1

The Management of
Logistics of E-Commerce
Companies
Special Study on Amazon.in
Jason Fernandes - 13SJCCB055
Tanya Jacobs - 13SJCCB072
Research Methodology
February 2015

Report 2BBMA 4

Acknowledgement

Our deepest gratitude goes first to Dr. Sheelia, we have benefited a

lot and academically prepared for this Research Project form her
guidance. We would like to express our gratitude to our helpful and
patient BBM coordinator Mrs. Rency Alex. As our coordinator, her
valuable suggestions and reminders have helped us in keeping with
our deadlines
Additionally, thanks to our patient and professional interviewees
from Amazon India, who have shared their knowledge and
experience with us. They give us a chance to conduct our research
work by taking the patience to help us carry out our questionnaires.

Table of Contents
Index
Index

Abstract

Introduction
A.Background of the Industry
B. Purpose
C. Methodology
D.Questionnaire
E. Secondary Information
F. Literature Review

4
5
5
5
7
7

Statement of the Problem

19

Theoretical Framework

20

Concepts

21

Logistics

22

A.Table 1.1

23

B. Strength Of logistics

24

C. Shortcomings of logistics

26

D.Table 1.2

28

E. Table 1.3

28

Findings and Conclusion

29

Logistics used in Amazon

29

Final conclusion

31

Bibliography

33

Appendix 1 : questionnaire

34

Abstract
With the further promotion and application of e-commerce, logistics
is becoming necessary. Logistics and the importance of e-commerce
are more and more getting peoples attention, but what is the
relationship between e-commerce and logistics still needs to be
explored.
The purposes of thesis are to research the relationship between ecommerce and logistics in B2C (business to consumer) companies.
The aims of the thesis are threefold. Firstly, describe the coordination
mechanism between e-commerce and logistics in general and
particularly in Amazon.com. Secondly, find out the strengths and
shortcoming of logistic when the company is developing ecommerce in general. Thirdly, In general, we focus on finding out the
way to coordinate logistic in developing e-commerce, and how the
logistic helps companies to develop e-commerce.
The qualitative research method is used in our thesis in order to
fulfill our purposes. It is a case study of Amazon China as the study
subject. We analyzed the data, collected from the interview and
documentation. There are certain limitations for our thesis: the
interviewees were working, and they only had one hour for us to
make the interview. Because of the time limitation, we could not get
satisfactory and detailed information from them. So we collected
some secondary data in order to support our thesis. In order to get
much specific data i.e. more logistics information about logistics in
Amazon, we phoned the customer service and in order to get some
detail data.

After the research, we found if e-commerce and logistics go hand in

hand and converge; they create a unique mechanism which can help
the business and market.

Introduction
Background of the Industry
Today many of the new e-commerce companies have failed or are
struggling for economic survival, and the failure for many companies
in e-commerce can be in part accounted by the neglecting of
logistics. E-COMMERCE-commerce or electronic commerce is the
buying, selling, and exchanging of goods and services over computer
networks through which transactions or terms of sale are performed
electronically. Electronic commerce especially B2C (business to
consumer) businesses are now the most commonly discussed type of
e-commerce which sells to individual consumers online.
However how to deliver the commodity to consumers is an important
issue and the logistics should not be neglected, and the prominent
role for e-commerce companies is especially in the logistics segment.
According to electronic commerce and logistics, (2010), Logistics
techniques are developing fast, but not fully connected with the
development of Internet and IT today. And not too much scientific
study supports the coordination between logistics techniques and
Internet. E-commerce and logistics should have a coordinated
relationship that helps new e- commerce companies to develop well.
Besides the IT developing, how to allow e-commerce and logistics
developed coordinated is still needed for the future research.

Purpose
The purpose of the thesis is to explore the relationship between ecommerce and logistics in B2C (business to consumer) companies.

The aims of the Research project are:

i. Describe the coordination mechanism between e-commerce and
logistics in general and particularly in Amazon.com.
ii. Find out the common general strengths and shortcomings of
logistic when a company is developing e-commerce.
iii. Figure out ways to coordinate logistic when developing ecommerce and explain how Amazon.com is developing e-commerce.

Methodology
The primary data is from our questionnaire study. Primary
information is a type of information that can be acquired from a
company directly without it being analyzed or evaluated. It can be
collected through questioning or observation. The primary
information collection has to suitable for the research purpose and
will provide the thesis a realistic view on the research problem.
Sampling and asking questions play significant roles in doing
research. Therefore, this work mostly depends on Questionnaires.

Questionnaires
There are two main methods for conducting questionnaires which are
face-to-face interview and telephone interview. Face to face
interview can be carried out in a variety of situation, in the home, at
work, outdoor, on the move, and can be used to question members of
the general public, experts or leaders, particular segments of society,
or disabled people, ethnic minorities, both singly and in groups, P.

