Transcript e-tailing & SCM Janat Shah

e-tailing & SCM
Janat Shah
[email protected]
E-tailing : SCM Issues
• Relevant SCM Issues
– Material Flow
• Inventory, Transportation
• Managing returns
– Insourcing versus Outsourcing
• Unique Challenges in India
– Internet Penetration
– COD Model
• Higher returns
e-tailing & Retailing: Performance
measures
Inv. Turns
ROA
Amazon
10.0
4.4%
Wal-Mart
8.3
8.8%
Dell
35.6
6.8%
Amazon(2011): Role of SCM
• Assets*:
Inventory : 4992
Total assets : 25278
: Revenue & Costs*:
Revenue : 48077
Income from Operations: 862
Shipping Revenue: 1552
Shipping Cost: 3989
*In Millions US$
Amazon: Relevance of Shipping Cost
2011
2010
2009
2008
2007
2006
Net Sales
48,077
34,204
24,509
19,166
14,835
10,711
Income
from Ops
862
1406
1129
842
655
389
Shipping
Revenue
1552
1193
924
835
740
567
Shipping
Cost
3989
2579
1773
1500
1200
884
Net
shipping
cost/Net
Sales
5.1%
4.1%
3.5%
3.5%
3.1%
3.0%
Shipment charges in E-retailing for various
category of products for differing shipping times*
Standard Shipping ( 3-5
Days)
Two-Day shipping
One-Day shipping
Type of product
Per shipment
Per Item
Per shipment
Per Item
Per shipment
Per Item
Automotive items
4.50
0.50/lb
9.00
0.99/lb
12.50
3.99/lb
Books
3.00
0.99
7.49
1.99
12.49
3.99
CDs, DVDs
1.99
0.99
5.49
0.99
8.99
2.99
Computers
7.99
0.65/lb
9.99
1.25/lb
16.99
1.99/lb
Grocery
4.99
0.59/lb
8.99
0.99/lb
14.99
1.99/lb
Clothing items
3.99
0.99
6.99
1.99
11.99
2.99
Sport items
4.99
0.49/lb
8.99
0.99/lb
14.99
1.99/lb
* Shipping within USA
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Source; WWW.Amazon.com
Importance of transportation cost for different
category of orders in e-retailing
Averag Average Value
Shipmen Transpor Shipping
e Price
t
Weight
Density
t Cost*
Cost as %
price
Laptop**
$1500
3 Kg.
$500/kg
1 laptop
Book**
$15
0.5 Kg.
$30/kg.
3 books
Grocery**
$5
1 Kg.
$5/Kg.
10 kg.
12.4
0.8
6.0
13.3
18.2
36.4
*Transportation cost is calculated using Amazon.com rates for standard shipping In US
** Typical order for Dell, Amazon & Webvan respectively
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Evolution of e-tailing
• Phase –I
– Drop Shipping
• Phase – II
– Inventory stocked at e-tailer & Logistics function
insourced
• Amazon has 79 warehouses
• Flipkart has 7 warehouses
• Phase III - ?
Supply Chain Evolution
•
First Revolution.: Ford Motor Co. 1910-1920.
– Single Product.
– Vertical Integration
•
•
Second Revolution: Toyota Motor Co. 1960-1970
–
Wide Variety
–
Long term relationship with suppliers.
Third Revolution:
– Dell Computers
• Customisation.
• Medium term relationship with suppliers
• Suppliers have to maintain technology and cost leadership.
– Bharti-Airtel
• Strategic Outsourcing : Network Management with Nokia & Ericsson & IT
Management with IBM
E-tailing: Critical activities
• Technology
– Web design
• Call Center
• Order Fulfillment
– Warehousing & Transportation
• Analytics
Key supply chain challenges for etailers
• Understanding & Managing logistics cost and
service
• Outsourcing of logistics function
Questions?
Table 1. The Gartner Supply Chain Top 25 for 2012
Peer
Opinion1
(173
voters)
(25%)
Gartner
Opinion1
(37
voters)
(25%)
ThreeThreeYear
Year
Inventory
Weighted
Weighted
Turns3
Revenue
ROA2
(15%)
Growth4
(25%)
(10%)
Composit
e Score5
Rank
Company
1
Apple
3241
651
20.2%
74.1
51.5%
9.69
2
Amazon
2713
435
4.4%
10.0
37.7%
5.40
3
McDonald
's
1121
283
16.0%
142.4
7.2%
5.37
4
Dell
2131
546
6.8%
35.6
2.7%
5.30
5
P&G
1940
622
9.2%
5.5
2.5%
5.05
6
The CocaCola
Company
1818
372
13.0%
5.8
19.7%
4.85
7
Intel
1006
406
16.2%
5.0
17.8%
4.63
8
Cisco
Systems
1243
582
8.4%
11.0
5.5%
4.46
9
Wal-Mart
Stores
1874
410
8.8%
8.3
4.2%
4.24
10
Unilever
1043
534
10.2%
6.0
5.5%
4.21
Source: http://www.gartner.com/technology/supply-chain/top25.jsp
E-Retailing:
• Provides the convenience of shopping from home but Physical delivery
takes longer time
• E-retailer can provide higher variety compared to Brick and Mortar store
and still mange higher inventory turns
– Centralisation versus decentralisation of inventory
• Transportation cost is higher for e-retailer
– Small shipment size
– Last-mile transportation
• Product/market Characteristic
– Value density, Nature of demand uncertainty, Volume of demand
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Eretail challenges in India
• Lower internet penetration
• Significant number of customers using COD
model for payment
– Higher returns
• Logistics infrastructure a challenge