A Study of E-Commerce Industry Manages Supply Chain Efficiently to Meet Customer Needs
A Study of How the E-Commerce Industry Manages Supply Chain Efficiently to Meet Customer Needs
Abstract
The research mainly focuses on the e-commerce industry and its strategies to effectively manage its supply chain vital in satisfying consumer needs and preferences. The study analyses the ecommerce sector through reviewing the industry logistics adopted and implemented by businesses in the quest to improve performance and competency. The research goals are achieved through the analysis of the ecommerce fresh produce business e.g., groceries. The paper examines the ecommerce fresh produce business regarding business supply chain, logistics, operations, and technology strategies necessary in meeting consumer needs and convenience.
The onset of the COVID-19 pandemic in 2020 saw many consumers change their purchasing habits from offline to the online purchase platforms for fresh products. The change resulted in increased user traffic in fresh products electronic platforms. The change in business logistics prompted businesses to quickly adopt strategies and responses to manage the bulging traffic caused by increased demand for e-shopping. These strategies involved formulating and implementing business tactics and approaches to improve the user experience and deliver satisfaction while maintaining effective inventory flow, viable and reliable distribution strategies and speed. The purpose of this study is to examine the supply chain logistics in the fresh produce ecommerce business by analyzing the distribution models, warehousing or storage, user access platforms, order processing operations and essential business technology. The primary goal of every business is providing value to the consumer through a competent user experience, product quality and convenience in access. Attainment of these business goals necessitates business to improve their operations, processes and accessibility which are crucial in developing competent supply chain systems.
Some key study deliverables involve the highlighting of the core determinants of consumer/user value in the fresh produce ecommerce business. These are the factors dictating user satisfaction and utility . Some of these determinants revolve around accessibility and efficiency of order placement platforms, product quality, order processing speed, clarity in business communication and delivery channels and speed etc. this research has learned the most concerned elements of the entire experience process of users using the platform until completing the delivery, that is, product quality and delivery speed. At the same time, maximizing user satisfaction is also the goal that companies have always traced to, to dig out the core purpose of users using the platform . For example, when users use the fresh food e-commerce platform, they can receive red envelopes if clock in every day , but receiving red envelopes is not the core purpose of users using the platform. The core purpose of users using the platform is to buy food with safe quality and a complete variety of food here and place an order with one click and deliver it to user’s door , so that users can complete the shopping needs without leaving their house. Companies should focus on how to ensure the quality of food, how to improve the efficiency of distribution, etc., instead of focusing on the details of receiving red envelopes.
The primary goal of every business organization is to comply with consumer needs and preferences through improved value, quality and user experience. Achievement of these satisfaction goals and meet the basic expectations of users, fresh e-commerce enterprises have invested a lot of technologies in the supply chain behind them, such as artificial intelligence, big data analysis, Internet of things and so on. These information technologies greatly improve the overall efficiency of the supply chain, not only from the root of product production to monitor the quality of food until delivery to users, but also optimize the logistics experience through the realization of technology Through the study deliverables, it is evident that efficient management of the fresh e-commerce platforms coupled with information technology are essential in the success of the business supply chain and the achievement of consumer value.
