How E-commerce Strategies can Enhance Efficiency in Food and the Clothing Retail Sector - Essay Example

Table of Contents 0 Introduction ……………………………………………………………………………….3 2.0 Literature Review…………………………………………………………………………3 3.0 E-commerce ………………………………………………………………………………5 3.1 Security in e-commerce ………………………………………………………..5 4.0 E-commerce and Supply Chain Management…………………………………………6 5.0 Supply Chain Management and Logistics……………………………………………….7 6.0 E-Logistics………………………………………………………………………………….9 6.1 Greatest challenge of E-Logistics…………………………………………………10 7.0 Case Study-Tesco…………………………………………………………………………..12 7.1 Drivers of e-commerce and e-logistics at Tesco………………………………….12 7.1.1 Marketplace Competition………………………………………………..12 7.1.2 Cost Effectiveness………………………………………………………13 7.1.3 E-fulfilment……………………………………………………………..13 8.0 Conclusion………………………………………………………………………………….15 9.0 References…………………………………………………………………………………17 1.0 Introduction E-commerce may be construed to refer to the process of not only buying but also selling goods and services via the internet. Mostly, the internet used in this kind of business is the World Wide Web. In this kind of business, potential buyers log onto the sellers website and shop from the catalogue maintained in the buyer’s website in something that can be said to be a virtual mall (New Age International, 1979: p5). Once the buyer decides to buy, he will do so via electronic money transfer and thus it is the responsibility of the seller to ensure that the goods or services so purchased are safely and timely delivered to the buyer. Despite the security concerns in business transactions as far as e-business is concerned, e-business or e-commerce for that matter has continued to gain popularity by the day. This paper seeks to highlight the concept of e-commerce and consequently offer an in-depth evaluation and analysis of the e-commerce supply chain management strategies thereby showing how these strategies can be use to enhance efficiency and effectiveness in food and/or clothing supermarket such as Tesco. 2.0 Literature Review There is a group of literatures that highlights the concept of e-commerce and how the supply chain management can lead to efficient business operations. New Age International (1979) tries to show the general practice of e-commerce, its evolution and its delivery to the general business efficiency. It describes e-commerce in its entirety therefore opening the arena to an understanding on how the application of supply chain management strategies can enhance the efficiency of e-commerce. As Chopra and Meindl (2001) delve into this topic in their book Supply Chain Management: Strategy, Planning and Operation it is clear that the subject of supply chain management is very important to any kind of business including e-commerce or e-business for that matter. The book ventures into every aspect of supply chain management; the strategy, the planning and the actual operation of the strategies and the plans. The book addresses the common strategies used in supply chain management and how these strategies have been applied to make commerce or e-commerce efficient and successful thereby giving the companies that use these strategies a competitive edge in the market. Handbook of Supply Chain Management, as written by Ayers James (2001) tries to explain the practice of supply chain management in the practical market place. The relevance of this book to the topic of this paper is the fact that the way supply chain management is practiced can also be applied to when business has been re-engineered to counter competition in the market place. The kind of business re-engineering that we are talking about here is the embrace of e-business by majority of companies. The concept of supply chain management has also been applied in e-commerce. The application, as the book cites, of supply chain management in e-commerce is not any different from the way it is applied in the normal kind of business. As Porter (1990) adds in his book On Competition, he says that Since the practice of e-commerce is motivated by the competition in the normal market place, the application of supply chain management in e-commerce is likely to be aggressive to achieve the very reason that led to the venturing into e-commerce; fight back competition in a bid to gain a competitive edge in the market. Finally, as Sahay (2003) reveals in his article Making Supply Chain Integration a Reality, the application of supply chain management strategies and the effective application of e-logistics are both paramount in making the integration of supply chain management into e-commerce a reality. 3.0 E-commerce E-commerce is rapidly picking up in the present society and it is doing well indeed. To gain a competitive edge in marketing, sales, market segmentation and even customer base, most business organizations have resolved to go the e-way so as to be able to display their merchandise 24 hours, seven days a week and be able to reach larger market segmentation. Many have also opted for the e-business option because it is cost effective as compared to its counterpart (New Age International, 1979: p5). 