`A huge market such as India presents large retailers with an experiment field. Wal-Mart's entry will help develop middleware such as the retail systems.'

Vinson Kurian

Thiruvananthapuram, Jan. 11

Lack of facilities such as transportation and large space requirements coupled with a need to understand customer behaviour will come in the way of Wal-Mart's success in India. But the retail behemoth could act as change agent by creating new benchmarks for suppliers.

This was how Prof Amiya Chakravarty, Philip R. McDonald Chair Professor in Operations and Technology Management at North Eastern University, Boston, assessed the chances of the `Beast of Bentonville', as it readied to test the waters in India through a tie-up with the Bharti Group.

DESIGNING CHAIN

He was speaking at a two-day seminar on `Managing in the networked economy', organised here by the Asian School of Business (ASB). It attracted participation from professors from major US universities, as well as CEO/CIOs from Indian industry.

The objectives of a supply chain include low cost, differentiation and responsiveness. Designing a supply chain has to deal with trade offs between these three elements and that would determine the structure of the supply chain.

This would involve decisions on the number of tiers, the channel design, strategic locations, strategic suppliers and where to locate the inventory in the various stages of the supply chain. Here comes the importance of a market-driven supply chain.

According to Mr Salem Ganapathi, CEO of Logistics Plus, given the huge margins that neighbourhood corner stores commanded, Wal-Mart can resort to reduced prices through disintermediation.

RIGHT MODEL

Prof Ruby Roy Dholakia from the University of Rhode Island said that the model of retailing chosen by large corporate retailers, i.e. whether they will sell grocery, fresh produce, FMCG or private-label, would decide their success/failure in India.

Considering Wal-Mart's experience in the US and Germany, it would not be successful in selling fresh produce because of the lack of facilities in India. But its positioning as a foreign brand might add to its brand image.

Mr Jagannivasan, Founder Director of MatexNet, said that since large retailers could control quality at source, the local retailers might be left to make do with second-grade produce, which would force them to go back to their "Big Brothers".

Prof Nikilesh Dholakia, also of the University of Rhode Island, said that a huge market such as India definitely presented large retailers with an `experiment field'. Its entry into the country would help develop middleware such as the retail systems. This would, in turn, enhance the capabilities of other retailers as well.

The seminar discussed issues such as distributed value chains and how information and communication technologies are powering and shaping the networked economies.

(This article was published in the Business Line print edition dated January 12, 2007)
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