Tampere, Finland — November 12, 2007 — NP Collection has become the first fashion company in Scandinavia to pilot an RFID-based total supply chain solution.

The pilot started in June 2007 with the aim of improving the efficiency of the company’s supply chain logistics. As NP Collection is in the process of opening its own chain of stores and expanding its global purchasing network, it needed a supply chain administration tool.

The RFID tags are attached to NP’s garments at the manufacturing site to enable tracking and data collection throughout the supply chain. In the first phase of the pilot the garments are RFID-tagged at a manufacturing site in Europe. Starting January 2008, garments manufactured in China will also be tagged, enabling NP Collection to track all its garments with RFID technology.

With RFID technology, NP is able to follow each stage of the supply chain in real time, which can help drive cost savings and increase accuracy both in logistics and manufacturing. The company knows exactly what garments are being manufactured, which are on their way to Finland and which retail shops are expecting shipments.

In addition to tracking the supply chain, NP Collection’s item-level RFID solution covers the receipt and dispatch of goods, inventory management and point-of-sale functions. The company can carry out daily inventory to see what products are on the shelves and which require replenishment. In retail shops, real-time product information can be used to plan shelf space usage before the goods have arrived.

“We’ve been following the development of RFID technology for many years. By this spring we’d become convinced that now is the right time to implement it,” said Risto Rosendahl, managing director of NP Collection. “Thanks to our state-of-the-art RFID solution, the product handling rate has improved tenfold and human error has been eliminated. We expect to reach ROI in six months.”

The RFID supply chain solution used by NP Collection is provided through collaboration between several companies. The integration services are provided by the Finnish companies RDN, Salpomec and Vilant, while logistics functions are supplied by Itella. UPM Raflatac is delivering the RFID tags, which are converted into labels by SML. The readers and antennas are supplied by ADT.

There is no magic answer to this question. However, one can make some educated guesses based on established best practices and how Indian conditions will modify or replace conventional wisdom. Let’s consider some of the factors that could affect the future of organized Retail in India.

Consumers – Who understands the Indian consumer the best will win in the end. What do we mean by the Indian consumer? Is it the teenager in Mumbai who commutes by local train, buys fashionable clothes from Linking Road and watches movies at the multiplex? Or is it the housewife who buys vegetables from the sabzi mandi and saves up money for chicken on Sundays. Or is it the fisherman out at sea who uses a cellphone to communicate his catch to the market on the shore? The Indian consumer is hard to pin down. As someone wisely said, the Indian consumer shifts loyalties with every 25 kilometers and with every 10 Rupees. The dimensions to deal with include class, education, language, caste and local customs in addition to the standard marketing dimensions used in the West.

Merchandising – Merchandising is what retailers do. This aspect has not received much media attention in India. However, this is often what differentiates a successful retailer from a flash in the pan retailer. Examples that come to mind include Zara, 7-Eleven and Walmart. Put simply, merchandising is the art-science of deciding what to sell where, at what price and when. The retailers that understand the Indian consumers and provide the right products at the right price will beat the competition.

Talent – This is already becoming a bottleneck for several Indian retailers. Experienced corporate professionals as well as fresh talent at the store level are hard to come by. The retailers that are able to retain their talent and provide them with growth opportunities could easily gain an upper hand in running a successful operation in India. Real Estate – This is a huge concern in India where quality real estate has become too expensive for many retailers to run a successful operation in cities. This is especially true for mass merchandise/discount retailers who operate on razor-thin margins. The acquisition of cheap leases in prime areas could decide whether a retailer becomes profitable at all or not. Another strategy is to expand in smaller towns and villages where real estate is still affordable and purchasing power is not as bad as one might think.

Supply Chain – This often quoted but not-so-often understood term basically refers to the back-end operations of a retailer. This includes the entire network of suppliers, warehouses, distribution centers and logistics operations. Effectively getting products to the right place at the right time is a lot tougher than it sounds when there are thousands of items and hundreds of stores involved. The supply chain infrastructure needs to be built from the ground up in India. This could easily affect the balance sheet of any retailer planning to start operations in India.

Policy – Although most people agree that FDI in Retail is just a matter of time, what this means is that till FDI is allowed, we will see our domestic players like The Future Group and Reliance Retail leading the way. What will happen when FDI is eventually allowed is anyone’s guess. If the examples of Brazil or China are taken into account, we will see a lot of consolidation with a few (6-8) large players remaining and several smaller niche players. Retail is a highly localized business (local preferences, local talent), so there is no guarantee that a foreign player will do better than an Indian player, as evidenced by Walmart’s failures in Germany and Korea. Surely, there are interesting times ahead!

