Supply Chain Management in E Commerce

The revolution which drives contemporary business to increase to survive and increase their profits share in today’s extremely competitive environment is known as e-commerce (Dale,2001). On the other hand, consumers are increasingly using the electronic communication medium of e-commerce for purchasing or even selling on online auction sites. Turban, E et al (2004) explains that the change in consumer’s shopping behaviour requires business to see e-commerce both as technology and strategic tool. Business want to increase the profit by providing customer direct online access of their product undercutting the middleman and customers are looking for product at reduced prices(Chopra and Meindl,2004). This means that e-commerce is not just about World Wide Web presence; it is a different way of doing business which require business to improve their operating models and strategies.

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The term E-commerce, strategy, business and consumers are used above in a very board term. This report discusses a rather narrow branch of e-commerce known as business to consumer (B2C) in online retail market of physical goods and its impact on firm’s logistics and supply chain strategies within the context of online shopping. The report is structured around a specific industry of online super markets also trading from high street outlets. In order to structure and discuss the report, it is vital to first understand the meaning of following terms and their relationship with each other in an online business to consumer to consumer context.

CONCEPTUAL FOUNDATION:-

CONCEPTUAL ELEMENTS

DEFINATION

REF

Ecommerce

Retailing over the internet between business,government,consumer etc

Nariane R, 2003

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B2B(Business to business)

Exchange business data to conduct business with their trading partners

Christopher bussler (oracle corporations)

B2C e-commerce (Business to consumer)

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Business to consumer retailing over the internet

Efram Turban et al (2004)

Business model

Set of planned activities also referred as business process

Supply chain

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The amount of physical channels that a product flow through to reach the end product

Bozart,C. and Handfield,R., Operation and SCM (NJ: prentice hall,2003):page 103

Logistics

A supply chain channel that ensures the effective and efficient delivery of goods from point of origin and point of consumption.

Logistix partner oy, Helsinki, FI,1996

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Disinter-mediation

Disinter-mediation is the removal of intermediaries between buyers and manufactures e.g. Dell

B2C IMPACT ON SUPPLY CHAIN STRATEGIES AND LOGISTICS:-

Hughes,A and Suzzane,R (2004), explain that the classifications of B2C are based upon the number of channels the product is passed through before reaching the end customer.

For Example, in direct sales : a manufacturer provide products directly to the consumers e.g. Dell whereas in broker: a third party organisation facilitates the transaction between sellers and buyers e.g. EBay and PayPal. Therefore, each B2C classification highlights the complexity level of underlying supply chain for that business. For example, in an online intermediary version of B2C, the product will have to pass through an integrated supply chain of suppliers,manufacturers,retailers and buyers and hence will require more strategic planning.

Dale, N(2001) insist that In order to ensure the smooth delivery of the product through such a complex journey of supply chain distribution, businesses have to align their business model with everyone involved. This further offers the business and opportunity to carefully define their supply chain strategy and then optimise their business processes such as efficient delivery through an effective logistic system. Hughes,A . Suzzane,R (2004) is in agreement with Dale, N.(2001) It is only after going through above mentioned process, a business is able to achieve disinter-mediation to provide its customer direct access to the products that otherwise would require a mediator.

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It can be urged that a well integrated and strategically aligned supply chain delivered by an efficient logistics channels will ensure a successful B2C operating model or a failing B2C model will expose weaknesses in the back end supply chain distribution and logistics. In any case , a moving from bricks to clicks will need to critically define its supply chain strategies and efficiently implements its logistics channels.(Hughes, A and Suzzane,R ,2004)

Chapter 2

Practice

In comparison to B2B supply chain, B2C supply chain have neither more channels or in some cases a single channel of transportation. As mentioned above this report will discuss B2C sales

Tesco Case study:-

Tesco is well known leading food retail group with worldwide presence in metropolitan cities of Europe, Asia and USA. Tesco is general distinguished as the world prime online grocer with annual revenue of more than £1 billion generated in United Kingdom and continuously expanding to other countries all over the world. (Tesco Case Study,2008)

