EBusiness Opportunity for HK Logistics Ltd. Essay
EBusiness Opportunity for HK Logistics Ltd.
Company Service and Product: Excellence Logistics Ltd (ELL) is a privately owned logistics company specialising in the delivery of Business-to-business items within throughout Europe. The company was founded in 1992 to provide an efficient logistics service specially targeted to manufacturing firms from their network of suppliers. The emphasis for the company at this initial stage was speed and efficient service as a result of regional efficiency. At start up, the company’s headquarters was in Hong Kong with a regional distribution centre in Shanghai, China. Presently the company has 5 major distribution centres all over the world, however our strategy to be a strong player in the Asian market is still core to our operations..
Our warehouses provided storage and logistics support for our clients which at inception were mostly Chinese companies but have extended throughout the world. Our Warehouse services have continued to be a vital aspect of our business as we support clients who do not wish to own their facilities, a trend which had become popular in the late 1980s. This aspect of the business still represents a significant part of ELL’s revenue. Apart from our warehousing services, ELL is involved in contract logistics services, freight management, and logistics consulting. However, the company extended to the offering logistics support for end products and distribution to our clients’ retail and wholesale outlets which increased our freight handling requiring new skills and expertise.
Size and Scope of Influence: The Company’s new goal is to be the premier logistics company serving manufacturing companies globally with a strong base in Asia. ELL’s new goal was to take the company from being seen as a logistics company primarily in the Asian region to being a global player leveraging on the use of technology to do this. The company’s employee figures have also increased from 2,300 to over 4000 within the last 2 years due to our efforts in expansion.
Revenue, Ambition, Strengths and Weaknesses: HK’s profit last year was $5.7M after tax as the year marked the beginning of huge investments in technology as a result of the need for the company to be more responsive and to implement major e-commerce and parcel tracking initiatives.
The company’s strength in Europe offered it huge benefits and market growth in the region despite stiff challenge from global operators. It however became obvious that the company needs to expand globally in order to benefits its corporate clientele most of whose operations required freights to other continents. This need was very important also as we extended our business to the shipment of end products form our clients to various distributors creating a new challenge.
Company’s attitude and goals regarding e-commerce: Last year the company transformed its website into a portal as first steps towards new integrated e-commerce initiatives. The company is now fully aware that this is the way to go to ensure that it benefits its growing customers and stay competitive. The major challenge for ELL is to coordinate its operations and ensure the integration of its services throughout the business from collection to delivery stages. To do this, it was essential to provide real-time visibility of our operations and parcel progress to our clients to ensure efficient management.
Section 2: Internet Business Scope
The e-commerce Project: As previously explained Excellence Logistics Ltd has evolved a new strategy to position it as a global player through the potential opportunities that e-commerce can provide. This is important because we believe that it will also enhance our ability to collaborate effectively with other global players who will wish to tap into the Asian market. In line with this our warehousing solutions have been enhanced with four new distribution centres to give our growing client base flexibility and wider range of locations closer to their manufacturing plants.
This is guaranteed to optimise cost savings, lower liabilities, increased speed-to-market and enhanced freighting and shipment services. Our fulfilment services are aimed at providing specialised services including postponement, inspection, returns and salvage to our clients who require these value-adding services. The increasing importance of Asian companies in global manufacturing supply chain has put ELL in a strategic position and we aim to optimise our advantage.
Our Present Position: Our use of technology before this project was not spectacular as with most Asian companies. Like every standard company, we maintained a central database of our operations without the ability to track goods in real time. Information was shared with customers on stock levels on a weekly basis and updating of data was done manually from information received from our customers. Standard EDI transactions included advance ship notice and notice of shipment and payments by our customers was done through electronic funds transfer.
This was not good enough and it became obvious that we were loosing customers who wanted to know the condition of their shipments in real time which we presently could not do. It was therefore clear that we would be limited in providing good customer service and could loose most of our valued clients. So this e-commerce project was essentially important to move EEL to the next level in terms of our global strategy
Goal Setting and Corporate Communication: The importance of the internet project was clear to management as it was important in the growth of the company and new global initiatives for expansion. However, the huge financial commitments required meant that it had to be effectively explained to shareholders for approval. To do this, an internal team headed by the CIO was set up to articulate the goals and cost of the project. They were also given the responsibility for communicating this to all the stakeholders and drawing up an implementation plan.
New Opportunities/Necessary Changes: It was clear that to move forward, e-business was crucial to helping us get real time information necessary for our operational efficiency. The implementation of e-business was mainly driven by the growing demands on our business. This process started with the company streamlining its operations with the intention of transforming itself from a traditional bricks and mortar logistics company to a company using e-commerce and technology strategically to enhance service quality and delivery. It also had become necessary to extend beyond Hong Kong to serve companies in Europe and United States and these regions were increasingly sourcing for products from Asia which was our primary market.
