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The Effect of e Logistics On The Custome
The Effect of e Logistics On The Custome
MARITIME TRANSPORT
(AASTMT)
MASTER DEGREE
In
Supervisor
Helwan University
2012
I certify that the work presented in this thesis is, to the best of my knowledge and
belief, original, except as acknowledged in the text, and that the material has not been
submitted, either in whole or in part, for a degree at this or any other university.
I acknowledge that I have read and understood the University's rules, requirements,
procedures and policy relating to my higher degree research award and to my thesis. I certify
that I have complied with the rules, requirements, procedures and policy of the University (as
they may be from time to time).
Supervised by:
Name: Prof. Dr: Omar Salman
College of Commerce, Helwan University
Assessed by:
Name: .........................................................
Arab Academy for Science & Technology
I
Quran Aya
ُ (ِسورةِالنحلِ)87ِ,
صدقِاهللِالعظيم ِ ِ ِ ِ
II
Acknowledgement
III
ABSTRACT
IV
The integration of IT with logistics management is an important
prerequisite for good logistics management. An electronic commerce
portal can be used as a marketing channel in collaboration with existing
intermediaries or through bypassing intermediaries––disintermediation
will provide high leverage opportunities to the logistics function and
increase its flexibility. Hence the development of E-Logistics becomes
essential for success in global operations.
V
Table of Content
DECLARATION ................................................................................................... I
Quran Aya ............................................................................................................. II
Acknowledgement ............................................................................................... III
ABSTRACT ........................................................................................................ IV
Table of Content .................................................................................................. VI
List of Figures .................................................................................................. VIII
List of Table ..................................................................................................... VIII
List Of Abbreviations………………………………………………………..…IX
Chapter One.......................................................................................................... 1
1.1. Introduction: .................................................................................................... 1
1.2. Background (Literature review) ...................................................................... 3
1.3 Study Objectives .............................................................................................. 7
1.4 Research Methodology..................................................................................... 7
1.5 Important Definitions ....................................................................................... 8
1.6 Model for information in E-Commerce ........................................................... 9
1.7 The supply chain flows: ................................................................................. 13
Chapter Two ....................................................................................................... 15
2.1 Introduction .................................................................................................. 15
2.2 Defining Customer Relationship Management .............................................. 16
2.3 A Brief History of CRM ................................................................................ 17
2.3 Why is CRM important? ................................................................................ 18
2.4 THE 6 LAWS OF CUSTOMER EXPERIENCE .......................................... 18
2.4.1 Law #1: Every Interaction Creates A Personal Reaction ........................................................ 19
2.4.4 Law #4: Unengaged Employees Don't Create Engaged Customers ........................................ 23
VI
2.4.5 Law #5: Employees Do What Is Measured, Incented, and Celebrated .................................... 24
VII
LIST OF FIGURES
List of Table
VIII
List Of Abbreviations
IX
VE : virtual enterprise
VI : Product/service value integration.
QR : Quick Response
ECR : Efficient Customer Response
LBS : Logistics Brokerage Systems
ERP : Enterprise Resource Planning
DCI : Demand Chain Integrator
TTM : Time to Market
TTC : Time to Cash
CCR : Customer Creation and Retention
BPR : Business Process Reengineering
DC : distribution center
VTE : vendor trading exchange
X
Chapter One
Introduction
1.1. Introduction:
Nothing has rocked the young field of supply chain management like the
emergence of the Internet. While the management of information flows has
always been a key aspect of Supply chain management, the rapid growth of web-
based information transfer between companies, their suppliers, and their
customers has decidedly increased the importance of information management
in creating effective supply chains. Indeed, the Internet has emerged as a most
cost-effective means of driving supply chain integration. We define E-Business
as the marriage between the Internet and supply chain integration. This marriage
is transforming many processes within the supply chain from procurement to
customer management and product design.
Interest in the Internet has changed so drastically in recent years that one
can speak of a universal breakthrough. The remarkable increase in users can be
attributed mainly to the appeal of the World Wide Web, the Internet feature that
is enjoying the greatest growth. There is some uncertainty about how much the
Internet and electronic commerce (E-Commerce) are being used, and especially
about the expansion of such usage in the future. At the same time, E-Commerce
is a new phenomenon that is surely going to have an enormous impact and
significantly change the way both individuals and companies shop, manage their
business activities and distribute their products.
1
E-Commerce will open an entirely new market for actors in the logistics field.
Logistics and distribution system that function efficiently and effectively in all
respects will be crucial for the success of the companies involved. This implies
that manufacturing companies, and especially logistics companies, must identify
and create effective logistics solutions in order to compete on the marketplace.
Ordering materials of various kinds electronically, and primarily via the Internet,
will become more and more common. This applies not only to business-to-
business but also to business-to-customer. This end consumer will normally be a
private person who orders everything from books, clothes and food to a new
model computer. The result is that the end consumer can receive and will
demand to receive the goods ordered significantly faster than via traditional
distribution. The subsequent result will be shorter lead times, the disappearance
of one or more physical intermediaries, and direct transports to far more
addresses, especially in those cases where retail stores are circumvented. We can
anticipate less use of private cars, but more employment of delivery vans, as well
as smaller orders to be shipped longer distances, especially in the international
context. During the preliminary phase, we might expect these consequences to
imply greater direct costs, while the consumers’ indirect costs for seeking,
ordering and having their purchases deliver to their homes will go down.
The Internet signifies new opportunities for reaching the global market. Yet
this, in turn, also signifies great demands on the actors who want to exploit these
opportunities. Right now, there are several big actors who market themselves
solely via the Internet (e.g. the booksellers Amazon.com and bokus.se), yet there
are very few who do this profitably. Making it possible to use the Internet as a
marketing channel requires new knowledge about how the entire logistics system
needs to be developed in various environments and about the consequences this
will imply for other actors.
2
1.2. Background (Literature review)
(Lambert, Cooper et al. 1998) And, for Logistics they suggest to adopt the
Council of Logistics Management (CLM) definition:
“Logistics is that part of the supply chain process that plans, implements, and
controls the efficient, effective flow and storage of goods, services, and related
information from the point-of-origin to the point-of-consumption in order to
meet customers’ requirements”
1 Lambert, Cooper et al. 1998. Supplly chain Management : Implementation Issues and research Opportunities. International Journal of Logistics Management.
3
that provides products, services, and information that add value for customers
and other stakeholders.
And, e-logistics will refer to impact that Internet has on the supply chain process
that plans, implements, and controls the efficient, effective flow and storage
of goods, services, and related information from the point-of-origin to the point-
of-consumption in order to meet customers’ requirements”.
Buttle, F. (2009.) has defined the CRM is nothing more than one to one
relationship marketing and disintermediation, but that is a lot by influencing
through continuous relevant communication and developing long
term relationships to improve customer reliability, achievement, preservation and
prosperity The evaluation of CRM is due to the fast changes and developments
in the marketing and web technology .CRM’s goal is a so called
customer intimacy and achieving lasting success in competitive environment As
4
CRM lies in each and every business operation Peelen, E. (2005) believes that
CRM is a powerful tool in both the business to business and business to
consumer environments, but it has been both oversold and underutilized2
2 Buttle, F., & Biggemann, S. 2003. Modeling Business-to-Business Relationship Quality . Sydney : Macquarie Graduate School of Management, 2003.
