Decentralized Inventory for changing Indian buyer behaviour
For a very long time, operating via a central warehouse has been the de-facto approach for businesses to store and distribute their inventory to consumers. It is easy to manage everything in one place. It might also appear cost-effective compared to having a decentralized network where you have multiple warehouses spread across different cities. The complexities associated with it is what prompts businesses to not opt for it.
However, the market trends have changed dramatically in the last few years in favour of decentralized inventory. The rise of Amazon and the COVID-19 pandemic have been an eye-opener to the pros of this approach.
Online shopping is no longer limited to the metros or major cities in India. In fact, over 60-70% of the orders come from Tier 2 & 3 cities. With better access to fast and affordable internet, this share is expected to increase even further. Handling this demand via decentralized inventory could be a game-changer for any business as they try to scale in the highly competitive e-commerce market.
When does a centralized inventory fail?
In a fast-paced world, speed is everything. Customers would prefer to shop with brands like Amazon that are able to offer it. With a centralized inventory, it is almost impossible to compete with the modern-day expectation of superfast delivery.
To add to it, any system with a single point of failure is risky. It brings down the entire network along with it. Your central warehouse is just like that. The supply chain can be disrupted due to unforeseen consequences like natural disasters and emergencies.
A centralized inventory also fails to capitalize on many modern-day technological advancements for supply chain optimization and data-driven decision making.
Why should a business move to decentralized inventory?
At a high level, there are two simple reasons- (1) You want to serve your customers faster and better. (2) You want to stay efficient in your operations by building a resilient supply chain network.
Let’s take an example of a business based out of Delhi where they have their central warehouse. You notice a sudden surge in orders from Chennai. The traditional approach would be to ship your inventory to the customer location directly from Delhi, no matter the distance. It is almost impossible to make a quick delivery in this context. If a competitor is able to deliver a similar product faster than you, the customer would most likely prefer to shop with them instead. Now, what if you are under a local lockdown, have some issues with transportation, or if there was some power blackout? Longer delays can make the customer cancel their order.
If you have a portion of your inventory stored at Chennai, you can seamlessly make the deliveries on time. That’s exactly what decentralized inventory helps you achieve. You can also stock up beforehand by observing trends and predicting market demand. The overall service will become more agile, competitive, and efficient. What might have taken 15 days to process and deliver before can now be done in 2 days.
Amazon is able to do it with its warehouses present across more than 12 states in India. This has significantly improved its brand as a fast delivery network, an important factor that makes the customer place more orders with them. Once an Indian buyer is used to such a seamless service, their expectations for faster delivery grows. Failing to meet them can affect customer retention.
How can you do it too?
Establishing a decentralized network and managing the logistics of the entire supply chain can sound like a lot of work. For businesses that don’t have multiple self-owned warehouses, it can seem costly and time-consuming.
That’s exactly where the WareIQ platform comes into the picture. It can help you seamlessly decentralize your inventory and manage the necessary logistics in an efficient manner. WareIQ does all the work for you including procuring and storing the inventory at their network of fulfilment centres spread across the country.
What does having such a decentralized inventory/supply chain mean to your brand and service?
- Faster Pan-India delivery with better shipping timeline/tracking.
- Data-driven optimization of your business.
- Efficient and smart inventory placement powered by the philosophy of “supply where there is demand”.
- Helping meet the customers’ expectation of an Amazon level service.
- Reducing cancellations due to delays in delivery.
Benefits to business and consumers- a win-win situation.
Managing a central warehouse is cheaper but it comes at the cost of the cons we have discussed earlier. Outsourcing the decentralization of your inventory to a platform like WareIQ can actually bring down the overall costs as it improves business and customer retention. It also helps in achieving better operational efficiency- i.e provide superior services to the customers at the same cost. Also, managing local demand surges and scaling your business in new cities becomes easier.
For a customer, it means faster delivery (within 2 days) and options like same-day pickups. They may no longer be bound to Amazon when they expect the same. It also increases their reliability and trust in the brand.
E-commerce isn’t the only industry that can benefit from decentralized logistics. The same applies to pharma, healthcare, hardware industry, etc. that may operate on a B2B level.
With changing customer expectations, the older way of doing things no longer works. Centralized warehousing is not well equipped to deal with fragmented demand and the dynamic markets that exist today, the positive impact on sales and overall growth due to decentralized inventory can surpass the costs incurred in setting it up, especially when using platforms like WareIQ.
The ultimate USP of decentralization is rather straightforward. No matter what product we sell, if it is not put in the consumer’s hands before the competitors, businesses risk losing their market share.