List of Contents
iAbstract
vi Declaration
7 Chapter 2 – Literature Review
9 2.2 The operation mode of supply chain upstream to downstream
11 2.3 Measurements of Supply Chain Efficiency
12 2.4 Information Technology for Efficiency Management
15 3.1 The brief introduction of methodology structure
15 3.2 The supply chain management philosophy of this study
16 3.3 The impact of user satisfaction factors
17 3.4 Information technology improves management efficiency
19 3.5 The method of collecting relevant data
20 Chapter 4 – Understand user satisfaction factors for fresh food e-commerce
20 4.1 Fresh food e-commerce user portrait
22 4.2 User satisfaction factors for fresh food e-commerce
24 Chapter 5 – Analyze the three parts of e-commerce supply chain
25 5.1 Upstream (sourcing supply)
28 5.2 Midstream (transportation and warehousing)
30 5.3 Downstream (distribution to consumers)
32 Chapter 6 – Information technology in fresh supply chain management
32 6.1 Upstream (supply and production)
36 6.2 Midstream (transportation and storage)
38 6.3 Downstream (distribution to consumers)
41 Chapter 7 – Limitation of project
42 Chapter 8 – Conclusion and Further research recommendation
List of Figures
Page
Figure 1 2015-2023 China's fresh food e-commerce industry market size 2
Figure 2 Regional distribution of fresh food e-commerce users 21
Figure 3 Basic portrait of fresh food e-commerce users 21
Figure 4 Basic portrait of fresh food e-commerce users 21
Figure 5 Satisfaction of online shoppers with different aspects of fresh food
platforms in China as of 2017 23
Figure 6 Agricultural products in China, channel distribution in 2019 25
Figure 7 Supply chain construction of some fresh food e-commerce companies 27-28
Figure 8 The several warehousing management models 28
Figure 9 Forecast market value of smart agriculture worldwide in 2017 and 2022 33
Figure 10 Step one of smart agriculture works 34
Figure 11 Step two of smart agriculture works 34
Figure 12 Step three of smart agriculture works 34
Figure 13 Manual work vs. Drone work 35
Figure 14 Real-time monitoring of transportation environment 38
Figure 15 Trends in the scale of time-sharing behavior of fresh food e-commerce
users in 2020 40
Chapter 1 – Introduction
1.1 Problem Background
Supply chain management is an essential operation for every business regardless of its service or product delivery model whether traditional, ecommerce or both. A successful supply chain involves reliable sourcing of products or supplies, management of inventory flow through practices such as warehousing, value addition through processing or treatment and delivery of the product to the consumers via accessible and friendly platforms. Business environments are usually dynamic through external forces such as government policies and changes in consumer purchasing habits etc. These changes are highly liked to affect the business models of companies hence the need for appropriate business responses.
Providing value to consumers/users requires businesses to develop business models that are reflective of their consumer needs and preferences. A competent business model addresses it target market concerns thus creating value and royalty. Through competent supply chain, most businesses are creating healthy business-consumer relationships and improving user loyalty. The study reflects on core determinants to a successful supply chain management for ecommerce businesses, in the current case, fresh food and produce products.
With the rapid development of online shopping, the concept of fresh food e-commerce is not unfamiliar, and the fresh food e-commerce industry has gradually broken out of the traditional fresh food model. At first, the traditional way of buying fresh products was through users going to offline retail stores to buy. Now the concept of fresh food e-commerce is to transfer the traditional purchasing mode from offline to online. Consumers can complete integrated operations on the mobile app, including product selection, order payment, door-to-door delivery, etc. Secondly, due to the increasing popularity of fresh food e-commerce, emerging models such as pre-storage, home platform and community group buying have emerged one after another. At this stage, multiple business models coexist in the fresh food e-commerce industry, and competition is becoming increasingly fierce. Compared with other e-commerce categories, fresh food e-commerce links are complex and have higher requirements for transportation and warehousing. It requires companies to have strong supply chain management capabilities in order to win in the competition.
There was a world-class epidemic covid-19 in 2020. When all the Chinese people are isolated at home, fresh food e-commerce can satisfy users to complete the selection of food ingredients online without leaving home and deliver them to the door. Therefore, the demand for fresh food e-commerce in this epidemic has skyrocketed. From 5 million daily active users during the Spring Festival in 2019 to 10 million during the epidemic in 2020, the daily active user growth rate was 100% (deloitte, n.d.). From the known data, we can see the explosive growth of fresh food e-commerce users. In February 2020, the top 3 companies in the domestic fresh food e-commerce field, Hema Fresh Food, Dingdong Shopping and Daily Fresh Food, MAU (monthly active users) reached 17.19 million, 14.54 million, and 10.3 million, respectively. And with the growth of user groups, the transaction scale of the fresh food e-commerce market has also continued to rise. As shown in the figure below, green represents the size of the transaction and blue represents the growth rate, from nearly 50 billion transactions in 2015 to 560 billion in 2021, there has been an increase of more than 10 times in this case. And the following data predicts that in 2023, the market transaction scale of fresh food e-commerce will reach more than 800 billion Yuan. The rapid growth in the ecommerce fresh food and produce market requires businesses to review their supply chains regarding supply logistics and management. These concerns include reliable supply sourcing, ample storage and inventory management, processing and value addition, distribution and accessibility by consumers e.g., order processing, delivery, communication). For example, how to improve the efficiency of production in the upstream of the supply chain to meet the rapidly increasing demand for supply, how to manage warehousing in the middle of the supply chain to ensure food quality, and how to improve the efficiency of distribution in the downstream, etc. Only when there is an improvement in efficiency at each stage, the efficiency of the overall supply chain will be greatly improved.
