Individual Assignment
Logistics Management
Individual Assignment: Case Study
Case 1: P & G
Summary
Procter & Gamble (P&G), a global consumer products company with a vast and complex
supply chain, faced a significant supply chain disruption in September 2012 when a Japanese
chemical plant, operated by Nippon Shokubal Co., one of its key suppliers of acrylic acid for
superabsorbent polymers (SAP), experienced a devastating explosion. Acrylic acid is a critical
ingredient in disposable diapers, and this incident had the potential to cause a global shortage.
P&G, with its commitment to maintaining a seamless supply chain and customer satisfaction,
took swift action. Although alternative suppliers were available, they lacked the capacity to
fully compensate for the lost production. P&G and Nippon Shokubal collaborated closely to
find a solution, eventually reopening a Nippon Shokubal plant in the USA with P&G's support
and adjusting their supply chain plans to ensure no product shipments were missed. This case
demonstrates the importance of strong supplier relationships and agile supply chain
management in mitigating disruptions and ensuring product availability.
What are the key lessons from this case for dealing effectively with disruptions to the
supply chain?
This case offers several key lessons for dealing effectively with disruptions to the supply chain:
Þ Strong Supplier Relationships: Maintaining strong and collaborative relationships with
key suppliers is essential. P&G's ability to quickly engage with Nippon Shokubal Co. and
work together in the face of a crisis was crucial in finding a solution.
Þ Diversification of Suppliers: Overreliance on a single supplier can increase vulnerability
to supply chain disruptions. Companies should consider diversifying their supplier base to
have backup options when such disruptions occur.
Þ Risk Assessment and Mitigation: Companies should proactively identify potential risks in
their supply chain and develop contingency plans to address these risks. Understanding the
vulnerabilities in the supply chain is essential for quick and effective response.
Þ Agility and Flexibility: Being agile and adaptable in the face of disruptions is key. P&G's
ability to restart a dormant Nippon Shokubal plant in the USA and adjust their supply chain
plans showcased their flexibility and willingness to take unconventional steps to maintain
product availability.
Þ Communication and Collaboration: Effective communication and collaboration among
various teams within the organization and with suppliers are critical during supply chain
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Individual Assignment: Case Study
disruptions. The involvement of P&G's Chief Procurement Officer in Japan highlights the
importance of high-level engagement in crisis situations.
Þ Prioritizing Customer Satisfaction: Maintaining product availability and ensuring
customer satisfaction should be a top priority during disruptions. P&G's commitment to
zero missed shipments and no retail shortages demonstrated their customer-centric
approach.
Þ Trade-offs and Adjustments: Sometimes, supply chain disruptions may require
adjustments to the planned operations, such as delaying new product introductions.
Companies should be prepared to make necessary trade-offs to mitigate the impact of
disruptions.
Þ Continuous Monitoring and Improvement: Companies should continuously monitor and
evaluate their supply chain resilience and make improvements as necessary. Lessons
learned from each disruption can inform future risk management strategies.
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Individual Assignment: Case Study
Case 2: SHOPCLUES: Turning Logistics into a competitive advantage
1. Describe the ShopClues operating model.
ShopClues operates with a managed-marketplace model, which is distinct from the inventoryled model commonly used by many other e-commerce players. Here are the key elements of
ShopClues' operating model:
Þ Managed-Marketplace Model: ShopClues follows a managed-marketplace model from
its inception. In this model, the company doesn't maintain extensive inventory of
products. Instead, it acts as an intermediary connecting buyers and sellers. Sellers list
their products on the ShopClues platform, and the company provides the platform,
technology, and services to facilitate transactions.
Þ Extensive Seller Network: ShopClues has a large network of over half a million
registered sellers (merchants) across India. These sellers offer a wide range of products,
including unstructured categories such as home and kitchen items, appliances,
unbranded apparel, auto accessories, and mobile and laptop accessories.
Þ Focus on Smaller Cities and Rural Areas: Unlike some other e-commerce platforms
that primarily cater to major cities and urban areas, ShopClues focuses on smaller cities
and non-metropolitan regions. The company recognized the growth potential in these
areas and targeted price-conscious households with lower disposable incomes. Over
70% of ShopClues' Gross Merchandise Value (GMV) comes from sales in these smaller
towns and cities.
Þ Zero-Inventory Approach: ShopClues does not maintain a significant inventory of
products. Instead, it leverages its extensive network of sellers to provide a wide variety
of products to customers.