3 Chaffey, D. 2007. E-Business and E-Commerce Management: Strategy, Implementation and Practice. s.l. : Pearson, 2007.
5
fast with less operation cost because system implementation and expansion can
be managed in one location and one server.
Due to E-CRM, you can interact with customer’s right at your site
through phone, chat, email, collaboration or forwarding of pages back and forth
between the Representative and the Customer. According to Harris, E. K. (2000)
E-CRM customers will have any service available anytime throughout the year
and can assist the customer in any way he required and pass on any information
about your company's product or service, right then and there with the prior
permission when the customer is browsing through pages at your site. E-CRM
maintains long term relationship with the customers with providing trust, ethics a
nd friendship.
4 Harris, E. K. 2000. Customer service : a practical approach. 2nd. s.l. : Elaine K. Harris, 2000.
6
Secondly, several of the quality dimensions of perceived E-CRM are new and
most of them are related to technology: ease of navigation, flexibility, efficiency,
site aesthetics and price knowledge.
5 Sharp, D. E. 2003. Customer relationship management systems handbook. London : Duane E.Sharp, 2003.
7
1.5 Important Definitions
Logistics
“Logistics is that part of the supply chain process that plans, implements, and
controls the efficient, effective flow and storage of goods, services, and related
information from the point of origin to the point of consumption in order to meet
customers ‘requirements.”.
-Council of Logistics Management (www.clm1.org)
Ecommerce (E-Commerce)
E-Commerce logistics,6
E-fulfillment
6 Bayles, Deborah L. 2002. E-Logistics & E-Fulfillment:Beyond the “Buy” Button. [prod.] BridgeCommerce, Inc. CEO. Curaçao : UNCTAD Workshop, 2002.
8
E-Procurement
A good e-procurement system helps a firm organize its interactions with its
most crucial suppliers. It provides those who use it with a set of built-in
monitoring tools to help control costs and assure maximum supplier
performance. It provides an organized way to keep an open line of
communication with potential suppliers during a business process. The system
allows managers to confirm pricing, and leverage previous agreements to assure
each new price quote is more competitive than the last.
E-collaboration
7 Bayles, Deborah L. 2002. E-Logistics & E-Fulfillment:Beyond the “Buy” Button. [prod.] BridgeCommerce, Inc. CEO. Curaçao : UNCTAD Workshop, 2002.
8 Lumsden, Ola Hultkrantz and Kenth. 2010. THE IMPACT OF E-COMMERCE ON TRANSPORT. Sweden : Department of Transportation and Logistics, Chalmers
9
however nothing that stops us from redesigning the model to analyze E-
Commerce.
Potential entrants
Suppliers/Producers
10
as a vertical integration of the business process where one company takes control
over the whole flow of goods.
11
Buyers/Consumers
Substitutes
12
companies are involved we can say that this is valid for the total freight market.
Through acquisitions, deals, partnering etc. the companies try to get a complete
European network as a step towards achieving global coverage. One thing that is
behind this network war is that the transportation companies want to get a larger
share of the supply chain, value-added logistics. The manufacturing companies
try to postpone operations that make their product unique for the customer. This
operation can then be done by the logistics company.
Figure 1-2
The above figure indicates two important flows that we would like to emphasize
the data flow and the physical flow. E-Commerce will impact all elements in the
supply chain, which rely on data flow to improve efficiency. Still, physical
transportation is needed for most products, implying the usefulness of deriving
ecommerce demands on logistics by analyzing the logistics customers. Demands
on a smooth integration of these flows will increase in the future, from being a
competitive advantage to a necessity. In internal logistics, within a plant, fixed
13
installation or permanent information connections often provide physical links
between the sender and the receiver, whereas in external logistics (between
companies in the chain) there are only virtual (abstract) Links between the nodes.
Maintaining the relation between the information system and the physical goods
can sometimes be difficult.
14
Chapter Two
CRM and Customer Satisfaction
2.1 Introduction
But strategy is only half the success story. It takes Customer Relationship
Management (CRM) technology to put a strategy to work. Its technology that
provides the underlying infrastructure that enables employees to get, keep and
grow the customers so vital to success.
15
2.2 Defining Customer Relationship Management (Ramadan, 2010)9
Done right, CRM allows companies to increase both their revenues and
profits while lowering the cost of marketing, selling to and servicing their
customers. The payoff is clear - by better aligning business processes and
managing customer data across all customer-facing functions, companies can
build successful, profitable and long-term customer relationships.
9 Ramadan, Mahmoud. 2010. The strategic value of Customer Relationship Management(CRM. 2010.
16
2.3 A Brief History of CRM (Ramadan, 2010)
The term ‘CRM’ first emerged in the mid-1990’s, created with the intent
of describing how Sales, Marketing and Customer Service technologies needed
to work not just within each department but also together.
17
2.3 Why is CRM important? (Ramadan, 2010)10
1- Retaining customers isn't easy, though. The Internet has lowered the cost of
switching and made markets more price-sensitive.
Going against any of these laws will likely cause poor results. But if you
conform to these laws, then you’re better positioned to deliver great experiences
to your customers.
18
Make sure you’re not breaking them. Look at these laws regularly,
especially when you are starting a new initiative. And ask yourself: Is this
effort breaking any of the 6 laws of customer experience? If the answer is
yes, don’t go ahead. Find some other approach that conforms to these laws.
Share them with others. The 6 laws will have the largest impact when
they are widely understood across your organization. So share this document
with as many people as possible
This is the most fundamental customer experience law of them all. Simply
put, experiences are totally in the eyes of the beholder. The same exact
experience can be good for one person and bad for another. As a matter of fact, it
can be good for someone at one point in time and then bad for that same person
at another point in time. That's why we often say "experiences designed for
everyone satisfy no one."
19
That will require companies to have a very clear picture of their important (and
not so important) customers.
You know more than your customers; deal with it. You can't get rid of your
biases, but it helps to acknowledge them.
Recognize that customers may not understand things like product names,
acronyms, and process steps that you regularly discuss at work. So there's
a natural bias for making experiences too complicated for customers. Get
in the habit of asking yourself: "Would our target customers fully
understand this? “
don’t sell things, help customers buy them. Whenever you're thinking
about a customer experience, always try and frame it from the customer's point
of view. Look at all interactions as an opportunity to help customers to do
something. How can you institutionalize this? Infuse the voice of the customer
within your processes.
20
2.4.2 Law #2: People Are Instinctively Self-Centered
Everyone has their own frame of reference, which heavily influences what they
do and how they do it.
Customers, for instance, care intensely about their own needs and desires
but they don't generally know or care as much about how companies are
organized.
