Acknowledgement

I would like to thank Prof. VISHAL GERA for giving me an opportunity to write this thesis
and for giving me an unconditional support to make my work look better by giving valuable
feedbacks and advices.

My parents are my life and they have encouraged me from thousands of miles away with
their love, care, and motivation. They were with me in all good and bad times and the reason
for coming to Italy for higher studies.

I would like to thanks to Dr Ashutosh gaur, for being my inspiration and moral support when
I was stressed writing this thesis and staying beside me all the time and realizing my dreams.
Without my friends, I would have never come here and make my dreams come true. I am
grateful to my beloved friends. who were encouraging me to bring the best out of me.

I want to thanks to my university for giving me a seat out of many applications, to continue
my education and providing all the support and guidelines which I experienced in a
multicultural environment.

Finally, my thesis is dedicated to all hunger people and for mankind who are struggling for
their existence somewhere in the world. This thesis is for world peace and harmony among
the mankind.
94
ABSTRACT
The Impact of Indian E-commerce B2C industry on Supply chain management (SCM) is a
crucial topic in the last decade since the conventional supply chain activities are transformed
into an Information technology-oriented practices. Several big companies and start-ups have
been trying to dominate the e-commerce B2C sector. E-commerce industry has influenced so
many variables in the supply chain; suppliers, consumer purchasing behavior, information
technologies, logistics, inventory, and warehousing management.

In the competitive economy where many big companies and several start-ups are trying to
take hold of the market share, it is very essential to understand the overall impact of the e-
commerce industry on different levels of Supply chain management. The Supply chain
management distribution channel is mainly concentrated for this paper and it starts from the
moment the product is available with the retailer or supplier and ends with the order
fulfillment of the customer.

This paper focusses on how Indian e-commerce industry have impacted the field of Supply
chain management and the case studies of two big giants of Indian e-commerce; Flipkart and
Amazon enhance the knowledge about the impact of e-commerce sector on several supply
chain activities. By interviewing the top management from both the companies, it gives a
proper insight to know the impact in real time. Literature review and case studies have raised
few research questions which are answered through this paper, however, there are many
limitations in Indian market which doesn’t allow these companies to function efficiently and
they are also been mentioned in the end of this paper. Summary of the findings guides
through the channel to know more about various situations of uncertainty.

Not many researchers have studied about Indian e-commerce industry and the findings from
this paper would fill the gap in the literature and could help in conducting any further
researches. At the end of this paper, it has been found that there is a huge impact of e-
commerce industry on SCM distribution channel activities and it is quite different from the
conventional supply chain which involves manufacturer, distributor, retailer, and customer.
Internet plays an important role and further research should be conducted in this area and this
paper would provide the proper justice for other researchers to carry out their work and fill
the gap in existing literature.

Key words: E-commerce, Impact of e-commerce, Supply chain management, Flipkart,

Amazon India, E-commerce case studies, E-commerce Supply chain.
INTRODUCTION

1.1 Context of the study

Ever Since the internet has revolutionized the way people communicate and do business
around the world; it has given a large indefinite liberty for the customers to meliorate in their
lifestyle and how they see the technology to make use of it for the betterment in every
possible way. In India, the penetration of internet has been increasing rapidly in the last
decade and claiming the population of approximately 1.3 billion people, it attracts all the
major players in the market to benefit them by selling their products which could finally
reflect in their financial reports. The conventional method of customer arriving to the retail
shops has been transformed into an effortless purchasing by placing an order online through
the facilitation of e-commerce companies. The estimation at the end of the year 2014 was 302
million users, which was observed to be a significant year since it saw 32% remarkable
growth in just one year. It took almost a decade to increase the number from 10 million users
to 100 million users, three years to increase from 100 million users to 200 million, but it
achieved 300 million milestones from the past 200 million in just one year. The estimated
internet users as of today are approximately 354 million and it is still growing at the rate
more than everyone expected. Also, the mobile internet users grew to nearly 213 million
users at the same span of time (IAMAI report 2015).

As the number of internet users grew, the e-commerce companies also started up to provide
them qualified products on their doorsteps. Few such examples are Flipkart (found in 2007)
and recent entrant Amazon (2013). Also, the challenges faced by these companies also grew
because of diversified Indian market, culture, tax laws in different states. The major challenge
which will be discussed in this research is about supply chain distribution which includes
reverse logistics when a customer is unwilling to accept the product and it has to be returned
to the company’s warehouse.

The traditional supply chain management in India has largely got transformed into strategic
supply chain management (SCM) due to the impact of e-commerce companies. It has been a
challenging task for all the e-commerce companies to cope up with the problems arising from
disruption in the supply chain distribution networks. Since from the beginning, this has been
a game changing factor for Supply chain management to meet the demands of customers and
fulfill the orders. They must be self-sufficient to design and implement better supply chain
management strategies, design, and control or else it will be very difficult to sustain in
the
competitive market like India which accounts to 17.5% of the world population. This
research is mainly oriented on the challenges faced by e-commerce companies in supply
chain management distribution and what measures could be taken to overcome them or to
make the system more efficient to deliver the products. Due to the gap in the past literature
and not much research has been done particularly about Indian e-commerce industry, this
could spread light for various problems associated with the e-commerce supply chain
management distribution and possible solutions to them. The technology driven e- commerce
and supply chain management is changing and more research should be done on this topic
and this thesis would provide justice to spread light on various undiscussed issues in the
literature and researches conducted so far.

1.2 Problem statement and motivation of the research

The substantial evolution and growth of e-commerce in India will put an enormous pressure
on the area of supply chain management distribution network of the companies. E-commerce
companies are offering infinite varieties of products to the customers which are spread across
a large geographical and demographic area. Knowing these facts and due to many players
already functioning in the market, it is solely not dependent on which product is offered in
what price, but the competition has shifted to delivering the products with trouble free
logistics and in less shortened time. Henceforth, the differentiation of the providers, mostly
comes from the way they handle their warehouses, predict customers’ purchasing behaviors,
forecast, and control the inventory, facilitation and ease shipments, and also most
importantly, how the reverse logistics is handled if a customer refuses to accept the product
which doesn’t meet his quality expectations. Most of the companies have offered customers
cash on delivery and hence they have to be ready if the product comes back to the warehouse.
It also involves the hidden costs and it appears to be one of the main difficulties where e-
commerce companies have to be more strategic. Therefore, the market leader is the one who
has the best supply chain management strategies compared to its competitors.

The motivation of this research has born as an autonomous idea stemming from the broader
opportunities for emerging e-commerce market in India in the coming years as illustrated
above. Supply chain management has always been an interesting area where a lot of research
has to be done in the coming future. Factors affecting e-commerce companies in India has to
be addressed in a better way to tackle the current problems prevailing in supply chain
management. India is chosen for this research because of the vast opportunities which are
evident by looking at the way the country’s economy is growing. It is an emerging market in
 the whole world for all interested companies to invest in its soil and it recently overtook
China in annual GDP growth. The population of 1.3 billion people serves as the best market
to invest, do business, experiment and gain profits. The internet users are rising at an
alarming rate of 6 million people per and it’s a challenge for an organization to handle the
Supply chain with enormous orders in hand and evident diversification which is common in
India. More research should be done on how supply chain distribution can be more efficiently
managed and what are the flaws which are holding back to deliver the efficiency.
Furthermore, increasing the effectiveness of distribution network.

The compound annual growth rate (CAGR) which can be defined as “the mean annual
growth rate of an investment over a specific period of time longer than one year”
(Investopedia) is very high related to e-commerce and it would reach its peak by the year
2020. The following fig.1.1 shows the graph of sales and CAGR as it can be observed how it
took the pace from 24 billion INR ($0.4 billion) in 2009 to reach 504 billion INR in 2016 ($8
billion). It is estimated that the e-commerce will touch $100 billion by 2020 which is more
than tenfold of the current value. The problem raises in the future for all the e-commerce
companies needs to be addressed and when the articles were searched from different journals,
there was not much research done on Indian e-commerce market and especially in the area of
supply chain management distribution which is the core of every e-commerce company. This
research is also motivated by analyzing the problems and those factors which affect the same.

Fig.1.1 CAGR in e-commerce (PwC report)

1.2.1 Factors affecting the e-commerce supply chain management distribution in India
 Buyer-supplier relations (Susan and Raj, 2003; [Link] and Michael Malooni,
2005; [Link] Crook and James, 2007; Injazz et al., 2004; Raymond and Charles, 2007;
Richard Klein, 2007; Ram Narasimhan et al., 2009; Shashank Rao, 2011; Finn Wynstra et
al., 2015; Antonio and Ilaria, 2015; TingtingLi et al., 2015; [Link] et al., 2010)
Key words used: E-commerce, supply chain management, supplier relations, supplier
management.
 Consumer purchasing behavior (Julian Chaparo Pelaez et al., 2015; Sriram and Sinha,
2005) Key words used: Purchasing behavior, E-commerce, Customer behavior.
 Warehousing and inventory management ([Link], 2002; [Link] et al.,
2004; Melo etal., 2009; [Link] etal., 2015; Yacine etal., 2015; [Link] Guler et al.,
(2014; Phichet et al., 2015; ) Key words used: Warehouse management, Inventory
management, Demand management, Supply chain management, E-commerce supply
chain.
 Logistics and reverse logistics (Elliot, 2007; Thomas Foster, 2008; Ann Marucheck et
al., 2011; Anubhav Reddy et al., 2014; Qian Yang and Xiande Zhao, 2016; Lawrence C.
Leung et al., 2013; [Link] Wingerdan et al., 2014; Jie Du et al., 2015; Jie Yu et al., 2015;
Jaideep Motwani et al., 2002) Jian Liu et al., 2014) Key words used: Logistics, E-
commerce logistics, Supply chain management, Order fulfillment.
 Information technology (ERP, RFID) (Nir Kshetri, 2007; [Link] and Ngai,
2004; Georgios et al., 2008; Robert et al., 2007; Hillol Bala, 2013; Antti Tenhial and
Pekka Helkio, 2015; Patricia et al., 2008; Tijun Fan et al., 2008; Ming [Link] et al., 2013;
Vick et al., 2004) Key words used: ERP, RFID, Information technology, E-commerce
information systems.
 Unskilled workforce and supplier knowledge (Ganesh and Devraj, 2008)
 Distribution channels (Niklas Fedrik, 2003; Niels et al., 2008; Elliot et al., 2007; Daniel
et al., 2012; Weiwang et al., 2014; Mehdi et al., 2015; Junsong et al., 2015; Qihuilu and
Nan Liu, 2015; Pantelis et al., 2011) Key words used: Distribution channels, Distribution
management, Supply chain management practices, E-commerce, Supply chain
management
 Supply chain risk management (Masoud and Mahour, 2016; Christopher Stang, 2006;
Jukka and Katrina, 2016; Frank Weingarten et al., 2016; Mihalis and Thanos, 2016;
Bruno, 2015) Key words used: Supply chain risk management, risk management, supply
chain management.
All the above-mentioned factors are obtained from deeply analyzing the research articles which
have been retrieved from various journals. The motivation for the study comes from the
problems raised in e-commerce industry SCM distribution and this research would provide
optimal solutions to overcome the challenges thus making the e-commerce industry more
efficient and sustainable to fulfill the orders of customers. It needs further investigation and it
will be elaborately discussed in literature review and case studies of chosen companies in
India for this research.

1.3Aim and scope of the research

The primary aim of this research is to identify loopholes factors affecting the existing SCM in e-
commerce industry and to find an optimal applicable solution which can be used in general
for all the existing companies in India. This research will address the following questions
raised by the current scenarios and problems which will be discussed in critical analysis part.

 What are the current practices of e-commerce companies in India regarding

SCM distribution and why strategic SCM is very important in Indian e-
commerce?
 What are the measures to be taken to make the shipment easier and deliver in
short possible time?
 How e-commerce companies should make their employees and suppliers
knowledgeable to achieve their goals?
 What are the risks involved in e-commerce SCM in India?
 How to act at the times of uncertainties, fluctuating demand, inventory
problems, shipping to remote or far places and in case of return of the product ?
Fig.1.2 Commodity distribution in E-commerce (Internet and mobile association of India)

The above fig.1.2 demonstrates the purchasing behavior of customers in India and it clearly
indicates what consumer is willing to buy most of the time through online. Commodity
distribution in India is widely classified Consumer Electronics, Apparel and accessories,
Baby products, Books, Home and furnishing, Beauty and personal, healthcare. Consumer
Electronics heads the chart and it holds 34% of the market share followed by Apparel and
accessories which is 30% of e-commerce industry market share. The scope of this
research is mainly concentrated on SCM in e-commerce and category of products is
chosen as whole for the companies taken for case studies. (IAMAI report)
To be in precise, the supply chain management area is discussed only from the order is placed
from the customers and until it reaches them. In other words, the distribution channel of
the SCM is prominently focused for this research. As we can see from fig 1.3, e-
procurement is done by sending a purchasing order to the supplier which is reached to
warehouse, handling of warehouse and inventory control, shipping to the respective
customers are the important aspects in e-commerce SCM which are to be focused. The
literature which has been gathered from various sources for this research is obtained from
online data bases and all the articles have been analyzed systematically before writing the
literature review.
 Main scope of this research

Fig.1.3 E-commerce order processing ([Link]

The geographical location used for this research is India and the sector is e-commerce
B2C industry. From the below table you can see the clear view of how the research is
limited and what all areas are covered. Only consumer electronics and Apparels &
Accessories data are used for the research. Supply chain management is usually starts
from procuring raw materials from the supplier followed by manufacturing process and
then distribution to wholesale retailer etc. until the product reaches to customer. Since the
present research is based on e-commerce industry, the upstream of supply chain is out of
scope. Only the procurement of finished products from the supplier, distribution channel
of the e-commerce industry, logistics to make the product reach to the customer and
reverse logistics if any returns for the unwanted product or product without quality are
considered for the work.
It is notable that the impact of e-commerce supply chain is studied in multifunctional
areas and the results are obtained by number of case studies which have been conducted
solely for the purpose of this research and the data has been collected by the respective
operational heads or manager of those companies selected for the research. The previous
literatures and the articles collected for this research clearly indicates that very few
researches have performed studies about Indian e-commerce SCM since India is still an
emerging economy and there is much room for the industry to grow. Also, only from past
few years e-commerce sector has grown very rapidly and it attracts many researchers to
carry out work about how to develop an efficient supply chain in a diversified country
 like this which has many tax regulations and logistics is a big problem to reach customer
which are living in different remote areas.
Scope of the work Area Limitations

Very much diversified and

mostly rural. This makes
logistics difficult to work
efficiently.
Geographical location India Not much research has been
conducted on Indian e-
commerce which is a drawback
to conduct research with fewer
resources.

Only B2C e-commerce

Companies consulted Flipkart, Amazon companies are considered
for case study
Supply chain distribution channel Upstream supply chain has not
starting from the supplier who been taken into account.
Research area supplies the product until it reaches
to the customer.
Operations management, Very few researchers had
Operational research, Purchasing, conducted study on Indian e-
Literature review Business research, Production commerce and a huge gap has
economics Journals. been found in the literature.

The managers were not willing

to share important data’s and
Skype and phone Respective managers of the they said it’s discreet to share
interviews companies selected for case study which is against company’s
norms. But the data collected
was sufficient for the current
research.

Table 1.1 Scope of the research

 1.4 Significance of the Research

SCM
activities

Quality Warehousing,Inventory
validation, control,Skilled work force
Logistics,Transportation
costs

Suppliers E-commerce Supply chain excellence

Company and customer satisfaction

Supplier relations, Payment, E-

procurement, Supplier selection
Fig 1.4 Impact of e-commerce on SCM (Researcher’s idea)
The above fig 1.4 is originally generated by the researcher and it is an autonomous idea
about how to reach excellence in e-commerce supply chain management. This research
will be very useful and resourceful to fill the gaps in the literature which have been
accounted so far and it will try to spread light over many areas which previous researches
have failed to concentrate on. Being the rapid growing economy in the world, the future
of e-commerce is in the hands of efficient supply chain management. If this can be
achieved, definitely it will drive the economy of India into a new era of technological
advance. Since it is projected that the e-commerce industry will grow towards $100
billion mark by 2020, it is very essential to address the needs and loopholes in the current
system of distribution and management of supply chain. Still there are many things
lacking due to company’s norms to provide complete details or it might be the customer
who is newly entering the market and companies are unable to predict the purchasing
behaviors of various people across the country since India is very much diversified. But
 this research will provide a significant idea about what factors are really affecting the
present supply chain distribution network in the e-commerce companies and what can be
done to overcome in case of any such uncertainties.

