Forecasting Model for Fruits & Vegetables in Retail Outlets

EXECUTIVE SUMMARY

Statement of Purpose

To create an indenting system between Retail Outlets & MIS of Subhiksha Trading Services Ltd in Upper North Region. The system should serve the following purposes

Ø Reduces Inventory

Ø Reduces Time lag in SCM

Ø Reduces Dump

Problem Faced

Ø High level of Inventory

Ø High time lag in SCM

Ø High Dump Value

Solution

Implementation of PRABAL’S INDENTING SYSTEM Version 1 that takes into consideration the following parameters.

Ø Average Sales

Ø Day Effect

Ø Season Effect

Ø Increment Effect

Ø Dump Effect

Ø Days of Stock

Ø Critical Shelf Life

Problem Analysis

The company is leading Retail Chain, which serves Fruits & Vege

tables (F&V) also. The F&V are purchased centrally from

Mandi and supplied to Ware House. The purchase is based are based on the compiled order of the region provided by MIS. MIS compiles the data based on the Indent given by individual RO’s(Retail Outlet).

Indent is made by Supervisor. The education level of Supervisor is less than higher secondary. The indent is given in 2 days advance to MIS. Indent is normally created by gut feeling of Supervisor.

Indent > Supply = Wt loss + Sale + Closing Stock

Closing Stock = Sellable Closing Stock + Dump

Present Methodology

Ø On the Closing of Day i.e at night, closing stock is weighed and recorded.

Ø Each outlet tries to maintain the desirable no. of day’s stock, which has been calculated for each item separately.

Ø Also Critical Shelf Life of each SKU has been calculated and circulated.

Ø While indenting, supervisor normally keeps both the mentioned information in mind.

But the closing stock calculated by them is misleading in two ways:-

• Closing Stock reported consists both sellable Closing stock and Dump.

• Closing Stock is taken at night, while reported in the morning. Considerable amount of weight loss and increase in Dump occurs by the morning.

This deviation from ideal indent at RO level creates a bullwhip effect at Central Purchase Level.

New Methodology

The indent is forecasted, based on the mathematical formulas.

It Considers:-

Ø Average Sales

Ø Day Effect

Ø Season Effect

Ø Increment Effect

Ø Dump Effect

Ø Sellable Opening Stock in the morning

Ø Days of Stock

Ø Critical Shelf Life

Ø Crate Size

1. Gives Recommended Indent
2. Gives the option of modifying indenting by increasing the %age of sales over last day

Nomenclature & Formulae

Nomenclature

DSi = Day Sale of particular SKU on Day i

Average= ∑ DSi (i=1 to 14)

Dump E=( ∑ DUMPi)/14 (i=1 to 14)

INPUTS

DSi where i=1 to 14

OS15 = Opening Stock of Day15 of particular SKU

DUMP15 = Opening Dump Stock of Day15 of particular SKU

STN IN15 = Stock Transfer Inwards(Accepted) on Day15 before Indent is made.

STN OT15 = Stock Transfer Outwards on Day15 before Indent is made.

OUTPUTS

RI = Recommended Indent in no. of crates for Day17

FI = Final Indent in no. of crates for Day17

Recommended STN out in no. of crates on Day15

OPTIONAL INPUT

Increment desired on last day sale in percentage inputs.

REMARKS

Kindly mention that why you are giving this increment when its more than 50% or less than -50%

Formulae

DE= Day Effect

DE= (DS3+ DS4)/2

Avg Sale

SE= Season Effect

SE = ∑ DSi (i=1 to 8)

∑ DSi (i=1 to 7)

Dump E= Dump Effect

Dump E= (( ∑ DUMPi)/14)/Avg (i=1 to 14)

PS= Projected Sale

PS= Avg(1+DE+SE+ Dump E)

DOS = Days of Stock

DOS = OS15 + STN IN15 – STN OT15

Avg

CSL= Critical Shelf Life

Logic Test 1 If DOS > CSL

> Stock out the excess stock

Else >Regular Indent

Logic Test 2 If DOS<1/2*csl

> Additional Indent=AI

> AI= RI*0.45 (0.45 is taken by Hit & Trial)

Else >Additional Stock=0

Recommended Indent = Reco I = RI+AI

Inc= Increment percentage over last day sales (DS14)

FI= Final Indent = Reco I(1+Inc/100)

Marketing Concepts@IIMs

A Professor at one of the IIM's (INDIA) was explaining marketing concepts to the Students:-
1. You see a gorgeous girl at a party. You go up to her and say: "I am very rich. Marry me!" - That's Direct Marketing
2. You're at a party with a bunch of friends and see a gorgeous girl. One of your friends goes up to her and pointing at you says: "He's very rich. Marry him." - That's Advertising
3. You see a gorgeous girl at a party. You go up to her and get her telephone number. The next day, you call and say: "Hi, I'm very rich. Marry me." - That's Telemarketing
4. You're at a party and see gorgeous girl. You get up and straighten your tie, you walk up to her and pour her a drink, you open the door (of the car)for her, pick up her bag after she drops it, offer her ride and then say: By the way, I'm rich. Will you marry me?" - That's Public Relations
5. You're at a party and see gorgeous girl. She walks up to you and says: You are very rich! Can you marry ! me?" - That's Brand Recognition
6. You see a gorgeous girl at a party. You go up to her and say: I am very rich. Marry me!" She gives you a nice hard slap on your face. - That's Customer Feedback
7. You see a gorgeous girl at a party. You go up to her and say: "I am very rich. Marry me!" And she introduces you to her husband. - That's demand and supply gap
8. You see a gorgeous girl at a party. You go up to her and before you say anything, another person come and tell her: "I'm rich. Will you marry me?" and she goes with him - That's competition eating into your market share
9. You see a gorgeous girl at a party. You go up to her and before you say: "I'm rich, Marry me!" your wife arrives. - That's restriction for entering new markets