Moving from a centralized inventory system to a decentralized inventory system is aimed at
• improving supply chain efficiency,
• reducing transportation costs, and
• improving customer satisfaction levels.
Till 2015 Flipkart had a single warehouse located in Bangalore.
𝗔𝗱𝘃𝗮𝗻𝘁𝗮𝗴𝗲𝘀 of moving to a decentralized inventory system:
1. 𝗙𝗮𝘀𝘁𝗲𝗿 𝗱𝗲𝗹𝗶𝘃𝗲𝗿𝘆: Helped improve its customer satisfaction levels and compete with other e-commerce companies.
2. 𝗕𝗲𝘁𝘁𝗲𝗿 𝗶𝗻𝘃𝗲𝗻𝘁𝗼𝗿𝘆 𝗺𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁: Manage its inventory more efficiently.
3. 𝗖𝗼𝘀𝘁 𝘀𝗮𝘃𝗶𝗻𝗴𝘀: No longer had to transport products from a single warehouse in Bangalore to customers across India.
𝗣𝗿𝗼𝗯𝗹𝗲𝗺𝘀 with moving to a decentralized inventory system:
1. 𝗜𝗻𝗰𝗿𝗲𝗮𝘀𝗲𝗱 𝗰𝗮𝗽𝗶𝘁𝗮𝗹 𝗲𝘅𝗽𝗲𝗻𝗱𝗶𝘁𝘂𝗿𝗲: Significant amount of capital expenditure. Flipkart had to invest in building new warehouses, hiring staff, and purchasing equipment.
2. 𝗜𝗻𝗰𝗿𝗲𝗮𝘀𝗲𝗱 𝗼𝗽𝗲𝗿𝗮𝘁𝗶𝗼𝗻𝗮𝗹 𝗰𝗼𝗺𝗽𝗹𝗲𝘅𝗶𝘁𝘆: Manage inventory across different locations, which added to its operational complexity.
3. 𝗜𝗻𝗰𝗿𝗲𝗮𝘀𝗲𝗱 𝗰𝗼𝗼𝗿𝗱𝗶𝗻𝗮𝘁𝗶𝗼𝗻: Required better coordination between different teams and departments.
https://lnkd.in/gFDk5Dn5
𝗜𝗻𝘃𝗲𝗻𝘁𝗼𝗿𝘆 𝘁𝗮𝗸𝗲𝘀 𝘁𝗵𝗲 𝗰𝗲𝗻𝘁𝗿𝗲 𝘀𝘁𝗮𝗴𝗲
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