The Logistic System of Chain Enterprises in E-Commerce

The Logistic System of Chain Enterprises in E-Commerce Huiying GAO, Honglei LI, Renchu GAN (School of Management and Economics, Beijing Institute of Technology, Beijing, 100081) Abstract: Based on the two-tier distribution system and the normalized business process of the chain enterprises (such as chain store), an operational pattern on logistic system is studied in E-commerce. The pattern proposed in this paper meets the case to develop multi-variety, multi-level and multi-manner distribution business on the foundation of the retail of part commodities. Comments and suggestions are presented. Key Words: E-commerce, Logistic, Distribution, Chain store 1. Introduction The technology of chain distribution has received increasing attention in modern logistics. At present in China, logistics has become one of the bottle-necks in the development of E-commerce. In order to make full use of enterprises resources, advanced management idea of chain business should be considered to develop multi-variety distribution business and provide the third party distribution service in E-commerce. So that chain enterprises(such as chain stores) with new management idea can engage in distribution business to adapt to the tides of market economic. The development of E-commerce quickens the data exchange inside the enterprise, among the different enterprises and between the customers and the enterprise, which lays the way to develop distribution business. High-speed data processing and communication makes the real-time and complicated distribution control available. Based on the two-tier distribution system and the normalized business process of the chain enterprises (such as chain store), an operational pattern on logistic system is studied in E-commerce. The pattern proposed in this paper meets the case to develop multi-variety, multi-level and multi-manner distribution business on the foundation of the retail of part commodities. Comments and suggestions are presented. 2. Distribution system of chain business Distribution is a process or manner of commodity transportation. It refers to that commodities are delivered to customers by commerce enterprises according to the demand of customers. With the increase of the number of chain stores and the distance between the headquarters and the chain stores, the system is coming to be hugeness and the objects and content of service become more and more complicated. All kinds of cost also become difficult to control and the market competition becomes more and more intensive. The development of E-commerce makes the long-distance distribution available that provides the potential market and opportunity for distribution enterprises. The distribution pattern in E-commerce is Customer-Centric, Zero Lead Time and Technology-Enabled. Moreover, distribution center can perform the function of uniform logistics management. By the means of science and modernization, it can respond to customers in time, cut down the cost of management 1

greatly and obtain the optimal profits as well as social benefit through the division and cooperation of specialization. Two-tier distribution system is adopted in the distribution enterprises whose distribution areas are wide and customers are dispersed. It is made up of the top distribution center and many chain stores and has the function of distribution and retail. Thus it is called chain distribution. In figure 1, the top distribution center is the logistics center to provide goods for the whole chain net and the other enterprises. It mainly takes charge of goods purchasing, storing allotting, circulating, processing, transporting and information Chain Store Top Distribution Center Chain Store Chain Store communicating. It delivers quantitative goods to chain stores in the specified time according to the demand of them. It also performs the task of wholesale and provides distribution service to great customers. Chain stores mainly provide distribution and retail service to ordinary customers and act as the second distribution center. In the whole distribution net, any chain store can provide commodities to many customers and any customer can accept commodities distributed by many chain stores. The demand of every chain store is collected to the top distribution center and then the top distribution center makes the uniform decision of distribution and stock. Figure 1 distribution system of chain business 3. Operational pattern on logistic system of chain enterprises in E-commerce Distribution center is the economic organization specializing in goods distribution. From another point of view, it is the logistic beachhead that integrates processing, tallying and delivering. Uniform logistic management is realized in two aspects. One is centralized purchase and uniform stock, the other is centralized storage and uniform distribution. Through the implementation of the two steps, the top distribution center plays an important role in the whole system of chain business. Grouping after Process Transfer Center Distributing Customers Commodities Order Delivery E-Market Delivery delivery Chain Stores Task allot Inner Order Inner System Data Flow Logistic 2 Headquarter Shipment Instruction Shipment Instruction Process Center Distribution Center Storage Center purchasing purchasing Suppliers Supply Supply

