Chapter Twelve: Fulfilling E-Commerce Orders and Other EC Support Services
12-1
Online File W12.1 Order Fulfillment Troubles in Toyland
As the entire world watched the transition to the new millennium occur without any of the feared major Y2K problems, the B2C
industry in general, and online toy retailers in particular, experienced a catastrophic logistics problem at the end of 1999.
According to reports by many popular media and EC research companies, overall satisfaction with online shopping
declined significantly in December 1999 and January 2000. Consumer frustration with late deliveries and with poor customer service before, during, and after purchases drove this decline. In general, e-tailers struggled to meet the demands of
last-minute holiday shoppers. It became clear during the period of peak demand that the order fulfillment infrastructure of
most e-tailers was weak.
The situation was especially critical in the toy business, where competition was fierce. Many toy e-tailers promised to
pay delivery charges and even gave $20 discount coupons. The Toys “R” Us site (toysrus.com) averaged 1.75 million visits
from potential customers each day, and eToys (etoys.com) averaged 1.9 million. The number of toy orders far exceeded the
companies’ projections. As a result, ToysRUs.com notified customers that only orders made prior to December 14 would
arrive in time for the holidays. For orders made after that date, customers would have to pay a premium if they wanted to
expedite shipments. A few days prior to Christmas, toysrus.com notified some customers that the toys that they had
ordered for the holiday (even some ordered before December 14) probably would not arrive in time and offered these customers $100 coupons as compensation. eToys and other e-tailers experienced similar problems. Amazon.com was forced to
ship multiproduct orders in several shipments instead of one, substantially increasing its expenses. It is no wonder that
consumer satisfaction with online retailing fell. The e-tailers themselves undoubtedly felt considerable dissatisfaction with
their order fulfillment record.
Toys “R” Us partnered with Amazon.com in 2000. Toys “R” Us handled the buying and management of inventory
while Amazon.com was in charge of Web site development, order fulfillment, and customer service. By 2005 most of these
problems were eliminated when demand forecasting was improved.
On July 1, 2006, the toy company left Amazon.com and opened its own independent Web site again. The company
hired Excel, a leading logistics provider, to deliver merchandise it sells through its site. The company also opened a
574,000-square-foot fulfillment center in Groveport, Ohio, to support the product assortment on ToysRUs.com and meet
increased demand during holiday seasons.
REFERENCES FOR ONLINE FILE W12.1
Bloomberg News. “Toys ‘R’ Us Falling Short on Christmas
Deliveries.” December 23, 1999.
Business Wire. “Toys ‘R’ Us Opens New Fulfillment Center in
Groveport, Ohio, to Support Expanding Toysrus.com
Business; World’s Greatest Online Toy Store Gears Up for
Peak Selling Season.” September 14, 2006. findarticles.
com/p/articles/mi_m0EIN/is_2006_Sept_14/ai_n2698
5694 (accessed March 2009).
Cooper, G. “Present Perfect.” DestinationCRM.com,
November 2001. destinationcrm.com/articles/default.
asp?ArticleID=1218 (accessed March 2009).
Taylor, C. “Christmas Postponed.” Time, December 26, 1999.
time.com/time/magazine/article/0,9171,36503,00.
html (accessed March 2009).
12-2
Part 5: EC Support Services
ONLINE FILE W12.2
Application Case
HOW DELL FULFILLS CUSTOMER REPAIR ORDERS
supply projection. This allows Dell to use repairable parts to
compress time and reduce costs, enabling a team of about
10 employees to successfully process more than 6,000 service
orders every day.
The online system generates timely information about
demand forecast, the cost of needed inventory, and “days of
supply of inventory.” It compares actual with forecasted
demand. This enables Dell to communicate critical information to external and internal customers, reducing order
fulfillment delays.
Producing or acquiring the required parts through component substitution, upgrades, and engineering change
orders must be effective in order to provide superb customer
service at a low inventory cost. The system also provides an
online standard body of knowledge about parts and planning
strategies.
One of Dell’s success factors is its superb logistics and order
fulfillment systems. Customer orders, which are received
mostly online, are automatically transferred to the production area, where configuration determines which components
and parts are needed to create the customized computer that
the customer wants.
Once configuration is complete, the problem becomes
how to get all the needed components so that a computer
can be ready for shipment the next day. As part of the solution, Dell created a network of dedicated suppliers for justin-time deliveries, as well as a sophisticated computerized
global network of components and parts inventories. The
global network is also used for product services (e.g., repairs,
upgrades, demanufacturing, etc.).
Let’s examine how Dell provides service when a computer
that is in the customer’s possession needs to be repaired. Dell
is trying to achieve for repairs, upgrades, and other services
the next-day shipment that it uses for new computers. For
repair activities, Dell needs parts and subassemblies to be
delivered to hundreds of repair stations, worldwide, from
internal warehouses or external vendors. The search for the
parts and their delivery must be done very quickly.