You know more than your customers; deal with it. You can't
eliminate your biases, but it helps to acknowledge them. Recognize that
customers may not understand things like product names, acronyms, and process
steps that you regularly discuss at work. So there's a natural bias for making
experiences too complicated for customers. Get in the habit of asking yourself:
"Would our target customers fully understand this?"
don’t sell things, help customers buy them. Whenever you're thinking
about a customer experience, always try and frame it from the customer's point
of view. Look at all interactions as an opportunity to help customers to do
something. How can you institutionalize this? Infuse the voice of the customer
within your processes.
don’t let company organization drive experiences. Just because you have
separate organizations running your Website, retail stores, and call center does
not permit you to make customers jump through hoops. Customers shouldn't
have to know (and they certainly don't care) how you are organized. Here's a key
symptom to look for: Any front-line employee that needs to explains to a
customer how your company is organized.
21
2.4.3 Law #3: Customer Familiarity Breeds Alignment (Ramadan, 2010)11
Not many people wake up in the morning and say "today, I want to make life
miserable for our customers." Yet every day, lots of employees (from front-liners
to senior execs) make decisions that end up testing, trying, or downright
upsetting their customers.
But it's often not individual actions that cause the problems. Often times, the
issues come down to a lack of cooperation or coordination across people and
organizations.
Given that most people want their company to better serve customers, a clear
view of what customers need, want, and dislike can align decisions and actions.
If everyone shared a colorful view of the target customers and had visibility into
customer feedback, then there would be less disagreement about what to do for
them. While it may be difficult to agree on overall priorities and strategies, it's
much easier to agree on the best way to treat customers.
11 Ramadan, Mahmoud. 2010. The strategic value of Customer Relationship Management(CRM. 2010.
22
Talk about customer needs not personal preferences. Disagreements are
somewhat natural when people debate things from their own points of view.
Instead of discussing what you like or think, re-frame discussions to be about
customers. If you find that you don't really know enough about customers to
solve the disagreement, then stop arguing and go get more information about
your customers.
don’t under-spend on training. You can't just change some business rules
and processes and hope that customers will be treated better. Just about any
change to customer experience requires some employees to change what they do
and how they do it. So don't skimp on the training effort.
23
Measure employee engagement, Firms need to put the same rigor in
monitoring employee relationships that they do in monitoring customer
relationships. So they need to develop a relationship tracking measure like
"likelihood to recommend <firm> as a place to work" that is used to gauge
progress and to identify corrective.
don’t "expect" people to do the right thing. While employees may want to
treat customers well, you can't just expect them to do it. Why not? Because
companies want their employees to do a lot of things, but organizations often
hone their measurements, incentives, and celebrations to achieve short-term
growth and profitability targets. So without any explicit intervention on behalf of
customer experience, the environment will push employees to focus on just
about anything except customer experience.
Clearly define good behavior. Before you just adjust the environment, it's
important that you define/describe the type of behavior that you want from
people in every role. Do you want customer service reps to spend whatever time
they need to on the phone to solve a problem or do you want them to cut down
the average handle time on each call? The measurements, incentives, and
celebrations should be adjusted to reinforce those behaviors.
Watch out for mixed messages. You can only get consistent behaviors
from employees when all three levers (measurements, incentives, and
celebrations) are working together. If you celebrate things that are different than
what you measure, for instance, then employees aren't sure which signals to
follow.
24
2.4.6 Law #6: You Can’t Fake It
You can fool some people for some of the time, but most people can
eventually tell what’s real and what’s not. This shows up in a couple of areas.
First of all, employees can sense if customer experience is not really a top
priority with the executive team. The second place this shows up is in marketing
efforts. No matter how much money you spend on advertising, you can’t
convince customers that you provide better experiences than you do.
Know how you treat them, the best you can do with marketing is to reinforce the
truth. If you want to change how you are perceived, then start by treating
customers better; and then use advertising to reinforce the new way that they’re
being treated.
1) Conventional distribution
25
delivered to the national distribution center (DC). Here they are stored,
consolidated and reloaded, and then sent on to the next stop, the local
DC. The goods are handled in the same way as at the national DC, and
are thereafter sent on to the retailer, where they are sold to the customer.
Figure 2-2
The point where the goods change from being delivered to stock
to being delivered to order is called the customer order point (COP). In
conventional distribution, the COP is at the retailer, where the customer's
order and buy the products. This is called a push system since the
company predicts the demand and the goods are pushed through the
distribution channel.
26
delivered. The more the customers are willing to pay, the faster they can
receive their products, and the distribution models will then be different
according to the lead time allowed.
3) Distribution Channels
27
goods are perishable. In this warehouse the tulips are consolidated into
smaller consignments and then transported to the retailers, for example
an Interflora store. The customer now places an order at the Interflora
store over the Internet, and the florist arranges the bouquet. The flowers
are then distributed to the customers, either in Interflora’s own vehicles
or in a courier’s van.
Figure 2-3
28
DC in Bäckebol, Göteborg. There they are stored and packed, and finally
distributed directly to the customers by Schenker-BTL.
In section below will follow a discussion that starts out from this
question:
29
which can distribute cold or frozen food together with packages to
“refrigerating mail boxes” in residential areas, i.e. carry out deliveries
when the customer is not at home and thereby decrease the resource
utilization.
Since the last link in the distribution chain from shop to end
customer (downstream) in normal systems does not affect the product, as
the alternative cost (for the individual) is often considered low, the new
logistics systems for E-Commerce will experience a cost increase here.
This rise will then require compensation in the form of lower product
30
costs (upstream) towards the customer to make him/her, from a cost
independence perspective, choose home distribution
Owing to the fact that the ordering via Internet and the deliveries
may vary in time, different solutions for distribution can be efficiently.
This, of course, enables new forms of price differentiation.
13 Lumsden, Ola Hultkrantz and Kenth. 2010. THE IMPACT OF E-COMMERCE ON TRANSPORT. Sweden : Department of Transportation and Logistics, Chalmers
31
Globalization, which is one of the major trends the latest
decennium creating large multinational companies and this trend
both allows and forces companies to target market segments on a
worldwide basis.
Consolidation, or spatial concentration, is both a trend within
industries for companies to consolidate their position through buy-
ups that is closely related to the globalization trend. It is also a
trend towards consolidation of product groups and the production,
transport and storage of these products.
Deregulation of markets, for example the inner market of the EU
that actually is a trend that is both a prerequisite and enforces the
globalization and consolidation trends.
Development of new technologies such as the Internet that allows
for rationalization and the creation of more custom made systems
with retained efficiency and also allows for new business models,
such as E-business.
The trend towards increased return on invested capital also
creates new demands on especially transportation and logistics
solutions in order to cut down on storage and other buffers in the
systems.
The environment considerations are also a major trend that affects
the way companies do business and is the basic factor behind the
strive towards a sustainable society which creates new demands on
all industry sectors.
32
used and the processes created to handle this global presence become
larger and more complex and very hard to survey by the stakeholders
involved.
a) Requirement of a sustainable society:
The focus in this context is given in Figure 2-4. In the figure the
original ideas of the two different approaches to handle complexity in
transportation and logistics systems are given. The basic assumption
was, and still is, that there exists a tradeoff between a reductionist
approach and an integrated approach. In the context of transportation and
logistics this will mean a tradeoff between using an overcapacity of
resources and the use of methods and strategies that uses information as
the source to handle the complexity.