284. Telephone interviews avoid the necessity of traveling to the

respondents, and all the time and problems associated with
contacting people personally. With wider telephone ownership,
particularly in developed countries, it is often possible to contact a
suitable sample of the target group by the process. Above all, the
study subjects Amazon, Flipkart, snapdeal, pepperfry which are all
located in Bangalore. The Questionnaires were carried out at an Ecommerce conference that was conducted at the Park Plaza Hotel
Marathalli, bangalore. The conference was regarding the release of a
new Software Plugin for the backlog of processing orders that, was
being launched by SAP. The event had an attending crowd of many
medium and top level mangers from various online e-commerce
giants who were involved in the Marketing and logistics segments of
their respective companies. We were able to get our questionnaires
answered by 5 managers from 5 different companies who were
involved in the sales and logistics department of their own firms.
There are three types of questionnaires which are open, semistructured and closed. The closed questionnaire depends on the type
of information you wish to elicit. For very precise answers to very
precise questions, used in quantitative and statistical analysis, a
closed questions formulated in the process related to a questionnaire
is required. Our semi- open questionnaire was between achieving
defined answers and defined questions, while leaving time for further
development research of those answers, and it is including open
questions. If the research needs to explore the situation and wants to
get information which you cannot predict, then the open
questionnaire is appropriate. Both a closed questionnaire and an open
questionnaire are used in this project report.

SECONDARY INFORMATION
The secondary data have been subjected to interpretation they are
referred to as further data. The principal sources of secondary
information comprise libraries and archives, and collections,
government departments and commercial bodies, the internet. When
Comparing the secondary information to the primary information,
secondary information is much easier and quicker to obtain, besides
it generates a lots of help when examine and

have a deeper understanding of primary information. But there have

some disadvantages of secondary information that are some of the
information are not current, and the confidentiality issue may be
raised. On the other hand, the secondary still have some benefits that
we decided to use. In this thesis, we use the secondary data from our
textbooks, the books in the library, other textbooks borrowed from
supervisor, and the data from Internet.

Literature review
Reviewing the literature is an important research activity in the
thesis. These sources are mainly from university library, google
scholar, and research publications, reports from Indias logistics
association, and so on.

1) Flipkart to throw open its logistics arm 'eKart' to deliver packages

of competitors.
Radhika P Nair, ET Bureau Feb 13, 2014,
BANGALORE: Online retail firm Flipkart will begin to deliver packages for its
competitors, as the company's logistics arm, eKart Logistics opens services for other etail ventures.
eKart, which is currently running a pilot programme intends to roll out these services
in the next few weeks. "We are running a pilot with a few partners. It is in a very early
stage right now," said Sachin Bansal, Flipkart's cofounder and chief executive, who
declined to share details of the companies which are part of the pilot. Flipkart created a
separate brand for its logistics arm in April last year and has so far used eKart only for
in-house deliveries.
"We did the rebranding last year as we wanted others to use our logistics as well," said
Bansal. eKart now reaches consumers in about 150 cities, the largest such network set
up by an online retailer in India. The move is part of Flipkart's overall plan to diversify
its business portfolio. Last year, it launched an online payment gateway solution
PayZippy that allows customers to save their credit card details. This service is now
used by other online companies as well.

"This is another page out of Amazon's book," said Ashish Jhalani, head of advisory
firm eTailing India. "Amazon internationally built a huge technology infrastructure for
their use and then opened it out for others." In the US,Amazon does deliveries for
other traders and is expected to launch a similar service in India as well.
http://articles.economictimes.indiatimes.com/2014-02-13/news/47305247_1_logistics-arm-payzippysachin-bansal

2) Here is why FlipKart will not remain just an E-Commerce

Company.
Chaitanya Ramalingegowda | June 18, 2014 at 8:30 am
Almost every urban and tech-savvy Indian is familiar with the fairy tale of Flipkart,
how the two founders started with absolutely no inventory but would go out and
source the book before delivering it and the enormous funding that they went on to
raise on the path to hitting the $1 billion GMV target earlier this year. The e-commerce
side of the story is what is well known and publicized in the popular media. But
Flipkart has been working quietly to diversify into allied businesses and supplement
the revenue and boost their bottom line in the process.
Flipkart currently has 6 different entities with various names as per publicly available
information. The function of each entity and the product / service owned within is
unclear.
WS Retail Services Pvt Ltd
Although WS Retail was incorporated in 2009, most of the products being sold on
Flipkart till 2013 were from the inventory owned by Flipkart. As seen in an earlier
post, this was at a time when the FEMA policies on e-commerce and multi-brand retail
were unclear. As the rules became clear that e-commerce and multi-brand retail entities
could not have FDI, WS Retail was sold off to a group of HNIs led by Rajiv Kuchhal
in 2013, with a board comprising of unknown individuals rumoured to be relatives of
the Flipkart founders (unconfirmed). If true, this makes it a notional separation with
WS Retail working closely with Flipkart, although they are two different legal entities.
Currently, Flipkart is operating in the marketplace model where any seller can put up
their products and pay a commission to Flipkart. However, it is to be noted that a vast
majority of products available are owned by WS Retail, making it one of the largest
sellers by far.
eKart (Legal entity name unknown)
Flipkarts in-house delivery and logistics team was spun off under the brand name
eKart, although there is no specific website and the legal entity that owns eKart is also
not known. As this post goes live, all eKart delivered packages can only be tracked on
the Flipkart website, and typically for the products owned by WS Retail. However, the