1.4Structure of the thesis

Chapter - 1
Introduction
Chapter - 2
Literature review

Chapter - 3
Research methodology

Chapter - 4
Case study – Flipkart (India)

Chapter - 5
Case study – Amazon (India)

Chapter - 6
Critical analysis

Chapter - 7
Conclusion

Fig 1.5 Structure of the thesis

 Introduction: This chapter gives all essential details about the thesis such as
introduction to the whole research as a context of study, problem statement and
motivation of the research, aim and scope and significance of the research. This part is
the first and important because the whole research is based on the objectives and aims
stated in this chapter.
 Literature review: This part of the thesis acts as the backbone where all the
necessary details about the current research is taken by reading articles from various
 journals which are collected by a systematic search from scientific databases like
ScienceDirect, Scopus, Emerald, Google scholar etc. Each article is assigned with a
key prospect to carry out a comprehensive study through the guidance of previous
researchers worked in the same area. This is followed by the results at the end.
 Case studies and Research methodology: Two e-commerce B2C companies have
been selected for this research and each company is analyzed very carefully and
interviews have been carried out with the respective managers/executives of each
company regarding the Supply chain management distribution and warehousing
management. By analyzing the data obtained from the interviews, qualitative design
will be established about how to make the existing system more efficient by using the
knowledge obtained from literature review and case studies. This could be for any e-
commerce company in India in general and it will help for future researches in the
same area.
 Analysis and conclusion: This is the final stage of the research where everything is
summarized, analyzed from the beginning and conclusions are being drawn by the
researcher.

1.6 Conclusion for Introduction chapter

Being the fastest growing economy in the world, India is facing many challenges ahead in the
area of supply chain management. Since our scope of this research is to analyze the impact of
e-commerce on supply chain management distribution channel, it is clearly known from this
chapter that there is a need to address the issues and effects of e-commerce companies on a
SCM distribution network. To build a sustainable economy and keeping in mind that 6
million internet users are increasing every month, one should take a big leap in innovating
new methods for making SCM of e-commerce to sustain any kind of uncertainties which can
arise in the future. Only an e-commerce company can achieve competitive advantage over
another when it has effective SCM distribution network which facilitates towards making the
qualified product reach to customer in the given span of time or even earlier. This chapter
tells about the current scenario of Indian e-commerce industry and the aim of this research
which is to find out how it impacts the distribution network in SCM.
 LITERATURE REVIEW
2.1 Literature review: An overview
In the previous introduction chapter, it has clearly mentioned about problem statement, aim
and scope of the research and the structure of thesis in which the way research is conducted.
In the beginning of this research, many online data bases for articles have been searched in a
systematic way by using proper keywords related to the research. The articles are then
classified according to the problem statement and they are grouped to write a detailed
literature review. It was found that many researchers are highly interested in either e-
commerce or solely supply chain management. Few researches have attempted to collaborate
e-commerce and supply chain management but the desired results have not been satisfactory
and proven enough in the field of supply chain distribution of e-commerce company
products. More research is required in warehousing, inventory control and about how to make
the existing e-commerce supply chain distribution network more efficient and sustainable.

Firstly, the respective keywords were used to search articles on the online data bases like
Science direct, Emerald, Google scholar etc. Then the articles were selected by applying
filters for the journals. Various journals were searched and various results were recorded.
Later, the search was carried out at micro level by applying subject filters (e.g. supply chain,
internet, market etc.). From the obtained results of articles, each and every article was
analyzed from the title name and abstract it carried. If it was helpful for the research, it has
been downloaded and full text analysis was carried out. The reference and citations
mentioned in some articles also lead path to find new articles which were helpful for the
current research study. All the articles were written in English language.

After reviewing the articles, it was quite common thing to see that there was a huge gap in the
literature and relevant works were not carried out in the area of e-commerce supply chain
management since the internet era has started, it took lot of time for the e-commerce to
emerge and in a country like India it’s been just few years when the e-commerce observed
rapid growth since the upgrading of technology by internet users and the emerging economy
gave the pace for establishment. Only few articles have conducted on Indian e-commerce but
proper conclusions have not provided due to lack of resources and facts. This research is done
keeping in mind that e-commerce and SCM go hand in hand and if a company has to be
 successful and market leader, it should have an efficient SCM and ability to reach customers
in least possible time.

The following Table 2.1 represents the various journals consulted and the articles obtained
from them. The search was made on scientific data bases which are served to store all the
major journals and articles like Science direct, Emerald, Scopus, Google scholar etc.
Necessary keywords using and articles were selected only after reading the whole abstract
and proof read whether it is helpful in the current research.

Journal type Number of articles

Journal of Operations management 22
European journal of Operational Research 6

Journal of Industrial marketing management 3

International Journal of Production economics 32

Journal of Purchasing and Supply chain management 1

Journal of Business research 1

Journal of Electronic commerce research and applications 2

Conferences Number of papers

Procedia – Journal of Computer science 1

Procedia – Journal of Economics and Finance 1

Procedia – Journal of Social and behavioral sciences 1

Total number of articles 70

Table 2.1 Journals and articles consulted

2.1.1 Research volume over time

By seeing at fig 2.1, it is clearly visible that the trend of internet and e-commerce have
evolved only since the last decade. The number of articles has been substantially increased
over time and it reached peak once in 2007 when e-commerce just started in India since this
study is about impact of e-commerce in India. The number of articles is growing at an
 alarming rate since SCM in e-commerce is a hot topic for research and development and it
needs lot of attention from the researchers. Still there is very few authors who has published
an article about Indian e-commerce and literature review implies that there has to more
researches to be conducted about the current state of Indian e-commerce and its impact on
SCM. The lack of articles was a major issue to conduct this research and this will fill the gap
between those articles.

Total

23

Total
10
8
7
6 6
4
3 3 3 3
2 2
1 1 1

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Fig 2.1 Article dispersion over years

2.1.2 Geographies
Out of all the articles collected for this research, it can be seen from the fig 2.2. That USA
dominates the chart followed by China and UK. Since the internet and world wide web was
potentially innovated and researched in US, a greater number of authors and researchers have
shown interest in this area to publish their articles. This research is concentrated on Indian e-
commerce companies but it can barely see that there are only 6 authors who has given their
contribution in the area of e-commerce SCM. India is still adapting to the internet and online
shopping but it is a very big market for any company to establish within a decade in the
future when India wil be fully accessed with internet and more advanced compared to now.
 This research will fill the gap in the area of Indian e-commerce SCM and more researches
have to be conducted to know more about the world’s fastest growing economy.

Total
76
CHINA 28
13
HONGKONG 12
8
GREECE 8
7
SPAIN 7
7
INDIA 6
5
FRANCE 4
3 Total
SWEDEN 2
2
IRAN 2
2
TUNUS 1
1
RUSSIA 1
1
PAKISTAN 1
1
AUSTRALIA 1
0 10 20 30 40 50 60 70 80

Fig 2.2 Article dispersion over countries

2.2 E-commerce Industry: An overview and evolution

There are various definitions of e-commerce found while doing this research and all of them
are cited below in order for the better understanding of the particular title.

“Electronic commerce, commonly written as e-commerce, is the trading or facilitation of

trading in products or services using computer networks, such as the Internet.” (Wikipedia)

A type of business model, or segment of a larger business model, that enables a firm or
individual to conduct business over an electronic network, typically the internet
(Investopedia)

“The business of buying and selling goods and services on internet” (Cambridge dictionary)

“Any form of business transaction in which the parties interact electronically rather than
physical exchanges or direct physical contact” (European commission, 1998)
“The electronic process by which individuals’ organizations make a transaction, such as buy,
sell, transfer, or exchange products, services and/or information” (Turban [Link], 2004)

The business world has transformed from traditional retail distribution into an e marketplace
by the external and internal forces which are caused by globalization, increase in shared
information, customers getting educated and technologically advanced, and change in the
way we see buyer-supplier relationships, fast paced innovations in the technologies and
highly increase in complex products. Today’s marketplace is mainly consumer focused and
competitive advantage is achieved only through efficient supply chain management. (Martin
Grieger, 2003). Internet sales have seen enormous growth rates in the last few years. Initial
hype was created when the e-commerce was just introduced which were not sustainable but
later on, over decades these business models have changed a lot to make the e-commerce
industry more sustainable and profitable. (Niels A.H Agatz [Link], 2008)

The electronic market place concept was first documented in mid-1940’s which was known
as Television and the main purpose of this system was to remote-market Florida Citrus fruit
(Henderson, 1984) . The need of real developments happened in the 1970’s when the first
computer based electronic market place pilot project was initiated (McCoy and Sarhan,
1988).

Fig 2.3 shows the different kind of business models and the various players involved in it.
Mainly Government, Business and Consumer are selected to indicate various transactions
between them and e-commerce is placed when a transaction happens between business and
the consumer.

E-commerce is an integral part of consumers for shopping plenty varieties of products and its
growth is rapid in terms of increasing number of customers and the revenue generated. These
qualities have made e-commerce as an interesting area for researchers to introduce their ideas
and hypothesis. (Julian Chaparro-Pelaez [Link], 2015). Developing countries like India, Brazil
exhibit an enormous market and economic growth and e-commerce is considered as an ideal
opportunity to reach new milestones in terms of overall economy or GDP. (Adel.A. Ayoub,
2015).
 Government Business Consumer

G2G
G2B G2C
Government e.g. Coordination
e.g. Information e.g. Information

B2B B2C
B2G
Business e.g. e-commerce, e- e.g. e-commerce
e.g. E-procurement
markets ([Link])
([Link])

C2B C2C
C2G
Consumer e.g. Price comparison e.g. e-markets
e.g. Tax compliance
([Link]) ([Link])

Fig 2.3 Internet applications (Coppel, 2000)

2.2.1 Different phases in the online shopping process

Search catalogue: Customer enters the company’s website through his credentials or he can
register if he is a new one. He can find millions of products displayed in the website allocated
in various main categories and sub categories. The catalogue has all the information customer
wants such as technical specifications of the product, discount if there any, number of days to
delivery and also reviews from other customer who has bought the same product and
expressed their experiences below the product details.

Add products to cart: Once the customer chooses the right product, he can add that product
to his shopping cart. It means he is willing to buy the product or he is interested in the
product. If he does not want that product, he has an option to remove it from the shopping
cart.

Check out – Process online payment – check out: The customer has already chosen the
right product for him and when he is done with the shopping of various products in his
shopping cart, he can check out anytime. At the time of check out, he will fill some important
details about shipping address, invoice address etc. The payment must be done once he is
checked out and almost top leaders in the market have easy payment options without any
difficulties. He is now complete with his payment and it’s time to sign out or check out from
his shopping cart and company’s website for keeping his credentials safe and not letting
anyone to use them.
 Search catalogue

Add products to cart

Check out

Process online payment

Check out

Order notification

Order shipping

Order confirmation

Fig 2.4 Phases in online shopping process i.e. e-commerce (Swapnil, Shamkant, 2015)

Order notification, shipping and confirmation: In this research, these three are very
important things to notice since the real supply chain come into existence once after the
customer places his order. He gets a confirmation from the company to his mail address that
the payment has been processed successfully and your order will be dispatched soon. The
order is procured from the supplier or taken from the warehouse inventory if it’s available.
The product is carefully packed and shipped to the customer through own logistics or 3PL.
Now the customer receives the notification of shipping with tracking code to see where the
product is and when it will be reached to him. Once the order is delivered to him, the
company receives confirmation that the order has reached the customer in X number of days
and if the product is damaged or whether customer wants to return it, it is a problem for the
 company to balance transportation costs since reverse logistics to be kept at very minimum to
gain profit and towards efficient management of company’s supply chain.

2.3 Supply chain management in twenty first century: An overview

Major developments in the production, transportation of goods, packaging, increased in
shipping frequency, information technology have severely damaged the environment (Dutton,
2012). So to balance this, another paper suggests that the expectations in the field of supply
chain management are changing in twenty first century and a great emphasis is being made
on cleaner practices as well as concentrating on primary aspects like quality, price and
innovation. (Hanes, 2013). SCM includes various activities which involve products and
services which in turn lead to increased gains to the company. SCM comprises of all parties
of a product or service, from the initial suppliers to the end customers. (Mentzer [Link]. 2001).
According to (Lee, 2004), the main goal of traditional researchers and practitioners was
focused on cost savings or product and service enhancement or both. It was not taken much
into account whether these activities in the stages of SCM has improved the well-being of
people or the surrounding environment which they live in. ([Link] [Link], 2015),
attempted in their paper to showcase how organizations should pro-actively develop their
competitive strategies based on cleaner practices in the twenty first century.

2.3.1 Cleaner supply chain management (CSCM) classification:

Strategic planning

Product design and development

Purchasing and procurement

Manufacturing and production

Distribution and logistics

IT and IS

Human resource

Fig 2.5 Cleaner supply chain management classification ([Link] [Link], 2015)
[Link] Strategic planning: ( [Link] [Link], 2015) analyzed many papers related to
strategic planning which were mainly focused on environmental concerns. Also, they
emphasized on social concerns and sustainability. They come up with strategic planning
practices which could help social and environmental concerns which will further satisfy
economic objectives. Some practices which they have mentioned in their paper are as
follows:

 Lean practices: The intensity of environmental practices and their resulting

consequences and effects on the lean and SCM practices was investigated by
(Hajmohammed et al. 2013). In another paper, (Dues et al. 2013) identified that lean
practices are helpful for environmental improvements and also improvement in
environmental and green practices influence positively on lean practices. Competitive
advantage and good relationship between stakeholders can be created by
implementing green environmental practices and focusing on quality, as well as their
relationship related with lean practices and workers betterment. (Cruz, 2013). (Tseng
et al. 2013) states that “there is an urgent need for appropriate policies that promote
green design, green supply chain, lean production, worker health and safety, and
consumer protection”.
 Quality practices: (Wagner and Sutter, 2012) in their paper, they study the effect of
ISO-14000 which is environmental certification. Even though it is not rightful tool,
but it is proven to be more efficient in reducing supply chain environmental impacts.
(Jabbour et al. 2012) claims that the environmental supply chain management theory,
which is considered as a preventive approach but it has a greater positive influence on
the priorities of manufacturers in terms of cost, quality, flexibility, and delivery. A
country’s supply chain strength which includes all the individual organizations
involved can also be determined in terms of their quality and the type of supply chain
activities practiced. (Vachon am Mao, 2008)
 Sustainability: There are many researchers who have given different ideas about
sustainability in supply chain practices. Noticeable paper was from (Searing et al,
2008) who contented two strategies: Supplier risk and performance management and
supply chain sustainable product management. Later (Vachon and Mao, 2008)
examined the connection between supply chain characteristics and sustainable
development at country level which was used by (Zhu and Geng 2013) to carry a
study about the drivers and barriers to sustainable procurement and sustainable
 customer cooperation for energy savings and emission-reduction program in China.
(Hutchins and Sutherland, 2008) investigated the relationship between decision
making in a particular business and social sustainability and suggested a general
strategy for the enforcement of social sustainability measures.

[Link] Product design and development: Even though very few studies have been focused
on environmental aspects of product design and development, many previous studies have
not considered human aspects. The impact of ecological and technological innovation on
product design for environmental approach was studied by (Georgiadis and Besouw, 2008).
The role of specific products was explored by (Ortegon et al. 2013) on wind turbines end-of-
service life and reverse logistic challenges faced while doing it.

[Link] Purchasing and Procurement: A significant number of efforts and researches have
conducted in this area regarding green supplier development and how a supplier is chosen
using supplier selection models. Very few studies focused on supplier selection based on cost
savings, economic and social aspects. Long term partnerships and cooperation have not been
emphasized. Significant models proposed were by researchers (Govindan [Link], 2013) and
(Surkis [Link], 2012) one of which is multi criteria approach for selecting suppliers based on a
sustainable supply chain initiative development and another was a decision model and
framework for sub supplier selection and team formation in an already existing environment.
All studies have focused on how to manage suppliers, how green sourcing can be achieved
and on supplier development programs.

[Link] Manufacturing and production: For the twenty first century supply chain cleaner
practices, the summary of all the previous literatures extensively discussed about
sustainability indicators, environmental protection using alternative energy, reducing the
waste to minimum and management of carbon emissions ([Link] and N.
Subramanian, 2015). Strategic planning was highly focused followed by procurement and
production, with most studies concentrated on green sources and supplier’s implementation.
This can be achieved through superior product design, optimizing the existing processes,
monitoring the processes, training and development of both workers and suppliers towards
green supply chain which is combined with government policies and uniformly implementing
the above said in all industrial and business facilities.

[Link] Distribution and logistics: Very few limited numbers of studies on logistics in
cleaner production has mostly concentrated on reverse logistics where a defect
product is returned by the customer and it goes backwards in the supply chain in turn later the
manufacturing company disposes or re use the product. Forward logistics in cleaner
production have not given much prominence in the previous literature. (A. Gunasekaran and
[Link], 2013). All the studies in reverse logistics have explained the channel
structure or multi objective modelling. Under multi objective modelling, most studies came
up with three recovery options which are material, component and product itself.

[Link] Information technology/Information systems (IT and IS): Information and

communication technology (ICT) tools used in a facility are the major drivers for energy
efficient manufacturing (Bunse [Link], 2011). The important uses of ICT tools in efficient
production, to measure and control thus improving energy efficiency have been highlighted
in their studies. It concludes that the ICT tools are the core of any company in any kind of
supply chain in the twenty first century to have a greater competitive advantage and to
implement cleaner practices.

