E-Commerce in Logistics - Coursework Example

[University]

Introduction

E-commerce refers to the process of selling goods and services over the internet. The process involves the practice of presale and post-sale activities (Deise, 2000). The evolution of the internet over the last two decades have seen businesses rise to great levels. The internet has led to the emergence of E-commerce, which has dramatically changed the structure of business transactions (Bayles and Batiah, 2000). Therefore, the adoption of E-commerce in the area of logistics has been inevitable. E-commerce logistics has been appreciated in this modern world as a vital factor in driving the global economy. Logistics in business is a very important aspect since it is a substrata of the supply chain. Therefore, it can be used to ensure that raw materials are acquired in the right quality and at the right time. The application of E-commerce techniques in logistics ensures that the demands of the consumers are responded to in an effective and efficient manner. The integration of E-commerce in logistics is done through dynamic modelling, programming and logic (Kiranodous, 2008; Lu and Zhang, 2007). This paper aims to critically analyze the aspect of E-commerce in logistics, and how E-commerce in logistics can enhance business operations.

E-commerce

There has been major developments of communication technologies within the last decade of the twentieth century, which enhanced innovations and promoted globalizations. The convergence of the telecommunication and computer technology initiate new business organizational systems referred to as internet, which presented an evolution of ecological business development (Javalgi, Todd and Scherer, 2005. The internet has enabled businesses to position themselves in the opportunities available to strategically rethink the business models and processes. Electronic commercial transactions over the internet are commonly known as ‘E-commerce’ and it is growing each years in various business operations. The growth is experienced in either business-to-customer or business-to-business transactions. As such, it is a big part of the commercial transactions globally. However, the policy makers are tasked with huge and complex issues such as taxation, security, privacy, and development of infrastructures. However, the evolution of E-commerce can be attributed in the both development and technological innovation of information communication technologies (Javalgi, Todd and Scherer, 2005). The first time that the application of E-commerce was reported in business was in the 1970s, where the electronic funds transfer (EFT) were made possible from one organization to another. Since then, E-commerce has brought upon an astonishing experience especially in the manner that it has transformed traditional shopping. E-commerce has made it possible for people to shop everywhere and at any particular time, especially due to the availability of devices such as smart phones. There are two main models of ecommerce, the first is business-to-business (B2B) where the sellers and buyers are commercial organizations. The second model is Business-to-consumer, where the seller is a commercial enterprise and the buyer is an individual. The two models will be analyzed comprehensively in subsequent section.

Thus, it is the responsibility of the E-commerce users to assess whether the E-commerce strategy used is beneficial to the commercial enterprise or competitors, and this is because of the availability of social media usage. Today’s businesses have prompted customers to demand personalized and intimate relationship, which has resulted in new transaction levels. Companies have benefited greatly from E-commerce since internet has capability of expanding the business into new markets and grow. Deise (2000) indicate that systems and technologies within the E-commerce are positioned to utilize the internet through interactions between the customers and business enterprises. E-commerce has also made it possible for businesses to develop new relationships with customers, distributors, suppliers, logistics providers, and creditors. There are available E-commerce strategies that a commercial enterprise can utilize to enhance sales and growth. The role of E-commerce in logistics is also very critical since it involves aspects such as order fulfillment, payment processing, product delivery, which are very key in building the customer satisfaction and loyalty (Bayle’s, 2000). The future of E-commerce is promising and it is vital for business enterprises to position themselves and embrace E-commerce in their business model, since in the future E-commerce will be a major tool of sale. Some business operations such as logistics will ease when E-commerce is embraced. The growth of E-commerce is uncompromised since each year the number of E-commerce deals grow exceptionally. Therefore, businesses that have not embraced E-commerce should speed up and introduce the concept in their business model lest they become obsolete in the near future.

