(TIỂU LUẬN) thảo luận logistics international sourcing and procurement logistics

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 Introduction E-‐commerce in Europe Changes in logistics caused by e-‐commerce Logistics solutions for e-‐commerce 4.1 In-‐house 4.2 Drop-‐shipping 4.3 One stop e-‐commerce (outsourcing) Challenges in e-‐commerce logistics 5.1 Delivery time 5.2 Availability of goods 5.3 Fluctuation in demand 5.4 Software application 5.5 Lack of ICT infrastructure and economic and education 5.6 The challenge of geography Current trends in e-‐commerce logistics 6.1 Reverse logistics 6.2 International trade (cross-‐border) 6.3 IT solutions 6.4 Same-‐day delivery Conclusion References: 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” E-‐commerce is getng 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” 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.” 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) Manners-‐Bell J (2013, p 238) European Commission (2012, p 5) Dethloff J (2015, p 19) E-‐commerce in Europe “E-‐commerce is widely acknowledged as a key contributor to economic growth and increasing employment levels across the European Union” 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 2020 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 Romania 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 For comparison, the turnover of e-‐commerce in the United States amounted in 2013 up to $419 billion and in China $328 billion E-‐commerce provides direct and indirect employment of about 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 Changes in logistics caused by e-‐commerce E-‐commerce logistics is complicated and operationally complex 11 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 European Commission (2012, p 2) Ecommerce Europe (2013) European B2C Ecommerce Report 2013 European Commission (2013, p.18) Ecommerce Europe (2013) Infographic Europe 2013 Key data at glance Ecommerce Europe (2013) Infographic Global 10 11 Ecommerce Europe (2013) Infographic Europe 2013 Key data at glance Kuo, B.J (2014) 12 Bayles D.L (2002) • 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 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 4.2 13 Drop-‐shipping Drop-‐shipping 14 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) 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) • 4.3 supplier’s errors One stop e-‐commerce (outsourcing) 17 One-‐stop for e-‐commerce is a service which specialized companies provide to brands and e-‐retailers on outsourced bases Most ofen, smaller retailers cannot 15 ditto 16 ditto 17 Kuo, B.F (2014) 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 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; sofware 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) 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 5.3 20 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 5.4 21 Software application In e-‐logistics, the data is the most important Handling of data is of great importance to the company Appropriate sofware 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 5.5 22 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 5.6 23 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 20 21 22 23 24 24 ditto Kawa, A (2013) Bayles D.L (2002) ditto ditto 6.1 Current trends in e-‐commerce logistics 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 26 expense 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) 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 ofen 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 6.3 29 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 Afer 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 European Commission (2012, p 3) 28 European Commission (2013, p.27) 29 European Commission (2013, p.28) 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 getng 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 shif 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) 32 Lierow M., Jansses S., D’Inca J (2014, p.5) 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 33 Lierow M., Jansses S., D’Inca J (2014, p.8) 12 convenient time period Kiosks can be located close to work places or commercial facilities, not necessary in the area where they live 34 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 ofen 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 European Commission (2013, p.134) 13 References: Bayles D.L (2002) E-‐logistcs & e-‐fulfllment: beyond the “buy” buton Retrieved March 23rd, 2015, from: http://r0.unctad.org/ecommerce/event_docs/curacao/bayles.pdf Dethloff J (2015) presentaton “Logistcs – Introducton 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 partcular 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 Logistcs? 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) Logystka 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) Disruptve logistcs New Fronter 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 frm 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 Logistcs 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) Defniton of e-‐commerce Retrieved March 19th, 2015, from: www.oxforddictionaries.com/definition/english/e-‐commerce Shopify (2015) The ultmate 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 ... selling, and shipping goods is of the key importance in e-? ?logistics 5.5 22 Lack of ICT infrastructure and economic and educational barriers Lack of Internet, standards of education and economic... doing in- ‐house logistics, there is a possibility of cannibalization of brick and mortar and wholesale businesses through online sales Challenges in e-‐commerce logistics The e-? ?logistics is about... 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 Changes in logistics caused by e-‐commerce E-‐commerce logistics