[Link] Human resource in cleaner supply chain practices: Human aspects were discussed
only within the context of tourism industry regarding clean practices. (Sigala, 2008)
demonstrated how to integrate the aspects of sustainability into the tourism supply chain.
Many studies revealed that sustainable management practices could result in cost savings.

2.3.2 Supply chain management in e-commerce companies

Supply chains are regarded as compound structures which are characterized by various numbers
of activities dispersed over so many functions and organizations. That is the reason why it’s
been a challenge for effective supply chain coordination. (Arshinder [Link], 2008). David [Link],
2004 have claimed that it is essential to interlink strategic management and SCM to
company’s goals yet there is less evidence about the exchanges happening in those two areas.
Many researchers have been able to provide clear idea about the concept of SCM through
various concepts which includes marketing, Operations management), Management science,
Purchasing and Logistics. Since the supply chain consists of various functions and activities,
it is essential to provide a multidisciplinary approach towards the research. (David [Link],
2004). [Link] [Link], 2015 adds that customer relations and supplier management
also plays a vital role in managing supply chain activities. Supply chain growth is very
essential and acts as a reflection of a country’s economy in developed countries.
2.4 Supplier relations in e-commerce SCM
The emphasis on e-commerce SCM strategies is aimed at upbringing the development of
supply chain partnerships. Whole integrated effort to identify, maintaining the relations with
suppliers and building a proper network for the mutual benefits for the company and
suppliers will help in the long run. It would increase the efficiency of supply chain over time
and also the effectiveness of relationship between the company and suppliers (Ram
Narasimhan et al, 2009). Before in the old days, a number of theoretical approaches have
been made in the literature like resource based theory, transaction cost theory and agency
theory. Only since the last decade, researchers have begun to implement holistic, theoretical
approach of social exchange theory (SET) to supply chain relationships. (Griffith et al, 2006,
Li et al, 2008).

2.4.1 Social Exchange theory

In the paper (Emerson, 1976 and Bandura, 1986), social exchange theory has been analyzed
in depth and they argue that individuals or corporate groups interact for a reward or with the
reward from their interactions with others. SET has the following main basic postulates
mentioned in their paper as follows,

 People are rational and calculate the best possible means to engage in
interactions and seek to maximize profits/returns.
 Most gratification is centered in others.
 Individuals have access to information about social, economic and
psychological dimensions that allows them to assess alternatives, more
profitable situations relative to their present condition.
 People are goal oriented.
 Building social “credit” is preferred to social “indebtedness”
 SET operates within the confines of a cultural context (i.e. norms and
behaviors defined by others)

2.4.2 Power driven relations between e-commerce Company and its suppliers
Researchers have provided a number of conceptualizations of power between buyer and
supplier out of which one is SET which has been mentioned before this part. (Dahl, 1957)
defined power as “A has power over B to the extent that he can get B to do something that B
would not otherwise do”. In another paper (Emerson, 1962) defines power as “The power of
actor A over actor B is the amount of resistance on the part of B which can be potentially
overcome by A”. While these two definitions of power are different in nature but they have the
similar message to convey and explains the ability of one social actor to influence another
social actor. Power, which drives supply chains has been significantly discussed in many
literatures and in the context of SET, it is defined as “The ability of one member of a supply
chain to influence or control the decisions and behavior of other persons, groups or
organizations (Payan and Mcfarland, 2005).

To understand the concept of power, first we need to understand the issue of dependence.
(Emerson, 1962) defined dependence as “Dependence of actor A upon actor B as being 1)
Directly proportional to A’s motivational investment in goals mediated by B, and 2) Inversely
proportional to the availability of these goals to A outside of the A-B relation”. It is best
understood in the setting of social relationships. That is, when wants to control B (where
control is measured via adopted policies/strategies), the extent to which B is actually
controlled by A is a function of how much B wants to be dependent. And in the same sense,
we can say that B wants to control A and the extent to which A is controlled by A is a
function of how much B wants to be dependent on A. Hence power is related with
dependence between company and suppliers functionally. ([Link] et al, 2009). Thus
in e-commerce supply chain, relationship between company and suppliers is power driven
where both try to take control over the other to be in the higher position of power. For
example, when an e-commerce company has suppliers who are dependent to sell their
products to only that company, then the company gets power within their relationship. But it
is to be noted that even the e-commerce company may maintain a higher position but it is still
dependent on its suppliers for the smooth functioning of its supply chain.
Another paper from ([Link], [Link], 2005) emphasizes the effect of power driven
supply chains and according to them,
 Both the company and suppliers i.e. power source and power target should be able to
recognize the power source and then harmonize the supply chain strategy for power
influences.
 The performance of the supply chain is enhanced by a stronger buyer-supplier
relationship.
 Treating the partner unfairly by the power holder will victimize the supply chain and
results in underperformance. In the same way, if a power holder offers justice to the
supply chain and treat the other with a respectful way, the power may serve to the
benefit of the power holder. ([Link], [Link], 2005)
 They adopted the table from (Stuart, 1993) to differentiate between traditional and current
partnerships between buyer and supplier

Traditional supplier Supply chain partnerships Result

relationships
Price emphasis for supplier Multiple criteria for Improvement,
selection supplier selection Success sharing,
Short term contract for Long term alliance with Supply chain
suppliers suppliers efficiency, Cost
Large supplier base Few qualified suppliers benefits.
Proprietary information Shared information
Power driven problem solving Mutual problem solving

Table 2.2 Difference between traditional supplier relationships and supply chain

The above table 2.2 depicts the shift of traditional supply chain relations in which a company and
suppliers are involved and how it is transformed in the current era as a collaborated
conceptualized model to keep buyer-supplier relations strong and long. Nowadays, e-
commerce companies won’t risk to change suppliers often and also do not keep relationships
with many suppliers. Few qualified and certified suppliers serve well enough to drive a
company in the path of success.

2.4.3 Role of trust in e-commerce SCM

Trust is the most important and prominent character between an e-commerce company and the
supplier to keep the relationship healthy and strong to keep the supply chain stable. From the
research point of view after studying the old literature, trust emerges as a multi- dimensional
concept embracing major components such as fairness, loyalty, vulnerability, dependability,
non-opportunism, benevolence and collaboration (Seppanen et al., 2007). The trust in SCM is
largely adopted by the categorization of (Sako, 1992) and later (Ireland and Webb, 2007)
distinguished between contractual, competence and goodwill trust.

 Contractual trust arises when partners expect their counterpart will follow the
contractual clauses.
 Competence trust occurs when the partners feel that their counterparts own the
capabilities for performing specific tasks.
  Goodwill trust occurs when partners take open-minded decisions to take steps for
mutual benefits while stopping from taking unfair advantage of their counterparts.
Accordingly, many supply chain researchers have argued that trust is a prominent critical success
factor which will result in positive outcomes such as improved flexibility, responsiveness,
and cost reduction Role of Technology in e-commerce SCM

In the 21st century, e-commerce companies are in the race of improving their organizational
competitiveness in order to compete with the other companies. Everyone is trying to improve
their agility level with the main goal of being dynamic, flexible and sensitive to changing
market requirements. This can be done with decentralizing value-added activities by
outsourcing and developing a virtual enterprise. (A. Gunasekaran and Nagi, 2004). All these
features show the importance of information technology (IT) in integrating suppliers in
virtual enterprise and SCM. It has been observed that there are very few researches have
conducted so far that deals with IT in SCM. However, an effective SCM is achieved only by
the help of strong IT support inside and outside the company. An e-commerce company has
suppliers in various places and each of them has to be integrated and requires an integrated
information system (IS) for the purpose of sharing various value added information along the
supply chain. IT acts as nerve system of the SCM which carries information throughout the
process and activities.
Fig 2.6 Impact of Information technology in e-commerce SCM operations (Source: Achit and Vinod, 2015)

The above fig 2.6 represents how all the activities and processes in an e-commerce company
are exchanged through IT. A company has to employ high level and secured IT systems in
order to make the customer journey and SCM activities to perform smoothly without any
trouble. A dedicated team of Engineers are to be kept in charge and necessary steps to be
taken in case of every uncertainty. Without competitive IT systems, an e-commerce company
cannot be competitive in the existing advanced market where customer has various choices to
choose from where he purchases.

The benefits of using an effective IT is summarized as follows,

 Orders can be fulfilled and transactions can be done at any given point
irrespective of time.
 Customer can make better buying decisions.
 With the help of IT, the products can be showcased in such a way that customer
can see wide variety of products on his fingertips.
 It is the easiest and economical way to do business online.
 Reduction in cost to e-commerce Company because of unnecessary issues
arising in the supply chain.
  Faster and effective delivery of products in time to reach customers.
 Secured payment option available online can be made possible only by IT
which makes customer feel their payment is processed successfully.
 Advances in IT bring new changes to the existing system which means
increased productivity.
 Cash on delivery is trending in India and it is a part of implementing IT
systems to confirm whether the customer who is buying the product is trustable
when the customer chooses luxury product for cash on delivery. (Achit and
Vinod, 2015)

Strategic Planning

Strategic planning of IT in SCM can help the company to make long term decisions such as the
selection and effective implementation of IT systems with the goal of achieving a strong and
well connected supply chain. Taking into account of the characteristics of SCM, these long
term decisions would enhance functional co-operation and also extended enterprise
integration. IT plays a very important role in creating a demand for various products which
can at last improve the quality of supply chain. As we see from the fig. , the involvement of
top management in making strategic decisions like IT investments would bring out better
results in SCM. When we speak about IT, it’s not about just any software or a tool but the
change in whole existing business process and the way it operates. There can be many
reasons one can implement IT in their supply chain and few are mentioned below:

 Few companies try to implement IT system to develop and effective SCM if it has to
compete a market where speed of delivery and quality are important.
 Some companies need financial and technical support from the government and hence
they implement IT system to improve their supply chain performance.
 For example, in an internet enabled SCM, companies has to look into multiple
competitive performance factors, this requires cost reduction as a primary criterion
and hence they should go for implementing IT systems.
 Business process sometimes has to be restructured to adapt with the current
technology and competitive market and this can be achieved by eliminating non value
adding activities in the supply chain and it can happen with the help of IT system
implementation.
 Strategic planning of IT
Top management participation, long term business plan, global
market and competitiveness, virtual enterprise, agility and cost,
global outsourcing, E-business, strategic partnerships, Mergers
and acquisitions, new products and services, new market
creation, reputation, integrated systems.

Implementation of IT
Top management support, cross-functional project team with IT
skills, business process re-engineering, quality function
deployment, concurrent engineering, life cycle approach, project
management, required financial support, employee
empowerment, performance measures and metrics.

Knowledge and IT management

IT training and education, core competency training, investment

in knowledge capital, E-learning, E-training, groupware.
Multimedia, workflow technologies, cross-functional training,
job rotation, reward and incentive schemes, empowerment and
team work, contribution to knowledge capital.

IT in SCM IT infrastructure

Fitness for the business process, internet connectivity, IT

investment, enterprise resource planning, software and hardware
availability, autonomous agents, EDL, XML, LAN, MAN,
WAN, intranet, extranet, IT skills, training and education of IT ,
IT evaluation.

E-commerce

Global market and competition, digital firms, access to

alternative markets, opportunities for networking, technological
advances, enhanced strategic alliances with partners, reduction in
cost and increase in agility, open communication, enhanced
teamwork, customer relationship management, E-work.

Virtual enterprise

Fig 2.7 IT in SCM Partnership based on core competences, collaborative network of

([Link], Nagi, 2004) firms, virtual teaming, virtual logistics, enterprise resource
planning systems, B2C E-commerce, training and education in IT
  E-commerce companies has to create a good image and smooth functioning of their
activities to attract customers who makes an order and hence IT systems helps the
company to achieve the goal and later SCM can also be improved.

Many companies often think they have the best IT systems and they fail to take long term
decisions to make it better by strategic thinking. Every year, new innovations happens across
the globe and one must re-think and adopt those in the organization to make IT systems
suitable to changing business process and environments around the market. Customers need
changes hence the competitiveness among the other companies, hence it should be taken care
to invest in IT and also to ensure it up to date according the current technological advances.

Virtual enterprise and SCM

Creating a virtual enterprise (VE) is considered to be one of the main strategic applications of
IT systems. It becomes an important to strategy to ensure agility in supply chain. In an E-
commerce industry, it can be a good move to collaborate all the partners and suppliers
through VE, who are offering different products depending on their core competences.
Supplier selection is pre-determined by the business model of e-commerce Company. Virtual
logistics can contribute to the agility of an organization. This can be done by hiring
employees who are better known for their skills in different computer languages like JAVA,
XML and web development. Many companies are unable to conceptualize the idea of VE and
they think it is impossible to implement. However, there are many companies who have
implemented and have been proven successful in their operations. Main objective should be
creating awareness and make the companies know the results of implementing a VE in their
business models. Before introducing VE, companies have to evaluate their suppliers’ and
partners’ IT systems and to what extent they can support the integration process.

E-commerce and SCM

Already we have said well about how e-commerce companies creates demand and affect the
SCM and hence IT systems can be used to develop VE and ERP systems for the fulfillment
of demand which will pass through supply chain before order fulfillment. Considering the
current on which pace the e-commerce industry is growing, necessary measure to be taken
even in customer relationship management for receiving feedbacks from customers and being
pro-active to change in their demands on the products. Implementation of IT in a B2C e-
commerce company will reduce the time of delivery and smooth functioning of supply chain
in particular.
Infrastructure for IT in SCM

The internet is a medium through which many internal and external communications in an IT
system takes place and the portals should be capable to handle enormous amount of data
which flows in and out. It need speed internet portals and database management systems. On
some special occasions, many customers rush into the company’s website hence creating
internet traffic and the company should have the best IT infrastructure to meet the problems
and solving them in uncertain events. The website should never be crashed or customer
shouldn’t face any difficulty to place an order even on peak days. Customer won’t like to
view the page and wait to open for long time which will further make him lose his interest to
visit the website and try for another company. Developing a strong It infrastructure requires
investment on internet based services, hiring highly skilled developers and managing the data
base and keep monitoring the website constantly by a team of engineers. Also it needs to
invest in giving training to their employees and making them to know the functional
objectives and strategies which they are going to handle. It has been crucial for the successful
application of IT in SCM and many companies fail to identify their weaknesses and strengths
in terms of streamlining their business processes and also lack of knowledge of computer
skills among their employees.

Knowledge and information technology management

Building knowledge management (KM) system is a strategy many companies are considering
but in a networked economy, many companies lack in developing a suitable framework for
effectively managing knowledge an IT considering their life cycles. It must be note that
systematic evaluation of various KM and IT management strategies are required to achieve
the objectives. Knowledge about customers and market requirements can be easily extracted
by web-based information systems. But it is unlikely that any company would let its
employee to search in the enormous amount of data spending unlimited amount of time.
Hence, data mining and data warehousing tools will help to improve the speed of data
processing and the right information can be taken which will result in timely and accurate
decisions. Many researchers have managed to study about this topic but they are yet to come
up with precise strategies and techniques for managing knowledge and IT management in
SCM.
Implementation issues of IT in SCM

Implementation of IT in supply chain requires a strong group or team which includes top
managers which a knowledgeable in IT and from all functional areas. Well structure
implementation plan is necessary to develop an effective supply chain. First thing the
organization to do is to check the current business model or any changes are required before
implementing IT. Highly skilled employees who are familiar with many methods and
techniques to effectively manage the implementation of IT in an organization are a vital part.
Top management should provide all the necessary support such as financial and technical to
cut the cross functional barriers. Measuring and monitoring the systems can be a challenging
task where problems can arise and the team should be capable of solving them in less time to
keep the system stable. For an effective supply chain, implementation of IT with suitable
framework would provide the strength and support for the company’s operations. Since it
should be done with the help of theoretical analysis and past experiences, it has also observed
that there are not much empirical research have been conducted so far and the lack of perfect
case studies put the organization behind in terms of achieving full benefits of implementing
IT in SCM. ([Link], Nagi, 2004)

2.4.4 Enterprise systems

Enterprise systems implemented in an organization has proven to be an important investment
option for operation mangers and have been acknowledged in the literature for their potential
to improve the business and make it successful. (Akkermans et al., 1999). For this particular
research the ES include Enterprise resource planning (ERP) and Customer relationship
management. Companies nowadays are heavily investing on ES to get the maximum benefits
in the area of operations management. ([Link] et al., 2007).

2.4.5 Enterprise resource planning (ERP)

ERP systems attracted the attention of the business world at the start of this millennium due
its vast benefits. Apart from the investment required to implements ERP systems, these were
a breakthrough in the world of internet. (Jutras, 2010; Olhager and Selldin, 2003). Many
managers and organizations have sought in-house developed ERP systems designed
according to their business models instead of using conventional packages. (Deloitte, 2010).
“ERP systems are modular software packages that integrate a firm’s business functions
around a common database and standardized processes that are configured to fit the needs of
the user organizations” (Sasidharan et al., 2012). Generic ERP software packages are
nowadays customized to the client’s requirements and the type of firm in which they are
implementing. (Robert and Weston, 2007).