To facilitate this search for parts, Dell is using an online
intelligent inventory optimization system from LPA software
(now clickcommerce.com). The system can reconcile the
demand for parts with the action needed (e.g., repair,
upgrade, transfer, or remanufacture). For example, the system
allows Dell to factor the yield on reusable parts into its
Questions
1. This process improves what portions of order fulfillment?
2. Enter dell.com and find information about how Dell
conducts repair (warranty) customer service.
3. Relate this case to the discussion of “returns” in this
chapter.
4. What competitive advantage is provided by this Dell
system?
REFERENCES FOR ONLINE FILE W12.2
dell.com (accessed March 2009).
Xelus, Inc. “Case Study: Dell.” 1999. xelus.com/industries/
cs_dell.html (no longer available online).
Chapter Twelve: Fulfilling E-Commerce Orders and Other EC Support Services
12-3
ONLINE FILE W12.3
Application Case
PEACOCKS USES WIRELESS WMS TO SMOOTH
ITS INTERNAL SUPPLY CHAIN
Peacocks of Wales (peacocks.co.uk) operates approximately
250 retail stores, selling clothes and home furniture in Wales
and southern England. The company had a problem with its
internal supply chain: Its paper-based system of managing
product distribution was prone to problems, such as incorrectly completed pick-lists, wrongly picked items, transcription errors, delays in generating and receiving data, and
much more. These interfered with the company’s growth
strategy and reduced its profit.
In 1997, Peacocks consolidated its six warehouses into
a single distribution center (100,000 square feet, 3 stories).
Stores were ordering more than 4,000 SKUs each day. These
needed to be picked and shipped to stores effectively and
efficiently. Using one place instead of six solved some of
Peacocks’ problems; however, the paper-based communication system was still ineffective. With the paper-based pick
system, it was easy to run out of products at a specific
location. When this occurred, the picker had to either wait
for more products to arrive or return to his or her original
location. The paper-based pick system had delays built into
it, and stock problems were difficult to predict.
In 1998, the company began to replace its paper-based
system with a wireless system (from Symbol Technologies, a
division of Motorola). The fully automated distribution center
now is equipped with a hands-free, real-time put-away and
picking system. It is based on a combination of dozens of
wearable computers and several truck-mounted terminals
supported by a wireless LAN. The system provides real-time
control. Whether an item moves by hand or by truck, Peacocks
knows precisely where it is. If at any point in the process
someone is at the wrong location, handling the wrong product,
or trying to send it to the wrong place, the system simply
sends out an alert and prevents the action. When Peacocks
receives a delivery from a manufacturer, the consignment is
checked and the individual cartons from each delivery are
given an identifying bar code label and scanned to report
receipt. In this way, every item can be tracked through the
distribution center from the minute it arrives. The system
immediately knows if there is a requirement at a pick location.
Once individual cartons are labeled, Peacock uses an
automated conveyor system to send cartons to either the pick
face or to the pallet store, as directed by the wireless WMS.
Each member of the picking team wears a wrist-mounted
terminal that receives picking instructions from Peacocks’ host
system via the wireless LAN. As empty trolleys arrive in the
pick area, the picker scans a bar code on the empty trolley,
and the terminal’s LCD screen tells the picker which aisle to go
to, which location to pick from, and which items to pick.
When a picker arrives at the pick face, the picker scans the bar
code mounted at the end of the aisle. This verifies that the
picker is in the correct aisle. The picker then scans another bar
code at the product location to verify that the location is
correct. Finally, the picker scans each item as it is placed into
the trolley.
Once each pick is complete, the conveyor system takes
each trolley to the dispatch area to be loaded into crates for
delivery to a Peacocks store.
Because the data are sent to the host in real time as
the picking operation proceeds, the system knows when
stocks are approaching the replenishment level set by
Peacocks. When an item needs to be replenished, the system
sends an alert to a truck-mounted terminal in the pallet
store. As with the wrist-mounted terminals, an LCD screen
on the truck terminal directs the driver to a precise location
in the pallet racking. On arrival at the location, the driver
uses a handheld scanner to scan the location bar code. This
confirms that the truck driver is at the right location and
selecting the right product.
The hands-free arrangement saves time and minimizes
damage to the devices. The system also is user friendly, so
training is minimal.
Questions
1. Describe Peacocks’ internal order fulfillment process.
2. Identify all segments of Peacocks’ supply chain that are
improved by the system and describe the improvements.
3. How has the new system corrected the previous
problems?
4. What are the advantages of wireless tools?
5. Investigate how RFID may improve this system in
the future.
REFERENCES FOR ONLINE FILE W12.3
motorola.com/staticfiles/Business/US-EN/
EnterpriseMobility/homepage/index.html (accessed
June 2009).