3.1 Security in e-commerce As stated earlier, the security of transactions in e-commerce is a formidable and potent concern. Imagine buying a good or service online, you pay but the service or commodity is not delivered at all. Yet still, imagine you are selling goods or services online and you deliver the services or goods and you don’t get paid at all. Further, in the competitive market, your competitors may decide to turn into hackers to push you out of business so as to raise their customer base. And the imaginations go on and on and on and yet still one cannot be said to be overreacting. These are security concerns that need to be addressed in the e-commerce practice. Security, as far as e-commerce is concerned, also includes the bid to validate business transactions, the process of controlling access to commodities or resources that are classified for instance the web pages meant for registered members or a few selected users only, encryption of the communication process and many more processes. Generally, security in e-commerce is all about the effort to ensure and insure not only the privacy but also the efficiency of the e-business transactions (Laudon & Guercio, 2001: pp143-7). 4.0 E-commerce and Supply Chain Management When we talk about commerce in general, either e-commerce or otherwise the aspect of supply chain management is implied because goods and services have to be moved from the suppliers to the dealers or sellers so that they can be assessed easily by the end consumers (Geunes, 2005: pp122-127). Therefore, when we talk of e-commerce, it is not any exception as far as supply chain management is concerned. Actually, in ecommerce, the supply chain management is even rigorous and thus calls for strategies that can easily bear on efficiency and smooth flow of products and services. The question that arises is why e-commerce? This is a question that has been asked for some time now and it continues to be asked as the retailers and other businessmen continues to embrace e-commerce. Basically, there is something about e-commerce that is attracting all and sundry to venture into this innovation in the hope of making the practice of business less rigorous and efficient. Indeed, e-commerce has its positives as compared to its counterpart and this is why it continues to gain popularity. Despite its security challenges as highlighted in the foregoing sections, people have come to realize that they have to embrace an aspect of trust because e-commerce is an issue of trust by design (Keen et al, 2000: pp57-59). As competition hits the market, most businessmen will want to differentiate in order to achieve a competitive market edge. This is a common business practice. E-commerce is a form of this differentiation that helps the businesses to achieve a competitive edge in the market. Beside competition and globalization a general fall of global supply has also had a hand in this kind of business differentiation so as to embrace e-commerce. Such circumstances, as mentioned earlier will thus call for formidable supply management strategies besides others such as clusters, e-logistics etc. According to research, e-logistics has the ability of lowering costs up to 10%. Based on this very important revelation of research, most of the very successful and efficient organizations such as Hewlett-Packard, Tesco, Xerox and Compaq among others have been favourable to supply chain management and as such, e-logistics. E-logistics is basically an extension of the online transactions so as to achieve shipping of goods and services to the consumers. Before the advent of e-commerce, there was the concept of supply chain management and logistics. However, as information technology developed, supply chain management has been applied in e-commerce and the coining of a term such as e-logistics has been made possible. The integration of supply chain management into e-commerce has been made easier with the utilization of modern technology which has been found to greatly compliment and augment the basic practices of logistics and supply chain management within the e-commerce environment. 5.0 Supply Chain Management and Logistics As stated earlier, the advent of business competition encouraged innovations such as the embrace of e-commerce and the effective management of the supply chain. Actually, most organizations have realized that their efficiency is strongly tied to the collaboration and the sync with both their customers and suppliers. If there is competent collaboration with these two groups of people, then business efficiency and performance are inevitable (Hieber, 2002). Before you can understand the concept of supply chain management, it is imperative that one understands what supply chain is. Basically, supply chain is the myriad of processes from the raw materials to the transportation of end products from suppliers to retailers/wholesalers as well as transportation of the end products to the end users. Actually, the scheme and complexity of a supply chain depends upon the type and size of the organization and the type of products being handled. The supply chains may be short and very simple or may be very long and ultimately complex. Therefore, the control of all the events that take place along the