E-Logistics Essay, Research Paper
Is E-commerce Creating a More Efficient and Effective Logistics Industry?
Electronic commerce has revolutionized not only the way goods are sold, but how they are
delivered. Customers demand products delivered at very high speed with complete order
flexibility and convenience. Moreover, today’s online customers want to be able to track their
order instantly, from the moment they place an order until the moment they receive it at their
doorstep. With all new technologies customers became smarter. They want to be able to re-route
shipments, determine delivery costs and time in transit, and break up their orders for multiple
shipments to different addresses. All this implies that the shift of the power from the seller to the
buyer has created a new era of expectations, and buyers—whether they are consumers or
businesses won’t tolerate bad experiences such as partial shipment of goods, poor product return
policies or timely back orders.
The most common form of logistics has traditionally been based on moving large shipments of
items in bulk to select strategic customers in a few geographic locations. Shipments have been
tracked by container, pallet, or other unit of bulk measurement, not by individual item or parcel.
Manufacturers have backed up their trucks to loading docks at retail stores or distribution
facilities, relying on those entities to deliver the goods through the final links of the supply chain
to individual customer. Often the various links of the supply chain have had limited visibility
into the operations of one another. The capability for end-to-end visibility of a package from
manufacturer to customer has been virtually nonexistent in a traditional logistics environment.
With the beginning of electronic commerce traditional logistics has been radically transformed.
Electronic commerce is demanding an active, high speed, approach to logistics. The typical
electronic commerce customer is unknown entity who orders products on an individual basis,
according to impulse, seasonal demand, price, and convenience. A manufacturer or online
merchant must be able o customize an individual order and ship it directly to the buyer anywhere
in the world. It’s also necessary to track the location of the item at any given time along the
supply chain with handling customer inquiries, product return, and even offering gift wrapping—
all at ten times the speed and at fraction of the cost of traditional shipping and fulfillment.
Forrester Research sums up the vastly differing characteristics between commerce site logistics
and traditional logistics. For example, whether for traditional logistics the average order amount
is more than 1,000 items, it is less than 100 with commerce site logistics. The demand style and
inventory/order flow in the first case is push and unidirectional, whereas with e-commerce
logistics it is pull and bi-directional. Destinations for traditional logistics are concentrated with
the stable consistent demand, whereas for e-commerce logistics destinations are highly dispersed
with seasonal, fragmented demand. All these fundamental differences in traditional logistics
versus commerce site logistics are representing a shift to future of e-logistics. Opportunities are
arising along to better service customer, whether it is another business or a consumer.
E-commerce is a narrow term applied to the process of conducting simple transactions on-line.
Electronic business, however, is the total integration of electronic processes throughout the
critical functions of an enterprise. It is a total solution that takes into account e-logistics, efulfillment, supply chain optimization, enhanced customer satisfaction, and a combination of
other tangible and intangible benefits. Designing, building and maintaining an e-business site
involves both hard costs and soft costs. Which are usually allocated in three ways: infrastructure
costs, direct project costs, and distributed costs. Hard costs include tangible good such as
hardware, wiring, software, telecommunications lines, and the like. These are for the most part
fairly easy to quantify and allocate. Soft costs include labor, training, loss or gain of sales
opportunities and represent intangible factors that are difficult to quantify and hard to allocate.
This basic principle of e-business today is being implemented in various size and type
organizations conducting their businesses on-line, which have created a new environment for
transportation and logistics.
E-businesses are forcing a fundamental shift in the structure and services of transportation and
logistics businesses. Firms are transporting more on-line purchased goods and they are actually
subordinating their individual business plans and identities that becoming an integrated part of
their electronic business customers’ supply chain. One solution to this change is creation of
extranet that links and allows trading partners—customers, warehouses, suppliers, drivers, rail
partners—independent of their internal resources, efficient interaction with the supply chain. It is
that information technology provides the underlying links as well as the logistics data collection
and analysis platform for all these activities. There is myriad of examples outside of the
companies that have established this kind of relationship within their supply chain coverage,
making this efforts not inexpensive. That is why most of the businesses try to establish a joint
network to streamline procurement of transportation and logistics services.
SupplyLinks Global Logistics Network is a recent example of multi-modal transportation
services network that provides customers with single, neutral source to plan, book and manage
shipments worldwide. This web-based logistics management company includes AIT Worldwide
Logistics (IL), BAX Global (CA), Central Freight Lines (TX), Central Global Express (MI),
Exel (UK), Watkins Motor Lines (FL), and Schneider Logistics (WI). SupplyLinks is an example
that is actively integrating additional providers into the network. David I. Beatson, Chairman and
CEO of SupplyLinks said, ”The formation of this network is a significant move in transportation
industry and for SupplyLinks and it great to have so many leaders on board and look forward to
long term alliances with them.” The SupplyLinks Global Logistics Network enables
transportation providers to reach new customers with lower sales, marketing and customer
service exopenditures. Members establish and maintain pricing through the network by providing
pre-negotiated tariffs to SupplyLinks. This approach differs from many existing e-logistics
models, which award business to the lowest bidding carrier in an auction format. Further,
SupplyLinks is deeply integrated with the information systems of participating providers,
reducing customer integration, shipment processing and operating expenses.
