Content
1:-Abstract
2:-Introduction
Vision, mission and objectives
3:-Inventory Management
4:-Warehouse Management
5:- Order Fulfillment
A CASE STUDY ON SUPPLY CHAIN MANAGEMENT BY
FLIPKART
Abstract:
The e-commerce business has gained momentum in the Indian markets. The popularity among
the young generation to go for e-commerce has increased over a period of time because of the
wide variety of products available at a very competitive price. Flipkart, Amazon, Snapdeal and
many other have come up in the market and are able to sustain the local retailers because of
the wide variety that they offer in the online stores. The biggest challenge of the online stores is
managing their supply at distinct location and making it available to the consumer within the
committed period. All this requires a strong supply chain management system in place. The
research paper deals with developing an understanding of supply chain management system of
ecommerce business with special reference to Flipkart.
Introduction
The concept of e-commerce is accepted very rapidly by the Indian consumer. The biggest drivers for
online shopping is shortage of time, availability of a variety of products at a very competitive prices and
retailers facing challenge in accommodating variety of stock for the consumers, thus prompting them to
resort to e-retailers.
A quick overview of India's Internet penetration shows a user base of approximately 462 million
rounding nearly to 35% of the population. The spread, and subsequent adoption of e-commerce, thus,
only seems logical. With several reputed brick-and-mortar retailers also offering online services, it seems
natural the trend of shopping remotely will scale up substantially.
As there is competitive environment in this sector, online retailers try to provide various services such
as flexible payment methods, warranties for electronic goods and free home delivery with very
competitive prices.
Vision
“To become amazon of india”
“Mission”
“To provide delightful and memorable customer experience.”
Objectives
“Completely hassel free shopping experience with best price”
Supply chain management of flipkart
The company structure of Flipkart is divided into three broad categories. First is Product and
Technology which is the core team of the company, second is Business Development which is
related to sales and third is Operations which deals with the supply chain management of the
company
Product and Technology Team
The product and technology team is the core strength of the company. The team manage the
entire process right from listing of item to search engine optimization to maintenance of
website.
Business Development Team
Business development team is responsible for all the activities related to sales including vendor
management to pricing and discount strategy.
Operations Team
Operations team deals with all the supply chain aspects of the company right from
procurement and warehouse management till customer support. The team support the
customers both online via telephone as well as offline via email.
Customer Support team
Flipkart has a strong focus on customer service with customer delight as the top most priority.
And to fulfil it the company guarantees a 24/7 full customer support and to cater this facility it
has a dedicated customer support team which offers both inbound and outbound support.
Logistics
Logistics is one of the most important facets of any successful ecommerce venture. Flipkart
ships more than 100000 items a day which makes management of the logistics a cumbersome
task for the company. Furthermore, the cost of the delivery is born by the company itself
making logistics a financially complex issue also. Hence in order to successfully manage
logistics. Flipkart uses its in-house logistics known as „eKart‟ (EKL). The e-commerce company
created eKart as a separate brand to serve WS- Retail, the B2C side of Flipkart. eKart currently
offers services such as delivery logistics, reverse logistics and pay on delivery. It also offers
customer support and technology integration for order tracking, customer notifications,
reporting
Reverse logistics / returns processing
Flipkart follows a 30 day return policy. This policy which is primarily aimed to build trust with
the consumers, has led to many customers duping Flipkart. For example there have been
several incidents when a customer buys a book only to read it and then return it within 30 days.
Similar incidents have been observed with mobile phones as well. Flipkart, through its data
management systems, has tried to identify such frauds. Return of a product to Flipkart can
happen if the 3rd party cannot deliver to the address or the customer does not accept the
product. Some orders are cancelled while the delivery is being processes by the courier
company. Such orders are not recalled but delivered to the address and then cancelled.
Customers can call the customer support and courier back the product to Flipkart. The delivery
cost is borne by Flipkart.
When a customer requests return of a product, there are 3 paths this request can take:
1. Replacement: Flipkart returns the product to the supplier and obtains a replacement that is
delivered to the customer.
2. Store credit: If the customer is not satisfied with the product, he or she is given store credit
of the same amount.
3. Actual cash-back: Given out as cash for cash-on-delivery payment or refunded for online
payment.