Þ Differentiated Product Categories: ShopClues specializes in unstructured product
categories, which are less commonly offered by other e-commerce platforms. This
includes products that cater to the needs and preferences of consumers in smaller cities
and rural areas.
Þ Marketplace Aggregator: ShopClues serves as a platform where sellers can showcase
their products and reach a broad customer base. The company aggregates a diverse
range of offerings from its network of sellers, enhancing the variety of products
available to customers.
Þ Fulfillment Services: ShopClues offers various fulfillment services to sellers, including
Velocity Premium (SCVP) for end-to-end fulfillment, Velocity Basics (SCVB) for
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Individual Assignment: Case Study
shipping and delivery, and Merchant Direct Fulfillment (MDF) for merchant-managed
fulfillment. These options allow sellers to choose the level of service that best suits their
needs.
2. How were ShopClues’s logistics requirements different from those of traditional
offline retailers?
ShopClues had unique logistics requirements that differed significantly from those of
traditional offline retailers. Here's how ShopClues's logistics requirements were distinct:
Þ Geographical Spread: ShopClues operated as an online marketplace connecting a vast
network of sellers, with over half a million registered merchants located across the
country. This extensive geographical spread of both sellers and customers presented a
challenge that traditional retailers, typically concentrated in physical stores or
distribution centres, did not face.
Þ Diverse Customer Base: ShopClues served a diverse customer base spread across
various tiers of cities and rural areas. Traditional retailers often have a more localized
customer base and distribution network.
Þ High Order Volume: ShopClues processed a significant number of orders, with millions
of orders to be fulfilled each month. Traditional retailers may handle a lower volume of
orders in comparison.
Þ Delivery Time Expectations: Due to the nature of e-commerce, customers expected
faster delivery times, especially for interstate deliveries. ShopClues had to meet these
expectations, which often required efficient logistics operations and partnerships.
Þ Reverse Logistics: ShopClues had to manage a substantial volume of sales returns, with
an average return rate of 5%. Handling reverse logistics, such as product returns,
replacements, and refunds, was a critical aspect of the e-commerce business, and it had
to be managed efficiently.
Þ Integration with Sellers: ShopClues had to integrate its platform with a large number
of individual sellers, allowing them to view order status and manage their own
fulfilment processes. This level of integration was essential for the platform to run
smoothly and efficiently.
Þ Regional 3PL Partners: ShopClues relied on a network of third-party logistics (3PL)
partners, including regional logistics players, for both forward and reverse logistics.
This strategy allowed them to expand their reach and serve customers in Tier 2 and 3
cities.
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Individual Assignment: Case Study
Þ Technology Integration: ShopClues heavily invested in technology to improve logistics
services. They built a technology platform that facilitated real-time data exchange
between the platform and 3PL partners, enhancing communication and demand
management.
3. What is ShopClues’s logistics strategy? Highlight the benefits of this strategy.
ShopClues adopted a logistics strategy that involved outsourcing its logistics operations to
third-party logistics (3PL) partners, both for forward and reverse logistics. This strategy was
designed to address the unique requirements of its online marketplace model and cater to a
wide geographical customer base. The strategy encompassed several key elements:
Þ Use of 3PL Partners: ShopClues partnered with a network of 3PL companies, including
regional logistics players. These partners were responsible for handling various aspects
of logistics, including procurement, packaging, and delivery.
Þ Express Surface Mode: ShopClues shifted from air transport to an express surface mode
of transportation to optimize logistics costs. Air transport was significantly more
expensive than surface transport, and the shift allowed cost savings.
Þ Technology Integration: The company invested in technology to facilitate real-time data
exchange between the platform and its 3PL partners. This integration enabled effective
communication, demand management, and improved tracking of shipments.
Þ Reverse Logistics: ShopClues managed reverse logistics efficiently, handling product
returns, replacements, and refunds. The company had a network of reverse 3PL partners
to deal with returns.
Benefits of ShopClues's Logistics Strategy:
Þ Expanded Reach: By partnering with regional logistics players, ShopClues was able to
expand its reach to Tier 2 and 3 cities, which were underserved by traditional logistics
providers. This expanded reach allowed them to tap into a wider customer base.
