This action might not be possible to undo. Are you sure you want to continue?
THEORY INTO PRACTICE
A Very Short Trip into History History of Consumer Direct Logistics in the grocery or FMCG industry began 1989 with Peapod in Boston. The list of companies that started and stopped operation since then would fill pages and it doesn t make sense to enumerate all the names here. More important is the fact that three different time slots or phases can be distinguished since Peapod started business: E-commerce enthusiasm between 1990 and 1999, followed by extreme caution between 1999 and early 2001, followed again by pragmatic realism during the last year. Until autumn 2001 most capitalintensive companies ( loud players ) had left the market and only the cautious ones ( silent players ) had survived. Companies definitely have learned that it is necessary to set up scalable operations and to grow slowly with the market. Today the ecommerce market in the grocery sector seems to be stable. Today s Situation: Concentration on High Density Areas But the fact that companies like Tesco in Great Britain and Capraboacasa in Spain have learned to grow with the market does not mean that all problems are solved. A study conducted by Germany s Fraunhofer Society in cooperation with ECR Europe in Brussels (Fraunhofer/ECR Europe 2002) shows clearly that successful Consumer Direct Logistics companies in Europe concentrate on metropolitan areas and conurbations. A high density of consumers is the best guarantee for profitability. The consequence is that especially the rural population is out of reach for real CDL-Les Quatrièmes Rencontres Internacionales de la Recherche en Logistique Fourth International Meeting for Research in logistics
there are links between CDL providers and manufacturers like one concerning the update of product catalogues. Another paper that has been recently published during this years NOFOMA conference makes it somewhat clearer: The basic principles of logistics and Supply Chain Management are not taken into account by existing CDL operations (Prockl/Wilhelm 2002). Here we find a promising starting point for coming R&D activities. The authors of the study analysed Europe s CDL operations in a comprehensive desk research and conducted detailed interviews with twelve CDL companies in Spain. on the other hand. Great Britain. Future Solutions: Expanding the Concepts and Principles of Logistics and Supply Chain Management to the Last Mile of FMCG Distribution A first and interesting hint on new R&D issues can be found in Fraunhofer/ECR Europe (2002). it is still hard to find related approaches of collaboration along the supply chains in practice. Finland and Germany in order to find and evaluate smart practices. Austria.2 services for grocery items and Fast Moving Consumer Goods. the joint optimisation of assortment or avoiding out of stock situations which seems even more important in an environment of Consumer Direct than it has already been in the classical on-shelf business but. They describe more than 60 different practices for three basic scenarios and come to an interesting conclusion: On the one hand. Positive experiences with the ECR concept that is also described as the best known realisation of Supply Chain Management (Klaus 1998) justify research activities on potential effects of adaptation of basic principles to the needs of the last . That evidently shows the necessity of research and development activities in this field.
The retailer s has additional benefits because of reduction of non-value adding activities like stock management. easier planning processes. Adaptation of CR to Last Mile Requirements: Home Replenishment What does the term Home Replenishment mean? At first sight the basic concepts of CR and Home Replenishment are the same. reduced stock level and stock capital etc.mile. less out of stock situations. Therefore Continuous Replenishment requires actual information or at least a good forecast on sales. The responsibility for restocking shelves in retail outlets is taken away from the retailer and placed on the supplier. While the supplier replenishes products in the retailer s outlet using his own logistics systems or a service provider . The basic idea is to optimise the supply process and to guaranteeLes Quatrièmes Rencontres Internacionales de la Recherche en Logistique Fourth International Meeting for Research in logistics 3 continuous product delivery which exactly meets the consumers demands. One has to distinguish between information on shipments leaving the retailer s central warehouse and data on real sales in the retailer s outlet. This is especially true for Continuous Replenishment. From Continuous Replenishment to Home Replenishment: Adaption of an ECR Principle to the Needs of the last mile The Basic Principle of Continuous Replenishment Continuous Replenishment is one of the core concepts of ECR. higher consumer loyalty etc. In it s perfect form Continuous Replenishment is based on actual sales. The supplier wins due to higher flexibility as far as the delivery process is concerned. In the following chapters we ll try to figure out what kind of benefits can be expected and how this principle could be adapted to optimise processes in CDL operations.
