Episode 55

Arvind Fashions: Crafting the Future of Retail Supply Chains

Category :  Leadership Paradigms

Join us on a journey through the transformative world of retail with Arvind Fashions on the Counterpoint Podcast. Host Shubham Agarwal sits down with MD & CEO Shailesh Chaturvedi to explore their leap towards a more efficient, profitable supply chain. Learn about their strategy for optimizing inventory and enhancing gross margins. Listen now!

Shubham Agarwal : Hello and a very warm welcome to the Counterpoint Podcast. I am Shubham Agarwal and we are going to speak about Arvind Fashions today.

Arvind Fashions markets 27+ international and national brands in India. In this episode, we have with us Mr. Shailesh Chaturvedi, MD and CEO, Arvind Fashions. He talks about how they are transforming their end-to-end supply chain from fabric to store with the help of Vector Consulting Group to improve their gross margins and stock turns. So, let’s talk to him.

Hello Sir, welcome to the Counterpoint Podcast Sir, pleasure to have you here. So let’s begin our discussion.

Shubham Agarwal: You have a very enviable portfolio of market leading brands like US Polo, Arrow, Flying Machine, Tommy Hilfiger, Calvin Klein, etc,. Can you tell us something about the operations of the company?
Mr. Shailesh Chaturvedi : So we have multiple channels, almost 1200 stores, largely franchisee, and a couple of our own CoCo stores also. And we do very large business with our key partners be it department stores, be it online partners, lot of key retailers in cities. Typically we sell from our central warehouse to all the channels. And the way our industry works is that we book orders in advance through roadshows, collect the orders, then send it to the manufacturers through the sourcing team, produce them, and then launch the season in February for spring, summer and then August for Fall holiday.
Shubham Agarwal: The company is currently in the process of transitioning to Supply Chain 2.0. What has been the thinking behind it?
Mr. Shailesh Chaturvedi : See, let me start with two big broad philosophies that we really believe in and are trying to execute; one is on capital constraint theory; we believe for any company, capital should be treated as a scarce commodity. And we should always believe in good and bad times that capital is under constraint and it’s a scarce commodity. So, that’s one philosophy we work on. Second philosophy is the return on capital employed that anything we do must deliver a certain return for our shareholders. Now, if I take the sum total of these two philosophies, one on the capital constraint model and the other is on ROCE, then a big part of our life becomes how to manage inventory because inventory is where or let me say, unsold inventory, unsold inventory is where a large part in our industry the capital gets blocked, or the profitability of the business gets affected, and ROCE gets affected.
Shubham Agarwal: How did the way in which the company manage inventory change in line with this thought process?
Mr. Shailesh Chaturvedi : So you know, again, if you look at the problems are always the good style gets stocked out, and, you know, poor selling or poor sell-through garments, we always have excess, so it’s a between stockout and excess. So, what we did is that with the help of Vector, we looked at our inventory into different stream, fashion at one end and the Core at the other end, or what we call NOSS, Never-Out-Of-Stock styles. And we are making sure that it is available and making sure that it is a service without human intervention through the machine learnings. And Fashion is a different business where we’ve focused on improving the full price sell through designing a line closer to the market conditions will limbal adapt quickly responsiveness. So you know, the two buckets of the inventory behave differently. And our treatment should be different for each of these two buckets.
Shubham Agarwal: Can you elaborate on how Supply Chain 2.0 aligned with this approach?
Mr. Shailesh Chaturvedi : What Vector does, they have a software VectorFLOW, and there’s a very detailed working from stores to central warehouses to the garmenteers to the mills. And all the four pillars are very important from the store, what should be stocked there and where and how the visual merchandising and tracking of Core should be to the central warehouse should be the what should be the stock norms at the central warehouse. Where should the bin be in the warehouse for these Core products, the alignment of the warehouse, we work with DHL for their alignment on this, then going back to the garment makers, the factories which produce garments, alignment with them, how much stock will they keep, what kind of capacity they will dedicate it for us. And then the fourth pillar of the mill itself. Now here, we are moving away from holding inventory in the store and the warehouse back to the vendor. The vendor is going to hold capacity and inventory for us. So alignment is important; it takes time to get everybody aligned. So all four pillars, from store to warehouse, to garmenteers to mills, are all aligned; it’s taken us six months of a lot of hard work for the Vector team and our team. But together, we have sort of created that alignment. And we have seen green shoots have benefited from this alignment.
Shubham Agarwal: Can you elaborate of these benefits in the Core category, so far?
Mr. Shailesh Chaturvedi : We’ve seen good progress, and there’s a lot expected, even more, but what I’ve seen is that the contribute the availability has been more than 90%, which is good, which is a very good standard to work with. We have also seen because of this increase in availability, the sale of Core products have gone up now, seeing 17-18% contribution coming from Core, in some cases going even beyond 20%.