Symbol Technologies. “Case Study: Peacocks Distribution
Centre.” 2004. Download at whitepapers.silicon.com/
0,39024759,60089224p,00.htm (accessed March 2009).
symbol.com (accessed January 2007).
12-4
Part 5: EC Support Services
ONLINE FILE W12.4
Application Case
GROCERY SUPERMARKET KEEPS IT FRESH—WOOLWORTHS
OF AUSTRALIA
Dealing with early movers of pure e-tailing is a major
problem for established retailing. How is a well-established
major supermarket to respond? With huge investments in
brick-and-mortar stores, Woolworths of Australia found
itself dealing with just this question. Three major players
dominate the grocery market in Australia: Coles Myers,
Woolworths, and Franklins. These three companies control
some 80 percent of the marketplace. Franklins, which is
owned by a company in Hong Kong, takes a low-cost,
minimum-service approach. The others, both Australianbased, provide a full range of products, including fresh
foods and prepared meals.
Woolworths’ initial approach was to set up a standard
Web site offering a limited range of goods, but excluding perishable items. The delivery service was initially available only
in areas near the company’s major supermarkets. Woolworths
felt it had to respond to the newly emerging approaches from
online entrepreneurs. If those organizations were allowed to
take over a sizable segment of the market, it could be difficult to recover it.
It was not long before management realized that this
was not an effective approach. Woolworths’ staff had to walk
the aisles, fill the baskets, pack the goods, and deliver them.
For an organization that had optimized its supply chain in
order to cut costs, here was a sudden explosion in costs.
When gross margins are only 10 percent, and net margins
around 4 percent, it is very easy to become unprofitable.
Furthermore, Woolworths has established its place in
public perception as “the fresh food people,” with fruits and
vegetables, freshly baked breads, meats, and prepared meals
being promoted heavily. If home shopping ignores these,
Woolworths is avoiding its strengths.
Woolworths’ Homeshop, the second-generation home
shopping site (woolworths.com.au), was designed with freshness in mind, and all the fresh foods are available for delivery.
REFERENCE FOR ONLINE FILE W12.4
Jordan, E. “Grocery Supermarket Keeps It Fresh: Woolworths of Australia.” Professor, Macquarie Graduate
School of Management, Australia, August 2000.
Deliveries are arranged from major regional supermarkets,
rather than from every local store. There is an AU$50 minimum
order, and a 7.5 percent surcharge for home delivery, as well as
an AU$6 delivery charge. This helps in recovering the additional costs, but an average order, around AU$200, still returns
little profit.
New users can register only if deliveries are possible to
their postal address. On first use of the system, the customer
is guided to find the products that they want with suggestions from the list of best-selling items. Alternatively, the
customer can browse for items by category or search by
keyword. Items are accumulated in the “shopping trolley”
(cart). The first order is entered into a master list for future
orders, as are subsequent orders.
When the customer has selected the required items,
they select “checkout”; at that point, the total value is
computed and the customer confirms the shopping list.
Payment is made only at time of delivery using a mobile
(cellular) electronic funds transfer (EFTPOS) terminal, and
either a credit card or a debit card. In this way, precise
charges can be made based on weight of meat or fish, as
well as allowing for out-of-stock items.
The customer has to set the delivery time and day. If
the customer is not home to accept the delivery, additional
charges will be applied.
Additional services that are available include dietary
advice, recipes, and recording of preferred food items.
Questions
1. Describe the driver of the online initiative.
2. Describe the difficulties of moving online.
3. Find the status of online service today at
woolworths.com.au.
Chapter Twelve: Fulfilling E-Commerce Orders and Other EC Support Services
Online File W12.5 Order Fulfillment at GroceryWorks
EXHIBIT W12.5.1
1 Each customer order is placed 6.5 to 9 hours ahead of delivery time.
2 Suppliers pick goods off their own shelves and package them for
pickup, with orders sorted by customer and placed in coded bags.
3 GroceryWorks vans pick up the goods from suppliers.
4 Fresh goods from suppliers are sent along a conveyor belt; dry goods
are picked from GroceryWorks’ warehouse shelves.
5 GroceryWorks vans head to customers’ homes, stopping by suppliers
on their return trip to the local warehouse to pick up the next round
of customer orders.
1
Frozen
foods
vendor
Produce
vendor
Meat
vendor
“Home meal”
vendor
GroceryWorks trucks
pick up the next batch
of fresh goods from
vendors after
finishing delivery to
customers’ homes
2
3
RECEIVING
Conveyor belt
4
Picking zones
Dry goods
5
Customers’
homes
LOADING
Dry
cleaner
Video
store
Source: Steinert-Threlkeld, T. “GroceryWorks: The Low-Touch Alternative.” Interactive Week, January 31, 2000.
Originally published in Interactive Week, xplane.com. Reprinted by permission.
