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CERTIFICATE
This is to certify that the project work titled
Cost Minimization and Expansion Strategy
DROP@STORE
DELHIVERY PVT.LTD.
Is a bonafide work done by
Nihal Pathan
For the award degree of
BACHELOR IN BUSINESS ADMINISTRATION
______________
Dr.(Col).Sneh.V.Sharma
______________
Prof. Pallavi Deshpande
ACKNOWLEDGEMENTS
Nihal Pathan
ABSTRACT
This report focuses on studying the impact of Project Drop@store on Delhivery Pvt.
Ltd.Drop@store is a new project undertaken by the New Venture Development (NVD) team
of Delhivery. The basic aim of the project is to minimize the cost of last mile logistics. It is
clearly seen further in the report that the project is cost-effective and also such type of project
is proving beneficial to the firm. But it was also found that the project has its potential
drawbacks mostly in maintaining the company standards regarding the service quality. It will
face challenges like fierce competition and day to day technological changes. So, it is
difficult for the project to have a solid impact on the firm. But, the project does have scope.
The e-commerce logistics sector continues to evolve rapidly with changes in the business
environment. So, such different types of models or projects are always welcomed. Further
report includes the overview of the e-commerce logistics industry, my materials and methods
used to analyze the data available, results and discussions and the conclusion.
Table of Contents
Sr.no.
1
1.1
1.2
1.3
1.4
2
2.1
2.2
2.3
2.4
2.5
3
3.1
3.2
3.3
3.4
3.5
3.6
4
5
6
Title
Pg.no.
Introduction
05
08
13
22
24
26
Introduction
Introduction
In this chapter, a brief introduction about the company, and the project undertaken by the
company is given. Also, the objectives and the scope of the project are discussed in detail,
clarifying the personal motivation for choosing this research topic.
1.1
Project Drop@Store
Drop@store is a new project which is initiated by DelhiveryPvt Ltd. It is taken care by the
NVD team of the DelhiveryPvt Ltd. This project came into effect from May,2016. It is
operated all over India including all major cities like Pune. Mumbai, Nagpur, Ahmedabad,
Surat, Goa, Gurgaon, Kolkata, etc. In Pune, the cluster manager (West Zone) with the help of
City Lead, Senior executives, Associates and few interns are working upon this project. The
major objective of this project is to reduce the cost of the dispatch centres all over India. It
aims to convert a particular vendor shop into dispatch centre. It is also trying to minimize the
cost of last mile logistics that was costing Rs. 25 per shipment to bring it to Rs. 15 per
shipment.The project also facilitates to create a chain of vendors which can act as a dispatch
centre and their delivery people as the firms field executives. With the approach of this
project, Delhivery is trying to make changes in its existing business model. Earlier, they made
arrangements for dispatch centers and field executives were hired to deliver the shipments to
the end customer. But with the implementation of this project, they are adopting a cost cutting
measure. With this, they are aiming to reduce the cost of last mile logistics.
Under this project, the company tries to communicate with all the local vendors who are
associated with Amazon, flipkart or other E-commerce websites. Also, the local vendors with
no E-commerce logistics experience are given a chance with respect to certain criterias. Then
if vendor is interested, the meeting will be fixed and in that meeting all the necessary details
such as costing and routes to be shipped are discussed. Also, the highlight of this project is
that the vendors are given an advantage of choosing the locations which they find more
6
With the Indian e-commerce space gaining increasing traction over the last couple of years,
logistics services firms, specifically catering to e-commerce space, is not lagging behind.
Specialised e-commerce logistics providers have an upper hand over the other normal
business-to-business logistics players, because collection of cash (in case of cash-ondelivery), returned items and delivery need special attention compared with general logistics.
