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One of the major constraints facing the supply chain of FMCG industry in general is the complex
distribution network and multiple layers of middlemen distorting the price of the final product being sold
by the firm. Also, ITC through Ashirwaad Atta wants to market fresh product that have been traditionally
handled by unbranded atta in each region. In these items, the freshness of the product is an important
requirement from the consumers point of view. Traditionally ITC has worked with centralized plants,
where they can manage quality and also enjoy big economies of scale. As freshness is one of the most
important criteria from the customers point of view, ITC will have to work with decentralized
manufacturing plants near consumer centres. Balancing quality, freshness and cost is a major issue for
ITC.
ITC currently leverages its established supply chain through its e-choupal network ,which has helped ITC
quantum leap in its network. By bypassing fragmented and opaque mandi market for wheat sourcing and
minimal re-engineering, ITC achieved improved profit margins for both farmer and ITC.
Through e-choupal,ITC developed a new sourcing channel by unbundling two aspects of the supply chain
information (price discovery) and transaction (weighing and delivery). Simultaneously, ITC set up
warehousing hubs managed by the erstwhile middlemen, which reduced transaction costs, screened
products for quality, and created efficient logistics with clear traceability.
While the traditional supply chain has worked well for ITC over the years, given the rise of digital
consumer, there is a need for ITC to shift towards establishing a separate supply chain for e-commerce
firms like Grofers , Bigbasket, Amazon and Flipkart.
Since most of these firms operate on a hyperlocal model with lead time for deliveries typically between
two and four hours,ITC can leverage its network of 1,550 wholesalers and some of its two million retailers
that are part of ITCs direct distribution network into sourcing centres for companies such as Bigbasket.
ITC can also leverage analytics to automatically identify the closest distributor or dealer or retailer, and
the e-commerce company will be directed to pick up the product from that particular outlet for
delivery.Thus, online retailers will not have to invest in distribution centres and can reduce the time for
sourcing and delivery.
Secondly,to monetize on its warehousing space,ITC can rent out extra space in its warehouse to online
sellers to stock their products at a subsidized rate. In return, the sellers shall push ITC products on online
marketplace platforms.
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