Secondly, technological development in the logistics sector had advanced with the possibility of clients being able to ascertain real time locations and condition of their shipment. New software applications implementation meant that we had to expand our IT section and employ more staff. It also meant that we had to downsize in some areas of the company that increasingly became irrelevant. In terms of strategy, the e-commerce project aimed at extending our frontiers giving us the ability to compete on a global scale hence our new positioning to be a global player. The project’s twin focus was:
- Enhanced Value through Channel Integration: We required the integration of our distribution network with our warehousing and transportation management systems to drive overall freight costs down by consolidating orders for multiple customers. This integration of systems also provides customers with immediate access to information with reduced order cycle times and transit times insuring that materials are in the right place at the right time.
- Automated Services through Integrated Technology: Our transportation management service was developed to reduce freight costs and increase on time deliveries. Transportation management services include carrier selection, pricing negotiations, real-time shipment status (via website) and automated communication. Automated communication includes:
- exceptions performance management and exception reporting
- claims resolution
Section 3: Knowing the Enemy (3)
One critical factor for our internet project as already expressed is the need to catch up with global competition and ensure that we offer our customers what they require. It is clear that our biggest inspiration in terms of competition is Exel, a global company originating from the United States. Exel is a global leader in supply chain management with significant interests in the Middle East and China. The company’s reputable has attracted global companies like Sun Microsystems, Ericsson, Motorola, Hitachi, and Nokia as some of the companies that it services. In a way, our service offerings are similar as we target manufacturing companies as our client base which is similar to what Exel does. Just over three years ago, the company faced a similar situation as what Excellent Logistics now faces;
there was need to provide an integrated global supply chain management systems as the company had clients in every continent and serviced their clients from delivering components for manufacture to the distribution of end products. In order to achieve this, the company hired the service of Agilisys to design a web-based supply chain integrator system that aimed at offering their corporate clients an integrated view of inventory and delivery status of goods at every point in time. In the project for Exel, the company listed the deliverables expected from Agilisys as follows:
- Intelligent interface design to enable re-use of purchase order and inventory data
- Integration of disparate systems for clients and third-party logistics suppliers
- Ability to track stock through the entire supply chain
- In-depth methodology to work on the look and feel of the site
- Multi-tier messaging architecture, extraction and middleware technologies to enable integration with incompatible systems
No doubt, the result of this project was that Exel became more able to respond to their challenges of expansion globally. This project no doubt portrayed Exel as a technologically driven company responsive to providing great services to its customers and increased its market share all over the world. We can surely say, its recent partnership with global giants DHL is a statement of the status Exel has gained over the years as a result of its e-business adoption.
Our focus has been explained in section 2 is similar to that of Exel while we desire to ensure that we continue to play a strong role in Asia. The figure below shows the critical areas the e-business project was meant to address:
Figure 1: E-business project concepts identified as crucial by collaboration team.
Excellence Logistics Ltd. is clearly interested in using this as a relevant pattern in our quest to implement our own e-business initiative. We are conscious of this and have extended our scope with our e-business consultants to include the following:
- Investigation of the use of RFD technology in logistics as we intend to be one of the first companies to implement this.
- Integration with third party suppliers like DHL and UPS for extended services and direct deliveries to our clients’ customers. This is very essential in the delivery of end products from our warehouses.
It is clear that we are essentially a Business-to-Business logistics company with particular interest in manufacturing firms particularly in the technology sector. Our target customers are likely to have the following characteristics:
- Be Manufacturing Companies usually in the Technology sector.
- With significant partnerships and interest in Asian market.
- Companies requiring specialised logistics services including warehouse facilities.
We shall be extremely focused to concentrate on our target sector and to be the best in our sector and will look for opportunities to better understand our customers and their needs. The approach is to ensure full empowerment and information sharing with our customers and partners with constant feedback on possible areas of improvement.
Section Four: eBusiness Strategy
Project Procedure: To achieve our goals as a company, it is essential to articulate clearly our e-business strategy as a company.
- Initiation Phase: A cross-functional team headed by the Chief Information Officer (CIO) looks at our needs and in conjunction with our consultants, produce a framework for the project.
- Planning Phase: This involved communication with management and evolution of a time-table with which the project will be guided and also explaining the process to our partners, staff and clients to understand our aims with the project. An extended collaboration team including representatives from operations, finance, IT, customer service, and human resources department was inaugurated at this stage to help with the process to ensure company-wide participation.
- Execution Phase: This involves the stage by stage implementation of the project including necessary skills training and workshops.
