Table of Contents

Purpose ................................................................................................................................................... 2
Guiding Principles ................................................................................................................................... 2
1. Maintaining and delivering the highest quality of meat .............................................................. 2
2. Establish the key driver metrics along with in-depth project plan with collaboration across
supply chain teams to achieve the highest instock% ........................................................................ 2
3. Identify and implement key projects around processes/ practices/ opportunities to
minimize written off inventory/ liquidation/ wastage ................................................................. 3
Support Areas ......................................................................................................................................... 4
Appendix - key metrics:.......................................................................................................................... 4
 Licious planning strategy

Purpose
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This document summarizes the vision of how inventory planning, by ensuring seamless planning and execution with the other
legs of supply chain, will drive best-in-market NPS and customer satisfaction without compromising the highest product quality
and thus increase long term revenues by tapping in to *$65 billion potential market and improving the net profit by reducing
COGS for Licious

*expected by 2020

Guiding Principles
1. Maintaining and delivering the highest quality of meat
2. Establish the key and driver metrics along with in-depth project plan with collaboration across supply chain teams
to achieve the highest Instock %
3. Identify and implement key projects around processes/ practices/ opportunities to minimize written off inventory/
liquidation/ wastage.

1. Maintaining and delivering the highest quality of meat- Licious is based on an end-to-end model that starts right from
procuring the fresh produce to processing, storage and delivery which allows for great control over quality. This is evident in
the repeat customer base (90%) of Licious (90%)

2. Establish the key driver metrics along with in-depth project plan with collaboration across supply chain teams to achieve the
highest instock%
What is Instock and why is it important?

Instock is defined as the scenario where the inventory is available for promise and to be ordered by customer, for each
SKU/product listing that the company offers to the customer on its site. The below formula is used to calculate the IS% for a
SKU. Licious IS% will be the weighted average of its 3000 SKUs’ Instock.

Instock page view (available to promise inventory is >0)/ Total page views.

Good instock % are critical in supply chain to ensure customer stickiness for new customers, drive repeat purchases from
existing customers, prevent loss of sale opportunity and thus drive up the customer NPS and subsequently the brand value.

Let us now look at the key drivers of Instock:

1. Low source demand MPE – MPE or mean percentage error is defined as the difference of planned forecast and actual
sales divided by planned forecast for each SKU. A negative MPE signifies the imbalance in demand and supply, with actual
demand outstripping the planned forecast. There are various approaches one can use to reduce the MPE the important one
being using the best and relevant demand forecasting techniques preferably backed by machine learning.

“AI-based approaches to forecasting are expected to reduce forecasting errors by 30 to 50% in some settings. The benefits
of applying AI in supply chain management, however, go far beyond that. Lost sales due to product unavailability can be
reduced by up to 65%. Costs related to transport and warehousing and supply chain administration are expected to decrease
by 5 to 10% and 25 to 40%, respectively. Due to AI, overall inventory reductions of 20 to 50% are feasible.”
Source: McKinsey study on Smartening up with Artificial Intelligence (AI) - What’s in it for Germany and its Industrial Sector?

2. Low destination demand MPE – Looking at FSN MPE in isolation does not give an overall solve for supply/ operational
issues related to last mile deliveries. Licious supply chain has 56 last mile delivery centers throughout India. Variability/MAPE
in destination demand may cause one excess load at one of the delivery centers, and reduced load at other centers across
the city while the total SKU demand remains as per the forecast. This is a non-ideal scenario leading to stress at one hub and
capacity underutilization (and possible cost implications) at another. The stressed hub may require reactive demand shaping
measures for the associated pincodes causing an artificially induced Out of stock scenario to protect the last mile supply
chain and poor customer experience and possible incidences of reduced quality. Identify and using the right forecasting
technique will help address this problem too.
3. Quality versus Instock - The scenarios in there is a conflict between the three guiding principles, quality has to be the
lodestar. A root cause analysis of such scenarios needs to be done to identify the action items to ensure the non -
repeatability of these in future. The AIs can be classified and assigned to the two critical steps at the source of supply chain-
Inbound and storage. A close understanding of raw material to final goods stage followed by right storage techniques will
help in taking proactive measures to reduce these conflicting scenarios. Efficient Inbound process with low TATs for dock to
stock, quality check after receiving the vendor consignment etc. are equally critical to ensure the right quality of raw
materials.

4. Right Inventory replenishment policy- Meat is a category with an extremely low shelf life. Hence, it is critical to have a
continuous review policy for inventory, instead of periodic review. The minimum shelf life that must be promised to the
customer also needs to be factored in. Vendor holidays, other foreseen delays in delivery time from pre processing centers
to processing centers are other key drivers.

