In the present business scenario which is characterised by keen competition and greater requirements of customer satisfaction, business firms are required to adopt advanced business technologies to enhance their efficiency in business operations and to reduce cost requirements. In this paper the application of e-logistics in the supply chain management is discussed. E-logistics is highly important in retail business as it involves complex supply chains. This study is focused on the importance of e-logistics in the retail clothing business. The business firm selected for the application of e-logistics is Tesco Plc which is a supermarket giant operating on international basis. The effectiveness of e-logistics in the supply chain management of Tesco is discussed to provide conclusion regarding the importance of technology in supply chain management.
Research Report Demonstrating the Application of E-Logistics and Supply Chain Management Strategies
In the present global business environment which is characterised by improved transportation facilities and advanced information technology, the business operations become global and the borders between countries are irrelevant. In this situation supply chain management (SCM) has greater importance in the trans-national business operations of companies. It is of greater importance in the retail industry where the link between the suppliers of raw materials and the end-use customers is complex. Effective supply chain management is of great importance for attaining competency in the competitive market environment. In a supply chain, suppliers, plants, distributors, retailers and others are involved which are representing different functions such as sale, delivery and production of goods and services. The supply chain management is considered as a critical element by most companies involved in the retail business. Customer service and inventory management are the important sectors in the SCM. SCM can be defined as “a network of autonomous or semi-autonomous business entities collectively responsible for procurement, manufacturing, and distribution activities associated with one or more families of related products.” (Supply chain management 1997).
Supply chain management strategies
The objective of SCM is to deliver the products at right place and right time at minimal cost and right quantity. Supply chain strategies of companies are often made based on reducing the cost. “Supply chain strategy is an iterative process that evaluates the cost-benefit trade-offs of operational components. Business strategy involves leveraging the core competencies of the organization to achieve a defined high-level goal or objective.” (Supply Chain Strategy: The Importance of Aligning Your Strategies 2009).
In the supply chain management (SCM), the improved and effective methods of collection of raw materials and delivery of finished products to customers are involved. In a SCM strategy five basic components are involved. They are described below:
- Plan: It is the strategic portion of SCM. The resources in the supply chain are managed based on this plan. It aims to measure and monitor the performance of the supply chain in attaining customer satisfaction on a cost effective manner. The customer value is ensured through ensuring high quality.
- Source: It is related to the suppliers of goods and services for the production. To ensure the accurate selection of suppliers, selection criteria are fixed by giving focus on pricing, delivery and payment processes with suppliers. The metrics for measuring the performance of the suppliers and their relationship are involved.
- Make: It is the production step. In this step, SCM managers prepare schedule for the entire functions in the supply chain such as production, packaging, testing and delivery. It is the most important part of the supply chain, in which quality levels of the production output as well as the productivity of the employees are measured and analysed.
- Delivery: In this step the decisions relating to logistics and transportation are involved. The co-ordinations of order receipts from customers, warehousing network arrangement, transportation are discussed in this step. Appropriate invoice system is also adopted for receiving the payments.
- Return: In this step the return of products from the customers due to defaults and lower quality are discussed. It is highly problematic, and to sustain better customer relation, a responsive and flexible network for dealing the return process have to be maintained. Problems relating to customers have to be solved with greater care.
Nowadays the usage of E-commerce is very large and wide in business community especially in the retail business. E-commerce means an economic activity of purchasing and selling of goods. The main objective of every business is customer satisfaction. That is, a businessman controls the supply chain; provides transportation facility, manages the expense etc. E-commerce is the purchasing and selling of goods and services through internet. Now E-commerce has changed a lot and has established websites for selling goods and services. It is known as logistics. E-logistics is the logistics processes and it gives an incorporated, fulfilment and supply chain management. The important process of E-logistics is shipping, tracking and Request for Quotes. And the requirements of E-logistics are speed and individualized behaviour.
Definition of E-Logistics: – “Services that address inefficiencies in the transportation industry, usually involving goods ordered online that can be delivered to the consumer in a timely and efficient manner. The service might include any of the following: order entry, order management, shipment and vehicle tracking, communications and reporting.” ( Elogistics Services 2007)
E-logistics is referred as combination of supply chain management depending on achievement of E-business in logistics. It is an important combination of supply chain and it avoids mediators such as wholesalers and retailers. It is the business within the Transport Logistics Cluster between companies and external business between Transport Logistics Cluster and customers. Due to the E-logistics it decreases the error rate and it provides more satisfaction to the customers. The risks and other problems are reduced by the usage of E-logistics. The main advantages of the usage of this system are as follows:
- Selling and purchasing of raw material at lower rate.
- It provides maximum profit through discount in error rates.
- It provides good quality administration.
- It increases the effectiveness of the logistical procedure.
- It develops the customer service.
