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Electronic commerce, marketing channels and logistics
platforms––a wholesaler perspective
[Abstract]Electronic commerce may impose new demands which the supply chain has to react to, while at the same time being an enabler of effective marketing and logistics.This paper describes alternative strategies for wholesalers conducting electronic commerce and how logistics may support the development of marketing channels and improve flexibility.
Related issues with logistics implications are the decisions whether or not to use multiple channels and if intermediaries should totally bypass dealers, or rather collaborate by letting them manage the marketing relations and bypass them logistically.The concept of ‘‘logistics platforms’’ is discussed, based on empirical findings.Empirically the base is a case study of an intermediary with extensive use of business-to-business electronic commerce in a supply chain with independent dealers.The paper compares theoretical aspects with findings from the case and gives some indications of the potential of electronic commerce and logistics platforms. 2002 Elsevier Science B.V. All rights reserved.
[Keywords]Supply chain management;Marketing channels;Logistics platform; Electronic commerce; Flexibility
In a supply chain there are several alternative strategies available for the participating actors.In this section we provide a brief presentation of alternative strategies such as separation of functions, multiple channels, and the question of where and by whom in the supply chain the activities should be performed.Basically the strategies concern disintermediation versus different kinds of collaboration.
The question of intermediaries and their function has been widely discussed during the last century from different perspectives including marketing channels, distribution channels and supply chains.Late ly, supply chain management has emerged as a paradigm with emphasis on the management of multiple relationships in interorganisational processes.The term, supply chain management, is often referred to as a holistic view of a value creation process from end customers to original suppliers where co-operation and trust are focused upon (Christopher and Ryals, 1999; Lambert and Cooper, 2000).Market ing and distribution channel theory have transferred input to supply chain management and logistics (Coughlanet al., 2001), e.g. Bucklin (1966) emphasised the number and types of function that occur in the channel, and the sequence in which they occur, as well as how these functions or activities are divided among the participants.
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The aspect of multiple channels is referred to by Anderson et al.(1997) as a horizontal perspective in supply chains where multiple channels may be used to reach end customers with different kinds of intermediary.Electro nic commerce, as defined here, is one of many possible channels to the market including catalogue sales, salesmen, dealers etc.M ultiple channels also have a vertical perspective by considering the lengths of the different channels were electronic commerce may be a direct channel to the end customer and a dealer is an indirect channel, a channel with an intermediary. The alternative strategies for multiple channels are discussed below. Elimination of intermediaries––vertical disintermediation––has been an appealing scenario for members of supply chains seeking the shortest way to end customers (Bakos, 1998; Vandemerwe,1999).Examples of disintermediation are manufacturers by passing wholesalers, and wholesalers bypassing dealers or retailers.Eve n if the advent of electronic commerce raised expectations of a coming era of disintermediation, several attempts to eliminate intermediaries have failed.Cost ly electronic commerce investments, expensive logistics and powerful intermediaries with a broad geographical scope and strong marketing relations with customers are some reasons for the failures. Elimination of intermediaries and all of their roles might therefore be a questionable course of action.The alternative would be closer collaboration with existing intermediaries.
Several authors have dealt with separation of functions or flows in the marketing channel.Bowersox and Morash (1989) claimed that the most efficient channel for achieving profitable sales might not be the most efficient channel for physical distribution.Also, Abrahamsson and Brege (1995) argue that marketing and logistics need to develop in their own ways, proposing that separation of marketing and logistics is a prerequisite for effective and efficient integration of activities.They argue that separation of physical distribution and marketing/sales into separate units provide possibilities for centralisation and simplified integration of activities in logistical flows.