5. Raw material load arrival time slot adherence and fill rate- Because of the hyperlocal nature of the end to end supply
chain, the slot adherence and fill rate against raw materials is extremely critical to the downstream activities in supply chain
of Licious. Vendor rating systems, integrated API s at preprocessing and processing centers are some of the key measures to
improve the same.

6. Fallback sources- Licious has 3 pre- processing centers which are used to serve 9 cities in the country. For SKUs that do not
require preprocessing, there can be alternate/ fallback sources available locally to serve the needs. The same vendor
presence in other geographies can be used to directly reach the delivery centers and finally the customers.

7. Exception handling – While out of stock scenarios cannot be completely avoided in real world, using right product/tech
solves to generate the right messaging helps in retaining customer stickiness and mitigating the future sales loss due to
customer shifting else. A few of such scenarios may be

a. Entry restrictions for certain pincodes in NCR pre/ during Republic day parade

b. Tech/product related outages.

3. Identify and implement key projects around processes/ practices/ opportunities to minimize written off inventory/
liquidation/ wastage – the written off inventory has a direct implication on COGS and hence the PnL. Due to lower shelf life,
deriving any salvage value is nearly impossible compared to other higher shelf life goods.

The key drivers that lead to liquidation/wastage of inventory are:

1. High source demand MPE – MPE or mean percentage error is defined as the difference of planned forecast and actual
sales divided by planned forecast for each SKU. A positive MPE signifies the imbalance in demand and supply, with demand
being lower than the forecast leading to excess inventory at processing enters. Owing to the lower shelf life of meat
products, this inventory will not be available for sale the next day and must be liquidated/disposed. There are various
approaches one can use to reduce the MPE the important one being using the best and relevant demand forecasting
techniques preferably backed by machine learning.

2. High destination demand MPE – Looking at FSN MPE in isolation does not give an overall solve for supply/ operational
issues related to last mile deliveries. Licious supply chain has 56 last mile delivery centers throughout India. Variability/MAPE
in destination demand may cause one excess load at one of the delivery centers, and reduced load at other centers across
the city while the total SKU demand remains as per the forecast. This is a non-ideal scenario leading to stress at one hub and
capacity underutilization (and possible cost implications) at another. The stressed hub may require reactive demand shaping
measures for the associated pincodes causing an artificially induced Out of stock scenario to protect the last mile supply
chain and poor customer experience and possible incidences of reduced quality. In case the goods have been dispatched
from processing to delivery centers with high demand, the delivery center will choose to return/ not service the products
higher than capacity. This will require the excess inventory landing at the delivery center to be disposed. Ensuring right
logistics planning software, which provide early visibility of delivery center level load before the processing center dispatches
the load may help in mitigating these wastage incidences. However, the long term solve needs to be accurate destination
level demand forecasts

3. Demand mismatch between different FSNs requiring the same raw material- in order to maintain the instock % of top
selling SKUs as 100% may lead to excess of other SKUs requiring the same raw material. This excess goes to liquidation due
to lack of enough demand. However, if this is known in advance as is a part of daily production plan, there are chances of
retaining the salvage value by becoming the raw material suppliers to the other hyperlocal industries such as centralized
kitchens, offline stores, restaurants, through establishing a reverse flow of finished goods to the vendors for raw materials.

4. Customer promise slot non-adherence: pre slot and post slot breaches are key drivers that drive up the returns% of a
slotted delivery supply chain. Minimizing breaches by estimating accurate last mile design productivities, understanding and
resolving the key drivers behind the pre slot breaches can help in minimizing these incidences.

Factors that impact Last Mile productivities are:

a. Customer Interaction time - I

b. Delivery vehicle speed- S

c. Slot area - A

d. slot duration – t

e. Number of orders in each slot- N

Last mile productivity is defined as: ROUND ((t*60/ (SQRT (2*A/ (SQRT (3) *N)) *1.4/S*60) +I),1)

Support Areas:

1.Identify and implement the right demand forecasting techniques, at FSN and destination pincode level, with the help of
data science team.

2.Product/ tech solves/ UX design solve for the right approach to error handling.

3. Initiatives around slot adherence/ Inbound process time reduction by ground ops/FC ops team

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Appendix - key metrics:

Supply chain activity Metrics Definition

Fill rate quantity fulfilled/ quantity promised for each raw

material consignment

Inbound/ Inbound delivery Slot adherence Gap between raw material landing time predicted vs
partner/Inbound planning actual arrival time

Dock to stock Time between unloading of consignment to put away/

sending away to production/ processing

RM liquidation% % of raw materials unused and disposed against

received

Production/production planning FG unit plan % of Finished goods produced / planned

accuracy
Inventory planning Instock % Total Instock page views (where promise able
inventory>0)/total page views

Liquidation% % of Finished goods disposed / produced

Productivity Count of goods delivered per van/ hour

LM design
Returns% Count of orders undelivered/orders attempted