The Bentonville-based retail giant Wal-Mart has finalised the business model for its cash & carry (wholesale) business in India.
The first warehouse (distribution centre), which will be up and running in Ludhiana, Punjab, by this June, will have a format similar to Wal-Mart models in the US. However, the product profile will be different from the US stores.
Wal-Mart’s cash & carry business, which is a 50:50 joint venture with the New Delhi-based Bharti group, is meant for large institutional or wholesale buyers and is not for retail sales. German retailing major Metro was the first international giant to set up cash & carry stores in India.
Ted P Huffman, director of supply chain and logistics for Bharti Wal-Mart, said, “The distribution centre will be similar to Wal-Mart centres in the US, but it will be smaller.” While centres in the US are spread over 1 million sq ft —two football fields put together—the Indian centre will have a size of 80,000 sq ft. He says high real estate costs are the reason for smaller distribution centres.
“We will be stocking grocery items and will not have items like toys and medical supplies, which we do in the US,” Huffman said.
Under the terms of the joint venture, Bharti will use Wal-Mart's back-end supply chain technology to sell to wholesale retailers. This includes the inventory system, logistics technology, cold chain infrastructure, truck tracking programmes and fuel management.
In terms of back-end technology, the Indian centre will be similar to the US units, where goods are placed on a conveyor belt and a barcode reader dispatches them to the relevant store’s warehouse. “In the US, we use radio-frequency identification (RFID) technology for high-value products, but in India we will use the bar-coding system,” Huffman added.
According to sources in the know, Bharti Wal-Mart had made plans for rolling out the technology for the distribution centre by the end of 2008 and Wal-Mart CEO Lee Scott had personally asked for the Indian operations to up and running by the end of the next quarter.
Further, the company is studying other locations across India to set up distribution centres. The Ludhiana centre will have 30-50 employees to sort goods for dispatch to different stores in North India.