Supply chain and value chain and operations research

Department of Fashion Management Studies

A Project Report on
“Strategies for Replenishment of Reliance Fresh”

Submitted in partial fulfilment for the Degree of

Master of Fashion Management
Under the guidance of
Associate Professor

Dr. Gulnaz Banu.P

On
th
17 April, 2020

Submitted By:
Anamika Chauhan
Anjali Phansal
Bhawna
Naveena R
Tamanna Maini

NATIONAL INSTITUTE OF FASHION TECHNOLOGY,

BENGALURU-560102

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 DECLARATION
We, hereby, declare that the research report entitled, Strategies for
Replenishment of Reliance Fresh, submitted by us to the college National
Institute of Fashion Technology, Bengaluru under the guidance of Dr. Gulnaz
Banu.P., is our original work and the conclusions drawn therein are based on the
material collected by us. The report submitted is our own work and has not been
duplicated from any other source.

Anamika Chauhan Place: Bengaluru

Date: 17th April 2020

Anjali Phansal

Bhawna

Naveena R

Tamanna Maini

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 ACKNOWLEDGEMENT
A successful project is a result of team work and co-ordination that includes not
only the group of developers who put forth the ideas, logic and efforts but also
those who guides them. So, at the completion of the project, we feel obliged to
extent gratitude towards all those who made valuable contributions throughout the
project. We are thankful for all the knowledge, guidance, and support imparted by,
Dr. Gulnaz Banu.P, Associate Professor, FMS, NIFT Bengaluru.

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 TABLE OF CONTENT

Sr. No Topic Page No.

1. Introduction 05
2. What is a Convenience Store 05
3. A Study on Reliance Fresh 09
4. In depth supply chain of Fruits and 16
Vegetables
5. Conclusion 32
6. References 33

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Introduction
A company's inventory is one of its most valuable assets. In retail, manufacturing,
food service, and other inventory-intensive sectors, a company's inputs and finished
products are the core of its business. A shortage of inventory when it's needed can be
extremely detrimental.
At the same time, inventory can be thought of as a liability (if not in an accounting
sense). A large inventory carries the risk of spoilage, theft, damage, or shifts in
demand. Inventory must be insured, and if it is not sold in time it may have to be
disposed of at clearance prices—or simply destroyed.
For these reasons, inventory management is important for businesses of any size.
Knowing when to restock certain items, what amounts to purchase or produce, what
price to pay—as well as when to sell and at what price—can easily become complex
decisions.
For the purpose of our study, we have chosen convenience store as a retail store
format.

What is a Convenience store?

A convenience store is a retail outlet that sells a limited range of prepared and ready-
to-eat foods, bottled and fountain beverages, household staples, tobacco products and
periodicals. Convenience stores are typically small in size, are open extended hours,
and, in most cases, are staffed by a relatively small team of cashiers, stock workers,
and managers.
While there can be significant differences between individual convenience stores,
these stores are stocked, located and designed for customers who are on the go and
need to pick up just a few items. Because convenience stores are often open late at
night, early in the morning and on holidays, many people also rely on them for
emergency purchases of things like ice, milk, eggs or over-the-counter medicines
when regular stores are closed.

Product Mix of a Convenience Store

• Staple products:
Staple products form the regular purchases for the consumer. Therefore, these are
bought out of habit, without much thinking.
Categories of Staple Goods
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These can be divided into four categories –
1. Meat, poultry, fish – beef, chicken, bacon, ham, shellfish
2. Bread and cereal – derived from wheat, barley, rice, maize like bread, pasta, rice,
grains, flour
3. Vegetables and fruits – fresh and canned vegetables and fruits
4. Dairy products – cheese, butter, milk, yogurt
• Impulse products: Impulse goods are the goods purchased without any
planning. For example: Chocolates, candies, bars, juice, beverages, desserts etc.
• Emergency products: Emergency goods are the goods purchased when there is
urgent need. For example: Over the counter drugs, torches etc.
• Seasonal products: Seasonal goods are the goods purchased in a particular
season.For example: Umbrella, Raincoats etc.

Supply Chain Management of a Convenience store

Sourcing: The Retailer chooses suppliers to provide the goods and products. After
suppliers are under contract, supply chain managers use a variety of processes to
monitor and manage supplier relationships. Key processes include ordering, receiving,
managing inventory, and authorizing supplier payments.

The majority of suppliers supply into a retailer’s distribution centre, rather than direct
to a convenience store. Suppliers also increase the frequency of their deliveries to each
distribution centre, in order to help retailers to manage demand volatility while
holding minimum inventory.

Distribution centre : A distribution center is a special type of warehouse which

has been designed to fasten the flow of goods and avoid unnecessary storing goods.
The goods and products are brought to the DC by the supplier. The basic warehouse
operations are movement and storage of products.

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The Retailer has several distribution centers serving several store areas to deliver
products. The Distribution Centre also deals with the procurement function for the
stores. The consolidation and combination of the product from each category are
allocated to the stores as ordered from here.

Retailer / Convenience Store: The order of each store is transported from

different DC’s in different shipments and have varied product quantities and types.