- Control Phase: The objective during the control phase is to closely monitor the performance measures agreed to by the collaboration team. Any service exceptions or performance measures not met will be reviewed with the CIO who was the head of the project and reported to management on a monthly basis.
- Process Improvement Phase: This involved the analysis of the project and improvements on initial design based on any shortcomings found. The objective of this phase is to meet the required service levels as originally agreed for the project. These initiatives will enable us to capitalize on past successes and allow us to take our supply chain to the next level of innovation, to effectively monitor operational capabilities, improve performance levels, measure cost accurately, and develop world-class processes.
Supply Chain Strategy: Our Supply Chain Management Strategy is to develop and manage a preferred supply base that enhances the success of our customers and their long term competitiveness. It is now clear that efficient supply chain management clearly impacts on the profitability of our clients. We shall therefore employ the following:
- Just-in-time supply management.
- Developing and maintaining long-term client relationships.
- Strong organizational and process integration to leverage on technology.
- Reduction in cycle times and reduction of total costs.
- Global Collaboration and outsourcing to reduce overhead costs.
Legal Framework: Legal issues with the e-business project include the following
- Privacy concerns for individual customers who want to ensure that their data, communication and information is secure.
- Global trade issues and legislations affecting the industry.
- Intellectual Property protection.
- Security of payment transactions.
Marketing Strategy: We aim to maximise our new e-business strategy and initiative be deploying online promotions, search engine strategies, co-marketing branding with customers and partners, new media advertisements and global brand development.
Section Five: Public Image
Organisational Goal: Our primary goal is to be a global logistics provider and the premier logistics company providing specialized services to manufacturing firms with a strong base in Asia. We have however clearly defined four essential areas that this project is focused on with supporting performance measures:
§ Improve management efficiency
§ Virtual meetings and collaborations.
§ Reduced logistics cost
§ Increased Time Deliveries
§ Reports and event management
§ Security and trust issues
§ Provide secure login for partners, customers and employees.
§ Controlling access levels.
§ Better Customer Service
§ Provide Online Enquiry
§ Online viewing and real-time tracking of parcels.
§ Provide remote consultation services
§ Online registration and bill payment
§ Bigger Participation and Future Opportunities
§ For other logistics companies and potential Partners.
§ Identifying consolidation opportunities or possible global mergers.
§ Supports RFID technology.
Our foundation as an efficient and reliable logistics provider is built on the hard work and integrity in our operations which we have emphasized from the inception of the company. We would continue to utilize this while we aim at being responsive to new technology needs in order to improve our efficiency and keep the trust of our clients. With regards to software capability, it was important that it was customized to meet our specific needs with our focus on a paperless system based on flexibility and reduction in freight costs and increased delivery times.
Security and Privacy Issues: The following issues form the framework for our policy on security and privacy issues:
Data Protection: This is an important law gaining global attention with regional legislations particularly in the US and European commission. Our goal will be to ensure that all private information is obtained by obtained by fair and lawful means; relevant to the purposes for which they are to be used; should be protected with reasonable security measures to prevent unauthorized access, destruction or modification.
Financial Transactions: It is essential that all payments and transfer of money is done securely and that is in line with the company’s goal of transparency and fairness.
Intellectual Property: Trademark and intellectual property of our customers will be adequately protected.
E-mail and communication: We would use secured e-mail communication and create effective firewalls to protect both incoming and outgoing e-mail. It is essential that communication is sent to the right department and our collaboration software ensures this with the encryption of sensitive communication.
Risk Assessment: Clearly the major risk issues is Security and Technical faults . Our desire however is to turn this to a strategic marketing tool by ensuring emphasis on secure transactions. To mitigate these risks, we have done the following
- We have engaged IBM, a global player and foremost e-business consulting company.
- Ensuring that Technology used is relevant, secure and flexible to support future business changes.
- We have put offline software capabilities and procedures to deal with possible downtimes and internet failures. We are aware of lose of revenues by companies due to technical faults and will preempt this.
- Developed efficient service levels and procedures for timely intervention.
Communication Strategy: We would effectively communicate and educate our customers, suppliers and partners as to the effective use of our systems for maximum benefit and ensure that responsibility is taken for our technology. We would emphasise the convenience, efficiency and the interactive experience that our e-commerce initiative provides.
Section Six: Information Strategy (2)
Information Gathering: As important as technology is, information is the basis and information is essential to make the business successful. As part of the initial process, the company has looked at what information is necessary to ensure we operate efficiently and provide the quality of service that we desire. It is therefore essential that information is carefully designed and assess should be monitored to ensure that it is used only for official purposes. Privacy is very important to also protect confidential information as some of our clients are competitors to each other to ensure that we operate ethically. It is also necessary to ensure proper reporting and performance measurement to enhance the future direction of this project. The figure below shows the major enterprise units and some sample information needs.