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service was offered to third party e-commerce websites from February this year,
starting as a pilot with just a few unknown partners. eKart claims to have a reach of
about 150 cities in India.
eKart (Legal entity name unknown)
Flipkarts in-house delivery and logistics team was spun off under the brand name
eKart, although there is no specific website and the legal entity that owns eKart is also
not known. As this post goes live, all eKart delivered packages can only be tracked on
the Flipkart website, and typically for the products owned by WS Retail. However, the
service was offered to third party e-commerce websites from February this year,
starting as a pilot with just a few unknown partners. eKart claims to have a reach of
about 150 cities in India.
http://yourstory.com/2014/06/flipkart-e-commerce/

3) How does Flipkart handle its logistics?What is the secret behind

its great service?how do the same day delivery and in a day
delivery concepts work?
You see the Pizza Hut outlet just 2-3 kms near your home? Everything except the
recipe of the Pizza, is actually owned by some local businessman. Whenever you call
Pizza Hut, it goes to the main call centre in Delhi and based on your address, your
order will be sent to the nearest Pizza Hut outlet and that is how you get your Pizzas
in just 30 mins irrespective of which city you are in.

So, in effect, the local businessman is actually using the Pizza Hut brand to run his
business and this business model is called franchising. The outlet near your house
owned & operated by the local businessman is called the franchisee. But becoming a
franchisee is not so easy because it has to abide by all the strict standards & policies
laid out by the brand.

Now lets come to Flipkart. Over the past few years, Flipkart has established itself as a
reputed brand & won the trust of millions of shoppers in metro & large cities. In order

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to scale it throughout India to thousands of towns & lakhs of villages, one of the ways
is franchising (like Pizza Hut) and that is exactly what Flipkart is also moving
towards. Instead of calling it franchisee, they call it "third party seller".
Flipkart allows third-party sellers on its website

Usually, third party sellers are large retail networks which have huge godowns with
branches in several cities employing thousands. WS Retail is one such online retailer
which has thousands of employees and is now a franchisee of Flipkart (it was earlier a
part of Flipkart but was recently separated as a new entity and is like a third party
seller today)
Flipkart divests front-end operations - The Times of India

This way, when you place an order on Flipkart and select a third party seller (you
would have noticed different sellers offering the same product for different prices
because there exists intensive competition between third party sellers), it will be
forwarded to the nearest branch of the seller who in turn will use Flipkart packaging
and deliver it to your house in short time (maybe 1 day or even a week). Your payment
goes to Flipkart which will later release the money to the third party seller by
deducting part of it as Flipkart charges (which includes transaction charges, brand
charge, operation costs etc).
{In the case of cash on delivery, Flipkart keeps track of payments & expects the third
party seller to pay those transaction charges to Flipkart.}

Although it looks like Flipkart can now relax while the third party sellers do all the
work, the real challenge for Flipkart begins now. Lot of care should be taken and
stringent standards must be set for third party sellers because they can easily tarnish
the reputation built by Flipkart over the years. Complaints have already started
pouring due to careless third party sellers:
http://www.quora.com/How-does-Flipkart-handle-its-logistics-What-is-the-secret-behind-itsgreat-service-How-do-the-same-day-delivery-and-in-a-day-delivery-concepts-work

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4) Amazon, Flipkart, Snapdeal bring their attention to ensure

products reach customers on time
Radhika P Nair & Aditi Shrivastava, ET Bureau Jun 20, 2014, 03.00AM IST
Online retailers are waking up to the fact that getting logistics right is the key to
succeeding in India. While they can do little about the potholed roads and local
government restrictions, the ventures are investing and innovating in areas that they
can make a difference in. With most of the growth coming from beyond tier one cities,
this has become all the more important. Also, if the $2.3 billion (Rs 13,700 crore)
sector is to grow to the projected $38 billion (Rs 2.28 lakh crore) in five years, it is
vital for online retailers to get their logistics issues sorted out quickly.
"One of the issues many ecommerce companies face is that in order to sustain a
significant growth momentum, they need to go beyond tier-I markets...For that, the
delivery network has to significantly expand without compromising on the customer
service levels and expectations," said Manish Saigal, managing director at advisory
firm Alvarez & Marsal.
Setting up a distributed chain of warehouses, using technology to determine where to
expand to and training delivery staff to handle more customer service responsibilities
are just some of the steps these firms have taken.
Take online marketplace Snapdeal, for instance. The company completely relies on
thirdparty logistics firms for picking up products from its 30,000 sellers scattered
across the country. However, there was a problem.
"All courier companies will pick up from one location and ship to multiple locations.
But not all will pick up from multiple locations," said Kunal Bahl, CEO of Delhibased Snapdeal, which is targeting sales of $1 billion (Rs 5,990 crore) this fiscal.
The firm began setting up fulfilment centres, or warehouses, across the country a few
months ago. In May, it launched Snapdeal Plus under which sellers can stock their
products for an additional fee at the 40 fulfilment centres in 15 cities. This service
allows the company to reduce shipping time to almost two hours in many centres.

