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Optimising Operations In The Retail Industry For Increased Efficiency

India's retail sector, integral to the GDP, has grown significantly in the last decade. With a $2 trillion estimate by 2032, preparation for widespread consumer expansion is vital

Optimising Operations In The Retail Industry For Increased Efficiency
POSTED ON January 15, 2024 6:44 PM

The retail sector in India has witnessed incredible expansion over the past decade through offline, online, and unorganised retail markets, and with the advent of online retail platforms, the industry has seen a massive surge during seasonal peaks.    

The industry—which contributes 10 per cent to the country's GDP, is estimated to reach $2 trillion by 2032.  As the consumer base expands beyond urban India, it is crucial for retailers to be prepared for what lies ahead for the retail industry in the next 15 years.  

Current Scenario and Challenges 

The advent of shopping centres and online retail platforms, along with the pre-existing unorganised marketplaces across the country makes the Indian retail sector the 4th largest market in the world.    

The growing customer base, owing to an increase in middle-income groups is unlocking the next tranche of customers in urban centres, and even more aggressively rural areas where the headroom for growth is much higher.    

The rural markets witnessed a 17.5 per cent growth in the FMCG sector in March 2023, as opposed to a 6.1 per cent growth in urban India, and the rural per capita consumption is estimated to grow over 4 times by 2030, which would be 3.5 times more than urban areas, indicating an immense contribution to the retail industry.    

While 65 per cent of the country’s population resides in rural areas, it becomes crucial for retailers to utilise the untapped potential of the rural markets and resolve existing bottlenecks that hamper the industry’s efficiency.   

The inconsistent access to rural India, owing to the supply-chain constraints and infrastructural hindrances often restricts achieving agility in networks, resulting in quicker turnaround time.    

Solutions :  

As retailers look at the next 15 years’ horizon in preparing for the Indian market, three broad areas require the utmost attention to resolve root-level challenges and further optimise their operations.    

An imminent focus on supply-chain improvements, making it Lean by applying KAIZEN principles (cutting waste and improving FLOW) is crucial. Improving the chains that serve the ever-increasing rural markets is necessary to not only reduce average delivery time but also leverage the higher purchasing power evident in rural families. The focus now seems to be on Urban supply chains.   

Customer orientation is a key component of the retail sector, and with the rise of e-commerce platforms, including instant delivery service platforms—which enable the delivery of FMCG products within minutes—it becomes pertinent to integrate a robust omnichannel to ensure a coherent experience for customers across both online and offline channels. Customer focus is not a slogan. Intent must be met with actions. Mapping and improving key customer experiences and processes is the way forward. Kaizen, again the science of continual improvement is key to continual customer service enhancement.   

Optimisation of operations via reconfiguration of transport and warehousing networks is imminent to improve supply chain and logistics in the rural markets. A smoother flow of inventory via stock management strategies could further aid in-store efficiencies and guarantee a low inventory shrinkage rate. The Kaizen way of thinking and performance management is critical in the WLD aspects - Warehousing, Logistics, and Distribution.   

The retail industry endures tremendous pressure to ensure the production of high-quality goods at the lowest costs, with additional supply chain disruptions and increased personnel costs. It is pertinent for retailers to recognise such disruptions to empower them in delivering exceptional customer services, maximising their profits, and potentially resulting in cost cuts.   

Retail is the right end of the supply chain if the left end is mapping customer requirements and product design. This entire value chain from Design to Delivery at the Retail counter has plenty of opportunities for the company- the science of continual improvement by cutting waste.
- Jayanth Murthy, Joint Managing Director, South Asia & Africa at Kaizen Institute

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