7/12/2011

Operations Management I
For Prof. Sanjay Jharkaria

[MAX FASHION RETAIL, CALICUT]

Group No: B-5 Section B
Arnab Guha Malik (74), Atul Sharma (75), Avinash Kumar (76), Bishnu Kumar Dokania (78), Meeta Dandekar (80), Hersh Kenkare (91), Amol Panditrao (100), Saurav Suman Mishra (112) Indian Institute of Management Kozhikode

Table of Contents
Acknowledgement .................................................................................................................................. 3 Introduction ............................................................................................................................................ 4 Organizational Structure ..................................................................................................................... 7 Employee Break-up ............................................................................................................................. 8 Recruitment ........................................................................................................................................ 8 Work Timings ...................................................................................................................................... 8 Training & Personnel Management .................................................................................................... 9 Product Profile .................................................................................................................................... 9 Store Layout .......................................................................................................................................... 10 Store Layout Divisions ........................................................................................................................... 11 Retail layout: ......................................................................................................................................... 13 Supply Chain.......................................................................................................................................... 15 Service System Design and Process Flow.............................................................................................. 16 Service Process Matrix .......................................................................................................................... 17 Inventory Management ........................................................................................................................ 21 Inventory Management at Max ............................................................................................................ 21 Inventory Control System Design Matrix .............................................................................................. 23 Inventory System employed at Max ..................................................................................................... 23 Product Lifecycle at Max ....................................................................................................................... 24 After Sales Customer Feedback Mechanism ........................................................................................ 25 LANPOS Software Billing System: ......................................................................................................... 26 Manager mode...................................................................................................................................... 26 Client (Regular) Mode ........................................................................................................................... 27 Billing Process: ...................................................................................................................................... 28 Marketing and Advertising Operations................................................................................................. 29 Customer feedback Mechanism ........................................................................................................... 31 Alteration .......................................................................................................................................... 31 Exchange ........................................................................................................................................... 32 Return Policy ..................................................................................................................................... 32 Feedback Form Filling ....................................................................................................................... 32 Recommendations ................................................................................................................................ 33 References ............................................................................................................................................ 34

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Acknowledgement
First, we would like to express our sincere gratitude to Professor Dr. Sanjay Jharkharia to provide us an opportunity to work on this dissertation. This work could not have been written without Prof. Jharkharia who not only was our supervisor, but also encouraged and challenged us throughout the course. We would also like to thank the employees and management of Max Retail India, Calicut who helped us understand the various processes of a service retail outlet. Thanks for their patience. We sincerely appreciate the Store Manager, Mr. Sanuf for his all-out support and time. We also thank him for permitting us get the various details needed in completing the dissertation.

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Introduction
Max Retail, a value fashion retail chain of Landmark group, was launched in 2004 in United Arab Emirates. Today, Max has a total of 173 stores in 13 countries in the Middle East & North Africa regions and India. The aim was to address the fashion and footwear needs of mid-income customers. The stress was on offering good quality at amazing value. Max is currently the largest value fashion retailer in the Middle East. Max retails its own label of apparel for men, women & children. It is known as CityMax in Saudi Arabia. It aims to have 200 operational stores across Middle East and India by mid 2012.

Vision & Mission of Max Retail

To create a truly global brand that provides growth opportunities for the company and its employees, whilst achieving its goal of becoming the number one value fashion retailer across Middle East and India

Mission Statement
Be a market leader in the field of value retailing. Provide fashionable products at affordable prices Be innovative, cost effective and globally competitive Exceed customers expectations Provide opportunities of growth for employees

Core Values
Constant focus & development on the product and value offered Continuous improvement of the customers shopping experience Commitment towards staff training & development Encouraging open work culture

Timeline
May 2004 1st store opened in Abu Dhabi, U.A.E June 2004 1st store operational in K.S.A October 2004 1st store operational in Kuwait March 2006 1st store operational in India May 2006 1st store operational in Jordon June 2006 Operating 36 stores in 4 countries June 2007 Operating 46 stores in 7 countries March 2009 82 stores operational across Mile East & India December 2010 145 stores operational in Middle East & North Africa region, India June 2011 170 stores operational in Middle East & North Africa region, India November 2011- 18th store in U.A.E

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Max Retail in India

The first Max Retail store in India was setup in Indore in March 2006. The store was a part of the plan to set up 50 stores in India by 2010 at an investment estimated to be in the range of INR 100200 crores. Earlier in 1998, Landmark group had launched Lifestyle, a premium fashion retail chain, in five cities across India. Max Retail was the first attempt by Landmark group in Value retailing in India. Max Retail aims to cater mid-segment, between premium and discount segments, which is estimated to be a 40,000-50,000 crore market. An average Max store in India has an area of around 22,000 sqft and requires an investment of Rs. 5 crores. The average turnover expected from a store is INR 15-18 crores annually at a growth rate of 14% per annum. A Max Retail store typically offers a variety of menswear, womens wear, and clothes for children and infants. In addition, Max Retail stores also offer footwear, accessories and home furnishings. The pricing is the key competitive strategy of Max Retail stores. The merchandise is generally priced in the range of INR 99-599. The target audience for a Max Retail store is the middle class income group and the young adult aged 22-35 years who is exposed to western dressing habits.

Expansion Strategy (India)

Our growth plan is very aggressive in the near future. We plan to open quite a few stores in tier I and tier II cities apart from the metros. Our strategy is to bring great fashion at good prices to these cities and revolutionise their fashion scenario. This falls in line with our overall brand mission to Democratise Fashion in the country. - Vasanth Kumar, Executive Director, Max Retail The above quote by the Executive Director of Max Retail sums up the business strategy of Max in India.