ERP has become an integral part in the SCM. The greater emphasis on SCM and information
technology advancement has created a need for enterprise-wide integration (Yen and Sheu,
2004). (Yusuf et al., 2004) justifies that it’s almost impossible to achieve a well-integrated
supply chain without the implementation of strong ERP system. (Pandya et al., 2004)
describes a set of generic processes in a process-based organization as follows: “order
fulfillment process, marketing process, support fulfillment process, and obtain order process,
product and service development process, and technology management process”. Focusing on
all these processes will result in a flexible enterprise, total service enterprise, technology
leader and virtual enterprise. Employees in an organization must not only teach and train
about the usage of ERP but also the company should make them aware with the strategic
implications in managing the supply chain using ERP. ([Link] and Nagi, 2012).
(Tenhiala and Helkio, 2015) argues about their view for and against ERP systems due to
mixed conclusions from various literature and researchers but they accept the fact that
organizations facing dynamic market requirements may benefit from ERP systems.

The below fig 2.8 represents how ERP systems replace complex and manual interfaces
between different systems with standardized, cross-functional transaction automation.
Implementation of ERP systems enabled by IT can affect the entire organization and further
impact positively in company’s SCM performance (K.B. Hendricks et al., 2007).

In another article by Jaideep Motwani et al., 20002), they have proposed theoretical
framework of ERP implementation and the factors which influence the performance. The fig.
is adapted from Kettinger and Grover’s model of BPC management which shows individual
components of the framework. These components are essential in knowing whether the ERP
system implementation can be successful or inhibits the growth of an organization.
Fig 2.8 ERP applications in an E-commerce B2C company ([Link])

Strategic initiatives

The fig 2.9 represents the theoretical framework of ERP implementation management. The
change of process usually comes from the senior management and begins with strategic
initiatives. The origin of strategic initiatives is the reaction to an urgent need to leverage
potential opportunities. Also many researchers have made evident that this process change is
often incremental, informal, emergent and is based on learning through small gains. These
strategic initiatives can be put into form in an organization either by a mandate or forced
through consensus within existing system of the organization.

Learning capacity

Nowadays environmental changes are inevitable and the major objective of learning is to
provide positive benefits through efficient adaptation to these environmental changes.
Adaptation here refers to making major technological changes or to learn from the other
companies who have adapted the strategy in order to achieve the best practices inside the
organization. The level of learning is determined by the experiences and higher level of
learning comes from reflecting on past learning experiences to discover new strategies for
learning. The process of learning can also be achieved by reviewing external information and
those scanners who span the boundary between the environment and the organization.

Fig 2.9 Theoretical framework of ERP implementation management (Source: Jaideep Motwani et al., 2002)

Cultural readiness

Organizational culture provides a platform the integration of individual learning with the
organizational learning and thus by enhancing the organization’s ability to learn, process,
share information and make decisions. Business process change can be done either by top
management or change agents (BPC team).
Information technology leveragability and knowledge- sharing capability

The role of IT has already been widely discussed in the previous parts and it tis the backbone
of any organization. The role of IT in the business process change can act as an enabler. It has
also been proven that it helps in learning and sharing knowledge through a co-ordinate
process among individuals inside the organization. IT infrastructure and to the extent which
knowledge sharing occurs, will result in successful business process change.

Network relationships

In an organization, under most situations, the previous researchers suggest that the
performance will be increased by cooperative, interpersonal and group behavior. However,
competitiveness among the competitive groups can even give better results and superior
performance. Such organizations that create these events and execute them will have an upper
hand in the competitive market.

Change management practice

“Change Management (CM) refers to any approach to transitioning individuals, teams, and
organizations using methods intended to re-direct the use of resources, business process,
budget allocations, or other modes of operation that significantly reshape a company or
organization.” (Wikipedia). It involves the process of effectively balancing two forces out of
which, one is in the favour of change and other who opposes the change. Usually in an
organization, individuals or group of people resist to change if they feel that change is a
threaten to them. Several evolutionary change throrists have said that the factors require to
accomplish change is dependent on employee involvement, communication inside the
organization about the change and the top management/Leadership. Practicing change
management would deliver best results in the long run and company’s operations and
implementation of ERP can be reflected in the efficient supply chain.

Process management practice

Process management is defined as “A set of concepts and practices aimed at better

stewardship of business proceses”. It is a comination of methodological approaches with
human resource management (HRM), in order to improve business process change. Process
management can be successful with the help of many tools and techniques such as process
metrics, process audit, process information capture, data flow diagrams, flow chart analysis,
fish bone diagram, and root cause analysis. ([Link] et al., 2002).
Thus, it can be observed from various arrticles and researchers who tried to make thier point
clear in case of ERP implementation in an organization which will lead to an effective SCM
and many studies already proved it. So in this modern technological era, using enterprise
systems and adapting technologically as the company advances and grows bigger, would be
the only way to make an e-commerce company supply chain function at its best.

2.4.6 Radio frequency identification(RFID) in E-commerce SCM

“Radio-Frequency Identification (RFID) is the use of radio waves to read and capture
information stored on a tag attached to an object. A tag can be read from up to several feet
away and does not need to be within direct line-of-sight of the reader to be tracked.”
([Link] This is an advanced technology very widely used to track the
shipments, objects, inventory objects etc. It mainly consists of three elements: a tag formed
by a chip connected with an antenna; a reader that emits radio signals and recieves in return
answers from tags; and a middleware that bridges RFID hardware and enterprise applications
(Ngai et al., 2008, Sarac et al., 2010). RFID technologies operates by comminucating with
numerous objects at a distance without contact in real time. This advancement in automatic
identification and data capture technology can enhance the ability to trace products and avoid
inventory accuracies thus making the supply chain more efficient once it is implemented.

Because of the major important use of RFID technology, many researchers and practitioners
have paid interest and lot of attention in this area (Kok, 2008, Ngai et al., 2008). Major
problem in E-commerce supply chain is being inventory inaccuracy when you have the
record of the product on paper but the product might not exist anymore. Inventory inaccuracy
is inevitable and many companies have admitted the discrepency between inventory records
and the amount of product really available for sale for customers (Tijun Fan et al, 2015). In
an article by (Atali et al., 2004), they have found out main reasons for inventory inaccuracies
being stock misplacement and inventory shrinkage. Inventory shrinkage mainly happens from
loss or damage or theft of products which leads to permanent loss. Inventory misplacement
can be managed by personally checking the stock but inventory shrinkage will go missing
which can results in the reduction of sales and 10% profit loss to the company.

The below table. Represents the operational charecteristics of RFID tags in real-time tracking
environment, their frequency range, cost and general appliocations. Usually ultra hig
frequency passive RFID tags are used in SCM. Passive RFID tags are the ones which doesn’t
use any external source of power and they are powered by the electromagnetic energy
 transmitted from RFID reader. These are mainly used in SCM. Active tags are the ones which
use a battery powered RFID tags that will continuosly send their signals to a reciever. They
are used mainly in high speed environmentsor the real time location of assets (for ex: tolling,
asset tracking). The main differences between active and passive RFID tags can be seen from
the table 2.3 below.

Low High Ultra high Microwave

frequency(LF) frequency(HF) frequency(UHF) frequency(MF)
Frequency range 125-134 KHz 13.56 MHz 860-930 MHz 2.45 GHz
Tag type Passive Mainly passive Active and Active and
passive passive
Read range <0.5 m 1.0 m 3.0 m 10 m
Tag size Larger Larger Smaller Smaller
Data transfer rate Slow Medium Fast Fastest

Ability to read Best Better Worse Worst

near metal or wet
surface
Tag cost High Lower than LF Lowest High
tags
Typical Livestock Airline baggage Supply chain Electronic toll
applications tracking, card- handling, library tracking, collection,
key access book tracking, Warehouse Railroad
control, beer keg electronic article management monitoring
tracking, exxon surveillance
mobil
speedpass.
Table 2.3 Operating frequencies and performance characteristics of RFID (Source: Tajima, 2007)

It is evident from the previous parts we discussed about RFID that the majority of the
researchers and practitioners focused on inventory/storage management using RFID
technology. The literature shows how RFID systems can help in reducing inefficiencies such
as poor storage space utilization, misplaced stocks and error in inventory records thus making
 the warehouse and inventory management much more efficient in the SCM. The technology
can be applied in any industry which will in turn make the company achieve prioritized goals
to improve the performance of supply chain. (Lim et al., 2013).

Passive tags Active tags

Power Not self powered(derive power Battery powered(internal),
from the electromagnetic field can be effective with less
generated by the reader), require powerful readers
hig powered readers
Read range Typically under 3m Can be 30m or more
Performance Lower data transmission rates, Higer data transmission rates,
subject to noise, greater orientation better noise immunity, less
sensitivity, fewer tags can read orientation sensitiviy, more
simultaneously, no self-reporting tags can be read
capability simultaneously, self-
reporting capability
Read/write capability Mostly ready only, may also be Read many, write/re-write
WORM(write once read many)
Tag cost Less than 1$/piece As much as 20$/piece
Physical size Can be small as dust particle, less Larger than passive, may be
weight due to no internal battery as large as a brick, greater
weight due to battery
Life Long operational life Limited due to battery life
General application Suitable for tracking low-value Suitable for tracking high
consumer goods, supply chain value items over long ranges,
tracking security/personnel access
control, asset tracking
Table 2.4 Difference between active and passive RFID tags (Source: Tajima, 2007)

2.5 Warehouse management in e-commerce SCM

For any e-commerce company, to function efficiently in today’s competitive environment,
proper warehouse management is an essential aspect. Most of the times customers places
orders for various different kind of products in small amounts and it is often received by the
logistics service providers. They often request for customized value added services and
timely delivery. Therefore, decision making process is one of the most important factors in
warehouse operations and also the fulfillment of customers’ orders is very necessary and
challenging to satisfy customer demand in terms of responsiveness, cost effectiveness and
flexibility. The performance of warehouse operations process is affected by never ending
changes in the business environment and also by the risks that occur in logistics operations.
Only a small number of researches have been made regarding warehouse management and
risk handling in the warehouse operations.

The e-commerce company usually displays millions of products and it gets orders from the
customers for various kinds of products from least price to special products. Making a wrong
decision in the operations of logistics can reduce the performance of the warehouse. Order
fulfillment decision making rights are owned by the respective warehouse managers in the
company and it is difficult for the warehouse manager to give proper instructions to handle
the order with consideration of product characteristics and existing warehouse operations.
Sometimes his judgement or decision may be inaccurate. Every company should be equipped
with resource allocation strategy based on the knowledge of the warehouse manager and if
there none, it means that no suggestions are passed regarding allocation of resources on how
to handle the order when a possible risk occurs in order fulfillment. This might result in
improper use of resources and loss of customer satisfaction. ([Link] et al., 2015)
2.5.1 Warehouse Risk management:
According to (Jutmer et al, 2003) risk is defined as “An exposure to the possibility of
negative economic impact, physical damage or delay as a consequence of the uncertainty
associated with the action performed”. Risk taking is perceived as an integral and inevitable
aspect in the management of any business and risk management is able to improve
competitiveness, reduced costs and maintain profitable gains to the company (Zsdidin and
Ritchie, 2008). Since the warehouse operations involve number of sub processes and hence
the risk factor will be increased in each step thus increasing the complexity of decision taking
ability. Customers have different requirement and keeping in mind that the warehouse is the
sole block of operations to handle different orders, keen observance is required. Different
products possess different characteristics and while handling those, one should provide good
quality control such as many products are sensitive to temperature and they impose
constraints on warehouse operational planning ([Link] et al., 2015). In a similar manner, it
is very important for an organization to implement warehouse risk management that measures
risks and provide suitable contingency plans to reduce the consequences of risks and assure
smooth functioning of operations in the warehouse. (Pai et al, 2003). According to ISO
31000, risk management consists of three steps,
 Risk identification
 Risk assessment
 Prioritization of risks
These three steps aim at reducing, monitoring and controlling the probability of uncertain
events going to occur in the future. (Carole and Oliver, 2012). The risks involved in the
warehouse management is discussed in this literature at later stages where SCM risk
management and role of IT in reducing risks in a supply chain of e-commerce companies, are
discussed. The following fig 2.10 shows possible risks identified from the warehouse
management which was adopted by ([Link] et al, 2015)
Fig 2.10 Different types of risks in warehouse management([Link] et al, 2015)

2.6 Inventory management and control

When we speak about e-commerce inventory management system, it is more complicated and
it gets risky if the company is selling products on multiple channels. More number of
channels of distribution gives rise to more number of inventory products and hence more
importance in handling the inventory. The e-commerce company will send a purchasing order
for the products which is obtained by forecasting the demand and they store it in the
warehouse by scanning the bar code of the product which will feed into the ERP system. But,
many times, because of errors, the physically available products at the beginning of the
selling period may not be equal to the products at the end of selling period. This is explained
by ([Link] et al, 2015) as inventory inaccuracies. When the e-commerce company receives
the order from the customers for a specific product and it is cumulated as a whole and sent to
the warehouse to pick it from the stock of inventory. Warehouse manager will compare the
total number of orders requested from the customers and the total number of available
products in stock. If the total number of orders from the customers is less than the number of
products available in the inventory, they will accept the orders or they will not. At the end of
the day, all the orders which the company has committed to, should be processed and shipped
but it will not happen always because of inventory accuracies. This raises a question and need
to research about how to reduce inventory accuracies and how can inventory be managed in a
way that all the products are available to customers at all times when order is placed even
from different channels.

2.6.1 Hoarding and phantom ordering in supply chains:

In the latest paper, the researchers have observed an unusual aspect in ordering products and
supplying in the times of uncertainties. It is explained by the words Hoarding and Phantom
ordering. Hoarding is defined as “Attempts to accumulate large private stocks of goods or
products when people perceive threats to supply”. Phantom ordering is closely related but in
an opposite way which can be defined as “The situation in which people react to uncertain
supply by ordering more than they actually desire, or ordering from multiple suppliers, then
planning to cancel their excess orders once they get what they desire”.([Link],
Gokhan Dogan, 2015)

Phantom ordering was first recognized by (Mitchel, 1924) and he provided an early
description of the process and its role in supply chain instability. He explains with an
illustrative example as follows. E-commerce or e-tailing companies orders in bulk a specific
product to their suppliers or a manufacturing company which produces it. But, the supplier
says whole orders cannot be fulfilled and he promises to complete 80 percent of the placed
orders. The e-commerce company gets worried because of unfulfilled customer orders and in
case not to repeat the same incident , it plans to order 20 percent more than desired assuming
that the supplier will fulfill 80 percent of their order. To their utter surprise, this time the
demand goes upstream stage by stage and reaches production channel. This time, the supplier
 is able to fulfill all the orders placed by the company and the ordered products exceed the
customer demand thus resulting in unnecessary storage cost and inventory. This is illustrated
very clearly in the following fig 2.11 by ([Link] and [Link], 2015)

Fig 2.11 Feedback structure of hoarding and phantom ordering (Source: [Link] and [Link], 2015)
If the customers orders for a product, the warehouse manager or the software checks for the
specific product in the inventory. If there is less stock compared to customers’ orders,
automatically it will convey the message to order more from the suppliers. However, the
supplier will have some delay to fulfill sudden orders. Once the products are delivered, it will
raise on-hand inventories and thus by closing the negative inventory control loop B1. If a
channel needs 100 units of products from the supplier each day and if it takes the supplier 10
days to fulfill the orders, then by Little’s law, the channel must maintain, in equilibrium, a
supply line of 100 units on order. If the supplier cut the process time or delivery time to 5
days, then the channel needs to maintain a supply line of 50 units. Warehouse managers,
using the software, would cut until the supply line fell from 100 to 50, closing the supply-line
control loop [Link] increase in its backlog will push the supplier to increase in shipments,
hence reducing the backlog of outstanding orders and closing the negative availability loop
B3. Usually, under normal conditions , the supplier is able to fulfill all the orders placed and
if a times comes when the supplier could not able to fulfill the orders in time and he takes
more time, for e.g. in the above mentioned example, instead of taking 10 days to supply 100
products, let’s assume he will take 15 days because the product is new to the market, uptick
in the economy, transportation bottlenecks, strikes or natural disasters. Now the channel
managers will have to order 150 units going farther ahead to keep the system in equilibrium
since supplier has asked for 15 days to deliver the products. Orders rise further and delivery
times will also increase more while allocations fall and delivery reliability drops, closing the
reinforcing phantom orders feedback, R1. Furthermore, by the risk of longer delivery days,
channel managers decide to increase their target for safety stocks in any time for uncertain
demand from customers. To achieve this, they must order more from the existing suppliers
which increases more delivery delays and reducing supplier reliability, increasing more safety
stocks and closing the positive hoarding feedback, R2. ([Link], Gokhan Dogan,
2015).
Managing inventory and having products in stock can be a challenging task to any warehouse
manager and the following factors can be used in e-commerce to reduce risk in inventory
management.
 Trying to keep core and non-core products separate. For example there will be
products which are in circulation and customers tend to order those products more and
another category is specific products for example at the time of festivals, school
dresses for kids before summer, seasonal products which customer use. By this, one
can clearly forecast the demand and perform order fulfillment.
 Improved forecasting as mentioned before is the key aspect in inventory management.
Predicting customers’ purchasing behaviors and ordering the products before the
inventory gets out is a challenging task for any warehouse manager and it should be
done with the collaboration of other departments like marketing, business research
and development.
 Over ordering and less ordering should not be done.
 Pricing strategies can influence customer to turn towards other alternative providers
and it can result in stocking up inventory if the product is not sold. So pricing should
be done technically by analyzing various data.
Sometimes the e-commerce company has different warehouses in the same city and the
inventory has to be managed by looking into both warehouses by using ICT tools. By the
help of proper software tool, one can reduce inventory wastage and products stocking.
([Link]

2.7 Role of logistics in E-commerce SCM

Logistic service provider plays an important role in e-commerce industries ([Link]
and Sarkis, 2008), because they states that it can improve company’s competitiveness in the
market over other companies. The scope of relationship between e-commerce companies and
product delivery service providers is complex due to the online transaction process. E-
commerce companies and product delivery service providers work like partners but yet, at the
end customers’ satisfaction is a combined effect of online transaction with the company and
the logistic service provider too. Hence, the quality of product delivery service providers is a
vital factor for all e-commerce companies. They treat product delivery service providers as
their suppliers since there is a thin layer of differentiation between those two. Most of the
time, e-commerce company’s role from the view point of service provider is as a customer to
them. Being called a customer, e-commerce Company obviously expects good service and
satisfaction, timeliness in the delivery from the logistics service provider. ([Link] et al, 2015).
Here arises the question about how e-commerce companies choose those product delivery
service providers and there exists a paper which has explored the context of this and it
explains as e-commerce companies which are selling fashion and 3C
(Computers/Communications/Consumer) innovative products, they need additional
customization. Because these products are of high price and quality. (Delafroz et al., 2010).
The era of internet changed the way products are delivered to customers and one important
key feature customers demand is to know where the product is, before it reaches them
(Tracing/Tracking). In another paper (Wang and Sang, 2005) illustrate that e-commerce
companies choose a product delivery service provider on the basis of their efficiency. Many
companies have been included customer service quality and logistic service quality in their
consumer feedback system.

