Retailers are improving their relationships with vendors after realising that efficient inventory management and supply chain management are critical factors in low-margin businesses.

“Most retailers are increasingly involving vendors in their business for better inventory management. Shoppers’ Stop is deploying a vendor-managed inventory system wherein the vendor can access data on stock levels in its stores,’ said Kumar Rajagopalan, CEO, Retailers Association of India.

This helps the vendor to replenish inventories or reduce supply so that goods do not get struck in stores and also do not go out of stock.

“Working closely with vendors is important if you want to get what you want and that too in time. India falls far behind the global average in the fulfillment of purchase orders,” said Thomas Varghese, CEO Aditya Birla Retail.

Aditya Birla Retail has introduced the ‘Global Standards-1’ initiative that could help make its supply chain and inventory management more efficient. “Globally supply chain costs account to two per cent of revenues. In India, it varies from three to six per cent,” he said.

Flow-through process is one such initiative that can avoid stocking of fast-moving products at the distribution centre. “This needs a highly reliable vendor who can supply the products as and when they are needed in stores. The products directly flow to the stores,” he said.

Retailers like Future Group have formed specialised agencies to meet the supply chain requirements for all the group companies. Unlike third party suppliers, these agencies can better enforce right processes. “A few retailers are also installing systems in their franchisee-operated stores which will help keep a tab on stock levels,” said Rajagopalan.