Walmart,Flipkart,Amazon,E-Commerce Models SCM 2.0

1. Analysis of Operations Models of E-Commerce Giants
Group 8
26NMP03 - Abhijeet Singh Tomar
26NMP15 - Argha Ray
26NMP20 - Bankim Samaddar
26NMP28 - Khushal Malik
26NMP36 - Pravin Sharma
26NMP45 - Sanjay Prasad

2. Amazon.com
1995:
Jeff Bezos
launched
Amazon as
online
bookstore
1999:
Diversified into
consumer
electronics,
furniture,
music,
software, etc
2001:
Registered
first ever profit
of $5mn
2000-2013:
Expanded
into Canada,
Japan, China,
India
•
Currently more than 34 product
categories
•
Active Amazon customers
◦ 2007: 66mn+
◦ 2013: 200mn+
•
Active Amazon sellers
◦ 2007: 1mn+
◦ 2013: 2mn+
•
Much of its success is due to
 Order fulfillment capabilities
 DC management
 Local Customization

3. Business Model of Amazon.com
•
•
As Seller
•
•
•
•
As
Intermediary
•
As Ecommerce
Service
Provider
•
•
Customer browse products on website and
place orders
Order is fulfilled either by internal DC or
drop-shipper
Customer relationship is with Amazon
Third parties list their products on
Amazon.com
Marketplace and Merchants program
Sales made by 3rd parties add to Amazon’s
Margin as incremental cost of each sale is
close to zero
Offers technology platform and web
storefront experience to other companies
Customer relationship and decision power
stays with the company
Amazon provides order fulfillment services

4. 3 – Tier Amazon Inventory Network
Information Flow
Tier-1
Vendor/
Supplier
Tier-2
Wholesaler
-DC
Publisher
/MFG
Tier-3
Amazon
Website
and IT
System
AmazonDC
Partner-DC
Customer
Indepen
dentSupplier
Physical Flow

5. China





Launched in 2004
through Joyo.com
Delivers goods on its own
Purchases on average
within 2.5 days
Cash on Delivery
prominent (70%)
Chinese are more
concerned about time of
arrival than lead time in
delivery. So Amazon.cn,
states what time of day
the items will arrive at
your doorstep
Japan

Launched in 2000

Same-day delivery: a key
selling point

Existence of Saihan system
prevents price competition
in case of books retailing.

“Look inside" option to allow
customers to read excerpts
& passages from books
before they purchase them.

Offered large selection of
products than its
competitors.
Amazon in Asian countries

6. Amazon India

Junglee.co
m




Amazon.in




Entered Indian E-commerce space in 2012 as
Junglee.com
Customers can compare product prices but not
purchase
Customer redirected to existing seller website or
physical store location for purchase
Amazon.in launched in June 2013
Marketplace model only unlike Amazon.com
Product Categories: Books, Kindle, Movies & TV and
Consumer Electronics (Mobile, Camera and Media
players)
Services offered: Third-Party Selling, Fulfillment
services, Product listing & promotion on website
Free Shipping for orders above Rs 499 fulfilled by
Amazon
CoD services only for orders fulfilled by Amazon

7. Challenges for Amazon India
Understanding of Market

Intense competition
Place model among Indian


Inadequate infrastructure
Sellers

Presence in tier-II and tier-
facilities

III Cities: 60% revenue
from tier-1, 40% from tier 2
Changing government
policies

Creditors collection periods

Marketing efforts
& 3 cities.

Credit card EMI payment
not available to tier 2 & 3
cities

8. WALMART
• Wal-Mart is the largest brick-and-mortar format retailer in
the world
• First store opened in 1962 in Kansas by founder Sam
Walton
• Principle was to be focussed on keeping costs low
• Always a volume player, emphasized on using cost
advantage to increase sales
• Every day low prices promised to customers in order to
manage demand fluctuations
• Also operates a retail website, hence not a pure brick-andmortar retail player

9. Supply chain network components : Where is the focus in the
retailing industry?
1
2
Sourcing
and
Procurement
3
Production
Plant Location
Capacity, Lead
Time
Flexibility
4
Planning
and
Distribution
Warehouse,
Inventory
location
5
Logistics
Transportation
networks,
Inventory
management,
Storage,
Loss/damage
Fulfilment
and
Customer
Service
Call centres
Retailing
Pricing
Product delivery