Figure 1 –The Market Size of Chinese Fresh E-Commerce Industry in 2015-2023
(Source: ( IResearch, 2020))
1.2 Problem Statement
The coronavirus outbreak in 2020, forced people to spend more time in their homes due to the pandemic management restrictions enforced by the government. practices such as telecommuting, video conferences and closure of work places and businesses prompted many people to operate from their homes. Based on this background, people’s shopping behavior is restricted, so people have shifted the way of buying daily necessities from offline to online. As a result, food delivery platforms and fresh food e-commerce platforms ushered in a large number of users and achieved explosive growth. Due to the rapid increase in the number of users and orders, the supply chain management model of fresh food and produce in e-commerce platforms, was overwhelmed by order and inquiry traffic resulting to shock problems in business operations such as inventory management, distribution, order processing and delivery. First of all, production in the upstream supply chain is scattered. As of 2016, domestic large-scale agricultural operations accounted for only 1.92%, while the United States has large-scale agricultural operations as high as 58.1% (iresearch, 2020). Relatively speaking, our country is dominated by small-scale business households, and large-scale agricultural production bases account for a relatively small proportion. This leads to insufficient standardization and technology of the production environment, which is not conducive to providing stable supply in the case of a sharp increase in orders. Secondly, cold chain logistics is vital to ensure the safety of fresh food, but the circulation rate of cold chain logistics in China is still at a low level (iresearch, 2020). Based on the imperfect infrastructure, it is not conducive to the rapid expansion of fresh food e-commerce. Problems in business supply chain infrastructure affect the quality and value received by the end user and may result in a user experience. Poor quality and value for users results in unhealthy consumer relationships and loss of user loyalty. Problems in supply chain jeopardize the competency of the business and may result in losing market share to the competition. Therefore, based on this explosive growth in demand, companies must increase investment in information technology to improve efficiency. Make the supply chain system standardized and technological. This study also splits the supply chain into upstream, midstream and downstream, and analyzes which information technologies are used by companies at each stage to improve efficiency and to achieve the ultimate goal — satisfying user value.
1.3 Project Objective
How does the fresh food supply chain invest in information technology to carry out effective and efficient management, so as to achieve the goals of reducing management costs, increasing production output, ensuring product quality and safety, and improving product delivery speed.
Objective No.1: Determine core users' satisfaction factors for fresh e-commerce platform through user portraits and other data based on the study deliverables.
Objective No.2: To analyze the operations and logistic layout business model of upstream, midstream and downstream of fresh food supply chain.
Objective No.3: Examine the role of information technology in ecommerce business supply chain management. Analyze how much efficiency the company has improved in each link of the supply chain through the investment of information technology.
1.4 Project Significance
From the perspective of the platform, the significance of this study provides companies with a deeper understanding of the scientific management of the supply chain and what efficiency improvements can be achieved through these technologies. From the user's point of view, users can more clearly understand which high-tech fresh food enterprises have invested in them in order to achieve a better user experience. Rapid market growth in the ecommerce sector, specifically fresh food and produce requires businesses to automate and boost the efficacy of their supply chain operations and management. Fresh e-commerce is different from traditional e-commerce, in term so product shelf life , demand patterns and nutrient reserves. The main products of fresh food e-commerce are dairy products, vegetables, fruits, meat and so on (iresearch, 2020). As shown in the below figure A, these categories of fresh products are the most in demand for cold chain logistics. These fresh food ingredients have a common feature, that is, short shelf life and perishable. Therefore, based on this feature, fresh food e-commerce companies will have slightly higher storage environmental conditions when transporting and storing their fresh products, which will increase storage costs. "The data shows that the cost of fresh cold chain logistics is 1-2 times higher than that of ordinary commodities, and the cost of cold chain accounts for 25% - 40% of sales. Therefore, for fresh e-commerce, processing, handling and distribution are more demanding due to the products short shelf life, and health and safety standards. For example, grapes, a representative fresh product, has relatively high requirements for packaging, because bad packaging may deform grapes during transportation. It also has relatively high requirements for transportation conditions. As the figure B shows that JiuYescm gives a packaging solution for grapes, and there are more than three steps for the packaging of grapes. So, in some cases, the fresh products may have more costs on packaging stage. If it is transported in hot summer, refrigerated transport trucks are needed to ensure that grapes will not rot during transportation. It is precisely because of the particularity of fresh food, so the supply chain of fresh e-commerce needs efficient management, in order to ensure that, on the one hand, the company's operating costs are minimized, and the benefits are maximized at the same time; on the other hand, the customer's satisfaction with the overall experience and service of fresh E-commerce is maximized.