Max Retail Stores in India

There are 42 operational Max Retail stores in India. Some of these stores follow a franchise model; however, most of the stores are company owned. In design and manufacturing, 10% of the designs are sourced from Dubai, which are later customized for the local consumers. The manufacturing is outsourced to about 150 facilities across India, in addition to what the company sources from Dubai. The employee strength in India is estimated to be around 1500. The annual turnover of Max Retail in India is projected to be Rs.375-400 crores in this financial year. Max Retail has its strongest presence in South India with about 15 stores.

Max Calicut
Max Calicut Store is located in Focus Mall on Mavoor Road. It follows a franchise model. The location is strategic as it is a major shopping area in the centre of the city. Most of the competitors of Max are located in this area. The main competitor of Max within this area is Reliance Trends which also competes in the mid price apparel segment. Max Calicut uses the additional space in the retail store as in-house warehouse. The supply to Max Calicut is sourced from the central warehouse in Cochin which is shared by Max- Calicut & Max-Cochin for merchandise supplies from Bangalore. On an 5|Page Indian Institute of Management Kozhikode

average it takes 1 week for an order to be delivered to the warehouse in Cochin and another 2-3 days for supply to the local warehouse in Calicut. List of Max Stores in India City Amritsar Agra Ahmedabad Bangalore

No. of Stores 1 1 1 6

Location Alpha One, GT Road Pacific Mall, Fatehbad Road Gallops Mall, Satellite Highway Road - Commercial Street - Oasis Centre - CMH Road - SPAR Hypermarket - 11th Main Road - III stage, Kathriguppe Circle Seven Seas Mall DBCity Focus Mall - Tunic City - Express Avenue Mall - Trishia Planet Abad Nuclues Mall Brookefields - West Gate Mall - V3S Mall Mahagun Mall - City Centre Mall - Oasis Centre - Inorbit Mall Treasure Island Mall C21 Mall

Baroda Bhopal Calicut Chennai

1 1 1 3

Cochin Coimbatore Delhi

1 1 2

Ghaziabad Hyderabad

1 3

Indore

Jalandhar Kanpur Kolkata Lucknow

1 1 1 2

Vival Collage Mall 2 Square Mall New City Centre Fun Republic Mall Phoenix United Mall

Mangalore

City Centre Mall

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Mumbai

Inorbit Mall Little World Mall Maxus Mall Mega Mall Oberoi Mall R- Mall

Nanded Noida Pune Raipur Vishakapatnam

1 1 1 1 1

Treasure Bazaar Unitech Mall, Great India Place Building F, Marisoft, Kalyani Nagar RK Mall CMR City Centre

Organizational Structure
The retail store is headed by a Store Manager, who is also responsible for supervising the day-to-day operations of the store, like stock-keeping, accounts, supply-chain, etc. The Store Manager is supported by an Assistant Store Manager who takes situation reports from the various Department Managers. The Department Managers are assigned to various departments like Meanswear, Ladieswear, Kidswear, Footwear and Information Technology. These Department Managers are further supported by Senior Customer Relationship Employees specific to each department. Their main task is to handle the sales occurring in their department and supervise the functioning of Junior Customer Relationship Employees.

STORE MANAGER

Mr. SANOOF

ASSISTANT STORE MANAGER

ASM

DEPARTMENT MANAGERS

MEANSWEAR

LADIESWEAR

KIDSWEAR

FOOTWEAR

IT

SENIOR CUSTOMER RELATIONSHIP EMPLOYEES

JUNIOR CUSTOMER RELATIONSHIP EMPLOYEES

MEANSWEAR

LADIESWEAR

KIDSWEAR

FOOTWEAR

IT

MEANSWEAR

LADIESWEAR

KIDSWEAR

FOOTWEAR

IT

HELPERS CLEANING STAFF & SECURITY

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The store also employs a number of helpers to assist the Junior Customer Relationship Employees in tasks like sorting, re-arranging, etc. They also help the customers in the trial rooms and regulate the usage of the same. The store also has a decent number of cleaning staff who are responsible for the upkeep and maintenance of the store interiors. In addition to the above, the store has employed 4 security guards, to help maintain the level of security in the store apart from checking customer baggage.

Employee Break-up
The store employs a total number of 56 people, which includes 20 permanent women staff, 24 permanent men staff, 8 part time employees and 4 security guards. The chart below gives the department-wise allocation of staff. The number of managers for various departments is also different. The menswear section employs the maximum number of employees with 4 Department Managers and 4 Senior Customer Relationship employees and 6 Junior Customer Relationship employees.

Employees
Menswear Ladieswear Kidswear Footwear IT Security Maintenance

Recruitment
Employee recruitment at the store has been outsourced to a recruitment agency, but it is done in consultation with the Store manager. The only type of temporary employees recruited, is for the positions of Helpers and Maintenance staff. The security guards employed are also recruited through a Security Agency. Max employees enjoy compensation and benefits on the following basis: 1. Full time Staff: Provident Fund (PF) apart from the regular base salary + Annual performance linked bonus (proportional to sales volume of each department). 2. Part Time Staff: They get a fixed remuneration package without any bonus.

Work Timings
The store has separate timings for women and men staff and also for permanent and temporary staff. WOMEN: MEN: 10:30 TO 19:30 HRS 11:30 TO 21:30 HRS PERMANENT STAFF: TEMPORARY STAFF: 10:30 TO 21:30 HRS 04:00 TO 21:30 HRS

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Training & Personnel Management

Max retail provides the store staff with various types of training to equip them with knowledge pertaining to the product, the material used, and on suggestive techniques. The various types of training imparted to the permanent employees are: Product Training Department Layout Product Materials (Department Specific) Customer Handling Role-Plays

The store does not impart training to employees who have prior work experience. It also encourages its employees to bring new experiences and skills to work. The store has 56 employees apart from the Store Manager. Most of the employees are on a permanent payroll basis. Each employee is given a uniform and the responsibilities are shared equally. Max retail is also an equal opportunity employer.

