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Technology & Logistics

It's all About “E”

byGordon Travers

Every time we pick up a logistics magazine or, frankly, almost any other business publication, we are told that we are in the middle of the next industrial revolution – the Internet. There is no doubt that the Internet and E-commerce are rapidly changing both the vision and the way businesses operate.

Change that has the ability to fundamentally alter the way people and business interact presents both an opportunity and a risk. One of the opportunities for B2B (business-to-business) is to increase your supply chain velocity by using information to replace inventory. For B2C (business –to-consumer) the opportunity is to extend your reach to customers and replace bricks and mortar with clicks and bricks.

The risks are just as noteworthy. In any revolution there are casualties – how many of the Fortune 500 company’s from 25 years ago are either still on the list or even in business today? The answer: more than 200 of the Fortune 500 from 1975 have ceased to exist. Being an old-line industry in this time of rapid change places you at risk. If you don’t start to explore this new business model you may very well find yourself on the wrong side of global balance sheet.

What is surprising is that many people in supply chain management have not seen the benefits of global inventory management. During a recent conversation, a senior manager from a 3PL (third party logistics provider) stated he saw no need of compiling benefits for mobile inventory management. It’s hard to believe coming from a company with a value-add to customers residing in information and inventory/asset management.

What is as big a risk as inaction is deploying an incomplete solution. For example, setting up a dot.com for customers to purchase goods is not enough. You need a complete fulfilment infrastructure in place. One need only look at Toys R Us last Christmas when its Internet site was not able to fulfil the orders it had promised to ship to see this.

Just how big an impact will E-commerce have? According to IDC, E-business will account for $2.5 trillion worldwide in 2003. This will have a major impact on the supply chain. Web-empowered consumers will cause a change from the current push to a pull model. According to Foster Research, residential package delivery will grow from 1999’s $2.98 million to $6.53 million per day in 2003. This will cause a shift from the traditional logistics model that dealt with bulk orders of more than $1,000 to a strategic customer and a different model of an E-commerce site involving logistics where we have parcel-sized shipments moving bi-directionally to a widely dispersed and relativity unknown customer base on a seasonal basis.

The good news is that same technology that is driving this change can be used to cost effectively respond to the needs it creates.

Bigwords.com and Radio Beacon provide examples of the new E-commerce success model. Bigwords.com is a college textbook vendor with no traditional bricks and motor stores. Sales orders flow in from the company’s Web site. Radio Beacon runs a totally paperless warehouse from receiving to shipping using 45 Symbol Technologies RF (wireless) mobile data terminals and Zebra printers. As sales orders are released, Radio Beacon generates a shipping label and packing slip before each order is picked and then directs the pickers electronically through the warehouse to select books in waves of 24 orders at a time. When the last book in an order is selected, the order is released to an integrated shipping system. By the time the books reach the shipping dock for a final verification scan of the shipping label, they are already on the manifest and ready to go. The paperless operation keeps the warehouse running smoothly and Web-based architecture allows the head office to monitor the operation in real time.

Web-based order entry, Radio Beacon’s wireless paperless application supported by a Symbol infrastructure, allowed Bigwords.com to go from a start-up warehouse to shipping ten thousand orders a day in eight weeks.

An example of how a more traditional bricks and mortar retailer can leverage both the existing infrastructure and the new Web-based business model can be found by looking at Simon Property Group, North America’s largest owner of shopping malls. In a test mall in Atlanta they have combined traditional shopping with E-commerce for an assisted shopping program called “FastFrog.com.” The system is for teenagers and uses the Internet and a Symbol CS2000 Memory Scanner. The CS2000 is a small thumb-shaped scanner optimised for .com applications. The teens scan the bar codes of products they would like as they roam the mall. At the end of the visit they return to the Frog Pond where they download the information to a personal Web page for access by family and friends. A person can visit the Web page and arrange to purchase something off the teen’s list from anywhere with Web access.

E-commerce is part of new business model and companies must look at how they are going to respond to the requirement for increased supply chain velocity and Web-based bi-directional demand logistics.