Procurement
When Flipkart started its operations, they had employed the consignment model of
procurement. In this model, the retailer (in this case Flipkart) holds the inventory owned by the
supplier, and buys it from the supplier only when it is sold to the end consumer. Since the
channel was new and unproven, this was the most risk-free way to operate. Later this was
discontinued and inventory was purchased to ensure superior delivery times and customer
satisfaction. But with foreign direct investment (FDI) favouring the marketplace model in April
2013, Flipkart changed its business model to marketplace model
Procurement of items could be for:
Inventory: These items are pre-ordered based on previous sales data to stock as inventory. This
category includes items with relatively low demand elasticity, fast selling items and items with
relatively long shelf life.
Just in-time: Items procured just-in-time are used to serve immediate outstanding orders.
Items with low or unpredictable demand are typically procured on an order-to-order basis. Just-
in-time procurement is also used for expensive items or products that have seen slow sales
growth
Stock out: Defined as when the product is unavailable in the inventory (held in warehouses) as
well as Flipkart‟s suppliers (as last updated) The central procurement team has visibility of all
the regional procurement teams‟ views, and therefore can monitor the stock levels for their
suppliers all over the country. The central team‟s focus is on bigger suppliers with a country-
wide reach.
Warehouse management
Flipkart has 7 major warehouses spread across the country in Mumbai, Kolkata, Delhi, Noida,
Pune, Chennai and Bangalore. They have smaller regional distribution centres at over 500
locations spread across Tier I and high volume Tier II cities. In Flipkart‟s Warehouse
Management System (WMS), there are three major segments namely, Inward Processing,
Storage Management and Outward Processing. Discussed below are the some of the details
regarding each of the sub-processes involved in the WMS.
In Flipkart‟s Warehouse Management System (WMS), there are three major segments namely,
Inward Processing, Storage Management and Outward Processing. Discussed below are the
some of the details regarding each of the sub-processes involved in the WMS.
Inward Processing
Physical inwarding: This is the area where physical delivery of goods from suppliers to the
warehouse is taken.
Quality Check + Scan: As soon as the goods are received, they go through an initial quality
check at this stage. After this, they are scanned to make an electronic entry to record the input
of goods into the warehouse on the IT systems. This step of quality check is also undertaken at
the supplier‟s premises depending on the contract that Flipkart has with them.
Pre-packing of products: At this stage, an initial packing of each of the products is done. This
pre-packing varies according to product. For instance, a book-mark and think transparent film
packing will be done for a book. Similarly, if there is a freebie attached to a product, then the
two products will be packed together.
Storage Management
Put-list generation: When the input of all products is done on the IT systems, a system generated list of
shelves corresponding to the products is generated to facilitate placement of products on shelves. This
is called Put-list generation, which marks the place where the respective items need to be put.
Order pending check: As soon as the system gets the input of the incoming products, system checks if
any of the orders for the incoming products are pending or not. If orders are pending, the respective
product is sent directly to the Final Packaging Area for Outward Processing.
Physical placement on shelves: Based on the Put-list, the products are placed on the respective shelves.
If the marked shelves are not empty, the product is put on an empty shelf, and the respective shelf
number is updated on the Put-list.
Closing Put-list: Once the product placement is done, Put-list is updated with the actual placement
information and the list is Closed.
Outward Processing
Pick-list generation: Based on the orders to be delivered for the day, a Pick-list is generated by the IT
system.
Pick-up from shelves: The respective products from the Pick-list are picked up from the shelves as per
the IT system entries and gathered together to move towards Final Packaging Area.
Final packaging: The picked-up products are packed in Flipkart-branded boxes. At this stage, packaging
is done according to the Category of the product, e.g., electronic items are packed differently from
stationery.
Placement in respective delivery hubs’ bags: After the final packaging, a product is placed in a specific
bag which is dedicated for that destination area delivery hub. These bags are dispatched to their
respective delivery hubs on a fixed timing during the day.
Order Processing
Flipkart uses its own ERP systems to process orders and track the details of all the transactions that
need to be carried out. A typical order at Flipkart starts with the customer searching, selecting the
required item and placing the order. This on an average takes around 8-10 clicks to get the order placed.
