Rpg Spencer Case Study

Case Study On

RPG Spencer

Supply Chain Strategy for Agri Retail

MANTHAN - The Retail Case Contest

AMAETHON 2007

IIM AHMEDABAD

Submitted by

Team Evanescence

Team Leader:

Mitul Joshi

mitul.j08@fms.edu

09911459121

Team Members:

Anand Natarajan

Mitul Joshi

Viral Nagar

Faculty of Management Studies

University of Delhi

TABLE OF CONTENTS

TOPIC Pg No

EXECUTIVE SUMMARY 2

1. SWOT Analysis 3

2. Existing Supply Chain Model - What We Are Doing 4

3. Behind Enemy Lines: What They are Doing 6

4. Suggested Improvements 8

5. A Blueprint - Managing the Supply Chain 10

6. Conclusion 16

REFERENCES 17

APPENDIX 18

EXECUTIVE SUMMARY

RPG-Spencer is the undisputed leader in the upcoming and hugely promising agri-retail sector in India, especially in South India, where it enjoys a clear edge over its competitors. With constant improvement, their supply chain strategy has progressed from one replete with inefficiencies to one of direct sourcing from farmers, resulting in better realizations for both farmer and retailer.

In the wake of favorable FDI policies of the Government, corporate giants from both India and abroad are entering the fray with new, innovative strategies to gain a foothold in the market. RPG-Spencer faces the risk of its supply chain strategy being replicated, thus leading to erosion of its competitive advantage in the agri-retail sector.

This case analysis proposes a blueprint of the strategy that could be adopted by RPG-Spencer to achieve its twin goals:

* To retain its lead in the south

* Geographical expansion to Northern India

We begin with a SWOT analysis of the current supply chain model adopted by RPG-Spencer. The opportunities that emerge from the SWOT analysis are then leveraged to bring about further improvements in the supply chain through backward linkages into agri-input retail and investments in technology.

We then present our procurement and distribution strategy for the northern market, which requires the setting up of "agri-input retail stores" in the vicinity of farmlands, also doubling up as "warehousing centers", to house the farm produce till it is shipped to the consolidation centre.

We conclude by providing a Logistics Strategy for the northern market which will make use of third-party logistics to leverage the economies of scale resulting from such an arrangement.

1. SWOT ANALYSIS

We begin with a SWOT analysis of the RPG supply chain strategy which will help us evaluate the current state of its business and suggest new strategies for expansion.

2. EXISTING SUPPLY CHAIN MODEL - WHAT WE ARE DOING

One of the first players to enter the agri-retail sector, RPG started its operations in South India in the late 1990s. In the beginning, multiple intermediaries were involved in this food chain, causing inefficiencies in operation, leading to rising costs and lower profits. To address this problem and to gain a sustainable competitive advantage, they switched to a 'Direct Sourcing' strategy in which the agricultural produce was procured directly from farmers, resulting in better margins for both.

Today, RPG Spencer sources directly from about 150 farmers who are first provided with specifications regarding quality, quantity, size and delivery dates. It provides trucks to the farmers for transporting the produce from the farms to the consolidation center in time without wastage. Once the products reach the direct consolidation center they are sorted, graded, profiled and sent across to the retail outlets. Transportation cost is charged for the use of the trucks.

RPG operates in the South through a hub and spoke distribution model where a central node or a consolidation centre (hub) services the requirements of various closely located outlets (spokes). This enables RPG to achieve significant cost advantages by the centralized purchasing of goods in huge quantities and distributing them through its own logistics infrastructure to the retail outlets.

This model has both benefits and drawbacks, some of which are discussed below:

3. BEHIND ENEMY LINES: WHAT THEY ARE DOING

With companies like Reliance, Bharti, Mahindra, ITC, and a host of others showcasing interest in the agriculture sector, will their "farm to fork" plans of procurement and marketing succeed? We shall now take a look at the strategies employed by the various competitors in the agri-retail sector and the challenges faced by these companies.

Broadly, companies entering the business are opting for three broad farming models - cultivation on company-owned land, farming on leased land and buying produce directly from large farmers or entering into procurement agreements from commission agents or 'aggregators' at mandis or large markets.

4. SUGGESTED IMPROVEMENTS

An agile and adaptive