Roodbergen, Vis and Boter secure funding from Dinalog for a 1.1 million euro projectMay 2010 – Researchers Kees Jan Roodbergen (project leader, Rotterdam School of Management), Iris F.A. Vis (VU University Amsterdam) and Jaap Boter (VU University Amsterdam and University of Amsterdam) have received funding from the Dutch Institute for Advanced Logistics (Dinalog) for their project entitled "Cross-chain order fulfillment coordination for internet sales". The total project size is 1.1 million euro. Participating companies are Neckermann.com, mYuice, Centraal Boekhuis, Scanyours.com and the non-profit public library organizations Sectorinstituut Openbare Bibliotheken and Vereniging Openbare Bibliotheken. The project was selected along with four other projects from a total of 21 submitted proposals.
Motivation of the projectThe internet has completely changed the ways in which people communicate. Gradually, the internet is now also getting a firm grip on the physical goods flows. More and more consumers are ordering products via the web instead of buying them in a retail store. From a logistics point of view, this sales channel switch has an enormous impact. Deliveries to traditional brick-and-mortar stores can be made in relatively large quantities at regular intervals. Consumers then buy the product in the store and provide an important logistics service: they transport their own products to their own homes for free. With the internet, products are ordered in small quantities by individual consumers and the web store has to arrange for transporting the products to the consumers' home address. It is almost needless to say that this significantly increases logistics efforts in the supply chain.
From the consumers' perspective, there seems to be a desire to increase online ordering, provided that some circumstances are improved. An important limiting factor for consumers is the delivery process. In many web stores, the consumer has no influence on the timing of delivery. As a result more than 30% of all orders cannot be delivered at the first delivery attempt. Besides planning, there is also the issue of speed. Information gathering and ordering is so fast on the web, that even a delivery time of 24 hours may feel like a lifetime.
Objectives & goals of the projectIn this project, new concepts, models and solution methods will be developed for a number of challenging innovations in the internet order fulfillment process. An important role will be played by the cross-chain control center (4C), which has a coordinating role, spanning across multiple supply chains. To better explain the 4C concept in the context of internet orders, consider the following example, which will also be researched in this project.
Currently, every web shop has its own "shopping cart", an electronic analogy of the supermarket shopping carts, to collect products from the web shop before proceeding to the checkout process. If a consumer wishes to buy products from three different web shops, (s)he will have to use three different electronic shopping carts, make three payments, and will have three separate home deliveries of the ordered products. An 4C that would offer one shopping cart that can be used to buy products at multiple web shops will make the ordering process much easier for the consumer. Implementation of such a concept is, however, far from straightforward, considering the potential consequences for information sharing, contract negotiations and software interfaces between all parties involved. Furthermore, the added value of the concept is only truly complete if all products from the electronic shopping cart are also delivered to the consumer's home in one single shipment at a time that suits the consumer.
More in general, the goals and objectives are as follows.
- New design methods will be developed for shaping the distribution network.
- New models and solution procedures will be created for efficiently merging flows of multiple web stores to individual consumers.
- New concepts for delivering products to consumers' homes will be tested.
Research approachIn the path towards the goal, logistics tools will be developed to design 4C networks that efficiently coordinate and integrate fulfillment operations for delivery (and returns) of products from multiple web stores to individual consumers. Use will be made of techniques from the fields of Operations Management and Operations Research, creating new classes for known problems such as Facility Location, Vehicle Routing, and Reverse Logistics. Input from the marketing field, using consumer profiles and transaction data analysis, will be vital to enable a view on the impact of ordering behavior on the various design choices and vice versa.
Expected resultsConsumers have adopted internet as a valuable sales channel. Four out of every five internet users in The Netherlands have performed an online purchase last year and about 700,000 new shoppers entered the online market in 2009. It is reasonable to expect a further significant growth of the online retail sales, which emphasizes the need for improved ways of handling the product flows efficiently and effectively.
The consortium contains universities as well as companies with extended experience in internet sales. This combination will ensure results that blend academic rigor and practical applicability. Consortium partners Neckermann.com and Centraal Boekhuis are already active as 4C and can bring new concepts from the project directly into action. The Dutch public libraries are in search for a new network design and coordination concept for book transports between library branches. The companies Scanyours.com, an eBusiness consultancy company, and mYuice, having its expertise in SAP implementations, can provide the gateway to a broader applicability of the concepts to new groups of consumers and companies.