Reliance Fresh Supply Chain

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INTRODUCTION

Industry Analysis

Retailing is a booming industry in India. India poses a lot of potential in this industry given the increase in urbanization, purchasing power parity, nuclearization of family, increase in the youth population and middle class segment^[1]. India ranks seventh among all countries in terms of market potential and third in terms of net retail sales among the emerging and developing countries^[2].

Retailing in India can be classified into two broad categories namely, organized and un-organized. The un-organized retailing sector consists of conventional kirana stores, general stores and corner stores. This sector drives the revenue of retailing industry with 13 million outlets while the organized sector which consists of malls, showrooms etc have only 6.5 lakhs outlets. Thus, retailing provides employment to approximately 4 million people^[3].

The retailing industry has shown great consistency in terms of growth showcasing an annual growth of 12.3% between the years 2009-14. The penetration of organized retail stands at 8% as of 20152.

Firm Analysis

Reliance fresh is part of the retail business of Reliance industry started in 2006. It is a convenience store which offers eight product categories catering to the daily requirements of its customers. The eight categories are Fruits and vegetables, Dairy and bakery, Grocery and Staples, Packaged foods, Drinks, Confectionary and Snacks, Household products and Personal care. Until October 2014, there were 1961 Reliance fresh stores. Each store is located at about 2-3 km from each other and each outlet was sized between 2000-6000 sq.ft.

The competition for Reliance Fresh is high as it is difficult to differentiate from kirana stores. But today, about 40% of reliance retail sales come from this segment of food and grocery^[4].

Inbound Logistics

Reliance Fresh has eight product categories, namely fruits and vegetables, grocery and staples, packaged foods, drinks, confectionary and snacks, dairy and bakery, household and personal care products. It has a different supply chain structure for its various categories, depending on the perishability of the product. Let us look at the different supply chain structures.

Fresh products (fruits and vegetables)

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The fresh products are procured from the farmers. Farmers sell the fruits and vegetables to the vendors. The vendors pay the farmers in cash for the fresh products they receive. These vendors are registered at the Reliance Mumbai office, and are identified by a unique vendor code. These vendors then send it to the Reliance collection centers. The vendors are paid by the Reliance Mumbai office for the amount of products they receive. The logic behind avoiding the cash payments is to evade corruption. Each area has around 4-10 collection centers so as to get all varieties of products, as they may not be available from one region. Each of these collection centers has 1-2 staff dedicated to procuring materials based on their article list, e.g. onions, cabbage, potato, tomato etc. After this, the materials are forwarded to the Processing Centers. At the processing centers, the sorting and grading of materials takes place. They are washed, weighed and packed, and a report is sent to the category head. Finally, they are dispatched to the Reliance Fresh outlets.