Figure 2-4
The upper level in previous figure is the strategy level, where the
basic decision is whether to choose to reduce the system or keep it
33
integrated. The traditional approach has been to choose the approach
where we reduce the system in order to try to make them easier to
handle. Methods and strategies to handle the problems arising in
complex systems have not been readily available why this strategy is the
predominating in the transport and logistics industry today. The next
level is the tactical level showing the two dominating ways of creating
simple enough systems to handle a complex demand or environment,
surplus capacity or higher frequency (over transport), than necessary to
accomplish the current volumes. The last level in this figure is the
operational level that shows the practical solutions that are deployed in
order to solve the problem, such as hub and spoke. The right hand side
describes the other choice, sophisticated solutions to match the complex
problem. In these strategies information and knowledge are the main
sources to handle the complexity. In order to make the solutions
sustainable for the future we believe that we have to move the approach
from the side were we reduce the systems in order to make them easier
to cope with to the other side were we integrate them and use the
information in order to control and manage them.
34
interested if we use a transport system with over capacity or a system
that use over transport. In this way we can say that the shippers focus is
the commerce in this case E-Commerce. The forwarder is on the other
hand more concerned over enough transport capacity and an easy to
manage and redundant system.
Figure 2-5
The Two Perspective of E-Commerce- Participant Focus
Buyers want to know their landed cost of the products, when and
where the products can be delivered, etc. This additional information, the
order management, the IT services on which these are based, and the
Just-In-Time transport and delivery are summarized by the term e-
fulfillment. But e-fulfillment can and frequently does cover much more:
arranging for the insurances of goods in transit, export and import
customs clearance etc. In the same way, as the shipper is interesting in
the E-Commerce the forwarders are interesting in the e-fulfillment.
35
One problem the E-Business has been struggling with is that these
two perspectives haven’t matched each other. The shippers haven’t
understood the forwarders perspective and the forwarder haven’t
understood the shipper’s perspective.
36
Chapter Three
The E-Logistics Function
3.1 Introduction
The impact of E-Commerce on logistics service providers has been
discussed by (Patrick Delfmann, 2002)14. They argue that the logistical
implications of E-Commerce can be classified into two main categories: the rise
of e-marketplaces, and the elimination of supply chain elements
(disintermediation). Virtual logistics resources can be traded in the way most
goods are traded by companies and individuals. With the help of information
technologies such as the Internet and WWW, resources can be purchased,
utilized remotely, and lent or sold when supply outstrips requirements (Clarke,
1998). With virtual logistics operations there is much more flexibility in the
allocation of resources, and this means that the resources available can be made
equal to the resources actually used. ( Gunasekaran, et al., 2007)15
14 Patrick Delfmann, Sebastian Herwig, Łukasz Lis. 2002. UNIFIED ENTERPRISE KNOWLEDGE REPRESENTATION WITH CONCEPTUAL MODELS – CAPTURING
15 Gunasekaran, Angappa, Ngai, Eric W. T and Edwin Cheng, T. C. 2007. Developing an E-Logistics System: A Case Study. International Journal of Logistics:
Research & Applications. 2007, Vols. Vol. 10, No. 4, pp. 333 - 349.
16 DAMSGAARD. 1999. Stereological quantification of mast cells in human synovium. 1999. Vol. Volume 107.
37
founding airlines’ local strongholds as points of departure. E-Logistics consists
of four important components: (i) one-stop value-added services, (ii)
management of electronic information, (iii) a transportation network and (iv)
automation in warehousing operations. In logistics, customer satisfaction can be
improved by one-stop value-added services. This requires an integrated value
chain to be linked to a customer-care advocate, so that customers can receive all
of the required services with just one contact with suppliers. For example, in
government services, one-stop services allow you to find out any council service,
to make enquiries and applications, to pay your bills etc., - all less than one roof.
A 3PL also provides multiple value-added services, including product assembly,
packaging, re-packing, re-filling, labeling sorting, quality control, etc. to comply
with local regulations. ( Gunasekaran, et al., 2007)17
Research & Applications. 2007, Vols. Vol. 10, No. 4, pp. 333 - 349.
18 van Hoek R. 2001. The rediscovery of postponement: a literature review and directions for. 2001. pp. 161-184. Vol. Vol. 19.
38
need to reenter the data, real-time online ordering functions, and multi-level
password control so that different functions can have different access levels
controlled by authorized people. The role of E-Commerce models in developing
virtual logistics chains has been highlighted in many articles (Graham and
Hardaker, 2000)19. The most important requirements for using new technology
are that a firm must understand the value added for its customers and that it
restructures many of its business processes in order to receive its full benefits.
Ligon et al. (1992)20 discuss the role of EDI in logistics services. However, only
a limited number of articles have dealt with 3PL and the role of IT in improving
logistics performance. In the following section, an attempt is made to develop a
conceptual model for effective logistics management in a 3PL environment. The
appropriateness of the model design is confirmed. ( Gunasekaran, et al., 2007)21
19 Graham, G., Hardaker, G.,. , 2000. Supply-chain management across the Internet. International Journal of Physical Distribution and Logistics Management. ,
20 Ligon F. K., Dietrich W. E. & Trush W. J. 1995. Downstream ecological effects of dams. Bioscience 45. 1995, pp. 183–92.
21 Gunasekaran, Angappa, Ngai, Eric W. T and Edwin Cheng, T. C. 2007. Developing an E-Logistics System: A Case Study. International Journal of Logistics:
Research & Applications. 2007, Vols. Vol. 10, No. 4, pp. 333 - 349.
39
Figure 3-1
3.2.2 E-Presence
E-Presence often starts with one-way information about the company, its
products and services. The Internet is primarily used to publish information.
Suppliers can deliver product and service information directly to customers in a
cost efficient way. The next step is to create two-way communication for e.g.
customer support and answering FAQs.
22 Gunasekaran, Angappa, Ngai, Eric W. T and Edwin Cheng, T. C. 2007. Developing an E-Logistics System: A Case Study. International Journal of Logistics: Research &
Applications. 2007, Vols. Vol. 10, No. 4, pp. 333 - 349.
40
to reduced transaction costs. When it comes to digitally transferable services and
products, such as bank services, computer software, and music, transaction
fulfillment can also be done over the Net (E-Fulfillment). For physical products,
however, fulfillment has to be supported by physical movement (e-logistics).
41
The Internet development leads to disintermediation, i.e. middlemen are
disappearing. But it also leads to re-intermediation, i.e. new types of middlemen
offering new types of services are established. Infomediaries consolidate
information from several sources as a service to the customer. Travelocity is one
example of this “re-intermediation” incorporating information from other Web
sources to provide its customers services such as flight tickets, hotel, and rental
cars reservations. E-Logistics companies are also among the most important of
these new intermediaries. Ecommerce transactions put heavy stress on effective
and efficient logistics operations. ( Gunasekaran, et al., 2007)23
23 Gunasekaran, Angappa, Ngai, Eric W. T and Edwin Cheng, T. C. 2007. Developing an E-Logistics System: A Case Study. International Journal of Logistics: Research &
Applications. 2007, Vols. Vol. 10, No. 4, pp. 333 - 349.
42
way unencumbered by existing business infrastructure. Developing the right
infrastructure to support successful E-Business will be the real challenge. Most
companies have made major investments in business applications and ERP-
systems, but not very many have made investments in connecting these
applications together in a way that can withstand the intense demands of the e-
world. Connectivity solutions have to come in to help realize business goals of
agility, adaptability, and durability by interaction with trading partners and
customers. The growth of the Internet implies considerable systems integration.