supply chain is what is commonly known as the supply chain management. For this kind of management to come off as effective, all the fragmented parts of the supply chain need to be competently coordinated such that in the bid to lower costs, no customer satisfaction or quality aspects are lost in the process (Frazelle, 2001: pp241-244). Supply chain is composed of all the stages that fulfil the customers’ needs and requests either directly or otherwise. The chain (supply chain) involves the following components: Warehouses, manufacturer, suppliers (raw materials and finished goods), transporters (logistics), retailers and customers which are apparently the end point of supply chain. Supply chain management is under obligation to meet the customers’ requests. The fulfilment of these needs and requests include but are not limited to quality management, development of new products, aspects of marketing, efficient customer service and finance. Actually, supply chain management is not only about the design but also the maintenance and operation of a supply chain commensurate to the needs of the customers (Chopra & Meindl, 2001). Having said the above, it is evident that coordinating the pieces of the supply chain is inevitable. Also inevitable is the transportation component in the supply chain. Transportation component in the supply chain is made up of key players such as the transport organizations, financiers and the warehousing. It is now clear that customers’ orders do not look out for cheap transport options but more often than not, cheap transportation options ensure that a customer’s orders have been executed smoothly to a degree commensurate with customer satisfaction. Therefore, the concept of logistics in SCM is quite central since most of the philosophy in SCM has effectively been integrated in logistics thus calling for an advanced information system to enhance communication among the companies involved in a single supply chain. This is how e-logistics has been able to be born. According to (Cooper, 1993), logistics is the haulage of goods in a bid to complement business processes. Its primary intention is to plan, process, execute and control not only the warehousing of goods but also the flow of goods as well as the management of information starting from production to delivery to the end user in a bid to satisfy the customers involved. It is common knowledge hat the cost of logistics will ultimately affect the cost of the product being sold. As such most organizations have often sought to reduce the cost of logistics in a bid to maintain low product prices so as to maintain a competitive edge in the market. 200 European organizations were involved in a survey to show the effect of logistics on the price of commodities and it came out that about 7.8% - 23% of the final price of a commodity comes from the cost of logistics. To manage costs, most organizations have assumed that logistics is part of SCM and as such a new definition of Logistics has been coined. In this way logistics is defined as the planning, implementation, control and execution of not only effective but also efficient flow of goods from one point of production to another point of final consumption in a bid to satisfy the customers or consumers’ needs (Ayers, 2001). 6.0 E-Logistics The impact of e-business and SCM on e-logistics affects a comprehensive definition of e-logistics. However, a simple definition of e-logistics can be afforded. E-logistics can be construed to refer to the sum total of processes involved in the transfer of goods purchased or ordered over the internet to the buyer or end user (Auramo et al, 2001). To implement e-logistics it is necessary that the business processes are first renovated and re-engineered in a bid to add more value to the chain. It is common knowledge that any supply chain coupled up with supply management which has sufficient information is enough to satisfy the customers. The integration of SCM and e-logistics into e-business is intended to not only cut costs but also ensure diversification which will lead to a wide customer satisfaction. E-business venture in itself has two functions; to venture into new innovations so as to counter competition in the market place and to ensure smooth, efficient and effective business processes that leave the customers satisfied. The use of e-logistics is to ensure that all these processes are planned, implemented, controlled and executed effectively and efficiently so as to achieve both reduced costs and customer satisfaction (Ross, 2003: p97). 