Business to Business E-commerce

In this model the seller and the buyer of commercial goods and services are commercial organizations. This model comprise of electronic markets and intra-organizational systems where the internet is used for the purpose of interactions between departments of one enterprise. The leading items on Business to business E-commerce are computing electronics, utilities, and warehousing, shipping, and other logistics (Kian Chong, 2010). Business to business E-commerce can be said to be an electric support of business transactions between companies and cover a wide range of applications that enhance the enterprise to form electronic relationship with distributors, resellers, and other partners. This model does not just constitute of transactions that are done over the internet, but in involves the exchange of information prior and after a transaction. Business to business E-commerce can also be viewed as a medium for facilitating procurement management by decreasing the purchase cycle time and price for a purchasing company’s perspective. The growth of this model is expected to grow in the near future as the concept of E-commerce continues to influence business transactions. Business to business E-commerce can be viewed in three main perspective depending on the party that controls the marketplace: the buyer, the supplier, or the intermediary. If the situation is in buyer oriented marketplace, there are few buyers who face many suppliers; when it is supplier oriented, the many buyers face few suppliers; and when it is intermediary-oriented marketplace, many buyers are face many sellers. Business-to-Business Electronic commerce has revolutionized the traditional markets, this is because commercial enterprises are to buy and sell products as well as form new business relationships (Javalgi, 2005). The fact that companies can support huge transactions electronically, they become more efficient and process costs are saved and realized more easily. The logistics process is also enhanced to great levels, for instance this model makes it very simple for large companies to find alternative suppliers more rapidly and can thus put price pressure on real business partners.

Business-to-Consumer E-Commerce

Business-to-consumer (B2C) E-commerce is where the seller of goods and services is a commercial enterprise and the buyer is a consumer or an individual. Business-to-consumer E-commerce can comprise electronic transactions in marketing, ordering and paying, after sales service and, in the case of virtual or intangible goods and service, even delivery (Sun & Finnie, 2004). The main reason why customers use Business-to-consumer (B2C) E-commerce is because it ensures convenience when purchasing products and services over the internet. The model has also ensured that new customer base is attracted, new markets are reached, and promotion of products and services becomes simple and fast. Business-to-consumer (B2C) E-commerce has also been referred to as consumer-oriented ecommerce, since the company can establish a platform to sell their products directly to the customers without consideration of intermediaries.

Business-to-consumer (B2C) E-commerce and Business-to-business (B2B) E-commerce shares some goals, one of the goals that the two models share is completion of transaction on time. For instance, in B2C e-commerce, the seller ensures that the time between when the goods are purchased to when the customer possess the goods is minimized (Kian Chong et al., 2010). The other major common goal between the two models is the fact that they both consider completion of transactions without considering time and distance for the purpose of satisfying the customers. However, there are some identifiable differences between the two models of e-commerce. The major difference between the two major models is the manner in which business is carried out. For instance, in B2C transactions people are able to issue credit cards, cash or even checks to buy its while in B2B the commercial enterprise have business accounts that are maintained and billed at different time (Kian Chong et al., 2010).

Logistics

Logistics can be described as the part of supply chain that involves planning, implementing, and controlling the efficient, forward, and reverse flow and storage of goods and services between the source and consumption point so as to meet the customers requirement (Bayles & Batiah. 2000). The evolving role of logistics can be discussed from a past, present and future perspective. Logistics is an integral part of many businesses since it gives a strategic strength to many enterprises in terms of globalisation. It is important to understand where the aspect of logistics comes from to where it is headed. Historically, logistics was understood in military terms, and it involved procurement, maintenance and transportation of military facilities. The main aim of the objective of the logistics of the past is management of raw material acquisition to the end consumer. The past also collectively managed activities such as inventory and management control. Physical distribution and logistics in the past were also integrated in the marketing and production department, which prompted logistics to develop as an independent function within the business. Lastly, in the past there was very minimal coordination in the areas of purchasing, physical distribution (Christopher, Peck, & Towill, 2006).

In the present times the term logistics have been adversely been replaced by the term Supply Chain Management (SCM). There is no traceable source on where the name originated from and it has been mysterious, however the term supply chain management is linked to physical distribution and logistics of goods and services. The main observation that can be drawn in the present time regarding evolution of logistics is that it is mainly concerned with the concept of supply chain, where all processes in the production flow are concerned. Therefore, there is integration, coordination, relationship building, and collaboration of the entire process of supply chain. The concept of logistics in the present time also focus its operation from a global perspective. It should also be noted that the supply chain management (SCM) is currently been practiced as logistics (Manuj & Mentzer, 2008).

