Thảo luận-Logistics - in - E - commerce

Logistics in E-‐commerce

International sourcing and procurement logistics
Ana Hadzi-‐Jovancic & Agnieszka Losiak
ABSTRACT
Final report summarizing our presentation from 13.04.2015

Table of Contents
1 Introduction ...................................................................................................... 3
2 E-‐commerce in Europe ...................................................................................... 4
3 Changes in logistics caused by e-‐commerce ....................................................... 4
4 Logistics solutions for e-‐commerce .................................................................... 5
4.1 In-‐house ................................................................................................................ 5
4.2 Drop-‐shipping ....................................................................................................... 5
4.3 One stop e-‐commerce (outsourcing) ..................................................................... 6
5 Challenges in e-‐commerce logistics ................................................................... 7
5.1 Delivery time ........................................................................................................ 7
5.2 Availability of goods ............................................................................................. 8
5.3 Fluctuation in demand .......................................................................................... 8
5.4 Software application ............................................................................................. 8
5.5 Lack of ICT infrastructure and economic and educational barriers ......................... 8
5.6 The challenge of geography ................................................................................... 8
6 Current trends in e-‐commerce logistics ............................................................. 9
6.1 Reverse logistics ................................................................................................... 9
6.2 International trade (cross-‐border) ......................................................................... 9
6.3 IT solutions ......................................................................................................... 10
6.4 Same-‐day delivery .............................................................................................. 12
7 Conclusion ...................................................................................................... 13
References: ........................................................................................................... 14

2
1 Introduction
Electronic commerce is a form of trading goods using Internet network. Oxford
dictionary describes e-‐commerce, which is a common name, as “commercial
transactions conducted electronically on the Internet”1.
E-‐commerce is getting more and more popular. The share of this kind of purchases in
the total trade is still marginal but we are observing an increase of importance of
online transactions.
Online shipping is associated with the delivery to the final customer – the final
process in the supply chain, which is very complicated. The small scale of operations
of companies selling online, excessive fragmentation and difficulties in servicing
customers were the reasons of aversion of courier companies few years ago. Today,
online trade is the main topic in the logistics industry and the “parcel segment
witnessed an impressive increase in volumes due to the rise in e-‐commerce”2.
Logistics, next to the marketing, plays a key role in managing an online store. It
allows attracting new customers (by availability of goods, variety of delivery options,
short lead time and low shipping cost) and also helps to keep good relations with
clienteles who already placed their orders. Some years ago a good logistics service
(punctuality, conformity of goods, no damages, flexibility) was a competitive
advantage in e-‐commerce and today is rather “must be”.
“The e-‐commerce market is evolving quickly and is increasingly demanding both in
terms of innovative business solutions and consumers expectations.”3 The logistical
needs of this market are diverse due to the increasing variety of delivered goods
(from books, through clothing, up to household appliances), with different values,
weight and volume. Customers also demand receiving information about the status
of the shipment, flexible delivery options and free returns of the goods with prepaid
label attached.4
OxfordDictionaries (2015)
1
2
Manners-‐Bell J. (2013, p. 238)
3
European Commission (2012, p. 5)
Dethloff J. (2015, p. 19)
4
3
2 E-‐commerce in Europe
“E-‐commerce is widely acknowledged as a key contributor to economic growth and
increasing employment levels across the European Union”5.
In 2013 the online revenue of goods and services in Europe reached almost €370
billion. In the next years a further increase is expected – up to €625 billion in 2016.
The European GDP reached €16,5 trillion in 2013, of which 2,2% resulted out of e-‐
commerce. This value is estimated to be triple by 20206.
The level of sophistication and popularity of e-‐commerce is very diverse in the
Member States of the European Union. While 82% of Internet users in the UK bought
something online in 2012, only 11% did so in Romania7 . The UK’s E-‐commerce
market is the largest in Europe with a total turnover of 107,2 billion euros. It’s
almost as much as Germany (€63 billion) and France (€51 billion) together.8 For
comparison, the turnover of e-‐commerce in the United States amounted in 2013 up
to $419 billion and in China $328 billion.9
E-‐commerce provides direct and indirect employment of about 2 million people in
Europe. It is estimated that the total number of e-‐business is approximately 645
thousand and they send more than 3,7 billion shipments annually. The average value
of the shopping cart in the EU is €1 376.10
3 Changes in logistics caused by e-‐commerce

