Understanding the supply chain process of Big Basket

How large companies like Big Basket manage their supply chain end to end? How can they scale effectively and what do they optimize for?
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Today, the way we buy groceries has completely changed via the 10 minute grocery delivery companies. But only a few years back, the way to buy groceries was to go to a super market. Big Basket changed that. Big Basket has transformed the way Indians shop for groceries today. With just a few clicks on your phone, you can order all your grocery needs and have them delivered reliably to your doorstep. This is a huge change in the market and permanently transformed the landscape.

On-demand grocery delivery has been made possible through Big Basket’s innovative supply chain management. In this post, we’ll take a deep dive into how Big Basket manages procurement, warehousing, fulfillment, returns and more to enable a seamless online grocery experience.

What is Big Basket?

Big Basket is India’s largest online supermarket, enabling customers to shop for groceries and household essentials through their website and mobile app. Founded in 2011 in Bengaluru, Big Basket today delivers to over 25 Indian cities covering 70% of households.

Some fundamentals of Big Basket's business model:

- On-demand grocery delivery with a focus on fresh fruits, vegetables, dairy, meat etc.

- Offerings across staples, packaged foods, beverages, personal care, household items etc. Total assortment of over 18,000 products.

- Mobile app and website ordering for scheduled delivery slots. App has 14 million downloads.

- Delivery within 90 minutes to 24 hours depending on slot booked. Free delivery above minimum orders.

- Serves households as well as small businesses/offices. B2B segment called BB Daily.

- Hybrid retail model with combination of own warehouses, storefronts, distribution centers.

- Inventory-led model with strong private labels portfolio. 30% products are private labels.

This on-demand delivery at scale is powered by Big Basket's well-designed supply chain management process. Let's look at the key stages of their grocery supply chain.

Basic Structure of Big Basket's Supply Chain

Big Basket has built an end-to-end supply chain starting from procurement from brands and farmers to final delivery to customers. It can be broken down into:

1. Procurement

2. Warehousing

3. Fulfillment

4. Returns Management

Alongside these core supply chain functions, Big Basket also employs optimization levers and technology to improve efficiency. Let's understand each of these pieces.

Procurement

Big Basket sources inventory from three channels - national and regional brands, farmers, and private label partners.

Brand Partners: Ties up with leading national brands across food and grocery categories. Sources from manufacturers like HUL, P&G, Britannia, Godrej etc. Has partnerships with over 1000 brands.

Farmers: Sources fresh fruits, vegetables, dairy and other perishables directly from farmers. Has direct relations with over 4000 farmers across producing regions.

Private Labels: Works with third-party manufacturers to create own private label products under brands like Fresho (food), Happy Chef (ready-to-cook), Royal (household supplies) etc. Aims to offer quality products at lower prices.

By combining national brands, farm-fresh stocks and affordable private labels, Big Basket is able to offer a comprehensive grocery assortment to customers.

Warehousing

Big Basket operates on a hub-and-spoke warehouse model to store and distribute inventory across its coverage cities.

The central warehouses are called fulfillment centers or FCs. These large warehouses up to 1 lakh sq.ft handle sourcing, sorting and dispatching of orders. Each city has 1-2 dedicated FCs.

The FCs are supported by a network of over 350 dark stores or spokes. Dark stores are small warehouses where orders are prepped and loaded onto delivery vans. They act as last mile fulfillment points close to the customer.

The hub-and-spoke layout allows Big Basket to achieve:

- Economies of scale with centralized FCs

- Local assortment and express delivery thru dark stores

- Optimal inventory allocation across markets
 
Big Basket follows a just-in-time procurement approach. Except for some non-perishable dry staples, most inventory is sourced on a need basis. This prevents wastage and improves working capital efficiency.

Big Basket stores inventory under different temperature conditions:

- Cold storage (fruits, vegetables, meat, dairy etc)

- Dry grocery storage (staples, packaged foods, home supplies etc)

- Ambient temperature storage (beverages, personal care etc)

By classifying inventory, Big Basket is able to store products appropriately and maintain freshness.

