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Reinventing the Value Chain

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Reinventing the Value Chain

1 EXECUTIVE SUMMARY 3

2 THE RETAIL OPPORTUNITY IN INDIA 5

2.1 Porter’s 5-forces analysis of the Indian Retail sector 5

2.2 Indicators that point to a promising growth in the retail sector 6

1) Penetration of organized retail in India 6

2) A.T. Kearney’s Global Retail Development Index (GRDI) 6

2.3 Developments in India 8

2.4 Retail: In the backdrop of Global Trends 9

3 VALUE CHAIN 11

3.1 Understanding the value Chain 11

3.2 Metrics used in Retail 12

3.3 Value chain analysis 13

3.4 Value creation vs. Value extraction 14

3.5 Unlocking the potential of the value chain 15

4 NEW PARADIGMS IN THE VALUE CHAIN 16

4.1 Lean retailing 16

4.2 RFID Technology 17

4.3 Other enablers of “Value Creation” 18

1) Supply Chain Integration 18

2) Global Sourcing 18

3) Information technology 19

4) Transportation efficiencies 19

5) Bundling 20

4.4 The unending quest 20

5 CUSTOMER CENTRIC MARKET ORGANIZATIONS 21

5.1 Introduction 21

5.2 Information age 21

5.3 Nine Rules of customer behaviour 22

5.4 Internet culture and customer-centricity 23

6 CONCLUSION 24

APPENDIX I: PORTER’S VALUE CHAIN ANALYSIS 25

REFERENCES 26

1 EXECUTIVE SUMMARY

The retail sector in India is set to explode. India has topped A.T. Kearney’s global retail development index for three consecutive years. The consumer confidence survey conducted by AC Nielsen’s clearly reflects the buoyant mood of the Indian consumer. With consumers now accepting western retail practices and the government’s encouraging policies, players like Wal-Mart have announced their presence in India. Specialty stores in India are going to increase in number. With the arrival of the organized retailing sector and increased competition, comes the quest to increase efficiencies inorder to gain a competitive advantage.

Value addition has become the anthem of the modern business setup. Value extraction is the traditional approach in which a player in the supply chain gains advantage, by cost-cutting or any other way, at the expense of other players in the supply chain. Value analysis can be done by dividing the activities of the firm into primary and supporting activities and then formulating a strategy accordingly. Retail companies should build metrics around their value proposition. To unlock the potential value of the supply chain, the following steps may be taken:

• Waste elimination in customer/supplier interfaces

• Supply chain integration

• Reconfiguration to create new value

Lean retailing pressures move upstream. Demanding retailers ultimately put pressure on the OEM suppliers to increase their responsiveness. Thus, all players are always on their toes. Lean retailing aims to achieve zero inventory with improved order fill-rates. RFID technologies can greatly help in eliminating unnecessary losses such as excessive inventory carrying cost, obsolescence etc. Other tools/ methodologies which have contributed to better supply chain performance are information technology, global sourcing, bundling, supplier relationship management, Vendor managed inventory, Collaborative planning and forecasting etc.

The position of power is slowly shifting to the end consumers who today look beyond the product or service. Delivery, total cost of ownership, data and information, value or solution "bundles", business expertise and brand experience are all important to the consumer. The internet and the easy access to information has enabled the consumer to become more knowledgeable which has resulted in consumer-centricity on part of the market

It is of great value to coordinate

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