Þ Reduced Logistics Costs: Shifting to an express surface mode of transportation and
outsourcing logistics operations helped the company reduce logistics costs. Air
transport is typically more expensive, and this cost-saving measure contributed to the
company's profitability goals.
Þ Meeting Delivery Expectations: ShopClues was able to meet the evolving delivery
expectations of its customers. By partnering with 3PL providers that offered a range of
services, including time-bound deliveries and card-on-delivery, the company enhanced
customer trust, conversion rates, and repeat purchases.
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Individual Assignment: Case Study
Þ Economies of Scale: The logistics outsourcing strategy allowed ShopClues to achieve
economies of scale. It could focus on its core business of driving sales while reducing
the investment in logistics infrastructure. This approach minimized the risk of
transportation delays and losses.
Þ Integration and Real-Time Updates: Integration with 3PL partners through technology
allowed for real-time updates on both forward and backward deliveries. This improved
efficiency and customer satisfaction.
4. What are the steps in ShopClues’s order fulfilment cycle? Describe the role of thirdparty logistics partners in this cycle.
ShopClues's order fulfilment cycle involves several steps, and third-party logistics (3PL)
partners play a crucial role in facilitating these processes. Here are the steps in ShopClues's
order fulfilment cycle and the role of 3PL partners:
Order Processing:
Þ Customers place orders on the ShopClues platform.
Þ The platform's software checks prices, taxes, and payment terms.
Þ An order number is assigned to each order.
Role of 3PL Partners: 3PL partners do not directly participate in this step. Order processing is
handled by the e-commerce platform's software.
Inventory Management and Order Fulfilment:
Þ Integration of order information with the inventory and fulfilment system is crucial to
ensure timely fulfilment.
Þ Sellers, often spread across the country, view order status and manage their part of the
fulfilment process.
Role of 3PL Partners: In this step, 3PL partners may not have a direct role, as it primarily
involves coordinating with sellers and ensuring proper inventory management within
ShopClues' network. However, 3PL partners can indirectly contribute by managing inventory
on behalf of sellers if such services are offered.
Shipping:
Þ Order-status information flows to the selected 3PL partner through a pickup API.
Þ The 3PL partner schedules the pickup of packages, which may have been processed at
the seller's site or the fulfilment centre.
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Individual Assignment: Case Study
Role of 3PL Partners: 3PL partners play a crucial role in the actual shipping of the packages.
They are responsible for picking up the packages and transporting them to the designated
delivery locations. They ensure that the packages are handled and shipped efficiently.
Tracking:
Þ Customers can track the status of their orders using the order number or a tracking
number.
Þ Regular updates on order status, including shipping and delivery progress, are provided
to customers through various communication channels, such as email and SMS.
Role of 3PL Partners: 3PL partners are responsible for providing tracking information to
customers. They must ensure that customers can monitor the progress of their orders and
receive real-time updates. 3PL partners may also offer tracking services through their own
portals.
Order Delivery:
Þ 3PL partners are required to make multiple delivery attempts to ensure successful order
delivery.
Þ If an order cannot be delivered successfully (e.g., customer not available), the 3PL
partner may initiate a Return to Origin (RTO) process.
Role of 3PL Partners: 3PL partners handle the physical delivery of orders to customers. They
must attempt delivery multiple times to meet service-level agreements. In the event of
unsuccessful delivery, they play a role in initiating the RTO process.
Reverse Material Flow:
Þ ShopClues has a structured return and replacement policy for products that are
damaged, unsatisfactory, or the wrong product.
Þ A network of reverse 3PL partners is used to handle return orders across multiple PIN
codes.
Role of 3PL Partners: Reverse 3PL partners play a critical role in handling the return process.
They may conduct quality checks and handle the return of items from customers to the seller
or appropriate disposal if necessary.
5. What is the importance of reverse logistics in online retailing? Describe ShopClues’s
reverse material flow system?
Reverse logistics is a crucial aspect of online retailing, and it plays an essential role in ensuring
customer satisfaction, managing returns, and minimizing losses. Here's the importance of
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Individual Assignment: Case Study
reverse logistics in online retailing and an overview of ShopClues's reverse material flow
system:
Importance of Reverse Logistics in Online Retailing:
Þ Customer Satisfaction: Online retailers, like ShopClues, aim to provide excellent
customer service. Having an efficient and customer-friendly return process is vital for
customer satisfaction. When customers are satisfied with the return experience, it can
lead to repeat business and positive word-of-mouth.