When it comes to the distribution enterprises that want to realize multi-variety, multi-level and multi-manner distribution business, the operational pattern of logistic system is very complicated. In E-commerce the operational pattern should be as follows. It can be seen that in E-commerce the customers information can be transferred into the distribution center through the E-commerce platform and that the distribution center also carries through distribution among chain stores via the information network. Similarly, chain stores can order goods directly from the distribution center through the network and the distribution center can gather the ordering information to purchase and distribute uniformly. It shows that E-commerce platform ensures the information flow unblocked and that the further integration of information makes distribution more exact, direct and timely. In figure 2, the Top Distribution Center is made up of Logistic Management Center (LMC), Process Center (PC), Storage Center (SC) and Transfer Center(TC). I. Logistic Management Center (LMC) LMC is Figure the 2. control Operational center pattern on logistic of the system whole of chain enterprises distribution in E-commerce business. It mainly accomplishes the tasks of purchase, control, information management, and so on. Customers Service Center, Distribution Control Center and Purchase Management Center constitute LMC. a. Customers Service Center (CSS): To respond to the request of customers in time through the E-commerce network or the other communication tools and manage the information of the customers uniformly so as to ease the pressure of information processing in chain stores and realize separate service with information centralized management. b. Distribution Control Center (DCC): To be the center of LMC and to coordinate the Process Center, Storage Center and Transfer Center. Chain stores order goods from Distribution Control Center directly and then the Distribution Control Center integrates the information to direct the shipment or purchase according to the current stock. c. Purchase Management Center (PMC): To take charge of all goods purchase. It engages in the purchase of goods from suppliers based on E-commerce platform according to the purchase order from the Distribution Control Center (DCC). For the multi-variety distribution business, diversities exist in different kinds of commodities and the purchase task is so heavy that different departments should be set up in this center. II. Process Center (PC) PC makes the operation of goods process and regroup realizable. Commodities can be processed simply in this center. If the simple process is involved in a variety of goods or goods that can t be processed together, the goods should be classified. Thus different departments should also be set up. III. Storage Center (SC) SC is the storage and distribution base of Distribution Center. Besides some multi-variety commodities or those need to purchase a small bulk one time, the 3

commodities that are sold usually and those need to purchase a big bulk one time should be stored in Storage Center so as to meet the demand of every chain store. Like Process Center, different kinds of goods should be stored separately in different warehouses. IV. Transfer Center (TC) TC serves as the office of transportation and the third party distribution service center. To ensure to deliver in time and manage lightly, it should be divided into several transportation teams to provide delivery service to Process Center, Storage Center, Chain Stores and Customers. Chain Stores are the retailers to Customers and the Second Distribution Centers that can also provide commodities distribution or the third party distribution service. Generally speaking, 4

Grouping-after-Processing The 3 rd Party Distribution Distribuing delivering Organizations delivering Grouping-after-Processing... Team1 Team 2 Team n Distributing Great customers ⅠDistribution requesting ⅡBulky purchasing Ⅲ Bulily ordering II small purchasing Control Center Transfer Center delivering Store 1 Store 2... Store N Distribution Requesting (Bulk) Distribution Requesting (Bulk) Stock adjusting Customers delivering Ⅲ small ordering Task Allocing Chain Stores Inner Ordering Distribution Instruction CSC Bulily ordering DCC Dept. 1 Dept. 2 Shipment Instruction Purchase Instruction Shipment Instruction Stock Adjust Instruction Dept.1 Dept.2... Dept. n PMC... Dept. m Process Center Storage Center Dept. 1 Dept. 2... Dept. n purchasing supplying suppliers Distribution Center supplying Figure 3. Operational pattern on logistic system of chain enterprises in E-commerce 5

chain stores only have temporary stock to meet the daily demand of customers. The operational Pattern is shown in Figure 3. In the above distribution pattern, customers are divided into two categories, Great Customers and. are these who purchase small quantities of goods so that the store can meet their demand of purchase and distribution. are these who should be satisfied by the distribution center on account of the large quantity of goods they bought. Because different customers have different demands, there must be different kinds of transactions. Generally speaking, there are 3 kinds of transactions, Distribution Service Requesting, Direct Purchasing and Commodity Ordering. In E-Commerce, the following processes can realize those transactions. I. For Distribution Service Requesting a. Customers send their requests to Transfer Center through Internet or telephone b. Transfer Center dispatches vehicles to perform distribution service for customers c. Transaction is fulfilled when the confirmation signature and payment (if not prepaid when sending the request through net-payment) of customers is got. II. For Direct Purchasing To a. Customers go to stores for large quantities of goods b. Stores ask the Transportation Center or the third party distribution service organization to perform distribution c. Transportation Center or the third party distribution service organization dispatch vehicles to perform distribution service for customers d. Transaction is fulfilled when the confirmation signature of customers is got. The third party should be paid after the task To, the transaction will be fulfilled in the common style like that of the retail store. III. For Goods Ordering To a. Customers send their orders or demand to Customers Service Center through Internet or Telephone b. Customers Service Center transfers these orders to Distribution Control Center c. Distribution Control Center send shipment instruction to Storage Center or Process Center after calculation d. The instruction receiver asks the Transfer Center or the third party distribution service organization to perform distribution e. Transportation Center or the third party distribution service organization dispatches vehicles to perform distribution service for customers f. Transaction is fulfilled when the confirmation signature of customers is got. The third party should be paid after the task 6