Traditional stock control systems, such as barcode and tag label systems are outdated and inadequate for today’s market uses. RFID solutions represent a step forward providing accurate and efficient ways to keep track of the inventories. Nevertheless, most other RFID solutions do not take any measures to safeguard the identity of the operators, allowing the system to be vulnerable to theft. Titanium’s new solution pinpoints this issue and provides a complete solution for the customers.

In late 2003 the local economy began to recover and the Hong Kong retail sector began a steady growth rate. The growth in recent years has been even stronger. In the first eight months of 2007, retail sales value grew 10.6%. Among the retail sectors, luxury items realized one of the fastest growths of 20.2% in the same period.

For the first time ever Retail Solutions is being held in conjunction with a three day conference. Retail Week are relocating a series of well established conferences – including Supply Chain, Loss Prevention, Multi-Channel Retailing and the CIO Forum. These conferences successfully bring together senior-level retail professionals and are renowned for providing inspiring and stimulating educational content

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The synergy would enable Reliance to efficiently run its critical back-end operations, which essentially include warehousing of goods and transporting them to stores on time.

The latest move by India’s largest corporate house, which jumped on the retail bandwagon two years ago by promising to do everything on its own, seems to suggest that it now needs a partner for almost every retail initiative.

Industry observers believe that the company has expanded very fast and has managed to set up over 600 stores across various retail formats in less than two years, but its supply chain is in a mess. “How to get the right merchandise to the stores on time has been its biggest problem. You’d often not find the goods you want in Reliance’s food and grocery outlets,” said a source.

Wincanton, the UK-based $4-billion supply chain solution provider, has been roped in precisely to tackle this problem. It is expected to completely take over the supply chain, find the right warehouses for goods and transport them in time and in the right quantity to Reliance Retail stores.

Supply chain solution providers, Wincanton, for example, have IT systems in place to update them with regular data on inventory level in stores.

So, even without a store manager calling up, the warehouse manager would know the stores’ requirements. Wincanton serves several companies across industries, from FMCG to retail, automotive and oil. Its client list includes retail giants Tesco and Woolworths, auto companies Ford and DaimlerChrysler, and consumer goods firms P&G, Nestle, SAB Miller and GSK.

For Reliance, an alliance such as this means a major shift in its strategy. The season of alliances has begun at Reliance with specialty stores and is now fast extending to almost everything. Two years ago, when India’s largest private telecom operator, the Bharti Group, announced a tie-up with the world’s largest retailer, Wal-Mart, many thought it had got a headstart over other Indian corporate biggies foraying into retail.

But unlike Bharti, Reliance had decided to go solo. It made the ambitious announcement, not unusual from the house of the Ambanis, that Reliance Industries had earmarked Rs 25,000 crore for its retail business. Reliance had evaluated the options of partnering with a foreign retailer as well as buying out an existing Indian retailer, but had not found it very exciting.

True to its form, Reliance built scale fairly rapidly, spreading from one city to another. The growth was achieved through a team of professionals poached from existing Indian retailers, but the pace of execution dwarfed rivals’ achievements.

Reliance, however, realised it needed to do a lot more on the back-end to continue the pace of expansion and return early profits, which its shareholders usually expect.

“It didn’t take Reliance long to realise that retail was a different ballgame altogether. It’s not just about some long-term government policy or certain business competency, which it’s known to manage well. The variables in retail business are far too many. There could be a number of factors such as general economic downturn, terror scare, shorter wedding season, cricket season like an IPL or a political protest, which can affect store sales. You need to be able to manage that,” said a source close to Reliance.

The company has entered into alliances with foreign companies for several specialty stores, including opticals (Pearle Europe), toys (Hamleys) and apparel (M&S).

In most cases, the foreign retailer has the majority stake. This model, however, can’t be extended to front-end retail in food and grocery or hypermarkets as Indian laws don’t allow FDI in multi-brand retail. But it could be done in the cash and carry segment or retail back-end, an area where Reliance is in urgent need of help.

 In a challenging economic scenario, companies are taking notice of the contribution of this often ignored sales channel. According to FMCG industry estimates, these outlets have mushroomed significantly in recent years to contribute about 20% of retail sales from 10-12% a couple of years ago.

Typically, companies sell inventories to large re-distributors, which buy in bulk at discounted rates. Small paan-shop owners in big cities and rural markets then buy stocks from them in small quantities according to their requirements. In recent times, however, Pepsi, Coke, Parle Biscuits, Colgate and Cadbury, among other FMCG majors, have started servicing these outlets directly in metros. “These are no longer paan shops and are actually small top-up FMCG dealers. Most of them stock up a whole range of non-tobacco products, including personal care items,” Marico CEO Saugata Gupta said.

Consider the case of GlaxoSmithKline Consumer Healthcare (GSKCH). According to Nielsen data, ‘paan plus’ type of stores account for 10% of the company’s overall business as against organised trade which contributes only 4%. This, when GSKCH’s products comprise mostly non-impulse products, like Horlicks and Boost, that are sold through paan stores. GSKCH’s executive VP (marketing) Shubhajit Sen said: “We don’t cover these outlets directly, but quite often we have seen our products stocked in such shops, and this is true specially for low-priced stockkeeping units and sachets.”

