Electronic commerce, marketing channels and logistics platforms––a wholesaler perspective

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Abstract

Electronic commerce may impose new demands which the supply chain has to react to, while at the same time being an enabler of effective marketing and logistics. This paper describes alternative strategies for wholesalers conducting electronic commerce and how logistics may support the development of marketing channels and improve flexibility. Related issues with logistics implications are the decisions whether or not to use multiple channels and if intermediaries should totally bypass dealers, or rather collaborate by letting them manage the marketing relations and bypass them logistically. The concept of “logistics platforms” is discussed, based on empirical findings. Empirically the base is a case study of an intermediary with extensive use of business-to-business electronic commerce in a supply chain with independent dealers. The paper compares theoretical aspects with findings from the case and gives some indications of the potential of electronic commerce and logistics platforms.

Introduction

Electronic commerce has been proposed to have a major impact regarding threats and opportunities for intermediaries in many industries. Marketing channel intermediaries were in the early days of electronic commerce considered to add only cost and limited value, where upstream participants pursuing electronic commerce strategies threatened such intermediaries by attempting to bypass them (see e.g. Bakos, 1998; Vandemerwe, 1999). The development now is rather that the intermediaries are adding electronic commerce to their existing businesses as a countermove to disintermediation, such an is issue adding multiple marketing channels in supply chains (see e.g. Anderson et al., 1997; Bucklin, 1966). Multiple strategies will have implications for marketing channel strategy but also for logistics management concerning the demands and possibilities of electronic commerce.

A logistics viewpoint of electronic commerce is taken in the paper, where demands and possibilities for logistical structures and processes in electronic commerce are discussed in a supply chain setting. Related issues dealt with are disintermediation and collaboration in multiple marketing channels, which have potential implications for electronic commerce and logistics. Specifically, we explore how the demands of electronic commerce bring forth possibilities for logistics between participants in the supply chain and how logistics may support the development of marketing channels and improve flexibility. Two dimensions of logistics are discussed, the horizontal and vertical dimension respectively. Horizontal logistics concern relations between parties within a group of firms at the same level in a supply chain, while vertical logistics concern relations between firms at different levels in the supply chain. By co-ordinating and offering multiple channels in the horizontal dimensions, possibilities for e.g. the vertical decomposition of logistical functions may arise (see e.g. Caputo and Mininno, 1996; Wouters et al., 1999).

Electronic commerce has been defined as “any form of business transaction in which the parties interact electronically rather than by physical exchanges or direct physical contact” (European Commission, 1998). This paper regards electronic commerce as one of several marketing channels, including the use of the Internet to support inter-organisational processes, such as marketing, ordering and related service activities. The magnitude of electronic commerce may however differ from the evolutionary usage, e.g. ordering, to the “revolutionary” usage of electronic commerce as an additional marketing channel, e.g. new markets or customer segments (see e.g. Venkatraman, 1994). We will use the term marketing to include marketing and sales activities with related information flows.

The perspective taken in the paper is the wholesaler in a supply chain with independent dealers as intermediaries. The paper is conceptual with empirical illustrations from a supply chain consisting of wholesalers (Bergman & Beving Tools, BBT), its independent dealers, and industrial end customers in the Swedish tools and machinery equipment industry. The assortments are material, repair and operating inputs. The empirical base is an extensive case study of BBT performed from the spring of 2000 to the autumn of 2001 as part of the research project ELOG––Electronic commerce and logistical consequences––at Logistics Management, Linköping Institute of Technology.

The paper is organised as follows. We will start by discussing different dimensions of the term, logistics platform, followed by a discussion of marketing and logistics disintermediation and collaboration. These subjects are then illustrated empirically, where logistics is emphasised and discussed. Finally, conclusions are drawn from BBTs current electronic commerce state with reflections on logistics in a supply chain context.

Section snippets

Dimensions of logistics platforms

In supply chain management, the logistics system concerns the total material and information flow from supplier to end customer including the related activities, facilities, information systems and organisations involved (Lambert and Cooper, 2000; Cooper and Ellram, 1993). One of many possible interpretations is that logistics is referred to as a non-homogenous part of the supply chain that involves several participants at different levels. Such a non-homogenous part of the supply chain has a

Disintermediation, multiple channels, separation and collaboration

In a supply chain there are several alternative strategies available for the participating actors. In this section we provide a brief presentation of alternative strategies such as separation of functions, multiple channels, and the question of where and by whom in the supply chain the activities should be performed. Basically the strategies concern disintermediation versus different kinds of collaboration.

The question of intermediaries and their function has been widely discussed during the

Vertical and horizontal dimensions of logistics

An example of a logistics platform in a supply chain setting, with support from an electronic commerce portal, is BBT, which markets, sells and distributes tools and machine equipment in the Nordic countries. The business concept is to offer related products and services to industrial end customers in co-operation with local dealers that are found in the hardware, building and machinery trade. One of BBTs marketing channels is Toolstore (though only used as an ordering channel), an industry

Conclusions

This paper describes different lines of action for wholesalers conducting electronic commerce in multiple marketing channels. The focus is on marketing and logistics with an emphasis on the support from a logistics platform. The logistics platform is discussed as a part of the logistics system in the supply chain, a part which the focal company centrally controls, and has the power to design. Specifically, the term logistics platform is used to indicate connections to marketing channel strategy

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