Learn what to keep in mind to efficiently manage the scale of operations
“The post-purchase journey has two aspects – elevating the customer experience and bringing efficiency in operations, which will help you achieve profit," said Prateek Mahajan, Director, Unicommerce, during his masterclass on 'D2C supply-chain playbook for operation efficiency' at YourStory’s TechSparks 2021.
The Direct to Customer or D2C model is one where the brand sells to and forms a direct relationship with the end customer to develop brand loyalty. Here, the brand owns the customer data, which they use to reconnect, remarket and form repeat behaviour with them. This data is also used to grow their own product lines which suit the customer's behaviour.
A lot goes behind the scenes of the pre-purchase journey. You think about what you want to sell, and then decide the procurement cost, which is a huge chunk of your P&L. Next, you need to check the sales channels, be it your own website, marketplace or offline stores. After which, you decide how to generate traffic, set up a social media presence, and operations.
"All of this goes into building brand loyalty that increases the entire lifetime of the brand and increases profitability. Brand building takes time - you need patience and razor-sharp focus," said Prateek.
In-house vs outsourced operations
When you start a business, you can choose between fulfilling your own operation or outsourcing it to third parties. The former results in huge capital and training costs and processes change quickly. But the latter will help you scale faster, while you can focus on building your own brand. If you need to expand to different cities, it's as easy as a click. Prateek said that over the last few years, the logistics sector has boomed and now, there are a lot of brands to choose from, based on commercials, processes and market feedback.
He added that supply chain technology is the nerve centre of D2C. "If you have the right technology at the start, the growth journey is quicker. The supply chain technology needs to interact with all business units to achieve operational efficiency,” he shared.
Inventory management solution
Inventory, on the other hand, is the real asset, as it takes up the majority of capital. It is important to optimise inventory requirements and end-to-end visibility of product movement.
With technology, you can report inventory location, track inventory units at EAN, expiry or item level. "Businesses can easily implement FIFO, track their working capital to the last rupee and offer the entire product portfolio to customers. Customers on the other hand get zero percent order cancellation and error-free dispatches," said Prateek.
While choosing an inventory management solution, you need to check the level of tracking, reconciliation methodology and reporting infrastructure. And to measure the success, you should not have more than 30-45 days of inventory kept and should have less than 2 percent dead inventory.
Warehouse management solution
At the heart of operations is a warehouse management system that seamlessly handles procurement, inbound, picking, packing, shipping, dispatch and returns. This results in lower working capital and manpower costs for businesses, while customers get faster order-to-delivery times with almost negligible wrong shipment rates.
A warehouse management solution should be able to integrate multiple warehouses on a single platform, provide real-time inventory updates across locations, and automate crucial tasks at the warehouse to enable optimal stock levels and location-allocation.
Prateek said that close to 65 percent of orders are Cash-on-Delivery (COD) and 35 percent are prepaid. “It's important to verify customers with COD orders as they have a 20-30 percent RTO (Return to Origin) versus less than 5 percent for prepaid orders. You can automate this with WhatsApp verification or SMS OTP verification,” he mentioned.
While choosing an order verification solution, it should have parameters for risky order profiling, offer correct order recommendations and automate address correction, flag potential return orders, and have comprehensive return data analytics.
Order management solution
Order management captures all orders on a single platform with the same process for orders from multiple platforms. This reduces processing time and manual labour and results in error-free packaging. With technology, you can automate everything about online selling, and easily view product movement.
Businesses can process orders faster with fewer operation costs, improve customer communication and automation leads to zero errors. While choosing an Order Management Solution (OMS), make sure it integrates with all marketplaces easily, integrates with leading ERP and logistics services, and automatically allocate orders to correct warehouses.
What's equally important is finding the right delivery partners. With the help of technology, the order management system smartly assigns the best partner based on pin codes, costs, warehouses and serviceability. This results in faster order to delivery times and higher customer satisfaction. "A delay in delivery beyond three days increases the chance of return order by 10 percent. Making the right courier selection is important," said Prateek. He added that to measure the success of your OMS, when you dispatch the product, it should reach within two days in the same region, and within 3.5 days PAN India.
Return management solution
"Don't be disheartened that you'll lose those customers. There are chances where you can convert customer returns to returning customers. You need strong quality during dispatch, and the system should quickly process returns," said Prateek about customers returning orders.
When selecting a return management solution, ensure that it offers multi-warehouse and omnichannel returns, smart shipping provider allocation with the fast and easy return process, smooth order replacement, and bulk return processing for B2B orders. If you have less than 10 percent in the fashion category, and 2 percent in other categories, you have succeeded.
In conclusion, Prateek said that to consistently achieve operational efficiency, it's important to review and track a few metrics. Keep 30-45 days on inventory, your dead inventory should be less than 2 percent, all orders need to be processed in less than 24 hours, you need to have less than 0.1 percent quality fail related returns, your RTO should be 15-20 percent of total orders, and prepaid orders in the industry can be around 30-35 percent.
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