43
change in the way that supply and demand channels are run. In its simplest form,
the sharing of information at key points in the process is vital if companies are to
adapt to a demand led economy.
And, hence, it is an essential tool for the Internet and e-business. The
second phase in E-Business focuses on two way, interactive process integration
between the company, its supplier and customers. Process integration between
the decision-making systems of enterprises, their suppliers and their customers
becomes bidirectional and tightly integrated. Actions on one company’s
computers trigger processes at other companies. There is a dynamic interplay
and processes can be initiated in inter organizational systems based on
predefined rules. An order to a manufacturer may initiate information to OEMs,
first and second tier suppliers. Dell, for example, has built its success on very
close process integration with suppliers and customers. Fast, two way
communications reduces lead times and total costs, streamlines the flow of
resources in the channel – and puts very heavy demand on e-logistics.
If the first two stages of Internet applications are seller and supply chain
oriented, then the third stage is buyer and demand chain oriented. Distribution
channels have to be restructured when companies move from E-Commerce to E-
Business and business processes become more integrated and partly automated.
44
Supply chains are rapidly transformed as enterprises go beyond their Web-
based storefronts and create systems that execute business processes with their
suppliers and customers over the Internet. Internet-connected enterprises will re-
make interactions across the entire chain from raw materials supplier to the
ultimate user. Traditional value chains are transformed into intelligent value
webs! Companies working within intelligent value webs will be able to reduce
inventory, increase flexibility and responsiveness and improve customer service.
Fundamental changes in the way access is provided, content is marketed, and
products are sold and delivered are occurring. Logisticians will have to plan and
implement concurrently and as fast as the marketers. And a new breed of
logistics – e-logistics – is emerging.
45
versus capital tied up in inventory was falling below 1! The rescue was the third
generation – capital oriented – logistics.24
24 Gunasekaran, Angappa, Ngai, Eric W. T and Edwin Cheng, T. C. 2007. Developing an E-Logistics System: A Case Study. International Journal of Logistics: Research &
Applications. 2007, Vols. Vol. 10, No. 4, pp. 333 - 349.
46
The e-logistics concept is developed in accordance with the new rules of
play discussed above. The concept is defined by the interaction and integration
taking place in the interfaces between traditional logistics, Information and
Communication Technology (ICT) and process management. Deep
knowledge and competence within all these areas is required in order to succeed.
Figure 3- 2
The E-Logistics concept Interplay in the interfaces between traditional Logistics, ICT, and
Process management
ICT provides the methods, systems, and techniques necessary. Data base
technology and data mining techniques are major enablers in the implementation
of the e-logistics concept. The gap between those who know enough about ICT
and those who know enough about the application area – logistics – has to be
bridged. This is a major task for research and education, and it also approached
by Swedish universities.
Logistics provides the frame of reference, the concepts, and the models
for management of cross-functional and inter-organizational flows and
processes. Logistics is, in many ways, the cradle for process orientation.
47
were explicitly integrated in the approach. This cross-functional approach has
been further accentuated by concepts such as concurrent engineering and
Business Process Reengineering (BPR).
• Customer Creation and Retention (CCR) that creates and retains customer
relations all the way from the very first contact, via after sales, follow up and
continuous improvement.
• Time to Cash (TTC) - the total materials, information and payment flow.
48
• Time to Market (TTM) - the total process for development and improvement
of products and services. The concept of e-logistics focuses on integration and
improvement of interaction in the interfaces between these processes.
Figure 3- 3
25 Johan Visser, Ryuichi Yoshimoto. 2001. THE IMPACT OF E-COMMERCE ON TRANSPORT. Tokyo , Japan : Faculty of Commerce and Management, Hitotsubashi
University, 2001.
49
In this paper, however, the government will be referred explicitly because they
have responsibility to establish new logistics policies under different ICT
conditions.
Shippers are either the consignors who send goods or the consignees who
receive goods in the supply chain. Their concerns are to maximize net profits by
50
reducing lead-time from ordering to fulfillment, and decreasing opportunity cost
resulting from failing to cope with changeable consumer needs, among others.
Some of the shippers have the logistics functions in-house, because their
logistics system makes their competitive power stronger. However, the share of
logistics activities conducted by logistics service providers has been increasing
in Japan.
51
Table 1
Concern of Stakeholders
ICT will affect the logistics system in different ways. Concerning the
influence of ICT on the logistics system, three aspects should be examined
(Figure 3-5):
26 Johan Visser, Ryuichi Yoshimoto. 2001. THE IMPACT OF E-COMMERCE ON TRANSPORT. Tokyo , Japan : Faculty of Commerce and Management, Hitotsubashi University,
2001.
52
Figure 3- 5
Not only B2C but also B2B transactions would be affected. In the United
States, the automobile industry established a web site involving several firms
(suppliers, car dealers, and logistics service providers) where trade information
are exchanged and shared, such as part order, inventory information, and even
information on new designs. The Internet is used as a tool to cooperate with a
small number of partners, as well as to procure mass-produced parts at a low
price from all over the globe. The Internet can be the catalyst to accelerate the
standardization of EDI (Electronic Data Interchange) between firms, which
progressed slowly before.
53
3.4.2 E-logistics (Johan Visser, 2001)27
27 Johan Visser, Ryuichi Yoshimoto. 2001. THE IMPACT OF E-COMMERCE ON TRANSPORT. Tokyo , Japan : Faculty of Commerce and Management, Hitotsubashi
University, 2001.
54
segmentation, mass customization, supplier partnership, and just in time
manufacturing and logistics.
The logistics concept has evolved from its early focus on cost efficiencies
in transportation and warehousing to today’s customer focused e-logistics
approaches. During the 1980s methods were identified to make logistics
operations function as an integrated set of processes. The 1990s presented a new
definition of the logistician’s role. This evolution intended to integrate many of
the company’s core operating processes and to provide a comprehensive view of
the company’s supply chain operations. The impact of supply chain operations
on overall corporate performance was recognized and companies started to look
for external help in delivering those results. The possibilities of third party
logistics providers (TPLs) to improve the performance of the company’s supply
chain by outsourcing the transportation and warehousing functions were
identified. Outsourcing allowed the company to focus on its core competencies,
to provide a differentiated level of customer service and to take advantage of
greater operational flexibility. Some operating and capital expenses could also be
reduced.
55
The issue right now is to meet management’s expectations to create a truly
integrated supply chain that improves operational performance, delivers the
scope of services needed, and provides on-going financial benefits. At the same
time, customer demands and requirements are further accentuated and
highlighted with the development of Internet applications. The move from e-
presence, via E-Commerce to E-Business implies a shift from supplier oriented
push to customer oriented pull strategies. That means an evolution from supply
chain management to demand chain management, i.e. truly customer driven
supply chains. The next significant evolution in logistics is emerging and it is
called Demand Chain Integration which creates a new role – the Demand Chain
Integrator (DCI). In essence, the DCI assembles and manages the resources,
capabilities, and technology of its own organization with those of
complementary service providers to deliver a comprehensive demand chain
solution. The DCI acts as a single point of interface with the client organization
and provides the management of multiple service providers through a teaming
partnership or alliance. The approach aligns the capabilities of the DCI and the
“best of breed” service providers to deliver demand chain solutions.
