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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
Mobiles
Fashion
Books
2012
2013
2014
2015 (f/c)
2016 (f/c)
10,000
80,000
4,00,000
15,00,000
45,00,000
40,000
5,00,000
20,00,000
50,00,000
50,000
2,00,000
10,00,000
20,00,000
20,00,000
Category
Avg Returns (% of
Avg Selling
Avg Product
Orders Shipped)
Mobiles
3%
7,800
0.60
Fashion
15%
1,100
1.00
Books
7%
450
0.25
Mobiles
Fashion
Books
Zone
Demand Split
Inventory Split
North
28%
25%
East
14%
5%
West
23%
20%
South
35%
50%
North
48%
37%
East
18%
2%
West
17%
7%
South
17%
54%
North
25%
60%
East
20%
5%
West
15%
15%
South
40%
20%
Table 4: Costs
Line
Haul
Costs
(Rs/Kg)
South
North
West
East
South
North
West
East
25
55
40
50
55
31
42
45
40
42
27
60
50
45
60
38
UOM
Units/Sqft
Rs/Sqft
Rs/Sqft
Rs/Sqft
Rs/Sqft
Items
Delivered/Day/Person
Data
10
50
55
80
45
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.