Tips, tricks and trade secrets to optimise costs in your supply chain [#IRE 2014]

The Ecommerce industry in India will grow to approx. USD 70 billion by 2020,as highlighted by Flipkart CEO, Sachin Bansal in an interview to Siliconindia. However, its worth questioning at this point of time, does the services supporting it at the backend able to keep pace?

Managing the logistics and supply chain costs have always been a daunting task for all Ecommerce players. Even for retailers with a strong distribution network across the country, delivery logistics can still be a challenging task because of the high cost of holding inventory and running these distribution facilities.

At iamWire’s recent Internet Retail Expo 2014, we had experts from GoJaVAS, Holisol, etc., to share their views on reducing costs in various categories such as Warehousing, IT, Packaging and Logistics.

Warehousing

This consume a major portion of the overall supply chain costs. A few believe that it could be anywhere between 5 to 40% depending on what you are selling and at what pricing.

According to Naveen Rawat, Director at Holisol, in order to reduce the warehousing costs, one must spend time on planning the warehouse layout. “Time constraints may exist, but its better to go for ‘ Built in suit’ facility. There should be efficient receiving as inventory accuracy and product flow ,all start with it. Also, one must develop and implement a vendor compliance model,” added Naveen.

Other solutions can include reducing warehouse back orders, can-not-finds as well as the picking time, 70% of which is spent walking. Analyzing how an efficient slotting in warehouse can be done, will also help in making processes much faster.

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IT

To cope up with the IT costs, as per Srinivasan Iyer, Principal Consultant at Vinculum, one can surely work on the ‘Mix and Match’ concept. This will provide an opportunity to get multiple options such as combining virtualization with the cloud. Then, there are open source softwares to suit a team’s IT needs when it is on a tight budget.

“Innovation and optimization is the key to face the supply chain issues. Also, there is a need to reduce the complexities and adhere to the standards in the IT sector to get things done in an easier manner,” he added.

Packaging

This is another area which one seriously needs to cater with. As per Gaurav Vora, Director at Dynaflex, the key to optimize the cost of packaging in eCommerce revolves around many factors, with selection of right vendors playing a critical role. One must check out if the vendor is having a proper infrastructure, bandwidth to deal with price fluctuations in the market, sustainability in dealing with unexpected events as well as the vendor’s relations with his own suppliers.

While deciding for the packaging design, the company must be clear on what exactly is the feeling it wants to convey to its customers. Making it different and more premium can help one’s brand stand out in the crowd.

Logistics

Last but not the least is logistics costs. Vijay Ghadge, COO at GoJaVAS believes that basically, there are two cost components associated with logistics viz. the cost of successful delivery and the cost of unsuccessful delivery wherein, an unsuccessful delivery most of the time costs much higher than the successful one.  “If it’s customer initiated, you can’t do much. If it’s your LSP, the costs go up as it leads to calls to your contact centre,” he added.

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Vijay also said that while optimizing these costs, speed and accuracy of cashback plays an important factor. Also, repeat purchase rates vary significantly for customer services through different LSP’s. “Incorporating customer feedbacks in one’s LSP decision making will help. Logistics is not only a cost center, but is also a revenue generator, as working with right partners can bring one repeat customers,” said Vijay.

We do believe that logistics in this country was in poor shape, simply because the big players did not seem to have believed that it is important to make investment when everyone can live with basic level of services. But today, in the time of consumer centric retailing, with less and less loyalty, the pressure is being realized by all to do whatever and get to state of the art services levels for Indian Consumers also.

Thus, in the coming time, we expect the logistics segment in India continues to grow mutually with eCommerce growth, and may be faster than Ecommerce. Also, considering the size of investment gone in Ecommerce, it would certainly push the entire support system, logistics being the first one.

For an overview of the social media discussions around this session, see this Storify. You can also watch this three-minute trailer or the full video.

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