The World Development report (2010) indicate that by 2050 approximately 90% of the world population will live in the developing nations, which will change the dynamics of the logistics. Therefore the growth of logistics and supply chain is projected to grow tremendously and organisations are expected to pursue outsourcing, increase their international operations, and make sure that there businesses are operating in a global arena. The future of logistics also advocates that there should be a revenue generation strategy so as to enhance cost reduction. The supply chain will be devised in such a manner that it will enhance a logistics customer service, and this is because logistics customer service is the grounds in which revenues can be created. Logistics in the future is also projected to see aspects such as purchasing, operations, advertising, production, and marketing merge, which will be enhanced by supply chain management. Finally, as globalisation continues, the focus of logistics and supply chain will remain to be an important factor that will determine the success of a company (Bowesox,, Mentzer, & Speh, 1995).

Implementation of Ecommerce in Logistics

In the business environment, e-commerce and logistics converge and work simultaneously to enable businesses to provide products and services that address the customers’ needs. Some of the objectives that the coordination of e-commerce and logistics seeks to achieve include the purpose of logistics operation, sharing of interest rate, intelligence, flexibility and networking in business operation. While logistics play a vital role in the development of e-commerce, e-commerce is also vital for improvement of the supply chain system and logistics system. Delfmann, et.al. (2002) argues that both concepts are indispensable in the supply chain.

Need for Logistics in the Development of Business to Business E-Commerce (B2C)

According to Sun & Finnie (2004), there is a very close relationship between e-commerce and logistics. Since logistics plays a vital role in the development of e-commerce, it has an enormous impact. Moreover, logistics is inextricably linked to the future development of e-commerce. Slywotzky (2000) provided an overview of the relationship between e-commerce and logistics especially on the view of the sales process and commodity production. The author explains that only 5% of the time is spent on production and processing with the remaining 95% time being taken up by loading, storage and transportation. In this, 30% to 50% of the total value of the goods is accounted for by the logistics costs, amounting to 20% to 80% of the funds. Logistics is taken as a major profit source of the economy, which plays a central role in the economic growth. Research posits logistics as the ultimate frontier to reduce the supply chain costs, increase labor productivity and reduce resource consumption. Many scholars believe that the role of logistics activities in e-commerce is not only associated with the reduction in cost, but also in the improvement of the usefulness of the service to the customers, through improvement of the competitiveness of enterprises.

Wu (2005) believes that the advancement of e-commerce is inevitable, but logistics is required if consumers are to source real products from virtual systems. It is also prudent to note that the development of the e-commerce is heightened by the development of the logistics system. This has sparked the pathway for accelerated trade innovation, particularly the change in the circulation pattern. Likewise, the system of logistics development offers a broad spectrum of technical support and development prospects, which provides a new, modern direction of development. This helps businesses meet the new demands of the customers by supporting modern business applications.

Song et.al, (2000) believes that decentralization triggers most of the bigger firms to shift into smaller and manageable units that put them in positions that allow them cater for the unique market needs, without the risk of loss of important economic benefits. One of the most important aspect of make-or-buy decision that an e-business considers is logistics outsourcing, which is based on cost-efficiency. The shift is a strategic choice in the wake of increasing competitiveness and complexity in the global business environment.

Influence of E-Commerce in Logistics Systems

The logistics business development has also been heavily impacted by the electronic commerce (Bayles & Batiah, 2000). A greater range of customers easily access logistics companies through the use of the internet. This allows them to develop business in locally and globally. Commercial companies are able to sample and select the logistics companies with the most suitable price. Presently, more and more businesses have been able to find customers through online logistics, partners as well as overseas agents.

