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Swift Service: Retail majors leverage telecom to streamline their supply chain

October 14, 2013
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The Indian retail sector has witnessed significant activity in the past year. Taking a big step, the government has approved 51 per cent foreign direct investment (FDI) in multi-brand retail. It has also raised the FDI limit to 100 per cent in single-brand retail as well as allowed cash-and-carry (wholesale) trading and exports.

Although Indian retail firms expect the move to provide an impetus to the sector, overseas retail majors objected to the suggestion that at least 30 per cent of merchandise would have to be sourced from domestic micro and small enterprises. The government has stated that the 30 per cent requirement could be met over a period of five years initially but will have to be met on an annual basis thereafter. It has also clarified that unlike the previous policy, under which half of the entire investment by foreign players had to be made in building back-end infrastructure, global chains would only have to invest 50 per cent of the “initial” mandatory investment of $100 million in setting up cold storages and warehouses.

Following this, global retail majors like Wal-Mart and IKEA have lined up to enter the segment. The Cabinet Committee on Economic Affairs has allowed IKEA to enter the Indian market and establish a single-brand retail venture in the country. In this case, the FDI is expected to be $1.76 billion, making it by far the largest investment by a foreign brand in the Indian retail sector.

Currently valued at over $500 billion and with an annual growth rate of about 20 per cent, the Indian retail industry has emerged as an investment destination for domestic and overseas players alike. According to Deloitte, the sector witnessed a growth of 10.6 per cent between 2010 and 2012, and is expected to be valued at $750 billion-$850 billion by 2015.

Moreover, in the past two years, online retail has emerged as a viable business option. This segment is projected to be valued at $76 billion by 2021, accounting for over 5 per cent of the Indian retail industry, according to a report by advisory services firm Technopak.

The Indian retail sector is expected to gain momentum over the next five years. According to a report by Booz & Company and the Retailers Association of India, the sector will witness 9 per cent growth till 2016, with organised retail growing at 24 per cent or three times the growth rate witnessed by the traditional retail segment (which is expected to grow at 8 per cent).

To tap the business opportunities associated with this growth, retail majors are looking to deploy a multi-tiered, flexible telecom infrastructure that facilitates streamlined connectivity across the organisation as well as its retail and distribution chain.

A wireless local area network (LAN) typically forms the backbone of a retail company’s communications infrastructure. This medium is deployed to support specific and innovative applications, with a focus on either improving existing processes or adding new ones. In a retail set-up, LAN primarily supports standard desktop applications such as email, web browsing, file server access, and other conventional enterprise applications.

Wireless LAN is also used by retail firms to establish fully mobile point-of-sale stations. A mobile point-of-sale station comprises handheld computers, scanners and printers, with integrated credit card readers. A wireless LAN infrastructure connects the mobile point-of-sale station to the company’s back-end systems.

Wireless technology also helps these companies in inventory management. For instance, in a company’s shipping and receiving area, wireless connectivity mediums are deployed in the form of hand-held barcode scanners and entry terminals, which are linked to back-end systems through wireless LAN. Many retailers currently use the direct exchange or a uniform communication standard to allow delivery personnel to directly input invoices into a store’s accounting system, simplifying billing and accounting.

In addition, standard technologies and IT tools such as leased lines, VSATs, MPLS, ISDN lines, Wi-Fi and radio frequency (RF) are used. Leased lines help the company deal with heavy network traffic, apart from  providing an “always-on” connection between the two end points with higher bandwidth vis-à-vis plain old telephone lines or ISDN connections.

Similarly, VSATs help in remote connectivity and support tools such as email, internet access, voicemail, videoconferencing and real-time video inspection.

Interestingly, the use of data centres is higher in this vertical as compared to

others. Data centres perform functions like ensuring server uptime, data recovery and backup, storage management, hardware and network operations, and providing end-user support.

tele.net surveyed various companies in the retail sector to assess their telecom requirements and solutions. The following questions were asked in the survey:

What are the organisation’s key technology requirements?

What mix of service providers and vendors is used?

