Last mile delivery for flipkart

Abstract

Flipkart’s faces a lot of uncertainty in its demand pattern and predicting it is very difficult. The demand pattern for Flipkart is seasonal which makes the supply planning (logistics) a challenging business. The demand variability is most felt at the last mile because of the Bull Whip Effect. Currently Flipkart’s logistics is handled by Ekart(the logistics arm of Flipkart) or third-party players. Approximately 80% of the Flipkart’s logistics requirement is fulfilled by Ekart and rest by independent 3PL vendors. Any order booked on Flipkart platform gets supplied by either Ekart or 3PL vendors based on defined selection logics and serviceability. Ekart handles the movement of goods from the fulfillment center or seller premises to the last mile delivery hub. This process usually requires a lot of hops from one hub to another before it finally reaches the last mile delivery hubs. After the package reaches last mile hubs, delivery executives deliver it to the customer address. A last mile delivery hub usually handles a few pincodes. After the packages are received at the last mile hubs, they are divided amongst the various pincodes by sorters who are full-time employees of Flipkart. Post this the last mile delivery executives move out of the hubs for delivery to customer doorsteps. For last mile deliveries Flipkart currently has two models. One is delivery through permanent employees of Ekart, the second type is through outsourced channels like sub-vendors and the most recent model is through F-Quick which is currently in a nascent stage. F-Quick works on freelancing model. In this model, the delivery executives working are not permanent employees of Flipkart. They are paid a certain amount per successful delivery made. Unlike permanent employees they are not entitled for any fixed salary. The freelancers working for F-Quick can book a slot previous day to deliver the next day. They currently don’t have any assurance of getting a delivery when they book a slot. Currently most of the deliveries are handled by the permanent employees of Ekart. Problem and scope:- In the initial days of Flipkart, it was very important to give the best customer experience. So, it chose to employ permanent employees who were trained on how to interact with the customer and were also responsible for fulfilling the delivery promise that was made to the customer. Currently, the demand seen by Flipkart is very variable and has a considerable MAPE%. Due to this during the period of high demand, delivery executives will be overloaded with the deliveries. This can also lead to delivery promises to customers not being fulfilled resulting in CPD breach. While during low demand periods they will be underworked, and Flipkart will be incurring cost because most of the delivery executives are permanent employees and need to be paid a fixed salary resulting in capacity underutilization. To solve this problem a variable model needs to be put in place which can track the demand pattern and reduce the reliance on permanent delivery executives. There are two models to have a variable model. One is the current F-Quick model and the other one is by using various stores for last mile deliveries. These stores can be local Kirana stores or franchise stores like McDonald, Subway etc. The F-Quick model is currently in a very nascent stage and needs to be scaled up. Around 25,000 packages are delivered through this model and Flipkart wants to scale it up to 1,00,000 packages. To do this, target segment needs to be identified who will be ready to work as part-time delivery executives. The next step is to develop a value proposition to this target segment so that they get onboarded on the platform. In the store-based model, the individual stores will be given certain deliveries to be done in its nearby area. The store can then use the people it employs to do the deliveries. Store owners will be paid a certain amount for every successful delivery made. For this model, it is important to understand if store owners would be willing to onboard this system and what are the benefits they will be looking for from this. To do this a primary survey needs to be conducted to develop a better understanding and consequently develop a value proposition for them.