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Enhancing Logistical Process Of E-Commerce

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Question:

Discuss about the Enhancing Logistical Process of E-Commerce.
 
 

Answer:

Introduction:

I am studying a course on Engineering Management which a practice that combines the technical skills of engineering with the business and management skills so as to prepare us on solving business problems that are complex in nature.  A practical understanding of the business situation is needed to be a good engineering manager in addition to the technical knowledge is required. This includes practical understanding of engineering management processes used in companies (Belanger, Pupulin, Coope, P.Geoph, & Lowe, 2004).

As a professional, I can assume from any of the available roles such as project manager, systems manager, technical consultant, corporate strategy planner, strategic consulting manager, and material logistics professional. Logistics being one professional area of development for management engineers attracts me. With an increase in the ecommerce organizations in India, it is seen that logistics decisions play a critical role in ecommerce space. 

I would develop myself as a professional engineering manager who can provide supply chain consulting to ecommerce organizations. Thus, I have chosen a practical project on ecommerce logistics which aims at understanding how logistics operations can be established and streamlined to achieve strategic performance advantages. This would help me understand how Indian ecommerce organizations work and manage their logistics and develop myself. This knowledge would make a pathway for me to reach out to organizations into ecommerce space after I graduate as they would be able to see my potential as an Engineering manager from the research I would be conducting (Lloyd, 2000).

Professionalism in Engineering demands specialized technical knowledge on subject which I have with my college learning which would help in assessing operational alternatives.

As a professional engineering manager, I would also need to have certain skill sets including ability to solve challenging issues, ability to do modeling for visualizing solutions, and ability to apply theories learnt or abstract concepts learnt to practical engineering applications. Logistics is a complex problem to solve when it is about developing in-house capabilities for an organization and thus, this project would help me gain a practical problem solving skills.

Also, as I am taking the case of a company that has already developed its logistics that I would have to visualize to create a model to present during my research, the project would also help in understanding the concepts of business modeling. Further, many of the concepts and theories that I have learnt during my classroom sessions would be put to use in practice through this project. I have learnt about plant layouts, material handling, supply chain networks, and systems engineering that would be very useful as I would be able to apply them to the case study and learn the professional trait of applying theories to practice (Szpytko & J.Lis, 2005).

Besides these traits, a professional engineering manager also needs to have commitment to standards, ethical responsibilities, ability to handle uncertainty, communication skills, ability to appreciate management concepts, and ability to work with, lead or manage teams. As I am focused on one organization and would conduct research on the same, this would give me an opportunity to work with teams and develop these professional traits.

Research Background

In-sourcing of logistics services has become less use practice used by organizations all over the world because of costs and complexities involved. There are only a third of multinational organizations that have in sourced operations including logistics. Outsourcing on the other side has many advantages such as lower costs, more flexibility, access to more capabilities not present in-house, facilities consolidation, faster entry into new market and so on.

Organizational Background

The chosen organization is Flipkart which is into ecommerce space and had started with outsourcing model to slowly move to adoption of the in-sourced logistics. The company was founded in 2007 by IIT; Delhi Alumni’s and is headquartered in Bangalore. It started as a book store but now sells an array of products through ecommerce including electronics, white goods, consumer goods, lifestyle products, stationeries and more (NIGAM, NAYAK, & VYAS, 2015).

Aims & Objectives

Aim of this research is to discover ways organizations can use in-sourced logistics to build on strategic advantages and achieve better performance in the ecommerce industry. Specific objectives of the research would be:

  • Understanding the impact of outsourcing and in-sourcing of logistics on organizational supply chains
  • Understand how Indian ecommerce operate their logistics
    • Explore the impact of in-sourced logistics on ecommerce organizations performances
 

Literature Review

When an organization procures components required for its production processes from the company itself, the process of in-sourcing. In-sourcing can be done within the home ground, process called onshore in sourcing or through a foreign subsidiary, which is called offshore in sourcing. A major challenge with in sourcing is that the flow of products or its components happens across transnational borders making it difficult to make interpretations of the trade statistics.

Outsourcing can help company reduce these complexities while at the same time, reduce investments and get more returns. There are other benefits of outsourcing that further add value to the arrangement such as access to different supplier capabilities, improved performance, and more. This is the reason why many international organizations have higher focus on the outsourcing of their operations.  However, in 2005, Gottfredson, Puryear, and Phillips discovered that around 50% of these organizations adopting outsourcing model actually fell short of expectations. There were only 10% of these companies that were able to save costs and only 6% were satisfied with the overall performance of outsourced operations (Akili, 2011).