What are the biggest concerns with respect to the telecom infrastructure?

What are some of the mobility and enterprise applications implemented by the organisation?

Which network security tools are used?

Which redundancy tools are being used?

Which new product or service is of relevance for the company?

Key technology requirements

According to the respondents, the key technology requirements of companies are deploying reliable, scalable and low-cost telecom solutions that have a short turnaround time. Adopting technologies that enable mobility and the “work any time, anywhere” concept, establishing a multi-channel communications platform, and deploying unified contact centres and social networking tools are also important.

With these targets, retail majors have deployed a multi-tiered communications infrastructure. Such a set-up typically comprises virtual private networks (VPNs), leased lines, email, network switches, structured cabling, the internet, MPLS, transmission control protocol/IP (TCP/IP), VSAT and synchronous transport module (STM) technology. For last mile connectivity, wireless technologies such as optic fibre cable (OFC), RF and Wi-Fi have been deployed by most respondents.

Companies with a pan-Indian sales and distribution network have deployed simple tools as part of their LAN within the headquarters. A more complex network is used for interoffice connectivity and for connectivity between the company’s headquarters and retail outlets.

For example, Lemon Mobiles has a 2 Mbps leased line network, sourced from Bharti Airtel, at its corporate office. To connect its over 500 distributors and 25,000 retailers, the handset manufacturer uses the enterprise resource planning (ERP) application. According to the respondent, ERP has been deployed for stock transfer, which helps officials track finances, deliveries and sales invoices. Similarly, an ERP system is being used for its over 350 service centres, which allows employees to place orders for spare parts and track consignments, while distributors can monitor various transactions in their area.

Besides ERP, Unique Infoways has opted for an OFC-based network and RF at its corporate office. The ERP system is used for all functions pertaining to stock transfer, billing, accounts, customer details, etc. The network has a hub-and-spoke structure, which means that all the main servers are located at a central office, to which all the outlets are connected. Most of the company’s outlets use RF, OFC and VPN to connect to the headquarters. An OFC network is primarily used by employees at various locations to access financial, sales and customer-centric information. Some locations also use point-to-point leased line connectivity, depending on the number of users. In this case, the leased line acts as a “pipe” to connect to the main office.

Telecom major Sistema Shyam TeleServices Limited (SSTL) uses VPNs, access lines, high speed internet and STM technology at its headquarters and for inter-office connectivity. All its 300 offices are connected through a wide area network. The company’s circle and head offices are connected through high speed internet, while its data centres in Noida and Chennai are connected via STM technology. Both data centres are ISO 27001 certified. Meanwhile, SSTL’s retail outlets are interconnected through a VPN, which connects to the operator’s central system via over 20,000 secured access lines.

For connectivity, The Mobile Store has opted for a single technology at each location. For example, all retail stores have availability-based broadband and/or internet connectivity. “We select the best broadband package available in a particular service area, based on our requirement,” says the spokesperson. In addition, for connectivity between the headquarters and retail stores, the company has deployed a secure VPN link over the internet. To connect its outlets, the firm has deployed various applications and uses email as the primary connectivity medium. To connect the data centre to its head office (hub connectivity), it has deployed MPLS technology.

Britannia Industries Limited has opted for a single technology – MPLS – to connect its 120 remote offices. The company has partnered with several vendors including Reliance Communications (RCOM), Tulip Telecom and Vodafone India for supplying MPLS links.

Retail majors Bangs Hospitality and Saholic also have a relatively simple

set-up. For LAN, Bangs Hospitality uses Wi-Fi, TCP/IP technology, the internet, networking switches and structured cabling. It has a 4 Mbps internet connection provided by Bharti Airtel. Saholic uses broadband connectivity coupled with high speed data cards, leased lines and Wi-Fi connectivity for last mile access.

Apart from telecom tools, retail majors are using a number of IT applications and platforms. For instance, SSTL has deployed network control centres and security control platforms. The operator has also set up an internal messaging interface, which is used at its corporate and circle offices to encourage the exchange of ideas.

