Logistics has always remained a challenge for the retail industry. The success of any retailer will depend upon his control over the logistics. A modern retailer has to deal with the logistics of different kinds- temperature sensitive (dairy & frozen products), perishables (fruits & vegetables), products which will get damaged (crockery, glassware, electronics). With the lack of good infrastructure such as cold storages, good roads for easy transportation it get even more difficult to manage the logistics for a retailer.
A normal Mom and Pop stores have always depended on the logistical strength of the FMCG companies to ensure availability of the products at their stores. Better the logistics of the any FMCG Company better is the penetration of such brands. But in order to grow in size a retailer needs to build his own logistics.
One industry a retailer can learn about logistics is that of the milk business. Here the milk business refers to purely the pouch milk business which has a shelf life of a single day and not the tetra pak milk. most of us have the privilege of milk being delivered to our doorstep every morning. For a few others fresh pouch milk availability in the early morning is just a stone’s throw away from their place.
This is possible only because of the logistical strength of the milk co-operatives. Very few places are not connected by these companies that the areas are depended on the tetra pak milk or the milk powder.
The milk co-operatives have worked on a back end as well as front end logistics. The back end logistics refers to the procurement of milk from the dairy farmers’ right at their door step. Having a good back end logistics helps these companies is procuring great quantities of milk at a good price. As the product is highly perishable and is temperature sensitive it is very difficult for the farmers to transport the milk to distant places. Hence having a sourcing point with the necessary infrastructure to collect, store and transport milk enables the companies to maintain continuous procurement. Companies which have not worked at strengthening their back end infrastructure have died a natural death especially during times of milk shortages.
Now about the front end logistics. After procuring milk from farmers and completion of the pasteurization process and the packing, the final products needs to reach its end consumer. The whole of this chain works during the night hours. From loading at the factories to reaching the necessary touch points. The milk parlours and other points where milk is sold receive milk in the night or in the wee hours of the morning. In the early morning the delivery boys pick up from these touch points and delivery it at your door step. Even where the consumers buy milk from the nearby milk parlours or a normal roadside milk vendor (whose business is only for 2-3 hrs in the morning) start early morning. Infact observed that a lot of other companies are using these touch points to sell their products. These days a milk parlour also sell breads, idli dosa batter and other products connected with our breakfast and is easily perishable.
Remember a MD of a milk co-operative telling that over a period of time the buying habits of milk has changed. Today nearly 25% of their milk business comes post the rush morning hours. Hence they have two despatches every day. One dispatch in the night and the other in the afternoon. The afternoon dispatches cater to customers buying in the later hours.
So with the changes in the buying habit of the customers the companies also change their logistics.
Any other industry which has worked and improved its logistics based on customer behavior?. Any other industry or retailers who have great back end or front end logistics?
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