Þ Product Quality Assurance: Reverse logistics enables online retailers to inspect and
assess returned products. This helps identify issues such as product defects or damages,
allowing for improvements in quality control and supplier management.
Þ Returns Handling: Managing returns can be complex and costly. An effective reverse
logistics system streamlines the handling of returns, reducing the operational burden on
the retailer.
Þ Inventory Management: Handling returns efficiently can help online retailers manage
their inventory more effectively. They can restock items that are in good condition,
reducing the impact of excess inventory or stockouts.
Þ Environmental Responsibility: Managing returns responsibly and efficiently can reduce
waste and promote environmental sustainability by minimizing the disposal of returned
products.
ShopClues's Reverse Material Flow System:
ShopClues has developed a well-structured reverse material flow system to manage product
returns:
Þ Return Request Process: Customers can file a return request on the ShopClues platform
within 10 days of receiving an order. This initiates the return process.
Þ Pickup Arrangement: Once a return request is received, ShopClues arranges for the
pickup of the returned items. Pickup is typically scheduled within two business days of
the request.
Þ Return Reasons: ShopClues classifies return reasons, which may include mismatch
with customer preference or product damage. Understanding these reasons is valuable
for quality control and product improvement.
Þ Refunds and Replacements: ShopClues ensures that over 95% of customers who return
items receive refunds within 12 to 24 hours of pickup. Customers can also request
replacements if available.
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Individual Assignment: Case Study
Þ Reverse 3PL Partners: ShopClues collaborates with reverse 3PL partners, such as
Nuvoex and Pikndel, to manage approximately 4,000 reverse orders per day across
14,000 PIN codes. These partners play a key role in handling returns, conducting
quality checks, and managing the return-to-seller process.
Þ Customer Convenience: ShopClues may reimburse customers for courier charges if
they choose to return items themselves, particularly from cities not covered by reverse
3PL partners. These reimbursements are often in the form of "Cluesbucks," loyalty
points credited to the customer's account.
6. Describe the role of technology in the logistics management of ShopClues.
Technology plays a pivotal role in the logistics management of ShopClues, enhancing the
efficiency, visibility, and coordination of its supply chain. Here are key aspects of technology's
role in ShopClues' logistics management:
Þ Integration with 3PL Partners: ShopClues has invested in technology to facilitate
seamless integration with its third-party logistics (3PL) partners. This integration allows
for real-time data exchange between the e-commerce platform and the 3PL partners. It
ensures
that
information
flows
efficiently,
enabling
timely
and
accurate
communication.
Þ API Integration: ShopClues uses Application Programming Interfaces (APIs) to
integrate individual application program interfaces of different logistics partners. This
allows for the exchange of data and information between the platform and the 3PL
partners, facilitating communication and coordination.
Þ Demand Management: Technology aids in demand management by allocating order
volumes based on partners' capacities and past delivery performance. This helps ensure
that orders are distributed effectively among 3PL partners, optimizing delivery
efficiency.
Þ Real-Time Tracking: Technology enables real-time tracking of shipments, providing
customers with the ability to monitor the status and location of their orders. This feature
enhances transparency and customer satisfaction by keeping them informed about their
deliveries.
Þ Order Processing Efficiency: The e-commerce platform's software checks prices, taxes,
payment terms, and assigns order numbers, automating the order processing. This
automation streamlines the fulfillment process and minimizes manual errors.
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Individual Assignment: Case Study
Þ Return Request and Processing: ShopClues' platform allows customers to initiate return
requests easily. This digital process ensures that returns are efficiently tracked,
managed, and processed, reducing the administrative burden on the logistics team.
Þ Data Analytics: Technology enables data analytics and reporting to assess the
performance of logistics operations. This data-driven approach helps in identifying
trends, improving processes, and making informed decisions to enhance logistics
efficiency.
Þ Customer Communication: Automated communication channels, such as email and
SMS, are used to provide customers with regular updates on the status of their orders.
This keeps customers informed and engaged throughout the order fulfillment process.
Þ Efficient Inventory Management: The platform allows sellers to view order status and
manage their part of the fulfillment process. Integration and real-time updates improve
inventory visibility and coordination between the platform and sellers.
Þ Inventory Tracking: Technology facilitates the tracking of inventory, ensuring that
ShopClues has accurate information about the availability of products. This is crucial
for efficient order fulfillment and managing customer expectations.
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