Inventory Replenishment
Replenishment is the movement of inventory from upstream or reserve product storage
locations to downstream or primary storage, picking and shipment locations. The
purpose of replenishment is to keep inventory flowing through the supply chain by
maintaining efficient order and line item fill rates. The process helps prevent costly
inventory overstocking.
The goal of a replenishment strategy is to determine:

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Safety stock level – a stock buffer used to protect against the random fluctuations in
demand and/or supply, and

Replenishment plan – a schedule reflecting how much you should order today and in the
near future.

The majority of Convenience stores use 2 types of replenishment strategies - Periodic

and Perpetual Strategy.

Periodic Strategy: With the periodic strategy, inventory is replenished at specific

intervals. For example, every three months, the retailer looks at the levels to see if they
need replenishing. If the inventory levels are still fine, then he doesn't reorder anything.
Even if the inventory runs out before that point, using a periodic strategy, he would not
re-order until the cycle ends. Replenishment orders are placed only at the predetermined
review points.

Perpetual inventory system: The perpetual inventory system, tracks inventory

‘perpetually’ as it moves throughout the supply chain. In this approach, warehouse
managers keep a continuous track of inventory balances, meaning inventory is updated
automatically every time an item is received or sold through every point of sale. In the
perpetual inventory system, purchases and returns are also recorded automatically in
the inventory count.

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 A Study on Reliance Fresh
Reliance Fresh is the convenience store format which forms part of the retail business
of Reliance Industries of India which is headed by Mukesh Ambani. These stores sell
fresh fruits and vegetables, staples, groceries, fresh juice, bars and dairy products. A
typical Reliance Fresh store is approximately 3000-4000 square feet and caters to a
catchment area of 2–3 km. This has direct appeal to the urban consumer who looks at
the best quality at competitive prices. The company has introduced a new supply chain
which eliminates middlemen and enables sale of items directly from farmers to
consumers.
Reliance Fresh has a Pan-India presence that has spread to more than ninety-three cities
and towns in India. Its headquarters base is at Mumbai in Maharashtra. The brand
serves its customers with help of 1,691 outlets of Reliance Fresh that are located close
to residential areas in the commercial complex to gain maximum customer presence.
It started operations with its first store in Hyderabad and with time has located others
in Ahmedabad, Amritsar, Bangalore, Bhopal, Udaipur, Noida, Chennai, Cuttack, New
Delhi, Nagpur, Mumbai, Kolkata, Warangal, Vadodara, Pune and Bikaner. It has a
strong distribution network and it includes a Farm to Fork model. A farmer sells its
products to Collection Centre and from there it reaches Processing and Distribution
Centre and then to a Reliance Fresh outlet. A consumer can easily buy to its heart’s
content from here. The company has encouraged direct dealings so that farmers can
benefit from this scheme.
Reliance Fresh has put its onus in offering best possible and fresh products to
consumers directly at low prices. It has adopted a reasonable pricing policy that is
affordable and pocket-friendly to attract a large number of consumers. It has
implemented a promotional pricing policy to encourage bulk sales and increase its
revenue figures.
Supply Chain Management is a comprehensive approach to manage Reliance fresh
interactions with the organizations that supply goods and services.
• The goal of Supply Chain Management (SCM) is to streamline and make more
effective TRANSPARENT processes between RIL and its suppliers.
• SCM practices create a common frame of reference to enable EFFECTIVE
COMMUNICATION between RIL and suppliers by encouraging online
activities.

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 • SCM increases the EFFICIENCY of processes associated with acquiring goods
and services, managing inventory and processing materials.
• SCM ensures BETTER QUALITY BUT LOWER PRICED end product.

Product Categories
• Product width: Fruits, Vegetables, Juices and other FMCG Products
• Product length: Fruits and vegetables both Indian and imported are available
• FMCG Product length includes detergents, hair products, perfumes, cosmetics,
household products etc.

Products under Food Category offered by Reliance Fresh:

Following are the food category products offered by Reliance Fresh
Fruits and Vegetables:
a. General: potato, tomato, onion etc.
b. Seasonal-melon, guava, okra, cauliflower etc.
c. Exotic: lettuce, broccoli, kiwi etc.
d. Cut: pumpkin, okra, salad etc.
e. Others: spinach, coriander, curry leaves etc.
Dairy:
a. Fresh milk- branded milk- whole/skimmed etc.
b. Fresh milk products- curd, lassi, buttermilk etc.
c. Dairy chilled- butter, srikhand etc.
d. Dairy staples- ghee etc.
e. Processed dairy- milk powders, cheese etc.
f. Frozen dairy products- ice-cream, frozen paneer, frozen fries etc.
g. Dairy substitutes- soya milk, margarine etc.
h. Bakery- Breads, rolls, bun etc.

