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Supply Chain in eCommerce (2011-12)

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Supply Chain in eCommerce (2011-12)

  1. 1. “Supply Chain in E-Commerce”PROJECT REPORTSubmitted in partial fulfillment of the requirements for the award of theINTERNATIONAL MBA IN SUPPLY CHAIN MANAGEMENTBy“AKASH SINGH THAKUR”“UBI/DMBA/OCT11/8264”Under the guidance of“ NEHA GUPTA – PGDBM / MA-Journalism & MassCommunication”JARO EDUCATIONMUMBAI“JANUARY 2011”
  2. 2. 1DeclarationI, Akash Singh Thakur hereby declare that this project report titled Impact ofecommerce on Supply Chain submitted in partial fulfilment of the requirementfor the “International MBA in Supply Chain Management” is my original workand it has not formed the basis for the award of any other degree.____________________AKASH SINGH THAKURPlace: MumbaiDate: 31/01/2012
  3. 3. 2AcknowledgementI would like to express my special thanks of gratitude to Ms. Neha Gupta (Sr.Category Manager- govasool.com), my colleagues at emart solutions, as well asour CEO- Mr. Aditya and COO- Mr. Srikanth who gave me the golden opportunityto do this wonderful project on the topic “Impact of ecommerce on supply chain,which also helped me in better understanding of the complexities of supply chainand i came to know about so many new things. I am really thankful to them.Secondly I would also like to thank my parents and friends (Mr. Kumar Prashant)who helped me a lot in finishing this project within the limited time.THANKS TO ALL WHO HELPED ME.
  4. 4. 3Table of Contents1. Industry profile....................................................................................................................... 4Supply chain management.......................................................................................................... 4Electronic commerce................................................................................................................... 4GROWTH OF RETAIL IN INDIA...................................................................................................... 52. Company Profile.................................................................................................................... 7Marketing: ................................................................................................................................... 7Human resource:......................................................................................................................... 9Operations:................................................................................................................................ 10Finance: ..................................................................................................................................... 10SWOT Analysis:.......................................................................................................................... 113. Need for Study..................................................................................................................... 124. Literature Survey................................................................................................................. 135. Objectives of Study............................................................................................................. 176. Research Methodology ...................................................................................................... 187. Analysis ................................................................................................................................ 198. Conclusions ......................................................................................................................... 249. Recommendations.............................................................................................................. 2710. References........................................................................................................................... 2911. Appendix............................................................................................................................... 30
  5. 5. 41. Industry profileSupply chain management (SCM) encompasses the planning andmanagement of all activities involved in sourcing and procurement, conversion,and all logistics management activities. Importantly, it also includes coordinationand collaboration with channel partners, which can be suppliers, intermediaries,third-party service providers, and customers. In essence, SCM integrates supplyand demand management within and across companies.The Indian supply chain industry represents $50billion and is growing at a rate of7 % annually also opening up of the organized retail sector is attracting big retailchains like Wal-Mart and Carrefour in addition to big Indian retailers likePantaloon and Reliance. Thus demand for logistics and supply chainmanagement services would be largely driven by the growth of the Indianeconomy.Estimated logistics costs represent 15 to16% of China’s GDP and 11 to 13% ofIndia’s GDP.Electronic commerce refers to the buying and selling of products or servicesover electronic systems such as the Internet and other computer networks.However, the term may refer to more than just buying and selling productsonline. It also includes the entire online process of developing, marketing, selling,delivering, servicing and paying for products and services.