To tap the fast-growing market, logistics players are all set to grow rapidly with the latest
round of PE funding. In such cases, it is important for Delhivery to work on such various
projects and understand its impact to cope up with the competition. It is also important for
them to focus on the strengths and weaknesses of the project to improve the effectiveness of
the project. With the enormous growth of E-commerce logistics retailing in India, there lies a
huge scope and opportunities to study this project effectively.
Industry Overview
7
2.1
The E-commerce market in India was estimated at USD 17.6 billion in 2014, and is expected
to grow at a CAGR of 40% to touch USD 136 billion by 2020. The online travel segment at
USD 12 billion alone, comprises about 68 per cent of the e-commerce industry in India,
including travel and e-ticketing websites. Ticketing accounts for the largest share of the
online travel market , with domestic air ticketing driving growth. At USD 3 billion, ecommerce retailing is the second largest and fastest growing segment. This is followed by the
financial services and classified segments, job searches and online matrimony which
contribute to about 15 per cent of the market by value.
2.2 E-commerce retailing market in India
The e-commerce retail market is among Indias exciting and fastest growing markets. It is
poised to be worth USD 36.7 billion by 2020, from USD 3 billion in 2014, growing at a
CAGR of approximately 52 per cent. The industry has come a long way since its inception
and is continuously gaining momentum and value. The Indian market is driven by factors
such as increased penetration of internet and smartphones focus on advertising, ease of
shopping for customers, innovative payment options, deals and discounts and the rapidly
changing lifestyle needs. At present, the e-commerce retailing industry is witnessing
approximately 1 to 1.2 million transactions per day, led by categories including apparel
(approximately 43 per cent), electronics (approximately 24 per cent, and books
(approximately 22 per cent).
2.3
Logistics is a key enabler for growth of the e-commerce retail industry and is increasingly
emerging as a differentiator in terms of customer service and satisfaction. Logistics in ecommerce retail is evolving with growing business requirements, and is acting as an
important lever for business growth. The logistics sector specific to e-commerce retailing in
India was valued at USD0.2 billion in 2014 and is projected to witness a CAGR of ~48 per
cent in the upcoming five years to reach USD2.2 billion by 2020. While many e-commerce
retailers have partnered with logistic service providers to fulfill their business requirements,
some players have also invested in building in-house logistics capabilities. While a large
share (as much as 50 per cent) of the e-commerce logistics market is commanded by in-house
logistics players, the other 50 per cent is controlled by third-party logistics (3PLs) service
providers including traditional Logistics Service Providers (LSPs), e-commerce focused
logistics providers and India Post.However, apart from increasing competition and the rising
demand from tier-III and remote locations, an addressable market is expected to be about 45
per cent of the total, which could be close to USD1 billion in 2020. Also, the focus is now
shifting from standard to specialised deliveries, which requires 3PLs to invest in new
capabilities and building infrastructure.
2.4
3)
4)
5)
6)
7)
etc. cannot not be controlled by the company. Its the way they show their mannerism
to the end customers which is going to matter in building Delhivery, a reliable
logistics brand. So, this could be a challenge to the project.
Working in the firm for almost two months, I found that as number of on boarded
vendors are increasing day by day, keeping a record of their documentation also pose
some kind of problem.
While executing this project, Delhivery is going to face fierce competition from its
big competitor Amazon. Amazon India is also working on the same business model
like drop@store for a long time compared to Delhivery. They are offering Rs. 20 for
each shipment compared to the Rs 15 per shipment of Delhivery. So, this could be a
challenge for the NVD team of Delhivery to convince Amazon vendors to do the
shipments at as lesser price.
Relationship between the vendors and the existing dispatch centre managers can also
act as a hindrance in the process of executing this project.
Efficiency rate of the vendors could also as a challenge in front of the project as
company has no control over managing the way in which the vendor could work.
Technology-wise, the project Drop@store is still not that advanced when we compare
it with the competitors. This might keep the project lagging behind the competition.
Few competitors offer electronic devices which ease their work of managing the data
and in a way providing swift customer service.