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Staples:
a. Cereals- bajra/maize, wheat, rice etc.
b. Pulses: chana dal, urad dal etc.
c. Spices: chilli powder, turmeric powder etc.
d. Edible oil: refined oil, filtered oil (mustard oil) etc.
e. Dry fruits: cashew nuts, almonds etc.
f. Loose sugar, branded salt and sugar.
Processed foods:
a. Ready to cook- noodles, papad, soups etc.
b. Ready to eat- ketchups, jam, pickles, cornflakes, cakes etc.
c. Biscuits- glucose, marie, salted, cream etc.
d. Confectionery- chocolates, candy etc.
e. Namkeen and snacks- wafers, farsans, potato chips etc.
f. Beverages- tea, coffee, soft drinks, juices, bottled water etc.
e. Baby food

Following are the non-food category products offered by Reliance Fresh

Fast Moving Consumer Goods (FMCG):
a. Lifestyle- stationery etc.
b. Apparel- hankies, undergarments etc.
c. Footwear- socks, chappals etc.
d. Personal Care- shampoo, creams etc.
e. Home care- detergent powders, floor cleaning liquids etc.
f. Baby care- Baby shampoo, diapers etc.
Others- crockery, utensils scrubber, mugs, buckets etc

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Supply Chain Management in Reliance Fresh
Reliance Fresh makes its purchase of green vegetables and fruits from the local farmers
but never from the mandis. By approaching farmers directly, it thereby reduces the
procurement wastage that further paves the way for better returns to Indian farmers
and wholesalers as well as it renders greater value for the Indian consumers. In the first
phase vegetables and fruits are procured from the suppliers and wholesalers followed
by processing, separating rotten ones and finally packaging for sale. The objective of
the Collection Centre is to buy fresh and good quality of vegetables and fruits. The
company can save the mandi charge through these practices.

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Figure 1 illustrates the farm-to-fork model of Reliance Fresh. Reliance started its retail
operations of Reliance Fresh store by following the supply chain model comprising of
procuring vegetables and fruits directly from the farmers and operating with moderate
margin. (Mass selling was the key to Reliance Fresh operations for the first few months).
Figure 2 represents the supply chain management of Reliance Fresh. It is clear that the
raw material is procured from farmers or suppliers and the wholesalers, and the farmers
and wholesalers use their own logistics for assembling the same in the collection point.
From the collection point, Reliance Fresh uses its own logistics for transportation and
processing in collection point, then transported to processing point or (DC) distribution
centre and ultimately to the customers through the retail outlets.

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LOGISTICS-
1. PERISHABLE GOODS
The produce from the farmers is collected at the collection centres. Which are smaller
and do not have cold storage facilities. A preliminary quality check is done here. Then
the produce is moved to the distribution centres where they are sorted, graded and
packaged. Here, the data (product type, quantity, grade, cost price etc.) is entered into
the SAP system for easier tracking of the inventory.
Every day the retail store manager raises a purchase order for the next day based on the
estimated demand, which is received by the cluster manager at the distribution centre.
Based on the availability of the products the ordered items are delivered to the area
manager daily in full or proportionately when overall demand exceeds availability.
2. NON-PERISHABLE GOODS
Items are collected from the manufacturer or national level distributor and delivered
directly to the various distribution centres. Each store has the minimum order quantity
level for each type of product which is tracked by SAP system. Based on the sales data,
as soon as the product level goes below its minimum order quantity the SAP system
automatically places the order.

INVENTORY
Most of the inventory is kept at the distribution centre level to minimize the overall
inventory across the supply chain. Perishable items are stored usually in cold storage,
and are supplied based on first in first out basis. Non-perishable items are stocked and
reordered based on the minimum order quantity levels.
However, retail stores are usually provided with small storage facility based on the
forecasted demand at that store. Store inventory is usually to store the non-perishable
items. Perishable are usually kept for more than 2 days, and after that period they are
thrown provided they perish.

DISTRIBUTION CENTER
Reliance Fresh has strategically placed their distribution centres taking in to account
both collection centres and retail stores. Replenishment of the stock to the stores has a
lead time of 2 days, that means each store has to provide a forecast 2 days in advance.
Perishable goods, once arrived at distribution centre, are graded into different lots based
on the quality of the produce and then data is entered into SAP system. Based on the
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demand they are shipped to reliance retail stores and other party stores. Left over is
moved to cold storage or sold back in the wholesale market.
Certain produce like pulses, porridge, rice, sugar are procured in bulk, graded and
packaged and then sold as private labels under the name “Reliance Select”. The
powerful brand of Reliance provides them good margins on their private labels than
other brands.

REPLENISHMENT
Purchasing, storing (or restoring) and selling inventory are the most significant business
processes for a convenience store. Reliance Fresh typically have copious amounts of
inventory in a wide range of products. Therefore it follows both periodic and perpetual
inventory systems for replenishment of its products. It implement proper internal
controls and inventory policies to optimize these processes. A better inventory system
means faster inventory turnover ratios, less spoilage and higher financial margins.