Product Profile
Most of the products at the store are from the landmark group, one of the prime brands owned by Max. Other than that few other brands are also sold. A product line is shown below. Menswear Casual Denim Casual Non Denim Formal Semi formal sportswear Casual Denim O B (Ordinary and Basic) Casual Non Denim (O) Semiformals (O B) Formal (O B) Innerwear Ladieswear Western Core Western Young Night Wear Western Basic & Western Denim Western (OB) Kidswear 2-8 boys & girls 8-14 boys & girls Sleepwear Footwear Sportswear Formal Semi formal Casuals Others Apparel Accessories Fashion Jewelry Leather Accessories Neckwear

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Store Layout
Store Location
The store is located on the first floor of Focus Mall, which is one of the three malls in Calicut. The location is strategic as the Mall is located on Rajaji Road, in the centre of Calicut city. This area has restaurants, book stores, retail outlets and a hub for apparel purchases which attracts quite a big crowd on weekends. Although the mall has retail outlets of leading brands such as Indigo Nation, Provogue, Bossini, and Titan, Max Store is the anchor shop of the mall.

Store Layout
Max Store is located on the first floor, and is visible to anyone walking in the centre area on the ground floor. When a person gets off the escalator on the first floor, Max Retail Store is the first store he/she sees. The total floor space is approximately 14,000 sq. ft inclusive of back-end office and storage space (approx 2,000 sq. ft) and retail area (approx 12,000 sq. ft). Of this space about 300 sq. ft is allotted to branded clothes in each section. There is a huge merchandise display using models, outside the entrance for attracting customers attention to the variety offered at the store. There are two trial rooms one for men and the other for women. There are very few mirrors in the store except the ones in trial rooms.

Setting of Shelves
There are two broad categories of displays used in the store: Horizontal Shelves These shelves consist of apparel, shoes and accessories of different sizes stacked in normal shelves. Since all the sizes of a particular pattern of Tshirt/other apparel are placed in once stack, searching for the required size becomes slightly cumbersome. Moreover, once the customer removes it from the stack, it has to be folded again and replaced in the same order by the personnel. The key advantage of using this display system is that lesser storage space is utilised. It adds to the neatness and aesthetic appeal of the store, provided dislodged garments are put back quickly.

Circular

hangar displays These displays comprise a plurality of about 5 hangars radially placed, and completely a full circle. These displays are customer-friendly as the customers can easily flip through the merchandise. The only drawback of having too many such displays is that it takes a lot more space and may create obstruction for customers to manoeuvre in the store.

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Store Layout Divisions

Max India follows a strict standardised layout for all its chain and franchisee stores, which is adhered to in Calicut outlet. The store can be broadly classified as womens apparel section to the left side and mens and childrens apparel section to the right of the store, which is closer to the entrance.

Left side of the store from the entrance:

The womans apparel section is located to the left of the store. A large amount of floor space is covered with revolving hangar displays and the horizontal shelves and wall hangars are restricted to along the walls. In general, the relatively inexpensive apparel is displayed in the central area whereas the expensive ones are displayed on the wall hangars, to ensure minimal damage. Ethnic apparel: The womens apparel section is located to the left side of the store beginning with the ethnic wear, ranging from kurtis, kurtas, pyjamas and salwars, to dress materials in the far left front end of the store. Max also houses ethnic branded wear such as Praful and Melange in this section. The ethnic apparel is the highest contributor for sales in womens apparel, mainly owing to larger demand for conservative and traditional clothes by women, bearing the culture. There are wall hangars for displaying clothes, which avoids discomfort to the customers had a higher height shelf been placed there. The trial room is at the back end of the store, so the customer has to move a large distance.

Western wear: The womens western wear is located from the cash counter to the end of left side. This section has a large variety of T-shirts, tops, tunics, shirts, skirts, denims and trousers for women. The clothes are mostly displayed in revolving hangars, which are much cluttered and with limited space between two hangars. During peak hours/crowded times, it could prove to be a discomfort for the customers. Towards the far left back end of the store, ladies innerwear and nightwear are displayed. The trial room has 6 cubicles which are very close to the western wear section.

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Accessories and Bags: The handbag and accessories section is placed near the cash counter. Max houses different types of handbags, rucksacks, and sling-bags. In the accessories section, there is a large collection of neckpieces, earrings, bracelets, bangles, hair accessories.

Central area of the store from the entrance:

Footwear for men, women and children are placed in the central area of the store. Max has both casual, formal and sports footwear for all. The fancy footwear for ladies and kids are the highest sales earners of this section. The footwear is placed in the order of the price range.

Right Side of the store from the entrance:

The mens apparel (about 4,500 sq. ft in area) and kids wear section is located to the right of the store. At the right of the entrance, there is a security baggage counter, which follows a token system. The guard is also responsible for counting the footfalls in the store on a daily basis. A similar display system is used for mens wear. Childrens wear: The kids wear section has been divided according to the age, beginning in an ascending order. There are separate racks for girls and boys after the age of 3 years. The first section 1 is for Kids (0 4 years), which is followed by garments for Kids (4 - 12 years). The Kids section typically consists of horizontal shelves for display. This section approximately covers 1/8th of the total floor space. In between, the racks, there are boxes with soft toys and colourful cushions, which attracts children. Mens casual wear: Beyond the childrens section, mens casual wear has been placed based on price range, including T-shirts, semi-formal shirts, innerwear, and trousers and denims. There are many hangars to allow ease in browsing the merchandize. The trial room is situated close to this section. The mens apparel section in all contributes to around 1/6th of retail space. There are some branded apparel such as Kappa, Levis available in this section. Since this apparel is the overall highest contributor to sales, it has more shelf space in the right corner as well as centre of the store.

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Mens formal wear: This section is situated at the right back-end of the store, and includes shirts, trousers, and ties. The store has an exclusive space for Peter England formal apparel, which is managed by their personnel. The formals are typically kept on revolving hangars but include shelf display too.

