SUPPLY CHAIN MANAGEMENT - BACKBONE OF E

RETAILING: CASE OF FLIPKART

Supriya Bhagat1, Roshan Raju2, Dr.Sagar P.Bhadange3
1,2
Assistant Professor, Sadhu Vaswani Institute of Management Studies for Girls, Pune
3
Assistant Professor, School of Retail Management,
Symbiosis Skills & Open University

Abstract the big cities of India; the lesser time involved in

Supply chain management has revolutionized online shopping, is a key driver for online
how business can be carried out. The market retailing. The customers from small cities and
for E retailing in India has gained a great towns are also attracted to the online route
momentum with consumers preferring to go because of the availability to a variety of
online to buy products. Real time information products. As there is enhanced competitiveness
on the E retailing websites and enabling in this sectors various services viz. warranties
collaboration between trading partners are and replacements for electronic goods, free home
the main fragment of Supply chain delivery and flexible payment methods are
management. This paper deals with how provided by the retailers with competitive prices.
supply chain management forms a major part The competitive environment in this sector calls
of online E retailing and how it has become a of for the online retailing company for
backbone for this industry. The supply chain integration within a network of organizations
management in case of the Indian E retail within the supply chain. This has led to place
giant Flipkart along with what challenges they additional importance on Supply Chain
face and what opportunities they have in the Management (SCM) which in itself is a
near future are considered. challenge for the major players. SCM philosophy
Keywords: Supply Chain Management states that the optimizing all the connecting links
(SCM), E Retail, Flipkart in the supply chain lead to the enhancement of
the entire performance of the entire supply chain.
Introduction Supply chain management is a vast subject. It
The technological era of the internet has plays significant role while pursuing company
revolutionized not only the way businesses are objectives .In this research paper broad
conducted but also the methods adopted with the definition of supply chain management and then
management of the supply chain, such as the way discuss the importance of managing a supply
businesses connect with each other and how each chain in case of E retailing firm Flipkart and the
member in the supply chain is impacted. The several challenges and opportunities they face in
purpose of the research paper is to understand this is discussed.
supply chain management for online E retailing
and how it influences the way retailing is carried Supply Chain Management
out. The major operations involved in supply Cooper, Lambert in their research paper titled
chain and its proper management is indispensible "Supply Chain Management: More than a new
for the success or the failure of the retailer. name for Logistics” defined SCM as “the
In a country like India the online retailing market delivery of superior customer value at least cost
has gained a great momentum in the last few by proper management of upstream and
years .The likes of FlipKart, Snapdeal and downstream relationships with integration of key
Jabong have become the popular names in this business processes”. The complete business
market. Amazon has also entered and invested in processes inside the supply chain, from start of
this growing Indian online retailing market. In
 
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supply to the point of consumption, is embraced firms involved in retailing are a part of an
in case of Supply chain management. integrated system called the supply chain.
The following processes are included in the The firm or individual which act as the retailers
SCM: customer relationship and service buy the goods in huge amount directly through
management, demand management, e- the manufacturers or a wholesaler .These goods
procurement, manufacturing flow management, are then sold in smaller quantities to the final
product development and reverse logistics. consumer to earn profits .In the present era
online retailing has taken a momentum the
Online retailing examples include the likes of alibaba.com, ebay
Retail is the sale of goods and services from etc.
individuals or businesses to the end-user. The

Online retail market size and growth

There has been a swift growth in India’s online cost. A key challenge for a retailing firm is to
retail industry in the last 5 years from around Rs manage this chain, especially with the realization
16 billion revenues in 2007-08 to Rs 140 billion that the decrease in time of the supply chain
in 2012-13, which has translated into a channel not only decreases costs but also
compounded annual growth rate (CAGR) of over provides a competitive advantage .Technology
57 per cent. The main reasons for the growth is and information are key fundamentals for
due to the increase in internet penetration and successful operation of the supply chain. Keenan
change in the lifestyles of the consumers who and Ante (2002) noted that during the next 5
prefer buying products online .This market is years, collaboration by supply chain partners
excepted to boom and grow at a healthy 55-60 % over the Internet can potentially save $223
CAGR to Rs 510 billion by 2015-16. billion with the reduction in transaction,
In terms of size, India’s online retail industry is production, and inventory costs.
very small compared with both organized and
overall (organised + unorganised) retail in the Flipkart.com
country which has a lot of potential. The Flipkart.com founded in 2007 by two IIT Delhi
industry’s revenues are expected to more than graduates, Sachin & Binny Bansal is today
double to around 18 per cent of organized retail India’s largest online shopping website. The
by 2016 from around 8 per cent in 2013. company was started with the prime objective
back of making books easily available to
Role of SCM in Online Retailing consumers who has access to internet. Today, it
With an increased competition in the is present across product categories including
marketplace, one can observe an increase in movies, music, games, mobiles, cameras,
product offerings in the market. It has therefore computers, healthcare and personal products,
become essential for online retail firms to better home appliances and electronics, stationery,
manage their supply chain process so that they perfumes, toys, apparels, shoes and a lot
can well control the supply and demand aspects more. The company has raised a total $360
of their product portfolio. The aim for retailers million in its fifth round of funding, the largest
and their supply partners is to manage this chain investment raised by an Internet company in
to create value for the customer at an acceptable India. It is a strategy that has enabled them to
 