Perpetual inventory system records the quantity of items sold as items are purchased.
The SAP system at Reliance Fresh records additions or deductions from inventory and
tells management what items are on hand. The stores also follows Periodic inventory
count. In this, beginning inventory and ending inventory within an accounting period
is tracked, but it does not track the inventory on a daily or per-sale basis. They track
their inventory by having employees take a physical inventory count. The physical
inventory determines that the inventory quantities are exact, or if there are differences
in quantity mentioned physically present and that mentioned in the SAP system.
Basically, after finishing with physical inventory, the system and physical stock levels
must be the same. Following are the steps which Reliance Fresh follows to replenish its
products:

• Minimum inventory: A minimum inventory is maintained so as not to run out

of stock. The inventory level varies for products and location depending upon
the demand of the product in a store. For staple, processed and non- food
products its 15-20 days and for fruits, vegetables and diary products its 1-3 days.
• Staple, processed and non- food products: Reordering takes places when the
stock for a particular product is available for 20 days. The system automatically
generates a purchase order (PO) on 21st day. The store gives an order of 3months.
• Fruits, vegetable and dairy: Reordering takes places every day.
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 • Lead time:
• Lead time for grocery i.e the staple & processed food and non-food products is
15-20 days.
• For fruits, vegetables and dairy products it is 1 or 2 days.

In-depth Supply Chain Process for fruits and vegetables

The fruits and vegetable section is classified as CPC and wet DC.
City processing Centre (CPC)
The City Processing Centre (CPC) is ideally meant for carrying out certain processes on
the fruits and vegetables. At the same time it partly serves the purpose of providing
storage area for the fruits and vegetables which are procured for the purpose of
processing them and then handing over to the wet DC. This processes are as follows:
· Sorting and grading through different methods.
· Crates Washing
· Ripening
· Cold Storage processing
Wet Distribution Centre (DC)
It is meant for storage and distribution of milk, paneer and ditribution of the fruits and
vegetables to the stores.

THE PROCESS – F & V (FRUITS & VEGETABLES) CATEGORY

Step 1: STO (stock transfer order)/ indent by ‘Reliance Fresh’ chain of stores
Daily, at each of the stores, the store franchisee / store FDM (franchisee development
manager) will raise a STO (stock transfer order) / an indent.
A STO is an estimate of the store’s requirement of SKU’s (here of F & V section),
based on the SKU wise sales. It is divided into morning STO / indent and evening STO
/ indent. The morning STO is an estimate of the store’s morning requirement of F &

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V SKU’s and the evening STO is an estimate of the store’s evening requirement of F &
V SKU’s. The morning STO is based on the morning sales trend and the evening STO
is based on the evening sales trend.
At present, a STO is raised by the franchisee / FDM by 11:00 AM. This STO is meant
for a delivery to be made after two days. This two day/48 hours time-gap is provided
for the following operations:
1. Procurement Planning:
i. Ascertaining the requirement
ii. Communicating & Conforming
2. Procurement
i. Target Allocation
ii. Price Band
iii. Harvesting
iv. Bringing to the CC
3. Sorting and Grading
4. Packing (in some of the cases)
5. Weighing and Barcoding
6. Outbound Operations
i. Allocation to stores
ii. Transportation Planning
7. Store Setting

STEP 2: F & V (fruits & vegetables) Category Raising PO

The F&V category in simple terms means purchase department for fruits and
vegetables. Each store’s F& V STO is accessible by the F & V category through SAP.
And through it, the F& V category will consolidate the morning STOs of all the
Reliance Fresh Stores, which will give the morning P.O. And similarly by consolidation
of the STOs of all the Reliance Fresh stores an evening P.O. will be generated. Such
consolidation will be SKU wise.

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For example, if there are fourteen stores, then from the STO of these stores the total
demand for french beans will be determined. Similarly, for each SKU belonging to the
F & V section the total demand will be determined.
This will be done by 2 P.M. every day. The morning P.O. and evening P.O. each will
have a SAP generated unique number, for its identification.
Modifications in the store wise morning and evening P.O.:
The F & V category will make the necessary modifications in the morning and evening
STO prepared by the franchisees / FDM at the store level. Such modifications will be
based upon the following :
3. Opening stock of the Fruits and Vegetables at each store.
4. Sales trend of each SKU
5. City Area of store location
6. Day – Weekday / weekend
STEP 3: R-GRN (rough goods received note)
The ‘city processing center’ (CPC) incharge will prepare a rough goods received note,
termed as ‘R-GRN’ is an estimate against the PO, of the quantity of the SKUs which
the CPC will be able to hand over to the outbound team after sorting, grading and
weighing and barcoding it, within the CPC cutoff time.
Cutoff time is the maximum time limit for completion of task/s. The morning R-GRN
is an estimate of the quantity of the SKUs which will be handed over for the morning
PO and the evening R-GRN is an estimate of the quantity of the SKUs to be handed
over for the evening PO. R-GRN is prepared on basis of :
1. Stock of F & V on hand with the CPC
2. Estimate of the quantity of the PO which can be procured to bridge the gap between
the PO and the stock on hand.
If on basis above study if the results suggest that the entire PO quantity will not be
procured well in time, than the R-GRN will be for the SKU wise quantity which the
CPC in charge is cent percent sure. If the CPC in charge feels that only 70 % of the
morning PO can be delivered to the outbound team by the CPC cut off time than R-
GRN will be prepared only for the 70 % of the PO. And it will be handed over to the
outbound team. If the rest 30 % is procured than again R-GRN will be prepared by the
CPC incharge and given to the outbound team for ‘Planning allocation to stores.’

