5 tips for startups to build cloud strategy: The RedMart way
What can startups looking to move to the cloud learn from RedMart’s deployment of Manhattan’s SCM cloud model. e27 finds outBy Terence Ng 09 Jan, 2014
With low capital expenditure and rapidly increasing assortment of offerings, cloud-based software solutions are fast becoming the go-to choice for companies. This is most evident among startups, which take advantage of cloud to cut costs, allowing them to focus on and grow their core businesses.
Examples are abound of startups successfully leveraging cloud to optimise their businesses, and Singapore-based online grocery store is the latest to join the bandwagon. In November, RedMart had announced that it completed three months of seamless operations after implementing SCALE, a warehouse management system (WMS) by supply chain solutions provider Manhattan Associates.
Just how did RedMart benefit from its adoption of cloud-based WMS? Are there any tips or learnings for aspiring startups on making the most of the pay-per-use model?
Articulate a need
The goal of RedMart is simple, yet powerful: to disrupt traditional grocery retail by offering customers a better way to shop for their everyday household essentials. To do this, it needs to provide a wide product selection with high availability levels, competitive prices, same day and next day delivery, and close to 100 per cent order fulfilment.
E-commerce for groceries is arguably one of the most complex retail businesses, given the large number of unique items associated with a typical order and the fast delivery times demanded by consumers. Therefore, RedMart needed a robust solution to optimise the processing of incoming product shipments and speeding up the picking and packing of large numbers of outbound orders – each made up of many individual SKUs (stock keeping units).
In this case, the requirement from the cloud model was to deliver improved visibility in the warehouse, by showing how much inventory was available and where it was located, ensuring orders could be processed within a tight wave, and reducing the time from order to delivery.
Learning: Startups looking to move to the cloud have to articulate their needs clearly and invest in a solution that caters aptly, lest they end up with something that is either inadequate or overpowering. This leads us to the next point…
According to RedMart, it explored several competing offerings in the marketplace before selecting Manhattan Associates as its solution provider. For one, it felt that the team at Manhattan Associates best understood its business needs and provided invaluable guidance throughout the selection and pre-deployment phases. Also, affordability and ease of implementation factored into the decision.
Learning: In the same way, startups need to look around at various vendors, taking into account factors such as team, support, cost, and ease of implementation and use. No two startups will have the same needs, so what works for one may not be suitable for the other.
Minimise IT management
As a startup with limited resources, managing IT infrastructure was low on RedMart’s list of priorities. Less time and energy spent on taking care of server outages and maintaining uptime meant that they could focus better on maximising customer experience.
RedMart had already deployed all its enterprise systems on the Amazon Web Services (AWS) platform. Seeing that Manhattan’s SCALE could be implemented on AWS as well, the company wasted no time in working with the Manhattan team to optimise performance, ensuring that there were no latency issues for on-premise devices, including printers and scanners.
Keeping all systems on AWS meant there was no need to invest in new network infrastructure, saving RedMart the costs of migration and re-implementation.
Learning: Similarly, startups need to take a look at their current IT infrastructure before selecting a cloud model, making sure that the new solution is compatible with what they currently have.
In-house vs outsourcing
Considering the critical nature of the business, it is understandable that RedMart would prefer to develop and operate an essential part of the business such as the supply chain in-house, instead of outsourcing it to an external logistics vendor. By taking advantage of cloud, the online grocery store was able to create as well as control a streamlined, scalable and customer-focused service operation across the entire supply chain.
Learning: For startups contemplating outsourcing and/or cloud services, it is a good to see how RedMart balances the need between retaining control and cost savings. According to Co-founder Vikram Rupani, RedMart is not so much a retail company as it is a technology company which is focused on retail. As such, they are forced to think creatively about how to solve their unique problems, creating innovative solutions to disrupt traditional supply chains. Outsourcing is unlikely to allow RedMart to exercise this capability, even though it may result in lower costs.
Implementing SCALE took just over four months. Subsequently, RedMart’s team kept a close eye on user data, quantifying the benefits of the Manhattan solution.
RedMart’s operations were running at full capacity within five days after the system went live. This showed that SCALE was rather well suited to RedMart’s business size, letting it avoid the costs and dangers of over-expansion. Other indicators looked good as well, with the time taken to complete orders being halved and fulfilling order capacity going up by over 50 per cent in the week immediately after the implementation. Moving forward, RedMart believes that it can increase its capacity by approximately 15 per cent each month for the foreseeable future without any significant increases in headcount.
Learning: For nimble startups staying on their toes, ready to pivot at a moment’s notice, such a model is invaluable. While there is no guarantee that their implementation of cloud will be as smooth as RedMart’s, assiduous monitoring will allow quick responses to problems along the way, perfectly encapsulating the spirit of the ‘Lean Startup’.
For the record, Pivotal Asia — partnered by Hian Goh, one of the two founders of Asian Food Channel, and Shane Chesson, ex co-head of Technology investment banking for Citigroup in Asia — is an investor into RedMart’s previous round.