Case StudySHOPCLUES: TURNLNG LOGISTICS INTO A COMPETITIVE ADVANTAGEShopClues has developed a marketplace for the masses by building a technology platform thatconnects Tier 2 and Tier 3 customers [households with income between $6,000 and $15,0001residing in Tier 2 and Tier 3 cities] with regional/local brands.In Marth 2016, Ranjit Mayne, senior director of logistics and fulfilment at Sholk'lues.com(Shop Clues), a leading online marketplace headquartered in Gurgaon, India was reflecting onthe company's positive turnaround in logistics strategy. Until 2014, the company had beendependent on-air transport to deliver shipments, which had limited it to Tier 1, Tier 2, and afew Tier 3 cities (covering 8,000 postal index numbers or PIN codes). It was entirely reliant ondie few national courier services such as Blue Dart Express limited, Ecom private limited, andGati Ltd for deliveries. These services had high logistics costs per unit and were not able toreach customers in tier 3 and 4 cities, which left customers unable to place orders anddissatisfied.To meet delivery service-level agreements (SLAs), expand its reach, and reduce delivery costs,ShopClues had shifted to a logistics outsourcing strategy, which involved using a combinationof national and regional partners. To further optimize logistics costs, the company shifted froman air mode to an express surface mode of transportation. During its mega Diwali sale InNovember 2015, 70 per cent of orders were delivered by third-party logistics (3PL) partnersthrough express surface delivery covering 19,000 PIN codes. This increased to 95 per centduring the 2016 Diwali sale. By the end of 2016, ShopClues was delivering over two millionorders per month across 30,000 PIN codes in the country, using a network of 37 3PL partners(see Exhibit 1). 'Our network of logistics partners delivers to nearly 30,000 destinations acrossIndia, which is the largest for any e-commerce site in the country," Mayne noted.In February 2016, ShopClues became the fourth entrant in the country's "unicorn club” of e-commerce marketplaces (after Flipkart, Snapdeal, and Paytm) after it successfully securedfunds from investors, including Singapore's sovereign wealth fund, GIC Private Limited. Thecompany was targeting to be profitable and to file an initial public offering (IPO) of its shareson the Nasdaq stock exchange by the first financial quarter of 2018. To achieve the goal to bethe first profitable e-commerce company in the country, ShopClues's logistics and deliveryfunctions had a crucial role to play. As head of the logistics function at ShopClues, Mayne hadsome tough questions to answer: How would the logistics strategy support the company'sgrowth strategy? How could It meet evolving expectations of customers from its onlinemarketplace? What would be the merits and demerits of a 3PL strategy? How could ShopCluesleverage technology to optimise logistics services?

Question

Case StudySHOPCLUES: TURNLNG LOGISTICS INTO A COMPETITIVE ADVANTAGEShopClues has developed a marketplace for the masses by building a technology platform thatconnects Tier 2 and Tier 3 customers [households with income between $6,000 and $15,0001residing in Tier 2 and Tier 3 cities] with regional/local brands.In Marth 2016, Ranjit Mayne, senior director of logistics and fulfilment at Sholk'lues.com(Shop Clues), a leading online marketplace headquartered in Gurgaon, India was reflecting onthe company's positive turnaround in logistics strategy. Until 2014, the company had beendependent on-air transport to deliver shipments, which had limited it to Tier 1, Tier 2, and afew Tier 3 cities (covering 8,000 postal index numbers or PIN codes). It was entirely reliant ondie few national courier services such as Blue Dart Express limited, Ecom private limited, andGati Ltd for deliveries. These services had high logistics costs per unit and were not able toreach customers in tier 3 and 4 cities, which left customers unable to place orders anddissatisfied.To meet delivery service-level agreements (SLAs), expand its reach, and reduce delivery costs,ShopClues had shifted to a logistics outsourcing strategy, which involved using a combinationof national and regional partners. To further optimize logistics costs, the company shifted froman air mode to an express surface mode of transportation. During its mega Diwali sale InNovember 2015, 70 per cent of orders were delivered by third-party logistics (3PL) partnersthrough express surface delivery covering 19,000 PIN codes. This increased to 95 per centduring the 2016 Diwali sale. By the end of 2016, ShopClues was delivering over two millionorders per month across 30,000 PIN codes in the country, using a network of 37 3PL partners(see Exhibit 1). 'Our network of logistics partners delivers to nearly 30,000 destinations acrossIndia, which is the largest for any e-commerce site in the country,&#34; Mayne noted.In February 2016, ShopClues became the fourth entrant in the country's &#34;unicorn club” of e-commerce marketplaces (after Flipkart, Snapdeal, and Paytm) after it successfully securedfunds from investors, including Singapore's sovereign wealth fund, GIC Private Limited. Thecompany was targeting to be profitable and to file an initial public offering (IPO) of its shareson the Nasdaq stock exchange by the first financial quarter of 2018. To achieve the goal to bethe first profitable e-commerce company in the country, ShopClues's logistics and deliveryfunctions had a crucial role to play. As head of the logistics function at ShopClues, Mayne hadsome tough questions to answer: How would the logistics strategy support the company'sgrowth strategy? How could It meet evolving expectations of customers from its onlinemarketplace? What would be the merits and demerits of a 3PL strategy? How could ShopCluesleverage technology to optimise logistics services?

Accepted Answer

Logistic management is the part of management that deals with managing the flow or movement of…