Figure A – China Cold Chain demand for fresh products and the proportion of total output in 2018
(Source: ( IResearch, 2020))
Figure B - The packaging steps for grape
(Source: (jiuyescm, 2017))
1.5 Project Scope
The study scope involves analysis on the key aspects in the improvement of fresh food and produce ecommerce businesses supply chains. The following is a list of popular and leading domestic fresh food e-commerce platforms in China.
|
# |
Enterprise Name |
Description |
Official website |
|
1 |
Fresh Hema |
China fresh e-commerce platform |
https://www.freshhema.com/ |
|
2 |
Miss Fresh |
China fresh e-commerce platform |
https://www.missfresh.cn/ |
|
3 |
Pagoda |
China fresh e-commerce platform |
https://www.pagoda.com.cn/ |
|
4 |
Fruitday |
China fresh e-commerce platform |
https://www.fruitday.com/ |
|
5 |
DJI |
Smart Hardware Technology Company |
https://ag.dji.com/cn |
|
6 |
XAG |
Agriculture smart solution provider |
https://www.xa.com/about |
|
7 |
LongShine |
Provide enterprises with supply chain solutions |
https://www.longshine.com/ |
|
8 |
JiuYescm |
Supply chain solution operator for fresh food e-commerce |
https://www.jiuyescm.com/ |
|
9 |
Meituan |
Chinese shopping platform for local consumer products and retail services |
https://bj.meituan.com/ |
1.6 Brief Description of the Report Outline
Chapter 1- Introduction
Descript the project background, project statement, project objective, project significant, project scope and project outline. The purpose is to clarify the framework of the entire research.
Chapter 2 – Literature Review
To be added later
Chapter 3 – Methodology
To be added later
Chapter 4 - Understand user satisfaction factors for fresh food e-commerce
Explain the user portraits and user characteristics of fresh food e-commerce and analyze user satisfaction factors. The purpose is to understand the core user groups of fresh food e-commerce and their basic expectations of fresh food e-commerce.
Chapter 5 - Analyze the three parts of e-commerce supply chain
The split introduces the upstream, midstream and downstream structure of the fresh food e-commerce supply chain, and how the company is deployed at each stage. The purpose is to understand the supply-delivery model of the emerging retail field of fresh food e-commerce and to understand the differences between multiple operating models.
Chapter 6 - Information technology in fresh supply chain management
Explain what representative information technologies companies have invested in each link of the fresh food e-commerce supply chain, and what efficiency improvements these information technologies have brought to the company. The purpose is to analyze whether information technology really helps companies improve the overall efficiency of supply-delivery through data comparison.
Chapter 7 - Limitation of project
Explain the restricted factors encountered in the research process, the size and dimension of the data limit the accuracy of the data, which led to the limitation of the depth or dimension of the analysis of this article.
Chapter 8 - Conclusion and Further research recommendation
Based on the discovery of findings and the analysis of data, the final argument of this article is that the investment of information technology by enterprises can indeed improve the efficiency of the overall supply chain. While improving management efficiency, it is also satisfying the needs of users-----guaranteeing product quality Safety and delivery speed.
