Research of Network Expansion Model of Logistics Enterprise Based on Chain
Operation
Rui-yu Pan, Wei Wang, Qing Wan
Department of Management, Zhejiang Shuren University,HangZHou, China
(pry777@163.com)
Abstract - At present, the dispersion of logistics
resources and the lack of effective cooperation in
organization are two main problems about development of
the logistics industry in our country. These result in the huge
waste in logistics activities and the low of logistics service
ability. This paper demonstrates that the logistics enterprise
chain management and innovation would be an important
way to improve competitiveness of logistics enterprises and
integrate Idle logistics resources in our country. This paper
indicates three models of network expansion of logistics
enterprise based on chain operation: regular chain;
franchise chain and voluntary chain. And according to the
characteristics of three chain operation modes, this paper
suggests the different levels of logistics enterprise to use
different chain operation mode.
Keywords - logistics enterprise, logistics enterprise,
network expansion
I. BACKGROUND
In the recent 20 years, the continued rapid growth has
been realized in Chinese logistics industry. The total
amount of the national social logistics raised from 3
trillion in 1991 to 125.4 trillion in 2010 . Growth 40
times, with an average annual growth rate of 21.7%. But,
total social logistics cost per GDP reduced from 24.0% in
1991 to 17.8% in 2010, with an average annual reduced
rate was only 1.56%. total social logistics cost per GDP is
an important index to
judge the logistics operation
efficiency and modernization degree in a country. High
level of total social logistics cost per GDP indicated that
the development of the logistics industry in China only
reflected in the volume growth, but the whole society
logistics operation efficiency was still low. the dispersion
of logistics resources and the lack of effective cooperation
in organization were two main problems about
development of the logistics industry in our country.
These resulted in the huge waste in logistics activities and
the low of logistics service ability[1].
From the point of view of socialization division of
labor, the development of the logistics industry could
produce the expected benefits only based on scale
operation. But logistics enterprise constructions cannot
expand unlimitedly because of the limit of the logistics
demand and management ability, and the division of
professional also limits logistics enterprise integration
expansion. On the other hand, network organization with
double characteristics and advantages can give
consideration to the market and enterprise. So it has both
economies of scale and can avoid the "big enterprise
disease"[2]. Therefore, the research and innovation of the
logistics network would be an important way to improve
competitiveness of logistics enterprises and integrate Idle
logistics resources in our country[3].
Now, the related research about logistics network
mainly concentrated in the logistics network planning in
manufacturing enterprise, large circulation enterprise and
its service agencies to resolve the problem about the
location of network facilities, the service distribution and
routing arrangement[4,5]. But related research about
logistics network is seldom standing in the point of view
of the logistics enterprise. The existing focuses on the
optimization homework, logistics functions or link
logistics facilities, such as the research of distribution
system, inventory system, information system [6],in stead
of the mode of logistics enterprise network expansion and
ways of operating. Therefore, this paper tries to discuss
the logistics enterprise network operation problem, and
organizing logistics enterprise network taking example by
the experience of chain operation concept standing in the
point of view of the logistics enterprise.
II. THE EXPANSION MODE OF LOGISTICS
ENTERPRISE NETWORK BASED ON CHAIN
OPERATION
Chain management that an associated unit is made
up of several branches under the unified leadership of the
headquarters to take part in business activities is a kind of
modern management and organization form. It stressed
professional specialization under the overall planning and
centralized management based on the work division to get
the scale benefits. There are three types of chain
operation, regular chain, franchise chain and voluntary
Chain, respectively. These three forms always keep a
vigorous vitality and exist widely in retail, catering
industry and many services from production to today.
Retail chain, franchise chain and voluntary chain,
Although at present, successful cases that chain operation
applies to logistics industry is rarely, it provides a
innovation mode to the network expansion of logistics
enterprise.
A. Regular Chain
A organization form of enterprise that the same
capital owner has its assets and direct management shops
to manage similar goods and services. By direct
investment to set up shop whose assets belong to
investors, they make unified accounting and management.
The store has no independent assets and legal status and is
operated by centralized and unified management from the
company's headquarters.
What is regular chain is logistics enterprise establish
its chain enterprise in a new location to help itself to
expand business. There two ways to increase their regular
chain logistics network one is direct whole investment by
themselves, the other is the form of merger and holding.
