Supply Chain Logistics and Physical Distribution - Term Paper Example

Supply Chain: Logistics and Physical Distribution The paper is aimed at discussing business of ecommerce in context of its supply chain management. The company here is a web-based online sales platform that is engaged in selling consumer electronics. The company sources products from the manufacturer and makes direct delivery of the orders through a hired logistics company and efficient supply chain management. A detailed assessment of the company’s supply chain and way of managing its organizational structure for supporting business activity form a critical part of this report and facilitate an understanding of criticality of logistics management in the ecommerce business. The ERP software used and the planning and control mechanism provide a comprehensive outlook on entire supply chain process of the company. Table of Contents Abstract 2 Introduction 4 Discussion 4 Question 1 4 Question 2 6 Question 3 9 Question 4 10 Conclusion 11 Future Work 11 Introduction The virtual companies presently do not necessarily have to have a good handling and storing mechanism. Besides that, they need not have a direct customer-vendor relationship. The owners of such companies have little role to play in the entire production and sales process. All they require are customers and brand association. This is done by means of a sophisticated internet and web-based technology, which brings the customer and the brand together. The owner of such a virtual company collects money from sales and transfers the share to the manufacturer (Donat, 2003). The paper is aimed at an analysis of supply chain and its processes in the context of a web-based business that is engaged in selling consumer electronics. After providing a brief outline of supply chain of the company, the paper studies the causes behind choosing the supply chain pattern and its management and reporting structure. The paper concludes after a comprehensive evaluation of the control and planning mechanism in product logistics and distribution activity. Discussion Question 1 The supply chain designed for the purpose of this study is based on a web-based product selling service, where the company is a website that deals with sales of electronic items sourced directly from the manufacturer. This retail distribution based supply chain is engaged in the business of real time buying and virtual selling of electronic products, primarily catering to the consumer goods electronic industry. The e-commerce business is fairly catching up in the global context and offers ease and convenience in shopping for branded and standardised products that do not require hand-on shopping experience. The e-commerce business aims to provide convenience, efficiency, speed and ease in shopping experience to the contemporary busy clientele. The global world is increasingly aiming to save time in doing tedious shopping to spend more time in luxury or are finding less time from office work to engage in real time shopping (Wright, 2002). The goods are ordered on the web-based platform by the customer. Such order is transacted in two levels. The payment made by the customer is either through credit card, debit card or internet bank transfer. Once the company receives confirmation regarding receipt of money, the order details are sent to respective manufacturers so that goods can be directly shipped from the manufacturing units to end consumers through transport system of the web based company. This logistics is a company like, FedEx, which picks up the products and takes charge of delivering them to the final consumer at a charge (Khuraana, n.d.). The business is based entirely on efficiency of distribution and supply chain management. The key performance indicators of this business and its supply chain management can be; 1. Reduction in time for delivery of products: The reduced time in delivery shall increase efficiency and customer satisfaction as well as save a lot of costs associated with warehousing of products. This also indicates competency in the delivery management at branch levels. 2. Reduced time in warehousing and storing of goods to be sold: Just-in-time ordering of goods shall increase product costs; whereas, storing consumer electronics for a longer span of time can increase costs associated with warehousing per product. Hence, in order to strike correct balance between the two, it is necessary to make efforts through order frequency judgement so as to reduce warehousing costs per product as far as possible. 3. Reduction in distribution costs of product category being delivered: Reduction in distribution costs can be made with proper area-wise distribution segregation, efficient fuel management, economic shipping and transport cost management as well as with a well-trained and efficient staff for delivering the product desired in a correct and smooth manner. It is one of the most critical aspects of a business associated with e-commerce. 4. Reduction in order cancellations: This is an important aspect that reflects the order processing speed allowing least time for cancellation of the same. The customer care and support systems need to be efficient in order to aware of key reasons that can lead to order cancellations. 5. The rate order returns: This is important to assess that correct product is being delivered and proper specifications are being met in order processing, besides ensuring timely delivery and conditions of the product when delivered (Johnson and Whang, 2002). The goal of the supply chain management is to allow for least time in delivery of products ordered as well as to reduce costs of warehousing for products that are being sold on the website. This shall in turn reduce the waiting period for replenishment of stock, which has positive effects on cost and period of warehousing. Logistics form the critical aspect of this business and the entire business activity depends on efficient management of order processing and timely and correct delivery of the product from manufacturer to the final consumer (Ross, 2010). Question 2 The entire process of supply chain within a web-based business involves five basic companies; the e-commerce company, the logistics company, the manufacturing company, the local logistics vendor and the bank. Figure 1: Supply chain Process flow The consumer places order on the web platform and makes payment via a bank transfer or credit/debit card payment options through the payment gateway. The order information is received at operations department of the company and the bank processes the transaction to the company’s account. The bank confirms the receipt of payment for ordered item to operations team of the company, which then sends information to manufacturer of the particular item for details of the order as well as gathers details of the order like, package size, weight, manufacturer, order collection location with the manufacturer, delivery location and expected delivery date to the logistics supplier. The manufacturer sources the product from his warehouse and makes it ready for shipment. The logistics firm collects the product, making it ready for delivery and also conforms to company specific packaging by labelling purchase and warranty details. The key assets of this supply chain management process is contract with