Flipkart’s Decentralized Inventory Triumph and Amazon’s Regional Fulfillment Revolution
Moving from a centralized inventory system to a decentralized inventory system is aimed at
โข improving supply chain efficiency,
โข reducing transportation costs, and
โข improving customer satisfaction levels.
Till 2015 Flipkart had a single warehouse located in Bangalore.
๐๐ฑ๐๐ฎ๐ป๐๐ฎ๐ด๐ฒ๐ of moving to a decentralized inventory system:
1. ๐๐ฎ๐๐๐ฒ๐ฟ ๐ฑ๐ฒ๐น๐ถ๐๐ฒ๐ฟ๐: Helped improve its customer satisfaction levels and compete with other e-commerce companies.
2. ๐๐ฒ๐๐๐ฒ๐ฟ ๐ถ๐ป๐๐ฒ๐ป๐๐ผ๐ฟ๐ ๐บ๐ฎ๐ป๐ฎ๐ด๐ฒ๐บ๐ฒ๐ป๐: Manage its inventory more efficiently.
3. ๐๐ผ๐๐ ๐๐ฎ๐๐ถ๐ป๐ด๐: No longer had to transport products from a single warehouse in Bangalore to customers across India.
๐ฃ๐ฟ๐ผ๐ฏ๐น๐ฒ๐บ๐ with moving to a decentralized inventory system:
1. ๐๐ป๐ฐ๐ฟ๐ฒ๐ฎ๐๐ฒ๐ฑ ๐ฐ๐ฎ๐ฝ๐ถ๐๐ฎ๐น ๐ฒ๐
๐ฝ๐ฒ๐ป๐ฑ๐ถ๐๐๐ฟ๐ฒ: Significant amount of capital expenditure. Flipkart had to invest in building new warehouses, hiring staff, and purchasing equipment.
2. ๐๐ป๐ฐ๐ฟ๐ฒ๐ฎ๐๐ฒ๐ฑ ๐ผ๐ฝ๐ฒ๐ฟ๐ฎ๐๐ถ๐ผ๐ป๐ฎ๐น ๐ฐ๐ผ๐บ๐ฝ๐น๐ฒ๐
๐ถ๐๐: Manage inventory across different locations, which added to its operational complexity.
3. ๐๐ป๐ฐ๐ฟ๐ฒ๐ฎ๐๐ฒ๐ฑ ๐ฐ๐ผ๐ผ๐ฟ๐ฑ๐ถ๐ป๐ฎ๐๐ถ๐ผ๐ป: Required better coordination between different teams and departments.
https://lnkd.in/gFDk5Dn5
๐๐ป๐๐ฒ๐ป๐๐ผ๐ฟ๐ ๐๐ฎ๐ธ๐ฒ๐ ๐๐ต๐ฒ ๐ฐ๐ฒ๐ป๐๐ฟ๐ฒ ๐๐๐ฎ๐ด๐ฒ
A specific example in Andy’s letter to shareholders was about Amazon’s move from a national to a regionalized fulfilment network.
Amazon is optimizing their inventory placement strategy for faster delivery times.
Amazon created eight interconnected regions for self-sufficient operations with a broad selection.
This change benefits customers and the environment with faster delivery and reduced impact.
https://www.aboutamazon.com/news/company-news/amazon-ceo-andy-jassy-2022-letter-to-shareholders