The overall layout of the store is user-friendly, neat and adequately furnished. During festival or offer seasons, the retail area is decorated using balloons, festoons and other decorative embellishments.

Retail layout:
The following diagram shows the layout based on approximations. Keys to reading the figure: The red line at the right-hand side of the store is the line of visibility. Green squares depict horizontal shelves Blue circles depict the circular hangars

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Supply Chain

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Service System Design and Process Flow

ELEMENTS IN THE DESIGN OF A SERVICE ORGANISATION
There are basically four elements involved in the design of a service organization:

Target Market

Service Concept

Service Strategy

Service Delivery System

Target Market: The target segment for Max Retail is diverse as reflected by its product portfolio. The store aims at attracting people in the age group of 4 to 50. The continuously increasing brand-consciousness and disposable income of the countrys population has aided the growth of Max Retail. Service Concept : Max Retail offers a variety of quality products both of their own brand and well-known brands like Puma, Peter England, Sparx. Variety of products across footwear, menswear, and womens wear is the USP of this store and it hopes to maintain customer loyalty via a two pronged approach of quality and efficient customer service. Service Strategy: Max Retail provides service to the customers with the highest possible quality. Customers walk in with expectations and walk out with a wardrobe. He goes there for the experience of having healthy food. The staff at any service establishment plays a very important role in the proper functioning and success of that establishment. In retail stores, the staff is instrumental in helping the customer select the desired product of the right size and addressing queries or grievances. Employees help the store to facilitate the process of quality service. The behaviour of the employees directly contributes to the customers overall experience. Their actions, reactions and conduct while interacting with the customers will directly affect the customer satisfaction. Service Delivery System: The delivery of the product plays an important role in improving customer service. Some of the factors like the time spent waiting outside the trial room, time required to find a desired product in an alternative size or colour from stores will directly affect customer satisfaction and loyalty. Waiting Time is the time spent outside the trial room.

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Query Fulfillment Time is the time taken from the point when the customer would like to try a variant of a product to when it is located and handed over to the customer for trial.

Service Process Matrix

Degree
of Labour Intensit y

Mass Service

Profesional Service

Service Factory

Service Shop

Degree of Interaction The service process matrix applicable to Max Retail is shown as below. A high amount of customer interaction is required and the degree of labour intensity is relatively low which puts it in the category of Service Shop. It is important for the sales and other executives to address the needs of each customer separately and provide appropriate products with minimum possible delay.

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SERVICE SYSTEM DESIGN MATRIX

Essentially this points out the fact that quality and consistency of services; sales force management and consumer involvement are the key issues to be taken care of by Max Retail. Also in the service system design it falls in the face-to-face loose specs position, highlighting the importance of selling skills being the key in differentiating with the competitors.

Process Flow in Store:

The process flow of Max has been studied as different components with each having a typical process flow. That is, the different sections like Security Counter, Trial Rooms, Billing counters and the Purchase Process of the Store as a whole- each of them are observed to be different processes functioning independent of each other. Therefore each process was studied separately and is presented as shown below. Trial Rooms: There are 2 trial rooms in total. One placed in the Gents section and the other one in the ladies section. The Trial rooms execute the following procedures: Maximum 3 garments only Rule: Each person is allowed to carry a maximum of 3 garments at a time. This is to ensure smooth replacement of the tried clothes back in their original positions. Coupon System: Based on the number of clothes a customer has taken for trial a color coded coupon is handed over to the customer. The customer is expected to return the coupon back to the Security guard. The coupon is taken back after the trial is done and the person in charge makes sure that all the garments tried are in proper condition. The intention behind the coupon system is to keep track of the number of people in the trial rooms and number of clothes being tried at any given time.

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Clothes checked and issues token based on the number of clothes. Max. garments allowed=3

Service staff pick up the garments form the BIN and place them back in their respective positions

PROCESS FLOW

Garments tried and returned. Coupon given back

Garments placed in the BIN for replacement

General waiting time= 0 during weekdays (observation of store manager) Weekends, the waiting time is predicted to be somewhere around 10-12 minutes during peak shopping hours (5pm-9pm) Baggage Counter: The baggage counter is handled by two security guards and this counter is located right at the entrance of the store. The purpose of the store is to ensure that no personal baggage is carried inside. This is to o Make sure that customers comfort levels are high which enhances shopping o Avoid unfair means of theft which would be facilitated with the presence of personal baggage. This helps in avoiding embarrassing situations like examination of baggage.

The flow of the process is depicted below:

Baggage like bags/helmets/covers etc are collected and tagged with a token having a unique number.

Customer given a token which has the same number of the tagged token to avoid mix-up

Customer's belongings are returned back once the token is given back. Loss of the token entitles a fine of Rs.200/-

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SERVICE BLUEPRINT:

SUGGESTED SERVICE BLUEPRINT:

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Inventory Management
Inventory is the stock of any item or resource used in an organization. For Max store, the stock of apparels, accessories, footwear and all the items that are being sold in the retail area forms the part of inventory. For this project, we are ignoring the office supplies which form a negligible part of inventory. Inventory management system is the set of policies and controls that monitor the levels of inventory and determine what levels should be maintained, when stock should be replenished and how large stock orders should be. In making any decisions that affects inventory size, various types of costs must be considered such as holding costs, ordering costs and storage costs. Hence inventory management is a trade-off between lower costs and meeting the sales demand.