13

This is a model that Amazon.in has followed since its launch in India a year ago. "Our
fulfilment centres play a pivotal role in our distribution network," said Amit Agarwal,
vice president and country manager at Amazon India.
Apart from the main warehouses at Mumbai and Bangalore, Amazon also has a
network of about 20 delivery centres in these cities and in Delhi and Chennai to ensure
speedy deliveries. Flipkart too is following suit. The company, which is rapidly scaling
up its next-day delivery promise to 50 cities and offers same-day delivery in 10 cities,
has seven warehouses and is increasing that count.
Also, its in-house logistics arm eKart allowed it to quickly provide value-added
services like next-day delivery and the recently launched scheduled delivery.
"Having eKart is an advantage. We have the agility to roll out these services. But now
some of the third-party firms have reached the same level and we will start using them
for these services soon," said Rahul Chari, vice president of supply chain engineering
at Flipkart that crossed $1 billion (Rs 5,990 crore) in sales last fiscal.
http://articles.economictimes.indiatimes.com/2014-06-20/news/50738968_1_thirdpartylogistics-firms-fulfilment-centres-amazon-india

5) The Growing Pains of Indian E-Commerce: What You Need to

Know
Capturing Indias rapidly growing e-commerce market has been a holy grail of tech
entrepreneurs for years.India is a country with a booming economy, rapid growth of
internet penetration, and a market of 1.2 billion. Its also a place where consumers
have a lot to gain from not going to the stores. A shopping trip can mean being packed
into trains like sardines, navigating streets jammed with stalls and cow herds, or
haggling with aggressive rickshaw drivers. The city centers are chaotic, and the
contents of a shopping list are distributed over dozens of different stores or street
stands. It seemed the perfect place to build a robust online economy.
Indeed, a year ago the business hotels of Delhi, Bombay, and Bangalore were packed
with budding e-commerce entrepreneurs cutting deals with foreign VCs, who couldnt
get their money in fast enough. Investment firms poured 691 million into the top 52
companies, two-thirds of that in fiscal 2011, according to the Delhi based investment
bank Allegro Advisers. The race was on, and startups started battling for primacy in
verticals from cars to baby products. But while a few well-funded juggernauts, like

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Flipkart, have succeeded in establishing brands and conquering large parts of the
market, none of the major players have shown a profit, and few have even shown
enough revenues to cover overhead after the cost of goods and deliveries.
The road to becoming the Amazon.com of Indiaor even the diapers.comhas
proved more arduous and expensive than giddy investors had imagined in 2011.
Problems with logistics, payment gateways, and intense competition for too few
customers have created an environment in which companies are struggling to survive.
As a result, investors are holding their money close, creating a funding drought just as
the industry hits major growing pains. The war for each vertical has often become a
test of who can outlast the siege of their competitors, who can survive the longest in
the face of price wars.
Indian e-commerce companies have had to overcome serious hurdles. Among the
largest of them is logistics. While major multi-nationals like DHL and Fed-Ex operate
in India, goods are normally shipped through smaller and much cheaper third party
carriers. Different carriers have to be used for different regions of the country. For
orders sourced outside the major cities, individual couriers often have to be hired to
make last mile deliveries from drop-off points by bicycle. The difficulties and
unreliability of the carriers has forced some of the largest and best funded players, like
Flipkart, to develop their own logistics arms to deliver their packages. The decision
however, carries massive capital expenses in an industry that is still not standing on its
own feet. It also means a huge increase in exposure, and a business that is now
seeking success in two industries instead of one.
Another difficult problem is that the Indian market demands a cash on delivery (COD)
option, in which the consumer pays the courier once they have received the product.
Its a hard problem to get around, because credit card penetration is relatively low in
India, and consumers are still not trusting of putting financial information into online
forms. Indias economy is largely informal, and Indian consumers are used to paying
cash; only the most high end of businesses accept credit cards.The problem is that the
COD system creates a delay in payment. Courier companies generally hold the money
for two weeks, which means that the e-commerce company has to restock inventory
before the cash from its last sale has arrived. It is also expensive, some couriers
charging upwards of 3 percent for the service. But the biggest hit comes from the
much higher return ratesometimes up to ten percentby consumers who simply
changed their mind or could not be reached at home. These goods cycle back into

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inventory after weeks, and carry a high cost of restocking and re-listing, and
sometimes have to be written off altogether.

http://www.forbes.com/sites/morganhartley/2013/01/24/the-growingpains-of-indian-e-commerce-what-you-need-to-know/

6) Zepost And Shiprocket: A Fair Comparison Of Indias Two Best

Logistics Services
In the race of offering the best services, both KartRocket and Zepo come up with new
features that will help their clients to setup and manage their online store quite easily.
One such was logistic services Shiprocket and Zepost offered by Kartrocket and Zepo
respectively. While Shiprocket was started in mid 2013, Zepo tied up with AVN
logistics in January 2014 to come up with Zepost. If you are still unsure about which
logistic company to choose, check out the below infographic to have a sneak peak
about the two services. This will help you take a better and profitable decision.