11
E-‐commerce logistics is complicated and operationally complex. With the
introduction of e-‐commerce, the traditional logistics had been transformed. Some of
the major e-‐commerce characteristics that imposed new requirements on logistics
services are:12
• a larger number of on-‐line customers (mostly unknown to the seller) leads to
larger number of smaller parcels and packages
5
6
Ecommerce Europe (2013) European B2C Ecommerce Report 2013
7
European Commission (2013, p.18)
8
Ecommerce Europe (2013) Infographic Europe 2013 Key data at glance
9
Ecommerce Europe (2013) Infographic Global
10
Ecommerce Europe (2013) Infographic Europe 2013 Key data at glance
11
Kuo, B.J. (2014)
12
Bayles D.L. (2002)
4
• origins and destinations of shipments are more widely spread
• more customers place direct order with manufacturers and distributors
• accountability for shipments extends through the entire supply chain
• higher customer expectations about quality of service and higher demand for
fast delivery
• higher rate of return products back to the seller
• demand for online shipment tracking
• focus on one-‐to-‐one marketing (customized delivery)
• higher complexity in fulfilling international orders
• increase in the volume of small shipments leads to growth of demand for
warehousing transport and other logistics infrastructure
• greater scope for customer self-‐service
4 Logistics solutions for e-‐commerce

There are three possible ways of doing logistics for e-‐commerce business: in-‐house,
drop-‐shipping and one stop (outsourcing).
4.1 In-‐house
This first approach is the most popular. It allows full control over the companies
activates and there is no dependence on external contractors. The one of the biggest
challenges of in-‐house logistics comes with the situation when the number of orders
increases. This situation will require an additional man power and warehouse space,
in other words, more investments.13
4.2 Drop-‐shipping
Drop-‐shipping14 is a method where the stores don’t keep the products that they are
selling. When the store sells a product, it purchases it from the third party, a
wholesaler or manufacturer, and has it shipped directly to the consumer. As a result,
a merchant doesn’t stock or own inventory.
13
Kawa, A. (2014)
14
Shopify (2015)
5
Advantages of drop-‐shipping:15
• less capital is required: when starting an e-‐commerce store there is no need
to invest a lot of money in inventory up front
• easy to get started:
o no cost for a warehouse
o no packing and shipping
o no tracking inventory
o no handling returns
o no managing stock level
• low overhead: lower compared to traditional brick-‐and-‐mortar businesses as
there is no need for managing a warehouse and purchasing inventory
• flexible location: as long as one has access to the internet, he or she can run
and manage its business
• wide selection of products: because there is no need to pre-‐purchase the
products, a greater selection of products can be offered to customers
Disadvantages of drop-‐shipping:16

• high competition
• low margins: thanks to the high competition, prices for the products are very
low
• Inventory issues: high dependence on suppliers
• shipping complexities: due to the fact that multiply suppliers are used, there
will be different shipping costs for each of them (e.g. a customer makes an
order for three different products which are available from three different
suppliers)
• supplier’s errors
4.3 One stop e-‐commerce (outsourcing)

One-‐stop for e-‐commerce 17 is a service which specialized companies provide to
brands and e-‐retailers on outsourced bases. Most often, smaller retailers cannot
15
ditto
16
ditto
17
Kuo, B.F. (2014)
6
benefit from in-‐house logistics due to low volumes. The revenue for such companies
is made through a percentage of net sales that flow through the website or cost for
running an e-‐commerce channel. Such companies provide:18
• research analysis
• e-‐commerce site development
• web promotion
• customer care
• orders inventory management
• fulfillment (order placement, inventory management, shipment operations,
invoicing, and management of client data)
• delivery arrangements
One of the main advantages of one stop e-‐commerce is that the all operational
functions are managed at one place. In contrast, same as for doing in-‐house logistics,
there is a possibility of cannibalization of brick and mortar and wholesale businesses
through online sales.
5 Challenges in e-‐commerce logistics