Inventory Management at Max

The following diagram shows inventory management system for Max stores. As shown there are two manufacturing facilities viz. Mumbai and Bangalore. Bangalore has central warehouse for southern region. This caters to 6 local stores in Bangalore city itself. These retails outlets are owned by Max. Bangalore warehouse also caters warehouse in Kochin. This warehouse caters to two retail outlets viz. Kozhikode and Kochin. These retail outlets are franchise stores. The inventory in Max Stores is replenished from Bangalore to Kochin warehouse on weekly basis. The mode of transport used is trucks. From Kochin warehouse, the stocks are replenished every 2 to 3 days depending on the sales. Also security tagging of the clothes is done in Kochin warehouse. The delivery of inventory is done in carton boxes. A typical carton consisting of clothes weighs around 10kg. It has clothes in pre-pack. Each pre-pack contains same item in 12 different sizes. There is no concept as of Inventory storage because typically everything is displayed in the store. The customers are well aware of this fact and search from the choices put in front of them. Some short term storage done in small side room by the side of the Ladies Trial room. This practice is also in line with the fact that there is no warehouse/storage room in Focus Mall. The total pilferage from the warehouse in Bangalore to Focus Mall in Kozhikode is estimated to be 2-3% which occurs due to spoilage, theft etc.

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INVENTORY MANAGEMENT SYSTEM AT MAX

Considering the inventory levels, fast moving goods such as T-shirts priced below Rs. 199 both for ladies as well as men are displayed in abundance often in multiple shelves. These comparatively cheaper products offer great variety in large numbers (on an average 20) in almost all the sizes. The inventory level goes down with increasing prices and for non in-house brands. The sales people are responsible for rearranging the moved inventory back to the shelves and this forms major part of their job. In terms of searching for a particular item, a customer rarely approaches sales people and as far as the latter as concerned, they dont come forward asking questions like what are you looking for.

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Inventory is replenished based on the weekly sales. Plannogram is used to maintain the record of sales. The records are maintained by two categories age group wise and season wise. Weekly sales report is sent to the Bangalore office. The inventory allocation to each store is done in Bangalore only.

Inventory Control System Design Matrix

INVENTORY CONTROL SYSTEM DESIGN MATRIX If we map the MAX store in the above matrix, it would fall as shown in the above figure. This is because the requirement of various inventory items is highly independent of each other. Also Max store employs computerized sales reports to replenish the stocks. Hence the costs involved in the transaction are not as high as manual two bin system. However, the inventory obsolete risk is also on the higher side as shown.

Inventory System employed at Max

Since at Max store, the weekly sales report is reviewed by Bangalore office and accordingly, the inventory is replaced, this comes under fixed time period model of inventory system. Here the order quantity is variable for each item depending on the sales of that particular item. The biggest disadvantage of this system is that sometimes, very fast selling apparels or items may go out of stock between two review periods because after reviewing the stocks, the replenishment at least takes 3 to 4 days.

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FEATURE ORDER QUANTIY

P-MODEL I.E. FIXED TIME PERIOD MODEL q is variable (i.e. order quantity varies each time the order is placed)

WHEN TO PLACE T is constant (When the review occurs and new stock comes in) ORDER RECORDKEEPING SIZE INVENTORY Counted only at review period. Typically weekly for Max store

OF Larger than fixed order quantity model

Product Lifecycle at Max

The products in Max store are categorized as per following 1) Season Based Winter, Spring, Pre-autumn, Rainy 2) Age-group Based 3) Sales Based Slow moving & Fast moving

Since, it is a lifestyle retailer, Max products have a definite life cycle and the variety of clothes in the store depends both on the prevailing fashion and the season in question. During the summer season, there is a distinct spike in demand for light coloured clothes and similarly the winters bring consumers in looking for light woollens. Max actively follows a summer and winter collection schedule with the lifecycle for any product lasting between four months to 6 months. Apart from these observations, the sections catering to other brands in the Max retail outlet may not necessarily follow this cycle. The product life cycle for these brands may be akin to the lifecycle determined/followed by their respective parent brands/companies. The typical lifecycle for a product is shown the in diagram below. Fresh stock comes in at the beginning of new season. The products are then classified into slow moving and fast moving depending on the sales of that product. For slow moving items, after 60 days, price discounts up to 50% are given. If the product still does not get sold, then flat price discounts are offered e.g. Rs. 400 off for a branded shirt etc. If the product still is not sold then at the end of the season, the product is scrapped. There is no salvage value for scrap as the product is distributed among the Max store employees only. Also, overall on an average, the scrap is expected to be 10% of the total input.

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FRESH STOCK

DISCOUNT FOR SLOW MOVING ITEMS

FLAT PRICE DISCOUNTS

SCRAP (10%)

PRODUCT LIFE-CYCLE AT MAX STORE

After Sales Customer Feedback Mechanism

Max has an after sales service and customer feedback mechanism which can be generally categorized under the following heads: 1. Return Policy 2. Alteration Policy 3. Exchange Policy 4. Customer Feedback 1. Return Policy: Max has a general return policy under which products purchased within 14 days can be returned back in case of defects. Max also stipulates that the customer take certain steps to make the process a smoother experience. 2. Alteration Policy: As a part of services provided by it, Max offers its customers a free of cost alteration service 3. Exchange policy: Max also has an exchange policy in place if the customer is unsure of what he/she has purchased. In their own words, Because if you are anything less than 100% delighted with the purchase, we would feel our promise is not 100% delivered. 4. Customer feedback: Customer feedback forms an important part of Maxs feedback mechanism to improve its service and customer experience. The store manager is always around to lend an ear to the concerns of the customers and any ideas for improvement. Max also has a section on its online website where they have a form which is open for suggestions.

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LANPOS Software Billing System:

There are many Point of Sale (POS) systems, out of which Max Retail Store uses LanPos system. LanPos (Landmark Point of Sale) is used across all Landmark group of companies.