REFERENCES:
1. http://www.zepo.in/automatedshipping.html
2. https://dl.dropboxusercontent.com/u/99389987/ZePOST%20PinCode%20Coverage
%20List.xlsx
3. http://www.shiprocket.in/shiprocket-shipping-rates/
4. http://www.shiprocket.in/resources/Shiprocket-Pincodes.xlsx

http://www.shiprocket.in/zepost-and-shiprocket/

7) Be Cautious When Ordering from eCommerce Sites which do not

have their Own Logistics
Setu in Misc on Nov 6th, 2012
India is currently witnessing an eCommerce revolution where almost every other new
startup company is trying to make it big in the eCommerce domain. While this is good
and generates healthy competition, there are also companies who are just popping up

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in order to sell products. Whats wrong in that? Nothing. Except that that is not enough
to make it big in this huge country. Lets start with a brief history.
There were players in the past, but the company that really made a dent in the domain
is, undoubtedly, flipkart. They started by selling books and are now on the way of
selling almost everything that can be sold. They used BluDart as their delivery partner
initially, and then slowly rolled out their own logistic operations which enabled them
to have much greater control on the whole buying process.
Others that made huge impact are myntra, jabong, letsbuy (bought and closed down by
flipkart). I am sure there are many others. What is common in all of them is that they
started their own logistic operations. You might wonder why this was so important.
Lets have a look.
India is a very different market from the rest of the world. In addition to having a lot of
people, its not as organized as the developed countries. Businesses do not spend on IT
systems as much as their counterparts around the world. This is true for logistics
companies as well. Even big companies like blu dart have average to poor tracking
systems in place (compared to what fedex & UPS have around the world). This is
where having your own logistics operations pays off for an eCommerce company. In
addition to having greater control on the consignments, the company can offer value
added services like COD, return collection etc. leading to more customer satisfaction.

I have two examples to vouch for my point:

1. Pepperfry.com
Recently, I bought something from pepperfry.com a relatively new site which sells
furniture, furnishings and a lot of other stuff. They have a really nice site and most of
the features you will expect from a typical online shop. What they do not have is their
own logistic chain. They rely on blu dart for delivery. When I received my item, I
found that it is broken. I called up their call center to ask for a replacement, who asked
me to email them a few snaps of the damaged item. A few hours after sending the
same, I got an email from them asking me to pack the item back and send it to them.
They said that they will refund me the price of the item and shipping cost up to INR
150. What surprised me was the fact that the email did not contain any mention about

17

replacement of the item. I replied to their email asking for clarifications and am yet to
receive a reply. I am assuming they just want to return the item. Re-ordering it might
not go in my favor as I bought it using a discount coupon which is not valid now.
The point to note here is that if I follow their process, I am signing up to face
inconvenience for their fault. The damaged product delivery was obviously a result of
oversight by their warehouse employee or mishandling during transit. I have to pack
the item, go to the courier agency and then send the receipt to them for reimbursement.
And I am not even sure if INR 150 is going to be enough to send the item back.
2. Myntra.com
I bought a pair of footwear from myntra, used it for about 10 days and its sole came
off. It was obviously a defective product. I called up their customer care who asked me
to create a return online. I created the return at 11 am. Their delivery guy (part of their
logistics fleet) came to collect it from me at 11:30 am and I got the store credit in my
account by 12. I ordered the same item again by 12:30 pm.
The key differentiator between the above two examples is logistics. As myntra has its
own logistics chain, it could easily locate its delivery guy in my area as soon as I
created a return. They informed him about the return and he collected it from me.
Since he is their employee, he verified the item in front of me and informed the
warehouse about the receipt which triggered the credit to my account.
Of course blu dart offers pickup service (Microsoft has been using them to replace
Xbox 360) and pepperfry could use them for return collection, but it would be too
costly for them and they probably dont care. They are in it just to sell stuff. They
seem to have no interest in gaining customer satisfaction.
What should be kept in mind when starting an online business in India is that in
addition to low prices, customers here are also looking for convenience and a certain
amount of trust. The brick and mortar retailers in the developed countries have been
offering 30 day returns since a long time. And their stores are far more convenient and
accessible than the stores here in India. Still they are facing a stuff competition from
the online shops. What companies probably fail to understand is that there is huge
opportunity here. The key USPs for any online business to succeed here are low prices
and customer convenience. Give me a reasonable price and the convenience to avoid

18

going to a crowded store and I am sold. Evidently myntra, jabong & fipkart are
milking on this fact.
We recommend our readers to exercise caution when buying from websites which do
not have their own logistics. In case you get a damaged product or have to return it for
any other reason, you are in for huge inconvenience.

http://woikr.com/misc/be-cautious-when-ordering-from-ecommerce-siteswhich-do-not-have-their-own-logistics/

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Statement of the Problem

In the US, Amazon has become mature. But China as a developing
country, more new e- commerce companies have been developed,
and more comparison has been happened. So in this situation, for a
fast and steady growth the companies should solve the bottleneck
between e-commerce and logistics and have a coordinated
relationship. This is the reason of why we choose the research
subject.
But there still have many problems need to solve, like logistic
companies compete, focus on price first; more new e-commerce
enterprises establish with more competitive challenges than other
countries. Some spaces need to improve the logistics aspect.