The e-‐logistics is about speed, reducing operating costs and customer’s expectations.
There is a multitude of challenges for e-‐logistics. Some of them are delivery time;
availability of goods; fluctuation in demand; software application; lack of ICT
infrastructure and economic and educational barriers; geography challenges; etc.
5.1 Delivery time

Some of e-‐retailers fail to deliver the goods on time. They are either late or they
deliver goods outside the agreed timeslot. Furthermore, delivery operators are
under pressure to service their customers in the evenings or on Sundays. Also, cross-‐
border deliveries normally require longer delivery time than domestic deliveries and
they can be subject to delays because of the customs duties and import duties.19
18
TransCosmos (2015)
19
Bayles D.L. (2002)
7
5.2 Availability of goods
Limited availability or absence of certain goods in the warehouse is one of the
greatest weaknesses of e-‐commerce. Unfortunately, sometimes it happens that the
customer makes an online order believing that the good is available but it come up
that he/she must wait longer than usual for a delivery due to the absence of the
ordered good. This can discourage customers to buy from the same e-‐retailer in the
future.20
5.3 Fluctuation in demand

The difficulty in the use of online shops is a large variability in demand which causes
problems in the planning. It is difficult to predict the exact sale because an e-‐shopper
can be anyone who has access to the Internet. Fluctuations in demand also cause
difficulties in planning the number of employees of storage. E-‐commerce is seasonal.
Especially the demand increases during the holiday season.21
5.4 Software application

In e-‐logistics, the data is the most important. Handling of data is of great importance
to the company. Appropriate software and databases are needed. The movement of
data between different parties involved in buying, selling, and shipping goods is of
the key importance in e-‐logistics.22
5.5 Lack of ICT infrastructure and economic and educational barriers
Lack of Internet, standards of education and economic resources are problems of the
less developed countries who would like to adopt the use of e-‐commerce and its
associated activities.23
5.6 The challenge of geography

The delivery to the location of some customers -‐ poorly inhabited, hard to reach
places, away from the center -‐ can be quite challengeable.24
20
ditto
21
Kawa, A. (2013)
22
Bayles D.L. (2002)
23
ditto
24
ditto
8
6 Current trends in e-‐commerce logistics
6.1 Reverse logistics

E-‐commerce delivery also includes an important element of reverse logistics, where
consignments are shipped from the customer back to the e-‐retailer.
“Reverse logistics is the process of moving goods from their typical final destination
for the purpose of capturing value, or proper disposal”. 25 In recent years, the
number of returned goods purchased via the Internet has increased significantly. The
most common reasons are technical defects, delays in delivery, erroneous orders
and damages in transit. Unfortunately, some of the returns are made at the
customer's expense.26 For many customers, this is one of the major barriers to the
development of electronic commerce. Customers would buy more products, if they
had more opportunities or easier chance to return goods.
The biggest problem for e-‐buyers is the cost of delivery. In the case of returned
goods transportation has to be paid twice -‐ when the goods are sent in to the
customer and the customer returns them. Additionally to this there are also costs of
correction of invoices, inspection of goods and refund.
The current trend is to give a customer a return option “in advance”. The return
label is sent together with ordered goods (or by e-‐mail) and with all necessary
information. The sender bears all costs of return parcel. This requires additional
agreement between the online shop and the carrier. Easy and free of charge return
process helps to keep customer satisfaction even if the product was, for example,
defected.
The other trend in reverse logistic is an exchange of returned goods. The courier,
picking up the parcel from the customer and, at the same time, delivers the
substitute.
6.2 International trade (cross-‐border)