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With the rapidly rising scale of operations, e-commerce retailing players have been
strategically opting for viable operating models depending on the nature of products and
operations. Broadly categorized, there are three kinds of models prevalent among ecommerce retailers:
a) Inventory-led : Inventory is purchased by the in-house buying arm of an ecommerce retailer and stored by them in their fulfilmentcentres.
Comment: -This is a capital intensive model, with high overheads and substantial
inventory risks. However, it is nonetheless helpful in creating trust and service
credibility among users, leading to a better brand value and recall. This model is more
popular for fast-moving, low-value multi range products.
b) Marketplace: The marketplace model has two variants - storage/warehousing by an ecommerce retailer and drop ship. In the marketplace model, inventory is not stored by
an e-commerce retailer. Packaging and quality checks are carried out by the sellers,
and the items are then sent for storage in the mother warehouse of the e-commerce
retailer, or directly shipped to the customers from the sellers warehouses.
c) Click and Mortar : The click and mortar share is relatively smaller across categories
primarily because these companies strategically plan to capitalize on the marketing
efforts of established players, and limit their expenses to publicize their own
website/shopping pages.
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The e-commerce retail logistics sector in India is evolving, with three distinct 3PL categories
serving the sector - captive logistics arms, traditional logistics service providers and ecommerce retail focused logistics service providers.
a) Captive logistics arms: The captive arms of e-commerce retailers are assured of large
captive volumes and some have also opened up to service other e-commerce retailers.
They have a first-hand understanding of the sector requirements and have evolved
their processes, IT systems and people practices to meet the requirements of the
sector.
b) Traditional logistics service providers: These 3PLs have forayed into deliveries for
the e-commerce retail sector. These LSPs have an advantage due to their established
network and reach, along with their experience and expertise in providing logistics
services pan-India.
c) E-commerce retail focused logistics service providers: In view of the rapid growth in
the e-commerce retail sector, dedicated LSPs for e-commerce retail have been
established over the past three to four years, and have been able to capture
approximately 50 per cent of the sector. This has primarily been due to better service,
investment in technology infrastructure, wider range of product offerings, competitive
pricing and their ability to reimburse cash quickly.
14
Project Drop@store
Strength
Cost-Effective
Facilitates better reach
More convenient for vendors(Location-wise)
Weakness
Opportunity
Threat
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The reason behind doing an unstructured interview was to get a wider picture of the project in
which many aspects will get included. The objective of the interview was to answer the
following questions:
To evaluate the impact of Project Drop@store on the firm, to study the challenges faced by
the project, to study its importance and to understand the role of the employees working in
that project.
To conduct the interview, I found no other person than my Industry guide, Mr. Tanmay
Shetty, who is also the cluster manager of Delhivery Pvt. Ltd [West zone]. He was heading
this project and the NVD team for the west zone of India. The interview lasted for almost 45
minutes, so ample interaction got possible.
Interview with Mr. Tanmay Shetty
Q.1 What, according to you, is the importance of the Project Drop@store to your firm?
A.
It is cost effective. As per shipment charge will get reduced. We could be able to save
almost 10 Rs. on each shipment. Now thats our main objective. We almost deliver approx.
10,000-12,000 shipments from the west zone of India. And also it tries to save our costs by
shutting down the dispatch centres. That clearly depicts that this project will surely boost our
profits.
Q.2 Do you think, the company has taken a right decision by taking up this project?
A. Yes, I do feel. The e-commerce logistics industry is expanding and is getting
technologically advance day by day. Also, the numbers of e-commerce logistics providers are
increasing. So, everyone in this cut to edge competition requires adopting a unique business
model through which they can stay in this race. So, I think, by taking up this project,
Delhivery has taken a step in that direction.
Q.3 How marketing is playing a role in this project?
A.
I think, the success rate of this project largely depends upon the way our team markets
this project. The basis for this project is marketing. Especially, the negotiation skills of me
and my team will be tested i.e. the way we convince our vendors to deliver our shipments at a
lower rate than our competition. And we know that to be a good marketer, we need to be a
good negotiator.
