to a store for bill payment –6 days

Time available for bill payment—20 days

2. Diesel:

Per hour consumption by generator –8 litres

Capacity of generator—100 litres

Reorder level of diesel—10 litres

3. Equipments:

Freezers—3

Chillers—1

Store name:Thiruvamiyur

Store code: 2038

1. Electricity:

Average cost in a month—Rs.20000

Time taken for the delivery of cash to a store for bill payment –6 days

2. Diesel:

Per hour consumption by generator –10 litres

Capacity of generator—100 litres

Reorder level of diesel—50 litres(the half mark in the generator)

The quantity purchased in a month 30 litres

3. Equipments:

Freezers—3

Chillers—3

Store name:Royapettah

Store code:2051

1. Electricity:

Bill payment is made monthly once

2. Diesel:

Per hour consumption by generator –8 litres

Capacity of generator—100 litres

Reorder level of diesel—20 litres

Process of utility bill claiming:

The utilities include Electricity, Diesel and Water. The

expense for Electricity is claimed in the EB portal. The time taken for the store to receive

cash is 6 days. The expense for Water and Diesel are met from petty cash given to the

store.

Methodology:

The different utilities include electricity, water and

diesel. For the purpose of analysis the stores are divided into different classes based on

their area because the usage of utilities depend on the store area, within each class the

best and worst cases are noted. The EB bills from Jan’10 to June’10 are analysed.

1. Analysis of Electricity expenses(Tamil Nadu):

Findings:

Range(Store area) Best in clause Attention required

Store code Store name Store code

Store name

Less than2000 sq/ft 2043 Anna Ngr 6th 2038 Thiruvanmiyur 2035 Adyar Between 2000 and 3000 sq/ft 2577 A A Road 2165 JK Complex 2788 Chitlapakkam 2032 Ashok Ngr 2031 Anna Ngr 18th 2039 Teynampet Between 3000 and 4000 sq/ft 2629 GG Nagar 2033 Purasaivakkam 2831 VVV Mahal 2030 Valasaravakkam 2724 Chandran Nagar 2041 T.Ngr Between 4000 and 5000 sq/ft 2805 Moolakulam 2034 Chrompet 2804 Avinishi Road 2046 Madipakkam 2265 Saidapet 2421 North Usman Between 5000 and 6000 sq/ft 2840 Ram nagar 2047 Porur 2579 DOAK Nagar 2734 Pattabhiram Between 6000 and 7000 sq/ft 2834 PN Road 2822 Perambur

2841 Ammapet Saradha Theatre 2810Mettupalayam Road

Between 7000 and 8000 sq/ft 2743 Padma Theatre 2381 Sai Baba Clny

More than 8000 sq/ft 6089 Mangalam Towers 6068 Kolathur

2. Diesel(Tamil Nadu):

Diesel is used for running the generators. So the expenses for diesel are analysed in the same manner as that of electricity expenses.

Findings:

Range(Store area) Best in clause Attention required

Store code Store name

Store code Store name

Less than2000 sq/ft 2053 Arumbakkam 2038 Thiruvanmiyur Between 2000 and 3000 sq/ft 2577 A A Road 2823 Avadi 2052 Choolaimedu 2032 Ashok Ngr 2049 Nanganallur 2037 Natesan Ngr Between 3000 and 4000 sq/ft 2629 GG Nagar 2030 Valasaravakkam 2829 KK Nagar 2033 Purasaivakkam 2831 VVV Mahal 2828 Ambattur Between 4000 and 5000 sq/ft 2747 Heber Rd 2034 Chrompet 2804 Avinishi Road 2733 Medavakkam 2578 K K Nagar 2421 North Usman Beween 5000 and 6000 sq/ft 2840 Ram nagar 2047 Porur 2579 DOAK Nagar 2734 Pattabhiram Between 6000 and 7000 sq/ft 2834 PN Road 2822 Perambur

2841Ammapet Saradha Theatre 2810

Mettupalayam Road

Between 7000 and 8000 sq/ft 2743 Padma Theatre 2381 Sai Baba Clny More than 8000 sq/ft 6089

Mangalam Towers 6068 Kolathur

Reason for Wastage:

Delay from electricity office in taking EB reading

Errors in the data entered by Store in Portal for the purpose of EB DD

Mishandling of the DD received from Head quarters by Stores, results in unnecessary

delay and penalty

Recommendations:

The space in freezers and chillers can be used efficiently

The generators can be serviced at appropriate periods to improve their efficiency

Proper care can be exercised in Portal Claims made and handling the DD’s received by Store Person