Logistically Yours

The success of e-tailing is intertwined with the quality of logistic support; robust, responsive and lean is the need of the hour. Storai, in conversation with Anil Khanna, MD, Blue Dart Express Ltd. profiles Blue Dart’s ecommerce service.

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“The play for any express logistic service provider, within ecommerce, is in the non-travel vertical. Since the entire gamut of e-commerce is not addressable for us, Blue Dart has identified the e-tailing market. By creating simplified solutions for our customers, we have a dominant market presence.” Says Anil Khanna, MD, Blue Dart Express Ltd.

E-tailing in India has taken off on the back of Cash on Delivery.  Credit card penetration is still less than 30% (at a population level) and there are concerns about revealing card details online.  Cash on delivery ensured that customer adoption of e-commerce was high – but it also increased the operational load on the e-tailer and the logistics partner.  At the same time, COD provides companies like DHL with a platform to differentiate themselves:  they are able to demonstrate better control over key risk points such the inherent risk of fraud, counterfeit, mutilation and theft.

“In order to cater to the demands of the growing e-tailing industry, Blue Dart introduced the COD service as an additional payment option to customers. The invoice value of the shipment is collected from the consignee in the form of cash at the time of delivery. The cash collected from the consignee is returned to the e-tailer to close the transaction thus completing the entire system.”

Blue Dart has partnered with Yes Bank to offer MPOS solutions – a mobile device based GPRS connectivity to facilitate debit/credit card payments.  This POS device when connected to any smartphone device can be used as a POS terminal to facilitate card payments.

Coverage v.s COD v.s. Logistics model

For e-tailers coverage is the key to growing sales.  While full service logistics providers like Blue Dart cover most of the cities and towns, for regions below the Taluka level,  they still need to tie up with local service providers.

This has meant that e-tailers have to manage multiple partnerships and balance growth with operational efficiency.  Out of this compulsion a natural progression of inventory models (and the corresponding logistics partner) has emerged:Market_Place-3

Anil says, “The most common business model is the vendor based business mode;  as it is not very capital intensive. After receiving a set number of orders, the e-tailer purchases products from a local distributor, and then transports them to his own facility for packing and shipping. The advantage is that the e-tailer doesn’t have capital tied up in inventory or unneeded warehouse space, has all the shipping records on hand, and has a good idea of the distributor’s stock. The disadvantage is that the e-tailer is very dependent upon his distributor’s supplies, and may not be able to accurately reflect available inventory to his shoppers before they purchase.”

Warehousing is another business model followed by e-tailers. As the e-tailing business grows in revenue as well as product offerings, e-tailers prefer to switch to the warehousing model where the e-tailer develops its own warehouses to store inventory and is ready to dispatch as soon as he receives an order. “This approach is investment intensive, since e-tailers are paying for both warehouse space, and have capital tied up in inventory on the shelves. But it allows the best quality of customer service, since shipping and inventory records are maintained in-house.”, says Anil.

The choice of model depends largely on the size of the company and the amount of capital available; while large, well capitalized e-tailing players (e.g. Flipkart) have their own logistics divisions, the smaller ones work with multiple logistics providers. As the e-tailing industry is slowly pivoting to a marketplace model – most mid sized e-tailers are choosing to outsource their logistics to a market place model.

Range of Logistics options

Logistics companies also have aMarket_Place-4 natural hierarchy in the industry.

  • Full Service Logistics Providers like Blue Dart Express – They offer the widest geographical coverage to e-tailers. They also offer a wider spectrum of services such as API integration, POD, customer verification, data validation, fastest remittance of COD, low (Return to Origin) RTO’s, near ‘zero’ damages etc.
  • Captive Logistics – A handful of e-tailing players choose to have their own logistics support that is managed in-house. Captive players are mainly used as cost control inventory and are used more in metros and easy to reach locations.
  • Local Logistic providers – These include niche express service providers who cater solely to e-tailing shipments only. Such players focus on specific geographies and offer limited services, but are a good match for local / regional and mid sized e-tailers.

E-Tailer or Express Company?

“In today’s competitive landscape, while a self-owned logistics system may be a key differentiator, it’s not clear whether it will be a long-term solution, or a one size solution that fits all. Developing a self-owned logistics network entails a huge investment, besides requiring automation, innovation, investment in IT and also sufficiently trained staff, which should be able to provide value-added services to the network.”  – he explains.

This is an interesting ‘take’ on the market trend where companies like Flipkart have chosen to invest in the Logistics side of the business. Time will tell whether the move will enhance their valuation or whether they would have been better off continuing to work with multiple national and local express logistics partners.Market_Place-5

Technology

The integration of technology on varied fronts adds to efficiency and visibility for the e-tailer. So what does Blue Dart have to offer on the technology front?

Blue Dart’s technology solutions have seen a high degree of customer adoption. 79% of Blue Dart’s regular customers use one or more of their solutions.

Home grown innovations like the COSMAT II™ (the tracking and ERP system), TrackDart™ (monitoring shipment status), MailDart™ (tracking shipments over e-mail), InternetDart™ (memory bank for shipments), PackTrack™ (tracking software for medium and large customers), ShopTrack™ (tracking and CRM tool for e-business portals), ImageDart™ (online download of proof of delivery challans/documents, to speed up the customer’s bill process, waybill issuance capability, customer directory, data upload and download of tracking information), among others have enabled the weaving of thoughtful information management into the logistics business.

Service Impact

The graphic summarizes the key impact areas / KPI’s of the express delivery service – for a e-tailer:

“Our sophisticated systems integrate seamlessly with pMarket_Place-2rocesses to allow pick-up of shipments, move them across the network, deliver and convey information to the customer, invoice and maintain books of accounts. Blue Dart systems have been designed to monitor shipping patterns and sales trends of customers, locations and industry segments, month-over-month and year-over-year.” – concludes Anil.

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