· Security issues: A efficient Home Replenishment system needs comprehensive information on consumers habits and preferences and constitutes a significant intrusion upon the consumer s privacy. on suitable identification technologies as well as on integration of delivery boxes. Not every product is suitable for replenishment and not every segment of the consumer market will use the new service.g. There are special requirements concerning the price for hardware and software that is used by the consumer and the costs of different steps of the order to payment flow. The following list contains just a few crucial ones. · Cost issues: Home Replenishment is a new concept for the consumer market. The concepts Les Quatrièmes Rencontres Internacionales de la Recherche en Logistique Fourth International Meeting for Research in logistics 4 of data security and protection have to be an integral part of a Home Replenishment concept.in CR the retailer stocks up products in the consumer s larder in the Home Replenishment concept using his own fleet or a home delivery service provider. Secure data transmission and confidentiality are preconditions for success. In spite of that a closer look into details makes quite clear that the Home Replenishment idea opens up some additional questions and issues that are not relevant in the classical CR concept. definition and communication of the basic needs is critical because a sales representative visiting the consumer would be too costly. E. There are open questions on the technical support for the handing over process. Therefore there are open questions on the product portfolio that is needed to be offered and on the relevance of different consumer segments. · Marketing issues: Consumers consumption profiles are much more individual and dynamic than selling profiles of retail outlets. Other issues concern accepted delivery . · Logistics issues: Unlike CR the consumer often won t be at home during delivery and the concept of unattended de livery is therefore of great importance.
· The burden of boring and standard shopping trips (cf. Last but not least there are formal and legal issues concerning the unattended delivery process. Special optimising algorithms can guarantee a levelled (Klaus 1993) and cost efficient physical flow.frequency. Potential Benefits of Home Replenishment a First Overview Compared to existing CDL services Home Replenishment offers additional benefits: · The consumer defines maximum and minimum stock for the different replenishment products.Les Quatrièmes Rencontres Internacionales de la Recherche en Logistique Fourth International Meeting for Research in logistics . OoS situations etc. Capacities of resources are more evenly used. Kämäräinen 2000) is taken away from the consumer. One could say that Home Replenishment is the translation of the industrial Continuous Replenishment idea into a delivery concept for the interface between retailer s outlets and consumer s homes that is orientated towards individual consumers needs and takes special last mile requirements into account. Innovative technologies like electronic tags might help to solve problems. meeting friends or buying touch and feel products like clothes etc. · Additional business issues: Due to the b2c character of Home Replenishment services open communication channels like the internet have to be used. The service provider is responsible for keeping the stock in the given range but it is his decision at what time and day the delivery takes place. Besides confidentiality and secure data transmission other security concepts like data integrity. He wins because he has more leisure time for much more interesting things like visiting cultural events. On the other hand the retailer wins more loyal customers due to the outstanding increase in service quality. authenticity and reliability are important.
· The unattended delivery concept whic h has already tested but not really been accepted by the consumer in existing CDL operations for grocery products solves the problem of delivery times defined by the consumer. The following figure shows the order-to-payment-process which is the nucleus of this model. The delivery costs can be kept under control by choosing high level maximum stocks. The planning of daily delivery tours gets much more easier. This allows better planning processes. In this context (Prockl 2001) refers especially to the Supply Chain Operations Reference Model (SCOR) that has been developed by the American Supply Chain Council and the Supply Chain S that has been introduced by (Klaus 1998). Due to reasons of complexity and practicability this paper is based on the S . Framework for the Design of innovative Home Replenishment Services: ECommerce S model and Box of Alternatives E-Commerce S In Chapter 2 we mentioned that ECR can be described as the best known realisation of the Supply Chain Management concept. · The Home Replenishment concept might also solve the problem of supporting rural population with comprehensive CDL services at least partially. Based on continuous and detailed consumption data the service provider is able to build up consumption profiles. reduces OoS situations and opens up the opportunity to make some extra money acting as a test market for manufacturers and market research institutes. The S can be easily seen on the right hand side. Therefore it seems reasonable to choose a model that has been already used in connection with SCM issues.5 · The consumer gets more transparent to the service provider.Les Quatrièmes Rencontres Internacionales de la Recherche en Logistique . Due to the better usage of capacities the process costs for delivery can be significantly reduced.
