A Case Study

on
Supply Chain Model of Flipkart

By
Manas Tiwari
2018A4PS0971H

Under the supervision of

Dr. Phaneendra Kiran Chaganti

Birla Institute of Technology and Science, Pilani

Hyderabad Campus

Course: Supply Chain Management (ME F421)

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Contents
Acknowledgement ............................................................................................. 3
Introduction ....................................................................................................... 4
History of the company .................................................................................. 4
About the E-commerce business in India ........................................................ 4
Supply Chain of Flipkart ..................................................................................... 6
Logistics .......................................................................................................... 6
Procurement ................................................................................................... 8
Warehouses .................................................................................................... 9
Inventory Management ................................................................................ 11
Supplier Management .................................................................................. 11
Conclusion ....................................................................................................... 13
References ............................................................................................................................................ 14

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 Acknowledgement

I express my deep sense of gratitude to Dr. Phaneendra Kumar

Chaganti for encouraging me to work on this important project under
his supervision and also for the guidance and input provided to me
during the course of this project. This project provided me with a
chance to apply all the learnings in the course in the systematic way.
His teachings and constructive criticism have immensely contributed
immensely to the evolution of my ideas in project.

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 Introduction

History of the company

Flipkart is an Indian e-commerce company, headquartered

in Bangalore, Karnataka, India, and incorporated in Singapore as
a private limited company. The company was founded by Sachin
Bansal and Binny Bansal, and initially started by selling books online
but today has diversified into a generic e-commerce website, selling
a variety of products ranging from electronics, books, grocery,
healthcare products, home essentials, fashion and lifestyle products.
The two major competitors of Flipkart currently are Amazon’s Indian
Subsidiary and domestic rival Snapdeal. As of October 2020, the
market share of Flipkart is 31.9%. Flipkart has a leading hand in the
apparel segment, which was further given a boost by its acquisition
of the e-commerce site Myntra. In the consumer electronics and
mobile phones segment, it was on equal terms with Amazon.
Flipkart was acquired by a U.S based retail chain, Walmart, with the
acquirer holding a 81% stake in the company and valuing the
company at $ 20 billion.

About the E-commerce business in India

The e-commerce business in India has been bolstered in the recent

times by the increase in the smartphone penetration and availability
of internet at very cheap rates. Due to these reasons the Indian
online business is expected to rise to US$ 200 billion by the year
2026. The major leaders in the e-commerce sector are Flipkart and
Amazon India. Another factor that could be seen as a booster for the
growth of e-commerce business into India could be the various
government initiatives like Digital India, Start-up India, Make in India
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and others that are being offered by the government. The Indian e-
commerce sector is said to overtake the US sector by 2034. This
boon of the e-commerce sector in India could be attributed to newer
technological innovations such as hyper-local logistics, digital
payments and analytics. The growth would also provide employment
opportunities, increase tax collection and increase revenue from
exports.
The cheaper prices offered by the online retailers in India as
compared to the traditional retailers is also the reason that so many
customers are shifting from store-based retail stores to online retail.
These e-commerce sites also usually offer high discounts during
certain periods like festivals in order to attract more customer base.
They also offer convenient and fraud proof method of payments
such as online payment and cash-on-delivery respectively. On top of
these facilities the online retail stores also offer facilities such as
warranties for electronic goods and free delivery or fast delivery at
minimal costs. This all reasons are contributors to a lot of customers
shifting from traditional store-based retailers to online retailers.
There are also a lot of challenges faced by these e-commerce
companies to provide these facilities. The online retailers have to
hold up inventory of many months in order to get competitive prices
from the suppliers. In order to provide competitive delivery costs
some of the burden of the delivery costs have to be paid out of the
company’s pocket.

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 Supply Chain of Flipkart

The entire Flipkart structure is subdivided into the three main broad
categories as shown below:
Product and Technology Business Development Operations
Procurement
Vendor management Warehouse
Website Management
Sales management Logistics
ERP system
Pricing strategies Inventory Management
Supplier Management

We are mainly interested in discussing the operations part of the

three categories, as it is more relevant to our discussion of the
supply chain of Flipkart.
The product and technology division of Flipkart is responsible for the
management of the website and the ERP system of the company.
Every process starting from listing of an item on the website to the
optimization of the search engine is managed by this division of the
company.
The business development team is responsible for managing the
sales aspect of the company from vendor management, sales
management to pricing and discount strategies.
The operations division of the company can be further classified into
the following categories and are discussed below.