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gain lion’s share of the online retail market but C) Logistics
their operations need to be studied in greater Flipkart ships more than 1Lakh products a day
detail to understand if the company really has a and the company itself bars all the cost of
sustainable future. delivery .This makes management of the
logistics a cumbersome task and a financially
Flipkart & its Supply Chain Management complex issue for the company.For this purpose
The company structure of Flipkart is has 3 broad Flipkart, in April 2013 introduced its in-house
categories. logistics known as eKart(EKL) which currently
i. Product and Technology which deals reaches consumers in about 150 cities. eKart
with Website Management ERP System , currently offers services such as delivery
ii. Business Development which deals with logistics, reverse logistics ,pay on delivery,
sales and customer support and technology integration for
iii. Operations which deals with the supply order tracking, customer notifications, reporting
chain management of the company and analysis, billing etc. While more than 90%
which includes Procurement, of the Cash on delivery (COD) shipments and
Warehouse, Logistics and Customer about 60-70% of the overall shipments are
Support delivered by the EKL the rest of shipments are
The research paper concentrates on third aspect. catered by 3PL service providers.

A) Procurement D) Reverse logistics

With a marketplace model, Flipkart has a market Flipkart has a 30 day return policy. This policy is
place model wherein the prospective buyers can primarily aimed to build trust with the
deal with sellers directly and the delivery of the consumers. The return of products by customers
product or good will be done by Flipkart. They follows any of the 2 paths
have added more than 50 sellers to its list. At 1. Replacement: Flipkart returns the product to
present, the entire inventory of Flipkart is being the supplier and obtains a replacement that is
managed by WS Retail which is flipkarts pet provided to the customer
project. The sourcing at Flipkart is conducted at 2. Store credit: If the customer is not satisfied
2 levels i.e at Regional and Central levels with the product they are given store credit of the
.Procurement Teams manage each of these 2 same amount.
levels .Each regional procurement team has a
network of local suppliers for made-to-stock as E) Supplier Management
well as on Just in-time procurement. For a product in the new category Flipkart
generally start of by sourcing from local
B) Warehouse Management System suppliers and distributors. The bigger
Flipkart has 7 major warehouses spread across manufacturers or wholesalers are directly
the country in the states of Pune ,Mumbai, approached once there is enough generation of
Chennai ,Kolkata, Bangalore , Noida and Delhi. demand. To place an order with a supplier prices,
Also smaller regional distribution centers at over quality check and percentages of returns are
500 locations spread across Tier I and Tier II considered.
cities. Warehouse Management System (WMS)
consists of 3 major segments viz. What makes Flipkart stand out?
1. Inward Processing - Physical in warding Flipkart’s success is mostly because of their
: This is the area where physical delivery procurement model and its robust logistics that
of goods from suppliers to the warehouse make its standout from other e-retailing sites.
is taken. This backed up by an amazingly well organized
2. Quality Check & Scan: Once the goods warehousing and delivery system.
are received, an initial quality check is
done at this stage. Key Challenges faced by Flipkart
3. Packing of products: At this stage,  The internet penetration rate in India is
packing of each of the product is done. still one of the lowest in the world.
 Average broadband speed in India is very
low compared to other countries.
 Competition from new entrants
 
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 Lack of quality talent pool
 Increase in attrition rate.
 High customer acquisition cost

Concluding Remarks
Supply chain management plays a significant
role in the digital economy. E Retailers have to
manage the supply chains both strategically and
operationally. But it’s an ongoing transformation
and substantial challenges remain and can be
anticipated in the future.
For the development of sustainable supply chain
management it is essential for every E retailing
firm to maintain an information system of the
utmost quality which should be maintained
operated by employees who are well skilled and
trained.
In Indian online retail industry, its amazing
supply chain management that proves to be the
game-changer and that’s what Flipkart has done.
Firms snubbing this challenge are fated to fall
behind their rivals.

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Logistics Management
Keenan, F., S. Ante. 2002. The new teamwork.
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Jayashankar ,M. Swaminathan , Sridhar R. Tayur

 
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