It’s ALL about ‘CASH and CARRY’

‘CASH AND CARRY’-The name itself defines the business. Pay the CASH and CARRY the goods. This is a unique retail business model. For simple understanding, we can define it as a wholesale model. A wholesaler stocks and sells the goods in bulk. Cash and carry also follows the same. It also stocks and sells the goods in bulk. The one of the difference between the two is a wholesaler gives credit period but a cash and carry won’t. Another major difference between them is in assortment. Cash and carry assortment is wider than a wholesaler assortment. Assortment means width and depth. Width refers to the number of brands eg., if you take a shampoo, they will have various brands like Garnier, Sunsilk, Pantene, Head and Shoulder, Clinic Plus and so on. Depth refers to the number of SKUs (Stock Keeping Units) eg., In Head and Shoulder, they will have various kinds like Menthol, Black, Pink, Silky Smooth and so on. This kind of assortment you can’t find in a wholesaler. This is not only in shampoo but in all the categories like Staples (rice, wheat, ghee, oil etc.,) Home products and care (Fairness creams, perfumes etc.,) Food and drinks (biscuits, soft drinks etc.,) Frozen food items (fish, ice creams etc.,) Fruits and vegetables, Textiles (towel, bed sheets etc.,) Home improvement (Furniture) Media (TV, Mobile phones etc.,) Apparel, Foot wares and Home Appliances. It is impossible to find a wholesaler to have these entire assortments.

Normal customers like you and me can’t enter these cash and carry stores and purchase the goods unless you are registered customer. It is a B2B (Business to Business) model. They will sell only to the business customers like small Kiranas, Mom and Pop stores, hotels, restaurants and caters. And also these business customers should register themselves with the cash and carry. Once they get registered, they will get a Customer Identification Card. There is one more thing is there, a business customer cannot come inside the cash and carry store and buy items worth of 100 or 200 rupees. They have to have a minimum buy of 1000 or 2000 rupees depends on the cash and carry store.

In India, some of the players playing in the Cash and Carry game are the Germany giant Metro, Bharati-Walmart, Carrefour and Reliance Market. The basic fundamental thing in this cash and carry model is High Volume and Low Margin. If we see the supply chain it will be like this Manufacturers-->Distributors (in cases agents)-->Dealers-->Sub-dealers-->Retailers-->Consumers. This cash and carry model eliminates the intermediaries. It directly procures the goods from manufactures and selling it to the retailers. Here the supply chain will be like this Manufacturers-->Cash and Carry-->Retailers-->Consumers. It reduces the cost, lead time, damages and so on.

The most important benefit provided by the Cash and Carry model to their business customer is play with the retailer’s Working Capital. There is a Mom and Pop near my home. The daily average sales in that Mom and Pop store is around 1000 to 2000 thousand. For every three days the owner of the store purchases goods worth of 5000 thousand rupees. If he wants to do the purchase after three days, he has to sell all the goods which he bought. So, he will be too cautious in selecting the goods. He won’t buy 5 or 6 items for those 5000 thousand rupees. He will buy 15 to 20 items for those 5000 rupees. He does not want to take risk. He always wants to be in the safe side of the game. The risk here is, out of 5 items, if one of the items is not moving well, he will inquire a loss of around 4000 to 5000 rupees. But in the later part, out of 20 items if 3 items is not moving well, he will inquire a loss of around 500 to 1000 rupees. At the same time, he will be flexible in changing the assortment of his store whenever he wants. Instead of buying the goods from different distributors or dealers, he can find everything under one roof. The only disadvantage is he won’t get anything for credit. But the other benefits provided by the cash and carry completely screen the credit period demerit. Some of the cash and carry stores are also providing some credit, if a customer buys goods for a very large amount.

In India, this cash and carry model already created some changes. Let’s see the other changes in the coming days.

Downgrading "Causes and Consequences"

ALARM FOR THE INDIAN ECONOMY. Just a week before India overtook Japan in GDP in PPP (Purchasing Power Parity) and became the third largest economy after US and China. Before two years India was one of the fastest growing economy after China. India's GDP is growing at the rate of 9.1%. But, what happened to the current scenario. India's GDP growth reduced drastically and now it's growing at the rate of 6.1%. There are various factors are responsible for this like inflation, tight monetary policy etc.., 

Now, a new threat has come. The treat is from S&P (Standard & Poor). S&P is the credit rating agency in US. They warned India that they would downgrade the credit rating of India from STABLE to NEGATIVE (BBB-). This is the worst credit rating. This won't happen now. If India doesn't take any step to improve its growth by controlling the inflation and make certain changes in economic policies of India, after two years India will be in a great trouble. If we see the Index of Industrial Production (IIP) in February, it was forecasted to 6.1%. But, it was only 4.1%. Indian government should also have to take a look into it.