Logistics enterprises generally try to establish a
"standard company", and simplify and regulate it roundly
from location selection, system constituting, personnel
management, business operation and management . And
then copy branches according to "standard shop" .
The company headquarters operate, invest and
manage directly. Headquarters take depth and breadth
management way to control all subsidiary directly, and all
subsidiary accept orders forthwith with cooperation each
other. Outlets accept mutual cooperation headquarters. It
emphasizes the overall planning of professional division
of work on, in the division of labor based on the
implementation of the centralized management, in order
to get the scale benefits. It stressed professional
specialization under the overall planning and centralized
management based on the work division to get the scale
benefits.
Its business operation model is headquarters
centralized type for logistics operation. It adopts vertical
management, that is, in the logistics network, there is only
a command center, and all else is operating point.
B. Franchise chain
Franchise chain is a modern organization form. The
franchisor confer the franchisee for regulated period and
area trade rights and use rights of exclusive goods,
services and business system (including trademark, trade
name, the use of the business enterprise symbol,
technology, business premises and regional) according to
contracts. The franchisee according to the stipulations of
the contract perform business activities in unity business
mode set up by franchisor and should pay the
corresponding cost to franchisor[7].
The equality and mutual benefit cooperation
relations between franchise chain logistics enterprise and
charter logistics network authorized by itself. Logistics
enterprise headquarters and its joined enterprise belong to
different capital owner, namely of logistics network
afforded the capital of establishment and it has their own
independent property and status of legal person. Franchise
chain logistics enterprise usually doesn't take compulsory
measures to charter logistics in management. On one
hand, it formulates the rights and obligations of the parties
according to the franchise contract; on the other hand, it
guides business behavior of franchise store through the
effective service, guidance and supervision.
Joined enterprises perform business activities based on
contract, and should be ready to accept inspection and
supervision by headquarters a, violate compasses to
accept any time. If illegal should accept punishment.
C. Voluntary chain
Voluntary chain is the formation of network
organization which is combined by those enterprise with
the qualifications of independent legal for the common
interests. Usually, the some enterprise as a leader in this
network attracts others alliance based on the principle of
complement each other's advantages and resources
integration and restrict the behavior of all parties and
sustain economic relationship on the basis of contract.
Voluntary chain mode of logistics enterprise has the
following features:
(1)The joining trader have ownership of the
enterprise and independent legal status. The stores
cooperate on the basis of upholding the independent legal
status each other and keeping the original of the assets of
the ownership. Each franchisee operates with independent
accounting, admission of their own profits and losses,
personnel
independent
arrangement,
implement
differentiation, and personalized management[8].
(2)Two kinds of the form of cooperating between the
leading enterprise and alliance, one is cooperation based
on similarity, the other is cooperation
based on
complementary.
Similarity cooperation refers to leading enterprise
and each store have similar logistics capability and
logistics resources, to cooperate complete logistics
activities through the new configuration resources. Its
achievement is a formation economy of scale in a short
time, share the risk and cost. Complementary cooperation
is made up by partner with different core ability,
completing the cooperation projects .according to the
principle of complementary advantages. The content of
the logistics services include transportation, warehousing,
distribution, packaging, customer service, information
service and so on. Logistics enterprise hasn’t the
advantage in every detail because of its limits in resources
and ability. To form complementary cooperation through
joint between enterprises with different core ability and
the logistics demand of customer was decomposed into
several parts to be assumed by independent units This
separation increased the flexibility of the organization,
using the combination of resources and the new way of
transaction instead of emphasizing to takes the resource.
So we can satisfy the logistics demand with low cost
quickly and enhance the level of whole logistics.
(3) Part chain relations formed between leading
enterprise and joining trader. The project cooperation is
main method in Joint venture cooperation chain operation
process. A project team is made up by leading enterprise
and joining trader who provide capital, person,
and goods together to complete a specific logistics
services of customer. Because the joining trader
contribute a part of resources rather than all resources in
the joint venture cooperation chain mode, we think the
formation of part chain relations formed between leading
enterprise and joining trader in the mode of voluntary
chain to distinguish retail chain and franchise chain
which the joining trader contribute all the resources to
join in.
and competition of logistics enterprise. But logistics
enterprise can’t afford to construct network by themselves
entirely because of the limit of money and time, they can
Appearance
expand rapidly in a short term to satisfy service needs
from large customer through
Regular
Franchise chain
Voluntary chain
The logistics enterprises expand the scale by the help
Chain
of
the
capital from joining trader in the mode of franchise
logistics
logistics
network
Ownership
headquarters
network
chain but it can’t control joining trader effectively. So it is
Operation
headquarters
Business
Business independent more suitable for regional cooperation instead of national
unified
independent
network with big risk. In actual use, logistics enterprise
control
should find out the key, core customers who are
capital
headquarters
joining trader
Joint venture mainly consistent with their own long-term planning and conjunct
property
contract
contract
their development goals with these customers’ logistics
Link
requirements to distribute logistics network selectively.