With the DCI focusing on the entire chain, dramatic customer service
improvements can be attained. Operating cost reductions of up to 15% can be
driven through operational efficiencies, process enhancements, and procurement
savings. Savings can be achieved through the complete outsourcing of the
demand chain function and creation of economies of scale. Synchronization of
activities across chain participants can lead to operating cost reductions and
lower cost of goods sold due to integration of processes, improved planning and
execution of chain activities. Working capital reductions of up to 30% can be
realized through inventory reductions and reduced “order to cash” cycle times.
The Swedish company Sonat has proved that the theories discussed above
can be realized in practice. Sonat is the first company to offer high growth
European companies a comprehensive e-logistics solution, assuming
responsibility for the entire extended demand chain. Sonat designs, integrates,
and operates the chain for high-growth enterprises. Rather than being bound by
fixed agreements with specific logistics suppliers, Sonat cooperates with those
distributors and transportation companies that together form the most
competitive, timesaving and cost-effective demand chain for each individual
56
customer. By monitoring and operating the entire demand chain for a client,
Sonat can guarantee defined service levels to the end customer. The company
offers its customers a completely outsourced logistics department. The
company’s “Chain service” manages, plans, and integrates the customer’s
demand chain. Sonat targets small and medium-sized high growth enterprises,
including dot.coms as well as more traditional companies. With dChain, Sonat
takes responsibility for necessary process reengineering throughout the chain.
Each customized demand chain is integrated by an ICT-infrastructure,
connecting the various companies´ systems for planning, control, and follow-up.
To achieve this integration, Sonat has formed partnerships with market leaders
such as Oracle for applications and data-warehousing, SEMA Group for
operations, communication and security and Viewlocity for integration of
systems and information. Viewlocity is a global provider of B2B integration and
online trading community solutions. Viewlocity´s flagship product, AMTrix, is
used to ensure a seamless flow of information across enterprise boundaries,
connecting Sonat´s customers with their suppliers and distributors, achieving
end-to-end e-logistics solutions. (Ericsson, 2000) 28
28 Ericsson, Dag. 2000. e-Logistics - Key to Success in the Digital Economy. Athens : University of Skövde, 2000.
57
Chapter Four
The Benefits of the Partners through Using E-Logistics
4.1 Introduction
A lot of the visions and ideas discussed at that time are now realized under
concepts such as Efficient Customer Response (ECR) or Quick Response (QR).
The application enabler was new tools for gathering, storing, handling, retrieving
and distribution of data. The Swedish wholesaler Luna developed an information
system for coordination and cooperation with first the customers and then also
the suppliers. It was a very early application of ICT to improve effectiveness in
physical distribution. The world's first extranet, before the term was even
thought of! The system (Bascet Info-link) is still up and running, but the
technique is, of course, renewed. Today's technology – and especially Internet -
offers possibilities for new and flexible solutions.
58
4.2 Supply Chain Integration and E-Business: (Whang, 2001)
• Information integration
• Planning synchronization
29
Whang, Hau L. Lee and Seungjin. 2001. E-Business and Supply Chain Integration. s.l. : Stanford
University, 2001.
59
A- Information Integration: (Whang, 2001)
30
Whang, Hau L. Lee and Seungjin. 2001. E-Business and Supply Chain Integration. s.l.: Stanford University,
2001.
60
discovering whole new approaches to conducting business, and even new
business opportunities not previously possible. E-Business allows partners
redefine logistics flows so that the roles and responsibilities of members may
change to improve overall supply chain efficiency. A supply chain network may
jointly create new products, pursue mass customization, and penetrate new
markets and customer segments. New rules of the supply chain game can emerge
as a result of integration fueled by the Internet.
• Incentives must be aligned for all members in order for supply chain integration
to work. Incentive alignment requires a careful definition of mechanisms in
which the risks and associated gains of integration efforts are equitably shared.
Moreover, the incentive for each member must commensurate with her
investment and risk.
31
Whang, Hau L. Lee and Seungjin. 2001. E-Business and Supply Chain Integration. s.l.: Stanford University,
2001.
61
The Role of Technology and the Internet (Whang, 2001)
Supply chain integration is not new; many companies have already pursued it
as a way to gain competitiveness. Information technology has long been a major
factor. Relational databases, client/server architecture, TCP/IP network
protocols, multimedia, wireless technology, and most recently, the Internet, have
each, in their way, spurred new innovation and new possibilities.
62
Figure 4 - 1
Information Distortion and the Bullwhip Effect
33
Whang, Hau L. Lee and Seungjin. 2001. E-Business and Supply Chain Integration. s.l.: Stanford University,
2001.
63
processes. Workflow coordination can include activities such as procurement,
order execution, engineering change, design optimization, and financial
exchanges. The results are much more cost-effective, speedy, reliable and less
error prone supply chain operations. Below, we offer a number of examples of
how different companies are pioneering workflow coordination activities in these
and other areas.
4.2.2.1 Procurement
Sourcing parts for new products can be a major hurdle to timely and
profitable new product introductions. Using the Internet, companies can conduct
complex purchasing tasks such as parts-list management, quoting, decision-
making, ordering, and order change and order confirmation in hours instead of
days. The Internet also lets companies tap into a bigger supply base to ensure
dependable supply and backup sources. Timeliness in supplier selection, order
quote generation and receipt, and the integration of purchasing decisions with a
company’s internal Enterprise Resource Planning systems are particularly
valuable in new product introduction.34
34
Whang, Hau L. Lee and Seungjin. 2001. E-Business and Supply Chain Integration. s.l.: Stanford University,
2001.
65
opportunities are as limitless as the imagination. The following examples show
the range of possibilities.
35
Whang, Hau L. Lee and Seungjin. 2001. E-Business and Supply Chain Integration. s.l.: Stanford University,
2001.
66
An elaborate Web-based information system links Cisco and its supply chain
partners, and takes care of all the necessary information flows. But the physical
flows can be quite simple – 55% of Cisco’s sales are shipped directly from the
subcontract manufacturers to the customers, without stopping at Cisco’s
distribution centers. The result: lower inventory, faster, more accurate order
fulfillment, and reduced costs.
Most of us are familiar with the use of the Internet to perform upgrades to
software products. But some innovative companies are exploring ways to use the
Internet to upgrade hardware products, as well. Xilinx is a semiconductor
company producing field-programmable logic devices. Some of the products in
which Xilinx integrated circuits reside are going through constant product
generation changes that would require onsite updating or even physical
replacement. To address this problem, Xilinx developed Internet-
Reconfigurable-Logic (IRL). With IRL, the field programming logic can be
modified or updated after the installation at the end user’s premises over
networks and the Internet. These online field upgradeable systems can range
from multi-use set-top boxes and wireless telephone cellular base stations to
communications satellites and network management systems. Today, Xilinx is
the market leader for field programmable logic.