What will happen if S&P downgrade the India's credit rating? What are the causes and consequences? The first thing happens is it will create a cataclysm in FII (Foreign Institutional Investors). The foreign investors invested billions of dollars in Indian market. If this downgrading happens, the investors will pull back their money from the Indian market. Actually the downgrading indicates that the risk of India repaying the loan is high. This will create some sense of fear among the investors. This will further affect the Indian economy.

Suppose if we take US, every year they have allocated certain amount of money to invest in other countries through FII. If they allocated 25% of money to invest in South Asian countries, in India they will invest approximately around 4%. Because of this downgrading, this percentage will get reduced from 4% to 2% or 1%. This is only from US. Not only US investing in India. Other countries like China, Japan, and European nations are also investing in India. This creates a huge set back in infrastructure, technology, real estate and etc.., development in India.

Another major issue is the depreciation of India rupee against US dollar. Before two day it was around 52.17 rupees equivalent to 1$. If this downgrading happens, rupee will depreciate further. This will affect the importers of India. But, it is good for the exporters.

This downgrading will create a domino effect. Indian government has to take necessary actions to reduce the impact of the effect and boost the growth of the economy. Otherwise, it will create a chaos and it further suppresses the development of the Indian economy.

Supply Chain - "DevelopED Nations VS DevelopING Nations"

Is there any difference between supply chain between the developed nation like USA and developing nation like India? Of-course, there are lots of differences. The differences are in terms of flexibility, speed, innovation, the way the supply chain is designed etc..,

The major difference between the two economies is the GROWTH. India is growing in a faster rate when compared to USA. The GDP growth rate of India is 6.1% YoY. In case of USA is only 1.6% YoY. But the real GDP of USA is US$14.5 trillion and India is only US$1.73 trillion. USA market is almost reached the saturation point. Per capita income of USA is greater than India. Here, we can see the contradictory things. They are high per capita income versus slow growth rate and low per capita income versus high growth rate. So, obviously the supply chain approach is different for these two nations USA and India.  Source: http://www.tradingeconomics.com/

In case of USA, if the company wants to make money or to increase the margin, reducing the price of the product or cost cutting in the supply chain doesn't make any sense. The customers in the developed economies always seek for some innovative products that make some difference in the way they are living. Their main concern is no money. Their main concern is about the availability of brand new product. So, the supply chain in the developed nations should be agile enough to meet the demand of the customers. The supply chain should be efficient. 

Suppose, let’s take an example a brand new tablet enters the market. Customers want that tablet and the demand is so high for the tablet. At that time, if the company things of reducing the cost in supply chain, it will lead failure in meeting the demand. The company should think of how fast I can provide my new product to the customers. The customers are also willing to pay a premium for the new product. The only way for the company to make money is by charging more money to the customers by increasing their margin in case the demand is not high. But, in the above case of tablet, the demand is high and also the people are willing to pay a premium. The company will be beneficial if they increase the price and it ultimately leads to increase in the bottom line.

In case of India, the majority of the population always looks for a low cost product. The challenge for the companies in India is how they are going to provide products at low cost. Economies of scale play an important role. Apart from it, the other way of reducing the cost is by supply chain activities i.e., starting from the procurement of raw materials, logistics and distribution channels. In contrary to the developed nations, the bottom line can be increased not by increasing the price but by increasing the quantity of goods sold in developing nations.

Another important challenge the developing nations facing is predicting the demand. In case of developed nations, they don't have much difficulty in predicting the demand when compared to the developing nations. There are various reasons behind it. The most important thing is developed nations are technologically advanced. Everything is computerised and each and every activity that is happening in nook and corner of the supply chain are electronically recorded. They have inch by inch information about the business. In case of developing nations, nevertheless the technology is in developing stage.

Another important reason for the efficient supply chain in the developed countries is their transportation facilities. They have well laid roads, railways and frequent air transport. Developing nations are still lagging in it. 

All About Cloud Computing

'INNOVATION FROM THE GRASS ROOT LEVEL'- We are in the era which is transforming from real to virtual. Now, the emerging technology in IT is "Cloud Computing". It opened the way for the virtual space in the technology. The current market size of cloud computing is approximately US$ 40 billion. The future is like the rocket propelling by tearing the clouds against the gravity, the growth curve of cloud computing showing a tremendous upward movement against the current pandemonium in the world economy. By 2020, the size of the cloud computing is around US$ 240 billion.

What is "Cloud Computing"? Most of us know about this emerging technology. A simple example of cloud computing is GMail or hot mail or yahoo mail that we are logging in everyday by having a user name and password. We are accessing our e-mail account and also storing our information in the virtual space. Other examples are, accessing MS office, MS Excel in the online.