Q.4 Do you think is it right to close down the number of dispatch centres in every city,
considering your no. of shipments daily?
A.
Our current focus is on closing down the unnecessary dispatch centres. For example,
recently we merged the Rahatni and pimple saudagar DC. There was no load in the Rahatni
DC and both areas were nearby . So, the dispatch centres which are receiving no load to
deliver are operating unnecessary. And about the decision of closing down the dispatch
centres which had load depends upon the efficiency rate of the vendor therein. So, the
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decision of closing down a particular dispatch centre completely depends upon that area and
the efficiency of the vendor.
Q.5 What are the challenges that your firm had faced while executing this project?
A.
Every project has its own challenges to face. And Drop@store also has few of them.
Reliability of the vendors, then the quality of the services offered to the end customer, is
those few. But I felt the most important challenge which this project is facing is through the
competition. Especially, Amazon. They offer 20 Rs per shipment and also are technologically
advanced than Delhivery. And moreover, its a big marketplace to deal with.
Q.6 Dont you think such projects could hamper the quality of your firms service?
A.
In a way, it does. We do not have any control over those vendors delivery boys. But I
think these are the issues which will initially hamper the service issues of the firm. Over a
period of time, as the vendor will gain some trust regarding the company, efficiency will be
improved and simultaneously these service quality issues?
Q.7
A.
Being a cluster manager of the firm for the west zone, the role is to look after this
project for the whole west zone which includes cities like Ahmedabad, Pune, Mumbai, Goa,
Surat, Nagpur and many more. My role is to ensure that maximum load is given to our
vendors and to keep a check on the efficiency of the vendors. If not, then my job is to
continuously improve the efficiency of the vendors by implementing various strategies. Also,
Im handling the NVD team of Pune.
Q.8 Is your firm operating any other projects with Drop@store?
A. Yes, it is. We are also executing the Project Invictus. It deals with providing our
logistics services to various small scale marketplaces.
Q.9 Any comment on the competition.
A. As told earlier, we are facing a stiff competition from amazon. Also, there are various
other competitors like Blue Dart, DHL, FedExetc. with whom we have to deal with.
Q.10 What, do you think, is the scope of this project in the future?
A.
The scope is vast. The e-commerce industry is one of the emerging industries, today.
In future, we might be faced with more fierce competition. So, it was appropriate for the firm
to take up such project. If the project clicks, it can help Delhivery to grow in terms of sales as
wells as in terms of a brand in e-commerce logistics.
Q.11 Now, looking at the results for last three months, how will you rate this project a
success or a failure?
17
A.
Frankly speaking, it is very difficult to answer whether this project is a success or
failure in such a short time. Going with the current scenario, it is working fine. But still it has
a long way to go. And then only we will get to know if it was a success or a failure.
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Except the collection of secondary data, to carry out further analysis on the project, I
conducted an interview and also to tried to analyze with other method like SWOT Analysis.
With that, I could lead to my results in context to the available data. They are as follows:
Things which I conducted:
a) Unstructured interview
b) SWOT Analysis
c) Analysis of secondary data
Followings are the results which I achieved with respect to my objectives:
1. Regarding projects effectiveness in maintaining companys standards, it was found
out that initially there might be a compromise with the quality of the service of the
firm. These could include the reliability of the vendors or the quality offered by the
vendors to the end customers. But, later, over a period of time, as the vendor will gain
some trust regarding the company, efficiency will be improved and simultaneously
these service quality issues.
2. The project was found to be cost-effective by all means. It could easily minimize the
cost of last mile logistics. Also, the capital cost included for the dispatch centers will
be reduced. So, this project ensures enough profits for the firm.