Chapter 2 – Literature Review
2.1 Supply Chain Management
The study examines supply chain logistics of fresh food e-commerce, or how do enterprises manage the supply chain efficiently to meet user needs or realize user value. the main area of emphasis is supply chain management and ways in which businesses integrate these concept in the e-commerce business platforms. The term supply chain management has been defined by many authors or supply chain experts in different versions. Although the definition of supply chain management has its own merits in the description version, after sorting it out, it is nothing more than the following three factions, they respectively are the management philosophy, the implementation of a management philosophy, and the set of management processes. Jones and Riley (1985) who are the authors from the first faction suggest that the philosophy of supply chain management extends the concept of partnerships into a multi-firm effort to manage the total flow of goods from the supplier to the ultimate customer (Mentzer, 2001). In this case, the management philosophy characteristics are viewing the supply chain as a whole, working hard with a common strategy through all partners in the supply chain, and leading to customer satisfaction as an ultimate goal. Greene who is the author from the second philosophy suggests that the set of activities is a coordinated effort called supply chain management between the supply chain partners, such as suppliers, carriers, and manufacturers, to dynamically respond to the needs of the end customer. And the authors prefer supply chain management as a set of activities between partners have listed some core activities such as integrated behavior, mutually Sharing Information, mutually Sharing Risks and Rewards and cooperation, etc. Under this concept, supply chain management is regarded as the management of key activities that happen between partners towards the achievement of product quality and customer value. Liu et al (2018) emphasizes on the significance of collaboration among crucial players in the product supply chain logistics. Businesses have to automate and screen for defects in their supply chain management systems by creating linkages, eliminating communication barriers, forming supply contracts and harnessing of business synergy to improve the final user value. Furthermore, Lambert, Stock, and Ellram (1998) who are the authors from the third faction propose that, to successfully implement SCM, all firms within a supply chain must overcome their own functional silos and adopt a process approach. Thus, all the functions within a supply chain are reorganized as key processes. And this method focus on each process is to meet customer needs, and the company is organized around these processes (Cooper et al. 1997; Cooper, Lambert, and Pagh 1997; Ellram and Cooper 1990; Novack, Langley, and Rinehart 1995; Tyndall et al. 1998). Huang and Li (2008) project the need for ecommerce businesses to streamline their supply chain management systems and logistics with the business goals and objectives. The approach is proven to vastly improve performance efficiency and the creation of business operations synergy vital in achieving cost efficiency and profitability.
After listing all the philosophies of supply chain management, here is the concept of this study, this study partially agrees with the first faction of the concept of supply chain management listed in above, that is, viewing the management of the supply chain as a whole instead of managing the supply chain as a set of activities or a set of process. According to Chu and Liu (2007) businesses need to integrate their operations and focus on enacting complementing business models. All aspects of the supply chain eventually contribute to the final quality of the product and user experience on the target consumers.
The position of this study is that the emphasis on overall management is to interpret the definition of supply chain management from a broader perspective. The other two definitions both focus on supply chain management on managing some of the key processes and key activities involved in the supply chain. From the perspective as a whole, the latter two philosophies are all included in the big field of management. On the one hand, the supply chain will include a state in which multiple companies participate in collaboration. Then the transparency of information and the good cooperative relationship between multiple companies must be managed as key activities; on the other hand, each company or key nodes all play a key role in the supply chain and play their own value. They are indispensable. Therefore, each key role must make some adjustments in order to cater to the partner's strategy. This also explains the viewpoint of Lambert, Stock, and Ellram the authors who agree with the "process" philosophy. Can’t run the company as an island. Integrate the key processes and key activities that occur with the entire supply chain for management, so that participants are attached to a win-win goal, that is, to meet the core needs of consumers and improve user satisfaction. Langley and Holcomb (1992) suggest that the objective of SCM should be the synchronization of all supply chain activities to create customer value. Thus, SCM philosophy suggests the boundaries of SCM include not only logistics but also all other functions within a firm and within a supply chain to create customer value and satisfaction. In this context, understanding customers ‘values and requirements is essential (Ellramand Cooper 1990; Tyndall et al. 1998). Once unified, the next step of management is a matter of responsibility. Therefore, this study believes that management, key processes and key activities have always been involved in the existence of relationships, that is to say, management includes key processes and key activities, which are sub-steps in management.
