“Supply Chain in E-Commerce”

PROJECT REPORT

Submitted in partial fulfillment of the requirements for the award of the INTERNATIONAL MBA IN SUPPLY CHAIN MANAGEMENT

By “AKASH SINGH THAKUR” “UBI/DMBA/OCT11/8264”

Under the guidance of “ NEHA GUPTA – PGDBM / MA-Journalism & Mass

Communication”

JARO EDUCATION

MUMBAI

“JANUARY 2011”

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Declaration

I, Akash Singh Thakur hereby declare that this project report titled Impact of

ecommerce on Supply Chain submitted in partial fulfilment of the requirement

for the “International MBA in Supply Chain Management” is my original work

and it has not formed the basis for the award of any other degree.

____________________

AKASH SINGH THAKUR

Place: Mumbai

Date: 31/01/2012

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Acknowledgement

I 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 as

our CEO- Mr. Aditya and COO- Mr. Srikanth who gave me the golden opportunity

to 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 chain

and 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.

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Table of Contents

1. Industry profile ....................................................................................................................... 4

Supply chain management .......................................................................................................... 4

Electronic commerce ................................................................................................................... 4

GROWTH OF RETAIL IN INDIA ...................................................................................................... 5

2. Company Profile .................................................................................................................... 7

Marketing: ................................................................................................................................... 7

Human resource: ......................................................................................................................... 9

Operations: ................................................................................................................................ 10

Finance: ..................................................................................................................................... 10

SWOT Analysis: .......................................................................................................................... 11

3. Need for Study ..................................................................................................................... 12

4. Literature Survey ................................................................................................................. 13

5. Objectives of Study ............................................................................................................. 17

6. Research Methodology ...................................................................................................... 18

7. Analysis ................................................................................................................................ 19

8. Conclusions ......................................................................................................................... 24

9. Recommendations .............................................................................................................. 27

10. References ........................................................................................................................... 29

11. Appendix ............................................................................................................................... 30

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1. Industry profile

Supply chain management (SCM) encompasses the planning and

management of all activities involved in sourcing and procurement, conversion,

and all logistics management activities. Importantly, it also includes coordination

and collaboration with channel partners, which can be suppliers, intermediaries,

third-party service providers, and customers. In essence, SCM integrates supply

and demand management within and across companies.

The Indian supply chain industry represents $50billion and is growing at a rate of

7 % annually also opening up of the organized retail sector is attracting big retail

chains like Wal-Mart and Carrefour in addition to big Indian retailers like

Pantaloon and Reliance. Thus demand for logistics and supply chain

management services would be largely driven by the growth of the Indian

economy.

Estimated logistics costs represent 15 to16% of China’s GDP and 11 to 13% of

India’s GDP.

Electronic commerce refers to the buying and selling of products or services

over electronic systems such as the Internet and other computer networks.

However, the term may refer to more than just buying and selling products

online. It also includes the entire online process of developing, marketing, selling,

delivering, servicing and paying for products and services.

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Out of the 13.2 million internet users across 26 cities covered in IMRB’s earlier

research of 2006, 14.2% use the Internet to buy travel tickets; 5.5% people do

online 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 of

FY2012. (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 model

of store chains run by Khadi & Village Industries Commission

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1980s experienced slow change as India began to open up economy.

Textiles sector with companies like Bombay Dyeing, Raymond's, S

Kumar's and Grasim first saw the emergence of retail chains.

1990s saw a fresh wave of entrants with a shift from Manufactures to

Pure Retailers. For e.g. Food World, Subhiksha and Nilgiris in food and

FMCG; Planet M and Music World in music; Crossword and

Fountainhead in books.

Post 1995 onwards saw an emergence of shopping centers. Targeted

to provide a complete destination experience for all segments of

society

Emergence of hyper and super markets trying to provide customer with

3 V’s - Value, Variety and Volume.

Note: It has been observed that interestingly most of the Online Shoppers start

their e-Shopping journey with buying Air/ Railway Tickets in India.