Logistics

The way Flipkart handles their logistics in their supply chain are
discussed below:
• Flipkart uses its own, in-house branch of logistics called e-kart.
The services offered by E-kart include delivery logistics, reverse

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 logistics, and cash on delivery. It also has various technological
measures to help the customers such as order tracking, billing,
report and analysis etc.
• E-kart manages up to 85% of the total products that were
shipped by Flipkart, and the rest are managed by other third-
party logistic companies. Flipkart uses the facilities of these
other third-party companies like Blue Dart, First Flight etc, to
deliver the products to areas where courier doesn’t reach.
• Last mile delivery, which is usually the costliest and time
consuming because it involves multiple stops with low drop
sizes and also the highest human interaction out of all the legs
of delivery. With the help of E-kart the process of last mile
delivery is made easier for Flipkart because it is able to track
the shipments more easily, and is also able to guarantee
customer satisfaction by fast delivery because it is also able to
control the routes of delivery.
• Other advantages of having an in-house logistic branch is that
the company is able to save commissions, that would otherwise
have been charged by the third-party companies of up to 2%,
hence making the process of delivery less costly.
• The current modes of transport used by E-kart are surface and
air transport, whereas rail transport is not used. The mode and
speed of delivery are usually based on the quality of service the
customer desires.
• The local (warehouse and delivery location in the same city)
and zonal deliveries (warehouse and delivery location in the
same zone) surface mode of transport is used, whereas for
national deliveries (warehouse and delivery location located in
different zones) air transport maybe used. In cases where zonal
delivery required has high volume both surface as well as air
mode of transport maybe used.

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 • Recently, during the Big Billion Days, the festive season offered
by Flipkart during which the demand is heightened, E-kart
partnered with as many as 27,000 kirana stores in the country
in order to be more responsive.
• Flipkart also follows a 30-day return policy for its products in
order the customer is not satisfied. The costs of returning the
package are borne by Flipkart. The Flipkart return rates are
about 2.6%. The customer could either replace the product, ask
for a cash-back or get store credit by the company if they aren’t
satisfied.

Procurement

• When the company was just started and it started to expand

into multiple product types, they followed the consignment
model for procurement. This model involves, that the retailer
(Flipkart) holds the inventory which is actually owned by the
supplier, and only buys the inventory when the product is
bought by the customer. This model was adopted by the
company during its infancy because it was relatively risk-free as
the online retail business was new in India. The disadvantage
with this was slower delivery times.
• In 2013, the consignment model was abandoned by the
company in favor of a newer model called the Marketplace
model. In this model, Flipkart doesn’t have to maintain any of
its own inventory, rather Flipkart only ensures the delivery of
the product, and the buyers and the sellers interact among
themselves.
• There are two levels of sourcing conducted at Flipkart: Regional
procurement and Central procurement. The regional
procurement team handles local supplier network for made-to-
stock (certain demand, low demand elasticity products) and
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 just-in-time products (uncertain demand, high demand
elasticity products). They have the data of the stocks at various
Stock Keeping Units (SKU). The central procurement team has
control and visibility over the data available by the regional
procurement units and larger suppliers that can distribute their
products all around the country.

Warehouses

• The Flipkart warehouses are also called Flipkart fulfillment

centers, and are responsible for providing storage and shipping
to the sellers in the Marketplace model adopted by Flipkart.
• There are around 15 fulfillment centers of Flipkart around the
country and they all combine to have a total space of around
2.5 cubic million feet. There are other smaller fulfillment
centers located at tier II and tier III cities all across India.
• The warehouse management system of Flipkart can be basically
divided into three main segments: inward processing, storage
management and outward processing.
• In the inward processing segment of the WMS, activities such
as physical delivery of goods from suppliers, quality checks and
scans for products that don’t fulfill the quality requirements of
Flipkart and pre-packing of the products takes place. A record
of all the products from the supplier is also maintained at this
segment.
• In the storage management stage of WMS, a list is generated of
all the products and their corresponding shelves are generated
so that these products can be put at their respective shelves.
Then the systems are checked for pending orders for any of
these products and if there is any pending order that product is
directly sent to the final packing area. Now based on these lists

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 the products are physically stocked on the shelves at these
warehouses. Finally, the list is updated.
• In the outward processing segment of the WMS, a list for all the
orders is generated and then the products are picked up from
their respective shelves, sent to the final packaging area and
then sent out for delivery.
• Since the size and number of fulfillment centers is bound to
increase in order to meet the increasing demands of the
customers, the company has to ensure that the systems and
processes that are currently used at these warehouses are
scalable for a larger scale.

