The paper 'Online Retail Business Initiative' is a good example of a Management Case Study. A real logistics management situation was provided. In this case, we are assisting in the business development of a new online retail business initiative. Hence, this paper discusses the relevant logistics activities. Business Background Members of a newly formed consortium of domestic and overseas investors have joined forces to create an online retailing company. The members believe that there is a growing market for online retailing in Australia for (1) Car accessories and tools, competing with for example Supercheap Auto retail stores; (2) Leisure products for boating, camping, and fishing, competing with for example BCF Boating- Camping-Fishing retail stores; and (3) Electrical household appliances, competing with for example Harvey Norman retail stores Online retailing is a subset of e-commerce and refers to the purchase and sale of goods and services between consumers and retailers using the Internet (Commonwealth 2011). The members of the consortium have researched that Australian consumers are attracted to online shopping due to lower prices, a wider range of goods to choose from than those available from bricks and mortar in-store retailers, and convenience (Commonwealth 2011). The reduction in Australia’ s manufacturing to about 10 percent of the gross domestic product has resulted in an increase in imported consumer goods from for example China (Commonwealth 2007).
Due to low-cost manufacturing capability in China and a reduction in international trade barriers since China entered the World Trade Organization, many large retail chains have established region-based sourcing offices in Asia and China. High-Level Operations of the Business The new company is to pursue the strategy of procuring low cost manufactured goods in China.
The consortium has investigated if it should locate the company’ s distribution center(s) in China or in Australia. The conclusion is that the distribution center(s) should be located in Australia due to transportation costs and insufficient logistics networks for distribution from China to Australia. The consortium wants to establish a new company and has developed the following outline of its operations. Products for resale are to be purchased domestically and through the China-based overseas sourcing office. The intention is to have suppliers deliver their goods to collection centers in Hong Kong and in Shanghai and then ship the goods in bulk in containers to distribution center(s) in Australia. Although the ultimate intention is to have distribution centers in Sydney, Melbourne, Brisbane, and Perth, the company will start with one distribution center located in Sydney and then distribute products to customers in Australia from there.
Due to the differences in execution between online retailing and in-store retailing operations the company has decided to build a new distribution center within the next 18 months. The company has not yet decided if it should outsource its international and domestic logistics activities. CHINESE SOURCING OPERATIONS SUPPLIER SELECTION, EVALUATION, AND PROCUREMENT Due to old and current trends, China's sourcing operations are changing.
Hence, procurement managers are trying to adapt to this opportunity landscape. A different approach is now required that takes advantage of China's more sophisticated manufacturing base. There are several new issues that are starting to impact both the real and perceived competitiveness of China as a source of manufactured goods. Among these are the appreciating currency, increasing labor costs, and others (Evans & Wurster, 2000). Logistics activity can contribute to the low production cost and add value to place and time utility.
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