Fourth International Meeting for Research in logistics 6 Figure 1: Supply Chain S. containing additional stimulation processes. It was successfully adapted to b2c e-commerce processes. Source: Fraunhofer/ECR Europe 2002 ProcurementFo recast and Production PlanningInfo rmation Flow Materials HandlingProduction and Distribution Physical Ful f i lment Flow P a yme n t F l ow Return Flow ( S t i m u l a t i o n )Les Quatrièmes Rencontres Internacionales de la Recherche en Logistique Fourth International Meeting for Research in logistics 7 Table 1 describes the different process steps on a more detailed level. Table 1: Process Steps and activities. Source: Klaus 1998 ProcurementForecasting and Production PlanningO rder Processing Materials HandlingProduction and DistributionPhy sical Fulfillment Payment The generic model describes the order-to-payment process inside a company and can be used and adapted to all types of enterprises in a value chain. Source: Fraunhofer/ECR Europe 2002 Process Level 1 Process Level 2 Explanation Information Flow . The figure shows the four different generic flows that are important for the discussion concerning Consumer Direct Logistics issues: (1) the information flow. The result is presented in figure 2. (3) the reverse flow and (4) the payment flow. The process steps highlighted by the grey box as a whole can be understood as the CDL operation . (2) the physical fulfilment flow. Figure 2: E-Commerce S Model.
in others he does not. others use bag-in-box systems.g. Order Entry The order is received by the Consumer Direct Logistics provider. Physical Flow Picking and Packing The order is normally picked in dedicated warehouses and/or shops using mobile IT-equipment. Merging Partial deliveries which have been picked and packed in different warehouse or shop zones need to be merged before they are delivered to the consumer. Some companies use normal postal packages. the office or other places frequently passed by are used. plausibility of order etc. E. Consumer profiles are generated. Printed catalogues and complex automatic replenishment systems based on innovative IT-technologies limit a huge variety of marketing tools on both sides of the spectrum. Order Processing Order processing includes checks concerning creditworthiness of consumer. The merging process often takes place directly in front of the consumer s door. In some cases the consumer has to be at home. Last Mile The goods are delivered to the consumer. supply chain software can be used for assistance. cross checks are carried out to create consumer specific offers. Les Quatrièmes Rencontres Internacionales de la Recherche en Logistique Fourth International Meeting for Research in logistics 8 . There are different possibilities for packing picked items. Additional information is given to manufacturers or other partners upstream the Supply Chain. Different locations like the front door of the consumers house.Need Stimulation Consumer needs are stimulated using different media. Order Assignment The order gets released for physical fulfilment. Call centres as well as Internet connections are used. etc. The same applies to deliveries coming from other sources.
Reconditionin g The inspected goods have to be refined or reconditioned and repacked. the reconditioned and repacked products and items can be restocked in warehouses/shops or. the items collected at different consumers are bundled and given to a specialist. It has to be decided. Payment Flow Invoice An invoice is sent to the consumer by the Consumer Direct Logistics Service provider. somebody has to take back the products. for example. dry cleaning. Remittance If the consumer did not pay in cash during delivery or in advance he has to transfer the money using standard remittance processes. buffered in a designated zone. the driver places the delivered goods into the storage room of the consumer. Restocking After the inspection.g. repairs or dry cleaning. The same applies for special services like empties. e. whether the consumer gets a refund and what is to be done with returned items. Reverse Flow Receiving If the quality or quantity of the goods delivered is not in order. In some cases.Point of Use Service Depending on the type of product different point of use services can be offered. Sometimes. This process step is not necessary if credit cards or other prepaid mechanisms are used or if the consumer pays in cash. manufacturers or special service providers. the funding and refunding is normally done by financial institutions. Inspection The received goods are inspected by retailers. Payment Processing The underlying payment processing. in case of items that belong to dedicated consumers.Les Quatrièmes Rencontres Internacionales de la Recherche en Logistique Fourth International Meeting for Research in logistics 9 .
