Discuss about the Transport Management for Global Logistics.
According to Dell’Amico and Hadjidimitriou (2012), over the past decade, last mile delivery has gained enormous popularity due to the increased demand for fully integrated Omni-channel retailing. Retailers have been forced by evolution of the Omni-channel to consider evaluation of the existing transportation network capabilities, resulting in adjustments of the transportation network. Last mile delivery is the movement of people and goods from the business transportation hub to their final destination. The final destination of the goods is usually considered to be their home. The objective of the last mile delivery is to ensure delivery of goods as fast as possible to the end users.
Myerson (2015) argues that majority of business are using last mile delivery to gain a competitive edge in the market and to build brand loyalty. The surge on online orders has necessitated the need for e-commerce business to use last mile delivery. The use of last mile delivery enables retailers to guarantee and provide exceptional services to their customers and to easily adapt to the ever changing Omni-channel retailing environment. This report will provide a case study and research on IKEA, a Singapore company, as one of the companies using last mile delivery service.
IKEA Singapore is one of the stores controlled by IKEA group of companies headquartered in Delft, Netherlands. IKEA Singapore was opened in the year 1978. IKEA Singapore is among IKEA stores owned by Ikano Retail Asia. The company financial principle is to grow using their own resources and therefore, a majority of the company profits is re-invested in sustainable solutions, product development and lowering prices. IKEA Singapore operates two stores namely IKEA Alexandra and IKEA Tampines. IKEA Singapore has diversified its business and in addition to its core business of manufacturing, designing and selling furniture, the company operates houses, restaurants and flats (About IKEA – IKEA. 2017).
According to IKEA (2017), IKEA Singapore has an independent delivery service provider who helps customers to deliver their purchases directly to their business or home. The delivery fee depends on the product and the company specified rates. The company delivery lead time is usually three days. IKEA Singapore has a product range of 12000 products. All these products can be delivered to the customer home or offices upon request for delivery service.
According to Human Resources – IKEA (2017), the human resource department is tasked with the responsibility of creating an enjoyable and stimulating work environment as well as inspiring and attracting co-workers. IKEA Singapore has a diverse group of people from different countries with passion for home furnishing. The company culture is based on fun, enthusiasm and spirit of togetherness. The staff positive team spirit, values and attitudes is one of the major staff strengths. It is estimated that IKEA Singapore has more than 700 staff working in stores and regional offices.
The assets of IKEA Singapore are generally owned by the parent company, IKEA group. As such, the assets of IKEA are reported as total assets making it difficult to determine precisely the assets owned or leased by IKEA Singapore.
According to Coyle, Novack and Gibson (2016), goods are often not consumed at the place of their production, as such; transportation services are essential part of the supply chain. IKEA Singapore largely depends on transportation services to deliver its products to the consumer office or home. For this reason, transport is an essential trait in the supply chain of IKEA Singapore. The following are reasons why transport is important in IKEA Singapore supply chain;
One, transport services enable the company to meet the needs of the customers. A poor transport system would limit the ability of the company to deliver goods to customers within the agreed time which would result in customer dissatisfaction (Bookbinder, 2013).
Two, transport plays a connective role in the company supply chain that results in conversion of raw materials to useful products and to the consumers. Third, according to Morash and Clinton (2007), an effective transport system enhances service delivery and act as a source of organization competitiveness. Four, transport affects the price and cost of the products offered by the company. A poor transport system would increase the price or cost making the company products less competitive (Bookbinder, 2013).
Melo, Nickel and Saldanha-Da-Gama (2009) argue organizations are faced with challenges of increased dynamics and complexity of the logistic process. These challenges lead to the increased need for routing of goods as well as transport vehicles with the aim of adapting to the changing logistics environment. According to Home Delivery – IKEA (2017), IKEA Singapore contracts an independent third party to perform its delivery services. The contracted delivery company performs delivery service to the customer’s preference room at the delivery address. Customers usually receive an estimated delivery date in the shopping cart, though customers are not guaranteed to receive their order on that date. Usually, the company considers order processing duration and transit time when estimating delivery time. Once the order is ready the delivery company contacts the customer to schedule a delivery date and time. The distribution vehicles are dispatched from the company after an agreement is arrived at between the delivery company and the customer. As such, the delivery decision is not solely that of the company but a consulted decision which aims at enhancing customer satisfaction.