Fulfillment

Big Basket offers scheduled delivery slots for orders - from 90 minutes to 24 hours depending on city. Customers can book slots as per their convenience.

Some popular delivery options:

- BB Express - 90 min to 2 hour delivery. Charges apply.

- Early Morning - Pre booked time slots for early morning delivery. Free above minimum order.

- Regular - Schedule your delivery from morning to late evening. Free above minimum order.

- BB Daily - B2B delivery option for offices, restaurants etc.

Big Basket uses electric vehicles, vans and bikes for last mile delivery from dark stores to customers. It owns a fleet of over 1000 vehicles. Some key metrics:

- Each vehicle makes about 30-40 deliveries per day

- Delivery route optimization used to plan vehicle routes

- Delivery partner app manages trip planning and navigation

This fulfillment process allows Big Basket to make over 150,000 deliveries per day. The wide delivery slot options coupled with own last mile fulfillment are what make rapid online grocery delivery viable.

Returns Management

Big Basket has a customer-friendly returns policy to build trust and loyalty. Key aspects:

- "5 Day No Questions Asked Return Policy" - Items can be returned with no questions asked within 5 days.

- Convenient returns process. Customers can initiate returns via the app or customer care. Pickup is scheduled through the nearest dark store.

- Once returned items reach FC, refund is initiated within 1-2 days.

- Perishables are usually replaced, not refunded unless quality issues.

This returns management ensures customers can shop without hesitation and build recurring habit. It does lead to some revenue loss for Big Basket but is a strategic investment. Proper tracking and analysis of returns data also provides insights into improving procurement and quality.

Supply Chain Optimization

Big Basket deploys technology and operational best practices for optimizing various supply chain functions:

Inventory Management - Uses predictive analytics to estimate demand. This allows timely re-stocking and availability of items. Also prevents wastage of perishables.

Routing - Proprietary algorithms used to create optimal delivery routes from dark stores. Achieves high drop density and cost-efficient deliveries.

Packing - Intelligent batching and packing of orders at FCs improves speed and accuracy.

Just-in-time Processes - Inventory, routing and packing improvements enable just-in-time order processing. This reduces lead times and improves freshness.
 
High Operational Metrics: Big Basket is able to achieve best-in-class operational metrics which improve customer experience:

- High fill rates (>98%) ensures customers get all items ordered

- Low wastage (<2%) of fresh inventory through demand forecasting

- High NPS (Net Promoter Score) of 75+ reflects customer satisfaction

- Unit economics - despite high fulfillment costs, optimizations ensure positive unit economics

These supply chain optimizations are key to making the on-demand grocery model commercially viable and scalable.

Technology Enablement

Big Basket has invested heavily in building proprietary tech platforms to manage its complex grocery operations.

Some key technology capabilities:

Warehouse Management System - Manages inventory flows across FCs, dark stores and vendors. Provides real-time visibility.

Demand Forecasting Engine - Uses ML techniques to predict demand patterns at a granular level. Helps optimize procurement and availability.

Routing Engine - Automates optimal routing between dark stores and delivery addresses. Improves efficiency.

App and Website - Provides rich customer experience including personalization, recommendations, seamless payments.

In addition to customer facing tech, Big Basket also uses ERP, business intelligence and data warehousing tools for internal planning and decision making.

By integrating technology across the value chain, Big Basket is able to execute its supply chain model profitably at scale. Tech also provides flexibility to innovate business operations.

The extensive use of technology does require significant investments. But it provides long term competitive advantage and efficiencies which make the online grocery model viable.

In our opinion, Big Basket has changed the way Indians shop for groceries. Their approach to supply chain has the famous "Say no to jugaad" motto. (Jugaad = shortcuts). They focused on building resilient systems and processes at their foundation so scaling and maintaining customer experience becomes easier.

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