Therefore the morphologic box in figure 3 comprises only the more important design questions that are relevant for the design of a Home Replenishment service. In a first step partial design questions and potential answers are identified and summarized in a table. Remaining combinations can be realised at the end of the proceeding.The advantages of the model which are described in Fraunhofer/ECR Europe (2002) show that the e-commerce S is a suitable instrument for analysis of existing and design of future CDL operations. A short explanation of this concept might be appropriate here: The morphologic box represents a method to find solutions for complex design problems. In the second step different solutions of the complex design problem are generated by combining single solutions of the partial design questions. During the Fraunhofer study on CDL operations in Europe that has been referred to earlier in the text more than thirty partial design questions have been identified along the generic process model that has been described in the last section of the text (Fraunhofer/ECR Europe 2002). . To keep it simple we abstained from assigning design issues to the process steps of the S . Zwicky s Box of Alternatives A Generator for New Service Concepts The S -model is just one part of the framework that can be used for development of new Consumer Direct Logistics services. The resulting solutions of the total problem are then evaluated using feasibility and practicability as main criteria. The second and not less important part is the concept of the morphologic box of alternatives that has been introduced by (Zwicky 1966). Due to the fact that the number of pages is limited for this paper it won t be a good idea to present and discuss all of them.
Les Quatrièmes Rencontres Internacionales de la Recherche en Logistique Fourth International Meeting for Research in logistics 10 Figure 3: Morphologic Box of Alternatives for Home Replenishment Operations Design Issue Design Alternatives Products offered Packaged dry goods (normal handling) Fresh/chilled/frozen items (special handling) Additional services Medium for stimulation Printed Catalogue Voice communication World Wide Web WAP Product Consumer interface Personal Computer with ID-Module Mobile phone with ID-Module Pocket PC with ID-Module Identification technology Plain writing Classical Barcode Two-dimensional Barcode .The alternatives marked in dark grey have been chosen for the HORN (Home and Office Replenishment Nuremberg) project that is subject of the next and last chapter.
time definite .Electronic tags Security technology Personal ID-number Smartcard Digital signature Digital certificates Picking and packing location Retail outlet Central fulfilment centre of home delivery service Area of operation Local Regional National International Point of delivery Pick up at store Intermediate locations Office delivery Attended home delivery Unattended home delivery Delivery time Defined by provider Next day plus Next day.
Here the consumption messages are gathered and stored in a data base. Once each day a special decision support software algorithm that takes various system and customer specific restrictions into account checks the data base and generates picking & packing orders and shopping lists that are sent to a professional shopper .Same day Less than two hours Inspection of goods delivered Done by the customer using the consumer interface Automatic inspection using tags and home delivery box A Comprehensive and Totally New Approach: Home and Office Replenishment Nuremberg Basic Concept The Home and Office Replenishment service in Nuremberg supplies consumers with dry packaged and fast moving consumer goods. After consumption of a product the EAN article number that is printed on the product package is scanned with the same handheld and a message is sent automatically to the service provider using absolutely secure communication lines. The consumer buys his stock of products to be replenished once at the beginning of the service process and defines Les Quatrièmes Rencontres Internacionales de la Recherche en Logistique Fourth International Meeting for Research in logistics 11 maximum and minimum stock as well as the medium range for each product using a Pocket PC that is equipped with an integrated barcode scanner and an additional DECT module that provides the connection to the service provider s data base via ISDN and internet.
The consumer is supported with an SMS on his mobile phone that contains dispatch information and an electronic bill of delivery that is sent to his wireless Pocket PC. Especially the potential of innovative mobile ecommerce techniques and modern logistical replenishment concepts are to be used at the interface to the consumer. 2) Usage of this service generator for the development of a fundamental Home and Office Replenishment.who is also equipped with a wireless pocket PC with integrated GSM module and barcode scanner. 3) Development of the hard. Some first results and insights are presented in the next section of the paper. an acknowledgement of receipt is sent back to the service provider who then initiates the invoice. Goals of the Project Primary goal is to improve the competitiveness of home delivery services that deliver consumer goods for the daily needs. The shopping is done. After taking out the items the delivery is accepted or not. products are paid and packed into transport boxes. 3) Development and implementation of a generic security concept for confidential.and software needed for the realization of the HORN concept. In detail there are five different goals to be achieved: 1) Research into the phenomenon home delivery service and development of a generator for innovative CDL services.Les Quatrièmes Rencontres Internacionales de la Recherche en Logistique Fourth International Meeting for Research in logistics . carried to the consumer and put into delivery boxes for unattended delivery. reliable and authentic data communication and 4) Carrying out of a pilot trial in the area of ErlangenNuremberg and evaluation of the underlying service concept from an economic point of view. they have after preliminary examination proven to offer a considerable amount of problem solving potential. Even though these are not practiced today.
