Erim Conf 16nov01

7/31/2019 Erim Conf 16nov01

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R(e) Logistics - an overview

Prof. Rommert Dekker

B2C

- various products, food, advantages to companies

B2B

- various models, info exchange, reverse logistics


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e-logistics - B2B

Logistics is a critical success factor for e-commerce (Christmas 99)

Delivery options to customer

1. electronically (advice, software, electronic cards)

2. by mail (tickets, subscriptions, CDs)

3. parcel carriers, like TNT(books, toys, etc)4. by delivery services (furniture, TVs, PCs, refrigerators)

5. by specialised (cooled) transport (food)

In case of 1,2 customers do not need to be at home. In case 3,4,5

he/she does. Time is critical in case of 5. Logistics cost decrease if

multiple customers can be served in one run.

Alternatives: delivery at work, at gasoline stations, cooling box at

home, works in some cases.


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Delivery of food

Many failures: Webvan, Makro online, Peapod

Delivery options:

Store - advantages

no extra infrastructure needed, close to customers

Fulfillment centres - advantages

easier and paperless picking, no cash-register, cheaper

locations, larger assortment

Ahold: bought Peapod: limit home service to densely populated

areas, offer several delivery windows, combine with drugstore,

liquor store in fulfillment centres.

Marginal business: consumer does not want to pay for his own

time!


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Warehousing - consequences

Many small parcels to be packed in a limited amount of time:

this requires different material handling techniques,like pick-to-belt and faster packing (see de Koster et al)

Mail order companies like Wehkamp have successfully picked

up e-commerce, as they had already the right marketing and

logistical experience!


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Advantage e-commerce to companies I

E-commerce allows centralisation of stocks

e.g. Amazon uses few Distribution centres against manyindividual bookstores of Barnes and Noble (or Bruna)

Inventory centralisation pays off most for expensive, slow

moving products with high demand variability (not for cheapbestsellers!)

Many more books can be held on stock centrally (100.000 vs

10.000 in a store)

Inventory savings have to be balanced against higher

transportation costs and less impulse buyings.

Hence model works better for PC manufacturer DELL than for

Amazon.


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Advantage e-commerce to companies II

E-commerce allows product customisation to consumer needs.

E.g. customer composes a PC (harddisk, processor, memory,

supplies) himself. Then PC manufacturer assemblies it from

component stocks and transports it to customer (DELL case)

Advantage: no obsolete inventories (costs: 3% per month!)

react faster to market changes.

DELL forces suppliers to keep stock at its assembly plants

(Vendor Managed Inventory), hence it has negative stock costs

(because customer is charged earlier than vendors are paid!)

Model only possible for easily configurable goods.


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One main problem for e-commerce: returns

Data (Gentry 1999) on % of returns- 6% for general products

- 15% for mass products

- 35% for catalogue sellers and e-tailers

Striking example: cloths sold through internet

Issues:

- how to return (by mail, or collect)

- how to handle returns (in warehouse, return centre)- administration (refunds, VAT, customs!)

- what to do with returns (re-use, remanufacturing, recycle)

Return management is needed


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B2B - logistics - subjects

portals and market places for transportation services

web platforms for information exchange

tracking and tracing supply chains

new organisational forms for logistical services

(hypermediators)

new business models for reverse logistics


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Portals and Market places for transportation services

Transportation is often a commodity (airlines, shipping,

trucking)

product can be well-defined

administration cumbersome

transportation is a perishable good large inefficiencies in transportation (many truck drive empty

or half full)

Portals and electronic market places make market more visible.Many were set up, only few survive. Open models led to very

low prices and bad services. Closed market places work.


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Web platforms for information exchanges

Document flow connected to container transport is enormous

(250 messages per container; many parties involved)Large cost for entering info, large cost due to bad info, large

logistical inefficiences

In past in Rdam: EDI initiativesyet EDI is mainly point to point and expensive

Other ports have set up webplatforms acting like information

hubs (Portnet Singapore), which store info in a central

database and on which extra applications can be run

Rdam - behind, by EDI applications and the lack of a central

director (and too much focus on physical aspects)


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Tracking and tracing supply chains

Many supply chains involve multiple parties and multiple

activities. Controlling supply chain is very important for

providing customer with right products at the right time.

Quite often things go wrong or change and actions are needed,

which should be based on actual info of status of goods

(e.g. products do not arrive at customer: where are they)

Tracking and tracing products / containers in the chain and

making this info available through web is vital

Courier services like UPS provide this service for packages.

Will shipping lines, airlines or logistic service providers do

this in the box / container sector?


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Virtual organisations in supply chains

Efficient logistics requires coordination of many different

parties (shipping / airlines, trucking companies, rail / bargecompanies, warehouses, customs, banks, insurers,

authorities, etc)

and economies of scale in goods transported.

Virtual web based companies have been set-up to coordinate

whole supply chains, buying various transportation activities

Traditionally forwarders bundle small shipments in harbours in

a manual way.

Will these virtual companies have the market power to survive?


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New business models in reverse logistics

Return aggregators

bring together suppliers and customers, automatesprocurement of returns

ebay, www.qxl.com, www.metalsite.com

specialty locatorsvertical portals focused on a specific target segment

www.find-a-part.com, www.bigmachines.com

integrated solution providers

use IT to offer matching of demands and returns and other

target-specific services

www.returnlogistics.com, www.pharmacyreturns.com

(see Kokkinaki et al 2001)


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Properties new business models

Characteristics

A inclusion of reverse logistic activities (collection, inspection,sorting, remanufacturing)

B level of control (take ownership of products, arrange

transport, etc)

C added value

Return aggregators: A low, B low, C medium

Specialty locators: A high B medium C high

Integrated logistic providers: A medium, B high, C medium

Documents

Erim Conf 16nov01