E-commerce promises to be the future of the business revolution. So far, it has broken the regional boarders, thereby opening large industrial businesses to big future development. The development of logistics in a country’s boundaries has the potential of opening up that country to participate in the international arena, thereby reducing the gap between first world and third world countries. Qu (2012) views the logistics enterprises are being consistently strengthening as the e-commerce environment assumes even bigger and significant tasks in the global business environment. Some of the important business aspects that the logistics industry has the potential to shape is the social production. The industry also promises to be a coordinator of the society by ensuring effective provision of a broader range of logistics services. The e-commerce industry promotes the logistics industry by enhancing unparalleled development opportunities. The rationale for this link is due to the high-tech nature of the e-commerce environment, which is characterized by information revolution. It promotes business through information processing on the computer system to achieve objectives associated with order, advertising, authentication, payment and transaction and material object processing informatization and virtualization, purchase.

The changes in the business environment has the potential of restructuring business, creating unique businesses and leading to the death of others. However, the logistics enterprises will be greatly strengthened by the restructuring since they have effective and efficient tasks of connecting the consumers and the suppliers. This is achieved by creating a virtual stores characterized by the reinforcement the process of purchasing and storing products from the suppliers on time and then taking such products to the consumers on a timely manner in a way that satisfies the needs as and when they arise. The logistics companies are increasingly growing into the representatives of the suppliers and the manufacturers. These type of businesses provide comprehensive logistics services to the society through service coordination. As such, the e-commerce environment has had a major success in raising the logistics industry to greater levels, thereby playing a major role in developmental opportunities.

In the wake of the raise in innovation and programming needs in e-business, logistics companies can help companies that are both strong in innovation that those that are weak in innovation to achieve a high level of success. According to Deise & Wright (2000), logistics has a great importance as a support framework for e-business as it plays a value-aggregating activity that enhances the survival of a business. When e-businesses adopt sales channels that are integrated into the logistics system, they alter their logistics processes to allow them align their services and their products with the needs of the consumers. For instance, a company can shift its mode of operation to the unique characteristics of e-commerce such as easing the process of deliveries and shipment, ensuring delivery of products to the consumer’s houses as well as increasing in the number of deliveries. Bayles & Bathias (2000) foresaw this transformation by positing that the new convergence of the e-commerce and logistics systems is key to changing the traditional logistics systems where the system was based on carrying out large volumes of deliveries that were mainly centralized in nature. The authors concur with the revolution in the logistics systems and the e-business environment, arguing that businesses that did not change to accommodate logistics into their operation had to hire a logistics operator in order to benefit from the required skills of coordinating and effectively running an e-commerce business.

Supply Chains in E-Commerce

E-commerce has three chains; the supply chain, the agent chain and the value chain. The management of the three chains is vital for a commerce activity of business operating in an environment characterized by dynamic change (Segovia t al., 2002). The three chains are composed of complex structures that are imminent in both the e-commerce and the traditional commerce. The chains have a unique way of influencing the outcome of any business operation independently. It is also prudent to note that the flow of information in the e-commerce chains is key to the success of a commerce system.

Supply chain management is one of the major players in in e-commerce, particularly considering the link between e-commerce and logistics. Supply chain management in commerce and logistics refer to the act of managing the flow of suppliers and finished products from the suppliers to the consumers. In this case, the logistics system is concerned with the total flow of materials from the time in which they are acquired from the suppliers in form of raw materials to the time they are ultimately delivered to the end users in form of finished products.

Application of Model Predictive Controllers (MPC) in Supply Chains

The supply chain management is essential in logistics systems as it comprises of a series of activities and strategies that integrate numerous other entities efficiently with an aim of ensuring demand satisfaction (Lu et al., 2007). Moreover, the process allows for the e-commerce enterprises to meet the market demand at the lowest possible price (Kiranodous & Patrinos, 2008). In this case, the global business performance is largely reliant of the contribution and coordination of different actors in the supply chain. The current framework shows that business enterprises do not compete against each other when they are operating on the same supply chain. Rather, they complete each other and act as a whole while fighting for the leadership. The actors that stand out from the rest in the supply chain is the ones that deliver the customers the products that they need to meet their demand and satisfy their wants. They ensure that the customers get the products in the right condition, the right time, the best possible prices and at the desired destination. Nevertheless, it is prudent to note that the supply chain is a highly complex system that is influenced by an interplay of multiple factors that should be studied and managed effectively (Fu et al., 2014).