6.1 Greatest challenge of E-Logistics E-logistics enables electronic ordering and the subsequent deliveries of the ordered goods. As such, the greatest challenge of this process in the ability to coordinate and integrate the e-business operational activities meant to enhance the obligations in delivery programs. It is mandatory that the customers are delivered the goods that they have ordered in the time and the form in which they have specified in the electronic order. It is common knowledge that if these goods are not delivered in the appropriate time, losses, dissatisfactions, complaints, legal mitigation and other undesirable courses may ensue. Therefore, a company that embraces e-commerce should ensure an e-logistics that will enable them overcome this kind of formidable challenge. This challenge can be overcome by use of information solutions that link data collection and synchronization to the automatic management of all the containers and all their contents. Nevertheless, unforeseeable circumstances may lead to delays and dissatisfaction but all the same way there is nothing that can be done if such circumstances cannot be anticipated (Stanford-Smith et al, 2002: pp97-103). The table below shows how the greatest challenges of e-logistics can be overcome. Challenge Possible Mitigation Course Expensive goods Insured special delivery through reliable courier services Large/ heavy goods Specialized courier company Deliveries should be timed consumers to collect locally Unfit goods based on size, fit etc Comprehensive size specification. Mechanisms for return of unfit goods should be smooth Perishable goods Cautious packaging Use a company-owned delivery service (examples of the companies that do this is Tesco in its delivery of foods and fruits ordered online) Time-slot deliveries that will enable the customer to choose the best one that fits his/her interests. Questions on deliveries from consumers On-line tracking provision to be able to inform the customers appropriately Liabilities at Customs Well compiled information about the purchaser, type of goods, quantity and cost. Presence of local partners who will take care of the delivery paperwork 7.0 Case Study-Tesco Tesco, UK retail giant has been in e-commerce for a long time and this, in part, explains why it is able to be a market leader within a very aggressive business competitive environment. It has been able to manage its supply chain well through the use of a well organized and managed e-logistics. To achieve this, it has at some points contracted other companies such as Art Technology Group Inc (ATG). Just like Tesco, other retailers continue to note the value of e-commerce and this is why they have continued to invest heavily on it. Tesco is continually expanding its e-commerce by venturing into newer market segments that can be well served online. What has been able to make Tesco survive in the most challenging venture of e-commerce and e-logistics? The answer to this question will sufficiently offer insight to how e-logistics and e-commerce strategies that can lead to efficient and effective business practices which can render the business .less costly and hence quite profitable (Mehdi, 2006: p33). 7.1 Drivers of e-commerce and e-logistics at Tesco 7.1.1 Marketplace Competition The competition in the market place has been the greatest driving force that has effectively pushed business organizations to venture into e-commerce and consequently e-logistics. Business organizations that have embraced e-commerce, such as Tesco, have effectively curved their formidable positions and segments in the competitive market. 7.1.2 Cost Effectiveness Secondly, the desire to cut down the costs has drove Tesco to e-commerce. E-commerce cuts down appreciable operational costs and as such this has an implication on the final cost of goods. Retailers that offer attractive prices have the history of a crowd of customers. Price determination is often a tricky affair and as such you cannot quote prices reminiscent of cost-to-cost simply because you want to impress the customers. However, you can do this if you were in a Non-profit making venture. To achieve this pricing advantage, it is important that cost effective ventures are exhausted and this is where e-commerce and e-logistics come in handy. The less costly e-commerce translates to cheap commodities and hence the competitive advantage of Tesco in the highly competitive market (Enders & Tawfik, 2008: pp261-266). 7.1.3 E-fulfilment Majority of retail chains have considerably invested in expansion across geographical regions and even across national boundaries. This has called for e-commerce and even the practice of e-logistics. An example of such retail chains is the UK based Tesco. To offer e-fulfilment, Tesco has often ventured into strategies such as owning a logistic company that would take care of collecting orders and taking care of deliveries of the ordered goods especially for that case of perishable goods such as flowers, foods and even fruits and vegetables. Secondly, e-fulfilment is achieved by having e-warehousing which houses a myriad of various products which the customers can effectively choose what best fits their fancy. This strategy of e-commerce is an extension of the normal business practices in which a store offers variety such that customers do not need to visit any other place because thy can get all that they want under one roof. This warehousing of variety creates convenience and this effectively fulfils the customers’ needs. The most important factor of fulfilment, which is often assumed to be a central concern of e-logistics, is the delivery of the ordered goods. Tesco has often insisted on delivering goods right to the doorstep of the customer within the shortest time possible after payment has been made. As mentioned earlier, Tesco owns