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Significance of R-GRN
Both the morning and the evening R-GRN has a unique number, which are given to
the outbound team. On basis of this R-GRN numbers, copies of R-GRN will be
generated, which will have SKU wise list of the quantity in kgs which will be delivered
by the CPC to the wet DC. It will help the outbound team and the transport department
for planning out their operations as per the SKU wise quantity to be delivered.

R-GRN is important as it helps in planning out the following activities:

7. Sorting and Grading :It enables simultaneous planning for sorting and grading
of the material on hand and in the PO so as to hand over the sorted, graded,
weighed and barcoded material within the CPC cut off time.
8. Outbound Team : Morning and Evening R-GRN numbers are used for planning
out allocation of the fruits and vegetables to the stores.
9. Transportation Department : R-GRN will provide an estimate about the number
of crates that will have to be dispatched to each store, based on store wise
allocation of the fruits and vegetables.
STEP 4: Procurement Planning Team
At City Processing Centre (CPC) : The consolidated morning and evening PO numbers
will be mailed by the F & V Category to the procurement planning team. On the basis
of these PO numbers the procurement planning team will have an access to the
morning & evening PO on the excel sheet.
STEP 4 (A) Physical Stock Determination for RR (Reliance Retail)

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Method adopted for stock taking
Two types of crates are kept at CPC. They are ‘Black crates’ and ‘Grey crates’. The black
crate is for RR material and it weighs 1.7 kgs and the grey crate is for the NRR material
and it weighs 2.2 kgs. Each crate has a standard weight carrying capacity determined on
basis of the F / V SKU it carries. This weight is arrived at on basis of trial and error.
Physically weighing each SKU would be a tedious task and time consuming task if to
be carried daily. So, for each SKU the number of filled crates are counted. This is done
for Outside area, cold storages and the ripening chambers.
Cold Storages:
There are five cold storages in all. Of these currently three are in use.
Two are for CPC (for F & V) and one under the wet DC (for dairy products as milk,
paneer)
Cold storage No.1 has 3 degree centigrade temperature. It is used for imported fruits
like lichis, dates fresh and vegetables as green peas.
Cold storage No.2 has 11 degree centigrade temperature. And it is used for leafy
vegetables, French beans, bottle gourd, bitter gourd, pointed gourd.
Ripening chamber: It is a chamber meant for ripening some of the fruits. It is use for
banana, chiku, papaya and mango. The fruits are kept under ethylene gas for 24 hours
at 18 degrees and then the chamber is ventilated for 2 hours. Then the fruits are kept
for 3 days at 20 degrees temperature. There are six such ripening chambers, of which
currently three are in use.
Outside area : The area at CPC other than the cold storages and the ripening chambers
is termed as the outside area where the fruits and vegetables received are sorted and
graded. This area is divided into following parts :
1) Material Receiving Area
2) Sorting and Grading area: - Belt
- Vegetable trimming Line
- Table
3) RR stacking area

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4) NRR stacking area
5) Dump Material stacking area
6) Packing area
7) Weighing and Barcoding Area
8) Crates washing area
9) Palette storage area
The number of crates of each SKU is multiplied by the set SKU wise standard weight
for a crate. This gives the quantity of physical stock on hand in kgs lying in each storage
area – outside area, cold storages and ripening chambers. The SKU wise figure in the
total column gives RR component of the SKU’s in kgs, on basis of previous day’s
physical stock taking carried on today by 12:00 A.M.
This total kgs of RR fruits and vegetables are entered in today’s opening
stock in ‘Arrivals and Stock report’ to find the procurement quantity for
today.
STEP 4: (B) Determining the quantity to be procured

SKU Code: The code assigned to fruits or vegetables

SKU Description: A brief description about the fruit or vegetable stock keeping unit.
No. Of crates: The number of crates filled with Tomato economy.
Quantity : Quantity of tomato economy occupied in each crate is 10 kg. It is the
standard weight of tomato economy which can be carried by a black crate (Meant for
Reliance Retail (RR) graded fruit or vegetable) of 1.7 kg.

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Opening stock: The previous day closing stock of tomato economy. It is the stock of
tomato economy available on hand with the CPC.
Arrivals: They are the incoming fruits or vegetables to CPC from CC/ Mandi, direct
supply or national centres. Daily physical stock taking is carried out by the procurement
planning team by 12.00 A.M. The arrivals are the fruits & vegetables arriving at CPC
from any of the above-mentioned sources after previous day’s stock is completed and
recorded till 2.00 PM today.
Tentative Arrivals: They are the F/V which are going to be delivered at CPC but at
present this F/V have not yet reached the CPC. The suppliers /CC in charge or national
centres or mandi in charge officers have communicated about the quantity of F/V
which will be despatched to the CPC but has not yet arrived. The tentative arrivals are
confirmed on phone whether they will arrive or not.
Morning PO: It shows SKU wise total demand of the stores for F/V to be despatched
early morning.
+/- v/s Morning PO: It shows addition of opening stock, arrivals , tentative arrivals
and from the resultant figure the morning PO is deducted for each SKU. If the resultant
figure is negative, it means that the SKU is in shortfall by that quantity (kg) and hence
that much kgs of that particular SKU needs to be procured for fulfilling the morning
PO.
Example: Opening stock of tomato Economy -2800 kgs
+ Arrivals - 200 kgs
+ Tentative arrivals - 1000 kgs 45
______________
Total 4000 kgs
(-) Morning P.O. 5000 kgs
_______________
+ / - versus Morning P.O. – 1000 kgs

