January 01, 2012

Best Practices at Flipkart

 Flipkart an electronic commerce company was established by Sachin Bansal and Binny Bansal in 2007 and now it is among India’s largest online retailers with reported sales of Rs 75 crore for year 2011-11. Sachin Bansal and Binny Bansal both are alumni of Indian Institute of Technology Delhi who started this company after quieting their jobs in Amazon.com with a vision To be one of the largest multi-category e-commerce destinations in India, with a strong focus on customer service.

Initially Flipkart started with selling books online and has since diversified into a generic e-commerce site, selling CDs/DVDs of music, movies, games and software, as well mobile phones and electronics. According to the co-founder Sachin Bansal, “We started with books because they are a comparatively easy category  products to sell online. They do not require huge inventory maintenance, are easier to negotiate  supplier  terms and profit margins are high.” Also since books are low value items, inducing  customer trial was easy. It  was a safe option to start off with books, given their appreciation in e-commerce the world over. Now Flipkart have about 11.5 million book titles, 11 different categories, more than 2 million registered users and sale of 30000 items a day which makes it India's answer to Amazon. All this was possible because of the major goal of the company is to provide a memorable online shopping experience to their customers so that they come back again and again using innovative services like Cash on Delivery, a 30-day replacement policy, EMI options, free shipping , discounted price and very importantly on time delivery of the products.
Mr. Sachin Bansal

The role of logistics in the successful functioning of an e-commerce venture is indispensable. All these innovative services will be ineffective if the products do not reach the customers on time. Here are some Best Practices of the Supply Chain of Flipkart:
Building the Suppliers base- The Company has established a network of more than 500 distributors and only stocks frequently ordered items. Items like the 'Long tail' are almost always sourced from suppliers in real time and as and when the customer places an order.
Building Infrastructure for Operations- The Company has 4 offices in 4 metros cities with more than 500 employees. Warehouses of the company are located in 7 cities including the metros. Company has tie-ups with more than 15 courier companies like Blue Dart, First Flight etc. to deliver their products and Indian post for areas where courier do not reach.
The Process of Supply Chain- The first step in buying the products like books online from the Filpkart.com site by making payments using payments options like credit/debit card, cash-on-delivery, net banking, cheque/DD and money order and enter the phone number and address where the items need to be delivered.
Depending on items purchased they are packed and shipped accordingly for example mobile phones and books are packed differently as per requirement and also all items have transit insurance against theft and damages that may be caused while they are in transit. Flipkart bears the cost of delivery and this make them give a reason/motivator for improving efficiency at every point of supply chain. This also makes them differentiate from their competitors.
Now for delivering the items depending upon the area where the item need to be delivered either courier, Indian post or own internal logistics arm is used. The delivery time varies between less than 24 hours and 3 weeks depending on the location and availability of the product like the products which are imported take 3 weeks time to get delivered to the customers.
The inter-city, trans-zone deliveries are made using air cargo. For satellite cities and others in close proximity, products are transported overnight by train or truck.
For the local parts of the cities where the warehouses of the company exist products are delivered using two-wheelers, bicycles, or on foot depending upon the proximity of the place and because of this many of the deliveries are made within a day of the order being made. All the Team Members have been trained to work efficiently to meet customer expectations.
Use of Information system: The Company use sales to predict the inventory levels. The warehouses are split into multiple areas — inventory, packing, shipping and so on. The stocks are replenished every 24-48 hours. In the Back End, Flipkart stores details of all the transactions that need to be carried out. They have an understanding with their associates for order tracking, reconciliation and MIS (Management Information Systems) reports. The private courier companies in turn have their own ways of tracking every package. The customer is also updated about the status of his shipment via message, email or through the website.
When the product needs to be returned then due to the companies understanding with the courier companies it happens without any disputes or problems efficiently. “Flipkart takes care of the after-sales needs of its customers with regard to delivery of an item or addressing grievances including delayed delivery by the logistics partner, or addressing issues when an incorrect product is delivered. In the case of electronics, warranty and after-sales service is largely the responsibility of the manufacturer. Flipkart does however facilitate interaction between the customer and manufacturer/service center as and when the need arises.”[1]
Future for E-Commerce: India has 11 million online customers now which will increase to 30 million by 2015 which shows that the e-commerce industry with the increased internet penetration will be the service sector's growth engine in India. The industry's size is expected to increase to $11.8 b. Among the challenges faced by the industry is its dependency on the service providers like suppliers, logistics service providers, etc. whose service in not up to the expectation and are affecting the service of the online companies. To solve this issue efforts are to be made to educate these service providers the importance of using technology and provide them incentives to use these technology and shift their focus on to the customers. Seeing the prospects of growth a lot of new online retailers have come up and there is a price war going on to attract more and more customers which is putting pressure on the profitability of the companies so it has become extremely important to manage cost to increase profits which is only possible by building an efficient backend- a nationwide delivery network, warehouses , inventory management , logistics, efficient teams to manage all this therefore supply chain management becomes an important factor on which companies depend to sustain in this industry. Flipkart obtained funding from Tiger global management in 2010 which is being utilized by the company for strengthening supply chain capacity and upgrading technology platforms, including automation at warehouses.
[4] Articles from Economic Times
Vishal Singh is a PGP student of Indian Institute of Management Raipur. He has done his B.Tech in Chemical Engineering from BITS-Pilani, Pilani (Rajasthan) and can be reached at pgp11047.vishal@iimraipur.ac.in or at +91-7587208647.

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