the manufacturer for prompt availability of the product at low costs so that the margin can be utilized for making delivery as well as earning profits for the company; and contract with the logistics company for timely and safe delivery and perfect packaging of the good being delivered (Mehta, 2000). The resources used are information technology that is put through in managing and developing the web platform for proper display and ordering of products and the ERP software being used for order processing and management. The logistics supplier delivers to company warehouses that stock deliveries and also undertake the delivery process within cities. Such cross-docking system helps to reduce costs of external company delivery for discharging delivery and logistics services within city limits. The city warehouses allow for proper segregation of orders as per areas. The research unit for the company is collocated with the order processing unit, strategic management unit and IT units so as to provide IT team with findings of the research and aligning sales strategies as per demand pull and supply push factors (Valverde and Talla, 2012). Question 3 Figure 2: Organizational Structure: Supply Chain The reporting structure followed within the company is tall. In this structure, each level has a limited number of people reporting to head. Tall reporting structure allows for high levels of supervision and such is required in order to ensure that limited activities that the company engages in are carried out in the most efficient manner. This is important and critical for client retention and business sustenance. The only facility that a client looks for in online brand purchase activity is timely delivery and proper state of product being delivered. Hence, it is most critical that the business operates in close coordination and high levels of supervision with limited ambiguity in the reporting structure (Dowding, n.d.). The logistics and supply chain manager oversees activities of the inbound and outbound logistics managers and directly reports to the company’s management team. This represents criticality of the logistics function in e-commerce business (Baligh, 2006). The company plans out for the target market after deciding for the product to be sold through the online platform. Limiting the target market allows for more efficient management of internet based business. In case of electronic items, geographical controls can be exercised for delivery of products, being limited to main cities. This might reduce the target market and sales, but surely helps in establishing the strong roots for a start up concern. For controlling other divisions like, internal process control and outbound logistics control, the company has a proper ERP in place; this enables to track the order at various stages so that delay in any one stage can be immediately checked and corrected. Question 4 The business uses Saleswarp as the e-commerce software, which maintains data pertaining to product management, besides order processing through provision of shopping cart on the web platform as well as redirecting and connecting customers to banking platform (Saleswarp, 2014). The ERP software is a comprehensive tool that also enables multiple vendor management, which facilitates sharing information with the respective vendor and collection of the order summary from each vendor to keep a track of invoices. In addition to that, the software supports real time tracking of inventory at each level of the transactions process. This software also links the stock and status of delivery of local warehouses that are connected to the software. The direct customer shipment support allows for managing the order right from manufacturer to the end customers. The management of a logistics company is done by separate software, which manages data and processing undertaken by the firm. The Saleswarp software is also integrated with this logistics management software, facilitating comprehensive and single source of data. Such data is also used by the research team in order to track critical decision making credentials like, average order processing time, popular order categories, popular brands and average delivery time in cities, which in turn boosts planning and controlling processes. The choice of Saleswarp over other ERP systems was made as this software is a comprehensive and complete package that enabled single source of data collection. Such complete management makes it easier to manage operations of the company and smoothens out the supply chain process, thereby reducing ambiguity through different data points (Vaman, 2007). Conclusion The supply chain management of an e-commerce company is the most critical business activity because the entire business is dependent on efficient, correct, timely and proper delivery of the product ordered. There is no manufacturing related activity involved. This highest amount of costs associated with this business is involved in supply chain management and it is necessary for the company to focus on increasing its efficiency in order to improve profits by way of reducing supply chain costs. Such efficiency can only come through critical data analysis, appropriate planning, supervision mechanisms and systematic control of procedures (Plant, 2000). Future Work Future work in this field can be conducted on analysing effectiveness of the supply chain in place and finding out means and ways through operational analysis by using operational tools and techniques for predicting the most economical inventory positions, delivery chain and stocking and ordering systems on the order processing end. This is necessary in order to enhance company’s functions and increase profits through reduced costs from efficiency (Kalakota, 2011). Reference List Baligh, H. M., 2006. Organization Structures: Theory and Design, Analysis and Prescription. New York: Springer. Donat, J., 2003. E-business for Managers. [online] Available at: [Accessed 18 April 2014]. Dowding, H., n.d. Reporting Structure. [online] Available at: [Accessed 18 April 2014]. Johnson, M. E. and Whang, S., 2002. e-Business and supply chain management: an overview and framework. Production and operations management, 11(4), pp. 413-423. Kalakota, R., 2011. Big Data, Analytics and KPIs in E-commerce and Retail Industry. [online] Available at: [Accessed 18 April 2014]. Khuraana, A., n.d. Supply Chain Strategy. [online] Available at: [Accessed 18 April 2014]. Mehta, T., 2000. E-commerce and Supply Chain Management: Fitting the Pieces Together. [pdf] Hewlett Packard. Available at: [Accessed 18 April 2014]. Plant, R. T., 2000. Ecommerce: Formulation of Strategy. London: Prentice Hall Publications. Ross, D. F., 2010. Introduction to Supply Chain Management Technologies, Second Edition. Florida: CRC Press. Saleswarp, 2014. ERP for Ecommerce. [online] Available at: [Accessed 18 April 2014]. Valverde, R. and Talla, M. R., 2012. Information Systems Reengineering for Modern Business Systems: ERP, Supply Chain and E-Commerce Management Solutions. Berlin: Business Science Reference. Vaman, J. N., 2007. ERP in Practice: ERP Strategies for Steering Organizational Competence and Competitive Advantage. New Delhi: Tata McGrawHill Education. Wright, K., 2002. E-Commerce vs. E-Business. [online] Available at: [Accessed 18 April 2014]. Read More