The email Id is considered to be the unique identification of a customer and all the records are
maintained with reference to this Id. The payment can be made by using debit card, debit card,
Netbanking or COD (Cash on Delivery).
Order Fulfillment
Customer orders are fulfilled either via Inventory or JIT procurement depending upon the availability of
the products. As soon as the order is placed and approved, there is an inventory check done at the local
warehouse.
If the item is not found at the local warehouse, then the order goes to the nearest and then other
warehouses. The product is then packaged and delivered to the customer.
If the item is not found in the inventory it is forwarded to the Regional Procurement Team (RPT) for JIT
procurement from local vendors.
If yet not possible, the order goes to the central procurement team (CPT) for the last option of
procurement. After procuring from the vendor, the product is packaged and delivered to the customer
via the most convenient warehouse. They have an understanding with their vendors for order tracking,
reconciliation and MIS (Management Information Systems).
As and when the item is found, it is packaged then and there and shipped to the customer via either
courier, Indian post or its own internal logistics arm depending upon the area where the item need to be
delivered.
The customer is kept updated on the status of his shipment via message, email and/or through website.
An item is labelled out of stock only if it is not neither present in the warehouses nor with the vendors.
Flipkart, with its focus on customer delight, ensures an excellent after-sales service to its
customers with regard to the delivery and/or addressing grievances related to any faulty or
unsatisfactory products.
The return of such items is done in an effective manner without any disputes. This is possible
given the understanding with the vendors.
For example, in case of electronics, warranty and after-sales service is largely manufacturer‟s
responsibility. Whenever required, Flipkart facilitates a smooth interaction between the
customer and manufacturer/service centre. Flipkart varies between one day guaranteed
delivery and three weeks depending on location and availability of product
Inventory Management
The inventory stocks are replenished whenever it goes below Reorder point. The company
employs FIFO (First In First Out) method for its inventory management, under which for any
shipment request to a particular warehouse the oldest inventory items are shipped first.
This makes a lot of sense especially for the electronics items since the technology becomes
obsolete very quickly. With respect to determining what items to store in the warehouse and
what items to be procured from vendors, Flipkart uses Long Tail Concept, which is nothing but
selling a large number of unique items with relatively small quantities. Flipkart orders such
items on adhoc basis and usually don‟t keep inventory of such items since the demand for such
items is very less and thereby minimizing overall distribution and inventory costs.
Supplier Management
Flipkart has always operated on the philosophy of starting out small and then scaling up as
demand grows. It has been the same with selection of suppliers. For a new category, they
generally start of by sourcing from local suppliers and distributors. Once there is enough
demand generated, they approach the larger wholesalers or manufacturers directly. This serves
two main purposes:
It helps them to get better deals from the bigger manufacturers if they can order in larger
quantities frequently enough.
It avoids the channel conflict dilemma that large suppliers face when they agree to similar
terms with a smaller volume online player like Flipkart as compared to an established offline
distributor.
There are several considerations while placing an order with a supplier:
Price considerations –credit lines and discount terms play an important part in selecting
suppliers.
Quality Check contract – Depends on whether QC will be done at supplier‟s place and then
product will be shipped to Flipkart‟s warehouses or if the QC has to be done at Flipkart‟s
warehouses.
Percentages of Returns Accepted – Higher the percentage of returns accepted by a supplier,
the better for Flipkart.
Customer Support
Customer Support function for an e-commerce website is one of the most important touch-
points for the business in terms of building trust, customer acquisition and maintaining
customer loyalty. Flipkart‟s Customer Support team consists of call-centre agents who handle
in-bound and outbound calls and also a team that handles e-mail queries..
At present, a customer calls due to one of the below reasons:
Sales Assistance
General Enquiries
Product/Shipping related enquiry
One of the major reasons for these calls is Indian consumers poor familiarity with online
shopping protocols. It is important to note that Flipkart tries to ensure that any order is placed
within 6 clicks on the website.
There is also an outbound call-centre that performs the following tasks:
Pro-actively inform customers about any delay in deliveries.
Pro-actively check the status of refunds or returns. Inform the user in case any delivery has not
been successful due to the customer not being present at his address