To a. Customers send their orders to Customers Service Center through Internet or Telephone b. Customers Service Center transfers these orders to Distribution Control Center c. Distribution Control Center sends distribution instruction to Storage Center or Process Center, more than one if necessary d. Storage Center or Process Center ask Carriers to perform distribution e. Transaction is fulfilled when the confirmation signature of customers is got. In the above transactions, when receiving the commodities, customers can pay the company with cash, cheque, E-Wallet or Credit card through E-Payment. When the money in E-wallet is insufficient, the complement can be paid in the other ways. Concerned about the complicity of such business, the Third Party Distribution is introduced into the transactions. It has two different roles in the transaction, on one hand the company can provide the Third Party Distribution service to customers, especially to the, on the other hand, we can cooperate with the professional Third party Distribution Service companies to perform goods distribution. 4.Suggestions on development of Chain Distribution Business a. Construction of Distribution Center 10 The company should make full use of the existing resources and adopt the gradually developing strategy. Firstly, the company should carry through technical re-redesign on the basis of existing logistic equipment and build a small amount of modern ones including some high-level management information system so as to improve the service and establish the foundation of the large-scale distribution. Secondly, when the situation lives up to mature, the company can further equip the distribution system with powerful logistic equipment and technology. 10 The distribution center should be located in the central area. The central area does not mean the center of the city, but that of the system of the chain stores, so that distribution can be performed more easily. Moreover, the distribution center should have certain scale, necessary space, convenient traffic and expedient communication, etc. As far as the small and medium sized cities, one distribution center is enough, but as to the big cities, because there are so many stores scattered in a large areas, there should be a few distribution centers that are responsible for different parts of the whole city. In order to attain a well running, all the distribution centers should be inter-connected with networks under the control of the headquarters to realize separate service with information centralized management. 10 IT should be applied to the business of the distribution center. In exterior environment, Chain enterprises are confronted with different kinds of suppliers and complicate market. In interior environment, there are too many chain 7

stores with different kinds of demands to be responded to in time. Without information technology (IT), the company can t run properly. With the help of IT and related equipment, especially the computer network, managers can acquire much information from outer or inner environment to make decisions and realize the quick, lower-cost, fewer-links, higher-profit business. That means the distribution center is not only the collection center of all kinds of goods, but also the process center of business information. b. Construction of Chain Stores 10 Comments on location, scale and quantity Chain stores should be scattered from Storage Center and Process Center to outer space in the Radioactive-Ray Shape so as to cover large areas with a few stores. Before building the chain store, the purchasing power of the customers in that area should be surveyed to determine the scale of the store. Besides, the company can turn the existed shops into its chain stores through purchasing, merger and joint management. 10 Getting into the community service area Developing community service is a social activity in China and it also provides opportunities to chain business. If successfully getting into this service area, the chain enterprises will enlarge their markets and will also solve some social issues to some extent such as unemployment. By this way, the enterprises will not only make more profits, but also gain much social benefit, so that good social images can be set up. c. Branding operation According to the successful experience in the world, the chain stores should adopt branding operation strategy and two points should be concerned. One is that the administration and service should be distinct and advanced compared with its rivals, the other is that the company should take advantage of its marketing network and its well-known image to develop goods and service of its own brand. Reference 1. Ye Jiegang, Distribution (1999),Economic and Management Publishing House, 1999 (in Chinese) 2. Wang Zhitai,Study on the formation and development of distribution center, Logistic Technology, January,2000(in Chinese) 3. Zhang Chaoli, Distribution institution of chain enterprises, Research on material circulation, February,1998(in Chinese) 4. Zhu Qinghua, Liu changsheng, Distribution institution of chain enterprises, Research on Business, February,2000 (in Chinese) Resume: Huiying GAO, female, born in Nov.,1976.Ph.D student on Management Science and Engineering. Interested in theory and method on Information Management. Email:huiyingg@263.net Honglei LEE, male, born in Mar.,1974.Ph.D student on Management Science and Engineering. Interested in theory and method on Information Management. Renchu GAN, male, born in August,1938, Professor, Interested in Industry 8

Management, MIS, Decision-making and Support System, etc. 9