Idea Cellular has deployed a customer relationship management (CRM) tool and a knowledge portal. The CRM tool provides a centralised view of customers’ usage pattern. This empowers the company’s front-end agents based at its service centres to cater to customer requirements.

The telecom operator’s knowledge portal has been designed for all front-end staff at service centres and provides them information for better customer servicing. The portal has functionalities such as identifying the best plan for customers, advanced search functionalities, and an e-learning module that keeps the front-end staff informed about latest and online updates on cell site failure.

Saholic is developing various internal applications on the Python and Java platforms, while Bangs Hospitality has deployed the Raymedi and Wondershop epaid software platforms.

Most of the retail companies surveyed have established a data centre as part of their communications infrastructure. For example, Lemon Mobiles’ data centre is used to save all data related to ERP, mail, servers and the EMI number of all products sold, both secondary and tertiary. Its capacity is 500 TB and is connected to the rest of the set-up through leased lines.

Service providers and vendors

Retail companies mostly use a mix of operators and IT vendors to meet their communication requirements. These include Bharti Airtel, RCOM, Tulip Telecom, Vodafone India, TATA DOCOMO, Check Point Software Technologies, Cisco, Hewlett-Packard, Tata Teleservices Limited, Bharat Sanchar Nigam Limited, SAP, Tata Communications and Sitronics.

Key issues and concerns

Network security and support, extending the network to remote locations, ensuring adequate uptime and keeping pace with technology advancements are some of the key issues faced by retail companies. For example, as per the respondent from The Mobile Store, since the company’s communications network is large and distributed, it has deployed the services of multiple operators. While providing network support is a primary concern, ensuring network security is also a major challenge.

Mobile and enterprise applications

Multiple enterprise applications are being used by the surveyed companies. While email is the most common application, web hosting, audio- and videoconferencing solutions, and instant messaging are also being used. Audio- and videoconferencing are economical means of communication and help in tracking day-to-day activities in an easy and secure manner.

Retail majors have also been deploying multiple mobility applications. These include mobile email, mobile data connectivity, push alerts, conferencing, corporate intranet, sales force automation, field force management and mobile access to CRM and supply chain management. Lemon Mobiles has provided its sales force, and area and sales managers mobile handsets and laptops.

Network security

Securing the communications network is a priority for most retail majors. The most commonly used platforms include firewalls, built-in server security, antivirus packages, password protection, Linux (Ubuntu)-based systems and intrusion prevention systems.


Network redundancy

Most companies use RF links, leased lines, automatic switch-over systems, parallel redundancy systems, etc., for network redundancy. For example, Unique Infoways uses a parallel 2 Mbps leased line link sourced from Bharti Airtel, in case the primary leased line link fails. The network is configured in a way that when the primary system fails, it automatically switches over to the other leased line link. Even if the outage is a long one, the company’s operations remain unaffected, as data is be stored in the system through the redundant link. Once the network is fully functional again, the inventory is automatically updated on the system.

The way forward

Most retail majors have plans with regard to their communications infrastructure. The Mobile Store is currently finalising pan-Indian MPLS connectivity for its store network. According to the respondent, this is expected to facilitate consolidation of services and increase the network’s security. The company also plans to roll out a VPN-based access network for each of its stores.

Online retail major Nino Bambino plans to upgrade its existing warehouse management system to one that facilitates improved reporting and supports MIS. “The basic idea is to implement an integrated platform that functions as a system-to-customer-to-stock point. We plan to implement this in the next three to six months,” says the respondent.

Bangs Hospitality would implement the Windows 2008 server and deploy firewalls and Cisco routers by using VPN tunnelling. Saholic is looking to implement more mobility applications. It plans to provide each of its employees a 3G dongle or data card to streamline connectivity while on the move.

SSTL is undertaking research on structured data as part of the traditional business intelligence system. It is also working towards enhancing its data analytics to “big data” in order to analyse both structured and unstructured data. The company plans to adopt concepts like bring-your-own-device.

Therefore, recognising the potential of telecom as a strategic business tool, retail majors have earmarked a large part of their budgets for deployment of  the latest telecom and IT tools.

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