Logistics and e-commerce

By Peter Bradley -- Logistics Management, 2/1/2000

For all the hoopla in the popular press surrounding electronic commerce, more often than not the key role that logistics plays is forgotten. Unfortunately, it seems the fulfillment end of Internet ordering only gets attention when it fails. Thus, a number of stories circulated around Christmas when some electronic retailers could not deliver all of their orders before the holiday.

Last month's cover story focused on how the best known and biggest of the so-called e-tailers, Amazon.com, was working hard to ensure that its distribution network fulfilled, in more than one sense of the word, the expectations promoted by its wildly popular Web site. Those in the business of Internet selling fully understand the central role that logistics plays in their success. Customers who order on the Web expect excellent pricing and fast service. Often, they expect the logistics to come for free: Some research shows that Internet shoppers pay close attention to shipping charges--in most cases with little understanding of what's involved in making a successful shipment. They simply want today's order on the doorstep tomorrow and don't want to pay "extra" to get it there.

Logistics managers for Internet retailers face an enormous challenge, then. They have to move inventory swiftly and do it cheaply. Although electronic communication has changed the laws of economics in many ways, providing businesses with unlimited reach, the physical laws governing geography have not changed. Trucks, ships, trains, and planes cannot be made to travel much faster than they already do. The additional speed has to come from savvy logistics managers, who, in concert with their carriers, develop sophisticated networks and management systems. That's a process that is well under way in some, but not all, companies. Fortunately, both existing carriers and a new breed of fulfillment business are rising to help. (See our report on Page 51.)

The other side of electronic commerce is the business-to-business side. That's far older than the current headlines and Wall Street mania for dot-coms might imply. Beginning with electronic data interchange, electronic transactions and communications have long been a part of doing business. But in that realm, too, developments are accelerating at breakneck speed. Technological breakthroughs, applied correctly, should be able to link all of the partners in a supply chain, promoting speed, efficiency, and collaborative planning. The latest development is the creation of supply chain communities, linking partners electronically, with the most powerful business partner at the hub. (See our report on Page 44.) That breadth and depth of communication will be crucial for supply chain success. Even so, at the end of the day, if you're selling a physical product, the logistics system will be a crucial determinant of success.