November 24, 2012

LAST MILE DELIVERY –INDIAN CONTEXT

What is common amongst  P&G, HUL, Dominos, EBAY, Flip kart, & our local newspaper delivery person?

It is the constant struggle and innovation that they have to do in order to ensure an efficient last mile delivery of their product at the customer’s doorstep. For any company it is very important to deliver its product economically, timely, reliably and efficiently to maintain an edge in the market. But distribution in India is not an easy job. The geographical diversity, inconsistent infrastructure and low at par transport facilities form major challenges for a company to plan its distribution network. Moreover there is a multi-layered distribution system in India comprising of number of middlemen which increase the cost as well as time of delivery.
Another problem is that there are a large number of fragmented and unorganized shops all around the country which add up to the complexities of the distribution network. Also due to the lack of proper communication system, the companies are unable to keep a proper track of stock movement which many times leads to unavailability of the product when the customers require it.
The TV channels have to rely on a number of cable operators around the country, the pharmaceutical companies have to rely on large number of stockist's, semi stockist’s retailers and distributors to avoid the non availability of the medicine which is critical in this industry. During a recent analysts call, Apple's Tim Cook cited India's multi-layered distribution as the main reason for his company's small share of the market. The delivery of fresh vegetables to the market depends heavily  on the middlemen in mandis and any delay in the transportation leads to a whole lot of wastage.

Recently a report by research firm McKinsey & Company said that the Indian demographic will go through significant changes which would drive unique supply chain complexities. Research by McKinsey Global Institute suggests that by 2030, there will be 68 cities, each with population greater than one million (up from 42 cities in 2008). This is nearly 60 per cent growth over two decades. Cities will cater to a significantly large population. By 2030, around 590 million people will live in Indian cities, and around 200 million rural Indian living in the proximity of cities will depend on cities for growth. By 2030, the per capita disposable income in urban India is expected to grow four-fold. Around 100 million households will move up to the middle class. This is based on annual income between Rs. 2 lakh and Rs. 10 lakh.
The above report points to the growing demand and huge untapped market in India which is a major opportunity for the companies but this also means a bigger challenge in coming up with innovative supply chain solutions for the increasing distribution complexities. Mckinsey suggested that the companies should focus on channel innovation, consumer differentiation, volatility, near shoring and talent scarcity. Also one can learn from how Tupperware has carefully used the agents and women social groups to directly reach the customers. Another strategy that companies can look for is associating with the existing distribution channel as P&G did when it entered the Indian market by associating with the Godrej. Complex products or services may require setting up a complete channel including systems integration as Husk Power Systems used a “micro-franchising model” to supply equipment and training to local entrepreneurs to set up and operate village power-systems in India.
One of the most interesting innovations in the area of the last mile delivery is the impeccable delivery system of the Mumbai Dabbawallas. The Mumbai dabbawalla with six sigma certificate have been delivering around 200000 lunches daily without any error for a long time. The secret behind their efficient and robust system lies in the use of the existing train network and cycles.

Third-party logistics providers have a significant role in optimising the supply chain performance and costs where standalone supply chains cannot be economical and fruitful partnerships cannot be created. Services like logistics, delivery & payment collections and referral services, which are often complementary to online transactions, have become crucial for the e-commerce industry as portals jostle for more clicks in a crowded space. For instance, when 22-year old Aadhar Aggarwal opened an online grocery store, he realised that it was the logistics part of the business that was becoming a challenge. This led him to start Chottu.in, a last mile logistics firm that specialises in delivering the product at the customer's doorstep. Cash-on-delivery has become an important option for a lot of online buyers. Newbie firms like Hyderabad-based Gharpay are betting big on the growing need for cash collection firms.
About the Author:
The author of this article is Pulak Jain. She is a first year PGP student at IIM Raipur. She graduated in Electronics and Communications Engineering from IGIT,GGSIPU Delhi. Her interests include
reading fiction and philosophy. She can be reached at pgp12113.pulak@iimraipur.ac.in
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