The main strategy of every business enterprise is to provide good customer service. Customer is considered as the king of every business enterprise to increase profitability. If good services are provided to the customers they come back again. Through better customer service a good relationship can be built between businessman and customer. This business should concentrate to increase the market share by providing better customers service.
“The use of eLogistics provides many benefits, including lower costs and improved profit margins through a reduction in error rates, better asset management, improved customer service and an overall increase in efficiency of the logistical process.” (Elogistics 2008).
Dynamics of E-Logistics
The formation of logistics creates speed of service of product etc. In the ancient days logistics was an operational function consisting of transportation, warehousing, and management of finished goods. Nowadays logistics is a competitive weapon. E-logistics is a significant view of E-commerce. Because it provides the web generated necessities for product performance and supply channel information. E-logistics is considered as the basic driver of E-commerce. E-logistics provides so many market place dynamics. They are as follows.
- Implementation: – The main function of E-logistics is to recognize the closeness of the delivery of goods and services. The internet satisfies the customers and provides smooth progress of the buying experience.
- Management life cycle of product: – Every producer thinks about reducing the time taken for the delivery of new product in the market. E-logistics provides reduced time between product development and market introduction through value chain market.
- Reduction in fixed asset: – The primary objective of E-logistics is to utilize the information about demand and supply and consider it as a physical behaviour and alternate for inventories. Nowadays every organization reduces the allocation of asset investment and creates inventory based on supply channel.
- Outsourcing: – E-logistics provides business collaboration by connecting business necessities to different sources and competencies from any place in the supply network.
Applications of e logistics
The electronic-based supply chain management systems have greater potential in dealing with the above discussed five stages of supply chain. For each step discussed above, separate software is available today. It will help to carry out the functions in optimum cost-effective and efficient manner. Effective and efficient operational performance is targeted through e-logistics. E-logistics should be helpful for strategic planning, consultancy, logistics and customer services. Through this, the cost of logistics can be greatly reduced by serving multiple customers at the same time. The relation between the partners in the supply chain is strengthened through better sharing of information. The important applications of e-logistics are described below:
Sharing of information
Through the application of software in SCM, the data and information sharing among the supply chain partners can be carried out most effectively. The flow of information in the supply chain becomes greatly enhanced in terms of speed and reliability. Information relating to everyday prices is available to all the parties in the supply chain and thus pricing becomes less complicated.
For a company to get its supply chain partners to agree to collaborate, business leaders and supplier relations managers have to be willing to compromise and help partners achieve their own goals. (Wailgum 2009).
- Business forecasting: Through the SCM software, business forecasting is also facilitated. Installation of SCM software should help to predict the demand from the customers and enhance the functional level of supply chain. The forecast relating to the demands in market can be accurately done through the application of e-logistics.
- Business planning: The application of e-logistics facilitates most accurate planning of various processes in the supply chain. Planning and decision making will be better supported by the application of advanced e-logistics as it provides more accurate data for the decision making process.
- Inventory management: The timing of product delivery relating to market demand is essential for enhancing the supply chain efficiency. Just-in-time product delivery and timely pay off becomes possible through the application of e-logistics. The effectiveness in time requirements for the supply chain, reduced inventory requirements, and reduced order processing costs maintain the cost effectiveness in the supply chain operation. Every day low prices policy can be adopted by the partners in the supply chain. “The development of e-commerce, at both business-to-business (B2B) and business-to-consumer (B2C) levels, has had a major influence on logistics and supply chain management.” (McKinnon etal 2009).
E-logistics in Clothing retail sector
The textile and clothing trade is complex as it requires practical responses to the ever-changing demands of the customers. Improved value chain management is essential for reducing the operating cost. Operating cost reduction is a critical success factor in the retail clothing business. The pricing of products is an important factor influencing the purchase decisions of customers. To adopt competitive pricing strategy, cost reduction is important. Thus firms having competency in cost reduction only can succeed in the long run. Application of e-commerce logistics will help to adopt the most cost-effective source of supply with appropriate quality standards. Flexibility in selecting the suppliers is a major advantage of the e-logistics in the retail clothing sector.
Through the optimisation of the supply chain, the lead time requirements for delivery can be reduced. E-logistics is an important managerial contribution in the retail clothing business from both the business and customer viewpoint. The textile and clothing business is more globalized and the companies are adopting global sources for the essential resources to exploit the cost advantages available in overseas markets. Most of the companies are adopting the manufacturing operations in countries where operating costs are lower. Thus the supply chain becomes widened and large. For improving the operating cost efficiency, improvement in collaborative and technological capabilities is essential. The speed to market capability is another requirement in the clothing industry. The e-logistics will help send the products from the production centre to the marketing place at a rapid rate.
E-commerce for improving supply chain relations
In the retail clothing business, internet is highly used for marketing and business activities. “From a marketing perspective, the Web allows grater interactivity, thus allowing visitors, to only select and retrieve information that holds some interest.” (Daly & Bruce 2002, p.2).