Tesco Direct Launch:-

In 2006, Tesco initiated its first B2C project called Tesco direct to compete with other competitors such as Argos. Argos has been retailing using almost all sales channels such as outlets , catalogues and online. Tesco aimed at providing over 8000 goods in several consumer departments such as furniture, electrical and electronics, food, home and kitchen, garments and sporting goods allowing customers 24/7 access at cheap prices as compare to their usual outlet prices. Customer now have multiple choice to shop at Tesco using three different sales channels and can place their orders on-line, over the phone or inside the stores. (Electronic Commerce, 2009).

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Tesco Direct Challenges in Supply chain project successes:-

In their move from brick to click, Tesco needed to fulfil the assurance of their new internet retaining arm, Tesco Direct. However this requires a quick and complex transformation from traditional warehouse operation to a very different supply chain model of multi-channels retailing as mentioned above in (Tesco Case Study, 2008). Therefore management had to review the business operating model, revise and optimise business process particularly processes involving supply change and logistics to meet new requirements imposed by B2C trading model.

Neil Ashworth, the supply chain director of Tesco Direct states that:

“We decided to use an existing site for most of the customer fulfillment and this meant transforming the operation in a very short space of time.”

The most critical tasks included deciding upon changes in the running business process and balancing increased workload of the order fulfillment and delivery center operations. This was further complicated by the size and scale of the individual departments along with higher demands level in peak season such as Christmas and summer times. As discussed earlier that a B2C model may expose weaknesses in underlying supply chain strategies or reveal missing or weak logistics channel in any business environment, however it has been noticed that the scale of the problem is larger for retail business due to a larger supplier base.

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Tesco Supply chain management practice:-

Tesco is reputed for its best practices in the area of supply chain management. The company has increased and sustained advantage over its competitors by integrating innovations in its supply chain for example point of sale data, continuous replacement systems generated by the customer demand, key distribution, cross dock distribution centers and make use of a single channel like bus, van or truck to handout several stores(Electronic Commerce 2009). The entire process of transformation from brick to click was also supported by Tesco’s aim to provide best possible customer services. This commitment has been confirmed by Stuart Ross, the director of supply chain & distribution at Tesco 2005 by stating that:

“Customer focus and commitment to value has propelled Tesco into a leadership position developing a dynamic ‘virtuous circle’ comprising scale, efficiency and innovation within the supply chain.” 1

B2C impact on Tesco:-

The boost in the competition level between retail giants has evidently produced the want to recognize a new technique of performing business that can reduce the operating cost as well as reach the customer handily. This want was fulfilled by the B2C electronic commerce over the internet. Tesco has a well structured and user friendly website where products are categorized professionally into different departments and also provide an interactive help system that proficiently guides a new user to quickly get familiar the online shopping environment in order to help and persuade the customer to shop online. Tesco has tactically scheduled the distribution of their products in such a way that fresh goods packed on the very same day are made available to the customer on their doorstep through efficient logistics services. The B2C trading model offered Tesco the opportunity to improve their existing supply chain, adopt innovative integrated solutions for logistics as well as offer their customer a shopping portal free of time and geographical factors.

Conclusion :-

Use of internet by the customer in 21st century that resulted in massive growth of the internet backed by the scientific modernization was the biggest reason for the success of electronic commerce is justified in the case of Tesco plc where the supermarket monster has successfully applied the electronic commerce for all kind of items through combination of the different teso stores and the logistics fleet of the company. It was an achievement mainly because of the handiness factor connect with the electronic shopping system. Less operating costs and the removal of the storage space has provided evidence that the electronic retailing is not only easy but also cost reducing feature as well.

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The essential study has demonstrate that the TESCO Plc has attained customer satisfaction and competent management of the B2C electronic commerce protect through the execution of web technology to effectively conduct the whole business process over the Internet quickly.