Accessing a product which is stored in the cloud and utilizing the services provided by the product through online is cloud computing. 

This cloud computing is very much helpful for the companies which need some sophisticated software. Most of the sophisticated software's prices are high. Some of the companies can't afford it. This cloud computing helps  those companies accessing those software at less cost.

If we want to see the cloud computing in a larger perspective, lets take an example a mechanical Pro-E software cost around 2.5 lakhs per license. For a company which is manufacturing sheet metal components having a very large design team of 20 design engineers. Even though they can afford 50 lakhs per annum for 20 licenses, it seems to be too costly. Suppose if that company goes for cloud computing, they can reduce their cost. There is a great future future for cloud computing.

Some of the companies providing cloud computing are IBM, Amazon, Microsoft, Apple(icloud)......

"Every coin has two sides and every gun has its own tune".

Another major issue with this cloud computing is SECURITY ISSUE. There may be a chance for the companies data hacked by others. This will put that company in greater risk. Suppose if any bank using this cloud computing, what will happen if someone access the data. This not only put the company into risk but also the customers of the company.

If the companies providing cloud computing service having a strong security, then cloud computing will grow in a much faster rate than it's growing now.

Every product and technology has its own life cycle. Cloud computing is in GROWING stage. It will MATURE and it will DIE.

Then??????? Seek for an another advanced technology!@#$%^&*()_+ 

Impact of crisis in US and Euro in our "Mother Land"

What should I call? FATE or REALITY. Why it's happening? Some of the experts are saying market condition is not good. There is a complete pandemonium in the market space. I'm in a dilemma whether to believe it or not. The experts are not God. They are also just human beings like us.

I read an article today regarding "Impact of US and EURO crisis in India". Before reading the article I asked myself WHAT IS IN IT FOR ME? The reply that I received from my mind was "NOTHING". But something that prevented me to keep the magazine again in the rack without reading. That is "PLACEMENT". So, I read it.

I found something interesting. I just want to share those things.

Reasons for the US crisis:

US crisis was because of sub prime loans and credit default swap. Because of these, bankruptcy happened. The banks could not recover those sub prime loans and also they could not pay the compensation to the institution or any organisation who bought the credit default swap. Everyone knows the bank "Lehmann Brothers". It got bankrupted.

The hot news in the last month was "US degraded in their credit rating from AAA to AA+ by Standard's and Poor". It created a shock wave around the world. It showed that the risk in US securities and bonds increased. The impact of this degrade in credit rating in India is, US debt to India is US$ 41 billion. India occupies 7th. China ranks 1st. US debt to china is US$ 1.4 trillion. US total debt is US$15 trillion. The degrade in the credit rating shows that the risk in repaying the debt by US. This will have great impact in China as well as in India.

EURO crisis is because of sovereign debt. The European countries like Greece, Portugal and Spain are under pressure due to the sovereign debt. The failure of the bonds. Those countries are in a critical situation to manage the sovereign debt. The sovereign debt of Greece is about 130% of its GDP. So, pathetic. Now, the Greece government is taking necessary steps to come of the great financial depression. They are cutting the government jobs and government expenses. The unemployment rate in the government sector in Greece increased. That's big storyyyyyyyyyyyyyyyyyyy

Though some of our politicians and other economics experts saying that Indian economy is operating based on the domestic consumption. These crisis don't have much impact on India. India is also having enough liquidity to manage if something happens.

But in reality, India mostly depend on US and EUROPEAN countries in term of exports. Due to the crisis in those eastern countries, their consumption and spending is decreasing. This will lead to the domino effect. Suppression in their GDP growth. This will affect the Indian exports especially IT. This will affect the Indian economy. The depreciation rupee to dollar also occurs. The status of rupee now is US$ 1= 49.37 INR. In the coming days it may reach 50 INR. This will affect our importers.

POSITIVE IMPACT OF THESE CRISIS:

There may be decrease in the value of crude oil. Folks, remember the crude oil price went up to US$ 200 per barrel. Now it's reducing. The reason for the decrease in crude oil price is because US and European countries consume more oil. If they are in crisis, obviously they will reduce the consumption of oil. So, they may be a chance in the reduction of fuel price. It may benefit INDIA.

There are many pros and cons are there due to the crisis in US and EUROPE. The impact in India depends on the weightage of those pros and cons.

"IF SOMEONE WANTS TO GET SOMETHING OUT OF NOTHING, IT'S VERY DIFFICULT TO RESIST". 

I think we can't change the above statement. We always want good result without doing anything. When it's going to change?

Note: There may be some variations in the above figures. I read those figures long back.