E-commerce India - Inventory Management, Warehousing and Order Fulfillment

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While e-commerce store front (website) provides customer interfaceon the Internet, good back-end operations lead to customer satisfaction. One ofthe important back-end operations of e-commerce is inventory management. Whenthe customer browses the site, selects an item and makes payment, the item MUSTbe shipped to the customer in time. For that the item must be either producedby the e-commerce company itself or procured from a 3rd party.
If the procurement has to happen from a 3rd party, it can bearranged in different ways:

1. Drop-shipping

Items can be bought from the 3rd party just in timeand shipped to the end-customer. In this case there must be direct connectionfor the e-commerce company with the appropriate vendors, dealers or publishers.In cases like Sweets and Snacks this will be the modus operandi, unless thevendor himself manages the e-commerce store.

2. Warehouse-based shipping

Certain quantity of items can be procured up-front,stored in a warehouse and shipped to the customer based on the order.
In the second case, the quantity of inventory that needs to bemaintained in the warehouse has to be controlled appropriately. If there isless quantity of inventory then there would be inherent delay in procurementand shipping. If there is more than required quantity, the unnecessaryoccupancy of the warehouse would lead to financial disadvantage.
The inflow (from the suppliers) and outflow (to the end customers)of goods must be tightly controlled in the warehouse to restrict any damagesand pilferage. The orders taken for delivery in a day must be reconciled at theend of the day to match shipments and pending orders.
If the e-commerce company has its own warehouses, the location andnumber of these should be carefully selected. Any shortages or excesses andwrong locations would drain all financial resources of the company in no time.
One can also outsource the warehouse and order fulfillmentoperations to a 3rd party. From zappos.com experience (as mentioned in the bookby Tony Hsieh), one can understand that it is risky from different perspectiveto outsource such operations. Needless to say, one needs to be wary aboutoutsourcing such operations.
The last part of order fulfillment involves delivery to the endcustomer at his premises. This is done by:

1. e-commerce company's own courier service (like in case of Flipkart)

2. Private delivery service center (the likes of DHL, Bluedart…)

3. Government courier service from Post Office
4. Hybrid of all the above modes (typical case)

With Cash-On-Delivery (CoD) becoming an important payment mechanismthe delivery person not only has to ship the items, but also collect money fromthe end customer. There are companies like Gharpay,which specialized in cash collection.
Also, there are local companies which specialize in delivery ofcertain items and one such company is Delyverin Bangalore.
There is ample scope for companies operating in this domain toexpand and increase the scope of their activities. There is also talk aboutAmazon and Walmart setting up their own courier operations in India andbecoming successful Giants in the Indian e-commerce space. Let's wait and watch!