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2. Company Profile

There are two types of merchant companies, those that sell directly to consumers

and those that sell to companies. Each uses slightly different information systems

in the course of doing business. B2C, or business-to-consumer, e-commerce

concerns sales between a supplier and a retail customer (the consumer). A

typical information system for B2C provides a Web-based application or Web

storefront 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 sales

through their loyalty programs and Corporate gifting business and B2C through

its website www.govasool.com

Marketing:

Product Portfolio: Govasool.com basically is into e-commerce business

wherein it shares a huge market in Home and Kitchen appliance products

providing the customers best prices across the country. The website

provides products in various categories such as Flowers, Gifts, Home

appliance, Kitchen appliance, Home theatre systems, Mobile phones,

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iPads, etc. The main focus of the firm is basically to concentrate on market

share.

Distribution network: The operational and distribution network of the firm

has 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 model

through which it operates and handles the inventory and distribution

across the country.

Sales force: The Company consists of a strong and dedicated sales force

which is totally focused into the up gradation and growth of the company

by using the best of their skills and the provided resources. The various

branches of the firm into different cities have led the company to create a

well groomed sales force.

Pricing: Govasool.com is a major platform to provide the best prices

across the country in the industry and also providing the products with

best qualities.

Promotion Strategy: Promotion has been one of the major tools which

Govasool.com has focused upon in order to create a better positioning in

the customers mind. Company uses various promotional tools like Social

networking websites, Banners across major cities, TV ads, print ads in

major newspapers, etc.

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Customer service: Customer service is one of the major factors that is to

be focused upon in order to create a positive perception in the customers

mind for a long term relationship with customers. Govasool.com is focused

to a large extent on the after sales service which leads to become a major

player in the industry.

Market Share: As the e-commerce market is growing at a very high rate

across the globe so the firm is dedicated towards creating a better market

share in the market by applying various strategic tools.

Competition: The growth of internet users across the country has led to a

boom in the e-commerce industry which has created an opportunity in the

market for big players to gain more n more market share. The major

competitors 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 are

High level managers in the field of Marketing, IT, Finance & HR.

Each managers have subordinates which work under them consisting of

supervisors and the sales force. The total strength of the firm is 70 employees.

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The training & development in the company is handled by well skilled HR

managers who train the employees in such a manner that they work for the firm

with full commitment and dedication.

The company has well-nourished HR policies which are very much helpful in the

appraisals of the employees based on their work and the type of dedication

towards their job. There is an also well working retention policy which ensures

that the employees join the firm as a long term perspective and make the most

out 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 major

talents across the country. The operation managers keep control on all the

operational activities that takes place in the distribution and inventory

management in the firm.

Finance:

Govasool has seen a huge growth in the recent times. The annual turnover of the

company is Rs 8 crores. The growth that it has experienced in the past years has

been near about to 200%. The performance of the company is basically judged

based on the market share that it creates and the total gross profit that it makes

each and every year.

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As the company is majorly focused into e-commerce business so the major

customers are the online purchasing customers who visit the website

govasool.com and place orders. The company also plays a major role in doing

Loyalty programs for big companies across the country. The major customers are

such as P&G, J&J, Unilever, Lenovo india, Bayer corps, Essilor india, etc. The

major competition the company faces is in the e-commerce industry. The major

compititors are like flipkart.com, letsbuy.com, etc.

SWOT Analysis:

The major strength of the company is the Price at which the firm provides

products 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 phones

and 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 market

share and grow more into different categories. As the increasing number of

internet users across the country there is a great scope of growth and more

business. The major threat can be from the big players in the industry. In order to

eradicate the threats the company needs to focus more upon the prices as

compared to other market players.

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3. Need for Study

In the fast growing and busy world, noone has time to go and shop even their

daily required products from the shops. The cost of fuel and heavy traffic takes a

major time of people and thus comes the need for a fast and efficient way of

retailing which is expected to be the future trend.