The Internet enables many companies to use the Web to allow customers
configure specific order options tailored to the tastes and preferences of the
customers. Hence, the Internet facilitates mass customization. This has been a
key feature of online retailers, but has now spread too many mainstream business
and products. Examples run the gamut from personalized greeting cards (e-
Greetings, now part of American Greetings), to computers (Dell), from bicycles
(Cannondale and Voodoo) to automobiles (Ford and GM). Mass customization,
while not appropriate for every product or industry, can be a powerful way of
cementing customer relationships by providing a highly cost-effective level of
personalized service.
67
4.2.3.5 Service & Support
36 Butterworth-Heinemann.Chaffey, D. 2007. E-business and e-commerce management: strategy, implementation and practice. Pearson Education. [Online]
68
In addition, since Intuit has links to many key banking institutions, it can also
access the appropriate data, such as dividends and interests payments, and
include them in the electronic tax filing. The revenue from services, enabled by
the Internet, is steadily increasing as a percentage of Intuit’s overall revenue.
Delivering these services to customers via the Internet is only the most visible
aspect of this strategy. Behind the scenes, Intuit uses a range of Internet tools and
solutions to link and orchestrate a vast supply chain of providers, from banks and
brokerage houses to independent mortgage brokers, from insurers to office
supplies retailers like Staples. Without the Internet, Intuit’s transition to a
service-based company would not be possible.
The high cost of order fulfillment for online retailers has been viewed as a
major impediment to success. Traditional “offline” retailers are pioneering the
combination of the digital channel with traditional brick-and-mortar
infrastructure. 7dream.com in Japan is an example of such a “click-and-mortar”
multi-channel model.
69
developing similar click-and-mortar multi-channel fulfillment and distribution
strategies.
37 EFT. 2012. 2011-2012 Transport & Logistics CIO Report. Amsterdam : EFT: Eye For Transport, 2012. p. 18.
70
Figure 4- 3
4.4 Optimizing the E-Supply Chain: The Final Frontier (Hayes, 2004).
Of the myriad opportunities offered by the Internet, perhaps the one
providing the most immediate benefit, and showing the greatest long-term
promise, is supply chain optimization. The Internet's ability to remove
inefficiencies, break down communication barriers, reach disparate audiences
and foster collaboration is perfectly suited to managing and optimizing the
diverse and distributed players in supply chains of all sizes.39
39 Hayes, Ian S. 2004. Optimizing the e-Supply Chain: The Final Frontier. 2004.
71
streamlining its supply chain and business processes while providing customers
with personalized product options. Ford Motor Company, Daimler/Chrysler and
General Motors have teamed to develop Covisint, an online marketplace for
purchasing automotive parts and direct materials from their vast group of first
tier suppliers. The Paper Exchange, an Internet-based trade exchange, allows
suppliers and buyers to offer and bid on paper products and pulp. Ford recently
announced an initiative to share legacy-created product design drawings with its
suppliers using an XML translation tool. Even industries that have traditionally
been unaffected by supply chain issues, particularly services industries such as
IT consulting, now find a host of online marketplaces and aggregators seeking to
match buyers and sellers of services.40
Truly integrated and optimized supply and demand chains offer significant
benefits to their participants. To understand, imagine what would happen if your
company knew in advance exactly when you’re top clients were going to make
their purchases, what they intended to buy and where they needed the items
delivered. Armed with these accurate forecasts, you could notify your suppliers
of your precise needs, exactly when needed. Instead of buying raw materials at
inopportune moments, you could plan your purchases to take advantage of
favorable pricing. To lower overhead, you could manufacture and warehouse
products in the most ideal location. With more insight into buying patterns, you
could better predict customer needs, developing even more suitable products and
40 Hayes, Ian S. 2004. Optimizing the e-Supply Chain: The Final Frontier. 2004.
72
services in collaboration with your suppliers. Finally, to expand your market,
you could offer all of these products and services online, through one or more e-
marketplaces. What company wouldn't want these benefits?
The Internet is elevating supply chain optimization to new levels, but the
concept of supply chain management (SCM) is not new. Every company, no
matter its industry, is part of one or more supply chains both as a supplier and
buyer of goods. Supply chain investments, ranging from direct materials used to
manufacture products to indirect materials such as PCs and office equipment can
be huge. Any efficiency that can be introduced into the supply chain has the
potential to result in enormous cost savings. For manufactured goods, every
dollar squeezed from the "cost of goods sold" is a dollar added to profits. Every
reduction in carried inventory frees capital for other uses. Relying on techniques
such as "just-in-time" inventory management and logistics planning, and
applying automation where needed, many companies have started the process of
integrating and optimizing their supply chains. Auto manufacturers now rely on
automated systems to forecast and order parts mere minutes before they are
needed on the assembly line, and retailers like Wal-Mart have squashed their
competitors by developing sophisticated logistics, inventory management and
distribution systems, all tightly coordinated with suppliers.41
41 Hayes, Ian S. 2004. Optimizing the e-Supply Chain: The Final Frontier. 2004.
73
through vendor managed inventory programs, and third party service providers
perform a range of logistics functions.
E-SCM efforts can range from simple (an electronic catalog posted on an
e-marketplace) to complex (a platform to enable product design and
development between an entire supply chain). The benefits offered by each of
these E-SCM projects will vary. For example, a supplier posting an electronic
catalog on an industry-wide e-marketplace is not expecting to foster greater
product development collaboration with its customers. In total, however, the
benefits of E-SCM are plentiful. Depending on the position that a company
occupies in the supply chain, these benefits can be broken down by the buyer's,
supplier's and facilitator's perspective.
First, a buyer may be able to purchase both direct and indirect materials at a
lower cost, primarily due to price transparency and competition. Buyers that
purchase goods through an active e-marketplace populated by many
suppliers hope to take advantage of competition and dynamic pricing
opportunities to secure the lowest possible price for goods and services.
42 Hayes, Ian S. 2004. Optimizing the e-Supply Chain: The Final Frontier. 2004.
74
Although larger buyers such as Wal-Mart and Ford already enjoy sufficient
leverage to command price breaks and discounts, medium and smaller-sized
buyers gain access to more favorable pricing when suppliers are bidding for
their business via e-marketplaces and trading exchanges.
Third, a buyer may be able to forge stronger ties with its suppliers,
collaborating with them more closely in the design and development of
goods and services, and in forecasting, scheduling and planning production
activities. ERP systems have enabled many companies to share a subset of
this information already. The collaborative software, middleware XML
translators and more powerful customer relationship management (CRM)
functionality available today promise to align buyers more closely with all
participants in their supply chain.
4.5.2 Supplier Benefits 43
Supplier benefits generally fall into two classes, depending on the type of
E-SCM program in which they participate. For E-SCM programs that
concentrate on collaboration -- sharing product data, product designs, etc. --
suppliers have the potential to strengthen their forecasting ability, meet and
exceed customer demands by offering the right combination of products and
services at the right time, align their production schedules and manufacturing
capacity with buying patterns to improve inventory management and more. For
E-SCM programs that concentrate on commerce opportunities, the supplier's
greatest benefit comes from participating in large, active online marketplaces.
