E-Logistics Essay, Research Paper

Is E-commerce Creating a More Efficient and Effective Logistics Industry?

Electronic commerce has revolutionized not only the way goods are sold, but how they are delivered. Customers demand products delivered at very high speed with complete order flexibility and convenience. Moreover, today’s online customers want to be able to track their order instantly, from the moment they place an order until the moment they receive it at their doorstep. With all new technologies customers became smarter. They want to be able to re-route shipments, determine delivery costs and time in transit, and break up their orders for multiple shipments to different addresses. All this implies that the shift of the power from the seller to the buyer has created a new era of expectations, and buyers—whether they are consumers or businesses won’t tolerate bad experiences such as partial shipment of goods, poor product return policies or timely back orders.

The most common form of logistics has traditionally been based on moving large shipments of items in bulk to select strategic customers in a few geographic locations. Shipments have been tracked by container, pallet, or other unit of bulk measurement, not by individual item or parcel. Manufacturers have backed up their trucks to loading docks at retail stores or distribution facilities, relying on those entities to deliver the goods through the final links of the supply chain to individual customer. Often the various links of the supply chain have had limited visibility into the operations of one another. The capability for end-to-end visibility of a package from manufacturer to customer has been virtually nonexistent in a traditional logistics environment.

With the beginning of electronic commerce traditional logistics has been radically transformed. Electronic commerce is demanding an active, high speed, approach to logistics. The typical electronic commerce customer is 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 o customize an individual order and ship it directly to the buyer anywhere in the world. It’s also necessary to track the location of the item at any given time along the supply chain with handling customer inquiries, product return, and even offering gift wrapping—all at ten times the speed and at fraction of the cost of traditional shipping and fulfillment. Forrester Research sums up the vastly differing characteristics between commerce site logistics and traditional logistics. For example, whether for traditional logistics the average order amount is more than 1,000 items, it is less than 100 with commerce site logistics. The demand style and inventory/order flow in the first case is push and unidirectional, whereas with e-commerce logistics it is pull and bi-directional. Destinations for traditional logistics are concentrated with the stable consistent demand, whereas for e-commerce logistics destinations are highly dispersed with seasonal, fragmented demand. All these fundamental differences in traditional logistics versus commerce site logistics are representing a shift to future of e-logistics. Opportunities are arising along to better service customer, whether it is another business or a consumer.

E-commerce is a narrow term applied to the process of conducting simple transactions on-line. Electronic business, however, is the total integration of electronic processes throughout the critical functions of an enterprise. It is a total solution that takes into account e-logistics, e-fulfillment, supply chain optimization, enhanced customer satisfaction, and a combination of other tangible and intangible benefits. Designing, building and maintaining an e-business site involves both hard costs and soft costs. Which are usually allocated in three ways: infrastructure costs, direct project costs, and distributed costs. Hard costs include tangible good such as hardware, wiring, software, telecommunications lines, and the like. These are for the most part fairly easy to quantify and allocate. Soft costs include labor, training, loss or gain of sales opportunities and represent intangible factors that are difficult to quantify and hard to allocate. This basic principle of e-business today is being implemented in various size and type organizations conducting their businesses on-line, which have created a new environment for transportation and logistics.

E-businesses are forcing a fundamental shift in the structure and services of transportation and logistics businesses. Firms are transporting more on-line purchased goods and they are actually subordinating their individual business plans and identities that becoming an integrated part of their electronic business customers’ supply chain. One solution to this change is creation of extranet that links and allows trading partners—customers, warehouses, suppliers, drivers, rail partners—independent of their internal resources, efficient interaction with the supply chain. It is that information technology provides the underlying links as well as the logistics data collection and analysis platform for all these activities. There is myriad of examples outside of the companies that have established this kind of relationship within their supply chain coverage, making this efforts not inexpensive. That is why most of the businesses try to establish a joint network to streamline procurement of transportation and logistics services.

SupplyLinks Global Logistics Network is a recent example of multi-modal transportation services network that provides customers with single, neutral source to plan, book and manage shipments worldwide. This web-based logistics management company includes AIT Worldwide Logistics (IL), BAX Global (CA), Central Freight Lines (TX), Central Global Express (MI), Exel (UK), Watkins Motor Lines (FL), and Schneider Logistics (WI). SupplyLinks is an example that is actively integrating additional providers into the network. David I. Beatson, Chairman and CEO of SupplyLinks said, ”The formation of this network is a significant move in transportation industry and for SupplyLinks and it great to have so many leaders on board and look forward to long term alliances with them.” The SupplyLinks Global Logistics Network enables transportation providers to reach new customers with lower sales, marketing and customer service exopenditures. Members establish and maintain pricing through the network by providing pre-negotiated tariffs to SupplyLinks. This approach differs from many existing e-logistics models, which award business to the lowest bidding carrier in an auction format. Further, SupplyLinks is deeply integrated with the information systems of participating providers, reducing customer integration, shipment processing and operating expenses.

