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eCommerce Workshop
Auckland, June 24, 2004
B2C-Logistics in German Mail-order -Flow system modelling and empirical case studies
Dipl.-Kfm. Jörn Herrmann, MScPhone: +49.175.318.1386E-Mail: [email protected]
1
ABSTRACT
B2C-Logistics has developed to be a decisive competitive factor in the German mail-order industry. Through the impact of Electronic Shopping the influence of B2C-Logistics is growing. Our application of research in logistics is based on a qualitative model to describe and explain B2C-Logistics systems in Germany. It includes the trade-offs in the system between its effectiveness and efficiency, the structure dimensions and the environment conditions. In our flow system model we distinguish four structure dimensions: Goods network, data network, relationship network, and institutional network, that need to be managed in different ways following individual goals. The model was adapted to six case studies in the German mail-order and parcel network industry.
***
Jörn Herrmann is a researcher at the department of Business Administration and Logistics of Marburg University, Germany. Before and during his research he worked as a consultant with McKinsey & Company mainly in the logistics and mail-order sector. He studied Operational Research in Southampton, U.K. and Economics/Finance in Hagen, Germany.
2
AGENDA
• Industry background: B2C-Logistics most decisive competitive factor in German mail-order
• Flow systems model to describe and explain B2C-Logistics systems: Parallel network management necessary
• Empirical case studies in mail-order and parcel network industry validate qualitative model
3
AGENDA
• Industry background: B2C-Logistics most decisive competitive factor in German mail-order
• Flow systems model to describe and explain B2C-Logistics systems: Parallel network management necessary
• Empirical case studies in mail-order and parcel network industry validate qualitative model
4
3 phases of development:• 70s: Introduction of new logistics-services • 90s: Boom through German reunification • since 2000: Innovations through Electronic Shopping
DEVELPOMENT OF MAIL-ORDER IN GERMANY
1970 1975 1980 1985 1990 2000Share of total retail spendigsin percent
4,3 4,6 5,5 4,4 4,1 5,6
1995
5,8
21,0
11,6 11,4 15,0
20,6 21,2
6,7 4,3
2003
in bn. EUR p.a.
6,0
Growth (CAGR)in percent
+9,3 +11,6 -0,3 +5,6 +6,6 -0,3+0,6
2010
Source: HOFFMANN (2002), pg.17.
5
USAGE OF SALES CANNELS IN GERMAN MAIL-ORDER
1-Channel-Customers2-Channel-Customers3-Channel-Customers
Classic mail-order **Total 48,1 (48,6)
Online ShoppingTotal 26,3 (15,4)
TV ShoppingTotal 6,3 (7,0)
in percent of total population in 2004 (in brackets 2002)*
3,8 (4,9) 14,0 (8,5)
1,1 (1,0)
1,0 (0,9)
10,2 (5,0)
29,3 (34,4)
0,4 (0,2)
* N=1000 (1004) representative German inhabitants > 14 years with telephone access** Catalogue, booklets
Source: DEUTSCHES VERSANDHANDELS-INSTITUT (2002, 2004) pg. 1-17.
• Classic mail-order continues to be the dominating sales channel with decreasing influence which is mainly driven by a strong decrease in 1-Channel-Customers (-5,1-pp.)
• Strong growth in Online Shopping (Total +10,9-pp.)
6
Mail-order expertise area
SUITABILITY OF PRODUCT GROUPS FOR ELECTRONIC SHOPPING
4,0
3,5
3,4
3,4
3,3
3,2
3,0
2,9
2,8
2,6
2,6
2,3
1,9
1,4
Books/CDs/DVDs
Which product groups are suitable for distribution via Electronic Shopping (0= not suitable ; 4= very suitable)?
Telecommunication
Computer (HW/SW)
Photo
HIFI
Small Electronics
DIY
Apparel
Cosmetics
Pharmacy
White goods
Jewellery
Furniture
Food
Source: Company-Survey Marburg University.
3,9
3,5
3,3
2,5
2,3
2,6
1,6
2,1
3,5
3,0
3,0
2,4
2,5
2,0
1,7
1,4
2003 (N=55) 2000 (N=19) 1997 (N=21)
n.a. n.a.
n.a. n.a.
n.a. n.a.
n.a. n.a.
7
EVALUATION OF ATTRACTIVENESS OF PRODUCT GROUPS
Comparability from customer's viewpoint
Challenges in distribution logistics
Key drivers
• Market price transparency • Observable quality
differences • Involvement in buying
process
• Time pressure for delivery
• Risk of theft and pilferage
• Volume/weight/ handling of products
Source: Marburg University.
