Australian Distribution Centre Design, Advantages of Online Retailing vs In-Store Retailing - Case Study Example

Running header: Case study to provide a real logistics management situation Student’s name: Name of institution: Instructor’s name: Course code: Date of submission: Executive Summary Online retailing in Australia has undergone remarkable changes and improvements over the years. A forecast in November 2010 of the Australian online retail markets shows that by 2013, it is set to hit $ 36.80 billion. This is a significant growth considering the fact that the numbers stood at $ 26.86 billion in 2010. The latest forecasts show that the figures are set to hit $ 37.70 billion by 2013. From these figures, it is evident that online retail in Australia is booming. This overall growth in the online retail sector in Australia is attributed to several influences. Many consumers in Australia have started buying products online because of the launch of new online stores by many retailers, both internationally and domestically. The confidence and knowledge in e-commerce has increased among buyers as a result of the convenience of online retailing. In-store retailing is slowly being overtaken by online retailing as more and more businesses across Australia aim to increase their profitability. Every area of business, including logistics management, has begun to focus on online means of operations instead of the traditional ways of doing things. Online retailing has been used to improve logistics management operations in many firms across Australia. Supply chain functions are now being managed and improved using online retailing. Online retailing is different from in-store retailing because of the platform used to retail the goods of a company. In online retailing, the internet is used whereas in in-store retailing, the physical location of a business is used. This report revolves around the differences between online retailing and in-store retailing. This report has focused on real logistics management situations within a new company in Australia. The report highlights the differences between online retailing and in-store retailing focusing on the logistics activities of this new Australian company. These logistics activities include order management and customer service, Australian distribution centre design and operations and physical distribution within Australia. Table of Contents Executive Summary 2 Table of Contents 3 Introduction 4 Order Management and Customer Service 5 Australian Distribution Centre Design and Operations 7 Physical Distribution within Australia 10 Advantages of online retailing compared to in-store retailing 11 Conclusion 12 References 13 Introduction Online retailing is taken to be a form of electronic commerce whereby customers have the opportunity to buy services or goods from a retailer over the internet (Bigne 2005). With online retailing, there is no intermediary service since the customer buys directly from the retailer via an online platform (Elliot & Fowell 2000). In-store retailing on the other hand is the type of retailing that requires the consumer or customer to visit the physical premises or location of a business so as to purchase the goods and services from there (Falk, Sockel & Chen 2005). Online retailing beats the physical analogy of having to buy goods or services at the physical or actual premises of a business. The history of online retailing dates back to 1990 after the invention of the first World Wide Web browser and server by Tim Berners-Lee (Fritz 2007). This invention began being used commercially in 1991. In later years, the world experienced more and more advances in the online retail sector with the launch of online retail service such as online banking and Pizza hut’s online shop (Huang 2000). There have been a lot of concerns about the safety and viability of online retailing but a lot of inventions have been launched to this effect. For example, in 1994, SSL encryption of all data that is transferred online was introduced by Netscape so as to secure online transactions. Since then, the number of businesses turning to online retailing has been tremendous, with improvements being realized every day (Jarvenpaa & Todd 1997). Logistics management is concerned with governing of supply chain functions. Logistics management activities are known to include a variety of outbound and inbound warehousing, fleet management, transportation management, supply and demand planning, inventory management, customer service, order management, distribution centre design and operations and physical distribution (Murphy & Wood 2011). The main focus of this report will be on customer service, order management, distribution centre design and operations as well as physical distribution within Australia. These logistics management activities will be discussed in line with the differences between online retailing and in-store retailing. This report will prescribe the measures that need to be taken when developing a new online retail business initiative, focusing on the above logistics activities. Order Management and Customer Service Order management has been defined as a process involving taking, organizing, tracking and finally fulfilling the purchase requests made by customers for certain products and services offered by a company (Peterson, Balasubramanian & Bronnenberg 1997). Order management is mainly concerned with the order fulfillment process of a company. Many businesses use order management systems to ensure that the orders made by the customers are taken, organized and tracked well so that they can be fulfilled for the customers (Sherry 2005). If this company aims at fulfilling the orders of the customers, it has to develop an online retail business initiative that will be used to take, manage, organize, track and satisfy the orders of the customers (Peterson, Balasubramanian & Bronnenberg 1997). In regard to this, order management can be improved by coming up with order management systems that are designed to take, manage, organize, track and satisfy the orders of the customers. Online retailing entails the creation of order management systems that can be used to take, manage, organize, track and satisfy the orders of the customers (Murphy & Wood 2011). Order management systems are electronic systems that are designed to execute the above functions. Traditionally, order management systems were used to help commodity and security brokers accept the orders of customers (Elliot & Fowell 2000). According to Peterson, Balasubramanian and Bronnenberg (1997), order management systems are part of online retailing because online retailing involves taking orders from customers and fulfilling those orders. Online retailing entails making provisions for the customers to be able to order goods or services, pay for them and have them delivered to them or fulfilled (Jarvenpaa & Todd 1997). Order