Paul Alexander

ABSTRACT

Online retailers have created new demands and provided new opportunities for their supply chain providers.  This paper reports on a five year UK-based study of this market space, whose logistics needs are in part provided by third party e-fulfilment organisations (3PEFs), businesses offering traditional and innovative services specifically to online retailers.

In this environment traditional logistics providers are adapting in order to service a completely new group of customers, themselves rapidly evolving.  It is highly dynamic and competitive, and innovation is used as a tool to align providers with emerging and changing customer needs.  With new rules and the potential for extra profits, the environment has also proven attractive to new 3PEF entrants, further fuelling change in the market space.

In this study 3PEFs’ offerings are visualised as a portfolio of saleable capabilities providing storage, delivery and other diverse services across the supply chain.  In adapting to online retailers’ needs, these capabilities are shown to have been transformed from pre-existing capabilities, or are newly developed.  Previously published studies by the author have identified a portfolio of 13 core capabilities possessed by 65% or more of all 3PEFs.

To establish links between 3PEF capabilities and online retailer needs, the Croom e-Business Maturity Model is used.  It recognises that e-businesses concentrate on different commercial priorities in a staged sequence as they mature.  The core 3PEF capabilities have been mapped to the stages of this model and in this way offerings by 3PEFs can be linked to the supply chain needs of their potential customers.  As short term sales goals are predicated on such linkages, a motivation for providing aligned capabilities is established and tested.

Over the five years of the study, transformation of capabilities (from traditional to innovative) is measured.  It is observed that a significant trigger for developing new capabilities and adapting old ones is to make commercial sales.
Two specific groups of 3PEFs are identified based on the range of capabilities they offer.  “Specialists” have five or less core capabilities and use them to build strong relationships with important customers, while “generalists” use a larger portfolio of capabilities to hunt effectively in the general market space.  This transformation process occurs continuously over a number of sales transactions and a model is presented to explain this.

The rate of transformation in these two groups of 3PEFs was measured annually over the study period and shows that while capability innovations are occurring constantly and across all these businesses, 3PEFs are transforming from generalists to specialists as the former find and aim to retain important customers.

A model is presented to explain how customer expectations are also transformed in these same sales-based transactions, and application of this model in a wider logistics context is also suggested.