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UOM : It is means the ‘ Unit of Measurement’. It shows measurement in kilograms or
each. An each means a single fruit or vegetable. It is used to measure fruit like coconuts.
Evening P.O. : It is the SKU wise consolidated demand of all the stores together.
+ / - versus Evening P.O. : It is the difference between the ninth and the eleventh
column. It shows the SKU wise shortfall / excess quantity (kgs) in order to meet the
requirements of the evening PO. It is calculated by deducting SKU wise, the figures of
the evening P.O. (in kgs ) from the figure of the excess / shortfall shown in the ninth
column. This gives the excess / shortfall quantity( in kgs) for each SKU.it enables the
procurement planning team to undertake the procurement planning for the figures
arrived at in this column, as it gives the final shortage / surplus of the evening PO. It is
calculated by deducting SKU wise, the figures of the evening P.O. (in kgs ) from the
figure of the excess / shortfall shown in the ninth column. This gives the excess /
shortfall quantity( in kgs) for each SKU it enables the procurement planning team to
undertake the procurement planning for the figures arrived at in this column, as it gives
the final shortage / surplus.
Having determined the quantity to be procured, the next step is to find the right source
from which to procure each F & V SKU and accordingly plan its procurement.

STEP 4 (C ) : Pivot table for procurement planning :

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On basis of the above table, against the stock at CPC the PO quantity will be compared
and for the shortfall the procurement centres will be used. The system will generate a
pivots which will show the different centres from where and in what amount (kgs) a
particular vegetable / fruit can be procured. This will facilitate the procurement
planning work. And accordingly, the procurement planning team will carry out its work
by Communicating and conforming with the concerned procurement centre.

Procurement Planning/ Sourcing

Sources for procurement :
COLLECTION CENTRES (CCs): A Collection centre is set up to procure
vegetables from the farmers. Source CPC, CC National centres regular vendors Mandis.
As per the legal framework, each CC is either already registered or has applied for
registration at the APMC, so as to buy vegetables from the farmers. A Collection centre
is set up to procure vegetables from the farmers.
CC Officer

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At each CC, a reliance employee is appointed as CC officer. He has the responsibility
of procuring the vegetables from the farmers. Reliance needs vegetables in a large
amount. So, it procures the entire lot of the vegetables from the farmers and at times
even goes to their doorstep if needed. At each CC, sorting and grading is done by
workers on payroll of third party logistics.
Receipt Cum Weighment Slip: When vegetables are purchased from the farmers at
the CC, a ‘Receipt cum weighment Slip’ is issued to them by the CC officer. In it the
fruit / vegetable unique code is written under the SKU code column, the fruit /
Vegetable name is mentioned under the SKU description column, the grading is
mentioned under RR/NRR column, and then the per kg rate and total amount in rupees
is mentioned. It is signed by the CC officer and has the name of the seller and the date
of sale on it.
Stock Transfer note (STN): When the vegetables procured from the farmers are send
to CPC, a stock transfer note (STN) is prepared for it.It has detailed description of the
vegetables being sent from CC to CPC. It is signed by the CC officer. It means that
the vegetables purchased by reliance retail at CC are transferred to CPC, and STN
authorises such transfer. STN is meant for internal transfer of goods. It does not involve
reduction in monetary resources, as in case of a purchase.
At end of the day, at each CC, the CC officer will prepare a ‘Daily Procurement Slip’
and sent it with the last lot of vegetables. It will have columns for SKU code, SKU
description, its quantity (in kgs), rate per kg, amount ( in Rs ), computed as the product
of rate and quantity. The total of the amount column will give the actual total amount
( in Rs.) for all the vegetables purchased from the farmers during a day.
At the bottom of the ‘Daily Procurement Slip’, there are columns for opening balance,
deposits, payments and closing balance. The CC officer will fill in the columns of
opening balance, payments made during the day to the farmers against the vegetables
purchased and the balance amount will be the amount left after payment to the farmers.
The ‘deposits ’ column is meant for the amount which is deposited daily from Reliance
Retail’s bank account to the CC officer’s bank account at the CC bank. This column is
not filled in by the CC officer as he himself is not informed about the exact amount
deposited. This practise is meant for control purposes.

2. Direct vendors: Fruit and Vegetable wholesalers who provide quality products at
wholesale prices have become regular suppliers for Reliance. Large farmers also sell
their vegetables to Reliance Retail. They have entered into agreement with Reliance

25
Retail, as per which the vendors will supply the fruits / vegetables in vehicles arranged
by them at their expense.
3. National procurement centres: There are certain fruits and vegetables which are
not grown and hence not readily available in large quantities within the state. Such fruits
and vegetables are procured from those different states of India, where they are
available in the best quality. This is especially a practise for fruits like leeches and
oranges(procured from pune in Maharashtra), apples (procured from Himachal
Pradesh), pear, grapes and vegetables like onions. Reliance fresh stores offer certain
exotic fruits and vegetables, all of which are not readily available within every state.
4. Local Mandis: When the quantity of the fruit and vegetable procured from the
procurement centres as the CCs, regular vendors as well as from all available supply
sources is not sufficient to meet the PO quantities then for the shortfall, procurement
is made from the local mandis.
At each of the local mandis a reliance employee called ‘mandi officer’ has been
appointed. This person is responsible for all the mandi related procurement work. The
mandi officer has to take a morning round at the mandi under his responsibility. And
find out the prevailing mandi rates for each vegetable / fruit. The mandi officer is
responsible for finding this rate every hour and reporting it to the CC head at the state
office
He also informs the procurement team at the CPC, about the daily mandi rates, by 2:00
PM.
STN (Stock Transfer Note) : When fruits / vegetables purchased from the local
mandis are sent to the CPC,a STN is prepared as this merley involves a transfer of
goods from one to another place.The Mandi officer prepares the STN whenever F &
V material is send from mandis to CPC.

STEP 5: Procurement
Collection Centres : The CC head will give the procurement targets to each CC, on
basis of the procurement planning undertaken.
Moving Average Prices (MAV) : Procurement Price The prices of the vegetables
procured from the CC are generally within the price band. The weighted average price
is calculated for each vegetable procured. The system has such a mechanism that it
automatically picks up the last few prices, so as to reflect the most current scenario.

26
Hence this resultant Price is termed as ‘Moving average price. The procurement price
is determined in this way.

Price band determination :

The price bands are determined on the basis of the prevailing prices. Daily reports are
sent to the agriculture department’s head office Gurgaon, Delhi. The price bands for F
& V SKU’s are determined by the F & V procurement team. There the top level
executives ascertain the price bands to be assigned for the national level procurement
centres. The procurement teams will work to attain the given targets, both in terms of
Quantity and price as well as quality.
The CC and Mandi Officer and the Impress amounts :
The CC and the mandi officers are given a sum of money as an advance amount Given
and deposited in the banks. When, the payment are to be made early morning, the sum
of money which is required for it is withdrawn from the bank. This helps in doing away
with the management of excess funds not needed at the moment and at the same time
it enables to make timely payments.

F &V Category and transfer price for stores:

The transfer price : It is the price which will be charged for a sku.at Reliance fresh
stores. It is calculated by the F & V category. It is obtained by summing the following :
Procured cost (MAV) *
+ mandi tax *
+ mandi commission *
+ transport cost *
+ Sorting & grading *
+ Weighing charges *
+ Loading & unloading *
+ wastages *

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 ________
Total Price ***
+ Margin **
Profit **

At the CCs and mandis the vegetables will be purchased within the price bands as far
as possible. The last lot will arrive latest by late night, for the morning PO for which
the cut off time is 2:30 AM (next day).
Sorting & grading : It is done by the workers at the CCs / mandis.
Weighing : The vegetables will be weighed and a Receipt cum weighment slip(RWS)
will be prepared. This RW will give the procured quantity, and rate per kg for each day.
At the CCs /mandis the STNs will be prepared for the material to be sent to the stores.
Set of documents to be handed over to the CPC commerce department:
1) Invoice /delivery challan ( direct vendors and mandi purchase)
2) STN
3) Receipt Cum weighment slip

STEP 6:
Arrival at CPC:
The fruits and vegetable loaded vehicle will arrive at the CPC.

The CPC is the processing centre for fruits and vegetables. The F & V section is divided
into two main parts :
1)CPC – It is divided into inbound and processing.
2)Wet DC – It is divided into outbound and transportation.

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On arrival of a lot, the documents will be handed to the inbound supervisor. The
documents are for mandi purchase are as follows :
1) Invoice
2) STN ( two copies )
3) weighment slips
• For CC, the documents are:
1) weighment slips
2) Two copies of STN
• In case of direct vendors the document are as follows :
1) Invoice
2) Octroi fees receipt

3) Form 403 (if outside Gujarat)

The inbound supervisor will check the documents and get the vehicle arranged at the
receiving door and get it unloaded with the help of workers. On arrival there is a quality
check undertaken by the quality department. On spot sorting and grading will take
place.
STEP 7 : Sorting and Grading
Sorting : It is the process of separating the fresh and quality material from the total
material arrived.
Grading : It means assigning a grade to the sorted material depending on the quality
and condition.

Three Grades of Material :

As a result of sorting and grading, three grades of material are obtained. They are as
follows:
1) Reliance Retail (RR) Material : RR material means, the material that is meant for
‘Reliance retail’. At the CPC the fruits and vegetables received are sorted and graded.

29
Of the received material, the material which is fresh and of good quality is sorted and
graded as ‘RR’ Material.
2) Dump : From the remaining material, the material which has become out of use
either due to being rotten, or dried up (coriander, spinach etc) or due to large cuts
formation will be sorted and graded as ‘dump’.
3) Non Reliance Retail ( NRR) Material : NRR material is the material that is no meant
for Reliance retail. And the rest which as either minor cuts or is not fresh as RR material
will be sorted and termed as ‘NRR’(Not for Reliance Retail).

On the basis of such sorting and grading , a sorting and grading report is prepared. This
report is transferred from the paper to excel sheet by the data entry operator, which is
used for management information systems

STEP 8: Packing
Some of the fruits and vegetables like apples, onions,( netted )and vegetables like
tomatoes (transparent plastic) are packed.

STEP 9: Weighing & barcoding

The SKU wise standard crate weight is used for weighing. The fruits and vegetables
graded as RR are kept in black crates. This list of the SKU wise standard weight is given
to the weight takers and bar codes. With the weight of the SKU being ascertained, the
attached barcoding device generates a barcoded label.

STEP 10: Outbound

Step10(a) ALLOCATION TO STORES : On basis of R-GRN no., the outbound
assistant manager will generates a copy of the R-GRN. The receiving supervisors of the
outbound department take a copy of these R-GRN and on its basis, tally the RR graded
black filled crates being delivered by the CPC after sorting, grading, weighing and
barcoding them. All the SKUs received are cross checked with the R-GRN to ensure
that no SKU is left out to be received or no SKU is received in part as compared to the
R-GRN amount. All these crates are stacked in the ‘receiving reserve area’ of outbound.
In emergencies or when there is less time gap between the receiving of material and

30
their dispatch as in case of the evening PO, the crates are directly placed at the dispatch
locations, by tallying them with the R-GRN.
It provides the SKU wise list showing the kgs of each SKU that will be handed over, as
against the PO, by the CPC to the outbound team so that same is dispatched to the
stores. The outbound team needs time to allocate these fruits and vegetables amongst
the stores, especially when the entire PO quantity cannot be fulfilled. In case of Reliance
retail, the SAP enabled system will allocate each SKU in the R-GRN to the stores.
Such allocation will be based on sales trends of each of the SKU in the past three to
five days. Such an allocation is termed as ‘soft allocation’ and is possible due to SAP.
So, though the store might have indented a particular quantity of a SKU, but on the
basis of the total availability SAP will allocate on basis of each store’s individual sales
performance for each SKU. If ‘x’ store is selling more French beans than ‘y’ store, than
out of the total quantity between the two, ‘x’ store will be allocated more quantity of
French beans than ‘y’ store, even if the indented quantity of ‘y’ store is more than that
of ‘x’ store. This work of soft allocation is not visible.

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Conclusion
Reliance Fresh manages its value chain effectively. The vegetables and fruits are
delivered to the customers with proper emphasis on freshness and hygiene. The
distribution centers keep a track of the inventory requirements at the outlets and
carefully select the vegetables and fruits from the local farmers and wholesalers. The
retail stores well manage the vegetables and fruits under properly regulated
temperature and chilling conditions. Proper emphasis on pest controlling and germ
contamination are done looking at the shelf- life of the items. The staff are well
trained and well informed about the available categories of vegetables and fruits and
the technology been used in Reliance Fresh.

Customers get attracted at the ambiance as well as the abundance of vegetables and
fruits in Reliance Fresh. Hygiene, quality, safety and competitive price have always
concerned Reliance Fresh supply chain management; in recent years, social
responsibility and the more holistic goal of sustainability have also earned official
recognition. Reliance Fresh has made rapid progress towards building a value chain
starting from farmers to the end customers with ten core values like care, citizenship,
fairness, honesty, purposeful, respect,responsibility, safety and truth.
Reliance Fresh is customer centric, as Reliance Fresh tries to maintain relation with
customers as under loyalty programmes. It offers Reliance One Card which is also a
prepaid card. The customer feedback system has also being implemented by Reliance
Fresh. Reliance Fresh has defined role and responsibilities of each employee to avoid
ambiguity among the employees. Reliance Fresh also believes in continuous
improvement and it regularly trains its employees. Reliance Fresh has created value
chain partners and also adopted ‘Farm to Fork’ model which assures fresh, qualitative
fruits and vegetables at affordable prices. One of the strategies to enhance
productivity of Reliance Fresh stores is to continuously review the performance of the
stores on weekly basis, stores are graded performance wise. The four key performance
indicators are customers finance, people and operations. The stores are physically
appealing and uniformity is maintained to give better shopping environment to the
customers.

Thus it can be concluded that the overall functioning of Reliance Fresh is based on
the strategy for growth and development in organised retail sector and to create
benchmark in the industry.

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References
https://www.guru99.com/all-about-physical-inventory.html

https://www.thebalancesmb.com/choosing-periodic-or-perpetual-inventory-system-392936

https://yourbusiness.azcentral.com/manage-inventory-convenience-store-28396.html

https://www.slideshare.net/jitharadharmesh/reliance-retail-limited-jigisha?qid=9b7c8694-a2d4-49d2-
a2cf-90c94c04d142&v=&b=&from_search=4

http://mbacase.blogspot.com/2012/05/supply-chain-reliance-fresh.html
https://vdocuments.site/reliance-fresh-supply-chain.html
https://www.scribd.com/doc/77784338/Reliance-Fresh-Supply-Chain

https://www.convenience.org/Research/What-is-a-Convenience-Store

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