Logistics service provider or product service delivery provider selection criteria’s include
delivery speed and reliability of the provider. ([Link] et al., 2015). Another researcher (Esper et
al., 2003) chose four different variables on the basis of which an e-commerce company
selects their logistic service providers and they are delivery time, product condition, delivery
satisfaction expectations and carrier reliability. However, other researchers have also added
responsiveness, communication, order-handling and distribution to the above mentioned
variables for the selection criteria. (Cho et al., 2008).
Fig 2.12 Evolution of logistics in e-commerce companies (Source: [Link]
e- commerce-trends-2015-influence-buyer-experience/ )

The above fig 2.12 explains how the logistic services transformed according to customers’
needs and transformation in information technology and supply chains.

2.7.1 Reverse logistics and quality of the product

In an e-commerce industry, many companies offer give the right to customer to choose the
mode of purchase and almost more than 50 percent of the customers choose to pay when the
product is delivered. In other words, cash on delivery is most likely a feasible option for the
customer because they can return the product if it is not in the good condition or the product
which they did not meet their expectations as they saw in the company’s website. After
returning the product, the logistics service provider has to pick it back and return to the
company. It is termed as return to origin (RTO). (Wikipedia reverse logistics). In this process,
it adds up to the company’s existing inventory and quality checks have been made at first
whether the customer has rejected because of quality. If the product passes quality test, then
they have think for other reasons why the product has been rejected. If the same product is
rejected again, then they have to consult the manufacturer or supplier who is supplying the
product or return the whole stock assuming that the customer no longer wants the product.
Fig 2.13 Reverse logistics framework in an e-commerce company (www. [Link])

As we can observe from the above fig 2.13, an e-commerce company should have certain
return policies where they can encourage customers to buy more and retain them in the long
run. Many e-commerce companies gives their customers liberty to return the product if they
don’t feel satisfied without asking for a reason. Later, the CRM staff will call the customer to
take a feedback why the product has been returned. The products which are returned can be
broadly classified into these five categories according to their quality.

 Restock: These are the products which are unopened and returned to the inventory to
ship again to another customer who purchases the same product.
 Repackaging for sale: These products are opened by the customer and returned
because of the factor they didn’t meet their expectations or for any other reason but
the product will be in new condition and it can be repackaged and sent to another
customer who asks for the same product.
 Return to vendor: Some products which have technical defects have to be returned
to the supplier because most e-commerce companies are linked up with their vendors
with a credit or exchange policies.
 Disposition: Product has a value but cannot be re-sold on e-commerce.
  Scrap: These are the products with poor quality or defected, which cannot be used
and considered to be scrap items.

Asset recovery for the above products can be explained as follows:

 Restock: The product can be re-shipped to another customer and there will be
considerable amount of loss of value for the company due to handling and
transportation.
 Repackaging for sale: These products need to be sent back to the warehouse where
they are packed initially and shipped according to the company’s supply chain
process. Minimal amount of loss to the company but can be recovered fully if there
are more products of the same kind and shipping charges will be minimal.
 Return to vendor: E-commerce companies can get full cost of the product in return
because of their agreement with the vendors before purchasing the product. But cost
of handling transportation must be considered.
 Disposition: Product which an e-commerce company does not wish to sell but the
product has a value. In that case, may be using third party websites or considering to
sell the product in discounts to attract customers would be a good idea.
 Scrap: These are the products with poor quality or defected, which cannot be used
and considered to be scrap items. There are more companies who pay for this kind of
electronic scrap when sold in bulk but company loses high value of money when
many products come into this category.

2.7.2 Supply chain quality management (SCQM):

In the previous part where it has been discussed about reverse logistics, it gives clear idea that the
factor of quality is very important from the point of supplier, e-commerce company product
handling, logistic service provider quality until the product reaches the customer. The
increasing studies in the area of SCM have made researchers to re-think, innovate and
construct new models and frameworks for quality management in supply chain for the field
of operations management. Many works have been done in this area (Thirumalai and Sinha,
2005; Benton and Maloni, 2005; Flynn and Flynn, 2005). SCQM is defined as “Systems-
based approach to performance improvement that leverages opportunities created by
upstream and downstream linkages with suppliers and customers. ([Link], 2008). He also
suggested common themes in SCQM in fig , which has been adopted by (Adam and
Swamidas, 1989; Foster, 2007)
Fig 2.14 Common themes in SCQM ([Link], 2008)

Out of the entire variables mentioned in the above fig 2.14, the core elements of SCM being
quality practices. Product safety and quality practices should be combined to reduce the risk
of product returns /reverse logistics. Quality should start from the point of buying the product
from the supplier until it reaches the customer through the logistics service provider. In a
similar way, in a different article ([Link] and [Link], 2008) proposed a research
model about the relationship between quality and e-procurement performance.
 E-commerce
performance

Fig 2.15 Role of quality in ecommerce performance (Vaidyanathan and Devraj, 2008)

Following their research model, they concluded with these following postulates:
 H1 – Online information provided by suppliers is positively associated with
their fulfilled order accuracy.
 H2 – Online information provided by suppliers is positively associated with
their fulfilled order timeliness.
 H3 – Effective and easy to use ordering processes of buyers is positively
associated with suppliers’ fulfilled order accuracy.
 H4 – Effective and easy to use ordering processes of buyers is positively
associated with suppliers’ fulfilled order timeliness.
 H5 – Suppliers’ fulfilled order accuracy as perceived by buyers is
positively associated with buyer satisfaction.

2.8 Distribution channels and demand management

E-commerce works with the support of IT/IS and it’s a virtual world where customer can
search millions of products before buying them. Actually, e-commerce channels are
becoming tough competitions for traditional industry distribution channels and it pressurizes
firms to become e-enabled business. E-commerce generally uses internet as a channel where
a customer visits company website and select the product and at last the payment will be
made and the order fi fulfilled. All channels must perform three fundamental tasks: Exchange
 of goods, exchange of information and exchange of money. ([Link], 2002). Companies
usually benefit from multi-channel distribution strategies in many different ways. It enhances
the company’s ability to know more about customers’ purchasing behavior of any kind of
product. Companies with variety of product can also benefit from multi channeling since it
can find different ways of selling product online. Finally, if the company has excess
inventory, it can go to multi-channel distribution strategy in the hope of clearing the stock.

Sometimes, the manufacturer company decides to sell their products online with existing
retailer channel which gives rise to competition between the two which can be termed as
‘Supplier encroachment’. (Arya et al, 2007). This will directly affect the e-commerce supply
chain of B2C company because the manufacturer firm will also have to compete with B2C e-
commerce Company and it will disrupt supply chain activities as demand can’t be forecasted
correctly. The fig shows the traditional distributional channel against two channel distribution
from the manufacturing company which could be a threat to B2C e-commerce company
selling the same product because customer usually wishes to buy directly from the
manufacturer which is the influence of brand loyalty or less price they are offering.

Manufacturer

Retailer

Customer

Fig 2.16 Traditional distributional channel (Source: [Link], [Link], 2015)

 Manufacturer

Retailer E-tailers 3PL

Customer
Fig 2.17 Dual channel distribution (Source: [Link], [Link], 2015)

The e-commerce company gets competitive advantage over the manufacture and retailer who
is distributing if it offers the product less in price or a discount, by ordering fewer quantities
not to hold the stock in future if customer never buys. Demand forecasting and customer
relationship management are the key factors to retain existing and attract new customers. This
is illustrated in fig 2.16 and 2.17.

2.8.1 Impact of demand on distribution

In the literature, SCM models under demand uncertainty have received lot of attention from
the researchers. ([Link], M.C. Georgiadis, 2012). But (Daniel Rexhausen et al, 2012)
argues that demand management has not yet been exclusively analyzed in the academic
literature with respect to its impact on SCM performance. Demand management can be
defined as “The ability of a company to understand customer demand and requirements and
balance them against the capabilities of the supply chain” (Lambert and cooper, 2000).
Demand management (DeM) is traditionally also termed as “demand forecasting”. Evaluating
the relationship between company’s physical operations and customers is considered as a
major task and primary objective in distribution management (DiM). (Williamson et al,
1990). ([Link] et al, 2001) agrees that previous researches shows the prominence of
DiM since it directly interacts with the customer facing processes which will enhance supply
chain performance. However (Daniel Rexhausen et al, 2012) argues that the impact of DeM
and DiM are not to be studied separately since they both are linked with each other and he
proposes a model to explain the same. The below fig shows the model proposed by them and
it clearly shows the relationship between demand management and distribution management.
Fig 2.18 Structural equation model ([Link] et al, 2012)

On the basis of the above proposed model, they came up with ten postulates which are stated
below:

 H1 – The extent to which effective forecasting practices are implemented is positively

related to Demand management performance.
 H2 – The level of demand segmentation is positively related with demand
management performance.
 H3 – The extent to which integrated S&OP (To make sure the efficiency of supply
chain flows, companies need to integrate customer demand with the supply chain’s
purchasing, production, distribution as well as other related functions, which is
commonly referred as controlling or S&OP (Croxton et al, 2002) is implemented is
positively related with demand management performance.
 H4 – The level of adherence to the demand management processes is positively
related with demand management performance.
 H5 – Demand management performance is positively related with supply chain
performance.
 H6 – The extent to which effective warehouse management is implemented is
positively related with distribution management performance.
  H7 – The extent to which effective transportation management is implemented is
positively related with distribution management performance.
 H8 – The level of adherence to the distribution management processes is positively
related with demand management performance.
 H9 – Distribution management performance is positively related with supply chain
management performance.
 H10 – Demand management performance is positively related with distribution
management performance.

2.9 Customer purchasing behavior and order fulfillment

Nowadays, consumers have got full power to choose, compare and contrast competitive offerings
from various e-commerce companies with minimum spending of their personal time just few
clicks away browsing a website on the internet. (Srinivasan et al, 2001). The internet is the
perfect place for everyone because of the instantaneous information which is available and
customers can compare product offerings and price from different company’s websites. This
causes all e-commerce companies to battle on pricing decisions and brand loyalty gets faded
eventually. It is well accepted fact that the effectiveness with which an e-commerce company
is able to fulfill orders is a dominant and determinant key factor of customer satisfaction and
retaining the existing customers (Shenton, 2002). In their paper, (Ricker and Kalakota, 1999),
they explain good fulfillment of an order is as “Taking the right product, putting in the right
box, shipping it, and gaining customer’s approval - is a demanding task, and it is here – in the
down and dirty details of consumer direct order fulfillment – that the epic battles for
domination of the e-commerce marketplace will ultimately be won or lost”. In a similar way
to this, (Lee and whang, 2001) emphasize that “the ability to fulfill and deliver orders on time
could determine an e-tailer’s (e-commerce company) success”. (Newton, 2001) states that “It
is the successful transfer of physical products between merchant and the customer that
ultimately determines whether the customer will place another order”. Any e- commerce
company should ensure customers in a positive way about the availability of the product, ease
of return in case customer is not willing to take it and timeliness of delivery. These factors
will have a significant impact on the relationship of the customer with the company and to
win his loyalty (Heim and Sinha, 2001). E-commerce B2C transactions and order fulfillment
is a complex multi-faceted process that should continue successfully and efficiently which
will strain the growth of e-commerce economy. Order fulfillment as a whole involves all the
activities combined from the phase of a customer’s purchase decision
until the product is safely reached to the customer in time. Customer would be satisfied only
when his demands and expectations about the product are met. Customer’s expectations
functions as standards with which one can evaluate their experiences, satisfaction and quality.
([Link], [Link], 2005). In another paper, (Parasuraman et al, 1991) expresses that
understanding the customer’s expectation is the prerequisite for an e-commerce company to
deliver superior quality of products.

The impact of customer’s variables on supply chain in positive and negative way can be
summarized below. It can be observed that customer’s purchasing behavior plays a critical
role in deciding how much to stock in the inventory, it gives company to forecast the future
demand for certain products and in cases of large returns, they can look up into quality issues
or shipping times ([Link], [Link], 2005).
 Ease of placing order – It can have a positive effect in satisfying a new customer
and also retaining the existing customers in the long run. It has no impact on SCM.
 Product selection – If the customer chooses a product which is showing available
but if it’s not available in the inventory, then the company has to act immediately to
procure the item since customer cannot wait delays. It poses a risk to company’s
SCM since the handling costs will be high compared with multi orders for the same
product.
 Product information – it is very essential for the company to provide all the
necessary technical specification, product details and if there are any freebies offered
with the product. Because, if the information is not sufficient or if it’s not relevant to
the product which the customer receives at the end, then he will return it back to the
company. Logistics and transportation costs and quality costs will increase if there
are more returns. Hence providing all the information is necessary to the customer. It
has an impact on SCM and it’s a major barrier.
 . Shipping and handling charges - Some Companies offer free shipping and some
companies charge for the customers depending on where they are located and which
product they are buying. It will be very hard to ship to remote places if there is a
single order from that customer. So company has to wisely choose the location of
their warehouse so that it can reduce the shipping and transportation costs. It has a
big impact on SCM.
 Variable/drivers Significance Impact on SCM
Ease of placing order Earning new customers, No significant impact
Competitive advantage
Product selection More products and more Managing inventory for the
customer purchases, economic gain ordered product, negative if it is
not available
Product information Customer awareness, use of IT Customer will return the product if it
doesn’t matches the description
mentioned in the
website
Product prices Affects customer’s purchasing
Customer can choose the website
behavior which offers the same product at
less price and inventory holding
will be a problem
Website performance Facilitates customer’s journey It shows weak ICT tools which is
and positive impact a big no for IT enabled SCM
Shipping and Managing quality, packaging Reverse logistics, increase in
handling charges and product safety unnecessary costs.
On time delivery Order fulfillment and no returns More orders can be expected if
customers number is increased
which is a signal to ready for
keeping SCM stable
Order Essential to track the product A problem if 3PL is not
tracking/information before it reaches the customer performing efficiently
Product met Customer satisfaction, order Reverse logistics and product
expectations fulfillment, reduced returns return
Customer support Post sales and assistance in case of
It impacts when customer is not in
customers’ problems related town or asks for another day to
to purchased product deliver the product