3. It was found that competition is the major challenge which this project might face and
will be facing in the future. It is facing a fierce competition from the giant
marketplace Amazon, which also is working on the similar business model. Other
competitors like Bluedart, DHL, FedEx etc. are also competing with Delhivery. Also,
it was seen that competitors are implementing or adapting to various types of business
models day by day which makes it further difficult for this project to sustain. So,
continuous monitoring of the project is required to be done.
4. Also, it was observed that technology also offered some kind of hindrances to the
small scale or medium sized firms. Technological advancements like Application
Program Interface (API) integration of e-commerce retailers system with the 3PLs
system, Integration of systems in case of a reverse supply chain and Launch of Card
Swipe on Delivery is still missing with Delhivery and considering the fact that it is
offered by its few competitors, it will surely affect the firm or the project.
5. It was also observed that along with being cost-effective, the project facilitates better
reach throughout the cities. The vendor has a good knowledge about their respective
localities and also given the convenience of choosing the locations according to their
comfort, it will surely improve the service network of the firm and speed of the
deliveries will be improved.
Project Drop@store has a short term impact over the firm. With respect to my objectives
stated, it is cost effective, offers a better reach and is a good competitive move considering
the changing dynamics of the e-commerce retail logistics. The sustained growth of over 50
per cent in the Indian e-commerce retail sector underlines the need for efficient and
sustainable logistics operations for various sizes of e-commerce retailers in India. This shows
that the project does has a scope in the market but the growing prominence of the
marketplace model and the increasing penetration of e-commerce are likely to alter the way
e-commerce logistics functions in India. E-commerce retailers are expected to continue to
shift towards the marketplace model, with multiple merchants across categories from various
parts of the country.
The project has its own potential drawbacks like reliability of the vendors, service quality
issues, etc. But, in todays scenario, it is observed that the service reliability for these
segments is expected to remain critical for the success of e-commerce retailers and logistics
providers. So, though it will be an issue in the initial phase, it may still affect the project as a
whole in the future. We can also conclude that competition is the biggest challenge which this
project can face. The increasing network of e-commerce focused retail logistics providers and
increasing emphasis of full-fledged LSPs on the e-commerce retail sector are expected to lead
to intensified competition in the market, putting pressure on costs and margins. The
intensified competition in the market might affect the longevity of the project. Next followed
are the technological advancements which might put up a challenge in front of this project.
Use of technology is highly missing in the implementation of this project. The boom in the
Indian e-commerce sector could be attributed to the enhanced use of technology, which has
helped improve e-commerce in areas across the supply chain, inventory management,
improved customer experience and loss prevention. So, this might impact the productivity of
the project on a greater scale.
The e-commerce logistics sector continues to evolve rapidly with changes in the business
environment. With an expansion in reach and service levels, Delhivery need to evolve to offer
a portfolio of a range of services, as well as consistently innovate to keep pace with the
rapidly changing dynamics of the sector. They need to keep pace with the changing needs of
the business, whether launch of value added services to match growing customer expectations
or expanding reach into the semi-urban/ rural areas to enable new customer acquisition. In a
nutshell, logistic service providers need to be flexible as per the demands from the customers
and so the project.
I would recommend the company to focus more on strategic planning of the project. That
includes planning strategies regarding how to cope up with the fierce competition and also
constructing more effective business model .Also; if possible, the firm should focus on
making the project more technologically advanced as that will ease the operations.
References
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l https://www.reportbuyer.com/product/2621266/indian-e-commerce-logistics-marketanalysis.html
l http://www.delhivery.com/about.html
l https://m.yourstory.com/2016/01/commerce-logistics-2016/
l https://www.linkedin.com/pulse/e-commerce-india-scope-challenges-futureshantanu-gaur
l http://retail.franchiseindia.com/article/operations/logistics-and-supply-chain/Scopeof-technology-in-Logistics.a523/
l http://www.iamwire.com/2012/12/e-commerce-in-india-%E2%80%93-present-andfuture/5433
l http://www.kpmg.com
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