Saturday, September 13, 2014

Flipkart's inventory management

Flipkart is an electronic commerce company and among India’s largest online retailers with reported sales of $12.5million. Flipkart initially started with selling books online but has diversified today into a generic e-commerce website, selling CDs/DVDs, mobile phones and electronics. The mission of the organization is to provide a memorable online shopping experience to the customers so that they come back again and they use innovative services like 30 day replacement, Cash on Delivery, free shipping, EMI options mainly for electronics and on-time delivery.

Company Structure:

The operations team deals with Supply chain management; from procurement to warehouse management and customer support.

Supplier Network:
Flipkart has a network of 500 plus distributors and only stocks frequently ordered items. Items with low demand elasticity, fast selling items which have a long shelf life are maintained in inventory. Whereas items with low and unpredictable demand are procured once the customers places the order.

Warehouse Management:
Flipkart has & major warehouse spread across the Metros like Mumbai, Delhi, Kolkata and Chennai and in the cities of Pune, Bangalore and Noida. They further have smaller regional distribution centers at over 500 locations. Company has tie-ups with more than 15 courier companies like Blue Dart, First Flight etc. to deliver their products and Indian post for areas where courier do not reach.
Flipkart’s warehouse management has 3 major steps:
  • Inward Processing
  • Storage Management
  • Outward Processing 
Order Fulfillment Process:
Customer orders are filled via Inventory Management ot Just in time delivery depending on the availability of products

Inventory Management:
Flipkart uses a Continuous review model. The inventory stocks are replenished when the inventory levels reach Reorder point (ROP). The company employs first in first out(FIFO) method for its inventory management. Under the FIFO method, shipment request is sent to a particular warehouse where the oldest inventory items are shipped first. This model makes sense for electronics since technology becomes obsolete very quickly.
Flipkart uses sales to predict the levels of inventory. The warehouses are divided into multiple parts such as inventory, packaging, shipping etc. Stocks are replenished every 24-48 hours and in the back end the company records details of all the transactions. The company has partnered with postal companies for order tracking and reconcilation, Thus the customer is updated about the state of his order via email, website or text messages. If the product needs to be returned, it is done effectively and efficiently due to the companies partnership with the courier companies. In the case of electronics, warranty and after sales service is solely the manufacturer’s responsibility but Flipkart facilitates interaction between supplier and customer.

With increased penetration of internet services, the e-commerce business in India is forecasted to increase from 11 million customers to 30 million by 2015. Seeing the prospects for growth, several new companies are going to enter the e-commerce market and a price war is unavoidable. Thus in order to stay profitable in this  growing competition, companies will have to focus dramatically on reducing their costs and this can be achieved by maintaining an efficient backend- nationwide delivery network, warehouses, inventory management, logistics etc. and thus the importance of managing one’s supply chain should not be undermined. 

Will the inventory management strategies employed by Flipkart reshape India’s E-Commerce sector especially with Amazon coming into India? 



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