Previously, the supply chain management utilized either the mathematical or heuristics programming techniques to determine and meet the customer demands (Kiranodous & Patrinos, 2008). An optimization strategy was also used in the supply chain management where the constituent components of the supply chain were analyzed individually. This process has been criticized of disregarding the fact that the constituent elements of the supply chain share a dynamic relationship, thereby requiring the optimization process to be conducted on the system as a whole. Kiranodous & Patrinos (2008) recommends using control strategies to address the dynamic nature of the interactions of the system. This has an impact of effectively optimizing the performance of a supply chain regardless of the variation in time which alters the demand trends at a given point in time. In this light, the control theory is adopted in supply chains as a management instrument that has the capability of dealing with risks in the system such as lack of information, delays and uncertainty in the supply chain (Lu et al., 2007).

The implementation of MPC is supply chain management and inventory control is part of logistics management which integrates the programming paradigm to create robustness to the customer demand side of ecommerce. Logic programming is fundamental platform for transformation of logistics aspects of organization (Kiranodous & Patrinos, 2008). The main objective of the implementation of logic programming is based on the need to benefit from the advantages of maximizing the cost function measures that indicate the performance of the supply chain. The implementation of the MPC can be formulated so that the system is robust and stable regardless of the prevalence of stochastic demand and disturbances in the supply chain. The integration of the programing process in an e-commerce enterprise has an effect of integration of the challenges in production, the level of inventory and the delivery capacity. Moreover, it allows for the definition of the objectives related to the review and monitoring of the goals of inventory while ensuring prompt response to customers’ orders.

Agent Chains in E-Commerce

While the supply chia plays a vital role in logistics systems, human agents make up a decisive and active aspect in traditional commerce. The customer is a vital part of the e-commerce and taking into account the supply chain and the value chains is not sufficient enough for the e-business. In most cases, the customers are the primary agents in the system and are vital even in deciding the dynamic development of supply chains and value chains (Segovia et al., 2002).

Customer Experience in the Management of E-Commerce

Both traditional and e-commerce enterprises value acquiring and retaining customers for whom to sell their products to (Lu et al., 2007). The advancement of the internet has led to accelerated development of e-commerce, linked to information systems (IS) and artificial intelligence (AI). These services provide several strategic advantages to e-commerce compared to traditional commerce including interchangeability, interactivity, flexibility and mobility.

The development of e-service has grown in support of the flourishing of e-commerce. E-service aims at meeting the demands of the customers, thereby allowing business enterprises to increase their market share and consequently boost profitability (Segovia et al., 2002). Lu et al. (2007) posits that the development of e-service encouraged customers to develop their individual core competencies by reducing the cost of IT functions. Likewise, e-service providers and marketers are vital in the generation of new revenue streams as they play a major role in enhancing interorganizational relationships. E-service allows e-commerce businesses to know customers buying behaviors for purposes of creating better advertising strategies in attracting different customers. The application of e-service intelligence constitutes computational intelligence and expert system deployment logistics aspects of governments and businesses. As such, it is worth noting that the e-service is also prone to the same challenges that affect traditional services including attracting and retaining customers in the wake of stiff market competition as well as management of customers’ experience.

Conclusion

The rise in technological advancement and the widespread use of the internet has opened many regions to the global economy where the e-commerce takes a center place as a revolutionary move to replace most aspects of the traditional enterprises. The effective existence of e-commerce cannot be without the application of logistics system, which allow e-commerce businesses to effectively and timely deliver goods and services to the consumers. The success of e-commerce is based on the extent to which a business is able to meet the needs and demands of the market. As such, literature shows that both e-commerce and logistics exist in an indispensable relationship where both play a mutual role in strengthening the development of the other. For instance, logistics systems allow an enterprise to deliver the right quality and quantity of goods at the right time, and the right place, thereby allowing e-commerce enterprises achieve their goal of growth in market share and increased profitability.