  6. 6. 5Out of the 13.2 million internet users across 26 cities covered in IMRB’s earlierresearch of 2006, 14.2% use the Internet to buy travel tickets; 5.5% people doonline shopping especially products like Books, Flowers, Gifts etc. and 5%people deal in stocks and shares through the internet.The ecommerce industry in India is all set to touch Rs. 9210 crore by the end ofFY2012. (30% jump from Rs 7,080 crore in ’09).GROWTH OF RETAIL IN INDIA Retailing in India can be traced to emergence of the neighborhood"Kirana " stores catering to the convenience of the consumers. Era of government support for rural retail: Indigenous franchise modelof store chains run by Khadi & Village Industries Commission
  7. 7. 6 1980s experienced slow change as India began to open up economy. Textiles sector with companies like Bombay Dyeing, Raymonds, SKumars and Grasim first saw the emergence of retail chains. 1990s saw a fresh wave of entrants with a shift from Manufactures toPure Retailers. For e.g. Food World, Subhiksha and Nilgiris in food andFMCG; Planet M and Music World in music; Crossword andFountainhead in books. Post 1995 onwards saw an emergence of shopping centers. Targetedto provide a complete destination experience for all segments ofsociety Emergence of hyper and super markets trying to provide customer with3 V’s - Value, Variety and Volume.Note: It has been observed that interestingly most of the Online Shoppers starttheir e-Shopping journey with buying Air/ Railway Tickets in India.
  8. 8. 72. Company ProfileThere are two types of merchant companies, those that sell directly to consumersand those that sell to companies. Each uses slightly different information systemsin the course of doing business. B2C, or business-to-consumer, e-commerceconcerns sales between a supplier and a retail customer (the consumer). Atypical information system for B2C provides a Web-based application or Webstorefront by which customers enter and manage their orders (i.e.,Govasool.com, Amazon.com, Flipkart.com). The term B2B, or business-to-business, e-commerce refers to sales between companies.eMart Solutions is both B2B and B2C company. The company is doing B2B salesthrough their loyalty programs and Corporate gifting business and B2C throughits website www.govasool.comMarketing: Product Portfolio: Govasool.com basically is into e-commerce businesswherein it shares a huge market in Home and Kitchen appliance productsproviding the customers best prices across the country. The websiteprovides products in various categories such as Flowers, Gifts, Homeappliance, Kitchen appliance, Home theatre systems, Mobile phones,
  9. 9. 8iPads, etc. The main focus of the firm is basically to concentrate on marketshare. Distribution network: The operational and distribution network of the firmhas been into diverse areas and geographic regions across the country.Major distribution network is into cities like Bangalore, Mumbai, Delhi,Chennai, Hyderabad and Kolkata. The company also has a specific modelthrough which it operates and handles the inventory and distributionacross the country. Sales force: The Company consists of a strong and dedicated sales forcewhich is totally focused into the up gradation and growth of the companyby using the best of their skills and the provided resources. The variousbranches of the firm into different cities have led the company to create awell groomed sales force. Pricing: Govasool.com is a major platform to provide the best pricesacross the country in the industry and also providing the products withbest qualities. Promotion Strategy: Promotion has been one of the major tools whichGovasool.com has focused upon in order to create a better positioning inthe customers mind. Company uses various promotional tools like Socialnetworking websites, Banners across major cities, TV ads, print ads inmajor newspapers, etc.
  10. 10. 9 Customer service: Customer service is one of the major factors that is tobe focused upon in order to create a positive perception in the customersmind for a long term relationship with customers. Govasool.com is focusedto a large extent on the after sales service which leads to become a majorplayer in the industry. Market Share: As the e-commerce market is growing at a very high rateacross the globe so the firm is dedicated towards creating a better marketshare in the market by applying various strategic tools. Competition: The growth of internet users across the country has led to aboom in the e-commerce industry which has created an opportunity in themarket for big players to gain more n more market share. The majorcompetitors in the industry are such as flipkart.com, letsbuy.com,koovs.com, indiatimes.com, etc.Human resource:The Organization structure of govasool is more likely to be a horizontal structure.The structure is such that it consists of top level CEO & COO. Then there areHigh level managers in the field of Marketing, IT, Finance & HR.Each managers have subordinates which work under them consisting ofsupervisors and the sales force. The total strength of the firm is 70 employees.