10. Traditional retail supply chain structure
Information
Information
Information Flow
Vendor
Carrier
Retailer
Distribution
Centre
Carrier
Retail
Outlets
Customer
Physical Flow
Source: An Analysis of Current Supply Chain Best Practices in the Retail Industry with Case Studies of Wal-Mart and Amazon.com,Chiles and Dau, Georgia Tech

11. Internet retail supply chain structure
Information Flow
Vendor/Supplie
r
Website & IT
systems
Wholesale
DC
Internet
Retailer DC
Publisher/Mfg
Customer
Partner DC
Independent
supplier/3rd
party
Physical Flow
Source: An Analysis of Current Supply Chain Best Practices in the Retail Industry with Case Studies of Wal-Mart and Amazon.com,Chiles and Dau, Georgia Tech

12. Sourcing and Procurement
•
EDLP makes it essential for sourcing costs to be
•
For customer service, responsiveness and
low in order to make profits
•
choice as the goal, supply chain strategy is
Variety and assortment helps to maintain low
completely different from that of EDLP
priced market basket
•
Supply chain innovations used to lower costs
•
Policy of purchasing no more than 25% of the
•
manufacturers
•
producer’s overall business
•
The price of the product is negotiated before the
Focus on sourcing from local suppliers, large
•
Consolidated its global procurement functions
•
•
•
allowances and markdowns etc.
High inventory turnover because of the
business model
•
Receives consideration from suppliers for
primarily volume incentives, warehouse
Seek to increase direct sourcing, discount from
suppliers, process efficiencies and lean culture
and reduce the use of intermediaries in its global
sourcing processes leading to savings
Focus on reducing variable costs such as
transaction, processing and packaging costs
and long term contracts with suppliers selected
•
Procurement also for manufactured products
like Kindle devices
start of the growing season
•
Procurement of products for resale from
High supplier risk: No long term contract
agreements and guarantee of availability
•
Difficulty in procurement and fulfilment in case
of unforeseen disasters

13. Production
•
Most of the stock in the Wal-Mart
•
stores are procured from different
suppliers for resale
•
Amazon produces devices like
Kindle; production is outsourced
•
Kindle being an electronic gadget
is prone to the varying demand
not manufactured by Wal-Mart
•
The private label products are also
phase as seen with other
The manufacturers package and
electronic equipment
label these products and provide it
•
With new releases and versions,
to the store
•
older versions reach maturity and
Lead time is due to placing orders
decline phase
and replenishment of stock from
the suppliers and vendors
•
Lead time is due to the time taken
to complete and fulfil orders either
by the company or by the dropshippers

14. Planning and Distribution
•
114 distribution centres only in the US
•
•
Centralise distribution system using
Hub-and-spoke model, led to significant
the world
•
Heavy investment in IT and
In 2011 and 2012, addition of 9
massive distribution centres
cost savings
•
90 distribution centres in 4 parts of
•
Initially densely populated states
communication systems
•
were devoid of distribution centres
Satellite communication system – allow
due to state tax implications
stores to manage own stock, reduce
•
Now, Amazon has moved to “Same
pack sizes
•
Day Shipping Strategy” leading to
Bar-code, use of computers and RFID
heavy investments
made management economical
•
•
Real time supply chain
Inventory Turnover at distribution
communication which has
centres is high
minimised human intervention

15. 4. Logistics
Transportation Networks
Transportation Networks
•
•
Owns a fleet of 6500 trucks and
Doesn’t have a scale per order which
50,000 trailers
•
Fast and responsive in nature owing
carriers economical as compared to
to products
•
makes truckload and less than truckload
parcel carriers
Efficient routes followed to burn less
•
Transportation hubs called ‘injection
fuel and minimize empty miles driven
•
points’ located in areas with high
It has 158 distribution centres which
demand
support 90-100 retail stores each
•
within a 200 mile area
•
Trucks need to travel less and reduces
DC to injection points
•
lead time
•
Lowers transportation cost as well as
•
Hydrogen powered fork lifters used for
handling perishable material
Drop shipping: Listed products but
shipped and transported by partners
•
Material Handling
•
Last mile delivery made by UPS or
FedEx
the safety stock required at retail
outlets
Truckload and LTL carry inventory from
Reduces the inventory and shipping
costs for Amazon
•
Fulfilment service: products are offered
by third party seller but are packed and