12-5
12-6
Part 5: EC Support Services
ONLINE FILE W12.6
Application Case
THE RISE AND FALL OF KOZMO.COM
Soon after, more problems started to surface. As with
other B2C dot-coms, the more Kozmo.com sold, the larger
the losses grew. In response, Kozmo.com closed operations
in San Diego and Houston, imposed minimum charges, and
added more expensive items (such as rented DVD players)
to its offerings. This helped to generate profits in New York
and San Francisco. However, with hundreds of dot-coms
going out of business in late 2000 and early 2001, a major
financial backer withdrew its support. Kozmo.com eventually
ran out of cash and as a result had to close its doors on
April 11, 2001.
The idea sounded logical: Create an express delivery system
for online orders and deliver within an hour. The idea is not
new. Domino’s Pizza built its fortune on this idea, and today
many companies deliver pizzas, door-to-door, in less than an
hour in thousands of cities worldwide.
Kozmo.com’s business model was based on this idea.
But instead of pizzas, Kozmo.com envisioned the delivery of
food items, rented videos, electronic games, and convenience
products. Also, the model targeted only large cities, especially New York and Boston, where people use public transportation that may not be in operation at certain times.
Items were delivered by “Kozmonauts”—employees with
vans, bikes, or scooters. Orders were placed on the Internet,
but telephone and fax orders also were accepted. The products were delivered from Kozmo.com’s distribution centers.
The first logistics problem faced by Kozmo.com was the
return of the rented videos. It was uneconomical to send the
Kozmonauts to collect them. So Kozmo.com built drop boxes
(like the FedEx boxes), initially in New York. Many of these
boxes were vandalized. In an attempt to solve the problem,
Kozmo.com partnered with Starbucks and moved the boxes to
Starbucks cafés, some of which are open 24 hours a day. In
exchange, Starbucks became an investor in Kozmo.com.
Kozmo.com started to deliver coffee products to Starbucks’
customers, and Starbucks printed Kozmo.com’s logo on its
coffee cups.
With a venture capital investment of more than
$250 million, the company expanded rapidly to 10 cities.
During the initial period, delivery was free, and no minimum
dollar amount of order was required. This strategy attracted
many customers but resulted in heavy losses, especially
on small-value items. The company’s growth was rapid: By the
end of 2000, it had 1,100 employees, and it launched an IPO.
Questions
1. Draw the supply chains for food and rented items at
Kozmo.com. What logistics problems did these supply
chains present?
2. Compare Kozmo.com with Domino’s Pizza. Why did
Domino’s do so well while Kozmo.com failed? Analyze
the situation from an order fulfillment point of view.
3. The partnership with Starbucks was said to be
extremely innovative, but Kozmo.com canceled it when
its financial problems began. (Kozmo.com had paid
money to Starbucks for permission to place the drop
boxes.) Analyze this partnership.
4. Later in this chapter, you will learn about returns.
After you have read that discussion, come back to this
case and answer the following question: What advice
could you have given Kozmo.com regarding the return
of rented items? Also, recall the Netflix model in
Chapter 4.
REFERENCES FOR ONLINE FILE W12.6
Blair, J. “Behind Kozmo’s Demise.” The New York Times,
April 13, 2001.
Blair, J. “Online Delivery Sites Finding That Manhattan
Can Be a Hard Place to Make It.” The New York Times,
October 2000.
kozmo.com (2002) (site no longer available).
Chapter Twelve: Fulfilling E-Commerce Orders and Other EC Support Services
12-7
ONLINE FILE W12.7
Application Case
OUTSOURCING LOGISTICS AT NATIONAL
SEMICONDUCTOR CORPORATION
and trade compliance. UPS provides the telecommunications
network, the interface between NSC and UPS Logistics that
exchanges files, balances inventory, and handles other supply
chain functions. With its highly automated IT system, UPS
Logistics can go for days without talking to NSC unless there
is a need for an expedited shipment or a shipment problem
develops.
NSC has realized savings of 50 percent in its global
logistics costs since it began outsourcing its logistics in
1992. With UPS Logistics, it is saving 10 percent over the
FedEx system. With additional savings from other innovations
UPS has provided, NSC may see potential savings of between
15 percent and 20 percent. For NSC, outsourcing its international logistics needs has proven to be a cost-effective SCM
solution. The benefits of advanced information technology,
carrier flexibility, and logistics expertise have made its relationship with UPS Logistics one that will continue to develop
and thrive.
NSC continuously adds new products. Since 2008–2009,
a major new area is energy-efficient ICs and power management: Outsourcing of logistics is paying off, so the company
continues with this strategy. As a global company, press
releases are available in eight different languages.