management is therefore a crucial logistic activity because it will enable this company to effectively and efficiently take, manage, organize, track and satisfy the orders of the customers (Murphy & Wood 2011). Online management systems can be difficult to implement when practicing in-store retailing. Even though orders can still be managed, the effectiveness of this management when using online retailing is much higher than when using in-store retailing (Peterson, Balasubramanian & Bronnenberg 1997). Online retailing can be improved by coming up with more customer friendly order management systems (Falk, Sockel & Chen 2005). The company can ensure that the orders of its customers are taken, managed, organized, tracked and satisfied by using computer software that is designed to carry out these functions (Peterson, Balasubramanian & Bronnenberg 1997). The orders can be integrated from multiple channels by using inventory databases, order processing and data collection to include special services such as placement of orders, cancellation of orders, fulfillment systems, parcel carriers and credit card verification systems (Huang 2000). Customer service can also be improved when using online retailing as opposed to when using in-store retailing. Customer service may be referred to as the provision of special services to customers before a purchase, during a purchase and after the purchase. According to Peterson, Balasubramanian and Bronnenberg (1997), customer services comprise of all the activities undertaken by a business, specifically designed to enhance the levels of how the customers are satisfied. Online retailing will provide this company with the opportunity to satisfy its customers more compared to in-store retailing. This is because the customers will have a platform to contact the company in case of anything without having to be physically present at the company (Falk, Sockel & Chen 2005). Online retailing enables the flow of information between a business and its customers. Information is crucial for the success of any business and its flow needs to be facilitated so as to ensure that customers get what they want (Falk, Sockel & Chen 2005). Customer services are much easier to facilitate when using online retailing that when using in-store retailing. With in-store retailing, customer services have to be provided to from the physical location of a business as opposed to online retailing which can take place virtually anywhere (Jarvenpaa & Todd 1997). Customer services consist of customer support that assists customers to make correct and cost effective use of products or services. Such services can deal with returns, complaints, exchanges or any other issues that may arise. Australian Distribution Centre Design and Operations A distribution centre is a set aside storage location in any organization or company. It is a site where all received products are stored for security and preservation before they are delivered to the people who have ordered for them (Peterson, Balasubramanian & Bronnenberg 1997). These people include retailers and consumers. It is necessary to note there are processes that are needed at each and every step of the way to ensure that the flow of goods from one area to the next is reliable and efficient. There are very many processes that occur at distribution centres. The processes then define the outcome of the design that is enforced in the centre. A good example of distribution centre is the retail distribution centre which is tasked with the responsibility of carrying out distributions to all retail stores (Sherry 2005). The Australian distribution centre design is applicable to both online and in-stores. This is based on the fact that centre design and operations translate to customer satisfaction. This is because of the ability of the staff to effectively provide for consumer needs. This is because the designs make it possible to generate ideas, enhance customer service and reduce expenditure. This in turn translates to profits and organizational expansion. Online retailing is preferred in many areas all over Australia because of its many advantages (Sherry 2005). Its design and mode of operations are creating a convenient platform for all that are engaging in the trade. Online retailing relies heavily on the incorporation of technology and technological advances. This is because it ensures that the store is better placed to deal with many of the shoppers that visit their website (Falk, Sockel & Chen 2005). This means that the incorporated technology will translate to increased sales. The reliance on technology ensures that online retailers have invested in the best E-Commerce programs (Peterson, Balasubramanian & Bronnenberg 1997). This is complemented by acquisition and adaptation of the best softwares to enable the process of retailing to occur. It is not a difficult task to adopt softwares that complement the task to be carried out in any organization. Australia’s retailing sector ensures that it takes time to train employees to best suit the technology adopted. Training programs are essential because they ensure that the system in use is perfect in relation to employee capacity (Peterson, Balasubramanian & Bronnenberg 1997). Open source programs are capable of transacting and sharing information. The system has the ability to utilize the prompts that have been requested, check payments and receive the payments. This is through the selected method of payment that is in effect (Sherry 2005). In- store retailing ensures that their design is suitable to the goods and services that are on offer. In- stores ensure that it has openly displayed the goods and services. This is through advertisements and promotions (Peterson, Balasubramanian & Bronnenberg 1997). This ensures that the special category and roles of the products and services are highlighted. Most in-store designs are heavily reliant on what consumer base they target and what their needs include (Sherry 2005). This means that many clients are required to ensure that they are aware of the goods and services on offer. The flow of these goods and services is heavily reliant on consumer demands and requests (Elliot & Fowell 2000). In-store retailing ensures that the price that has been set is right for the goods and services that are being offered (Falk, Sockel & Chen 2005). Many in-store retailers have also incorporated the use of technology in their operations. This is to ensure that they have catered for each and every person that walks into many of their stores (Sherry 2005). Once the goods have been received, they should be broken down to sizeable elements. This means that they should be reduced to notable sizes according to the order that has been received. It is important for the quality assurance department to look into the orders and their quality (Falk, Sockel & Chen 2005). The orders are then packed ready for