Why Centralized E-commerce Supply Chains Are Broken

Yet beneath this growth lies a fundamental structural problem: the centralized B2B supply chain model that platforms like BigBasket, DMart, Blinkit, Zepto, and others have imposed on brands. While these platforms have achieved remarkable scale, the centralized approach creates significant inefficiencies, costs, and operational nightmares for the brands that supply them.

The Scalability Nightmare: When Growth Becomes a Burden

Consider this reality: brands must now supply to 30+ fulfillment centers across India for 5-10 major e-commerce platforms. This translates to 300+ shipments weekly, creating massive logistical bottlenecks that become exponentially more complex as new platforms emerge.

BigBasket's BB Matrix platform demonstrates both the potential and the complexity of managing such scale. The platform has enabled BigBasket to handle up to 15 million monthly transactions while reducing transportation costs by 50% and lead times by 60%. However, this success story from the platform's perspective masks the operational burden placed on supplier brands.

Each new platform partnership exponentially increases complexity for brands. Resource allocation becomes increasingly difficult as the network expands, and the management bandwidth required to coordinate across multiple platforms grows unsustainably.

The Economic Reality: Margins Under Siege

The financial impact of centralized supply chains is brutal. Logistics and inventory management costs can account for up to 20% of a product's final selling price in the Indian FMCG sector. While India's logistics costs as a percentage of GDP are around 8.35%, for FMCG brands dealing with centralized e-commerce models, the burden is significantly higher.

Brands with manufacturing units in specific regions face particularly prohibitive costs. A brand manufacturing in Kochi must pay premium rates for part truck loads (PTL) to reach fulfillment centers in Delhi, Mumbai, or Bangalore. Even with third-party transporters, PTL shipments are significantly more expensive than full truck loads (FTL), and transportation costs can consume 15-25% of product margins.

The working capital stress is equally severe. Seasonal demand spikes can require 2-4x increases in inventory, making centralized planning difficult and increasing working capital stress. Inventory carrying costs can consume 20-30% of total inventory value annually.

The Fill Rate Trap: Platform Penalties and Performance Pressure

One of the most insidious aspects of centralized supply chains is the fill rate challenge. E-commerce channels often report erratic and intermittent sell-in requests, leading to low fill rates and penalties for "out-of-stock" situations.

Weekly fill rate scorecards are now standard on platforms like Zepto, Blinkit, and Instamart. The penalties for underperformance are severe: reduced visibility, SKU deactivation, and financial chargebacks. This creates a vicious cycle where brands must maintain higher inventory levels at centralized locations to avoid penalties, further increasing working capital stress.

The pressure to maintain high fill rates often forces brands to compromise on quality control and manufacturing efficiency, as they optimize for just-in-time production to meet unpredictable demand spikes.

Quality Compromises: The Hidden Cost of Distance

Centralized supply chains increase transit times, particularly impacting the shelf life and quality of perishable products. This raises the risk of higher rejection rates at destination warehouses, creating additional costs and operational complexity.

Without regional inventory holding, brands are forced to optimize for just-in-time manufacturing to minimize inventory costs. However, this pressure often leads to quality shortcuts and insufficient quality control, as production schedules are driven by immediate fulfillment needs rather than optimal manufacturing processes.

Fresh products suffer the most, with reduced shelf life upon reaching consumers. This not only impacts customer satisfaction but also increases the risk of returns, refunds, and long-term brand damage.

Delivery Appointment Failures: The Last-Mile Challenge

The complexity of centralized supply chains extends to the final delivery stage. Missed delivery appointments can result in storage fees, re-delivery charges, product spoilage, and future scheduling delays, especially for perishable or urgent goods.

Industry data shows that 28% of scheduled delivery appointments still fail for large-item shipments, causing additional operational costs and customer dissatisfaction. Appointment-based deliveries are now standard for bulk and perishable shipments, with missed appointments leading to direct financial penalties and operational bottlenecks.