Contract
independence
Competitive cooperation
cooperation
They can consider to set up several regular chain store in
binding
relatively
mainly
the important city as logistics nodes to strengthen the
The branches
part chain
control of the customer resources and reduce dependence
degree
of all chain
all chain
on the joining trader. And then they can develop
chain
franchisee store around the regular chain store and build a
close network system eventually.
III. The application of chain operation mode in our
(3).Those small and medium-sized logistics
country’s logistics enterprises
enterprise who don't want to lose "independence"
established voluntary chain system
At present, the structure of the third party logistics
According to report from Chinese storage association
enterprise in our country is pyramid and it is divided into
fifth Chinese logistics supply and demand market,
three levels according to the size of the enterprise. In the
enterprises more than 500 employees accounted for only
first level is the some of large-scale, integrated logistics
11% and most of the enterprise on a smaller scale. They
enterprise, state-owned logistics enterprise mainly, such
take scattered and extensive management and lack
as SINOTRANS; The second level is the rapid
intensive and network management advantages include in
development third party logistics enterprise which has a
uncompetitive. In the fierce competition, small and
certain brand awareness in the national or regional but
medium-sized logistics enterprise can choose to be merger
number limited relatively, large and medium-sized private
by large logistics enterprise or become franchise chain as
logistics enterprise mainly; The third level is many
a concessionary chain logistics enterprise. But the former
scattered, small-scale third party logistics enterprise who
will lead to small and medium-sized logistics enterprise
provide a single logistics service and compete each other
lose ownership and management power and the latter will
in the bottom end of the logistics market.
lose their reputation and the opportunity to create brand.
The logistics enterprise at different levels can adopt
Those small and medium-sized logistics enterprise who
corresponding chain operation mode according to the
don't want to lose "independence" established voluntary
feature of three types of chain operation modes.
chain system. Then, many enterprises logistics resources
(1) Large logistics enterprise build up large
will be combined and will produce the effect of the largeenterprise groups through the retail chain
scale economy. It will make original dispersed and
The large logistics enterprise with strong strength
competing small and medium-sized logistics enterprise
who stand at the top of the pyramid can increase their
survive in the fierce competitions market
retail chain logistics network through building with own
capital directly or taking the form of merger or holding to
IV. CONCLUSION
construct
internal network, improve the network
specificity, and build a large enterprise group[9]. At the
Network can change the logistics enterprise growth
same time, it should take informational connection in the
environment and network service itself is a kind of
entity network through informational means. To manage
business model of logistics enterprise[10], so the network
integrative and achieve the scale benefits.
will be the path in development of logistics enterprises.
(2)Large and medium-sized l private logistics
Our logistics industry is at its early stages of growth.
enterprise which rely on brand advantage build The chain
Domestic logistics enterprise usually lack perfect logistics
system made up by joining mainly and supplemented by
network while foreign logistics enterprise is ongoing wide
retail chain.
range of mergers and acquisition and large-scale
The logistics enterprise which have certain brand
transnational investment. So the scale of the logistics
awareness with the increase of the stable customer pay
network is growing rapidly. The construction of domestic
attention to development of logistics network that has
logistics enterprise network is imminent. But the mode
become the most basic platform for customers serviced by
that logistics enterprise develop national network by
logistics enterprise and is key resources for development
themselves completely can’t become the mainstream
TABLE I
COMPARISON OF THREE TYPES OF CHAIN MANAGEMENT
model when they face the negative factors, such as
investment size, cost, time and others. Chain operation as
a modern distribution and organizational form provides a
innovation strategy for network expansion of logistics
enterprise. Because of the lack of reference experience
about chain operation used in logistics enterprise network
expansion, the third party logistics enterprise in the
development process of chain operation should do
according to its abilities and operate step by step to form
mesh chain system gradually, and then they will achieve
the economies of scale and improve the comprehensive
competitive power.
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