16. Logistics (contd.)
Inventory Management
Inventory Management
•
IT expertise + satellite communication system
•
•
Keeps check on unproductive inventory by reducing
cost to build new outlets to attract
SKUs and timely markdowns.
consumers
•
Order management & store replenishment carried
•
Owns no retail outlets -doesn’t incur
Consolidate the inventory at DCs –
out through Point-of-Sales (POS) system.
•
hence carry a much wider variety of
Quick Replenishment- use IT to locate &
products than the retail stores.
replenish goods.
•
DCs operated in automatic mode-
Voice-based Order Filling (VOF)- guide the person
efficient inventory tracking, inventory
responsible for order picking by voice to item
•
location monitoring,etc
locations.
•
Drop shipment model solves
Radio-Frequency Identification (RFID)
problem of stock outs & allows
Technology -Employees don’t have to physically
Amazon to offer products which are
scan the bar codes -saving of labor cost, reduces
•
not lying in its DC inventory.
stock outs.
•
Direct sourcing from some
publishers, manufacturers and thirdparty sellers- enable offering wide
inventories.
•
Retail Link System- Retail suppliers can monitor
the sales of their products and can replenish
•
variety, reduces dependence on
Collaborative Planning, Forecasting and
distributors and increases the markup.
Replenishment with key suppliers-share forecasts
•
3-ecehlon inventory management

17. Fulfilment and Customer Service
Fulfilment
Fulfilment
•
•
Big Data to optimize fulfilment networks,
to create powerful pricing tools and to
build the right product assortment
•
of orders with no minimum requirement
•
Customer trends analysed via social
media to optimise the fulfilment centre's
•
If not adequately predict customer demand
–lead to excess or insufficient inventory or
Customer Service
Walmart has a 90-day return policy for
Defects eliminated by Kaizen and
streamlining
inventory
•
Fulfilment centres can handle any number
fulfilment capacity
•
Failure to optimize inventory will increase
most of the goods sold with few
exceptions
•
the net shipping cost by requiring longzone or partial shipments
Customer Service
be a market leader in Canada
•
Customer centric policies designed to
•
Customer service centres operated globally
Tracking orders, placing return requests
•
Customers can track orders, shipment
made easy by One-touch facility at
details and also make changes to open
stores and also reduced costs
orders
•
Free super saver shipping and prime
shipping

18. E-RETAILING & FLIPKART
Demographic
• Large internet usage
• High mobile penetration
• Young population
Technological
• More secure online monetary
transaction
• Broadband connection
• Advancements in logistics
Macro-economic
Global
• Rise in disposable income
• Govt. committed to ease FDI norms
• Successful amazon model
• Rise in e-purchase
among customers

19. PRODUCT CATEGORIES
The matrix help in identification of product categories that are
more profitable based on industry & competitor analysis

20. PRODUCT CATEGORIES
Leather Goods and
travel accessories
Books & General
Merchandise
Camera and camera
accessories
CCC
Lifestyle
21 different categories, 4 million+ registered users , 45000 shipments

21. VENDOR SELECTION
A robust selection mechanism is put in place to ensure seamless backend supply chain
Vendor Management
•
•
•
Benefits
Price pass-through
Demand
responsiveness
Defect
Replacement
•
•
Challenges
Channel conflict
Distributor vs manufacturer

22. WAREHOUSE LOCATIONS
Hub & Spoke
Model
Delhi, Noida
Kolkata
Mumbai, Bhiwandi
Bangalore
Coimbatore
Flipkart operates 5 mother hubs that are geographically dispersed . It helps
in optimization of logistical expenses when demand arises from different

23. OVERALL SUPPLY CHAIN
1.
2.
Stock Liquidation
Negotiation with
supplier/bland/reseller
Internal liquidation
The flow-chart depicts the manner in which a customer order
is processed after the booking is made at the online portal

24. WAREHOUSE OPERATION
Receiving
Team
Dispatch
Team
QC
Team
Putter
Picker
Standard operating procedures have been designed to aid decision
making
during warehouse operation

25. JUST IN TIME MODEL
In previous model, Flipkart supplemented its own inventory from JIT vendors.
This helped in meeting unexpected customer demands during potential stockouts at WS retail

