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.

Business Activity Mapping - Requirement Identification and Vendor Management

Steps involve requirement identification and dealing with a vendor:

Step 1:

The customer places the purchase order for the number of units of product they need i.e., the finished goods.

Step 2:

The Engineering department receives the purchase order and it will check the availability of finished goods. If the finished goods are there, they supply the finished goods to the customers. Then, the freezing of design and preparation of BOM will take place. If not, go to step 3

Step 3:

The Engineering department prepares a Bill of materials. They send the BOM to the purchase department. The Engineering department requires the raw materials for the production of finished goods.

Step 4:

The purchase department checks the BOM with the stocks of raw materials

Step 5:

If the materials mentioned in BOM are available in the material storage department, they send the materials to the manufacturing department for manufacturing. Then, after manufacturing the finished goods stored in warehouse and then transported to the customers.  If not, go to step 6

Step 6:

List down the items need to be purchased and send the list of items to be purchased to the purchase department. Then, the purchase department sends the purchase order to the vendor.

Step 7:

The vendor supplies the ordered materials.

Step 8:

Before the materials get stored in the materials storage department, the inspection of materials will be done. This is to check whether all the materials are within the specification limit or not.

Step 9:  

If all the materials are within the specification limit then the materials are accepted and moved to material storage department. Then go to steps 5 and 11. If not go to step 10

Step 10:

Materials which are non-conforming and falling outside the specification limit are rejected. Suddenly intimation should be given to the vendor about the non-conformity of materials. After sending the non-conformity, the rejected lots should be sending back to the vendor. But, some of the materials are within specification limit. They follow step 7

Step 11:

The vendor sends the replacement lots. Then go to step 7

Step 12:

After the materials get stored in the material storage department, good receipt note will be prepared and it sent to the vendor and the finance department. Then, finance department sends the process payment to the vendor.