National Semiconductor Corporation (NSC) (national.com), based
in Santa Clara, California, is a manufacturer of state-of-the-art
digital technology. The company reported $2 billion in sales in
2004, distributing semiconductor chips and related products to
more than 3,800 customers worldwide (National Semiconductor
Corporation 2004). The company gains substantial savings on its
global supply chain costs by outsourcing its logistics activities,
both for offline and online transactions. The primary function of
its 3PLs is to move freight by the most efficient means possible.
The logistics providers offer advanced information technology
and broader global coverage, enabling NSC to concentrate on its
core competencies of designing and manufacturing its products.
Prior to 1992, NSC distributed directly from its manufacturing plants, which are primarily located in Southeast Asia. As
sales volumes grew and demands for faster delivery increased,
NSC turned to FedEx to distribute from a base in Singapore.
FedEx relied on its own air transportation equipment, which
restricted NSC’s shipments to FedEx’s flights and routes.
Therefore, in the late 1990s, NSC began looking for a single 3PL
that could provide flexible and efficient transportation. NSC
chose UPS Logistics Group, which opened a state-of-the-art
distribution facility in Singapore in August 2000.
UPS’s centralized distribution center receives shipments
from NSC’s plants in Singapore, Malaysia, and the Philippines.
UPS Logistics performs the basic functions of receiving and
storing inventory; picking, packing, and shipping to customer specifications; and arranging outbound transportation.
National Semiconductor’s IT systems were developed
in-house and are coordinated with those of UPS Logistics.
The integrated systems enable customs clearance, labeling,
Questions
1. Why did NSC elect to use a 3PL?
2. Why did NSC move to UPS?
3. What are the major services that UPS provides to NSC?
REFERENCES FOR ONLINE FILE W12.7
Coia, A. “Leaving Logistics in Capable Hands.” World
Trade Magazine, July 2002.
national.com (accessed March 2009).
National Semiconductor Corporation. 2004 Annual Report.
2004. national.com/invest/2004annual/glance.html
(accessed March 2009).
UPS. “National Semiconductor Gains Flexible Global
Distribution to Move Billions of Chips Worldwide.”
July 2004. Available for download at jobfunctions.bnet.
com/abstract.aspx?docid=59594 (accessed March 2009).
ups.com (accessed July 2009).
12-8
Part 5: EC Support Services
Online File W12.8 Players and Challenges in B2B Fulfillment
Players
Challenges
Shippers (sellers)
Mix of channels, choice of logistics partners, go solo or use aggregation, what to outsource, integration of strategic, tactical, and operational decisions
Solo and/or consortia buy sites, supply chain collaboration, total delivered costs, when
to buy
Self-service Web sites, links to vertical transportation e-marketplaces, institutional drag
Cooperation from carriers, breadth of modes/services, IT resources, customer acquisition
Receivers (buyers)
Carriers
Third-party logistics
providers (3 PLs)
Warehouse companies
Vertical e-marketplaces
Transportation
e-marketplaces
Logistics software
application vendors
Location, operational intensity, capital investment, mode of automation, choice of
builders
Where is the “ship-it” button? Who’s behind it? What services are offered?
Moving beyond spot transactions to ASPs and value-added services, neutrality versus
alignment, market mechanisms (e.g., bidding)
Comprehensive solutions, e-marketplace involvement, strategic partnerships, integration with existing software
ONLINE FILE W12.9
Application Case
INGRAM MICRO—WORLD-CLASS COMPUTER PRODUCTS
DISTRIBUTOR AND E-COMMERCE PROVIDER
An Overview
Ingram Micro (ingrammicro.com) is the world’s largest technology distributor and a leading technology sales, marketing,
and logistics company. As a vital link in the technology value
chain, Ingram Micro creates sales and profitability opportunities for vendors and resellers through unique marketing programs, outsourced logistics services, technical support,
financial services, and product aggregation and distribution.
Since its beginning in 1979, Ingram Micro has connected
technology solution providers with vendors worldwide, identifying markets and technologies that shape the IT industry. Today,
Ingram Micro remains at the forefront of the global technology
marketplace, bringing the latest products and services to market and finding new ways to bring value to our customers. As of
2009, the company offers a broad array of solutions and services to approximately 170,000 resellers by distributing and
marketing hundreds of thousands of IT products worldwide from
nearly 1,400 suppliers. Through Ingram Micro Logistics, the
company provides customizable services for order management
and fulfillment, contract manufacturing, contract warehousing,
product procurement, product pack out and cartonization,
reverse logistics, transportation management, customer care,
credit and collection management services, and other value
chain services. Ingram Micro serves 150 countries and is the
only global IT distributor with operations in Asia.
Ingram Micro’s Mission
Micro Ingram’s mission is to be an indispensable business
partner—the most valued bridge between vendors and
customers—and to measurably contribute to the growth and
profitability of customers—both vendors and resellers—in a
manner that is difficult to replicate or substitute. For vendors, Ingram Micro’s goal is to create value through efficiency, demand generation, and access to markets and
customers. For resellers, Ingram Micro provides unique offerings that create sales and profit opportunities, including
valuable vendor relationships, sales programs, access to
credit, and training and development.