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Inventory Management

• The continuous review model is applied by Flipkart to manage

their inventory. As soon as the reorder point is reached the
inventory is replenished by Flipkart.
• The FIFO method is used by the company in order to restock
their inventory. In this case whenever there is a request for
restocking, the older inventory items are shipped first.
• Some products in Flipkart’s inventory are kept in the
warehouse whereas some products are ordered directly from
the vendor. In order to determine which of the product would
be ordered directly from vendor and which product will be kept
in the warehouse, the company uses the Long Tail Concept,
which involves selling a large number of unique items in small
quantities.
• For items that are unique but are sold in smaller quantities, the
company doesn’t maintain inventory at the warehouse, rather
these items are directly ordered from the vendor because
demand for these types of products is not as much. This helps
Flipkart to keep the inventory and overall distribution costs in
check.

Supplier Management

• Flipkart usually starts on a small scale with its suppliers of

products under newer category, as in the initial stages the
demand is low. As the demand for these newer products begins
to increase Flipkart, then shifts its supplier from small scale
local suppliers and distributors to large scale wholesalers and
manufacturers.

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• Flipkart’s strategy of shifting to larger scale wholesalers and
manufacturers as the demand for the product category
increases benefits them in receiving large discounts on
products, because due to high demand they can order in bulk.
• Flipkart works with more than 500 suppliers. Due to the growth
seen by Flipkart in the recent years the company has
purchasing power over their suppliers.
• Flipkart’s image can be hampered by late deliveries to their
customer because Flipkart is targeting responsiveness over
efficiency. Hence, in order to avoid this the company rates its
suppliers based on their fill-rate performances.
• Apart from the grading other factors that influence the
company in choosing its suppliers are the price at which the
supplier is willing to offer its products – larger discounts with
better credit lines are preferred, the quality of the product
supplied by the manufacturer, and the percentages of product
from a particular supplier that are returned by the customer.

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 Conclusion

Flipkart is one of the major players in the E-commerce industry in

India, along with its competitor Amazon. Flipkart follows a policy of
customer satisfaction and hence focuses on improving its
responsiveness as compared to its efficiency. Hence, the company
takes several measures to ensure that the customers get the best
experience at the least cost as quickly as possible. The supply chain
of Flipkart is thereby modeled accordingly, to improve
responsiveness. The company has its own in-house branch of
logistics, has several fulfillment centers in different parts of the
country, has adopted the marketplace model and has taken many
other steps to ensure responsiveness. Prioritizing customer
satisfaction over efficiency also leads to many extra costs that are
incurred by the company, such as the price of delivery when the
customer returns an order, at various points in the supply chain. In
order for the company to keep progressing ahead and grow it may
need to adopt its supply chain to take reduce these costs and at the
same time ensuring that their supply chain is responsive to the ever-
growing demand created in the Indian market.

Link to Video Presentation: https://drive.google.com/drive/folders/14FsixC-

JUPcV-9r7Ta35HvZMdVX1-I6t?usp=sharing

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 References

https://exotel.com/case-studies/logistics/how-flipkart-connects-customers-and-delivery-agents/

https://www.livemint.com/companies/news/flipkart-onboards-27-000-kirana-shops-to-strengthen-
last-mile-delivery-1568026845806.html

https://www.businessinsider.com/last-mile-delivery-shipping-explained?IR=T

https://inc42.com/buzz/flipkart-shifts-to-the-amazons-marketplace-model/

https://indianonlineseller.com/2015/09/flipkart-expands-fulfillment-capacity-opens-new-
warehouse-near-chennai

https://cmuscm.blogspot.com/2014/09/flipkarts-inventory-
management.html#:~:text=Flipkart%20uses%20a%20Continuous%20review,method%20for%20its%
20inventory%20management.&text=Flipkart%20uses%20sales%20to%20predict%20the%20levels%2
0of%20inventory.

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