Table 2.5 Customer variables and their impact on e-commerce SCM ([Link] and [Link], 2005)
  Product prices – It is quite common that customer wishes to buy quality product
with less price offered by an e-commerce company. This issue will be discussed
later in Pricing and he chooses to buy the product from a company which offers
him minimal price for the selected product. It also has impact on company’s SCM
in case if a particular product’s inventory stacks up and inventory handling would
be an issue. For e.g. a customer is willing to buy a popular smartphone and all e-
commerce companies procure these phones and keep in inventory thinking that
the forecast will be right. For some reasons, if a company offers the same product
at very less price compared to other companies, then those companies will have to
reduce the price or face the problem of handling electronic inventory or returning
them to the supplier. In any case it is not a wise decision because they will lose
money
 Web site performance – Most customers choose online shopping because they can
spend minimal time in choosing the right product and also place an order in just a
matter of minutes. But if website performance is weak or slow in payment processing
or loading pages, customer would get impatient and the company will lose the
customer in the long run. It has no impact on the SCM of the company but even
though it has a positive impact when customer get satisfied with the website
performance and order more products which would pace up the SCM process.
 On-time delivery – Order fulfillment is clearly explained above before this part and
customer won’t be satisfied if the order is not delivered in the mentioned time.
Company has to rely on customer relationship management and if it gets too late,
customer is most likely to reject the product and send it back. Company will lose the
customer and also have to bear the reverse logistics charges which are not good for
any e-commerce company.
 Order tracking/status information – Mostly nowadays all companies provide a
tracking id to the customer regarding shipping of the product, through which courier
it is arriving, where is the product right now and so on. If a company uses its own
logistic service, then it has the whole power to control the operations but if it’s a third
party logistics which company is providing work to, then the 3PL should be certified
and qualified enough to reach customer in time. All the details which are provided on
the tracking id must be true and packaging and handling of the product should be
taken care very well in order to get no return. This has minimal impact on SCM but is
also important variable.
  Product met expectations – Customer just has a visual of a product and he can just
see it virtually. He cannot know whether it’s the same product which has been
shipped or the company won’t know what a customer is expecting. In most cases,
customer chooses cash on delivery (COD) option and if the product doesn’t meet his
expectation, the customer will be more likely send back the order asking for the
replacement or returning the money he paid. Company’s SCM also gets influenced
by this variable in a greater way.
 Customer support and post sales – An e-commerce company should have a strong
customer relationship management (CRM) department which can be in touch with
the customer 24 hrs. and whenever a customer needs something related the product,
they have to give all the necessary details. Also, after the product is shipped and
customer accepts the order, he may call for assistance and in case of any problems
related to using the product. Lack of good customer support team would lose
customers very soon. Sometimes the customer won’t be available at the time of
shipping or he asks the company to ship the product at a later date. If the product has
been already shipped, it is unnecessary activity where they have ship it again and also
bearing return of the product. This is variable where customers’ number will grow
leading company into building a bigger warehouse which can accommodate all the
ordered products and forecasted inventory.
All these variables mentioned above regarding customer’s order fulfillment are very
important since company can grow very rapidly by acquiring more customers which in
turns affects the existing SCM for the changes of future. So a SCM of e-commerce
should be flexible and strong to any uncertainties. For e.g. when One plus smartphone
was launched, they did not expect a lot of customers would be willing to buy the phone.
Due to huge incoming demand, they had to build a system where a customer could buy
only when he has an invite from the company or another customer to buy the phone. In
the meantime, the orders were executed thus reducing the supply chain risk.
According to ([Link] and [Link], 2005) who classified products into three main
groups based on customer’s purchasing process and this was first established in a paper
by (Copeland, 1924). These are as follows:
 Convenience goods: “Goods which the consumer usually purchases frequently,
immediately, and with a minimum of effort”. (American marketing association,
1948). During the selection and purchase of these goods through an e-commerce
website, the customer do not spend appreciable amount of time and money thus the
 risk expected are at lower level ([Link] and [Link], 2005). Another
researcher has told the same that, from the customer’s point of view, these goods
are usually less risky and eventually, the purchase behavior of the customer is
purely habitual or impulse-driven (Murphy and Enis, 1986). Examples for
convenient goods are routine things which customers use such as groceries, home
and office supplies.
 Shopping goods: “Goods which the consumer, in the process of selection and
purchase, characteristically compares on such bases as suitability, quality, price
and style” (American marketing association, 1948). During the selection and
purchase of these goods, customers spend noticeable amount of time and money in
searching and evaluating these products. (Murphy and Enis, 1986).From the view
point of a customer, these products are the ones for which the probable gain from
making price and quality comparison among alternative sellers is high relative to
the search costs in terms of money, time and effort (Holton, 1958). Customers also
feel increased amount of risk compared to convenience goods and the behavior
changes from routinized shopping to moderate levels of decision making since
some level of risks are involved in buying the product. Hence, buyers always
makes a decision to buy these products only after searching all the available set of
alternative sellers and other related products which has the same functions.
([Link], K.K. Sinha, 2005). Examples of such goods are women and men
ready to wear, Apparel and accessories for men women and kids.
 Specialty goods: “Goods on which a significant group of buyers characteristically
insists and for which they are willing to make a special purchasing effort”
(American marketing association, 1948). The main feature of these products from
customer stand point is that they no longer search for alternatives. They wish to
buy only the one they are searching for. Here, customers spend highest amount of
time and money compared two other goods i.e. convenience goods and shopping
goods. The customer usually has high expectations and requirements and receives a
higher risk. Decision making is very much extensive in buying these products.
Examples of such products are consumer electronics such as laptops, notebooks,
smartphones, tablets, jewelry, wedding dress etc. ([Link], K.K. Sinha, 2005).
We understand that there is a need for focused supply chain design for different kind of products
because of the different levels of risk involved and company can gain profit only when it
knows how to manage different products keeping the wastage costs at bay.
2.10 Conclusion for literature review chapter
The literature review helps to know about how the e-commerce companies operate and what
are the impacts on SCM distribution network activities and which are affected the most.
Following are the variables in SCM which are heavily impacted by the operations of an e-
commerce company and the conclusions are drawn from each of them.
 Supplier relations give the inner depth about how to build trust and good relations
with them to keep the products quality intact and company’s added value to the
customer high.
 Cleaner supply chain management practices have proved how to keep a supply chain
which is economic friendly.
 The information technology systems are back bone for any e-commerce company and
they are needed to integrate whole activities inside the supply chain and helps the
customer, supplier and e-commerce company to communicate with each other and
helps in problem solving.
 Warehouse and inventory management is very essential for an e-commerce company
and distribution of products to be monitored with care. Location of warehouses and
handling demand uncertainty will result in efficient supply chain which can sustain
longer and grow stable.
 Logistics services provide the last mile delivery of the product to the customer and an
e-commerce company should consult certified 3PL or can use its own logistic service
in order to avoid product returns and damage of the product. Product returns and
reverse logistics is a widely discussed topic when it comes to e-commerce distribution
channels since the company can’t bear extra costs in bringing the product back to the
warehouse or lose the customer for giving the wrong product.
 Distribution channels in which an e-commerce company fulfills the order and reach
the customer is very important and in case of e-commerce companies, the only
medium being internet website and there raises a question whether they can innovate
any new channel to reach its customers other than internet.
 Customer purchasing behavior is a significant factor which decides the success of any
e-commerce company and it should be carefully monitored and stored in a data base
to predict the demand for various products.
 Lastly, the quality of the product is really important whether it is from the supplier,
vendor or a manufacturer. The quality check should be done every time before the
 product is brought into warehouse. Also certified 3PL and certified suppliers should be
chosen for delivering the right product to the customer at the right time.

All the above mentioned factors are impacted by the e-commerce industry and they play a
significant role in knowing how an effective SCM distribution network can be formed by
knowing the intensity of the impact on each variable and importance of each variable in the
activities of SCM distribution network.
RESEARCH METHODOLOGY
3.1 Research methodology: an overview
The research methodology used for this research is the combination of literature survey and
case studies which helped in a way better to know about Indian e-commerce industry. It is
very much noticeable that no literature has been focused on discussing the impact of e-
commerce on SCM as a whole. Few articles have been helpful in their own way in different
areas. This research’s effort is put them all together and find the optimal solution for the
existing problems prevailing in Indian e-commerce industry SCM. It is also surveyed how
exactly e-commerce impacts the SCM in India by the help of case studies conducted and
feedback got from the top management employees in respective companies. Many questions
have gone unanswered in the literature and since Indian e-commerce industry started in 2007,
only few articles have spread light on this area but further research has to be done taking in
account that India will be one day the hub of e-commerce and challenges are inevitable in the
area of SCM.

Journal type Number of articles

Journal of Operations management 22
European journal of Operational Research 6

Journal of Industrial marketing management 3

International Journal of Production economics 32

Journal of Purchasing and Supply chain management 1

Journal of Business research 1

Journal of Electronic commerce research and applications 2

Conferences Number of papers

Procedia – Journal of Computer science 1

Procedia – Journal of Economics and Finance 1

Procedia – Journal of Social and behavioral sciences 1

Total number of articles 70

Table 3.1 Journal names and number of articles selected for the research
The articles have been used for the research methodology to know exactly how Indian e-
commerce industry impacts the SCM by the help of case studies. The impact of e-commerce
on SCM is seen in all the areas starting from suppliers and until the product reaches to the
customer. Employee satisfaction, customer purchase behaviors are also important factors to
observe.

Two companies have been consulted for the case study and they are Flipkart, Amazon India.
The data collected for the research is through contacting respective top management
employees from the companies and they were willing to share the information about their
operations and SCM but requested confidentiality. The research methodology is aimed at
helping researchers and practitioners to know the impact of e-commerce industry on SCM in
India. The case studies will help the research to answer many research questions raised while
going through literature as follows:

 What are the current practices of e-commerce companies in India regarding

SCM distribution and why strategic SCM is very important in Indian e-
commerce?
 What are the measures to be taken to make the shipment easier and deliver in
short possible time?
 How e-commerce companies should make their employees and suppliers
knowledgeable to achieve their goals?
 What are the risks involved in e-commerce SCM in India?
 How to act at the times of uncertainties, fluctuating demand, inventory
problems, shipping to remote or far places and in case of return of the product ?

The data collected from the case studies is the guideway for the research methodology and
this will be mainly focused on how e-commerce has impacted SCM and what measures are
used to determine the impact with a qualitative analysis and conclusions obtained from
Literature review.
 Scope of the work Area Limitations

Very much diversified and mostly rural.

This makes logistics difficult to work
efficiently.
Not much research has been conducted on
Geographical India Indian e-commerce which is a drawback
location to conduct research with fewer resources.

Only B2C e-commerce companies are

Companies Flipkart, Amazon. considered
consulted for
case
study
Supply chain distribution Upstream supply chain has not been taken
channel starting from the into account.
Research area supplier who supplies the
product until it reaches to the
customer.
Operations management, Very few researchers had conducted study
Operational research, on Indian e-commerce and a huge gap has
Literature review Purchasing, Business been found in the literature.
research, Production
economics Journals.
The managers were not willing to share
important data’s and they said it’s discreet
Skype and phone Respective managers of the to share which is against company’s
interviews companies selected for case norms. But the data collected was
study sufficient for the current research.

Table 3.2 Scope of the research

CASE STUDY 1: FLIPKART (INDIA)
Business sector: E-commerce.
Founded year: 2007.
Number of employees: 33,000.
Number of products and categories: Over 30 million products and 70+ categories.
Flipkart is a leading e-commerce company in India which was founded in 2007 by two
people who were ex-employees of Amazon (US) and the generation of e-commerce in India
started by the entry of Flipkart. Due to the increase in number of internet users in India,
Flipkart was started its operations with just one product category, books. Later the company
grew remarkably and today it sells over 70+ product categories. The company profile today
can be seen from the fig 4.1.

Fig 4.1 Flipkart company’s profile ([Link])

Since its start, the company has grown bigger and the ways of doing business too. It
introduced many technological tools, operations and customer friendly ideas to attract large
number of people to buy online. From the fig 4.2, we can see that it introduced various
services for making customer’s journey easy and comfortable.
Fig 4.2 The journey and technological advance of Flipkart company ([Link])

As it grew, the challenges in SCM also became a major concern for the company. Taking the
full advantage of the technology and skilled employees, it developed innovative supply chain
strategies to compete with other e-commerce companies. Some of them include cash on
delivery, dedicated logistics, one day delivery etc.

Flipkart has three main functional areas in the company which are Product technology,
Business development and Operations. Each has a sub department which functions on the
orders of heads of main areas.

4.1 Company structure

Product and technology Business development Operations

 Website development and  Vendor management  Procurement
management  Sales management  Warehouse
 ERP  Pricing strategies  Logistics
 Customer support
Table 4.1 Flipkart’s Company structure (Source: Interview)

Product and technology

Flipkart has highly skilled team of engineers who are dedicated to develop the website for the
company and put products on sale where customer can visit and see physically. This is done
through constant update of available products and if any new products enter into the market
and to be sold on the website. It has over 30 million products over 70+ product categories and
it’s still growing. Flipkart has ERP system but it’s different from conventional ERP software
which is used generally across the globe. It has designed its own ERP system with the help of
software developing engineers and any changes in the business model will reflect in the
change of ERP system and it can be accessed by any employee anywhere in India. All the
updates, sales, purchasing, shipping and operations happens through this ERP software. Once
the central team gets the orders from the customers on the start of the day, they will divide
the orders according to product categories and they will send to the regional team which is
necessary for preparing purchasing orders and send it to each supplier from the database of
over 500 vendors.
Business development
This is a dedicated department for choosing suppliers, negotiating and closing the contracts.
The suppliers are chosen who are qualified, skilled and who can deliver in less time. Pricing
strategy is decided by the business development head and in case of products are on stock for
long time, measures are taken to clear the stock by announcing a discount or by a strategy
called ‘Billion day’, which happens once in a year where customer can buy products at half
of its price just to make the supply chain stronger and better performance.
Operations
Flipkart operations are the main area this research has been conducted for and it plays a very
vital role in SCM. The impact of Flipkart Company on its SCM is very crucial because of its
product numbers and varieties. Hence the supply chain should be flexible, competitive and
efficient to handle any kind of pressure or uncertainty.
Procurement in operations
When the Flipkart was founded back in 2007, the traditional method was employed to
procure the goods where the company holds inventory purchased by the supplier and it will
order again once the stocked inventory of products is sold to the end consumer. At the
beginning, this method was risk-free and effective for the technology of those days. But in
earlier 2013, Flipkart adopted marketplace model by changing its business process and
started acting as coordinator between buyer and sellers and Flipkart no longer holds any
inventory of its own thus by reducing the trouble of managing inventory. The buyer and seller
will communicate on company’s website but the delivery will be made by Flipkart. This
model is very similar to the business of model of Amazon USA. Flipkart has a company to
manage inventory called WS retail which holds the inventory for the just in time or more
 demanded products. Sometimes products will be out of stock from the suppliers and it has to
act by procuring from the local vendors or by fulfilling from the existing inventory. The items
procured for WS retail inventory would be products of low demand elasticity and fast selling
items. Flipkart’s just in time procurement from local vendors is done in uncertain times when
the customer demands the order to be fulfilled on that day and to provide consumer delight
and to strive in the competitive market, Flipkart’s strategy of Just in time is very appreciable
and innovative idea. The company will put a product on ‘not available’ list only when it is not
available from its suppliers, local vendors and also in its inventory.

4.2 Warehouse management

Flipkart has 14 warehouses and more than 500 smaller distribution centers in smaller cities
across India and they are evenly distributed to facilitate the order fulfillment in less time. The
warehouse and inventory levels will be centralized and all the information can be accessed
from any office in India. Flipkart warehouse management is divided into three main process
and they are inward processing of products, Storage management of products which are
processed and outward processing of products to fulfill the orders.

Physical inward of Quality check and Pre-packing of

products scanning products

NO Updating final
Put list Physical
Order placement and
generation placement
pending closing put
on shelves
list

YES

Picking the Placement of

Pick list generation of Final products in
products ordered by product from the
packaging respective
customers shelves of the
warehouse delivery hubs

Fig 4.3 Warehouse management processes in Flipkart (Source: Interview)

Inward processing of products
This is the process where the products are procured from the suppliers and prepacked before
storing in the inventory and it consists of three sub process

 Physical inward of products where the products are procured from the suppliers and
brought to the warehouse.
 The quality check of the product has been checked when the products are purchased
from the suppliers and after the quality check, the products which are brought, are
electronically reported and scanned to entry in the IT systems.
 Pre-packing of products will be done by the company where it will cover books with a
thin film to store and it varies according to product type. If a product comes with a
freebie, then both are put together and packed.

Storage management
After the products have been passed through inward processing, the products have to be
stored according to their type and category to make the employees easy to find them while
fulfilling the order. This process happens when a put-list is generated after scanning the
products in the previous stage and there will be pre-allocated shelves for each particular
product. The put-list is generated for all the inwards and if the order is pending for any
product while generating the put-list, then the order will directly allocated to the order and
goes for shipping. If the order for the product is not pending, then the product is put on its
shelf for further use. If a product has no empty place to put on the shelf, then a new shelf is
provided for the product and the data is updated in the put-list. After the process, the put-list
is closed with the replaced products and received products. The products for the inventory is
decided by the purchasing behavior of the customer and fast selling, less risky products are
purchased for the inventory. Flipkart uses First in-First out method in which the old product
is shipped first because especially in the category of consumer electronics, the products tend
to me more obsolete.

Outward processing of products

It is a set of processes where the order fulfillment has to be made to the customer by shipping
the product.
 The regional procurement team will receive a list of orders to be fulfilled for the day
and according to that list, a pick-list is generated in the warehouse.
  The products on the pick-list are physical brought from the shelves by knowing the
product and shelf number which has been already update in the data base system.
 After taking the product, it is packed according to the type of product in Flipkart
brand packaging boxes and electronic items are packed in a special way not to cause
any damage
 As it has already mentioned, Flipkart has more than 500 delivery hubs in which
packed products are taken and the products are delivered to the destination. Each
delivery hub is assigned with number of places for delivery to cover maximum cities
and small towns across India.

