BPL to run a tight ship
Electronics firm is tapping into its own warehouses as well as Amazon’s network of fulfilment centres to save costs
Unlike its competitors, consumer durables company BPL neither has the brand equity to play the “price” card nor the sales numbers to derive economies of scale. Therefore, it is all the more critical for BPL to optimise its operations, supply chain and logistics to minimise wastage and safeguard its bottom line.
With three factories and eight warehouses in the country, BPL is swiftly moving its goods across India and saving costs to the tune of 3.75 per cent per annum on logistics. This is a significant amount for an electronics company that is making its way back into the competition. The company, which sells online through Amazon, is also utilising its e-commerce partner’s network of as many as 15 fulfilment centres to move goods seamlessly between states.
Manmohan Ganesh, chief operations officer, BPL Limited, says, “Unlike big companies that can afford wastage occasionally, we cannot be insufficient as we will be hit harder. Therefore, to save costs, it is important for us to run a tightly integrated operations and logistics chain.”
With a mix of imports and local manufacturing capabilities, the company has built a network of eight warehouses covering southern, northern, western and eastern parts of India. Given that south is BPL’s biggest market by sales, it has four warehouses in the region. Since 50 per cent of the company’s total sales come from the south, it has warehouses in key locations such as Bengaluru, Chennai and Hyderabad. It also has a warehouse in Palakkad (Kerala) that is currently not in use as Amazon is still working on launching delivery operations in the area.
The next two major markets for the company in terms of sales are north and west. Each of the regions accounts for 22 per cent of the company’s sales. The cities and towns in north are served by one warehouse each in New Delhi and Ghaziabad. Supply in west is catered through warehouses located in Mumbai, Pune and Ahmedabad. And the market in east is taken care of by a warehouse in Kolkata.
The company supplies products to its eight warehouses from its central and the biggest warehouse in Bengaluru, in accordance with the demand raised by Amazon.
“Our e-commerce partner too has a big network of 15 fulfilment centres. So, we work closely with them in tracking and mapping our sales and accordingly avoid duplication in stocking products in key locations,” says Ganesh.
Having said that, it is critical for BPL to move goods efficiently within its own network of warehouses. Because at any given point of time Amazon is dealing with a high number of suppliers and only has a limited amount of space to accommodate goods from each vendor. It is here that intelligent sales planning, accurate demand forecasting and timely refilling of stock kick in.
On business-as-usual days, BPL follows a monthly schedule of stocking its warehouses with required goods. In line with the online demand for its products, the company ships a specified quantity of goods across product categories such as TVs, refrigerators and air-conditioners (ACs) to Amazon’s fulfilment centre. However, the fill rates for the player go up during events such as Amazon’s Great India sale in January every year. The fill rates are also dictated by an increase in seasonal and geographical demand for sales.
For example, on the basis of demand, BPL restocks products such as refrigerator and ACs in summers more frequently.
With an eye on keeping the costs low, the company has outsourced its transportation requirements to third parties. It uses the services of multiple partners to move goods across its own network warehouses as well as to Amazon’s fulfilment centres. Working with multiple transporters who focus on moving goods in particular areas, such as south or west, helps BPL negotiate better rates. It has managed to cut down significantly on its operational costs by outsourcing logistics. It is estimated that maintaining its own fleet would increase BPL’s running costs by almost 40 per cent. Currently, BPL utilises a fleet of 15 to 20 trucks.
The Bengaluru-based company, which has returned to the market two years ago, has been slowly but steadily increasing its sales. Its total net sales turnover for the quarter ended September 2017 stood at ~432.1 million in comparison to ~215.6 million in the previous quarter.
Ganesh says that an online-only selling model has helped the company to be more agile and nimble. Since BPL gets sales and demand related data on real-time basis from Amazon, it is in a position to take quick calls on inventory management. Given that the company has its own warehouses, it is in a strong position to address sudden spikes in demand for the company’s products online. For example, Amazon is quick to alert BPL whenever there is a sudden but significant jump in online searches for the company’s products, be it microwave or TV on its platform within a span of two hours. Such alerts help BPL to quickly replenish its stock in particular areas (markets) from where the demand is coming.
With an e-commerce partner, the company does not have to struggle with standard issues of first buy-in time from dealers to physically move a set of goods before supplying or replacing it with fresh stocks to take advantage of a sale or leverage high demand for a particular product. With no liability to replenish or reduce stock in the dealer network which too has limited warehousing space, BPL finds itself in a stronger position to react quickly to competition, reduce inventory flexibly in case of stock holdings going up by resourcefully moving goods from one warehouse to the neighbouring one.
“Unlike big companies that can afford wastage occasionally, we cannot be insufficient as we will be hit harder. Therefore, to save costs, it is important for us to run a tightly integrated operations and logistics chain”