Evaluation matrix
Co
mp
arab
lity
of
pro
du
ct g
rou
ps
Challenges in distribution logistics
low
high
high low
Competition area
Expertise in assortment
Expertise in logistics
Risky area
8
AGENDA
• Industry background: B2C-Logistics most decisive competitive factor in German mail-order
• Flow systems model to describe and explain B2C-Logistics systems: Parallel network management necessary
• Empirical case studies in mail-order and parcel network industry validate qualitative model
9
Holistic view of
B2C-Logistics
Text
FLOW SYSTEM MODEL TO DESCRIBE AND EXPLAIN B2C-LOGISTCS
Effectiveness Effectiveness and Efficiencyand Efficiency
Structure Structure dimensionsdimensions
Environmental Environmental conditionsconditions
DescriptionDescription
Inter-organisational description and explanation of organisations, systems, and processes
Analysis of process execution and systems regarding to input/output relations
Definition of environmental factors and external frame of B2C-Logistics
Source: GÖPFERT (2001b), pg. 60.
10
ENVIRONMENTAL CONDITIONS OF B2C-LOGISTICS - OVERVIEW
Examples for influencing factors
Socio-economical development
Production technology
Political / legal factors
Impact on model parameters
Influence on stability and robustness of business models
Impact of innovations on efficiency/effectiveness, and stuctural dimensions
Basis of business models in mail-order, parcel network logistics and return management
• Regulatory-, price-, and investment policy
• Distance trade law• Contract law, corporate law
• Traffic infrastructure • Warehousing-technology• IT-systems (e.g. RFID)• Delivery technology ("Last
Mile")
• Customer characteristics• Cost of factor input • Market volume / growth• Development of population
1
2
3
Source: Marburg University
11
STRUCTURAL DIMENSIONS OF B2C-LOGISTICS -GOALS AND CONNECTIONS
Goods networkCreation of customer value & ROIC
Institutional networkEnabling of (idiosyncratic) investments
Relationship networkCooperative decisions for cooperative production
Data networkTransparency for cooperative decisions and production
Source: OTTO (2002A), pg. 271.
12
EFFECTIVENESS AND EFFICIENCY - APPROACH AND ANALYSES
Source: WISSEN (2003), Marburg University
Input network flow
Inhibiting factors inherent to the network
Output perfor-mance indicators
Material
Information
People and processes
Variability
Waste
Inflexibility
Quality
Cost
Service
ROIC (Return on Invested Capital)
The flow system model of B2C-Logistics is inhibited by variability,
waste, and inflexibility
13
AGENDA
• Industry background: B2C-Logistics most decisive competitive factor in German mail-order
• Flow systems model to describe and explain B2C-Logistics systems: Parallel network management necessary
• Empirical case studies in mail-order and parcel network industry validate qualitative model
14
GOOD FLOWS IN MAIL-ORDER
Source: GÖPFERT (2000B), pg. 118.
Sourcing/ Purchasing
Procure-ment/Import
Warehousing/Picking and Packing
ConditioningStorage/Further use
Distribution-logistics
Retro distribution-
logistics(Returns)
Classical retail businessB2C parcel network
Return management
Customer
1. 2.
3.
15
CASE EXAMPLE LOGISTICS CENTRE OF MAJOR MAIL-ORDER COOPERATION
Case studies:- two major mail-order corporations
- one TV shopping retailer
Sourcing/ Purchasing
Procure-ment/Import
Warehousing/Picking and Packing
Classical retail business1.
Source: Marburg University
16
CASE EXAMPLE B2C PARCEL NETWORK
Case studies:- German Post- Private parcel network
Distribution-logistics
Retro distribution-
logistics(Returns)
B2C parcel network
Customer
2.
Source: Marburg University
17
CASE EXAMPLE RETURN MANAGEMENT AT MAJOR MAIL-ORDER COOPERATION
Case study- major mail-order cooperation
ConditioningStorage/Further use
Return management3.
Source: Marburg University
18
Panta rhei - everything flows.(Heraklit)
References:
Deutsches Versandhandels-Institut (2002) Deutsches Versandhandels-Institut: Versandhandel,Emnid-Studie, FID Verlag, Frankfurt 2002.
Deutsches Versandhandels-Institut (2004) Deutsches Versandhandels-Institut: Versandhandel,Emnid-Studie, Bielefeld 2004.
Göpfert (2000B) Göpfert, I. : Entsorgungslogistik, in: Klaus, P./Krieger, W., Gabler Lexikon Logistik, 2., vollst. überarb. u. erw. Aufl., Wiesbaden 2000.
Göpfert (2001B) Göpfert, I. (Hrsg.): Logistik der Zukunft - Logistics for the Future, 3., akt. u. erw. Aufl., Wiesbaden 2001.
Hoffmann (2002) Hoffmann, D.: Versandhandel in Deutschland - eine Informationsschrift des Bundesverbands des deutschen Versandhandels, 5., erw., erg. u. akt. Aufl., Frankfurt 2002.
Otto (2002A) Otto, A.: Management und Controlling von Supply Chains, Wiesbaden 2002.
Wissen (2003) McK Wissen 2, Nr. 5, 2003.
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