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THEORETICAL FRAMEWORK

The research objectives are broken down as following:

(1) What are the coordination mechanism between e-commerce and
logistics in general?
a) How the logistics helps developing e-commerce?
b) How the e-commerce helps to improve logistics system?
(2) What are the strengths and shortcomings of logistic when a
company is developing e- commerce in general?
In this section, the strengths and shortcomings in both third-partylogistics (3PL) and self- logistics are reviewed.
a) What are the strengths of 3PL?
b) What are the strengths of integrated logistics?
c) What are the shortcomings of 3PL?
d) What are the shortcomings of integrated logistics?

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CONCEPTS
In this section, the definitions of e-commerce, B2C e-commerce,
logistics and 3PL logistics are presented.
E-COMMERCE
E-commerce according to Laudon & Traver (2008), the use of the
internet and the web to transact business, more formally, digitally
enabled commercial transactions between and among businesses and
individuals.
Rosen (2002) states that electronic commerce or e-commerce refers
to a wide range of online business activities for products and
services. And it useful to any form of business transaction in which
the parties interact electronically rather than by physical exchanges
or direct physical contact. E-COMMERCE-commerce is usually
related with conducting transaction concerning the transfer of
ownership or rights to make use of goods or services through a
computer-mediated network, or buying and selling over the internet.
B2C E-COMMERCE
Xing & Grant (2006) states, B2C e-commerce, also termed eretailing, is apprehensive with selling of goods and services between
firms and consumers via the electronic media.
The online companies selling to individual consumers are called
B2C e-commerce. This type of e-commerce is more popular than
other types. Amazon is general merchandise that sells consumer
products to retail consumers. Laudon & Traver (2008)

22

LOGISTICS
There are many kinds of definition about logistics management, for
example, according to Christopher (2011), Logistics were the
process of strategically managing the procurement, movement and
storage of materials, parts and finished inventory (and the related
information flows) through the company and its marketing channels
in such a way that current and future profitability are maximized.2
(Christopher, 2011).
Douglas (2000) states Logistics is that part of supply chain process
that plans, implements, and controls the efficient, effective flow and
storage of goods, services, and related information from point of
origin to point of consumption in order to meet customers
requirements.p 68. (Douglas, 2000).

Third-party Logistics (3PL)

Third-party logistics (3PL) services are firms that offer a range

of logistics activities for their consumers, according to
Christopher (2011). According to Boumole (2003), third-party
logistics is generally defined be the utilization of an outside firm
to perform all or part of another firms operations, its related to
outsourcing or contract logistics.

23

cost per COD delivery

700

525

350

175

Flipkart

Table 1.1

Amazon

Big Basket

Snapdeal

Peper Fry

24

THE STRENGTHS OF LOGISTICS

In supply chain management, logistics and development of
information technology change the way enterprises apply these new
techniques in supply chain management to achieve a competitive
advantage. Through logistics there has been an Increase the
efficiency of supply chain activities through the use of IT, to improve
business decision-making ability of the entire supply chain.

THE STRENGTHS OF THIRD PARTY LOGISTICS

1. Third-party-logistics is a lot more price effective compared to
integrated Logistics, and it needs only a small investment;
2. All goods and products can be delivered to the areas and pin-codes
that the integrated logistics cannot reach.

With the globalization for many business operations, outsourcing is

becoming increasingly common. According to statistics, out of the
top 500 enterprises in the world, 60% of these companies use thirdpart-logistic services and many companies also use more than one.
That is because logistics can helpful for developing e-commerce. The
use of third-part-logistics allows companies to reduce operating and
capital costs to improve their financial situation.

25

THE STRENGTHS OF INTEGRATED LOGISTICS IN

DEVELOPING E-COMMERCE COMPANIES.
Integrated Logistics is a combination of a self sufficient logistics
system and third-part-logistics. There are many companies that use
such a set up i.e. Flipkart, Snapdeal, Big Basket, Amazon India etc.
1. Assisting in marketing activities, increase the viscidity of the
customer, resulting in repeat sales and increased customer loyalty. Ecommerce companies can have direct contact with customers, which
would allow customers to understand the respective e-commerce
company better.
2. When the dispatchers deliver the goods that are from their own
business, it would ensure that more care is taken in its delivery as to
avoid any damages. So the loss and damage of goods will decrease
by a significant margin.
3. The distribution area in which integrated logistics can cover would
greatly increase the speed of delivery for when the order is made and
processed and with the support of COD (cash on delivery), there is
and improved customer shopping experience.
4, integrated logistics can improve the corporate image of the
company which would portray the firm as more capable in offering a
wild range of services.