· Some aspects make quite clear that the technical support of the concept is absolutely critical. fresh or frozen. · Home Replenishment does not change or optimise single steps of the order to payment process in CDL. Information on dimensions and composition of a product ore often missing. Apart from that there are first interesting insights concerning potential benefits. The concept is a coordination and integration instrument that optimises the process as a whole. kidney . Unfortunately the necessary technology. is much to expensive to be used today.12 State of the Project and first Insights The first two goals of the project have been achieved by now. Other solutions have to be found. E. It is irrelevant whether a product is dry and packaged. · Common product categories are not valid in a Home Replenishment concept.g. marketing and consumer behaviour. available product information doesn t provide all the information that is necessary for optimisation of capacity usage. Therefore it is difficult to estimate cost effects in advance. Products have to be divided up into touch and feel products and specialties like salad or fruits (the products you can buy at the Wochenmarkt ) and standard replenishment products like milk in tetra-packs. At the moment the project team is busy with the development of hardware and application software that is needed for the pilot trial in Nuremberg. IT. Results of research into the phenomenon Home Delivery Services have already been published in the study Consumer Direct Logistics (Fraunhofer/ECR Europe 2002). frozen pizza. Only the pilot trial which will start in spring next year and it s evaluation allow estimations on cost savin gs. electronic tags. Only a totally automated handing over process between service provider and consumer is formally and legally safe.
2002) Klaus. P. Krieger. cats food and other product you normally have in your larder. (2000) Supply Chain for e-Commerce and Home Delivery in the Food Industry. (1998).fi/ecomlog/text s/cies_berlin. Nr. ECR Europe (2002). a tool for generation of innovative solutions and some first results of an ongoing R&D project in Germany. There are models and methods for a comprehensive design and there are also first ideas how a Home Replenishment systems could look like. At the end it is quite clear that there is a need for new solutions. in: Klaus. Whether the promised benefits can really be achieved has to be proven. (1993).. W. · The consumers psyche has to be taken into account thoroughly. Consumer Direct Logistics. (1998). Nürnberger LogistikArbeitspapiere. . at: http://www. Supply Chain Management. P.3 Klaus. P. that the adaptation of CR to last mile requirements is a possible solution that promises various additional benefits.html (18. Brüssel/Nürnberg Kämäräinen. published by ECR Europe and Fraunhofer AVK. Bibliography Fraunhofer AVK. Die dritte Bedeutung der Logistik. If the usage of hard.Les Quatrièmes Rencontres Internacionales de la Recherche en Logistique Fourth International Meeting for Research in logistics 13 Conclusion The paper answers the question how the CR principle could be adapted for the last mile of consumer goods distribution. V. The private user is not very disciplined and you can take it for granted that the consumer forgets to scan after consumption at least once or twice a day.beans in tin cans.03.tuta.and software is too complex and if the system is not absolutely fool proved the service won t last for long. It presents a theoretical framework for design. The system needs to cope with that.hut.
Band 2. DVZ-Verlag. Hamburg Prockl. 434-440 Prockl. SCM als Gestaltung überbetrieblicher Versorgungsnetze eine Verdichtung von Prinzipien zur Strukturation und Ansätze zur theoretischen Hinterfragung.Gabler Logistik Lexikon. 2nd edition. Wiesbaden. p. Wilhelm. Gabler. 1st edition. (2001). Edition Logistik.. (1966) Entdecken. (2002). G. Forschen im Morphologischen Weltbild. Baeschlin/Glarus Abbreviations CDL: Consumer Direct Logistics CR: Continuous Replenishment DECT: Digital European Telephony EAN: European Article Numbering . G. F. conference proceedings. Erfinden. Smart Practices in Consumer Direct Logistics. NOFOMA 2002 Zwicky. M.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.