Technology Integration Nightmares

Each e-commerce platform requires different integration protocols, increasing IT complexity and costs exponentially. Real-time inventory synchronization becomes complex across multiple systems, leading to data inconsistencies that result in overselling or underselling.

BigBasket's BB Matrix addresses this by offering integrated WMS, TMS, and OMS solutions, but this represents a platform-centric solution that doesn't address the fundamental coordination challenges brands face when working with multiple platforms simultaneously.

The IT infrastructure costs scale non-linearly, and maintaining separate integrations for each platform requires dedicated technical resources that many brands cannot afford.

Single Point of Failure: The Vulnerability Problem

Centralized warehouses create dangerous vulnerabilities. Natural disasters, strikes, regional disruptions, or even local political instability can halt entire supply chains. The COVID-19 pandemic demonstrated how centralized systems collapse during large-scale disruptions, with companies losing billions in sales and operational downtime.

Unlike distributed systems that offer redundancy and alternative routes, centralized models offer no backup distribution channels. A single warehouse closure can impact supply to multiple platforms across entire regions.

Why This Broken Model Persists

Distributor Ecosystem Inadequacy

The primary reason centralized models persist despite their obvious flaws is the inadequacy of India's distributor ecosystem. Traditional distributors face challenges such as fragmented markets, inadequate infrastructure, credit/payment issues, and regulatory burdens.

Most distributors lack the technological capabilities required for modern e-commerce operations. They cannot provide real-time inventory management, sophisticated demand forecasting, or the level of service quality that e-commerce platforms demand. The buyer-supplier ecosystem in India remains fragmented and underdeveloped compared to global standards.

Platform Power Dynamics

E-commerce platforms favor centralized models for operational simplicity and negotiating leverage. Centralized supply chains give platforms greater control over inventory, pricing, and supplier relationships. This reduces brands' bargaining power and makes it easier for platforms to impose policies that benefit their operations at the expense of supplier efficiency.

Forecasting and Planning Limitations

Brands struggle with accurate regional demand forecasting due to limited historical data for e-commerce demand patterns. The number of online shoppers in India is expected to hit 350 million by 2025, but understanding regional variations and seasonal patterns remains challenging.

Investment in advanced analytics and AI-driven forecasting remains limited, particularly among smaller brands that lack the resources for sophisticated demand planning systems.

Short-term Financial Pressures

The immediate cost savings from centralized models appear attractive compared to the long-term investments required for distributed systems. Quarterly performance pressures prevent long-term strategic thinking, and the total cost of ownership—including lost sales, penalties, and inefficiencies—is often underestimated.

The Path Forward: Rethinking Distribution Strategy

The solution lies not in abandoning centralized models entirely but in developing hybrid approaches that combine the efficiency of regional distribution with the control and standardization that brands require. This includes:

• Technology Investment: Developing platforms that can manage multiple regional distributors with the same efficiency as centralized systems

• Distributor Development: Creating professional regional distribution networks that meet e-commerce standards

• Industry Standards: Establishing common protocols and standards for e-commerce-ready distribution partnerships

• Collaborative Forecasting: Implementing shared demand planning systems that leverage data from multiple platforms and regions

Conclusion: The Cost of Inaction

As India's e-commerce market continues its rapid growth, with quick commerce alone projected to reach $35 billion by 2030, the structural inefficiencies of centralized supply chains will become increasingly expensive. The top 40-50 cities account for a $250 billion grocery market, but serving this market efficiently requires a fundamental rethinking of supply chain strategy.

The companies that successfully transition away from purely centralized models will gain significant competitive advantages in cost structure, customer satisfaction, and operational resilience. Those that continue to rely on centralized approaches will find themselves increasingly squeezed by rising costs, platform penalties, and operational complexity.

The question is not whether the current model will change, but whether brands will proactively adapt or be forced to react when the inefficiencies become unsustainable. The data is clear: centralized e-commerce supply chains are broken, and the cost of maintaining them is only going to increase.