4.3 Order processing and fulfillment

Flipkart Company has its own ERP system through which all customers orders are managed and
fulfilled. The ERP system helps to generate a list of orders received by the customers at the
start of everyday and to keep tracking the details of all the unfulfilled orders yet to carry out.
For this case study, it has been conducted a real time ordering to check how the process
works. The customers can have millions of products to select or they can search the product
on the search area to select the right product which they are looking for. Once the product is
selected, the page will guide you to enter the email address and password, which the
company uses to identify individual customers and keep their purchasing records for further
use. If a customer doesn’t have an account, he can register and it is very simple. Either the
customer can look for other products in other categories or he can check out which guides
him to payment page. Flipkart accepts credit card, debit card, online banking and Cash on
delivery (COD).Apart from these, one can select to pay in EMI (Equated monthly
installment) or the customer has an option to use the gift voucher if he has one. COD model
is the cash cow for Flipkart since most of the orders (more than 60%) of the orders from
customers are placed for COD.

In India, credit card and debit card penetration is less and adding to that, people are yet to get
adapted for the online transactions, which they feel it is insecure. Hence they order for COD
and it also raises the issues of reverse logistics if the customer won’t accept the product or if
the product gets damaged while shipping. Flipkart’s uses marketplace model now and the any
individual can sell their products on the website (Like Amazon and Ebay). The Company
picks up the order form the customer’s place and the packaging should be done by the
customer. Once the product is reached to the buyer, the customer will get his money through
internet transaction after deducting a particular amount of commission by the company.
 Flipkart recently introduced one day delivery in which it is applicable only to the selected
number of cities and the customer can check whether it’s available in their area by putting the
area code. Not all the places in India can be reached since the customer base and area is too
big hence the customer has to check the product availability to deliver, COD availability, one
day delivery guarantee in his place just by entering the pin code and checking for it. For this
case study, the order has been placed by the researcher just to check the availability of the
product in different areas. Heavy products like home appliances and electronic goods like
laptops were not available for smaller cities since the lack of delivery hubs of Flipkart to such
places.

Customer places the

order

YES
Inventory check for the product at local
warehouse

NO
YES
Inventory check at other warehouses
which are nearby

NO
Packaging, shipping and
YES
delivery through Flipkart JIT procurement from local vendors by
logistics RPT

NO
YES
JIT procurement from other vendors by
CPT

Delivery to the customer, delivery receipt and cash settlements

Fig 4.4 Flipkart order fulfillment process (Source: Interview)

Initially the customer places the order and a list of orders is generated and sent to Regional
procurement team (RPT) from Central procurement team (CPT) for fulfilling the order and
shipping. The orders for a particular product are first checked whether it’s available in the
inventory at the local warehouse and if it’s available, the product is immediately shipped to
the customer. If the product is not available at the local warehouse, other nearby warehouses
is checked to have the same product. After checking the product in both warehouses and if
it’s not available, then the RPT team will personally contact the local vendors from their data
base to check for the product and if it’s available, it’s procured Just in time and shipped to the
customer as earliest as possible. If all the above searches fail, the RPT contacts CPT and
informs the product is not available. Then CPT will try to search for the product from other
vendors and after all these searches, the product will be purchased, brought to the warehouse
and shipped to the customer. In any case, if the order is not available, either the customer is
informed for the delay or the money is refunded if customer doesn’t want to wait. But in the
interview, the manager told that this is a rare case where the product won’t be available
anywhere considering his experience and Flipkart’s operations. The delivery time varies from
one day to few weeks depending on the product type but usually most of the products are
delivered in 2-3 business days.

4.4 Supplier relations, customer support and employee training

Supplier relations
The basic strategy of Flipkart when it comes to choosing suppliers is to purchase from local
vendors and distributors. when a consistent demand is generated to that product, it will
approach large retaliers or directly from the manufacturers. It allows the company to get
better deals from the manufacturers who are in search of an e-commerce company to sell
their products online. Flipkart has a grading system for the suppliers and it groups their
suppliers as A,B,C respectively on the basis of their past performance and fill-rate. The
suppliers are chosen on the following criterias:
 Pricing: Credit terms and discount provided by the suppliers plays an important role
in choosing them.
 Quality contract: The Company ensures the quality of the product and the supplier
should choose whether the product’s quality check is done at their place or in the
warehouse of Flipkart after the product is brought.
 Product returns: The more product returns accepted by the supplier, more profit to the
company. In an e-commerce industry product returns are very common and the
supplier should accept the returns for the mutual benefits from the company.
Flipkart has more than 500 suppliers including international suppliers. Before purchasing with
them, the norms and terms of the company is clearly stated and also about the quality of the
product. Supplier’s knowledge is enhanced by the business development team, which will be
in constant contact with the supplier and they will provide sufficient advice how to cope up
with the companies policies. The right product model has to be given and for this, the
supplier is trained from the field supervisors of Flipkart while personally visit supplier’s
place and bring the product to the warehouse.

Customer support

Customer support and assistance is available for 24/7 and Flipkart is very much concentrated on
customer’s delight. Flipkart has its own customer service care and it never outsourced for any
other company to handle their customer queries. They handle in-bound and out-bound calls
and have an approximately 6000 skilled employees working on customer assistance. They
receive calls and also emails from the customers and dedicated teams are assigned to both
areas. Their main goal is to

 Inform the customer in case of late delivery

 Inform the customer whether the product they ordered is not available and whether
the customer can wait for few more days until it’s procured.
 Track the order and give full product details and shipping details to the customers
who are not having access to internet at that time.
 Also they will inform the customer whether he is not present at his place at the time of
delivery.
 They also answer all the queries from the customers whom they receive like sales
assistance, delivery queries, general queries, payment and returns, discounts etc.

Employee training

Flipkart believes that the customer can be satisfied only by using skilled employees and suppliers
and training them. Initially the employees goes through a training process where they are
trained how to manage the warehouse, how to check the product in the inventory and so on.
They are also introduced to the company’s own ERP system which will be used for all
operations happens in the supply chain. Main training is given to the field supervisors who go
the suppliers to procure the product. Because nowadays there are so many products available
in the market with almost similar mode number with a slight difference in it and the products
looks exactly same. In those cases, they have to clearly check the customer for which model
he has ordered and they have to take the right product. Suppliers are also been trained in this
case of product purchasing. It will avoid the return of product from the customer and reduces
cost of shipping and transportation. Hence employee and supplier training are very essential
in keeping the supply chain efficient and proactive.

4.5 Logistics
With 8 million shipments per month, Flipkart should rely on outstanding logistic services. It
has collaboration with more than 15 courier companies like Blue dart, DHL, First flight etc.
Flipkart Company’s strategy was to create its own logistic service rather than depending on
third party logistics (3PL). As a result, E-kart was launched in 2011, which delivers more
than 60% of the total orders and the rest will be delivered by 3PL. Flipkart even uses Indian
postal service as a mode of delivery when the order has to be delivered to a remote place
where it is unwise to deliver just for single customer. It can take anywhere between a week to
two weeks’ time and customer will be informed at the time of placing the order. The best
technological advance in Flipkart website is that when a customer puts his area code, the
website will automatically tell all the details about number of days required to deliver and in
some cases, if the product can’t be delivered, then it shows ‘Product can’t be delivered to this
area’. Bulk orders to one place will always be delivered with e-kart, its own logistic service.
Thus it can maximize the profits and reduce the costs of product damage or returns when the
delivery happens through 3PL. Sometimes, for the longer distances, Indian railways or
airways are also used.

The shipments are first delivered to the mother hub or the main warehouse and then the
orders are picked and distributed to the respective delivery hubs and from there the products
are delivered by any means of transport like Motorcycle, bicycle or even on foot. Flipkart
manages its 3PL by giving them specific time to come and collect the orders so that the
orders are separated according to the 3PL companies which handle them and they are packed
and kept ready to be picked up. Later the tracking id of the order if updated as son the product
is dispatched from the warehouse. By using its own logistics, Flipkart save almost 2%
commission fee which was paid to 3PL before and since the labor cost is low in India; it can
make more profits by reducing delivery costs too. The type of logistic service to be used
depends on factors like the type of product, the location where it has to be delivered and the
mode of payment the customer has asked for. E-kart exists only in tier 1 cities including
metro and hence it can only handle 60% of the shipments. Indian post is used only when the
customer is already paid for the product and the place can’t be accessed from both e-kart and
3PL. Sometimes for the inter-state deliveries, the products are sent overnight in a truck or in a
train. For deliveries in the metro cities where Flipkart has its major warehouses, the products
are delivered by either a two wheeler vehicle, bicycle or even on foot depending upon the
locality.

4.5.1 Reverse logistics

Since 70% of Flipkart orders are Cash on delivery (COD), there are many chances of the
product to be returned by the customer. It can happen for many reasons for ex. Customer not
at the place, customer cancels the order after it is shipped, damaged product, not exactly what
customer ordered and fraudulent customers who just place the order and won’t exist at all. To
prevent frauds, Flipkart manages its customer database and checks their activities very
carefully and if a new customer asks for COD and if the product is of high value, the
customer support executives will call to the customer and ask few details before fulfilling the
order. Flipkart gets almost 2.6% of its whole shipments in returns and it is trying to minimize
the order returns with improvising the quality and educating suppliers who should give the
right product with right model number. Flipkart allows 30 day replacement policy with which
many customers make use of this and cheat the company. One such incident was when a guy
purchased a book online and he read the book after receiving and returned back to the
company asking for the replacement. Customers do the same with mobile phones also. If the
order is shipped through 3PL and if the customer cancels the order when it is already shipped,
the product will be delivered to the customer’s address and it will be brought back using
Flipkart’s logistic service e-kart.

When the customer returns the product, the company takes the following steps in order to
reduce unnecessary costs:

 Flipkart has an agreement with the suppliers and the product can be replaced from the
supplier if it is in its original condition and the product will be delivered again.
 If the customer returns the product just because he is not satisfied from the product,
the product is taken back and instead of refund, the company will give them store
credit or a gift card with which they can purchase on Flipkart again.
 Cash is given back for the returns with genuine reasons and it is refunded if the
product is purchased using online payment method.
  If the product is damaged while shipping from 3PL, Flipkart has an agreement and
insurance for the product and it will be covered by the 3PL company if it’s proven to
be true.

4.6 Selling on Flipkart

Any supplier, vendor or a manufacturer can sell their products on Flipkart website just by
following easy steps. Before selling, the seller should have a business of his own and get
registered on the dedicated website for selling by providing value added tax identification
number (VAT), pan card number and bank account details.

Step 1:

Fig 4.5 Selling on Flipkart step 1([Link])

Customers always choose the products which look the best and have full description of the
product. Flipkart company helps the sellers to upload and list their products by giving them
training and providing them all the necessary details how it can be done. It also provides the
details of catalog and photo-shoot partners across India which will facilitate to post a good
image of the product with all the details visible to the customers. They design the photo shoot
of the product; provide best quality images and a catalogue with full description of the
product. Partners are across 30 cities in India who are working with Flipkart Company to
facilitate and promote seller’s product on the website.

Step 2:
Fig 4.6 Selling on Flipkart step 2([Link])

A seller can sell all over India or he can minimize the boundaries for himself for selling in
particular cities or areas of India. Flipkart Company provides a platform to advertise the
products of sellers for free and it also gives the analytics report of the product sales and the
number of customers visited or viewed a particular product which is sent to the seller’s
account registered in the company’s website.

Step 3:

Logistics is the major concern in SCM but Flipkart owns its own logistic service and it makes
the company to pick up the products from sellers very easily. The company also provides
packaging support by telling the seller how to pack the product according to the norms of the
company. Once the package is done, the company collects the product either from e-kart, its
own logistic service or from 3PL. Most of the cases, the pick-up is done from e-kart
Fig 4.7 Selling on Flipkart step 3([Link])

.Step 4:

Fig 4.8 Selling on Flipkart step 4([Link])

Once a customer places the order for a particular product, the seller pack the product and
keep it ready to picked up by the Flipkart logistic service and it is delivered to the customer
as early as possible. Flipkart has one day delivery guarantee in all major cities and for the rest
parts, it will take 2-4 business days. If it is a remote place and there is only one order from
that place, the delivery time varies from 1-3 weeks. The idea of marketplace model where
sellers meet buyers through coordination of Flipkart is most profitable for the company and
also for the sellers.
 Pricing structure for selling on Flipkart

When a vendor, manufacturer or any seller wants to sell his product on Flipkart, the company
gets profit by commissions and shipping fee which is deducted from the product price which
is paid to the seller.

Fig 4.9 Pricing structure for selling on Flipkart ([Link])

The final amount paid to the seller will be deducted as market place fee and service tax on
market place fee. The illustration is shown as below:

Item Amount (in euros)

Selling price(decided by the seller) 1000

Selling commission(varies across products) 50(assuming 5%)

Shipping fee(Local) 20

Fixed closing fee 10

Total market place fee 80

Service tax(14% of market place fee) 11.2

Total deductions 91.2

Settlement value(amount credited to the seller) 908.8

Table 4.2 Pricing structure example for selling on Flipkart (Source: [Link])
 In the above table which is taken as example, the shipping fee may vary depending on where
the product has to be delivered. In India, there are inter-state taxes and hence it has to be
deducted from the seller if the product is shipped inter-state and intra-city price also varies.
The shipping fee depends on package weight also and it varies for light shipments and heavy
shipments. The selling commission varies for different products and it is decided by the
company itself. This business model makes all the vendors and manufacturers to showcase
their products through the dedicated website of the company’s website which helps their
business to grow and promote themselves in the era of internet.

CASE STUDY 2: AMAZON(INDIA)

Business sector: E-commerce
Founded year: 2013
Number of employees: 26,000
Number of products and categories: 42 million+ products over 100+ categories
Before entering the Indian market, Amazon US had a company based in India called
[Link], which was a price comparision website. Junglee was basically used by
consumers to type a product in the search and the website would show the prices of that
product across different sellers and when the customer clicks on the particular seller, that will
automatically guide the customer to the seller’s website. This was acquired by Amazon US in
1998 but the official launch of the company under Amazon was done in 2012. Amazon US
wanted to gather the realistic data and customer’s purchasing behavior and what they look
for, by using [Link] website. Later in 2013, Amazon India was launched but
[Link] was kept operating independently from parent company. Flipkart was 6 years
old company when Amazon entered Indian market and had almost 35% of the market share
in India. But Amazon din’t take enough time to establish its potential across India and as of
today, it is the biggest rival for flipkart. Flipkart was started by two people who were working
in Amazon US and quit their job to start a new e-commerce company which turned out to be
Flipkart. Hence Amazon US knows the strategy and players in the market very well and it
uses almost the same business model as US with little changes in the area of inventory,
warehousing and delivery methods.

For this research, Amazon company employee did not co-operate much in the interview since
the company was new into the market and they were not ready to share everything but the
information was sufficient for this research to fill the gap between old researches. They asked
 for confidentiality of the details of their identity and also provided enough details to help this
research.

5.1 Warehouse and inventory management

Amazon India operates on both inventory and market place model. It has about 20 fulfillment
centers across india which is evenly distributes in 10 states in all major cities to facilitate fast
delivery to the cutomers. The total area of all fulfillment centers is estimated to be around 1.6
million square feet where the sellers can store their inventory for a fee charged by the
company to store the inventory of vendors, retailers, manufacturers or any other merchants.
These fullfillment centers are warehouses where sellers of the products can stock up their
inventory which can relieve the burden of storing inventory at their places. Amazon make the
payment to the sellers as the sales go on for those products. Amazon now has almost 18,000
sellers and all of them are rated according to their quality of their product and customer
reviews. Anyone can register on Amazon’s website and become a seller if they posess
necessary documents which company ask them to provide while registration. Once they are
registered, the company brings the products to its warehouse from the seller’s place through
3PL and store them in th inventory. It helps the seller not to worry about packaging and
delivery since Amazon company will take of order fullfillment. But the seller has to pay a
perticular amount of fee for the storage of inventory in fulfillment centers.

Fig 5.1 Fulfilled by Amazon (FBA) ([Link])

 Fulfilled by amazon is a service offered by Amazon to its sellers and inventory management
is quite similar to Flipkart company where the inventory is stored according to bar code and it
is registered in the Management information systems(MIS). When the order is placed for a
particular product, first in first out method is used, i.e old inventory is processed first and new
inventory is kept for further orders.

Once the inventory is managed by the Amazon company fulfillment centers and a particular
fee is paid by the seller depending upon the cubic feet of space acquired for the inventory.
The seller can anytime place an order for removal of inventory and Amazon will charge per
unit for removal of inventory. The seller can do this because of slow moving inventory sales,
no market for that product or cannot pay inventory cost for long term. Removal order fee is
charged depending upon the item category and it is broadly classified into four; Small size
item, standard size item, over size item, over size heavy and bulky items. The fig shows the
different fee structures for different items if the seller want to remove the product from
fullfillment centers. Self pick up is picked up by the seller itself and standard shipping is
normal one which would take 3-7 days depending on the location of the seller. Expedited or
express mail delivery is charged high if the seller want his goods within 3 days.