To accomplish its mission, the company is using the
Web and advanced EC methods, especially in the logistics
areas. Ingram Micro has transformed itself from a technology
distributor to a global Internet business and SCM firm.
(continued)
Chapter Twelve: Fulfilling E-Commerce Orders and Other EC Support Services
ONLINE FILE W12.9
12-9
(continued)
Before the Internet
Prior to using the Internet as an EC tool, Ingram relied heavily
on its knowledgeable and powerful sales force to interface
with its customers, from managing orders to anticipating
customers’ preferences, needs, and likely purchases, as well
as for postorder and account information that clients needed
to track and manage their orders.
Putting the Back-End Systems on the Net
Two main issues were addressed during the creation of a new
electronic interface for Ingram’s customers: appearance and
new information needs. Customers needed accurate content in
user-friendly and readable form that was capable of manipulation. The information had to be available in an attractive
and simple-to-understand fashion. Customers also needed a
different way of doing business, including order processing.
This meant changing Ingram’s way of transforming its internal data and processes into external information. How would
these be achieved? By defining how customers would use the
company’s information and how and when they would use the
services.
Challenges in E-Logistics and E-Fulfillment
Ingram Micro faced a number of challenges.
1. Accuracy and customer expectations. Although its historic
customers, including resellers and manufacturers, understood the channel process and the likely delays and problems, Ingram Micro’s new customers expected a simple order
process, immediate order verification, continual access to
order information, and timely and near-flawless delivery.
Therefore, new functions and enhanced information were
added to the original logistics and fulfillment business.
2. Expanding the concept of “customer.” The company
was serving only corporate buyers, not the millions of
corporate end users and e-commerce consumers. Ingram’s
internal point of view had to be adjusted to ensure the
accommodation of new needs and perspectives of the
new customer base.
3. Making information more accessible. The biggest challenge was pulling an enormous amount of mainframe data
into DSSs and databases that were easily accessible via the
Web. The key was creating and maintaining an environment
where mainframe-knowledgeable personnel could work
effectively and quickly with Web designers and programmers.
4. Making the data eye-friendly. It was a huge effort to
turn the data into easily interpreted information for those
without eyes trained to read mainframe information.
5. Integrating disparate systems. Stand-alone systems in
the company’s warehouse (used to make personalized
delivery and label-printing possible) had to be altered to
accept new types and amounts of data as well as to
process them correctly. Another issue was the separation
and security of customers’ data.
Use of Outside Expertise, Hardware, and Software
Although most of the resources were internal, some outside
expertise, hardware, and software were used. The external
resources included those well versed in the most current Web
technologies and programming methods to enhance speed.
Cross-corporation teams were created to develop projects
between Ingram and their customers.
The E-Logistics and E-Fulfillment Framework
This framework is a virtual, mainframe-based fulfillment powerhouse with several external faces and connectivity options.
Real-time communication is via exchanges (e.g., EDI or XML)
with companies’ Web sites, ERP systems, order management
systems, and e-commerce engines. Ingram hosts a number of
B2B storefronts targeting specific customers. Joint development efforts allow resellers and vendor partners to complete
their business models by “plugging in” to Ingram’s logistics
engine.
The Results
Ingram now serves millions of customers in a historic
capacity (meeting needs directly) and millions of new
customers (meeting needs indirectly and transparently).
The company now performs its operations with much more
exacting intent.
Ingram’s Advice for Implementation of
E-Logistics and E-Fulfillment
Getting assistance from the best, either through consulting
or outsourcing, is a key to implementation. Even when the
concept is simple, the execution may be unpredictable and
complex. Know your customers, know your limits, and know
your customers’ limits. Identify critical success factors, both
from your company’s point of view and your customers’
points of view.
Ingram continues to offer its services to customers who
can use them. The customers benefit by being able to focus
on their own core competencies while using Ingram’s comprehensive infrastructure.
Ingram Micro Logistics
Ingram Micro Logistics provides supply chain services for
manufacturers, publishers, brick-and-mortar retailers, and
Web marketers. The supply chain solutions of Ingram Micro
Logistics help 2,000 technology suppliers reach 170,000
customers. The solutions can be implemented using its
infrastructure, the consumer’s own existing infrastructure,
or other third-party facilities.