The two modes in which the systems operates are as follows:

Billing Modes Manager

Manager mode
This mode is basically for the purpose of managing and monitoring the sales, reports, other details etc. This is not used for the regular billing. The manager is in control of the system as he is the one who is ensured with all the responsibility of initiating the LANPOS billing system. Following are the steps that are followed in general: System Login and Activation: To activate the billing system, the store manager logs on to the system using the combination of his username/password. The system authenticates the credentials, after which the billing process gets activated. So, basically it is the first step. Daily Sales Report: The sales report is generated clearly listing out the overall transactions consisting of number of articles sold, the revenue recognized etc at the end of each day. This

Client (Regular)

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report is used by the head-office as a snapshot to monitor the daily progress. Other reports regarding transaction, accounts and inventory can also be generated. Inventory Details: Another important step is monitoring the inventory details. There is an XML User Interface for this purpose for maintain the inventory level at any particular instant. Each time there is any change, it is uploaded on the system, thus generating the updated levels. It is very critical for this to be as updated as possible to avoid any subsequent mismatch in stocks used or purchased

Client (Regular) Mode

This is the regular billing mode. It is used by the staff at the billing counter. He needs to login with his username/password before he can start billing. Some of the important features in this mode are: Barcode Scanning: While billing every time when the barcode of an article is scanned, all information regarding the article appears on the user interface (on screen) connected to it. Any updation or any inquiry can be further done for that particular article. Price Levels: The system allows multiple price points for the products. Multiple price points mean normal list price, multiple sales price, volume discount prices etc. Inventory Management: The inventory levels are adjusted as soon as an item is sold. Also, through this, the staff can keep a tab on which all items are low in quantities. Those articles can be reordered to maintain the inventory. Payment Mode: The system allows for various modes of payment viz. cash, credit card, gift voucher, and loyalty points etc. The payment is also integrated with the payment gateways of various banks and credit card agents, which are frequently used for payments. The total amount is also updated accordingly. Bill: The final report is generated after all the entries are made including the payment options. The bill is printed using the attached printer. The final bill has the following details: o o o o o o o o o o o 27 | P a g e Indian Institute of Management Kozhikode Date of Purchase Time of Purchase Transaction Type Customer Ref Number Billing Station Number Cash Memo Number Cash memo date Billing staff name Item Code Item Description Quantity

o o o o o o

Rate Discount Gross Amount Tax Amount Amount Payable Payment type

Billing Process:

The Max store has at maximum 4 terminals in use at the billing counter. Depending on the customer crowd the counters are made operational. This is to make sure that there is no waiting time for the customers. Also in this process, the idle time of the staff can also be minimized. Calculation Average Purchases per day = 200 Assuming on an average one person does two purchases, Average purchase per day per customer = 200 / 2 = 100 Average time spent by a customer on billing counter = 4 to 6 minutes Taking 5 minutes for calculation Total billing time = 100 x 5 = 500 min Assuming on an average 2 billing terminals are functioning Hours worked by billing staff at one counter = 500 / (2 x 60) = 4.167 hours

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Marketing and Advertising Operations

The differentiating strategy of Max stores, in general, is having low prices. The average prices of products are around Rs.400-500. Due to this low price strategy and a large collection of in-house brands, discount offers and schemes are normally not floated in the store. However as soon as you enter the store, you see the low cost apparel mainly mens t-shirt on display. The prices of these tshirts are generally lower than the average price. This is done in order to draw the attention of the buyer towards them and stimulate a kind of impulse buying. Marketing of products doesnt require promoting the brands separately as Max itself is the brand for most of the merchandise. Throughout the store, there are no modifications done, no display changes affected to highlight any particular apparel etc. and in that sense the display is almost static. The ambience of the store is pretty decent with sufficient illumination. Outside the store, right at the entrance a board greets the customers saying Max: 0 km away. As far as advertisements are concerned, they are more or less nonexisting. Next to the focus mall, there is an electronic screen which shows commercials for Max and they are certain advertisements of Max store in around the area which form part of ATL activities.

Reports

How Reports are generated at Max Retail

Reports
Reporting and Sales Analysis Predictive Analysis Demand Forecasting

Other Analysis

The various reports that are generated by the MAX store which are used for analysis can be detailed as: Reporting and Sales Analysis: The reporting and sales analysis is done from the data captured by using the Lan-Pos terminals. The sales data is captured on the manager machine as and when sales take place and it generates daily sales analysis reports. At the end of every a sell through report is generated. This sell through report is then sent across to the regional office at Kochi and from there it is sent to the country head office at Bangalore. There they are analyzed against the sales targets and the store performance in terms of sales is ascertained. Also any strategic decision shifts which are supposed to be taken are taken and the store manager is made aware of it. Predictive Analysis Predictive analysis reports are also prepared in the regional head office on the basis of the information captured and relayed by the LanPos terminals and the manager terminal. This information is thoroughly analyzed using predictive models and a likely consumer profile is generated. The sell through report is very important and is Indian Institute of Management Kozhikode

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properly scrutinized. Depending upon the items sold, the head office decides which items can be classified as fast moving i.e. which items require faster replenishment at the store and which items can be classified as slow moving. This is very important because accurate estimation lowers the loss due to missed sales opportunity. Demand ForecastingOnce the consumer profiling is designed through Predictive Analysis, a demand forecast is prepared taking into account the results of the predictive analysis. The demand forecast is then passed over to the respective retail outlets. The inventory in the store outlet is accordingly replenished in order to cater to the expected nature of demand as predicted by the model. Also the management takes adequate steps to make sure that the fast moving items and apparels are replenished faster than the other items Other Analysis Several other reports are also generated on the basis of the information forwarded by the LanPos billing and manager terminals. These reports help MAX, Calicut, to target its customers more effectively by campaigns, to improve response time to market changes, to increase employee productivity and to improve customer service at the store.