And there is a portion to even increase the share of Core through Vector project, we want to take it to a higher level. And the beauty is that the turns in this business tend to be higher than the company’s stock turn. And also, the GP tends to be higher because these are perennial; they shouldn’t be discounted. And if we are able to increase the share of the Core NOSS items, and get higher GP, then it really impacts the overall company’s profitability and the stock turns. And today we are moved from three plus stock turns to four plus in the last two years.

Shubham Agarwal: What is the difference between this approach of Vector and the Automatic Replenishment System or ARS implementation that was earlier carried out?
Mr. Shailesh Chaturvedi : Everybody has a good demand planning software, and VectorFLOW is a good software. Also, what I really liked is how the Vector team connected with our IT team to connect with our SAP system and our point of sale system, a lot of bottlenecks got cleared, and they did a better job than it was happening earlier. And there was a good working with our IT team to solve those problems. And we now have automatic linkages between our POS and our ERP system along with the VectorFlow. So, you know, Vector is a specialist so they use their specialists you know specialities to sort of solve for some of the problems.
Shubham Agarwal: What are the plans for revitalizing the fashion segment?
Mr. Shailesh Chaturvedi : See Fashion is the bigger piece than Core, and that’s where the unsold inventory is a bigger problem. So there, the objective would be to reduce discounting improve full price sell through, design the line closer to the market and be a little more adaptable to compress the lead times. And that’s a completely different piece altogether. And they’re making sure you know we are ready for the season. So, when we go to the roadshow, a lot of times time is spent by the Vector team on preparing well, so that everything is prepared well. And when we go to the roadshow, the level of our preparedness is much higher than what it used to be earlier. And hopefully, that will lead to getting the goods on time in the right quantity, not access, not short. And we will hopefully work in a method where the discounting comes down by increasing full price sell-through.
Shubham Agarwal: What has been the implementation experience with Vector?
Mr. Shailesh Chaturvedi : See, when we appointed Vector, we had looked at two good options, and both were very, very good. One was Vector, another company. And both were really good. I mean, we could have selected either one. But we chose in favour of Vector because we felt that the senior management of Vector was a little more hands-on, and we sort of somewhere mentally aligned a little better with them. So based on the strength of Vector on the people side, we chose Vector. And they’ve been very, very hands-on; we work with a lot of other consultants, management consultants who come give us very intelligent theories, but they don’t participate in execution. But here, we are very clear that we needed somebody to roll their sleeves and work with us, and make sure you know they deliver the promise and also participate in some gains. So it’s a very sort of win-win approach where both of us are working together. And their team is sitting in our office all the time. Very hands-on, very aligned. So that’s good. Also, conceptually, very, very clear that all parts be stored in a central warehouse, garment makers, as well as the fabric mills, everybody’s looked in aligned in this, and it’s a, I would say, once it’s done, well it should change the fortune of our organisation.

Thank you so much Shailesh sir for this wonderful discussion. It is wonderful to speak to you. For all our listeners we will keep coming back with more such episodes. Until then, Bye.


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