For the customers’ benefits, they will have access through the network to a single source for shipment planning, tendering and tracking across all modes and carriers. It will enable them to consolidate logistics operations, optimize transportation expenditures and increase visibility into their supply chains. Customers are also provided with flexibility of using existing contract tariffs from their transportation partners or tariffs that SupplyLink has negotiated through the network, allowing to maintain existing relationships with providers and also providing access to a broader network of transportation services, which basically, is expanding the network through this demand. SupplyLinks has created a win-win situation for both shippers and service providers by enabling to maintain existing relationships and providing the latter with reduced carrier-established tariffs.

Another company driving attention of their position best-in-class information technology innovators is American President Lines and APL Logistics, subsidiaries of NOL Group. InformationWeek ranking of the 500 largest and most innovative users of IT across all industries shows that the company has advanced to 72nd place from 456th place last year and is the only global container transportation and logistics entity ranked. The company has also singled out for IT and service excellence by customers and industry organizations including Philips Electronics, Sears Roebuck, Kellogg, Colgate-Palmolive, and through Inbound Logistics, Journal of Commerce, Lloyd’s Loading List, Cargo News Asia and others, solving complex distribution problems for customers. Statistics shows that about 30% of APL’s customers around the world are now using the company’s e-commerce capabilities to conduct their businesses with the company. According to Don Liedtke, NOL’s chief information officer based in Oakland, CA, collaboration is the key. He described that to meet customer demand for seamless, comprehensive and reliable information on which to base business decisions today, company must integrate data from the many sources involved in a customer’s supply chain. It means that collaborating with the customers and own business partners and vendors, and also with the customers other vendors and even with own competitors is the key to help smooth workflow.

For the businesses and organizations today IT is the main business process re-engineering movement that brings the innovation. At this time supply chain management has moved from low level and highly fragmented set of administrative and overhead operations—to a strategic enterprise initiative. The evidence for it is the business-to-business e-commerce explosion and announcements by different industry representatives that they are launching cooperative logistics hubs. An original solution for Supply Chain Execution is provided by Voxware’s VoiceLogistics. It is their wireless, web-based interactive speech interface solution, which enhances speed, accuracy and productivity of logistics and fulfillment operations and seamlessly integrates with IT systems of virtually any distribution and logistics operation. This solution addresses major logistics market sectors, including consumer goods manufacturers, consumer packaged goods, direct to consumer (e-commerce and catalog), food and grocery, package handling, retail, third-party logistics providers, and wholesale distribution. Voxware’s speech recognition solutions are also deployed in package handling, mail sorting, manufacturing inspection, and military applications, and have proven they can deliver significant operating improvements and benefits in customer satisfaction and supply chain visibility in the recent successful installation at one of the major projects in Midwest. This is just another example of an e-process—design process for the era of customer relationship and logistics, which serve as the urgent and critical drivers of today’s business decisions for being in business tomorrow. Isn’t this what IT should be about?

Higher volumes of e-business shipments are not the only reason for these organizations to boost spending on the technology development. Aggressive e-business want their carriers to participate fully in the just-in-time process that enable manufacturers to fill orders as swiftly as possible while keeping inventory to a bare minimum. This implies that carriers systems must become intertwined with all of the facets of the e-business model in a variety of ways. The role of the order and its delivery is evolving to one that includes full-scale logistics, supply chain management and warehousing. For individual customers, studies have shown that online shoppers check the status of their package an average of seven times from the moment the “buy” button is clicked until the package arrives. This basically implies that e-business must be able to initiate, track, acknowledge shipments online. Fortunately, FedEx and UPS offer free tools that aid in tracking, tracing, and whole range of other functions. The USPS is also trying to develop some tracking tools to meet the e-business necessity. All these technological innovations as for businesses as to regular shoppers create friendly and time saving environment, however, with all of innovations there are some negative factors, which are affecting the whole concept of electronic business, particularly with individual customers.

The moment e-commerce site goes live it becomes a worldwide entity. The international shipments become a question whether of being accepted or not. The main reasons why the companies are not willing to go internationally include such obstacles as shipping difficulties, fraud, different product requirements, taxes and tariffs, and limited currency support. The global nature of e-commerce creates opportunities for tax avoidance, as well as double taxation. Vendors are faced with the choice of ignoring potential taxes on transactions outside their home countries or incurring the very substantial costs of compliance. Competitive advantage can be lost if the cost of the good reflects tax liabilities. That is why at this time international e-commerce is more relevant within business-to-business relationships of bigger volumes, integrating them to joint networks of business operations. But nonetheless it is a great step toward next level of trade in globalization, making the world a better place.

Deborah L.Bayles, E-commerce Logistics and Fulfillment. Prentice Hall PTR, Upper Saddle River, NJ 07458, 2001.

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