India - Why your supermarket is always out of stock

Tanvi Shukla

MUMBAI: Aditi Bhosale, 34, a homemaker and resident of Pune, is not too impressed by the four big brand supermarkets in her neighbourhood. She still finds it convenient to call her regular kirana store down the street for whatever she needs. “I know he will always have all the brands and products that I buy. I’ve never managed to get everything on my shopping list at one supermarket itself. Sometimes the soaps that my children like are missing, at other times, it’s the cooking oil brand that my mother prefers, which is out of stock,” says Bhosale. Grievances are aplenty in every city where modern retail has spread its wings. Retailers say, on an average, they receive 70% of the orders they place with their suppliers. Globally, this figure is as high as 99%. Why is it so low in India? For kirana stores, manufacturers don’t provide all of the available stock keeping units (SKUs mean different variants, sizes and package forms of the same product.) They supply ten most popular brands in a particular region to the kirana stores, and it works. But this model fails in modern retail. Sadashiv Nayak, chief executive officer, Food Bazaar, says, “The problem is that modern retail forms only 4% of the total retail industry and so manufacturers are not yet ready to change for us.” Sunil Kataria, senior president, Subhiksha, says, “Manufacturers are used to servicing kiranas on a weekly basis. But we need daily deliveries, sometimes twice a day.” This brings complexities in the supply chain. The problem worsens when the same SKUs are undelivered. So, if customers are big on Maggi and the suppliers miss deliveries 2-3 times in a row, maggi would be out of stock. Andrew Levermore, chief executive officer, HyperCity Retail says, “Globally, the power is in the retailer’s hands but here it lies with the manufacturer. It doesn’t matter to them if you close their account or don’t stock their products since even the biggest retail chains forms a miniscule part of the market.” Hence, retailers have begun to find solutions themselves. “We keep extra stock of whatever flies off the shelf the fastest and is not easily replenished,” says Nayak. Soaps, bakery and confectionary are few of the categories where extra stock is required. HyperCity, which has a higher fill rate of 91%, uses technology to beat the challenge. An algorithm is used to keep the supplier’s delivery history and orders are calculated accordingly. “If we know that the supplier will only provide 85% of the order, we over order. We ask for 15% more than what we require,” says Levermore. Manufacturers defend by saying that where they are used to a demand growth of 3-5%, a 20% spurt becomes difficult to manage and so it is the high demand which leads to mismatch in the order and delivery. Few FMCG giants have started working with retailers “We work out estimates on monthly basis because manufacturers’ production plans are monthly. Also we request them to let us know of any upcoming promotional activities which may spike the demand ,” says Kataria. As organised retail embarks on its journey from a mere 4% of the total industry to a healthy 20% by 2015, players have begun to realise the gravity of such loopholes. While retailers work towards growth so that manufacturers can’t ignore them, consumers can pray that this age comes really soon. s_tanvi@dnaindia.net