According to the European Commission a cross-‐border service is the future of e-‐
commerce but, on the other hand, the international delivery is considered to be an
obstacle. 57% of European retailers consider cross-‐border delivery as problematic,
25
Hawks, K. (2006)
26
Lupicka, A., Nowak, A. (2013)
9
while 46.7% of consumers declare they worry about the delivery in cross-‐border
transactions.27
One of the biggest barriers of cross-‐border trade is the cost of shipping. It was
observed that “cross-‐border delivery prices often are 3-‐5 times higher than domestic
delivery prices”28 what have a negative impact on e-‐commerce. There are also some
additional restrictions on sending shipments with high volume or weight as well as
delivery charges in advance. A possibly lower price of a product in a foreign country
doesn’t compensate the cost of delivery. Also, the delivery time is much longer (at
least a few days) and a day-‐to-‐day delivery is logistically almost impossible.
One idea to solve this problem would be market places where the shipments are
consolidated from various senders depending on the country of delivery. Parcel
brokers are able to offer lower price for the service to smaller e-‐commerce retailers.
National postal operators also started to cooperate with respect of common labels
(with information on the recipient’s name and address as well other necessary
information for processing a delivery) and common platforms (for example
emonitoring.poczta-‐polska.pl) for tracking parcels sent abroad.29
6.3 IT solutions
Information technology plays a key role in e-‐commerce not only because it’s
necessary to start an online shop, but also to exchange all necessary information.
New IT solutions support more than the selling process but also integrate the whole
supply chain. The most important is the all-‐time availability of information about the
current stock level – especially if 3PL also provides warehousing and transportation
service. After selling any good, the information should go immediately to the
warehouse where the package will be then prepared for sending. The customer
should receive an update about every important step (acceptance of the order,
receiving payment, preparing a package, sending for transportation etc.) and have a
possibility to track the parcel.
One solution is to incorporate e-‐retailer’s module with 3PL’s system. A database of
the seller can be integrated with a database of the logistics company by using an ERP
27
28
29
10
(enterprise resource planning) system. ERP uses common database of all
applications, which results in more effective operation performed almost in real
time. Unfortunately, the implementation of this system is mostly time consuming
and requires identifications of all business functions.
Another option is “easy-‐to-‐use seller tools”. UPS for example offers ready solutions
for the seller active on the biggest marketplaces (e.g. Amazon, eBay) which simplifies
a shipping process by printing labels, and getting detailed tracking information 24
hours a day, directly from the online shopping platform.
Using this kind of solution is also helpful if the e-‐seller wants to expand its activity –
for example in the foreign country.30 Being supported by well-‐known parcel service
operator is a kind of guarantee for quick delivery good shipping service and may help
to gain more customers abroad.
The logistics companies provide also marketplaces where e-‐sellers can start the
activity and obtain favorable commission rates. An example for this can be
meinpacket.de – the online platform powered by DHL.31 Using this kind of solution
enables faster delivery and lower shipping price. Retailers registered on this platform
are some kind of priority.
Another important function of information technology in logistics is a parcel
tracking. Most of the shops send a tracking number by which the customer can
check 24/7 were the package is and was. Unfortunately, the current solutions
provide only the information from logistics centers. We can easily check when our
parcel was send, from where and when it reached the next point. The innovative
idea is to use GPS system for tracking parcels. This solution would provide a
possibility to track the parcel in real-‐time also during transportation process. With a
total integration between e-‐commerce platform and logistics providers and
dedicated customer interface, this shift would also allow to change destination by
the customer in the real time.32 Of course this option requires some limitations like
area within the delivery location can be changed as well as the last point when the
new destination can be still requested.
30
UPS (2015)
31
Mein Paket (2015)
Lierow M., Jansses S., D’Inca J. (2014, p.5)
32
11
6.4 Same-‐day delivery
In terms of new delivery solutions, logistics service providers for e-‐retailers have to
be faster, and more innovative. In recent years e-‐commerce companies are making
same-‐day delivery their priority. Same-‐day system enables to receive the parcel at
the day of shipment and it’s used for a local service or when immediately delivery.
There are three standard models used for same-‐day delivery. The most common
solution is using a courier network. This model is based on integration of retailers
and local curriers, who can deliver goods even within few hours or during time-‐
window required by customer. With this solution even small or medium size sellers
can provide same-‐say delivery service in the given urban area. It is also fast and easy
to implement as the searching of the currier is done by brokers. The problems might
arise form the necessity to provide real-‐time overview of all inventories in all
locations (stores, warehouses).
Many of the grocery retailers use their own delivery fleet since this kind of business
may require special kind of trucks (for example refrigerated vans). With this option
they can keep control over the whole delivery process. Unfortunately, this solution is
relatively expensive. Company has to invest in the fleet and be flexible to meet
fluctuations in consumers demand. The volume and the quantity of operations have
to be significant to provide low cost service.33 Additional to this the current trend is
to focus on core competences and outsourcing rather than keep additional activities
in-‐house.
Postal providers or parcel carriers also offer same-‐day solution. This solution is
cheaper than a courier service mentioned before but it’s better for bigger companies
with a higher volume of shipping. The model requires postal provider to be more
flexible and move form the standard hub-‐and-‐spoke system. The solution can be a
parcel kiosk. The goods can be received from the seller and delivered to the
dedicated point selected by customers. The set of parcels for different customers is
delivered to the same location form where each parcel can be collected in the any
Lierow M., Jansses S., D’Inca J. (2014, p.8)