According to Esper, Jensen and Burton (2013) there are a number of challenges that retailers using last-mile delivery system face. These challenges can be overcome by ensuring the company has adopted the right strategies. However, Esper, Jensen & Burton (2013) note it would be impossible to eliminate all the challenges of last- mile delivery. IKEA Singapore experiences a number of challenges in order fulfillment and last mile delivery. Some of these challenges are;
One, failure by the delivery company to deliver products on agreed date with the customer. Two, lost products during delivery- the company has received complains from customers claiming their products were lost on transit by the delivery company. Three, high cost-the company delivery fee is quite high mainly due to high cost of overheads like the fuel cost. Four, customer nuisances- at times customers have provided inaccurate information like incorrect address, resulting to products being delivered at wrong addresses or instances when the delivery company finds no one at home to receive the products.
To solve order fulfillment and last mile delivery challenges the company may consider adopting the following solutions;
One; customer proximity- the company should consider increasing the distribution centers across the targeted geographical location to increase proximity to customers. Increasing proximity to customers reduces both the return and delivery time as well as reducing the delivery cost. Two, customer communication- the company should strive to ensure timely communicate with the customers. Timely communication about their order and date of delivery, when the journey and when the driver is about to reach the destination, ensures the customer will be at the point of delivery to receive the order. Three, real time visibility- incorporating technology in the delivery system will enhance customer experience. The company should equip its platforms with features that provide real-time data concerning delivery to all stakeholders. Providing real-time data to customers ensures they have full information concerning their order. Four, optimization techniques- the company should consider features like route optimization that would consider multiple variables like location proximity, traffic conditions, driver availability and delivery windows to determine the most optimal route for drivers with the aim of reducing the transportation cost and delivery time. Five, convenient lockers- the company may choose to operate convenient lockers at convenient locations with the aim of giving customers an option to pick up their products from these lockers at their convenient time. Adopting such a strategy would reduce cases of inconveniences where customers are not at home to pick up their delivery and enable the company to make delivery at its convenience, thus, reducing the delivery cost.
List of References
About IKEA – IKEA. (2017). IKEA /SG/EN. Retrieved 12 February 2017, from https://www.ikea.com/ms/en_SG/this-is-ikea/about-the-ikea-group/index.html
Bookbinder, J. H. (2013). Handbook of Global Logistics: Transportation in International Supply Chains. New York, NY: Springer New York.
Coyle, J. J., Novack, R. A., & Gibson, B. J. (2016). Transportation: A global supply chain perspective.
Dell’Amico, M., & Hadjidimitriou, S. (2012). Innovative logistics model and containers solution for efficient last mile delivery. Procedia-Social and Behavioral Sciences, 48, 1505-1514.
Esper, T. L., Jensen, T. D., & Burton, S. (2013). The last mile: an examination of effects of online retail delivery strategies on consumers. Journal of Business Logistics, 24(2), 177-203.
Home Delivery – IKEA. (2017). Ikea.com. Retrieved 12 February 2017, from https://www.ikea.com/ms/en_SG/customer_service/ikea_services/home_delivery/
Human Resources – IKEA. (2017). Ikea.com. Retrieved 12 February 2017, from https://www.ikea.com/ms/en_SG/the_ikea_story/working_at_ikea/work_areas_human_resources.html
Melo, M. T., Nickel, S., & Saldanha-Da-Gama, F. (2009). Facility location and supply chain management–A review. European journal of operational research, 196(2), 401-412.
Morash, E. A., & Clinton, S. R. (2007). The role of transportation capabilities in international supply chain management. Transportation Journal, 5-17.
Myerson, P. (2015). Supply chain and logistics management made easy: Methods and applications for planning, operations, integration, control and improvement, and network design.
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