Anchor Superstore

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PROJECT WRITE-UP

Managerial Economics

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Managerial Economics Project

For the purpose of our project we have selected a local grocery store located in Model Town, Lahore called Anchor Super Store. This store can stock around 500 brands with more than 6000 SKUs overall. With every product having its own unique demand characteristics, an average store keeper needs to strategically handle each item’s supply in such a way that minimizes its costs and maximizes its profits. We have particularly picked a grocery store because of the fact that it handles multiple supply chains at the same time and can thus allow us to study the price elasticity and demand derivatives for a diverse portfolio of products in great detail.

Since our selected store houses mostly local products, it regularly deals with distributors managing various product portfolios of different companies. For example, it would work with a distributor for Unilever for Fair & Lovely, Knorr, Lipton etc. P&G would have his own distributor and so would Coca Cola and so on. When dealing with these distributors, the store keeper has to be very careful in keeping a track of his store’s demand and not just rely on the distributor’s numbers. This requires strenuous record keeping, daily monitoring of sales and a deep understanding of each product’s demand indicators. Some items may have seasonal demand an example being Soup which is mostly consumed during the winters. For products like these the store keeper needs to be careful to place additional orders during the weeks leading up to winter so that he can be adequately prepared for the predicted rise in demand. Other products might have a more consistent demand such as Soap or Shampoo which are regularly in use and thus can be ordered more easily throughout the year.

In order to push new items or get rid of any slow moving stock, the store also indulges in various promotional tactics where it offers customers discounts or free items on bulk purchases. The marginal revenue for the store might decrease but conversely it would also help reduce much of its storage costs and the risk of the product reaching its expiration date. Besides product costs which are dependent upon the customers’ demand the store also has certain fixed cost. The vicinity of the store is on rent and needs to be paid an amount monthly. There is also the store staff comprising of 2 managers and 13 helpers who are given a monthly salary.