33
12
convenient time period. Kiosks can be located close to work places or commercial
facilities, not necessary in the area where they live.34
7 Conclusion
Precise and secure delivery of purchased goods is the key element of the process of
online shopping and the use of Internet as a medium of commerce today. The
successful delivery logistics can single-‐handedly increase the attractiveness of online
retailer and therefore contribute to the overall success of their website, disregarding
the quality of other elements in the process of online shopping. With the constant
increase of the share which online shopping holds in the market today, the
expectations of the customer -‐ the final link in the chain, will continue to grow.
Customers are often willing to make compromises when it comes to price of the
goods they buy online and to pay more for the quality they get in that way; but they
are rarely willing to compromise on the quality of the shipment of purchased goods,
disregarding the price. According to everything presented in this analysis, we may
conclude that the e-‐commerce delivery logistics will continue to experience further
pressure in fulfilling constantly increasing customers’ expectations for a secure,
precise and fast delivery.


34
13
References:

Bayles D.L. (2002) E-‐logistics & e-‐fulfillment: beyond the “buy” button. Retrieved
March 23rd, 2015, from:
http://r0.unctad.org/ecommerce/event_docs/curacao/bayles.pdf

Dethloff J. (2015) presentation “Logistics – Introduction and Overview”

Ecommerce Europe (2013) European B2C Ecommerce Report 2013. Retrieved March
23rd, 2015, from: www.ecommerce-‐europe.eu/news-‐
articles/publications/2013/european-‐b2c-‐ecommerce-‐report-‐2013

Ecommerce Europe (2013) Infographic Europe 2013 Key data at glance. Retrieved
March 23rd, 2015, from: www.ecommerce-‐europe.eu/facts-‐figures/infographics -‐
report Key E-‐commerce data Europe 2013

Ecommerce Europe (2013) Infographic Global. Retrieved March 23rd, 2015, from:
www.ecommerce-‐europe.eu/facts-‐figures/infographics -‐ report E-‐commerce data
Global 2013

European Commission (2012) Green Paper -‐ An integrated parcel delivery market for
the growth of e-‐commerce in the EU. Retrieved March 19th, 2015, from:
http://ec.europa.eu/internal_market/consultations/docs/2012/parcel-‐
delivery/121129_green-‐paper-‐parcel-‐delivery_en.pdf

European Commission (2013) E-‐commerce and delivery; A study of the state of play
of EU parcel markets with particular emphasis on e-‐commerce. Retrieved March
20th, 2015, from:
http://ec.europa.eu/internal_market/post/doc/studies/20130715_ce_e-‐commerce-‐
and-‐delivery-‐final-‐report_en.pdf

Hawks, K. (2006) What is Reverse Logistics? Retrieved March 20th, 2015, from:
www.rlmagazine.com/edition01p12.php

Kawa, A. (2013) Szczyt paczkowy w polskiej branży KEP. Retrieved March 23rd, 2015,
from: http://finanse.wp.pl/kat,1033691,title,Szczyt-‐paczkowy-‐w-‐
Polsce,wid,16247251,wiadomosc.html?ticaid=114a55