  11. 11. 10The training & development in the company is handled by well skilled HRmanagers who train the employees in such a manner that they work for the firmwith full commitment and dedication.The company has well-nourished HR policies which are very much helpful in theappraisals of the employees based on their work and the type of dedicationtowards their job. There is an also well working retention policy which ensuresthat the employees join the firm as a long term perspective and make the mostout of it.Operations:Operation department is one of the major strength of the company.Govasool.com as a firm is very much focused and consists of work force of majortalents across the country. The operation managers keep control on all theoperational activities that takes place in the distribution and inventorymanagement in the firm.Finance:Govasool has seen a huge growth in the recent times. The annual turnover of thecompany is Rs 8 crores. The growth that it has experienced in the past years hasbeen near about to 200%. The performance of the company is basically judgedbased on the market share that it creates and the total gross profit that it makeseach and every year.
  12. 12. 11As the company is majorly focused into e-commerce business so the majorcustomers are the online purchasing customers who visit the websitegovasool.com and place orders. The company also plays a major role in doingLoyalty programs for big companies across the country. The major customers aresuch as P&G, J&J, Unilever, Lenovo india, Bayer corps, Essilor india, etc. Themajor competition the company faces is in the e-commerce industry. The majorcompititors are like flipkart.com, letsbuy.com, etc.SWOT Analysis:The major strength of the company is the Price at which the firm providesproducts on the website. The company is a major leader in the market in Home &Kitchen appliance products.The major weakness of the company is in other categories like Mobile phonesand i-pads where the prices are quite high as compares to other online portals.In the e-commerce industry there is a great opportunity in order to gain marketshare and grow more into different categories. As the increasing number ofinternet users across the country there is a great scope of growth and morebusiness. The major threat can be from the big players in the industry. In order toeradicate the threats the company needs to focus more upon the prices ascompared to other market players.
  13. 13. 123. Need for StudyIn the fast growing and busy world, noone has time to go and shop even theirdaily required products from the shops. The cost of fuel and heavy traffic takes amajor time of people and thus comes the need for a fast and efficient way ofretailing which is expected to be the future trend.But, like every other process this also has got lots of barriers and thus toundertand the process involved in e-commerce becomes an important thing.Thus this research has been carried to understand the Supply Chain processesinvolved in an E-Commerce firm. As E-Commerce is a fast growing trend and isexpected to be the future of retailing.
  14. 14. 134. Literature SurveyIn this section we present the definition of Logistics, SCM and E-Commerce aswell as their relationship among others that are very crucial for the logisticsoperations.A. Logistics and SCMLogistics is defined by the Council of Logistics Management as the process ofplanning, implementing and controlling the efficient and effective flow andstorage of goods, services and related information from the point of origin to pointof consumption for the purpose of conforming to customer requirements. Itincludes inbound, outbound, internal, external movement and the return ofmaterial and goods as well as order fulfilment.
  15. 15. 14B. Logistics FrameworkFigure shows the physical and information flows from raw material to the finaldistribution of the finished products. It starts with the procurement activity wherethe process of selecting the suppliers and draw a purchase agreement takeplace. It refers to raw material, components, imported material, bought-in partsand supplies bought from outside organizations to support the company’soperations. It also involves the process of assigning task for the productionprocess, sub-assembly as well as work in progress.
  16. 16. 15Logistics frameworkNext is the material management activity where determination of quantities andtime points for all items. The goal is to achieve the efficient material flows,delivery services and utilization of resources. Attention is directed to which itemsmust new orders be planned, what quantity in the order must be stated for eachitem, when must the order of each item delivered to stock, directly to productionor directly to the customer.Final activity that involves in the logistics is the distribution process where thefinal receivers are the customers and end users. An additional and very importantfactor is that of reverse logistics where the flow of products and packaging backthrough the system.C. Relationship between SCM and logistics
  17. 17. 16Figure shows a simple supply chain that can be broken into three major parts:upstream, internal and downstream. The upstream supply chain includes theactivities of a manufacturing company with its suppliers and their connectionswith their suppliers. The supplier relationship can be extended to the left inseveral tiers, all the way to the origin of the material. The major activity isprocurement. The internal supply chain includes all in-house processes used intransforming the inputs received from the suppliers into the organization’s output.It extends from the time the inputs enter an organization to the time that theproducts go to the distribution outside of the organization. The major concernsare production management, manufacturing and inventory control. Thedownstream supply chain includes all the activities involved in delivering theproducts to the final customers. Attention is directed at distribution, warehousing,transportation and after-sale service.D. Logistics and E-CommerceE-Commerce is defined as technology- mediated exchanges between parties(individuals, organizations or both) as well as the electronically based intra- orinter-organizational activities that facilitate such exchanges.E-Commerce also can be defined as the process of buying, selling, transferringor exchanging products, services or information via computer networks, includingthe Internet.