Table 5.1 Removal order fee for different items on FBA ([Link])

5.2 Logistics
Amazon doesn’t have its own logistic service like Flipkart and it relies on 3PL completely to
deliver its products. It is planning to start its own logistic services by the end of 2016 to
facilitate more efficient SCM. Once the order is placed by the customer, it is sent to the
warehouse for fulfillment where the order is checked for that particular product and it is
picked up from the inventory by using information technologies and identifying the right
product by bar code recognition. Amazon offere different modes of deliveries depending
upon the location of the customer. It varies from morning delivery, one day delivery, two day
delivery to 2 weeks if the location is far. But it takes utmost risk to satisfy its customers by
delivering the product as early as possible. Amazon have a workforce of more than 14,000
people dedicated just for logistics as compared to Flipkart’s 12,000 employees.

Most of the Indian e-commerce companies offers same day deliveries but the real challenge
arises in fulfilling the order on the same day. Amazon refund the amount to the customer if it
fails to deliver the product in the promised dates. It uses great packaging before dispatching
the order and 3PL companies will collect the order to deliver to the preferred destination and
the tracking id is provided to the customer once the order is dispatched from the warehouse.
Flipkart was using the same method until 2013, but it handed over all its warehouse and
inventory operations to WS retail, which is owned by flipkart and WS retail acts as a seller
and inventory holder for Flipkart. But Amazon both manages inventory and market place
model where sellers can directly advertise their products on the website and when the
customer places an order, the company will find the product from the inventory, ships it and
pays to the seller as the product sales goes on.

Any order which is purchased below Rs. 499( 8 euros), the delivery charges are to be paid
from the customer which are minimal and standard rates set by the company. If a customer
purchases a product above that price, the product is delivered free of cost but the delivery
time varies depending upon the location of the customer. It can vary from 2 to 14 business
days. The detailed description of shipping charges and the days of delivery and different
modes of delivery can be seen from the table. Below. Morning delivery happens latest by 11
am in the morning and same day delivery happens latest by 9pm at night. Flipkart lacks in
delivering products by latest morning as Amazon does.

Amazon differentiates the products into four main categories: Small size item, standard size
item, Over size item, Over heavy and bulky item and the following fig shows the packing fee,
shipping fee and storage of the product in the inventory for different products in the
inventory. Amazon India offers 3 months free storage to its sellers after which it starts
charging per cubic feet of space occupied from the seller. 3 months free storage is offered
because Amazon is new to Indian market and to build the seller’s trust and make business for
long term.
 Shipping speed Eligibility Charges per order Limited period
offers
Eligible addresses
Morning Delivery will see the option Rs. 150 Rs. 120
during
checkout
Eligible addresses
will
Same-Day Delivery Rs. 150 Rs. 120
see the option
during checkout
Eligible addresses
One-Day Delivery will see the option Rs. 100 Not applicable
during checkout

Eligible addresses
will
Two-day delivery Rs. 80 Rs. 50
see the option
during checkout
A minimum total
You will see only order amount of Rs. No delivery charge
one of the three 499 for items will be levied for
2-4, 4-7 and 7-10 options depending Fulfilled by Amazon orders containing
Business Days upon your delivery is required for an items from Books
address, and order to qualify for category that are
location of the item free delivery. A Fulfilled by Amazon
ordered delivery charge of
Rs. 40 will be
charged for
orders
below Rs. 499.
Eligible addresses
Scheduled Delivery will see the option Rs. 130 Rs. 100
during checkout

Table 5.2 Delivery modes and rates of shipping ([Link])

Table 5.3 Rates for shipping small size item ([Link])

Table 5.4 Rates for shipping standard size item (Source: [Link])

The pick up and package fee has to be paid from the seller. Each product is classified into
four categories depending upon the weight of the product and for each additional weights, the
price will be increased. Delivery service fee is the charge paid to the logistic service to
deliver the product and storage fee is the fee paid to Amazon company by the sellers to keep
their inventory in one of its fulfillment centers or warehouses.
Table 5.5 Rates for shipping oversize item ([Link])

Table 5.6 Rates for shipping oversize heavy and bulky item ([Link])
 5.2.1 Reverse logistics
The products recieved by the customers can be returned to Amazon with 30 days replacement
policy but this won’t apply to all product categories. If the product if damaged or defective,
the replacement policy will be 30 days for less priced products like books, men’s wear,
music, watches, luggages and hand bags. But the replacement period is 10 days for all other
category products since they are considered to be og high value and price. If the customer no
longer need any item, they should return the product in 10 days for all the categories. The
return of the products purchased, can be done in 4 easy steps which is shown in the fig 5.2.
Below.

Fig 5.2 Ease of product returns process in Amazon ([Link])

 Customer clicks on easy return option on the website and initates the return by filling
order number and other details which he wants to return. He can either choose return
or replacement option.
 The website will guide the customer to the page where he will be asked the reason for
return and if any comments he has to write which would help the company to make
the shopping experience better.
 The return label will be generated and in case of cash on delivery, the customer
should provide a bank account to which the refund should be sent.
 Then the company will pick the product or the customer can self-return the product to
nearby drop off store if the order if fulfilled by amazon.
 The refund will take place in 5 to 10 business days after the product is recieved at the
Amazon fulfillment centers.

Every customer should go through return policy on the website before purchasing the product
or should see whether the product can be returned while buying and checkin out. Not all the
 products can be returned and there are many categories and product varieties like Video
games, Softwares, jewellery, Grocery and gourmet etc. cannot be returned.

CRITICAL ANALYSIS
1) What are the current practices of e-commerce companies in India regarding SCM
distribution and why strategic SCM is very important in Indian e-commerce?

As it can be seen from the case studies of giant e-commerce companies in India, it is evident
that the distribution channel used by the companies is mainly their website and they depend
solely on the customer who visits their website and places the order. Once the order is placed
for the product, it will be taken from the inventory or from the vendor and the order is
fulfilled by handing it over to logistics to deliver. Here, there is a main point to observe
which the way is different e-commerce companies handles the order fulfillment. Flipkart
doesn’t have own inventory and it has a subsidiary company WS retail to look after inventory
and warehouses, it has e-kart, its own logistic service to deliver the orders. Amazon and other
companies like Snapdeal and Infibeam still depend on 3PL to deliver their orders to the
customer. Flipkart market place model and Amazon uses both market place and inventory
based model. But many of the e-commerce companies only uses inventory based e-commerce
model and they have to change the business processes according the technological advance to
thrive in the competition from the big companies. Flipkart and Amazon almost cover every
part of the country when it comes to product delivery but other companies have not reached
that level nor they have more warehouses to fulfill the orders from various areas of the
country. The Indian government is central but the state government has their own taxes and
when the logistics is happened inter-state, then they have to pay for the taxes which will be a
loophole in company’s profits. Hence setting up warehouses in a number of states which has
more tier 1 cities and proximity to all the major cities would be a better idea for efficient
distribution of the products.

Supply chain management at strategic level helps the company a lot to fulfill its goals and
objectives. Decisions taken at strategic level not only help the supply chain but it reflects on
the company’s business model and corporate strategies too. Trying out new ideas, thinking
innovations in the area of supply chain would help the company to drive towards success and
makes unique in the market. Indian companies should adopt strategic SCM because of the
constraints to fulfill the order and also because of the lack of co-ordination among the
activities inside the supply chain itself.
2) What are the measures to be taken to make the shipment easier and deliver in short
possible time?

Every e-commerce company in India promises the customer that the order will be fulfilled in
given number of days while purchasing but most companies fail to do so. Only Amazon and
Flipkart offer the fastest delivery of the product which is one day delivery guarantee in
selected cities but all other companies take 3-7 days to deliver the product because of poor
infrastructure, logistics and lack of warehouses near the major cities. A company’s back bone
is its logistic service and Amazon is also thinking to have a logistic service of its own by the
end of 2016 to facilitate the ease of delivery without hassle. The product should be carefully
packed and 3PL should be chosen according to their quality and not according to the price
they offer. Cheap logistic services can save some money but provide no guarantee of the
product in case of damage or lost. The warehouses should be located near major cities or in
between major cities in accordance with covering large area for delivery. Also small hubs
should be opened in every city where the products are to be delivered from main warehouse
and then to the customer. In case of returns, it will be easy to pick from the small hubs rather
than picking up from the warehouse which is an extra transportation cost to the company.
Amazon is also trying to introduce drone to deliver its orders by 2017. As the technology
advances, the whole supply chain should be also upgraded using most recent software.
Efficient ERP systems should be used to track, store and fulfill the order as early as possible.
Picking up the product from the inventory can be made easy by using RFID technology
which is not used by any e-commerce company in India. This is a major drawback and as the
demand increases and customers too, the need for RFID technology will be more and it’s
better for all the companies to look forward for a highly qualified Information technology
system to support efficient supply chain activities By doing this, the order fulfillment happens
faster and hassle free. Most companies don’t use market place model except Flipkart and
Amazon. Market place model helps the company to reduce inventory costs and also the
product delivery can be made even easier if the customer is located near the seller’s place.
Easy pick up, easy shipping and easy returns happens only with information technology
supported supply chain and high quality logistics owned by the company itself.
3) How e-commerce companies should make their employees and suppliers
knowledgeable to achieve their goals?

Having IT systems or a big warehouse and well equipped logistic service is not just a solution
for the efficient supply chain management. Employee training and suppliers training is very
essential to make the whole process more efficient and flawless. Flipkart and Amazon have
almost 14,000 workforce mainly dedicated for logistics. They all should be trained about how
to identify the product, how to use ERP system and how to reduce costs in case of product
return. Product return takes place if the product is damaged or if the customer thinks the
product is not the same which is displayed in the website. The supplier or seller should be
aware and skilled to give the complete catalogue and description of the product and the
product ordered by the customer and shipped should be the same. Nowadays, a minute
change in model number can change the functioning of whole product in case of consumer
electronics. When the product arrives to the warehouse, the employees of the e-commerce
company should check the product and ensure that the product meets the quality requirements
and then scan the product and see whether it is same as the customer ordered. It takes time
but once the system is stable and both employees and suppliers become skilled, all these
flaws can be easily reduced and thus increasing the efficiency of whole supply chain
activities. Amazon and Flipkart are already giving training for their employees and sellers in
order to reduce the returns to as minimum as possible. Returns cannot be avoided but it can
be made to minimum which is a good development for the company’s progress and better
SCM.

4) What are the risks involved in e-commerce SCM in India?

 Too many players in the market and trust factor: Many people know only about
the big companies like Amazon, Flipkart Snapdeal etc. but many start-up e-commerce
companies and small companies are struggling to compete with the big players. Their
low quality of products and poor logistic service and delay in delivering the product
will affect the big players by ‘word of mouth’ factor. In India, many people don’t
believe e-commerce companies and refuse to pay online hence more than 70% of the
orders are cash on delivery mode. But many returns also happens in COD and the
company should concentrate to build trust of a customer and minimize the COD
returns.
 Logistics and shipping: Since India is highly diversified and there are less major
cities and more tier 2 and 3 cities, companies cannot provide logistic service to all
parts of the country due to lack of transportation facility or no service from 3PL.
Delivering a single product to certain places will cost company too much and hence
logistics should be considered as high priority to reach most of the areas in the
country.
 Tax Regulations: In India, the taxes vary from sector to sector and there are different
tax regulations for different category of products. If an e-commerce is sending bulk
products from one state to another state, then it must pay inter-state transportation and
service tax too. Different states use different tax regulations and hence it is difficult
for e-commerce companies to come up with a completely manageable supply chain.
In a recent development, the government of India has been taken a decision to stop e-
commerce companies to sell products at discounts. If it becomes reality, then it will be
a huge blow for the whole e-commerce industry in India.
 Rate of returns and frauds: Rate of product returns is common in India and
sometimes customers return the product even after using it. They misuse the
replacement guarantee which is provided by the company. An e-commerce company
has to provide replacement guarantee for a product or else it will lose customers and
other big player will acquire those customers. The quality of the product which is
returned and if it’s eligible to send back to the seller, should be verified. It takes long
time to get a new product from the supplier and settle the disputes but on the other
side the company has to send a new product to the customer or should refund his
money which would be very bad for the company’s profits.
 High inventory costs: The companies which use inventory based model has to bear
inventory costs if the products are not sold and demand for a specific product goes
down. Demand forecasting in e-commerce companies is very tough and the customer
purchasing behaviors can change anytime. They may like one product today but they
can move on to another product which likely happens in consumer electronics
category. Electronic products can’t be kept in the inventory for long time because of
their short lifecycle time. Adopting market place model like Flipkart and Amazon will
be a solution for reducing inventory costs.
 Investments: Reasonable investments in the e-commerce companies help them to
sustain in long term or else it’s very difficult to maintain growth and profits. The best
example being Flipkart raised his debt by selling bonds and Snapdeal is having talks
with China’s e-commerce giant Alibaba to enter Indian market with reasonable
investment in the company.
4) How to act at the times of uncertainties, fluctuating demand, inventory problems,
shipping to remote or far places and in case of return of the product ?

Uncertainty is inevitable and all e-commerce companies go through it at some point of time. May
it be demand uncertainty, logistics or inventory. Also it can be referred to natural calamities
like heavy rain or floods which is a quite common scenario in India. It makes it tougher to
transport the product from sellers place to warehouse and from warehouse to customers for
delivery. Flipkart is a good example and hence became market leader by providing the best
service even at the times of uncertainties. The solution is to create small delivery hubs or
drop off stores which Amazon is trying to build slowly after its entry to the market 3 years
back. It makes deliveries easy and keeps the stock ready to reach the customer. In every
small hub, there should be a small amount of inventory to be kept where it can be shipped to
customers either on two wheelers or by foot or by public transport if necessary. Customer’s
delight at the time of uncertainties is what makes an e-commerce company stand unique from
other players in the market. Demand uncertainty can be dealt with keeping less inventory and
if a company is following market place model instead of inventory based model, demand
uncertainty can be tackled easily since the seller will always have stock of the product and e-
commerce Company doesn’t need to bother about the inventory. If a product has high
demand and if it’s not available, then purchasing it from local vendors or any other vendors
as Flipkart does, would be the best solution. An e-commerce company should have
trustworthy suppliers and also have knowledge of local vendors in the market so that it can
purchase the product from local vendors if the product is not available in either its inventory
or from its certified sellers. Indian post service is used by Flipkart to ship products where 3PL
or its own logistics service can’t be reached. Sometimes trains are also used as mode of
delivering the product in time. For this research, two case studies have selected just because
of the reason that they are big giants in the e-commerce industry and their operations are too
much nearer to efficient supply chain management. All other companies and start-ups should
adopt these virtues of big giants and innovate new things in order to compete with big
players. Assessing the orders from different locations and if there are continuous orders from
a particular location, even if it’s far from the city, the Company should think of creating a
delivery hub near that area and facilitate to keep the stock and deliver it in time. Return of the
product is inevitable and it can be managed only with the help of skilled employees and
suppliers, perfect logistics and understanding what customer is asking for. It can reduce so
much unwanted costs to both supplier and the company.
CONCLUSION
This research is aimed at reviewing the literature and finding the real time impact of e-
commerce B2C industry on SCM distribution network in India. Past researches which have
been carried out in the field of Indian e-commerce B2C industry are very few and very few
articles have tried to bring out the expected qualitative results in this area of research.

The literature and case studies of Indian e-commerce big giants have given a complete idea of
how e-commerce industry impacts SCM distribution network in every activity starting from
suppliers until the product reaches to the hands of customer. It has given a broader idea of
every single detail about how Indian e-commerce industry has evolved and how SCM
activities have got influenced by the functioning of e-commerce industry. Since the entry of
Flipkart Company into the Indian e-commerce B2C industry, many new challenges have
raised about how to meet the requirements for building an efficient supply chain in the
context of using all the resources available which includes information technology, logistic
services, certified manufacturers and suppliers. These research questions are born from the
existing research questions in the area of Indian e-commerce and fewer authors have tried to
bring them into light. Many researches have to be conducted in the future since India will
surpass China and US in the number of internet users and e-customers. This research fills the
gap between the previous publications and helps for further research in this area.

It is clearly evident from this research that the impact of e-commerce on SCM is debatable
and it has changed the way of conventional supply chain used by many firms before the era
of internet. This research was concentrated on downstream of the SCM but the manufacturers
also gets the impact from e-commerce companies and whole SCM should be organized and
strategic decisions should be taken which can change the business processes, activities in the
supply chain and overall corporate strategies of the company. To survive in the 21st century, a
sound supply chain is very essential for an e-commerce company and it can be achieved only
by organizing all the affecting factors and finding solutions to the existing problems
prevailing in this sector. E-commerce industry has changed the whole way of conventional
supply chain into a way too smoother, flexible, efficient, technological, customer friendly
supply chain. Many firms have struggled to meet customer demands due to the lack of
internet sales or poor supply chains. E-commerce companies acts as mediator between sellers
and customers to facilitate the flow of products and to provide a broader platform for
manufacturing firms and retailers to showcase their products which can penetrate millions of
users’ profiles. This also allows customer to choose the right product and hence e-commerce
has changed the lives of consumers and their way of perceiving about shopping.

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