Other important reports are the daily checklists of the sales manager and the assistant sales manager who check: Retail Standards: Whether all lights, LCDs, PA systems are working properly Whether music playing is lively The ambience of the store is proper Whether the back store is clean The glasses and mannequins are proper and clean

Customer Service: Check on Customer suggestion/Feedback book and speak if any negative feedback Check whether the store employees greet the customers properly Keep count of customer walk-inns Make sure the promos and other offers are properly visible and the customer is aware of it

Cash and Billing Check the Daily sales reports Walk-in comparative reports Closing stock reports to RO/ HO

Stock management Keep a check on all depts. Monitor the Stocks received. Keep a tab on stocks not in Store but in Back Store Share stock requirements with MC team / AM at sub group level

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Another important report is the report maintained by the area sales manager as and when he visits. The thing that he checks are Store Ambience Stock Management SOP adherence relating to bills and exchange of items etc Working of the staff Store Fire safety alarm function Back store & stock room Maintenance of the store Services on floor

Customer feedback Mechanism

Max Retail gives due importance to the after sales service rendered to the customers so as to provide an enriching experience and everlasting satisfaction to its customers. The principle behind this is build a strong loyal customer base and provide a point of differentiation in such a competitive scenario in the retail sector of fashion clothing and footwear. Thus, studying the Max retail at the focus mall in the Calicut, the after sale service and customer feedback mechanism provided to the customers can be classified as follows:--

Alteratio n

Feedback Form Filling

Customer Feedback Mechanism

Exchange

Return Policy

Alteration
This is the part of services provided after sale of garments to the customers in case if any change in the purchased goods required depending upon the necessity of the customers. In general, an alteration counter is provided in the outlet to cater the needs of the customer where they can go for alteration in the purchased garments depending upon the requirements.

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Exchange
Max has an additional service in place for the customers as an exchange policy in which the customer who is in dilemma of what he/she has purchased. Such a customer is considered not to be 100% satisfied with the purchase hence they are given the option to exchange with the goods of their desire thereby ensuring 100% delight of the customers for the purchasing they make with the Max.

Return Policy
Under this policy Max provides an option for the customers to return the purchased products within 14 days from the purchased date in case of defects. The entire return policy is so designed that the customers receive a quick response to their grievances and have a smoother experience in the entire policy.

Feedback Form Filling

Customer Feedback Form filled by the customers is a vital Maxs feedback mechanism to improve its service and customer experience. Online feedback form is also available in the website for inviting open suggestions. The customers can visit http://www.maxfashionretail.com. Moreover, the store manager remains active so as to look into the concerns of the customers and any ideas that could bring improvement in the services provided to the customers.

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Recommendations
1. Pilferage accounts for a loss of almost 1.5% of total sales. This translates into a monthly loss of Rs. 45,000. Improvements in the tagging system at Kochi should help improve this state. 2. The most major issue that Max Retail faces is that of shortages. As told to us by the Store Manager, about 30% of total sales are lost due to shortages. The root cause of this is the procurement system of Max. The apparel industry functions in a very conservative manner. The materials (cloth) for a season of the next year Is ordered at the end of this years season. This means that items for three months are made in advance. Unless and until the demand forecasting is extremely accurate, this will translate into some items being fast-runners and some being slow-movers. If a fast running item is sold out in one month in a season of three months, it means a loss of potential sales of two months. Similarly a slow moving item occupies shelf space and the same material could have been used to make a fast runner. The manufacturing lead time is 2 months. A system where the supply is linked to real time demand will solve this problem. According to most store managers, the first two weeks into the season are enough to indicate which items are fast runners and which items are slow movers. Thus what we are recommending is a system where we supply only the first months inventory and then manufacture two weeks demand at a time. The garments are the same for both classes of items. The difference starts from the dyeing process and then the manufacture (tailor) stage. Effectively it translates into reducing the response time of the supply chain. This can be done by increasing the number of labour hours or adding extra machines. The additional cost is easily offset by the recovery of lost sales. A preliminary calculation for this is shown below. Activity Total number of customers per day Proportion Making a purchase Average bill amount (as per Store Manager) Total Sales per day Total Cost of Goods ( 4 times markup) Lost sales (30% fast runners and 20% slow movers) Lead time for manufacture of 2 weeks of inventory (with existing labour) Additional labour hours to reduce lead time to 1 week Labour costs for daily sales (30% of COGS) Labour Costs for lead time of 1 week Additional cost with new system Recovered sales with new system Profit from recovered sales (4 times markup) Net profit by changing supply chain Monthly profit Numerical Implication 600 1 out of 3 500 200 x 500 = 1,00,000 25,000 50,000 3 weeks 3 times 7,500 22,500 15,000 50,000 37,500 22,500 per day Rs. 6,75,000

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References
http://www.maxfashionretail.com http://www.maxfashionretail.com//storelocator/ The Choice by Dr. Eliyahu Goldratt

Appendix
STANDARD OPERATING CHECKLIST AT MAX STORE 1) CASHIER
1 1 2 3 4 5 6 7 8 9 10 11 12 Switch on all the systems at 10:30 AM Computer System, Sensormatics, EDC Machines, Intercom Phones, Music System & Scanners are working properly Cleaning & Dusting of Cash Tills All Back Bins cleared by Hangers, Security Tags, Carbon Papers & Shopping Baskets All Merchandise segregated Departmentwise and handed over to Staff of each Department Stationery available: POS Rolls, EDC Rolls, Scissors, Stappler, Stappler Pins, Calculator & Carry Bags in all sizes Ensure that POS Rolls & EDC Rolls are their in Printers Promos are being communicated to customers while billing. Ensure all store Promos are updated in Lanposs / Give away gifts / GVs are received from HC for the day . Ensure that the Visitors Book available on each Cash Till. Greeting at start of the bill / Thanking customers at End of the billing.( Hello madam, Hello sir ) Opening Invoice No. mentioned in Invoice Register 2 3 4

2) STORE OPENING

1
Check the lock before Unlock Unlock the Rear Entrance(Staff Entry) at 9:30 A.M. Switch on Optimum Lights On Floors Switch on Sensormatics on Floor Security in Place with Complete Uniform Adequate House Keeping Staff Presence of 1 Staff In each department Adequate House Keeping Staff for Cleaning and Moping Switch on AC by ___ A.M. Switch on the music Trial Rooms are checked & cleaned before 10:30AM Switch on adequate Lights at 10:20 A.M. Switch on T.V. at 10:25 A.M. Floats issued in tills & Dedicated Cashier by 10:25 A.M.

