TL1033: Logistics (Part 1 – Introduction to Theory)
Level 1 – Semester 2, Bachelor of Transport and Logistics Management
Department of Transport and Logistics Management
“Leaders win through logistics. Vision, sure. Strategy, yes. But when you go to war, you need to have both toilet paper and bullets at the right place at the right time. In other words, you must win through superior logistics.” - Tom Peters
The word logistics was used in warfare where logistics became a pivotal technique to win the game. In that case most of the military logistics literatures of early periods were delivered the tactics and insights to work in complex environments (McGinnis, ...view middle of the document...
It is forecasted that the e-commerce market worth will be $9.9 trillion by 2020(Singh, 2014). Customers rapidly change their purchasing behaviors into e-commerce (Reynolds, 2000). Thereby e-commerce becomes a good intermediary to continuous flow of goods and services.
As a result, e commerce and logistics were integrated massively by retailers and it became an essential aspect for the perpetual existence of companies (Gulati and Garino, 2000). Most of the time they use 3rd party logistics companies which perform logistics activities on behalf of others, or they use their own logistics. It could be their own or others logistics but ultimate target is to “be closest to customer”(Biondo, 2014). Being closest to customer means a lot in e-commerce market perspective. It is either by fulfilling customers’ expectations or by giving a satisfaction (Kavaliauskiene, Aranskis and Litvinenko, 2014). Both expectation and satisfaction can be fulfilled by ensuring right product ordered in a website, is in right place or consumer’s address within the duration that acceptable to consumer. In e-commerce logistics world it is defined as e-fulfillment (Baylse, 2002). Without logistics this task cannot be achievable.
Before going to e-fulfillment, there are two important aspects which are driven by logistics and provide competitive advantage in e-commerce. Those are cost and time (Biondo,2012). As mentioned earlier cost reduction was the primary objective of logistics to get a good profit margin. Also e-commerce is using logistics effectively with the same purpose- cost reduction. As e-commerce providing price visibility, consumers can compare to buy goods that suit with their budget. So, they may shift to low price goods among similar variety. Amazon.com uses such strategy to win the competition (Brisbourne, 2013). So that, effective logistics become important in the whole operation of Amzon.com.
But there is a limitation for cost reduction. Amzon.com was suffered by shrunk margins and the belief that e-tail is or will be profitable than traditional retail was started to become untrue (Trainer, 2013). But they started to compete by providing time utility and introduced same-day delivery. It was a huge challenge to deliver goods with a low price within one day. For that they outsourced and got specialized and expertized 3rd party logistics services. Currently UPS and FedEx do a great job as performing 3PLs. But still there is a main disadvantage of e-commerce is the speed of disposal of product which does not correspond to the speed of ordering (Lekovic and Milicevic, 2013) and if this key challenge can be overcome by any technology, consumers will totally shift to e-tail as it is entirely similar to retail.
Other than cost and time utilities, logistics become an important part in e-commerce in the scope E-fulfillment as it is providing an integrated service with all operations in e-commerce. For an example, logistics activities can be used for marketing...