Backend processes such as logistics, warehousing, customer support are critical for any e-tailer; however most of the start-ups including big etailers grapple with these important processes. Well organized and processed warehouses are of immense importance as it enables them to deliver the orders and meet the promised timelines with their consumers. In order to know more about the best practices of warehousing, including levels of IT enablement, geographic spread and Economic Order Quantity (EOQ) – SKUs matrix, iamwire interacted with Deepak Rishi, Senior Vice President – Operations, Myntra.com. Below is the major part of interaction
According to you what is the optimum numbers of warehouses for a mid to large size etailers?
The number of warehouses for an etailer will primarily depend on the following factors:
> Concentration of the market
> Current size and growth patterns of the organisation
> Model of service “buy n sell” vs “procure to order”
> Categories the etailer is currently selling
The etailers should focus on reaching the customer as fast as possible. A company with a concentrated market can work with 2-3 warehouses whereas a company which is more evenly distributed across India would require more.
Having decentralized warehouses has its own challenges which the company needs to be cognizant of and make sure to build in the right competences.
How should be the geographic spread located to optimize logistic cost when etailer has to ship across India?
In India, the top 10 cities contribute to 65-75% of the business for a geographically focussed e-tailer and 50-60% for the dispersed ones. Having 3-4 warehouses can easily service these markets with optimum cost.
Further, logistics cost can be optimized by having tie ups with local delivery partners and having company owned last mile delivery network where market concentration is high.
What should be the ideal level of IT enablement required to have efficient and relevant integration with logistics movement?
For large e-retailer like Myntra, technology is very critical. It helps companies like us track our shipment and inventory on real time basis at a very granular level. This in turn helps us increase efficiency at the operations level and provide a pleasant customer experience.
What is the Economic Order Quantity in terms of SKUs to be maintained in the warehouse to avoid logistic loss?
The distribution of inventory across the warehouses is a function of customer demand and market size. There is no single number that one can arrive at. Having a distributed model of inventory holding will have a higher cost. So the optimum path would be to maintain the right balance between distribution costs and logistics.
What advance technological infrastructure should be present in warehouses to cater to specific categories like F&G, jewellery, high end fashion products, glass/ anticraft or other delicate products?
The technology and infrastructure to be used is decided by the kind of products you are retailing. If you are dealing with a perishable or a short lifecycle product, you should be able to identify exact age of the product and the location of the product so that one can serve the order on FIFO basis. Then your system should be able to control and review the quality of the product.
In case of delicate products, the company should use the right material handling equipment. High value products require separate storage, regular reviews and higher security.
How should a company size its warehouse capacity based on order volume, inventory, what is the close approximate formula?
It depends on the overall size of warehouse one intends to build, while planning for a warehouse one needs to calculate the duration of scaling up period, and then map out important aspects such as stocking, inward and outward movement etc.. For holding formula, one needs to decide what numbers he intends to stock – for example, if you sell x in 90 days, then divide x by peak utilization, you will have the storage capacity. Always remember, warehouses cannot be utilized more than 80 percent of its actual strength.
What are critical roles in warehouse and ideal split between various level of staff in warehouse?
Again, it depends on size of warehouse one intends to put in place. For clarity – Suppose if you have strength of 50 head counts in quality department, in this case you are required to have 5 supervisors to monitor them.
What is the size of Myntra warehouse, how much is the approx capex spend and upto what capacity can they scale?
Currently, Myntra has one warehouse located in Bangalore spread over almost 45,000 Square feet that can hold up around 500,000 pieces. As far as expansion of warehouses is concerned, we are building a warehouse of similar capacity in Delhi (NCR Region) and planning to have one in Mumbai too.
How modern is present warehousing system in India in terms of security and handling goods?
Myntra, is one among the very few e-tailers who has invested in technology at the backend and currently operate a very advanced warehouse management system. As the market begins to mature, we will witness higher investments in material handling equipments.
What are the current challenges lie with you from your warehouse viewpoint.
A key challenge for any successful warehouse management team is to keep pace with the growing market demand without affecting the end customer. The team also needs to constantly innovate and improve on existing processes.
How is the Indian warehousing in comparison with global best practices?
I would say we are far behind in warehouse planning as compared to the western world. Enablement of automated system has not really been widely practiced in India as it requires major investment and the ROI is very gradual. On the other hand, manpower in India is cheap and technology centric investment takes time to repay.