  18. 18. 175. Objectives of StudyThe main objective behind this research has been a curiosity to understand thechanging pattern of retailing.• Compare e-commerce to traditional commerce• Understand e-commerce concepts• Relate the concept of supply chain to e-commerce• Identify ways (Processes) to carry out supply chain activities through e-commerce.
  19. 19. 186. Research MethodologyMost of the research being done is based on physical interviews being done withIndustry Experts with good experience in supply chain, logistics and ecommerceindustry. Primary Research: Interviews of employees at eMart Soluitons(Govasool.com) Secondary Research: Websites and BookseMart solutions is a startup B2B and B2C Private Ltd. Firm. Being a part of OrderManagement team in eMart has in itself given a lot of experience in supply chainand ecommerce industry.
  20. 20. 197. AnalysisThe Analysis of research and interviews is the thorough understanding of theprocess involved in supply chain, logistic activities involved in ecommercebusiness which is as follows:There are three types of supply change activities inecommerce business (eMart Solutions) First TypeProcess involved:1- Company (eMart) issues PO (Purchase Order) to vendor (ByFinance Team/Through CRM or Automated)2- Vendor delivers product to eMart office3- Vendor provides invoice (original) to concerned person4- eMart gives GRN(Goods Receipt Note) (Prepared by OperationTeam)*Points to be considered before issuing the GRNA- Quantity of ProductB- Model No. of ProductC- MRP of ItemD- Input Price of Item (from vendor)E- Tax rate (%)5- Vendor credit starts from GRN date (Credit term of payment)
  21. 21. 20 Second typeProcess involved:1- eMart issues PO (Purchase Order) to vendor by ........ pm (eg. 2pm) (PO prepared by Finance Team/Through CRM orAutomated )2- eMart will issue delivery request by.................. pm (eg. 5-6 pm)to Courier Company (Like Bluedart, Aramex) in agreement witheMart (By Operations Team through Email)*Email will includeA) Pick up details (Name, Address and Phone No of theconcerned vendor of the product ordered online)B) Delivery details (Name, add and Phone No. of the onlinecustomer)C) Product details (Product Name and Model No.)3- Vendor keeps ready the product by ....... pm (eg 5pm)4- Vendor courier the invoice to Emart (Hardcopy of invoice forrecord)5- eMart will verify invoice and issue GRN (Done by OperationsTeam) Third TypeProcess involved:1- eMart will issue the PO (Purchase Order) to vendor (Prepared byFinance Team/Through CRM or Automated)
  22. 22. 212- Vendor delivers stock to client directly without Invoice3- Vendor couriers invoice copy to eMart4- eMart gives GRN(Goods Receipt Note ) (By Operation Team )*Area of Consideration before issuing the GRNA- Quantity of ProductB- Model No of Product (like television etc.)C- MRP of itemD- Input Price (Provided by vendor)E- Tax rate (%)5- Vendor credit starts from GRN date (Credit term ofpayment from eMart)Other Innovative Processes: Automated Reminder on Stock updates to all the vendors1- A regular reminder to all vendors at 6 PM through CRM (ByCategory Management Team)2- Vendor will revert on Catagorysupport@gmail.com andOperation@govasool.com (Access will remain with categoryManagement and operations Team respectively)3- CM (Category Manager) has to send the mail on regular basisto the concern vendors4- After receiving the reverts, updation of stock on Govasool andEmart catalogue has to be done.