26

3.4 THE SHORTCOMINGS OF LOGISTICS IN

DEVELOPING E-COMMERCE
The logistics industry in U.S. has already been well developed before
the concept of E- Commerce even occurred. In India however,
although e-commerce is flourishing, we are seriously lagging behind
in the level of logistics technology and logistics management.

THE SHORTCOMINGS OF THIRD-PARTY-LOGISTICS IN

DEVELOPING E- COMMERCE COMPANIES
1. The infrastructure for Logistics being imperfect is the main reason
for why there is a long- negative impact in the development of ecommerce. The Infrastructure available is a key part in the
development of an efficient logistics operation. India's Highway
construction is not satisfactory, and as a result there is a lot
congestion in the dispatch and delivery of orders.
2. Our Logistics systems are imperfect, and the management level is
not enough to limit the rapid development of e-commerce. The
lack of good logistics systems is a major obstacle to e- commerce
development in India. A complete logistics system should include
a complete hardware and integrated software system.
3. The irregularity of the logistics enterprises is a key factor for longterm impact of the development of electronic commerce: Indias
logistics activities at an under developed level in terms of
execution, however the market itself is flourishing and growing
exponentially, without the proper systems in place its difficult to
adapt to the many varieties of the e-commerce model.

27

3.4.2 THE SHORTCOMINGS OF INTEGRATED LOGISTICS IN

DEVELOPING E-COMMERCE COMPANIES

1. It is very expensive to develop an efficient integrated logistics

system, generally the warehouse plan of the e-commerce company
should be a location in the forefront of metropolitan cities. So large
companies must lease thousands of square feet of warehouse space
for which the overheads per year are very expensive.
2. The is often a very high labour turnover which often results in a
shortage of staff.
3. Integrated logistics systems require logistics centers and
distribution points. Managing these logistic centers and distribution
points are very difficult.
4. How to reduce loss of goods and orders is a huge challenge for
integrated logistics. Without proper supervision and accountability
of staff there is often a lot of theft that takes place.

28

Daily no. of orders

30000

22500

15000

7500

Flipkart

SnapDeal

Amazon

Big Basket

Pepper Fry

Table 1.2 The Daily level of orders received by E-commerce companies

Orders paid for online

orders paid for by COD

50

37.5

25

12.5

Flipkart

Snapdeal

Amazon

Big Basket

Table 1.3 The Ratio of orders paid online : orders paid on COD

Pepper Fry

29

Findings And Conclusion

LOGISTICS SYSTEM USED BY AMAZON.COM
So for this part, Amazon India has a mixed logistic system; they use
the Third-Party Logistics, postal injection and their own logistic
department. This is different from the way Amazon operates in other
countries. The postal injection means that Amazon India using
Blue Dart is an important way of delivery. Blue dart DHL is a
company that delivers to almost every accessible pin-code in the
country, so the products can delivered to customers all over the India.
Over the next two years amazon are looking to develop their own
integrated logistics division however it cannot cover all the cities and
pin-codes in india; therefore, Amazon cooperated with 3PL to satisfy
the customers that Joy Company cannot cover. The delivery process
is not mandatory (fixed by Amazon); the customers can choose their
own ways to get the package. For instance, when a customer wants
an urgent overnight Delivery, Amazon is able to choose 3PL as a fast
way.

Third-party logistics is an unpalatable part in Amazons logistics

system. The 3PL focus on customer delivery by using other
transportation is extensively used. For Amazon.com, they use the
integration of third-party logistics of e-commerce operators on a
large- scale through intensive operation mutual collaboration and
increased efficiency. Amazon.com leads third-part-logistics as the
elements of e-commerce as logistics operations.
Outsourcing distribution can reduce the investment with lower
business risk. Amazon has long-term partnerships to help the

30

company have time to open up new a business focus on the

development of a competitive advantage.
But, Regardless of their methods, Amazon still thinks that thirdparty-logistics has shortcomings,
1. 3PL reduces the control knowledge of logistics;
2. There is a risk of the companys strategy information being leaked
out to competitors;
3.The third-party-logistics will not fulfill some customers needs.

A big advantage of Amazon system is their own logistics department.

But this advantage is based on the situation for big cities. The cities
with the big people and multi centers are how we called big cities.
The orders are randomly form many places in the city, so it is better
to have their own logistic company, it is easier to manage.

The Return of orders from dissatisfied customers is a major

shortcoming of E-commerce. E-commerce usually does not have real
physical stores; the customer only can get product information
through the webpage. It probably has some differences in color and
shape as well. So when customers get the real product in hand they
may not be satisfied. And through Amazons policy, the customers
have to pay for it and sign it before opening it, and if the customers
aren't satisfied with the product, the return process must be through
an online application or an enquiry with the customer service. For
some particular kind products like cameras, customers must show the
appraisal report of damage to prove it is not the customers fault. And
the appraisal report usually takes more time than the return time
limit. It is very troublesome for some customers. This is the main

31

reason why some customers wouldnt choose E- commerce. It is hard

to take the risk. Also, in India, there are no specials laws for Ebusiness disputes. So once the problem occurs, its hard to judge.
Even if a customer sues the company, the court will not take the case
of small product. So it is a very significant hinder of E-commerces
development. E-commerces security is a big issue, the information
problem, internet safety or payment safety and also the personal
information in third-part logistics. This is a bottleneck for E-business
development. The customer who did not have a computer since
education was not very clear about the company security problems.
How safe is the password and how to keep personal credit card
information security was a common problem. So, it leads that many
customers were worried a lot when they were starting to shop online
using E- commerce.