Watson, Zinkhan, and Pitt had a theory devised a framework for understanding performance implications of outsourcing. The framework identifies two types of costs that are incurred in the outsourcing model - coordination costs and suboptimality costs. Networks can increase both increase or decrease coordination costs based on the level of autonomy (Miguel, 2005).

Early adopters of outsourcing usually gain high returns while late adopters gain more of institutional legitimacy. The relationship between outsourcing and performance is affected in the long run and if there is too much of outsourcing, the performance can suffer. With more and more operations outsourced, management of multiple suppliers becomes difficult adding to coordination costs.  Further, the cost of offshore outsourcing is much more than domestic outsourcing. Rottman and Lacity conducted a study on US companies and found that offshore outsourcing projects cost them 50% of whole contract prices while domestic outsourcing contributed up to 10%. Offshore outsourcing models can majorly be affected by currency exchange rate fluctuations adding to costs of operations (Li, Fan, Abid, & Haartman, 2014).

 The ecommerce organization outsourcing its logistics operations risk losing their differentiation as they cannot differentiate their services against competition. They also lose on the bargaining power with suppliers as more and more organizations start to outsource their logistics to limited suppliers. Another challenge with outsourcing of logistics is that interfaces that connect the firm with customers reduce causing a lack of learning and thus, doing innovation becomes difficult (Kotabe, Mol, & Murray, 2007).

In the long term, outsourcing has a negative impact on performance and thus, it can be said that lesser the outsourcing, better is the performance of the organization.  While in in-sourcing, there is more control over functions and thus, there are no hidden costs that can affect the operations in longer run. Instead, the company with in-sourced logistics can actually achieve economies of scale over time and thus, gain a competitive advantage (ASL, 2014).

The choice of the logistics sourcing from outsourcing and in-sourcing can actually be affected by various factors other than their direct and indirect company advantages. These factors can be differences between countries, industries, and transactions. Walker has identified two levels of uncertainties in contracts including volume uncertainty which can increase costs when volumes are inappropriately estimated making in-sourcing of logistics a better approach while technological uncertainties raise questions on future technological developments making outsourcing a better option (Daniel Nordigardeh & Chicksand, 2015).

Research Methodology

This research would use a secondary case analysis methodology to identify ways organizations can use in-sourced logistics practices to improve upon its strategic capabilities and achieve better performance for their ecommerce business. The research would collect textual data of a selected organization with in-sourced logistics and would analyze their business and supply chain models. 

For collecting secondary data on Flipkart supply chain and logistics practices, the researcher would make use of journal articles, books, Flipkart website, its case studies, news sources, and other authentic data sources about company operations.

The case study would explore the logistics operations of the organization, would make an attempt to understand their decision of moving to in-source logistics and explore the performance benefits achieved by the organization after adopting in-house logistics.

 

References

Akili, E. A. (2011). Impact of the design of Logistics Outsourcing strategy on the firm´s logistic performance. University of Adger.

ASL. (2014). Outsourcing versus Insourcing. ASL.

Belanger, R., Pupulin, R., Coope, H., P.Geoph, & Lowe, G. (2004). Concept of Professionalism. APEGGA.

Daniel Nordigardeh, J. R., & Chicksand, D. (2015). Sourcing Uncertainties: The Case of Outsourcing and Global Sourcing. Modern Management Science & Engineering .

Kotabe, M., Mol, M. J., & Murray, J. Y. (2007). Outsourcing, performance, and the role of e-commerce: A dynamic perspective. University of Warwick .

Li, Y., Fan, R., Abid, M., & Haartman, R. v. (2014). The coordination of E-commerce and Logistics: A case study of Amazon.com. Hogskolan Igavle.

Lloyd, B. E. (2000). Engineering Professionalism. Journal of The Institution of Engineers.

Miguel, P. T. (2005). The Impact Of Logistics And Manufacturing Outsourcing On Shareholder Value . Graduate School of Vanderbilt University .

NIGAM, P., NAYAK, K. M., & VYAS, P. H. (2015). E- Commerce Challenges: A Case Study of Flipkart.com Versus Amazon. in. Indian Journal of Applied Research, 332-339.

Szpytko, J., & J.Lis. (2005). Professionalism in engineering practice. Mickiewicza: AGH University of Science and Technology.

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