For the customers’ benefits, they will have access through the network to a single source for
shipment planning, tendering and tracking across all modes and carriers. It will enable them to
consolidate logistics operations, optimize transportation expenditures and increase visibility into
their supply chains. Customers are also provided with flexibility of using existing contract tariffs
from their transportation partners or tariffs that SupplyLink has negotiated through the network,
allowing to maintain existing relationships with providers and also providing access to a broader
network of transportation services, which basically, is expanding the network through this
demand. SupplyLinks has created a win-win situation for both shippers and service providers by
enabling to maintain existing relationships and providing the latter with reduced carrierestablished tariffs.
Another company driving attention of their position best-in-class information technology
innovators is American President Lines and APL Logistics, subsidiaries of NOL Group.
InformationWeek ranking of the 500 largest and most innovative users of IT across all industries
shows that the company has advanced to 72nd place from 456th place last year and is the only
global container transportation and logistics entity ranked. The company has also singled out for
IT and service excellence by customers and industry organizations including Philips Electronics,
Sears Roebuck, Kellogg, Colgate-Palmolive, and through Inbound Logistics, Journal of
Commerce, Lloyd’s Loading List, Cargo News Asia and others, solving complex distribution
problems for customers. Statistics shows that about 30% of APL’s customers around the world
are now using the company’s e-commerce capabilities to conduct their businesses with the
company. According to Don Liedtke, NOL’s chief information officer based in Oakland, CA,
collaboration is the key. He described that to meet customer demand for seamless,
comprehensive and reliable information on which to base business decisions today, company
must integrate data from the many sources involved in a customer’s supply chain. It means that
collaborating with the customers and own business partners and vendors, and also with the
customers other vendors and even with own competitors is the key to help smooth workflow.
For the businesses and organizations today IT is the main business process re-engineering
movement that brings the innovation. At this time supply chain management has moved from
low level and highly fragmented set of administrative and overhead operations—to a strategic
enterprise initiative. The evidence for it is the business-to-business e-commerce explosion and
announcements by different industry representatives that they are launching cooperative logistics
hubs. An original solution for Supply Chain Execution is provided by Voxware’s
VoiceLogistics. It is their wireless, web-based interactive speech interface solution, which
enhances speed, accuracy and productivity of logistics and fulfillment operations and seamlessly
integrates with IT systems of virtually any distribution and logistics operation. This solution
addresses major logistics market sectors, including consumer goods manufacturers, consumer
packaged goods, direct to consumer (e-commerce and catalog), food and grocery, package
handling, retail, third-party logistics providers, and wholesale distribution. Voxware’s speech
recognition solutions are also deployed in package handling, mail sorting, manufacturing
inspection, and military applications, and have proven they can deliver significant operating
improvements and benefits in customer satisfaction and supply chain visibility in the recent
successful installation at one of the major projects in Midwest. This is just another example of an
e-process—design process for the era of customer relationship and logistics, which serve as the
urgent and critical drivers of today’s business decisions for being in business tomorrow. Isn’t this
what IT should be about?
Higher volumes of e-business shipments are not the only reason for these organizations to boost
spending on the technology development. Aggressive e-business want their carriers to participate
fully in the just-in-time process that enable manufacturers to fill orders as swiftly as possible
while keeping inventory to a bare minimum. This implies that carriers systems must become
intertwined with all of the facets of the e-business model in a variety of ways. The role of the
order and its delivery is evolving to one that includes full-scale logistics, supply chain
management and warehousing. For individual customers, studies have shown that online
shoppers check the status of their package an average of seven times from the moment the “buy”
button is clicked until the package arrives. This basically implies that e-business must be able to
initiate, track, acknowledge shipments online. Fortunately, FedEx and UPS offer free tools that
aid in tracking, tracing, and whole range of other functions. The USPS is also trying to develop
some tracking tools to meet the e-business necessity. All these technological innovations as for
businesses as to regular shoppers create friendly and time saving environment, however, with all
of innovations there are some negative factors, which are affecting the whole concept of
electronic business, particularly with individual customers.
The moment e-commerce site goes live it becomes a worldwide entity. The international
shipments become a question whether of being accepted or not. The main reasons why the
companies are not willing to go internationally include such obstacles as shipping difficulties,
fraud, different product requirements, taxes and tariffs, and limited currency support. The global
nature of e-commerce creates opportunities for tax avoidance, as well as double taxation.
Vendors are faced with the choice of ignoring potential taxes on transactions outside their home
countries or incurring the very substantial costs of compliance. Competitive advantage can be
lost if the cost of the good reflects tax liabilities. That is why at this time international ecommerce is more relevant within business-to-business relationships of bigger volumes,
integrating them to joint networks of business operations. But nonetheless it is a great step
toward next level of trade in globalization, making the world a better place.
Deborah L.Bayles, E-commerce Logistics and Fulfillment. Prentice Hall PTR, Upper Saddle
River, NJ 07458, 2001.
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