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Ensure that staff is in Complete Uniform By 10:30 Ensure staff briefing incl. Security done before open to cust. Merchandise well presented on the floor Manager's Signature Security Signature

3) STORE CLOSING

1
Store closing CD play before 30 min to closing time. All the Tills closed & Cash handed over to HC> Switch off Sensormatic, EDC Machine, Music at Till Point after last customer left . Recycling of Security Tags & Hangers Merchandise well presented on the floor - 100% recovery HK to do dry mop and dry garbage kept ready for pick up next day . Trial Rooms are empty and cleaned Switch off Television Sets Switch off AC - soon closure CD played Switch off 80% Lights On Floors after last cust.left Lock Manager's Room / HC room and seal Complete IT day end process / Reports to HO and Lock the IT room Switch off Sensormatics at Entrance after all staff walked out Closing Manger along with Security walked entire store , toilets, stock rooms and baggage counter Ensure all staff were frisked properly by security while leaving ./ Closing Security by closing manager Night Security Guards in Place with Complete Uniform at back door with torch lite ,wistle & baton. Leave if any important communications are there to opening manager to action. Door locked and Sealed by the Security Manager's Signature Security Signature

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4) STORE MANAGER DAILY CHECKLIST

Date :

1 2 3

Retail Standards & Customer service Customer Greeting - Hello madam / Hello sir. Check staff grooming , dept.-sections are manned effectively for cust.service Check Show Window Glasses/ Hotspots /Wall Mannequins are clean/neat Back store clean and neat Music played is Lively -Preferebly English check all lights/signages/ LCDs / PA system are in good working condition Check on Customer suggestion/Feedback book and speak if any _ve feedback Check time and again count of customer walk-inns Check on all promos communications were displayed in sections / Cash tills / Entrances / Lifts.

Cash and Billing Cashiers till open by 10:15am Sales cash is tallied and deposited to the bank by HC Check on un billed / un tagged merchandise if any at cash desk premises. Periodical checking of exchange/ reversal merchandise at cash desk Monitor cash till for fast & acurate billing / promos explain to customers. Check on petty cash expenses , GV / Gifts stock for promos if any Check for any billed invoces / duplicate invoice copies at cash counter ?

Daily reports and check lists Check the C.R.E-DM, inv exe /ASM. check list and acknowledge Check the Daily sales reports / Walkin comparitive reports / Closing stk reports to RO/ HO TIC daily enrollments were being mornitored and sent to RO/HO Inv.MIS incl PI & Global count reports were sent Check the store maintainance person chek list Check all HC reports - 3page / promos/markup/down/reversals/Hold n relese /Credit note issues & redeemed. Reviewed on store opening / closing check lists

Stock management Check on all depts. Fixture management with merchandise Monitor the Stocks received from BRDC / DSD Check for stock not in Store but in Back Store / BRDC Share stock requirements with MC team / AM at sub group level. No stock displys after 4 pm on floor .

HK/ Security / Admn

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Check Store entrance / Trail rooms security staff manned Toilets were neat and odurless / Door latches / water taps / flush are in working condition ( no leakages ) Security sensors are in working condition.- Random verify Check Staff attendance register( Max staff) Proactive security controles were discussed for Holidays / week ends / promos Dailly observations to be reviewed with concerned and corrected / Escalated to AM Sign here ==================================>

5) AREA MANAGER
Date : Remarks

Yes 1 Store Ambience VM & Retail standards incl.Merchandise management Dept. Fixture lay outs Manpower presentaion incl.HK/SEC/VP Promos / Themes / Communications Stock Management Top selling subgroups available Basic available Non basic available Back store stocks brought to floor/kept properly Repln / allocation pending if any Consolidation process if any SOP adhearance Exchanges / alterations Cash n Billing ( CN transactions / High value CNs ) Promo handling ( Issue of GV s / Gifts - tracker ) PI / Global count Trial room maint. Pilferage / staff misappropriations HC - Daily reports ( 4 reports ) DSR 3 Page reports Exchange / Reversal / Mark up /Down Hold n release / Promos / Staff discounts Safe key handling and petty cash tally Daily cash banking _ reconcillation Pending IOUs / cashier shortages if any Adherance of Check lists - Random verification for 3 CREs / 2 DMs / SM/ASM HR . Staff presence as per attendance register HR monthly registers / statutory submissions. All staff / Support staff received salaries.

No

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Grivience issues if any Statutory complience and renewals if any Statutory bodies store visits if any New staff induction Atrrition reasons Monthly training schdule -Validate staff 5 Store Fire safety alaram function Fire extinguishers in good condition store sensormatic / CCTV functioning Pilferage prone areas if any Electrical PDB Room maint. Store insurance Validity period. Back store & stock room Back store neat and tidey Stock room arranged neatly No open merchandise in back room Accs / F.Jewellery etc Storage of Fixtures etc. Maintainace DG set maintainance Lifts / Escalatiors Toilets / cust drinking water / seating Paint touch ups / Landscape / plumbing leakages AC & External siganges / LCDs / PA , Music system Services on floor Staff greeting customers Staff Guiding customers towards Lifts / Escalators /Depts. / Trail rooms Staff explainig promos Staff handling issues in time and solving DMs / Managers are interacting with customers on floor / post billing Best / poor services noticed by staff if any TIC enrollments / Cust. Interaction quality / Stationery mgmt. Other Observations / Stores Feedback points

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