When it comes to e-commerce, D2C brands especially, logistics is a highly involved function. It is the all too critical layer that converts an order into realized revenue. Further, unlike B2B supply chains, the end customer expects complete visibility on the order status from the time it is placed, till it is delivered. And the job doesn’t end at making final deliveries. The delivery/reverse pickup is a critical touch point with the customer, which has a lasting impact. In fact, the conduct of the delivery executive while handing over the package, and collecting cash payment also affects the customer’s relationship with the brand. In this super insightful interview, Hemant Kejriwal, a seasoned Supply Chain Leader and ExVP (Operations and Supply Chain) at Sugar Cosmetics takes us into behind the scenes of D2C supply chains.
Q] How are inefficient logistics operations eating into D2C revenues?
From a broad perspective, the inefficiencies I have observed in D2C companies are not very different from those in the traditional ones. Functionally, there is Sales & Operations Planning, Inventory Management, Procurement, Warehousing. From the tech perspective there is – ERP, OMS (Order Management System), WMS (Warehouse Management System), TMS (Transportation Management System). From the external service providers there are transporters and carrier partners for bulk movement vs end customer deliveries, local vs upcountry deliveries, within an hour / same day / express deliveries by road / rail / air. And then there is always the overarching concern on keeping costs under control.
Q] How have the changing consumer expectations impacted D2C supply chains in the recent past?
The single most significant change in customer expectation has been in the speed of delivery. From days it came down to hours, and now players are competing to deliver within 20 minutes! This has clearly raised the bar and increased cost. One needs to understand that such fast deliveries cannot be made possible within the same system that processes orders for delivery within 2-3 days by just getting the team to work faster. These hyper-speed deliveries require a completely different system – tech, team, storage facilities & delivery infrastructure. The jury is still out on its feasibility and its ability to increase revenue. Most of the brands are actually piloting these super fast deliveries just to explore and understand its impact.
Q] What are the cost parameters involved in a D2C supply chain and how does one optimize logistics costs?
The basic cost parameters are the same – warehousing & transportation with the fixed cost heads being rent, utilities, manpower and variable being packaging, and transportation. The key input here is to design operations keeping the broader business objectives of higher sales and better customer service. In my experience, the biggest gains are achieved by working closely with the sales & product development teams to scale up and scale down capacity timely & to proactively draw attention to overstocked or slow moving inventory.
Q] What can be done to ensure an errorfree reverse logistics system?
The importance of this aspect of the D2C supply chain system cannot be emphasized enough. Let me try to explain this in a step by step manner. It starts with the pickup request. The customer return policy must be clearly defined & the team must ascertain the validity of the pick up request before scheduling the pickup and initiating the pickup request with the logistics partner. The brand must also have a clearly defined and documented process for the pick-up executive to follow. The executive must thoroughly inspect the product(s) before pickup as per a clearly defined process with the logistics partner. The logistics partner must be held fully accountable for timely pickups and to bear the cost of an unauthorized or incorrect pickup.
This is an abridged version of the original interview published in the October 2022 issue of Logistics Insider magazine. Click here to read the complete interview.