  23. 23. 225- In case of no response from vendor reminders should send tothem Automated Reminder on Price Updation to all the vendors1- 15 days reminder will send to all vendors through CRM (ByCategory Management Team)2- Vendor will revert on Catagorysupport@gmail.com (Access willremain with category Management)Responsibilities of CMCM has to send the mail on 15 days basis to the concern vendorsAfter receiving the reverts from vendors, they have to update theprices on Govasool and Emart catalogue. In case of no responsefrom vendor reminders should send them again n again Automated Reminder on Invoice/invoice Latency to all thevendors1- A Reminder to vendor will send to all vendors through CRM (ByOperations Team)2- Vendour will revert on Operation@govasool.com with scan copyof Invoice or with AWD Details (Access will remain withoperations Team)3- Verification of the invoice on CRM on the following basis: (ByOperations Team)A- QuantityB- Model No.C- MRP of Product
  24. 24. 23D- Input PriceE- Tax rate (%)4- Operations will inform Category Team and Vendor regarding theincomplete invoice with details5- A new reminder will send to the vendor regarding theincomplete invoice with the details (By Category managementteam)6- Then payment will issued to the vendor (By Finance Team)7- Technical Support Needed8- Creations of the Email Id’s Catagorysupport@gmail.com andOperation@govasool.com9- Provisions on the CRM10- Automated Reminders as per the above details
  25. 25. 248. ConclusionsThrough Primary research done by interviews following points were concluded: Major triggers of e-commerce in India are: Saves time and efforts Convenience of shopping at home Wide variety / range of products are available Good discounts / lower prices Get detailed information of the product You can compare various models / brands Major barriers of e-commerce in India were: Not sure of product quality Cannot bargain/Negotiate Not sure of security of transactions / Credit card misuse Need to touch and feel the product Significant discounts are not there Have to wait for delivery
  26. 26. 25 Factors for growth of online retail sector Growth of Indian Economy: Second fastest Emerging opportunities in service sector Capital no longer a constraint – easy loans Increase in the young working population Hefty pay pockets Nuclear families in urban areas Changing Cultural Habits Middle class dwelling revamped Multiple drivers leading to a consumption boom: Favourable demographics Growth in income Increasing population of working women Raising aspirations: Value added goods sales Challenges for Indian Logistics Companies Competition from Indian and Foreign logistics companies. (LikeAmazon) Technology to keep pace with demand for real time information.(3G – 4G Technology)
  27. 27. 26 Corporatization and lack of skill sets. Shedding local mindset and move to a global mindset. Integration of services and value added services. Funds to fuel expansion & growth. Inadequate infrastructure and complex tax laws. Potential Benefits of B2B E-commerce Lower administrative costs Lower search costs for buyers Reduced inventory costs Increasing competition among suppliers (increasing pricetransparency) Reducing inventory carried Lower transaction costs: Eliminating paperwork Automating parts of procurement process
  28. 28. 279. Recommendations The Indian government should making efforts by Privatizing ports and airports. Increasing the number of gateway ports Investing in highway projects Streamlining customs and excise procedures Implementing EDI systems Improving the rail network. The government plans to invest $17 billion in transportinfrastructure between 2006–2010. Strategies for Successful E-Commerce: Developingan Effective Web Presence Decide which tasks the site must accomplish An effective Web site creates an attractive presence and meetsthe needs of its visitors It may be necessary to redefine your site’s business model tocapture new business opportunities Efficient Supply Chain
  29. 29. 28
  30. 30. 2910. References Chopra, S. and P. Meindl, Supply Chain Management: Prentice Hall E-Commerce and E-Business: Zorayda Ruth Andam www.wikipedia.org www.marketwatch.com/ The Economist http://www.ecommercetimes.comIn the end, all business comes down to Supply Chain vs. Supply Chain-Robert Rodin, CEO, Marshall Industries
  31. 31. 3011. AppendixGrowth of B2B Commerce 2002–2013 (In US)

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