These marketplaces, if frequented by a critical mass of buyers, extend the
supplier's market reach and potentially increase its overall sales. Because this
43 Hayes, Ian S. 2004. Optimizing the e-Supply Chain: The Final Frontier. 2004.
75
extensive market reach is achieved at a fraction of the cost associated with
other sales channels -- mass mailings, telemarketing, on site sales calls -- it is a
more cost-effective way to market and sell goods and services. Suppliers can
also take advantage of B2B marketplaces to gauge the demand for their goods
and services and, using dynamic pricing features such as auctions and bids, the
price that the market is willing to bear for these items. Although the price
transparency fostered by online marketplaces may deter suppliers from
participating at first, once a sufficient number of buyers and competitors are
using the model, every supplier must eventually join. Marketplaces can be
helpful with inventory management activities, allowing suppliers to auction off
excess inventory to a large group of potential bidders.
4.5.3 Facilitator Benefits44
A facilitator of E-SCM efforts is a party that provides some component
or service integral to the effort. A software or hardware vendor is a facilitator, as
is an ASP providing application functionality and/or Internet connectivity. In the
case of a B2B marketplace, the facilitator is the market maker that establishes,
administrates and operates the electronic marketplace, perhaps including services
such as financial settlement, fulfillment, logistics etc. In general, the benefits to a
facilitator are strictly monetary -- the software or hardware vendor receives
license fees and the ASP normally receives monthly rental or usage fees. The
market maker typically receives a percentage of each transaction; the Paper
Exchange marketplace charges 3% of each transaction completed by its
members. If the market maker also happens to be a large purchaser, and
participates in the marketplace as a buyer, then it will also enjoy all of the
benefits that accrue to a buyer.
44 Hayes, Ian S. 2004. Optimizing the e-Supply Chain: The Final Frontier. 2004.
76
sharing product design data. Tier 1 auto suppliers are developing their own
design, collaboration and commerce exchanges to interact with their smaller
suppliers. The dairy industry is launching a B2B exchange to auction perishable
dairy products.
Without the Internet, E-SCM efforts would be on the slow track rather
than the fast track. The Internet is the ideal platform for launching E-SCM
because it shares many of the same characteristics of a supply chain. Both
consist of a web of participants, communicating and sharing data and
information in a standard way. The Internet simply makes this communication
and data sharing more cost-effective through the use of standard protocols, a
choice of relatively inexpensive connections and high adoption rates. An array of
software products, translation middleware and XML are removing some of the
last barriers to widespread exchange of data.
There are some fairly painless ways to get immediate benefits out of E-
SCM. Participating in an e-marketplace as a buyer or seller is one method.
Implementing an automated procurement system is another. To extract even
stronger benefits out of E-SCM requires more complex and integrated solutions.
These solutions take greater effort and investment, and depend on industry
dynamics, competitors' activities and customer demands. Before embarking on
an E-SCM project, consider these issues:
Leverage
Your company's size, relative to others in the supply chain, will determine
who has the leverage to dictate terms. A small business customer does not have
the clout to tell Staples how to construct its Web storefront; Staples makes that
decision. Tier 1 auto suppliers, while individually large, do not have the leverage
77
to refuse participating in the big 3 automakers' marketplace. Be aware of your
position in the grand supply chain scheme.
78
Figure 4- 4
The more complicated the E-SCM solution, the more collaboration and
coordination required among the participants. Leverage may determine who gets
to run the show, but an uncooperative participant can wreak havoc on the project.
Suppliers that are involved in multiple E-SCM initiatives, perhaps a cross several
industries, will resist adopting conflicting, redundant or grossly expensive SCM
approaches. Designing, implementing and testing a complex E-SCM solution
between scores of players will stress any organization's program management
abilities. Commitment and perseverance are essential to putting a large-scale E-
SCM effort in place.
45 EFT. 2012. 2011-2012 Transport & Logistics CIO Report. Amsterdam : EFT: Eye For Transport, 2012. p. 18.
79
4.7 Categories of E-SCM Solutions (Hayes, 2004)
There are virtually hundreds of E-SCM solutions from which to choose,
ranging from simple to complex and requiring different levels of investment,
participation and integration. Electing to participate in an e-marketplace is a
relatively straightforward decision. Creating a custom extranet to give suppliers
access to your production data and sales forecasts is another matter.
46 Hayes, Ian S. 2004. Optimizing the e-Supply Chain: The Final Frontier. 2004.
80
Figure 4- 5
The Rang of SCM Options
81
Table 3
Categories of E-SCM Solutions
82
• ERP/EDI
83
information to enable better materials planning, inventory management, etc. -- or
may facilitate some form of commerce between the parties. Because these E-
SCM solutions are implemented on a custom basis, they often rely on outside
consulting assistance and may also incorporate some of the SCM vendor
offerings listed throughout this section.
Web Storefronts
Procurement Systems
84
automatically as end users perform their purchasing activities. Purchases
conducted over the procurement system are fed into back-office accounting and
legacy systems, which helps to reduce overhead and potential data entry errors.
Companies generally use procurement systems to lower transaction costs rather
than obtain the lowest price possible for supplies. Because procurement systems
work with a set of pre-approved vendors and do not support dynamic selling or
bidding, they are not designed to force prices down. The cost of implementing a
procurement system and maintaining electronic catalogs puts it outside of the
reach of small and medium-sized companies; however, ASP offerings may be
more cost-effective. Software vendors offering procurement systems include
Ariba, Commerce One, i2 Technologies and Trilogy. ASPs offering procurement
software include PurchasePro, Clarus and US Internetworking.
Collaboration Platforms
Many companies are looking for ways to enrich their communication and
relationships with the important players in their supply and demand chains.
These initiatives are based more on collaboration than they are on commerce,
and are meant to optimize supply chain operations, particularly in the product
design, planning and forecasting areas. Ford's effort to improve the sharing of
product design information with its suppliers is one example. Kmart's trial of
CPRF (collaborative planning, forecasting, and replenishment) with its suppliers
is another example. Software collaboration vendors include Syncra, Manugistics,
i2 Technologies, Logility and webPLAN.
86
CONCLUSION AND RECOMMENDATION
Conclusion and recommendation
But there are some Problems along the Supply Chain are summarized in:
1. Supply chains can be very long, involving many internal and external
partners located in different places.
2. Both materials and information must flow among several entities, and these
transfers, especially when manually handled, can be slow and error-prone.
3. Companies can improve their demand forecasting by using IT-supported
forecasts, which are done in collaboration with business Typical Problems
along the Supply Chain.
4. Other problems along the ESC mainly stem from the need to coordinate
several activities and internal units and business partners.
84
There are a lot of E-Commerce Solutions along the Supply Chain summarized
in:
1. Order taking can be done over the Internet, EDI, EDI/Internet, or an
extranet, and may be fully automated
2. Order fulfillment can become instant if the products can be digitized
3. Electronic payments can expedite both the order fulfillment cycle and the
payment delivery period
4. Managing risk to avoid supply-chain breakdown can be done in several
ways
5. Inventories can be minimized by introducing a build-to-order (on-demand)
manufacturing process as well as by providing fast and accurate
information to suppliers
6. Collaborative commerce among members of the supply chain can be done
in many areas
But there are some Barriers to C-Commerce along the Supply Chain and E-
Logistics:
85
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