Separation of functions could be carried out in collaboration with intermediaries. Composite channels are discussed by Anderson et al.(1997) and Wouters et al.(1999) where the supplier and its channel partners share the execution of the channel functions (decomposition).An example is where the supplier performs some functions such as sales negotiation and invoicing, while its channel partners perform physical distribution and order fulfilment.Com posite channels represent a vertical perspective, where decomposition deals with what participant will perform which activities or functions.Decompo sition of flows is achieved under terms of collaboration in the supply chain. Conclusions
This paper describes different lines of action for wholesalers conducting electronic commerce in multiple marketing channels.The focus is on marketing and logistics with an emphasis on the support from a logistics platform.The logistics platform is discussed as a part of the logistics
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system in the supply chain, a part which the focal company centrally controls, and has the power to design.Specifical ly, the term logistics platform is used to indicate connections to marketing channel strategy through the hypothesis that central control is more important than a central logistics structure, which may be achieved with co-ordination and standardisation of processes.A wholesaler, BBT, is used as an empirical base for conceptualising different dimensions of the logistics platform with regards to electronic commerce as a marketing channel.Furtherm ore, by comparing evolution patterns of the illustrated wholesaler??s and its supply chain with the theoretical alternatives some indications can be pointed out.
An electronic commerce portal can be used as a marketing channel in collaboration with existing intermediaries or through bypassing intermediaries––disintermediation.In the case of BBT the portal is used as a parallel ordering and sales channel in collaboration with existing intermediaries.The wholesaler gives its dealers the alternative to let their customers use BBTs marketing channel by ordering through the Internet portal, as well as by giving the dealers a promise not to bypass them without permission.In the case study there is no sign of disintermediation although the possibility is ready and waiting.
The case study shows that the wholesaler has focused on the horizontal dimensions of marketing and logistics.The marketing flows of seven different wholesalers/assortments have been tied together into one Internet portal, thus offering the participants in their supply chain not only ‘‘onestop-shopping’’ concerning the ordering of products,but also consolidated physical deliveries.These efforts have demanded a tight co-ordination of the information flows including ordering flows from dealers through the portal to the warehouses.
The horizontal development of the logistics platform, in terms of the physical flows, has becomeco-ordinated through the cross-docking of deliveries from two of the warehouses, and in terms of the information flows, the logistics platform has become co-ordinated by aggregated ordering and delivery information distributed to the portal.Even if goods from one of the three warehouses are not consolidated with the other flows it is a logistics platform in the sense that the logistics is centrally controlled.In terms of ordering flow the logistics platform is well developed and 40% of the orders to the wholesaler are taken through the portal.The vertical dimensions of the logistics platform give the dealers a possibility to decide to send their end customers?? goods directly from the wholesaler.The number of dealers letting their customers bypass them by ordering at the wholesalers Internet portal is still a minority, but the opportunity exists and the reasons for the limited use is primarily marketing considerations rather than logistics issues. Concerning the uncertainties in the business context that companies and their logistics management face today, a firm and its supply chain need to be flexible to compete.Thus , with logistics being an important ingredient in the business model, strategic flexibility involves the flexibility of logistics and especially the flexibility of the logisticsplatform.It could be argued that the possibility of adapting to changes in the environment concerns the possibility of choosing
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different lines of action in terms of disintermediation, multiple marketing channels, composite supply chain channels and/or multiple logistics channels, ordering channels or distribution flows.This requires a logistics platform that is centrally controlled and copes with strategic flexibility in new marketing channels and operational flexibility in current marketing channels.The wholesaler studied has built an electronic commerce portal and logistics platform that gives this strategic flexibility––a ready and waiting reserve to use when needed for future changes in the industry and its supply chain.Gerwin (1993) calls this kind of flexibility ‘‘banking’’, an investment that creates future options for a company.Fur thermore, at the same time the flexibility of the wholesaler creates uncertainties for rivals and competing supply chains.
In conclusion, we see a need for future research in this area involving a more precise definition of logistics platforms, conducting additional case studies and to test hypotheses concerning logistics platforms and evaluate their scope and performance.W e believe the interaction between marketing and logistics, horizontally and vertically in the supply chain, is an important area where much more is to be researched.
--Aldin, Niklas; Stahre.“Fredrik European Journal of Operational Research” 144. 2 (Jan 16, 2003)270-279
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