26. Inventory management
Parameters
Desired Service
Level
98.9%
93.1%
99.5%
91.3%
Average
sales/week
2.16
29
61
597
Average Loss of
sales (per week)
1.37
1.7
6
80
Average Margin
20%-25%
40%-45%
15%-20%
10%-15%
Actual service
level
92.2%
95%
92%
89%
Weeks of
inventory
1.17
1.6
1.55
1.39
Average Reorder
point
1
1.6
1.6
2
Cost of under
stocking
Rs 2362/-
Rs 349/-
Rs 4675/-
Rs 270/-
Flipkart has designed its reorder points based on the cost of under -

27. MARKETPLACE MODEL
Flipkart launched this platform on April 6th,2013
Salient Points
Product delivery and
shipping done by Flipkart
Flipkart now have large
assortment of products
Flipkart now act as a platform between buyers and sellers
Guiding Logic
After building a critical mass of
online shoppers, Flipkart
opened the platform for other
vendors to leverage its
customer base and brand

28. Marketplace model
Operational flow in Market Place model
Vendor Management

Vendors apply for listing and Flipkart sends out invitation after verification

All new sellers are categorized as Tier-2 sellers

A Tier-2 Seller can become Tier-1 seller after completion of one month on Marketplace
and has a settlement defect rate of less than 5%

Trusted Seller- Defect rate < 5%

Preferred Seller- Considered best for particular product and is shown on the top of the
seller’s list

Flipkart has its internal seller known as WS retail which supplies majority of the items

Seller Support: Dedicated team at Flipkart Marketplace to support sellers

Account Manager: Relationship manager for specific group of sellers

29. SELL OR RETURN




New policy being offered by Flipkart
Chance for new vendors to showcase their capability
Inventory in Flipkart’s warehouse with the pre-condition of buyback
free of cost.
Logistics and Inventory holding costs borne by Flipkart itself.

30. Comparative analysis
Parameters
Market Place
Sell-or-Return
Product Assortment
High
Moderate
Inventory Holding Cost
Incurred by Vendor
Incurred by Flipkart
Stock-out
Fewer due to pool of
vendor available
Same as WS retail products
as Flipkart holds inventory
Delivery Time
More because Flipkart
depend on vendor shipping
from its own warehouse
Less as Flipkart ships from
warehouse
Vendor Relationship
Stringent vendor selection
Lesser stringent compared to
MP
Inference
1. Market Place has an inherent advantage in meeting high uncertainties in
customer demand & competitive prices
2. Sell-or-Return mitigates the risk of Flipkart when introducing products with low
brand awareness

31. Web 1.0





Static Web Pages
Read Only
One Way Communication
Individual Participants
Eg Encyclopedia Britannica

32. Web 2.0





Dynamic Web Pages
Read Write Execute
Networked Communication
Community
Eg Wikipedia

33. SCOR Model


Supply Chain Operations Reference Model
Advocated by American Supply Chain Council
Plan
Source
Make
Deliver
Return

34. Plan


Product Purchasing Plan
Capacity Plan
Dynamic
Marketplace
Location and
Context Based
Services
• ShopSavvy
• Purchase at least price
• Delta Airlines
• Reverse auction to control overbooking

35. Source


Group Buying
Consumer Rating
Social
Networking
User generated
content
• Groupon
• Aggregation of orders to trigger
purchase offers.
• Flipkart
• Consumer opinion influence choice of
supplier

36. Make


Contract Research
3D Printing
User generated
content
• Google Sketchup
• 3D Modelling blueprinting and sharing
User generated
content
• InnoCentive
• Crowdsourcing

37. Deliver


GPS Tracking
Content Delivery
Location and
context based
services
• Cemex
• GPS to schedule and alter deliveries
Social
Networking
• NowPublic
• Local news uploaded at real time on
Facebook profile

38. Return


Airline Ticket Cancellation
Opinion Mining
Smartphone
User generated
content
• Airline Industry
• Apps used to cancel reservation at real
time
• Customer centric firms
• Polling generates data on customer
satisfaction

39. Supply Chain 2.0

Supply Chain Reconfigured
Focal Firm
Supplier
Customer
Enterprise 2.0
SCM 2.0
CRM 2.0

40. Thanks!
!!