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Flipkart is India’s biggest E-Commerce Retailer and has presence across various categories carrying a wide

Flipkart is India’s biggest E-Commerce Retailer and has presence across various categories carrying a wide assortment of products. More details are available online at flipkart.com

You are part of the business planning team for the Year 2015 -16 and are faced with multiple challenges for this year. One of the scenarios that you need to plan for is the next Big billion day slated to be sometime around Diwali of 2015. The Big Billion day is a one day only sale that attracts consumers across India wherein there is deep discounting across all categories leading to huge sales spikes. However, for the purpose of this exercise, you may assume that Flipkart operates only in 3 categories which are Mobiles, Fashion and Books.

As you sit in the beginning of 2015, you have already built capacity for 2014 volumes across all supply chain legs and can comfortably meet those demand numbers. From our past experience, we expect that traffic will spike 10X and demand will spike 3X during any one day sale that we run. We have seen historically that shipments travel between zones to reach the customer thereby increasing time to delivery and hence delivery cost. As Diwali is also the peak festive season for all companies in India, supply chain resources are scarce and we would need to work to understand how much capacity is needed for air movements between Zones. All products may not be available in all zones due to various reasons like presence of supply clusters, tax laws etc There will be mismatch between demand and inventory placement causing a lot of inefficient supply chain movement between zones. From a customer perspective, Flipkart has always been the pioneer in fast deliveries and is known for its prompt customer service. Delivery times for local orders (inter-zone) are between 2 and 3 days and for intra zone orders, Flipkart takes 3-5 days depending on location. During peak sale periods, customers may accept deliveries up to a week, but any delivery later than that will mean loss of trust and could result in order cancellations. Please also note that on Sundays, our delivery network works at 30% capacity. The share of third party sellers usually is about 10%, and this can go upto 15% during the Big Billion Day.

Table 1: Average Units dispatched in a Month     Avg Units dispatched/Month   Category

Table 1: Average Units dispatched in a Month

   

Avg Units dispatched/Month

 

Category

2012

2013

2014

2015 (f/c)

2016 (f/c)

Mobiles

10,000

80,000

4,00,000

15,00,000

45,00,000

Fashion

-

40,000

5,00,000

20,00,000

50,00,000

Books

50,000

2,00,000

10,00,000

20,00,000

20,00,000

Table 2: Other Information

Category

Avg Returns (% of Orders Shipped)

Avg Selling Price (In Rs.)

Avg Product Weight (In Kg)

Mobiles

3%

7,800

0.60

Fashion

15%

1,100

1.00

Books

7%

450

0.25

Table 3: Zone Wise Details

Category

Zone

Demand Split

Inventory Split

 

North

28%

25%

Mobiles

East

14%

5%

West

23%

20%

South

35%

50%

 

North

48%

37%

Fashion

East

18%

2%

West

17%

7%

South

17%

54%

 

North

25%

60%

Books

East

20%

5%

West

15%

15%

South

40%

20%

Table 4: Costs Line Haul Costs (Rs/Kg) South North West East   South   25

Table 4: Costs

Line Haul Costs (Rs/Kg)

South

North

West

East

 

South

 

25

55

40

 

50

North

 

55

31

42

 

45

West

 

40

42

27

 

60

East

 

50

45

60

 

38

Table 3: Supply Chain Assets productivity

 

Asset

UOM

Data

Warehouse Space

Units/Sqft

   

10

Warehouse Cost - North

Rs/ Sqft

 

50

Warehouse Cost - South

Rs/Sqft

 

55

Warehouse Cost - West

Rs/Sqft

 

80

Warehouse Cost - East

Rs/Sqft

 

45

Delivery Hub

Items Delivered/Day/Person

 

35

What are the various challenges that the supply chain will face in order to fulfil demand of the Big Billion Day. How will you plan to overcome these challenges? Please consider all aspects of supply chain from procurement till customer delivery, which needs to be well prepared for peak demand. Some of the major issues could be building for peak capacity from a storage perspective and related costs – considering underutilization, and maintaining an acceptable level of customer service Please provide a holistic strategy plan along with various assumptions and supporting analysis to substantiate your strategy.

Flipkart has an in house logistics arm which does deliveries to customers. Flipkart also works with third party logistics providers to assist in deliveries in some locations. For example, a city like Mumbai can be serviced by both in house team and third party provider depending on various factors. Flipkart is aiming to expand services to Tier 3 and below towns, from which the next growth wave is expected to come. The current delivery model is not optimal to expand into these towns as the deliveries / sq.km density will significantly reduce and add to cost. You are tasked with coming up with alternate models of delivery to reach Tier 3 towns and below. Please present a financial business case for the model you choose to go with. Make relevant assumptions and call them out clearly in your solution.