E-Logistics Structure and Operation

A firm desirous of offering goods on the Internet needs to develop a proper infrastructure for elec­tronically integrating all the operations of logistics in order to ensure customer satisfaction before, during and after the buying process.

1. Order Processing

The customer, after opening the website, may select one or more items for purchasing. Many web­sites offer an electronic bucket for customers to pick up the items they want to purchase. The dialog box requires reconfirmation from the customer through the price checking. For the low unit price items or low-value orders, the full payment may be asked through credit card. However, for a large- value order the customer may not pay the full amount at one stroke through credit card. In such cases, the order will be processed with credit terms as per the company norms, after considering the payment history of the client.

For repeat purchases in the case of B2B transactions, the order-processing system needs to build a database of the order history for offering discounts or certain credit concessions or for giv­ing an automatic signal for execution. The inbuilt software will check the prices, taxes, payment terms and delivery. The order will be accepted for execution only after it is technically and com­mercially cleared and the same will be confirmed to the client electronically.

The order processing on some sites is done online, while many go in for batch processing at the end of the day. For the e-commerce company order processing is of critical importance as it involves the setting up of system standards to meet customer expectations. Depending on the volume of the orders, the firm may process the order on an hourly or a daily basis. The investment in online order processing can be justified on the basis of the volume of order inflow.

2. Inventory Management

Depending on the business model, the inventory movement needs to be organized after checking with the warehouse or the vendor partners. In e-business the firm has to integrate online order capture with order processing, inventory and fulfilment system. In case an item is not in stock and is under process, late delivery will have to be confirmed to the client before the order is accepted. For stock items the replenishment instructions will be issued as soon as an item is removed from the shelves. The retail giant Wal-Mart uses the Automatic Inventory Tracking System for replenishing the inventory directly by the vendors. The system is connected to all of Wal-Mart’s vendors and 2500 retail shops across the United States. In e-commerce, honouring delivery commitments to customers must be seen as paramount if the seller is to remain competitive. So, the firm needs to have a backup inventory control system that closely coordinates the resources and monitors inventory movement, right from the source of supply to manufacturing to distribution centers and, finally, to the customers.

3. Order Execution

Once an order is accepted for execution, order filling instructions are passed on to the inventory manager or directly to the vendor for case filling and packaging. The delivery instructions will incorporate the consignee details, item details, quantity and packaging. The vendor or warehouse manager instructs the courier or 3PL partner to pick up the consignment for delivery to the client. All this is done electronically. The delivery details will be immediately conveyed to the customer along with the invoice copy for him/her to be ready with the balance payment against delivery by the courier or logistics firm.

4. Shipping

Based on the size of the order and the consignment, the transportation will be organized either through a courier service or through the logistics partner of the firm. The Decision software will decide online on the choice of the carrier, transportation mode and scheduling of the dispatch con­sidering the client’s location, public holidays and other eventualities. Some e-commerce sites offer the customer to place an order before the closing of the day for delivery next morning by10 a.m.

5. Tracking and Tracing

After placement of an order, the client always wants to know the order status or whereabouts of the products during transit. The bar coding system with satellite communication will help track the consignment. Most sellers provide the consignment tracking facility to the client as a value-added service on their websites.

6. Payments

Payments for a B2C transaction are accepted through credit or debit cards.

In B2B transactions, the system needs credit management support to decide on the credit terms to clients, based on their payment history and the volume of business received. The system needs to generate online invoices, deliver notes, payment outstanding reports, payment reminders, and so forth, using EDI.

7. Transaction Security

Transaction security can be enhanced by using an electronic fraud-checking system that checks the customer’s credit card electronically by running an anti-fraud algorithm or another type of authen­tication system at the time of order processing or material dispatch.

8. Order Postponement, Cancellation and Substitutions

The e-commerce firm has to carefully evolve its policies for order cancellation, postponement and offering substitutes in the event an inventory is not available. Such a situation may arise because of some problem in the supply chain or due to circumstances beyond the management’s control. In such cases, the firm may have to inform the customer in time and request for cancellation of orders. Alternatively, the firm may offer substitute products or postpone the delivery. The system should automatically signal the likely eventualities of stockouts so that the customers are informed well in advance.

9. Reverse Material Flow

In the event the customer does not like the product, or it has been damaged during transit, or the product performance is below expectation, the firm needs to evolve a product-return policy for issuing guidelines to customers and the operating people of the firm. The time frame to lodge a
complaint or return the product at the assigned collection centers has to be carefully spelt out in the sales contract displayed on the website. The responsibilities of both seller and buyer for return of goods have to be indicated to avoid customer dissatisfaction. The machinery to take care of reverse material flow may be a stand-alone system or integrated to forward the supply chain of the firm, depending on the volumes involved in the reverse flow.

Dell Computers represent one of the most successful e-commerce, logistics and supply chain stories. To compete with giants like IBM, Apple and Compaq, Dell has adopted a different strategy to market their PCs. They chose the e-commerce route. To order a PC with the desired configura­tion and specification, the customer has to log on to the Dell website, place an order and complete the online commercial formalities. There are good chances that the customer will get the PC the next day if he happens to be in the United States. The electronic commerce system installed on the Dell website registers an order after online completion of commercial formalities. The system estimates the demand of the various components going into the computer and places the orders for parts on the various suppliers. The suppliers then deliver the parts to predetermined supply centers where the computer is assembled. While registering the order, the system communicates the details of the customer and delivery location to the logistics partner. The office of the logistics partner nearest to the Dell supply center gets activated to pick up the material for delivery. The result of an efficient process such as this is a near-zero inventory and total customer satisfaction.

Blue Dart is one of the leading logistics service providers with e-commerce initiative in India. Blue Dart offers e-business solutions to facilitate seamless integrated transportation, distribution and supply chain management and helps leading multinational companies to sort out their B2B or B2C logistics problems through Web-based solution. The registered customer can log on to the Blue Dart website and make advanced online queries on shipment status, freights, transit time, bill­ing, pricing and scheduling.

In short, the e-linkage in e-commerce facilitates buying and selling through the Internet. It provides an online communication link for buyer, seller, vendors and logistics partners. Apart from the responsibility of physical distribution of goods, Blue Dart provides online delivery status and payment facility.

E-commerce logistics efficiency and effectiveness depends on the comprehensiveness of Web- based logistic solutions. Operational efficiency improvement requires timely communication across the extended business enterprise from customer to warehouses, distribution centers, manufacturer, vendors, transporters, and the like. The Web provides the way to access the information stored in the transaction database. E-commerce logistics software architecture needs to address the transac­tion application areas as shown in Figure 13.3.

The e-commerce logistics software involves application in both Internet and intranet Web- based business solutions, since customer satisfaction depends on the efficiency and effectiveness of coordination of the business processes within and outside the organization.

Source: Sople V.V (2013), Logistics Management, Pearson Education India; Third edition.