Application of e-logistics in different functions involved in the retail clothing business is discussed below:
- E-procurement: – E-procurement means computerization and combination of the purchasing process by the function of e-procurement software and the growth of bit trading exchanges. Through the application of e-logistics, the procurement of resources can be made at the minimum cost level.
- E-distribution: – E-distribution means providing better quality improvements for warehousing and distribution. It helps the customer to get the products with the minimum time lag. Companies can adjust their product distribution about the changes in the market demand.
- E-Reverse logistics: The e-logistics covers the reverse logistics function in the organization in the optimum manner. In clothing sector the reverse logistics is a critical factor that has to be dealt with carefully for meeting the customer satisfaction. Reverse logistics stands for all operations related to the re-use of products and materials. It includes product planning, collection, distribution, remanufacturing and inventory control, inspection, disposal etc. Reverse logistics activities support many companies. Different kinds of product have entered the Reverse Logistics, but the important sectors like computer, electronics and high-tech equipments are very popular. Information technology plays a very important role in reverse logistics.
Example of applications of e logistics in Retail clothing industry
Application of e-logistics in Tesco
Tesco is an international retail giant dealing in all kinds of consumer products. It is the market leader in retail business. Tesco adopted e-commerce based business operations for enhancing its operational efficiency and competitiveness in the industry. It upgrades its supply chain management system by implementing software applications. “Tesco adopts a common operating model across its businesses worldwide, allowing it to deploy and support key systems like supply chain and replenishment applications when it expands into new countries. The modernized application will be deployed in all of Tesco’s data centers across the world and create cost savings as Tesco will be able to use existing servers.” (Friedlos 2007).
Tesco information exchange (TIE) is a collaborative movement of Tesco with the Global exchange service. By using this system more than 450 suppliers of Tesco are doing their business operations. In this system, suppliers get accessibility to the daily electronic points of sales in the Tesco business and they can adjust their product delivery at the optimum level. It helps them to respond more rapidly as per the changes in the customer demand in the market. The delay in product delivery is avoided through this system and the optimum level of stock is always kept in the stores. In enables the collaborative movement of Tesco with the suppliers through the promotion of management features applied in the TIE programme. Through the TIE programme suppliers of Tesco are facilitated in the following ways:
- Gathering of real time data relating to the sales and market demand and make these data accessible to the suppliers.
- Helps to identify the performance level of the different sections in the supply chain.
- The introduction of new product is greatly facilitated.
- Data regarding the transaction can be made accessible via online.
- Customer satisfaction is greatly enhanced by ensuring the availability of the products at the right time, place and quantity.
- It helps to reduce waste.
“A lot of advantages are obtained by using this system. It enhances the customer satisfaction, improves product availability, reduces waste, streamlines the business process, reduces 33 percent of the lost sales on promotions and reduces 30 percent of the lost sales on promotions, and reduces 30 percent of the promotion overhead and waste.” (Weele 2005, p. 314)
Tesco.com is their online marketing place. Procurement of the resources is to be based on the demands of the customers. Tesco considered the needs and interests of its customers. The business strategies adopted and implemented by Tesco helped it to attain the top most position in the UK retail industry. The system helps to make easy the process of information gathering. It provides them competitive advantage in the industry.
Challenges in the implementation of supply chain software
Automation of supply chain is a complex and difficult process as it involves more business partners. Employees in each organisation involved in the supply chain are required to change their operational style. It needs higher cost for installing the software for the supply chain management. Thus only bigger organisations can adopt this method for attaining cost efficiency. Largest and most powerful manufacturers or retailers only can afford the changing requirements in the software-based supply chain management. The changes in the operational style will be conflicting among the partners. The goals of partners will be conflicting and thus the changes required for the software installation may be restrictive for different partners.
Barriers to E-logistics and E-fulfilment: – The important barriers in connection with e-logistics and e-fulfilment are as follows:
- Barrier is based on economic and educational aspects.
- Information, telecommunication and communication infrastructure are absent.
- It affects the management of global trade management
- Absence of security and other related problem.
- Geographical challenges.
The discussion on the e-logistics and its applications in the retail business revealed that in the new business environment characterised by extreme competition and need for reduction in operating cost, e-logistics is highly essential. In the textile supply chain management, e- market place provides opportunity to business firms for real time web-based solution improving the efficiency of resource collection, purchasing and negotiating. Through streamlining the supply chain, and avoiding unnecessary costs and facilitating quick response, the barriers affecting the supply chain efficiency can be reduced. In e-logistics trust is an essential factor for attaining the targeted objectives. For sharing the valuable and confidential information relating to the business with the partners involved in the supply chain, trust is very essential. The security of the system also has to be considered. In the technological application security is a major challenge. Employee acceptance and huge initial cost requirements are other factors that restrict the implementation of the e-logistics in the business field.
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