Ingram Micro Logistics’ integrated supply chain solutions help customers to:
◗ Increase turns and reduce inventory
◗ Change from fixed to variable cost structure
◗ Reduce cycle time from overseas manufacturing points to
customer locations
◗ Extend customer reach with integrated retail/Web
presence
The Logistics Network
Ingram Micro Logistics operates an integrated network of
Advanced Logistics Centers (ALCs) in the United States and
Canada, with more than 3 million square feet of warehousing
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ONLINE FILE W12.9
(continued)
space. Strategically located to offer 2-day ground service to
98 percent of the population, the ALC network can accommodate up to 15 million orders per year. Customers shipped to
include:
◗ Customization and postponement
◗ Reconfiguration and refurbishment
◗ Distributors
◗ Resellers
◗ Retail distribution centers and more than 10,000 retail
locations
◗ End-user customers at homes and businesses
Questions
Also, specialized programs available in Ingram Micro
Logistics ALCs include:
◗
◗
◗
◗
Product launch and replenishment
Turnkey manufacturing and assembly
JIT, vendor-managed inventory, and retail hub
Transportation management
1. Describe the improvements in Ingram’s back-end
system.
2. What improvements in logistics and e-fulfillment were
made?
3. What infrastructure was needed for the new systems?
4. What role did XML play?
5. List the implementation lessons.
6. What are the benefits of the new systems to Ingram’s
customers?
REFERENCES FOR ONLINE FILE W12.9
ingrammicro.com (accessed April 2009).
im-logistics.com/IML (accessed April 2009).
Chapter Twelve: Fulfilling E-Commerce Orders and Other EC Support Services
Online File W12.10 General Resources About Intelligent Agents
The following are some of the best general resources on software agents:
◗ One of the best places to start is the University of Maryland’s Web site on intelligent agents (agents.umbc.edu). Start with
Agents 101 at agents.umbc.edu/introduction. The site has downloadable papers and reports and an extensive bibliography
with abstracts (see “Publication and Presentation”).
◗ BotSpot (botspot.com) has comprehensive information about e-commerce agents and other agents. See also internet.com.
◗ MIT Media Lab (search for media projects at media.mit.edu) provides a list of agent projects and much more.
◗ The American Association of Artificial Intelligence provides comprehensive information about agents at aaai.org.
◗ The Computer Information Center in the United Kingdom provides a comprehensive knowledge base about intelligent
agents at compinfo.co.uk/ai/intelligent_agents.htm.
◗ Comprehensive knowledge bases about agents are available at agent.org and 123-bots.com.
◗ Carnegie Mellon University has several agent-related programs (search for software agents at cs.cmu.edu/~softagents).
◗ IBM has several agent-development projects (research.ibm.com/iagents and alphaworks.ibm.com).
◗ Stanford University has several research teams developing agent technology (search for Knowledge Systems Laboratory at
stanford.edu).
◗ Agentland.com is another “must” place to visit. It contains an up-to-date list of dozens of agents classified into
e-commerce and entertainment. Some of the agents and development tools can be downloaded.
◗ The Computer Information Center (compinfo-center.com) facilitates collaboration and technology transfer about agent
development.
◗ The University of Michigan has several agent development projects (eecs.umich.edu). An extensive list of resources also is
available at ai.eecs.umich.edu.
◗ The National Research Council of Canada (nrc.ca) provides an artificial intelligence subject index for agents.
◗ Botknowledge.com provides considerable information about all types of bots.
◗ The Xerox Palo Alto Research Center (parc.com) provides information on software agents in general and on multiagent systems in particular. In addition to references, articles, and application cases, you can find a list of leading vendors, some
with customers’ success stories. Related intelligent systems are covered as well.
◗ Microsoft employs dozens of agents (or “wizards”) in most of its software products. For details, see Microsoft’s SMS
Operations Guide (Microsoft 2003). With the Microsoft Agent set of software services, developers can easily enhance the
user interface of their applications and Web pages with interactive personalities in the form of animated characters. These
characters can move freely within the computer display, speak aloud (and display text on screen), and even listen for spoken voice commands (see msagentring.org). You can download Microsoft Agent at microsoft.com/products/msagent.
Periodicals and Magazines
The following periodicals and magazines often feature articles on agents and agent-related technologies:
◗
◗
◗
◗
◗
AI Magazine
Journal of Artificial Intelligence Research
Annals of Mathematics and AI
Expert Systems
IEEE Intelligent Systems
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Online File W12.11 Characteristics of Software Agents: The Essentials
Although there is no commonly accepted definition for the term software agent, people think of several possible traits when
they discuss software agents. Four of these traits—autonomy, temporal continuity, reactivity, and goal driven—are essential
to distinguish agents from other types of software objects, programs, or systems. Software agents possessing only some of
these traits are often labeled simple or weak. Virtually all commercially available software agents are of this sort.
Besides these essential traits, a software agent may also possess additional traits such as adaptability, mobility,
sociability, and personality. Typically, these latter traits are found in more advanced research prototypes. In this section,
we will consider the essential traits first.
The Essential Traits of Software Agents
The following are the major traits of software agents.
