In today’s competitive e-commerce grocery and FMCG industry, companies must balance aggressive expansion with financial prudence. Rapid growth often demands heavy investment in supply chain infrastructure, which can tie up working capital and slow down scalability. A compelling example of addressing this challenge comes from the implementation of the Asset Lite Model for pallets and crates procurement. This model not only reduced upfront capital expenditure but also ensured sustainable, flexible, and efficient growth.
The Challenge of Conventional ProcurementThe company’s expansion plan required opening 3 Fulfillment Centers (FCs) and 11 Distribution Centers (DCs), covering nearly 9 lakh sq. ft. of space. To support these operations, it needed around 20,000 pallets and 5,000 crates for material handling. Traditionally, this would have meant outright purchase, demanding an upfront capital outlay of ₹2.5 crore.
While asset ownership provided control, it created significant challenges:
- High Capex Dependency: Funds locked in assets restricted spending on expansion, marketing, and retailer incentives.
- Maintenance & Losses: Damages, repair needs, and theft added lifecycle costs.
- Resource Requirements: Dedicated manpower was needed for managing and maintaining these assets.
- Scalability Constraints: Ownership meant limited flexibility to expand swiftly across new regions.
These factors made it clear that a conventional purchase model was incompatible with the company’s vision for fast-paced, pan-India expansion.
The Strategic Intervention: Asset Lite Model –To overcome these barriers, the company adopted an Asset Lite Model by renting pallets and crates through long-term vendor partnerships. This approach followed a structured four-phase roadmap:
- Feasibility & Cost Study – A benchmark analysis proved that rentals were 26% cheaper compared to ownership over three years.
- Vendor Ecosystem Development – The company engaged leading rental service providers, ensuring long-term commitments backed by service-level guarantees.
- Governance & Tracking – By introducing SOPs for repairs, barcode-based monitoring, and digitized tracking, asset misuse was minimized, and losses were capped at <1%, well below the industry average of 3–5%.
- Long-Term Enablement – The use of digital asset tracking, automated reconciliation, and integrated repair/replacement SLAs ensured uninterrupted operations during periods of rapid scale-up.
Tangible and Intangible Benefits-The outcomes were remarkable. The company achieved ₹1 crore in savings (26% cost reduction) over three years versus outright purchase. More importantly, ₹2.5 crore in working capital was freed up to fuel expansion, marketing, and retailer incentives. Operational efficiency improved significantly, with a 20% faster rollout of FCs and DCs due to immediate asset availability. Governance and sustainability were also strengthened through transparent, digitized tracking systems.Beyond financial and operational gains, the Asset Lite Model delivered crucial intangible benefits:
- Agility: Faster market entry due to ready availability of rental assets.
- Flexibility: Dynamic scaling of asset requirements in line with demand fluctuations.
- Risk Mitigation: Lower risk of obsolescence, theft, or damage.
- Transparency: Digital accountability across centers improved oversight.
- Leadership Focus: Freed from the burden of asset management, leadership could channel efforts into business growth
The Asset Lite Model demonstrates a forward-looking procurement strategy for high-growth businesses. By avoiding heavy capital commitments, companies can preserve working capital, enhance scalability, and ensure governance without compromising supply chain efficiency. For MSMEs and fast-growing enterprises, this approach underscores how innovation in procurement models can unlock both financial flexibility and long-term competitiveness in a dynamic market environment.