Kawa, A. (2014) Logystika e-‐handlu w Polsce

Kuo, B.F. (2014) How onestop internet is powering ecommerce for brands. Retrieved
March 23rd, 2015, from:
http://www.socaltech.com/how_onestop_internet_is_powering_ecommerce_for_br
ands/s-‐0058208.html

14
Lierow M., Jansses S., D’Inca J. (2014) Disruptive logistics. New Frontier for e-‐
commerce. Retrieved March 26th, 2015, from:
http://www.oliverwyman.com/content/dam/oliver-‐
wyman/global/en/2014/sep/MUN-‐MKT20101-‐011_screen12.pdf

Lupicka, A., Nowak, A. (2013) Logistyka zwrotna źródłem zwiększania
konkurencyjności firm w łańcuchach dostaw. Retrieved March 20th, 2015, from:
www.logistyka.net.pl/bank-‐wiedzy/logistyka/item/85904-‐logistyka-‐zwrotna-‐
zrodlem-‐zwiekszania-‐konkurencyjnosci-‐firm-‐w-‐lancuchach-‐dostaw

Manners-‐Bell, J. (2013) Global Logistics Strategies: Delivering the Goods

Mein Paket (2015) Über MeinPaket.de. Retrieved March 23rd, 2015, from:
http://www.meinpaket.de/de/article/uebermeinpaket/view.html;jsessionid=1F8383
3FAA68B5A6F951C5E2B5F48152.as00?tid=FO_3a

OxfordDictionaries (2015) Definition of e-‐commerce. Retrieved March 19th, 2015,
from: www.oxforddictionaries.com/definition/english/e-‐commerce
Shopify (2015) The ultimate guide to dropshipping. Retrieved March 23rd, 2015,
from: https://ecommerce.shopify.com/guides/dropshipping

TransCosmos (2015) Global e-‐commerce one-‐stop services. Retrieved March 24th,
2015, from: http://www.transcosmos.net/downloads/service/ec/global-‐ec_e.pdf
UPS (2015) Easy E-‐commerce. Retrieved March 23rd, 2015, from:

www.ups.com/content/us/en/bussol/browse/enable-‐ecommerce.html

15

Thảo luận-Logistics - in - E - commerce

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Thảo luận-Logistics - in - E - commerce

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Logistics in E-‐commerce

3 Changes in logistics caused by e-‐commerce

4 Logistics solutions for e-‐commerce

Disadvantages of drop-‐shipping:16

4.3 One stop e-‐commerce (outsourcing)

5 Challenges in e-‐commerce logistics

5.1 Delivery time

5.3 Fluctuation in demand

5.4 Software application

5.6 The challenge of geography

6.1 Reverse logistics

6.2 International trade (cross-‐border)

Lierow M., Jansses S., D’Inca J. (2014, p.8)

European Commission (2013, p.134)

UPS (2015) Easy E-‐commerce. Retrieved March 23rd, 2015, from:

You might also like

Thảo luận-Logistics - in - E - commerce

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Original Title

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Thảo luận-Logistics - in - E - commerce

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Copyright:

Available Formats

Logistics in E-­‐commerce

3 Changes in logistics caused by e-­‐commerce

4 Logistics solutions for e-­‐commerce

Disadvantages of drop-­‐shipping:16

4.3 One stop e-­‐commerce (outsourcing)

5 Challenges in e-­‐commerce logistics

5.1 Delivery time

5.3 Fluctuation in demand

5.4 Software application

5.6 The challenge of geography

6.1 Reverse logistics

6.2 International trade (cross-­‐border)

Lierow M., Jansses S., D’Inca J. (2014, p.8)

European Commission (2013, p.134)

UPS (2015) Easy E-­‐commerce. Retrieved March 23rd, 2015, from:

You might also like

Logistics in E-‐commerce

3 Changes in logistics caused by e-‐commerce

4 Logistics solutions for e-‐commerce

Disadvantages of drop-‐shipping:16

4.3 One stop e-‐commerce (outsourcing)

5 Challenges in e-‐commerce logistics

6.2 International trade (cross-‐border)

UPS (2015) Easy E-‐commerce. Retrieved March 23rd, 2015, from: