OPERATIONS MANAGEMENT
PROJECT REPORT

Introduction:
Reliance Fresh is a chain of retail stores owned by Reliance Industries, headed by Mukesh Ambani. It was established in 2006, and now has more than 1000 outlets across the country. They sell a wide range of items including fruits, vegetables, groceries, juice, dairy products, FMCG goods and other staples. A typical Reliance Fresh Store has an area of 3000 – 4000 sq. ft. and caters to customers living within 2 – 3 km around each store. Reliance plans to invest over Rs. 250 billion over next 4 years for expanding its retail division. Reliance Fresh provides direct employment to over 5 lakh young Indians and indirect job opportunities to a million people, according to the company.
With its core growth strategy of backward integration, Reliance Fresh has made rapid progress towards creating and sustaining an entire value chain right from the farmers to the end consumers. Reliance Fresh has announced that it will minimize its exposure to fruit and vegetable business and position itself as a complete super market which focuses on categories like food, FMCG, stationeries and other products. It has a vision to generate inclusive growth and prosperity for farmers, vendor partners, small shop keepers and consumers.

STRUCTURE
Organizational Aspects: * 12 customer service associates are rotated periodically for various jobs like billing, stacking and customer service so that they do not get bored and also gain expertise in handling different tasks.

* Learning Curve – Billing time and waiting time for the customer is reduced because the cashiers gain experience in billing over a period of time.

* Monthly rewards program and incentives for the employees keep them motivated.

* Employees work in two shifts, 6 am to 3 pm and 1 pm to 10 pm, on rotational basis to reduce fatigue and work overload. 4 CSAs work in 1st shift and 5 CAs work in 2nd shift as number of customers is more in the evening.

* Except Saturday and Sunday, employees are allowed to take one day leave per week based on their choice by informing the manager earlier.

* Inventory unloading time is from 1pm to 4 pm.

Demand Forecasting:

Supply chain:
One of the officials said that the perishable items like fruit and vegetables were bought from the farm communities directly and the wholesale system was bypassed. Majorly the items which are directly brought from producers were sourced from surrounding districts keeping the transport cost low. This led to a reduction of prices as compared to the typical Indian agricultural product delivery mechanism and savings of about 20%. So, effectively these stores connect the source and producer of vegetables and fruits to the destination that is the urban consumer houses. This has broken the shackles of a long value chain of food distribution patterns in India.

This is a standard practice of backward integration where one partners with the suppliers or engages with them in a smart way to dismantle the long value chain that is avoidable. There are several other competitively important steps that Reliance Fresh has taken. A competitive price is offered to the farmers and payment is made at hand to maintain supplier relationships.

Cold Chain Storage and Distribution Mechanism
An extensive cold chain based supply chain has been developed to ensure long life of perishable items. This starts from the village where the farm is located. The agricultural crops are harvested and then packed locally. There is a common cold chain storage facility that caters to the complete village. There are specially designed vehicles that carry cold chain provisions so that the food items are safely transported.

Vegetable stored in cool ambience (~10-12 deg C)

As soon as the items are received at the stores, they are transferred to the localized cooling solutions. The fruits and the other agricultural products are disposed off after 2 days to ensure that spoiled quality is not sold to the customer.

Price, along with quality, determines the decision making metric for procuring any item at Reliance Fresh. The basket of products is purchased from a multitude of vendors and suppliers. The store generally does not enter into purchasing items on a standalone basis. The purchase orders are released on a city or state basis.
The spoilable items are bought as a whole by the city stores so that transport time is minimum and the items have a longer edible life. The other items which have a longer shelf life are ordered at a large scale. This gives the company a strong bargaining power and a competitive price to the customers.
Inventory Management:
Reliance Fresh has appeared as the largest non-wholesale buyer of agricultural consumable items in the state. It further intends to ensure all its supplies directly from producers. With the bypassing of middle elements of the value chain, up to 10% is saved in the transportation cost. The profits earned by such middle elements are hence re-distributed amongst the farmers as higher price for their products and lower price paid by the customers for all their purchases. The Farmer producer company model continues to provide fruit and vegetable supply.

Fruits and Vegetables

* The fresh harvest from farms directly is sent to the Collection Centre. The products are put under a preliminary quality control test here.

* Next destination for goods is the Distribution Centres. Here, there are provisions for storage and grade allocation. This is the first point where the information regarding each product input is fed into the IT system.

Distribution Chain for Perishable Items

* Each store then raises a purchase order daily, under the supervision of the store in-charge, on the basis of an estimated demand. The Cluster or the Area Manager then collects the total order pertaining to stores in one particular area.

* He ensures the products get delivered to the stores with an attempt to match the requirements and availability in the best way possible.

Non - Fruits and Vegetables

* The transporters collect the items from Manufacturer’s nearest warehouse or the country wide distributor and send it to the localized distribution centre.

Distribution Chain for Non-Perishable Items

* Each item carries a Minimum quantity in the stock to be maintained and observed. As soon as the quantity of the stock achieves even a lower level, a replenishment order is placed.

Storage and Distribution * Depending upon the forecast, the inventories are supplied to the store. In case of fruit and vegetables, supply is done locally and for other than fruits and vegetables, central forecasting server done the task. As the storage area is not so large, following points should be kept in mind and accurate forecasting should be made as : * Scarcity of inventories may lead to sales figure down * While large inventories would cause additional cost of storage * In case of perishable items, forecasting becomes most important as excess inventory will cause extra cost if items are not sold at time and will be added to wastage

* Store manager communicates to the assistant manager about the forecast two days before and then goods are supplied to the store. It means that it has time lag of two days between demand and supply of goods.

* Distribution:

Non Perishable- Other products

* Entry at store : between 1pm to 4pm * Unloading time : 30 Minutes * Inventory prediction from sales and decided by Head Office

Perishable Items- Fruits and vegetables * Entry at store : 9 am * Unloading time : 15-20 minutes * Inventory prediction from sales and decided by Head Office

Maintaining the stock

* Replenishment of the products in the store from the warehouses is done on daily basis * If Fruits and vegetables etc. are perished, they are thrown away 2 days after they are brought * Other FMCG are kept in the store till the expiry date * Such kind of refill process is termed as the ‘Fresh model’ and it leads to faster turnover of inventory as the customer visit to stores for the replenishment of food items or FMCG items is expected twice a week on an average * So, the store is supposed to maintain inventory for one day. * The storage area is refilled in the morning in case of fruits and vegetables * The shelves are stocked as and when required * Staff at Reliance Fresh is highly motivated and work as team for customer satisfaction * Perishable items such as dairy products, fruits & vegetables and bakery items are stocked into the shelves on daily basis * Other FMCG goods, which have relatively high shelf life, are replaced as per the requirement. The rate at which goods are replenished varies from product to product

Disposal of unsold products

* Reliance Fresh strives for customer satisfaction and good experience at store. When the perishable items are rotten, they are dumped. In case of no- perishable items if items are not sold till expiry date, these are items are also removed from the shelves and dumped. There is some value got from the dumped items * As per the Store manager, approximately 10% of the food items are removed from shelves and dumped due to perishing or expiry date has passed * Some items are taken back by the suppliers if expiry date has passed and goods are not sold. These items include dairy products and bakery items etc. * Apart from these cases, the rotten/ expired products are dumped. * We see that Reliance Fresh ensures that stocks in the store always maintain good quality and it also justifies their USPs of ‘Freshness’.

Contract Farming:
It’s an efficient system for successful production and consumption of agricultural and relevant products. It is a mechanism of understanding amongst the producers, the processing agents and the consumers or retailers. This model is claimed to have benefits for all the stakeholders like famers, processors, retailers and end customers.

In this era of globalization and swelling agribusiness, not many small farmers are expected to benefit as the practice of contract farming encourages the practice of extensive farming which can be applied only on large chunks of land.
Thus such farm and company link establishments also extend important services like insurance, credit, inspection and quality grading apart from assuring sustainable markets, reducing risk for all. This basically is institutionalization of farm practices to raise their productivity and subsequent income.

Integration of Value chain
The Indian agricultural market is undergoing a tremendous change and contract farming here plays a very major contribution. The demand of consumers has diversified and agricultural processing has expanded in an organized form.
Integration of top components in the chain
The food processing industry in India has turned organized and expansion of grocery retailing has initiated greater amount of competition amongst many private companies to conquer rising market demands. This intense competition has led to cost cutting measures and innovations in business models.
Since the retail industry relies heavily on supply chain innovation, their value chain has seen considerable compression leading to integration of the top components in the chain. This practice has therefore become an industry trend to ensure sustainable purchases of agricultural products with minimum price and high quality.

Disintegration of bottom components
The NSSO data gives the information that small farm productivity is higher than the larger farms prominently due to higher farm labor available per area. Such small farms and their farmers are used to intensive cultivation. They make low saleable surplus and thus have high brokerage cost in selling their produce.
Such small farmers are incapable of taking higher production risks and lack in resources, both monetary and technical, thereby restricting them from moving to high income generation crops and contract farming practices to ensure sustained income. So, contract farming has the prospect of introducing high value farming to poor farmers.

Some items stocked at Reliance Fresh: Vegetables | Fruits | Baking | Breakfast | Frozen Items | Snacks | Seasonings and Condiments | Cans and Jars | Meals | Cold Drinks | Stationery | Toiletries | Baby Care | Dairy Products | Some Apparels |