Autonomy
Autonomous software agents can perform certain tasks automatically according to the rules and inference mechanisms given
by the designer. As Maes (1995) points out, regular computer programs respond only to direct manipulation. In contrast, a
software agent senses its environment and acts autonomously upon it. A software agent can initiate communication, monitor
events, and perform tasks without the direct intervention of humans or others. For more, see Greenwald et al. (2003).
Autonomy implies that an agent takes initiative and exercises control over its own actions (Huhns and Buell 2002)
and thus displays the following characteristics:
◗ Goal orientation. Accepts high-level requests indicating what a human wants and is responsible for deciding how and
where to satisfy the requests. These are referred to by Hess et al. (2000) as homeostatic goal(s).
◗ Collaboration. Does not blindly obey commands but can modify requests, ask clarification questions, or even refuse to
satisfy certain requests.
◗ Flexibility. Actions are not scripted; the agent is able to dynamically choose which actions to invoke, and in what
sequence, in response to the state of its external environment.
◗ Self-starting. Unlike standard programs directly invoked by a user, an agent can sense changes in its environment and
decide when to act.
Autonomous agents can be resident or mobile (see Zhang et al. 2004).
Temporal Continuity
A software agent is a program to which a user assigns a goal or task. The idea is that once a task or goal has been delegated, it is up to the agent to work tirelessly in pursuit of that goal. Unlike regular computer programs that terminate
when processing is complete, an agent continues to run—either actively in the foreground or sleeping in the background—
monitoring system events that trigger its actions. You can think of this attribute as “set and forget.”
Reactivity
A software agent responds in a timely fashion to changes in its environment. This characteristic is crucial for delegation
and automation. The general principle on which software agents operate is “When X happens, do Y,” where X is some
system or network event that the agent continually monitors (Gilbert 1997).
Goal Driven
A software agent does more than simply respond to changes in its environment. An agent can accept high-level requests
specifying the goals of a human user (or another agent) and decide how and where to satisfy the requests. In some cases,
an agent can modify the goals or establish goals of its own.
Other Common Traits
Some software agents also possess other common traits.
Communication (Interactivity)
Many agents are designed to interact with other agents, humans, or software programs. This is a critical ability in view of
the narrow repertoire of any given agent. Instead of making a single agent conduct several tasks, additional agents can be
created to handle undelegated tasks. Thus, communication is necessary in these instances. Agents communicate by following certain communication languages and standards, such as Agent Communication Language (ACL) and Knowledge Query
and Manipulation Language (KQML) (see en.wikipedia.org/wiki/Agent_Communication_Language and
en.wikipedia.org/wiki/Knowledge_Query_and_Manipulation_Language).
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Online File W12.11 (continued)
Intelligence and Learning
Currently, the majority of agents are not truly intelligent because they cannot learn; only some agents can learn. This learning
goes beyond mere rule-based reasoning, because the agent is expected to use learning to behave autonomously. Although
many in the artificial intelligence (AI) community argue that few people want agents who learn by “spying” on their users,
the ability to learn often begins with the ability to observe users and to predict their behavior. One of the most common
examples of learning agents is the wizards found in many commercial software programs (e.g., in Microsoft Office applications). These wizards offer hints to the user based on patterns the program detects in the user’s activities. Some of the newer
Internet search engines boast intelligent agents that can learn from previous requests the user has made.
For a comprehensive discussion of these and additional characteristics, see Gudwin and Queiroz (2006).
REFERENCES FOR ONLINE FILE W12.11
Gilbert, D. “Intelligent Agents: The Right Information at
the Right Time.” IBM white paper, May 1997.
citeseer.nj.nec.com/context/1105800/0 (no longer
available online).
Greenwald, A., N. R. Jennings, and P. Stone, (Eds.).
“Agents and Markets.” Special issue, IEEE Intelligent
Systems, November–December 2003.
Gudwin, R., and J. Queiroz. Semiotics and Intelligent Systems
Development. Hershey, PA: The Idea Group, 2006.
Hess, T. J., L. P. Rees, and T. R. Rakes. “Using Autonomous
Software Agents to Create the Next Generation DSS.”
Decision Sciences, 31, no. 1 ( July 2000).
Hill, T. R., and M. Roldan. “Toward Third Generation
Threaded Discussions for Mobile Learning: Opportunities
and Challenges for Ubiquitous Collaborative Environments.” Information Systems Frontiers (February 2005).
Huhns, M. N., and C. A. Buell. “Trusted Autonomy.”
IEEE Internet Computing (May–July 2002).
Maes, P. “Artificial Intelligence Meets Entertainment:
Life-like Autonomous Agents.” Communications of the
ACM (November 1995).
Zhang, N., O. Shi, M. Merabti, and R. Askwith. “Autonomous Mobile Agent Based Fair Exchange.” Computer
Networks (December 20, 2004).