But, like every other process this also has got lots of barriers and thus to

undertand the process involved in e-commerce becomes an important thing.

Thus this research has been carried to understand the Supply Chain processes

involved in an E-Commerce firm. As E-Commerce is a fast growing trend and is

expected to be the future of retailing.

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4. Literature Survey

In this section we present the definition of Logistics, SCM and E-Commerce as

well as their relationship among others that are very crucial for the logistics

operations.

A. Logistics and SCM

Logistics is defined by the Council of Logistics Management as the process of

planning, implementing and controlling the efficient and effective flow and

storage of goods, services and related information from the point of origin to point

of consumption for the purpose of conforming to customer requirements. It

includes inbound, outbound, internal, external movement and the return of

material and goods as well as order fulfilment.

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B. Logistics Framework

Figure shows the physical and information flows from raw material to the final

distribution of the finished products. It starts with the procurement activity where

the process of selecting the suppliers and draw a purchase agreement take

place. It refers to raw material, components, imported material, bought-in parts

and supplies bought from outside organizations to support the company’s

operations. It also involves the process of assigning task for the production

process, sub-assembly as well as work in progress.

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Logistics framework

Next is the material management activity where determination of quantities and

time points for all items. The goal is to achieve the efficient material flows,

delivery services and utilization of resources. Attention is directed to which items

must new orders be planned, what quantity in the order must be stated for each

item, when must the order of each item delivered to stock, directly to production

or directly to the customer.

Final activity that involves in the logistics is the distribution process where the

final receivers are the customers and end users. An additional and very important

factor is that of reverse logistics where the flow of products and packaging back

through the system.

C. Relationship between SCM and logistics

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Figure shows a simple supply chain that can be broken into three major parts:

upstream, internal and downstream. The upstream supply chain includes the

activities of a manufacturing company with its suppliers and their connections

with their suppliers. The supplier relationship can be extended to the left in

several tiers, all the way to the origin of the material. The major activity is

procurement. The internal supply chain includes all in-house processes used in

transforming 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 the

products go to the distribution outside of the organization. The major concerns

are production management, manufacturing and inventory control. The

downstream supply chain includes all the activities involved in delivering the

products to the final customers. Attention is directed at distribution, warehousing,

transportation and after-sale service.

D. Logistics and E-Commerce

E-Commerce is defined as technology- mediated exchanges between parties

(individuals, organizations or both) as well as the electronically based intra- or

inter-organizational activities that facilitate such exchanges.

E-Commerce also can be defined as the process of buying, selling, transferring

or exchanging products, services or information via computer networks, including

the Internet.

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5. Objectives of Study

The main objective behind this research has been a curiosity to understand the

changing 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.

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6. Research Methodology

Most of the research being done is based on physical interviews being done with

Industry Experts with good experience in supply chain, logistics and ecommerce

industry.

Primary Research: Interviews of employees at eMart Soluitons

(Govasool.com)

Secondary Research: Websites and Books

eMart solutions is a startup B2B and B2C Private Ltd. Firm. Being a part of Order

Management team in eMart has in itself given a lot of experience in supply chain

and ecommerce industry.

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7. Analysis

The Analysis of research and interviews is the thorough understanding of the

process involved in supply chain, logistic activities involved in ecommerce

business which is as follows:

There are three types of supply change activities in ecommerce business (eMart Solutions) First Type

Process involved:

1- Company (eMart) issues PO (Purchase Order) to vendor (By

Finance Team/Through CRM or Automated)

2- Vendor delivers product to eMart office

3- Vendor provides invoice (original) to concerned person

4- eMart gives GRN(Goods Receipt Note) (Prepared by Operation

Team)

*Points to be considered before issuing the GRN

A- Quantity of Product

B- Model No. of Product

C- MRP of Item

D- Input Price of Item (from vendor)

E- Tax rate (%)

5- Vendor credit starts from GRN date (Credit term of payment)