The paan shops cater to consumers on-the-go and the urban poor. Small packs contribute a sizeable chunk of sales from these outlets. “We ensure that these outlets are serviced directly and indirectly and it is a very important sales channel for us,” Sanjay Purohit, executive director (marketing) of Cadbury India, said.

“Ours being a largely impulsepurchase category, paan shops account for a huge chunk of sales for us. Such stores have the distinct advantage of offering on-the-move convenience of purchase,” Satyavrat Pendarkar, PepsiCo’s (Frito Lay) director sales and supply chain, said.

According to Dhairyashil H Patil, vice-president of Maharashtra State Consumer Product Distributor’s Federation, the percentage of consumers who buy things on a daily basis in India is huge. “These paan shops cater to this consumer base. On an average, there are 345 outlets for a population of one lakh, and paan shops constitute over 15-20% of this number,” he said.

 Samsika Marketing Consultants MD Jagdeep Kapoor said: “As compared with modern formats, these smaller shops are far more organised. They have great business models with better inter-personal skills, good cash-flows and low overheads. We expect this channel to contribute over 25% of sales in the next few years.”

WHEN SMALL IS BETTER

Big cos have now started taking notice of the contribution of this often ignored sales channel These outlets in recent years have contributed around 20% of retail sales In recent times, Pepsi, Coke, Colgate, among other FMCG majors, have started servicing these outlets directly.

IBM will introduce new systems to help Sainsbury’s and its 4,000 suppliers find smarter ways of managing the supply chain and support continued growth in the grocer’s business.

Sainsbury’s will use an electronic trading network provided by Wesupply, and IBM will manage the migration of the grocer’s suppliers onto the system.

The retailer has previously suffered from problems with product availability in stores, and last year merged its supply chain and retail director roles in a move that analysts said could ease these issues.

The solution will allow Sainsbury’s to monitor the status of orders across its entire network and manage the availability of products. The Wesupply service will allow information flows to be streamlined. The grocer will also benefit from improved visibility of supply chain performance which will allow it to heighten stock control.

As part of this migration, Sainsbury’s will be transitioning its electronic data interchange (EDI) service to EDI network provider Inovis. Hundreds of Sainsbury’s suppliers are already using Inovis’ network to exchange documents with their customers.

Since the Rs 9,000-crore biscuit market witnessed a growth of 20% last year and is slated to sustain its growth this fiscal, ITC is looking at enhancing its biscuit manufacturing capacities by at least 15-20%, primarily to manage supply chain costs and improve profitability. “We plan to set up additional capacities in such areas where we have developed a significant front-end scale, but are limited by proximate capacities. Attempts are being made to create new biscuit variants in segments that are relevant to the consumer. The positioning of the marketing mix is also being worked upon to drive consumption by creating convenient price points or by differentiating product propositions,” Mr Chitranjan Dar, chief operating officer, ITC Foods Division, told ET.

For starters, ITC plans to drive growth by vitalising its brand ‘Sunfeast’ through product innovation, contemporary packaging and targeted brand communication. A huge investment is also being planned for brand building and product development. At the same time, the company is looking at investments in building trade loyalty across channels and markets.

Elaborating further, Mr Dar said, “while ITC per se has no plans to rationalise its biscuits portfolio, we review the basket from time to time. Additions or deletions takes place on the basis of the market feedback and actual sales. The idea is to strengthen the winners and replace the average performers with potential winners from the biscuits stable. As of now, there is no product which does not contribute positively to the overall pool of contributions.”

Incidentally, a large proportion of the growth in the biscuits segment is coming from the mid-price offers growing at 35%. The mid-price offers is the non glucose segment and includes cookies and sandwich cream products.

“There are clear indications that consumers are upgrading to mid-price offers in line with the growth of packaged foods in the country. Since consumers are ready to pay for good quality and tasty products, we find a growing value for product quality and hygiene. Hence, our capacity additions will partly be in line with these requirements Mr Dar pointed out. The basic product glucose, however, continues to be largest category in terms of volumes.

But Indian consumers won’t be able to partake of Wal-Mart’s everyday low prices. India’s restrictive commercial laws prohibit most foreign companies from setting up shop to compete with domestic retailers. So Wal-Mart’s debut outlet, which will open in the city of Amritsar in northern India later this month, is a wholesale-only operation that will sell mainly to vegetable vendors, hospitals, hotels, restaurants and other companies. The Amritsar outlet won’t even carry the familiar Wal-Mart brand. To deflect the attention of politicians and activists who oppose the entry of foreign multi-brand retailers, the Little Rock, Ark., company has named its Indian outlets BestPrice Modern Wholesale.