its own delivery company although at times it has to contract other companies to take care of the deliveries involving delicate, large and heavy commodities such as fridges, bath basins, etc. It is a common phenomenon when some retailers have gone out of e-commerce based on deliveries. Twilight deliveries involve the delivery of parcels through the post office which means that the customer has to go to the post office to collect the parcel during the weekdays. This aspect of delivery negates the very benefit of shopping online. Tesco, aware of these dynamics maintains doorstep deliveries of parcels through contracted courier services so as to achieve high customer satisfaction and convenience. However, sometimes the doorstep deliveries are made when the recipients may be out at work or any other kind of commitments. In anticipation of these dynamics, Tesco supports deliveries to the workplace therefore upholding the very convenience that e-commerce is supposed to enable. Further, there are lockable delivery boxes that are right outside the house which have a one way code and as such are accessible by the owner alone. Tesco, through its contracted courier services, make deliveries through this kind of delivery boxes. It is notable that some of these boxes have freezing facilities to prevent ordered perishable goods from going bad before the customer can get hold of them (Hooley et al, 2004: p497). Consistence is yet another aspect of e-fulfilment. If a customer orders goods online, he expects that the merchandise is delivered within the time specified or otherwise within the shortest time possible. If this is done consistently then the customer will not go anywhere else for e-shopping. This explains why Tesco has a crowd of loyal e-customers. Tesco has maintained consistent quality services, easy to use online shopping interfaces, timely deliveries, variety of products, best prices. With all these consistently offered, no customer will want to shop anywhere else other than Tesco. Generally, consistence in the offering of quality services as far as e-commerce is concerned go a long way in ensuring that a loyal customer base is established which will help steer the company to greater heights of success and hence a competitive advantage in the very competitive market environment. In the normal form of business, procurement is supposed to be less tedious and quite short to ensure fast transactions. The basic reason as to why people resort to online business is the convenience and the hatred for longer procurement channels. As such, Tesco has hitherto maintained a very less tedious, short and easy to operate procurement channels which expedite business transactions in their e-business. Provided the customer has paid and clarifies the type, quantity and quality of products he/she requires from the e-warehouses or e-shopping malls. Tesco will immediately commission delivery of these commodities. 8.0 Conclusion In conclusion, e-commerce is widely gaining popularity and any company that wants to retain its competitive advantage in a competitive market has no option other than embrace the e-commerce practices. Embracing of e-commerce is in itself not sufficient to take the organization to the level of success anticipated. What is required besides the embrace is the enactment of formidable, practical, workable, efficient and effective e-logistic strategies that will ensure that the transactions in the e-business forum run smoothly and the customer comes out happy. Meeting the customers’ satisfaction through an efficient e-logistics and e-commerce network system, timely and flexible deliverances have to be guaranteed and form, place and time utilities have to be satisfied by the delivery services. Furthermore, procurement and price advantage have to be maintained at levels that foster customer satisfaction. For price advantage to be achieved, it is necessary that cost effective e-business model is conceived. When the cost of operating the e-business is low, then the prices can be low hence making the achievement of price advantage quite easy. Inasmuch as the practice of e-commerce is challenged by a number of factors, once an organization such as Tesco has understood the dynamics and positions its e-logistics to counter these challenges, there is nothing that can stop such an organization from reaching the highest conceivable levels of success in the very competitive markets. Indeed it goes without saying that effective e-logistic strategies have the ability to enhance the efficiency and effectiveness of a chain supermarket such as Tesco. 9.0 References New Age International (1979): E-Commerce, New Age International, p5 Laudon K C & Guercio C T (2001): E-commerce: Business, Technology, Society, Addison Wesley Publishers, pp143-7 Keen et al, (2000): Electronic Commerce Relationships: Trust by Design, Published by Prentice Hall PTR, pp57-59 Chopra S, Meindl P, (2001): Supply Chain Management: Strategy, Planning and Operation: p449   Ayers J B, (2001): Handbook of Supply Chain Management, the St. Lucie Press Porter M. E, (1990): On Competition. Boston: Harvard Business School Press, p496 Sahay B. 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