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Second type

Process involved:

1- eMart issues PO (Purchase Order) to vendor by ........ pm (eg. 2

pm) (PO prepared by Finance Team/Through CRM or

Automated )

2- eMart will issue delivery request by.................. pm (eg. 5-6 pm)

to Courier Company (Like Bluedart, Aramex) in agreement with

eMart (By Operations Team through Email)

*Email will include

A) Pick up details (Name, Address and Phone No of the

concerned vendor of the product ordered online)

B) Delivery details (Name, add and Phone No. of the online

customer)

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 for

record)

5- eMart will verify invoice and issue GRN (Done by Operations

Team)

Third Type

Process involved:

1- eMart will issue the PO (Purchase Order) to vendor (Prepared by

Finance Team/Through CRM or Automated)

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2- Vendor delivers stock to client directly without Invoice

3- Vendor couriers invoice copy to eMart

4- eMart gives GRN(Goods Receipt Note ) (By Operation Team )

*Area of Consideration before issuing the GRN

A- Quantity of Product

B- Model No of Product (like television etc.)

C- MRP of item

D- Input Price (Provided by vendor)

E- Tax rate (%)

5- Vendor credit starts from GRN date (Credit term of

payment from eMart)

Other Innovative Processes:

Automated Reminder on Stock updates to all the vendors

1- A regular reminder to all vendors at 6 PM through CRM (By

Category Management Team)

2- Vendor will revert on Catagorysupport@gmail.com and

Operation@govasool.com (Access will remain with category

Management and operations Team respectively)

3- CM (Category Manager) has to send the mail on regular basis

to the concern vendors

4- After receiving the reverts, updation of stock on Govasool and

Emart catalogue has to be done.

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5- In case of no response from vendor reminders should send to

them

Automated Reminder on Price Updation to all the vendors

1- 15 days reminder will send to all vendors through CRM (By

Category Management Team)

2- Vendor will revert on Catagorysupport@gmail.com (Access will

remain with category Management)

Responsibilities of CM

CM has to send the mail on 15 days basis to the concern vendors

After receiving the reverts from vendors, they have to update the

prices on Govasool and Emart catalogue. In case of no response

from vendor reminders should send them again n again

Automated Reminder on Invoice/invoice Latency to all the vendors

1- A Reminder to vendor will send to all vendors through CRM (By

Operations Team)

2- Vendour will revert on Operation@govasool.com with scan copy

of Invoice or with AWD Details (Access will remain with

operations Team)

3- Verification of the invoice on CRM on the following basis: (By

Operations Team)

A- Quantity

B- Model No.

C- MRP of Product

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D- Input Price

E- Tax rate (%)

4- Operations will inform Category Team and Vendor regarding the

incomplete invoice with details

5- A new reminder will send to the vendor regarding the

incomplete invoice with the details (By Category management

team)

6- Then payment will issued to the vendor (By Finance Team)

7- Technical Support Needed

8- Creations of the Email Id’s Catagorysupport@gmail.com and

Operation@govasool.com

9- Provisions on the CRM

10- Automated Reminders as per the above details

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8. Conclusions

Through 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

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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. (Like

Amazon)

Technology to keep pace with demand for real time information.

(3G – 4G Technology)

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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 price

transparency)

Reducing inventory carried

Lower transaction costs:

Eliminating paperwork

Automating parts of procurement process

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9. 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 transport

infrastructure between 2006–2010.

Strategies for Successful E-Commerce: Developing

an Effective Web Presence

Decide which tasks the site must accomplish

An effective Web site creates an attractive presence and meets

the needs of its visitors

It may be necessary to redefine your site’s business model to

capture new business opportunities

Efficient Supply Chain

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10. 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.com

In the end, all business comes down to Supply Chain vs. Supply Chain

-Robert Rodin, CEO, Marshall Industries

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11. Appendix

Growth of B2B Commerce 2002–2013 (In US)