World Class ‘Petty Shop’ Supply Chain

Do you know Mrs. Lakshmi from Bangalore? Probably not! She is a petty shop owner at HSR Layout, Bangalore. I’m a regular customer at her shop. Do you know the shop’s Customer Service Level? – it is consistently 100% for past 5 Years. Never my favorite Ginger Tea and the Biscuits were out of stock in past years. Let’s see the Petty Shop’s Supply Chain nuances and secrets of success.

Note: The chat happened in local language and in local terms – those are changed a bit in the article to a relevant supply chain or business terms.

The Petty Shop:

Mrs. Lakshmi’s petty shop is a total of around 20 Square feet. The petty shop serves a total of 60+ SKUs and all stocked neat and clean. Each SKUs has a clearly defined area and a right sized container; ‘People who come here, will come in a specific time and in a group; only by having a neat set up I can service all of them quickly’ she said.

Supply Chain Techniques / Concept:

• Place for everything and Everything in its place – a key concept part of 5S
• SKUs Binning, Labelling and right size – Concepting (Slotting) and Parts traceability through LMS, two key functionalities part of WMS.
• More important one, the entire infra is built keeping the Customer Requirement as base. Value Steam Mapping have to be built starting from the Customer – Golden Rule while setting up things is being followed perfectly at the petty shop.

I asked her how she doesn’t have any stock outs? How she was able to manage this in a small area? She said “Initially I struggled a lot but gradually I learnt and understood what will sell, when and how much. Accordingly, I will plan my stocks. I work with a total of 5 different vendors and each vendor has to be notified by ‘x’ days in advance. Accordingly, I have marked on the product levels (she showed the marking on boxes, wood etc.) when I have to call them for the product. Just by looking around, I can tell which product is needed. If any delays from vendor side, I will start rigorous follow ups and also, I will ensure they don’t delay again. As years goes by, now myself and also the vendors know how frequently they have to visit my shop and with what products”.

Supply Chain Techniques / Concept:

• Well defined CDP Customer Demand Planning and seamless integration of demand data up the supply chain.
• How well ‘Up the Supply Chain’ (Supply) is set up, isn’t it? Clear understanding of lead times and ‘Min Max’ Inventory Management set up at the shop help her manage this.
• Without even knowing, she is actually following the best of vendor management practices – Vendor KPIs, Expediting, Delivery Schedules etc.
• Also, the petty shop uses one of the key concept of Lean – Visual Controls and Indicators.

Yet another amazing skill of Mrs. Lakshmi is – she knows the product costing by heart for each SKU, she can tell for each product sold how much she gets. Actually, she uses that info for any new vendor new product negotiation. Normally, money box in a shop would be one but Lakshmi has two; I asked why? She explained “As I sell products, I keep the profit in a box and the other box will have money which I have to use for replenishing “.

Financial Best Practices:

Indirectly, the petty shop is following all the best financial practices – Cash Flow Management, Pricing Strategy, Product Margins, Profitability and much more. Is there a better way to manage ‘Cash Flow’? I’m really amazed. It actually reminded me of one recent instance:

“While writing a business plan for a startup, I asked a new age entrepreneur “What is the plan for Cash Flow”? The answer was “VC Funding”. I leave it there without explaining much on the current quality of startup eco system.”

In the Petty Shop, 4 different flavors of tea/milk along with 3 types of Vada is served in the evening time. Mrs. Lakshmi adds the flavors only at the end before serving or serve plain as needed by customer (SCM Concept: Product Postponement).

Since most of the customers are from nearby offices and working people, Vada is served only on the week days and not on holidays and she perfectly plans it; Vada is served hot every time and I have never seen any wastage (SCM Concept: Planning for Seasonality / Demand Fluctuation).

At the Petty Shop, there are products like Candy, Cigar, Biscuits which are stocked (SCM Concept: MTS Made To Stock), New Stocks always goes back in shelf (SCM Concept: FIFO / Expiry Management), Green Tea which is made there if asked (SCM Concept: Made to Order), Vada arrives at Shop only at the right time when it will be sold (SCM Concept: JIT Just In Time).

The chat ended with the last question,

“Do you know about Technology? She asked ‘En’athu? (Meaning: What is that?) This Petty Shop doesn’t even have a trace of Tech but exhibits key SCM Concepts and World class process controls implemented in the simplest way which ‘Breaks-even’ for the petty shop.”

This Petty Shop exhibits a lot of business best practices and clearly stood as a great example.

“With clear vision and skills on effectively managing Customers, Vendors, Products and Cash Flow, Mrs. Lakshmi is truly an ‘Entrepreneur’ and an Inspiration to me.”

As a result of these due diligence and engagement, Petty Shop maintains a consistent healthy P&L past year and makes a Monthly Profit of around INR 35K even on leaner months.