Final Conclusion
The purpose of the project report was to explore the relationship
between e-commerce and logistics in B2C (business to consumer)
companies. To fulfill our purpose we used 3 aims to achieve the
purpose better. They are: i. Describe the coordination mechanism
between e-commerce and logistics in general and particularly in
Amazon.com. ii. Find out the strengths and shortcoming of logistic
business when a company is developing e-commerce. iii. Figure out
ways to coordinate logistic when developing e-commerce and
explain how Amazon.com is developing e-commerce.
Amazon India has started to get attention of this coordination, and it
has also been well popularized. The development of logistics is an
important part of e-commerce, and an essential part to meet customer
needs. Coordination between the two industries is still not strong

32

enough, we will need the integration of companies, employees and

the e-commerce company.
In order to fulfill the three aims, pertinent literature is described.
Relevant literature is reviewed on the theory to have an insight of
ideas in e-commerce, business-to-customer (B2C) e-commerce,
logistics, and third-party-logistics (3PL). Besides, for a clear
structure of our Project report, we broke down two research
questions respectively into some sub-questions, and then relevant
data was collected, and analysis methods were performed based on
different questions.
We found Amazon India has a mixed logistics system. However their
own integrated logistics department couldn't cover all the cities in
India. Third- party-logistics: The area that Amazon cannot cover
themselves was handed over to 3PL, where customers wanted an
urgent overnight mailing for example. Amazon creates a different
distribution center, according to different categories of goods and
improves the operating efficiency of the distribution center.
Amazon's distribution centers are set up by commodity groups.
One more reason that Amazon uses their own logistics department;
Amazon is very careful about their deliveries, considering it as a
competitive advantage by using their own logistics and they are able
to get a direct feedback from the consumers. Then increase the
business by the feedback from consumers.

33

BIBLIOGRAPHY
Fjermestad, J. &Allen, E. (2001), E-

http://www.quora.com/How-does-

commerce marketing strategies: an

Flipkart-handle-its-logistics-What-is-the-

integrated framework and case analysis.

secret-behind-its-great-service-How-do-

Logistics Information Management.

the-same-day-delivery-and-in-a-day-

Volume. 14, Issue. . Pp. 14-23.

delivery-concepts-work

Information from Amzon.com homepage,

http://www.shiprocket.in/zepost-and-

http://www.amazon.cn/gp/help/

shiprocket/

customer/display.html?
nodeId=200485640

Delfmann,W.,Alers, S.&Gehring, M.
(2002).the impact of electronic commerce
on logistics service providers. International
Journal of Physical Distribution & Logistics
Management. Vol.32 issue: 3. PP. 203-222.

http://woikr.com/misc/be-cautious-whenordering-from-ecommerce-sites-which-donot-have-their-own-logistics/

http://
articles.economictimes.indiatimes.com/
2014-02-13/news/47305247_1_logisticsarm-payzippy-sachin-bansal

http://www.forbes.com/sites/
morganhartley/2013/01/24/the-growingpains-of-indian-e-commerce-what-youneed-to-know/

34

Appendix 1:
Questionnaire On The Management Of Logistics of E - Commerce Companies

1) On an average how many orders do you get per day?

A. 5000 - 10000
B. 10000 - 15000
C. 15000 - 20000
D. 20000 +
2) How many Pin codes does your company restrict itself from providing its
services?
3) Does your Logistics department work 7 Days a week?
4) Do you outsource your Deliveries?
A. Yes
B. No
5) Do you have your own integrated Logistics system set up for delivering your
own orders?
A. Yes
B. No
6) If yes whats are its Limitations?

35

7) How do you manage your logistics when incoming orders exceed the
companys capacity to process them?

8) what criteria do you use to prioritize your orders?

A. Geographical location
B. Loyal/recurring Customers
C. Monetary value of the order
D. LIFO
E. Method of payment

9) Whats the capacity of deliveries your company can make in a day?

A. 5000 - 10000
B. 10000 - 15000
C. 15000 - 20000
D. 20000 +

10) What is the cost per delivery for COD orders?

11) If you do how much do you charge for COD and regular deliveries?
12) What are the payment cycles in which your company recieves its payments
from outsourced logistics providers?
A. 1 week
B. 2 weeks
C. 3 weeks

36

D. 4 weeks

12) Does your logistics division make any profits from the deliveries that are
charged to clients?
A. Yes
B. No
13) If yes what are your profit margins?

14) To make your logistics division more feasable to run would you sell your
services out to other clients and maybe even competitors?
A. Yes
B. No
15) What is the ratio of customers that pay directly online as compared to Cash
on Delivery orders?

16) How many orders tend to get lost of wrongly Delivered?