India is a country with lot of diversity and socio-economic conditions and rich culture clubbed with number of festivals. Business organisations face multiple challenges in fulfilling the demand for goods and services particularly during festive season.
According to a RedSeer study, the annual sales of e-commerce companies during 2020 is estimated at US $ 38 billion out of which around $7 billion is estimated during one-month sale in October 2020. Significant amount of business (around 60%) happens during September-October festive season. During current year, Amazon and Flipkart reported around US$ 3.5 billion in four days time during October festive season sale.
According to a Forrester Research study, the cumulative sale of e-tailers is estimated at US$ 4.7 billion during one week of October 2020 festive season which was around US$ 2.7 during 2019. According to Redseer, this year’s festive season sale is estimated at US$ 7 billion which is 75% more than previous year sales.
COVID-19 crisis is a challenge as well as an opportunity particularly for e-commerce companies. Due to disruptions in supply chains during COVID crisis, many new customers emerged from tier 2 and tier 3 cities. Industry analysis shows that around 50 percent of new customers on day 1 were from tier 3 cities.
The major segments that experienced a surge in demand include mobile phones, home category, appliances, beauty and general merchandise. The current year surge is attributed to COVID-19 restrictions and massive online adoption, affordable schemes offered by various brands and e-commerce companies and government of India’s call for Atmanirbhar policy and competition due to new entrants. This trend clearly shows the amount of stress that supply chains undergo during the festive season.
Some of the major challenges faced by e-commerce companies include the following:
- Inherent nature of product and consumer behaviour
- The unpredictability of demand for both new and old products in tier 1, tier 2 and tier 3 cities by old and new customers.
- Unpredictability in customer orders particularly during the first two days of the sale
- Higher consumption due to COVID-19 restrictions and preference for online buying
- Wide range of products/offers
- Shortage of workforce at all levels of the supply chain for both e-commerce companies and logistics companies
- Unpredictability in returns
- Competition among e-commerce players
- Number of products and quality of products offered
- Coordination among suppliers and other stakeholders of the supply chain
- Increased level of complexity in supply chains
- Launch of new platforms like WhatsApp based, video-based shopping
- Managing channel partners for products and services
- Managing multiple supply chains
- Managing shortages of fast-moving and inventory/obsolescence of slow-moving items
- E-commerce policy
COVID-19 is a big opportunity particularly for e-commerce companies, suppliers and customers, banks, logistics service providers and government for boosting its policies like Atmanirbhar Bharat, Make in India and others.
Remedies for managing Supply Chain Volatility
According to Gartner study, best companies in the world are the ones with best supply chains. Many companies have mastered their supply chains by focusing on innovative approaches based on products/services offered, customer demographics, supply chain processes, use of appropriate technologies and trained/skilled manpower. Managing supply chain stakeholders during peak demand season like festivals is one of the major challenges.
Some of the proven mechanisms that ecommerce companies can follow include:
- Demand and supply planning based on consumption pattern, product life cycle, season length, lead time and other factors
- Collaborative planning, forecasting and replenishment of various products offered during festival season
- Supply base management and brand management
- Inventory management using digital technologies like RFID, Chatbots, Voice, AI and ML tools for planning and control
- Storage space management using multi-user warehouse space
- A robust system for returns management
- System for managing compliances across the supply chain
- System for managing spurious products
- Advance planning for critical resources particularly workforce across the supply chain
- Reliable channel partner for last-mile delivery
- Use of state of the art digital platforms for fast and accurate response
- Use of digital technologies for tracking and traceability
- System for linking financial measures with supply chain performance
- Incentives to stakeholders for supply chain-wide performance
- Contingency plan for managing disruptions in the supply chain
This article has been authored by Venkataramanaiah Saddikuti, Associate Professor, IIM Lucknow