their transportation to various areas. The papers accompanying the documents are made in triplicates for all the parties involved. This creates a system of accountability and transparency (Elliot & Fowell 2000). The process of retailing is planned in a way that the goods can move swiftly from one point to the next. There are specific departments that deal with any of the issues that may arise as a result of the retailing process. Physical Distribution within Australia Physical distribution channels are essential in ensuring that the flow of goods is smooth and effective from one area to the next (Falk, Sockel & Chen 2005). Online retailing entails the reception of an order. Physical distribution is concerned with the handling, movement and storage of products from the point where they have originated from to the point that they will be consumed by the final customer (Elliot & Fowell 2000). Physical distribution within Australia uses various distribution channels to ensure that goods are moved from their source to their consumers. It usually occurs within organized distribution channels in the retail sector. This is relevant to retailing because it covers important areas such as customer service, order management and distribution centre design and operations (Peterson, Balasubramanian & Bronnenberg 1997). Goods need to be stored in convenient locations that will allow them to be easily distributed to retailers from the wholesaler and from the retailers to the final consumers. This is where the importance of efficient physical distribution focuses upon (Peterson, Balasubramanian & Bronnenberg 1997). Physical distribution activities systematically determine how customer services will be provided and the level at which they will be provided. Physical distribution also determines how orders from customers will be handled. With online retailing, physical distribution is made much easier since the internet creates an efficient platform to carry out these functions (Falk, Sockel & Chen 2005). With physical distribution, in-stores retailing and online retailing are conducted in different ways. With online retailing, physical distribution can be arranged from any location since it relies on the internet. This is not possible with in-store retailing since the parties must be physically present at the point of distribution (Peterson, Balasubramanian & Bronnenberg 1997). Advantages of online retailing compared to in-store retailing The company should shift from in-store retailing to online retailing. This is because of the advantages that come with online retailing. Applying online retailing to logistic management activities can lower investments and capital compared to establishing a new physical "brick-and-mortar" store. This will mean that the business will save a lot of capital that can be used for other useful ventures. The use of online retailing in logistic management activities can also aid in extending the reach of the business to new markets and new customers, thus building an extensive and reliable customer base. Online retailing ensures faster return on investment (RDI) than the traditional ins-store retailing. It contributes to the reduced costs of customer acquisition by up to 70%. Online retailing reduces the costs of transactions and the promotional, advertising and marketing costs incurred by the company. It can also lead to faster turnover of inventory as well as improved business understanding of its customers on a personal and 1-to-1 basis. Online retailing is synonymous for helping to serve one’s customer better by offering the customers a greater variety and improved convenience of shopping. It also leads to increased value of brands and brand recall as well as contribute to eliminating geographical barriers and boundaries for one’s business, this establishing a global market for the products or services of a company. Conclusion In conclusion, logistics management has been seen to take a new positive turn as a result of online retailing. Every successful business is governed by logistical operations. Many consumers in Australia have started buying products online because of the launch of new online stores by many retailers, both internationally and domestically. The confidence and knowledge in e-commerce has increased among buyers as a result of the convenience of online retailing. In-store retailing is slowly being overtaken by online retailing as more and more businesses across Australia aim to increase their profitability. At almost all stages of operation, it is important for the logistics of a company to be carefully and critically aligned to ensure that all the required services and products are systematized. In numerous occasions, there are systems in place to deal with the physical flow of products and activities from the retailer to the consumer. Online retailing has led to a lot of improvements in the logistics sector as compared to in-store retailing. Logistics management with in-store retailing cannot be compared to logistics management with online retailing. This is because online retailing has made logistics management much simpler, faster and efficient as compared to in-store retailing. Logistics management activities such as distribution have been improved as a result of online retailing. Online retailing has made distribution to occur at a much faster, efficient and convenient way as compared to in-store retailing. Other logistics management activities such as customer services have been improved with the advent and development of online retailing. Surveys show that online retailing has left more and more customers satisfied as compared to in-store retailing. Other logistic management activities such as order management and distribution centre design and operations have greatly been improved as a result of using online retailing. More businesses should consider using online retailing in their logistics management operations so as to ensure effectiveness, efficiency, accuracy and convenience among many other advantages. This report has outlined the difference between online retailing and in-store retailing and discussed these differences in line with the logistics management activities of customer service, order management, distribution centre design and operations as well as physical distribution within Australia. References Bigne, E 2005, ‘The impact of internet user shopping patterns and demographics on consumer mobile buying behavior’, Journal of Electronic Commerce Research, vol. 6, no. 3. Elliot, S & Fowell, S 2000, ‘Expectations versus reality: a snapshot of consumer experiences with Internet retailing’, International Journal of Information Management, vol. 20, pp. 323-336. Falk, LK, Sockel, H & Chen, K 2005, ‘E-Commerce and consumer's expectations: what makes a website work’, Journal of Website Promotion, vol. 1, no. 1, pp. 65-75. 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