Despite the stealth approach, industry experts expect Wal-Mart, known for squeezing efficiencies out of suppliers and supply chains, to have an impact on India’s $375 billion retail market, which is dominated by mom-and-pop businesses and outmoded distribution networks. “We can learn the science of retailing, how to build scale and efficiencies,” says Kishore Biyani, chairman of Pantaloon Retail, India’s largest homegrown retailer with 114 hypermarkets.

The world’s largest retailer isn’t new to India. For the past decade, the country has been an important Wal-Mart supplier of textiles, apparel, home products and jewelry. But in anticipation of its India launch, Wal-Mart for the last three years has been developing a network of suppliers to stock its stores with fresh produce and staples like lentils, wheat and rice — all with an appreciation for variations in local cultures and tastes. “India is not a homogenous market, so ours is not a cookie-cutter approach from the U.S.,” says Raj Jain, president of Wal-Mart India.

Although it is restricted to wholesale operations in its wholly owned stores, Wal-Mart has a small retail presence in India through a fledgling joint venture with New Delhi-based Bharti Enterprises. The U.S. company provides back-end support for Bharti’s chain of 25 Easy Day grocery stores that opened last year.

Although other foreign hypermarket chains are entering the country — British retail group Tesco has a joint venture with India’s giant Tata conglomerate, while France’s Carrefour is said to be in talks with Reliance — Jain says Wal-Mart is in no hurry to unfurl the Wal-Mart flag nationally. “The easiest thing is to roll out stores, but the most difficult is to sustain and feed them,” he says.

Indeed, Indian mass-merchandisers over the last several years expanded frenetically, trying to get a jump on foreign chains should Indian politicians eventually decide to open up the market to direct competition from overseas. Reliance Industries built 940 stores across the country in 18 months. Aditya Birla group has opened 548 stores since 2007. Today, with India’s economy slowing and with losses piling up, the domestic retailers have shut some outlets and laid off employees, partly because of difficulties in keeping large chains supplied with goods. “When you start opening stores and then work backwards, even we get scared,” says Mahadeo Pawar, a vegetable grower from Karjat, 31 miles (50 kms) north of Mumbai.

Caution in India may be a watchword considering the global recession and Wal-Mart’s blemished track record overseas. In 2006, the company pulled out of Germany and South Korea in the face of stiff competition and poor sales. Still, Wal-Mart has been weathering the economic crisis better than most. The company on May 14 announced it earned $3.02 billion in the three months ended April 30, about equal to the profit it made in the same period in 2008. Revenue fell 0.6% to $93.47 billion from $94.04 billion a year earlier. Highlighting the growing importance of markets such as India, nearly one-fourth of Wal-Mart’s sales for the quarter — 22.7% — came from its international division.

U.K. retailer Argos plans to deploy yard management software at its distribution centers across the country to optimize resources and improve efficiencies in day-to-day operations.

The Milton Keynes, -based retailer will use Dallas-based Retalix’s Yard Management System to provide greater visibility into warehouse operations, allowing real-time control and monitoring of its 500-vehicle fleet across all of Argos’ nine U.K. distribution centers through a Web-enabled user interface.

“With a large network of regional and national distribution centers across the United Kingdom, it is essential that our tractor and trailer fleet is closely tracked,” said Adrian Burleton, commercial director – supply at Argos. “By integrating the Retalix Yard Management system with our existing Retalix Warehouse Management system, we will be able to optimize our yard and dock resources, and eliminate inefficiencies that negatively impact our operations.”

The first phase of the rollout is the vehicle-tracking module, which is being implemented in parallel with the enabling radio frequency identification (RFID) technology. RFID readers are being installed at the entry and exit points of the company’s distribution centers, and each of the approximately 1,100 trailers and 500 tractors in the Argos fleet are affixed with a rugged RFID tag, automatically registering arrival and departure information as the vehicles enter and leave the distribution centers.

The Retalix Yard Management system is designed to automate the yard and dock management process through advanced predictive logic and leading-edge optimization algorithms. Using software engines and rich visibility tools, Retalix Yard Management is expected to eliminate operational silos and synchronize yard and dock activity with distribution center demand in real time.

The system, which was designed using the Microsoft .NET platform, is part of the Retalix Transportation solutions suite, which is designed to fulfill the critical transportation requirements of inbound traffic, yard management and dock scheduling for retailers and distributors. Additional offerings include Retalix Traffic Management, which provides comprehensive inbound freight management for planning, procurement, execution, settlement, visibility and supplier control, and Retalix Dock Scheduling, which facilitates dock appointment scheduling via the Web, predicts labor demands, optimizes dock resources and streamlines the flow of goods through the distribution center.

Argos operates 700 general merchandise stores throughout the UK and Republic of Ireland.