Logistics and E-Commerce - Essay Example

Logistics and E-Commerce “Logistics is defined as the process of planning, implementing and controlling the flow and storage of goods and services and related information from the point of origin to the point of consumption. In this internet age logistics service providers are heavy users of e-commerce, due to pressure to cut costs and move goods and services both more efficiently and faster in a real-time environment” (E-commerce Overviews Series, 2002) It is quiet evident that E-commerce has opened an innovative way of doing business by facilitating interactive processes such as intelligent collaboration, real time management and intermediation, and on-demand service delivery. E-commerce has radically changed operations: on the one side products and services are advertised on the net, and even effect payments through internet. On the other end customers expect faster and safe delivery of goods, thus exerting pressure on order fulfillment systems. Transport has become a more critical cost factor and integral component in the production and delivery process. E-competition forces organizations to seek increasingly sophisticated logistics options to meet their inventory-production-delivery flow (Jerzy Kisielnicki, 2002 ). In view of the above developments organizations cannot afford to miss the economic rewards of e-commerce for want efficient supply chain management and order fulfillment systems (Jerzy Kisielnicki, 2002). With such developments the role of transport systems in e-commerce cannot be undermined. Storing, packaging, shipping and tracking of hundreds of thousands of products from web based retailers has become a booming business for express shippers, transportation companies and even tradition postal departments. Shipment tracking was the first interactive internet application to find a market in freight transport. But as of now this is just one of the many applications available on the internet (Jerzy Kisielnicki, 2002) Products and services ordered over internet require more delivery trucks on the road to homes and businesses. This is where Intelligent Transport Systems (ITS) relevance to E-commerce is to be construed. Intelligent Transport System is defined as the application of information technology to the surface transport system. ITS covers all modes air, sea, road and rail and components of each mode – vehicles, fixed, infrastructure and control and operational systems. ITS seeks to improve the existing transport system rather than adding vehicles physically resulting in congestion. ITS stresses on reducing traffic congestion, thus reducing travel time, reducing sound and air pollution and also avoiding delays in delivery consequently keeping in time with production schedules (Jerzy Kisielnicki, 2002 ). “It often seems that net is changing every aspect of our lives, yet in other ways, it has had little effect. There are two opposing ideas of what effect of the net will have on supply chains and logistics. One view suggests that increased efficiency will pay rewards for all parties in a supply chain. The other view is that the net will overwhelm the supply chains, spot markets will make it impossible to plan and instability will dominate. But we have seen stability even during recessions in most of the economy. Important point to note is that web enabled supply chain may be the future but a manufacturer survives on the quality of the goods and relationship with customers and suppliers. Then does it imply that net is not as useful as it is thought off? The answer is mixed”. (Douglas Long, 2003 ). Customer demands that customized products be delivered at very high speed with complete order flexibility and convenience. Today’s online customers want to be able to track their orders instantly from the moment they click the buy button until the moment the package arrives on their doorstep, and be able to reroute packages, determine delivery costs and time-in-transit, and break up their orders for multiple ship-to addresses. The shift of power from the seller to the buyer is creating a new era of expectations, and buyers - whether they are consumers or businesses – say they will not tolerate experiences such as partial shipments of goods on an “Installment” basis, poor product return policies, or surprise backorders (Deborah L. Bayles, 2002). A typical e-commerce customer is an unknown entity who orders products on an individual basis, according to impulse, seasonal demand, price and convenience. A manufacturer or online merchant must be able to customize an individual order; ship it directly to the buyer anywhere in the world; track the whereabouts of the item at any given time along the supply chain; handle customer inquiries; handle product returns (reverse logistics); and even offer gift wrapping - all at ten times the speed and at a fraction of the cost of traditional shipping and fulfillment. These are the demands of modern times. Thus the major characteristics of e-commerce that impose newer requirements on logistics services are as follows: •Larger number of small parcels or packages due to a larger number of buyers making direct orders and a larger number of sellers than in traditional trade; •Large numbers of on-line customers, mostly unknown to the sellers; •Demand for shipments is much more unpredictable and unstable since it originates from more numerous customers; •Origins and destinations of shipments are more widely dispersed, given that more buyers place direct orders with producers and distributors and more sellers access buyers globally; •Accountability for shipments extends through the entire supply chain, compared with traditional logistics in which accountability is limited to single links of the supply chain; •Customers have high expectations about quality of services and demand fast delivery of shipments; •Higher incidence of cargoes returned to the supplier than in traditional trade; •Greater demand for and availability of information covering transactions over entire supply chain, thus allowing on-line shipment tracking and other supply chain management functions; •Greater focus on one-to-one marketing, which creates demand for customized delivery and post-transaction customer services; •Greater complexity in fulfilling international orders than in traditional trade, thus preventing some retailers and service providers from being involved in international e-commerce; •The emergence of demand for on-line processing of shipments, including cargo booking, bills of lading/airway bills, freight payment, rate quotation, landed price calculations and tariff management; •Substantial increase in the volume of small shipments, leading to growth of demand for warehousing transport and other logistics infrastructure that can handle larger volumes of small shipments; •Greater scope for customer self-service (Deborah L. Bayles, 2002). Online businesses have three options for handling e-logistics and e-fulfillment: they can perform the functions 1. Themselves in-house 2. They can outsource the functions to a third-party, 3. They can use drop-shipping (Deborah L. Bayles, 2002). Performing E-Logistics and E-Fulfillment In-house “Some firms consider overhauling their own businesses and doing the logistics and fulfillment themselves. If a business has an existing infrastructure, warehouses and customer service center, it can probably retool itself for in-house e-logistics, but it should hire outside expertise to determine how robust its existing logistics platform is and what revisions need to be made” (Deborah L. Bayles, 2002). Nonasset-based and Asset-based Providers “E-businesses seeking third party logistics providers (3PLs) may choose from two different types of service providers: nonasset-based and asset-based. The nonasset-based providers perform only the engineering services directly. In addition to designing the system, they coordinate the hiring of appropriate transportation and distribution service providers. One advantage of dealing with a nonasset-based 3PL is that the 3PL is independent of the carriers and warehouses bidding to perform the services. The 3PL is free to develop the most efficient and effective system under the circumstances and then to manage the selection of the service providers best suited to implement the system” (Deborah L. Bayles, 2002). Drop-Shipping “The idea of drop-shipping packages directly to the end user is also appealing to companies looking to streamline the delivery process. And, as more companies post inventory, shipment tracking, and product-availability information on the Web, the drop-ship process gets easier because the necessary data is easy to find and access. With drop-shipping fulfillment, a company sells a product, charges the customer, generates a purchase order, and sends the purchase order to the manufacturer or supplier, who then fulfills the order by shipping the product directly to the customer. Since the company never took possession of the product, the company does not incur any of the costs associated with storing or purchasing the product” (Deborah L. Bayles, 2002). Bibliography E-commerce Overviews Series (May, 2002) E-Logistics & E-Fulfillment: Beyond the “BUY” Button by Deborah L. Bayles, 2002. < http://r0.unctad.org/ecommerce/event_docs/curacao/bayles.pdf> Modern Organizations in Virtual Communities by Jerzy Kisielnicki (2002), Page Nos. 222 to 225. International Logistics: Global Supply Chain Management by Douglas Long (2003), Page No.361, Chapter16. Read More