Figure 2: Our Value Chain
As a result of our position in the supply chain business, it is important that we ensure efficient use of information between the interacting organisations and units as shown in the figure above. A typical situation is to get an order from our customers’ manufacturing locations to our central warehouse where the order is confirmed based on inventory availability. Inventory is also automatically connected to our supplier chains who supply components once the set reorder level is reached.
This same process occurs with the product retailers and individual customers who order our customer products. The essence is to maintain a just-in-time supply chain that maximises the efficiency of the value chain and reduces cost associated with poor forecast. Whenever a product or component is shipped based on an order, an invoice is automatically issued which is settled through online transactions and transfers. On the other hand, the supply chain system links with the company’s relevant departments particularly the accounts and logistics supports units.
Problems with Information Flow
- Dealing with different companies in the chain presents bottlenecks that hinder communication.
- Privacy Constraints and Data Protection differences across countries.
Strategy to enhance Information flow efficiency
- Work with companies, suppliers and partners who understand the value of efficient Technology and accept our strategy.
- Build a Customer Service Team to handle Information
- Keep communications from management to front office staff open at all stages of the project and with implementation.
- Make Excellence Customer Service the basis of our e-business project.
- Give ownership to everyone so that all employees can be part of improving the project and contributing to future changes.
Section Seven: Future Operation and Development
RFID Integration: In the long term, our business strategy is to maximize the opportunities that are available for global partnerships with other logistics providers in areas where we are not too strong, while we provide similar support in our primary area. One major benefit of the project is its suitability and implementation of RFID which is gaining global attention particularly for the logistics sector.
We are conscious that this is a trend that will be the standard for the future and with this project have positioned ourselves for its implementation in a year’s time. What makes the RFID technology interesting and important? Whereas barcodes only identify the product, RFID tags can tell what the product is, where it has been, it’s expiry date and any other information required for the product. This makes information retrieval and access automatic and complete on its own. It’ will produce adequate information about when and where merchandise is manufactured, picked, packed and shipped so that data can be stored, transmitted in real-time and shared with warehouse management, inventory management, financial and other enterprise systems.
Another benefit of RFIDs is that, unlike barcodes, RFID tags can be read automatically by electronic readers. Imagine a truck carrying a container full of widgets entering a shipping terminal in China. If the container is equipped with an RFID tag, and the terminal has an RFID sensor network, that container’s whereabouts can be automatically sent to Prime Technologies without the truck ever slowing down. It has the potential to add a substantial amount of visibility into the extended supply chain. The only issue in its implementation is the cost and the fact that it will still take a couple of years before it becomes a global standard.
This project has increased the potential of possible collaboration through the use of web services through which data is shared and transmitted to enhance communication between companies. Our positioning to enhance our future strategic goals will be in line with the following:
- Our initial strategy aimed at expanding globally will result in the implementation of our e-business project that is aimed at ensuring that we can track goods in transit and provide our customers with real-time information.
- The implementation of RFID to help efficient tracking of parcels and increase our efficiency at warehouses.
The four major groups that our company has include:
- Customers that we provide complete logistics solutions for including shipping, transportation to and from factory.
- Customers that we provide warehousing services alone.
- Customers that we provide warehousing and shipping of components and materials to their factories but who handle their own distribution.
- Customers who handle their own warehousing but leave transportation and logistics to us.
It is clear that our e-business project is essential to all these groups but will be more critical to the companies that use our operations completely. We are certain that this will enhance our ability to effectively increase our customer base in all these sectors.
Strategy to Enhance Future Value
- While e-business benefits may be difficult to measure, we will keep working on performance measurement of the project to ensure that value is generated and sustained.
- That we utilise simple technology that will be easily scalable and flexible to enhance future possible changes using open-source technology as much as possible.
- Sensitive to cultural and language barriers in the use of technology.
- Employee participation, training and motivation to make everyone involved in project development.
- The project must continue to improve convenience, efficiency and security for all users and stakeholders.
Kendra Bonnett, An IBM guide to doing business on the internet. Mcgraw Hill. 2000.
Charles Trepper, E-commerce Strategies. Microsoft Press. 2000.
Charles Trepper (2000) E-Commerce Strategies. Published by Microsoft Press. 10 – 11,
http://www.cio.com/research/scm/edit/012202_scm.html#scm_emerging (assessed February 18)
http://www.forfas.ie/publications/ebus_ict_leg02/021029_ebusiness_ict_leg_pressrelease_s.pdf (assessed February 21)