2.2 The Operation Mode of Fresh Food and Produce Supply Chain (upstream to downstream)
As mentioned above, fresh food and produce supply chain management involves many players executing their roles in adding value to the key processes. Supply chain management processes are dependent on each other and the performance of one player determines the success of the next in the process. Thus, there is a sequence, that is, the relationship between the upstream and downstream of the supply chain. Benita suggests that the supply chain is an integrated manufacturing process in which raw materials are converted into final products and then delivered to customers (Beamon, 1998). Moreover, as the figure shows, Benita unified the complicated links in the middle and divided the supply chain into two major stages. The first stage is production planning and warehouse management, and the second stage is logistics, which is the transportation from the place of production to the place of sale and the delivery from the place of sale to the consumer. Benita suggests that the production planning and inventory control stage, which is the first stage in his concept, among the concept production planning includes raw material scheduling and acquisition, manufacturing process design and scheduling, and material handling design and control, and inventory control includes the management of the storage for raw materials, work-in-process inventories, and final goods. (Beamon, 1998) In addition, the distribution and logistics process determines how enterprises retrieve the product from the warehouse and transport it to the retailers. These products can be shipped directly to the retailer, or they can be moved to a distribution facility before the product is shipped to the retailer. This process includes inventory retrieval, transportation and management of final product delivery. (Beamon, 1998)
So, after listing the Benita concept of the supply chain stages, it can intuitively be summarized as the upstream and downstream stages of the supply chain. Because the upstream and downstream industry chain relationships of fresh food e-commerce suppliers are complicated, and the platform operation models of each fresh food e-commerce company are different, it is difficult to integrate the fresh food supply chain into only two stages, upstream and downstream. In this case, subdividing the scene into three stages will be more conducive to understanding the tasks completed by fresh food e-commerce at each key node and the business process of the fresh food supply chain. So, this study partially agrees with the supply chain statement of Benita, this study suggests dividing the supply chain into three main stages which are the upstream stage which includes the production supply, the midstream stage which includes the management of transportation and inventories, and the downstream stage which includes the distribution and logistics. The differences between the Benita concept of supply chain stages and the split concept of this study are that this study has an additional midstream stage. Each stage contains different operating modes, and companies choose the most suitable operating mode based on their own advantages and resources.
So, for the upstream supply, there are two main modes of fruit source supply in the fresh food field. The first one is the integrated mode of production, supply and marketing. Company may sign an agreement with the ecological agriculture base, or acquire shares; the company provides capital and technology to ensure stable supply of fruits in quantity and quality. The other mode of production supply is the buyer model represented omits the middle levels of middlemen, such as fruit wholesale markets and brand distributors. The buyer model is to directly cooperate with the production base or fruit growers. Some fresh e-commerce companies operate with the first mode of production supply, some operate the second mode, and some combine these two modes together.
Additionally, for the midstream transportation and inventories, the first type of transportation and warehousing and called pre-warehouse mode means that the company establishes two types of storage centers. One is the central warehouse at the headquarters, which is mainly used to accept supplies from the middle and upper reaches, and the other is a small and medium-sized storage and distribution center which located close to consumers, and its source of supply mainly comes from the central warehouse of the headquarters. The second type of transportation and warehousing called the platform-to-home model. This model does not establish its own storage center, but whenever a consumer places an order on the platform, the deliveryman goes to a nearby supermarket merchant to pick up the goods and then deliver to the customers. The third one called the community group buying model. This model means using a social platform as a carrier, taking a community or multiple communities as a unit, pre-integrating the needs of users and purchasing products in the form of group buying. Furthermore, for the downstream logistics to customers, companies could choose the third-party logistics or their own logistics for the company's.
2.3 Definition and Measurements of Supply Chain Efficiency
Ou, C.S., Liu, F.C., Hung, Y.C. and Yen, D.C. (2010) suggests that the successful implementation of SCM can not only directly improve operational performance, but also indirectly improve customer satisfaction and financial performance. In addition, higher financial performance is also attributable to higher customer value brought about by higher customer satisfaction (Ou, 2010). In other words, these authors state that there is a structural model of supply chain management on firm performance such as the customer satisfaction and the financial performance. Also, it is vital for firms to understand the measurements of customer satisfaction in order to transfer the customer satisfaction factors into the performance indicators of firms (Huang & Li, 2008).
An organization that understands consumer behavioral patterns i.e. mechanisms consumers use to respond to products and services allows organizational management to make better managerial decisions. Such organizations can adhere to consumer needs and provide the right products and services according to customer preferences. Additionally, understanding consumer behavioral patterns allows organizations to foresee future consumer behavioral patterns and plan for them. Understanding consumer behavioral patterns allow organizations to improve their supply chain management and formulate suitable marketing strategies. Understanding consumer behavioral patterns are vital in developing long-lasting customer relationships. This study refined two core user satisfaction factors which are the delivery speed and the product safety. Although it seems like two independent satisfaction factors, when people see the first factor delivery speed, they will think of improving the distribution of logistics links, and when they see the second factor food safety, they will think of strengthening the control of food upstream. However, the research in this article believes that these two user satisfaction factors will not only be reflected in the two key links mentioned above but run through multiple links in the entire supply chain. Only when multiple links are coordinated and managed can they be fundamentally resolved or optimize these two standards to improve organizational efficiency and realize user value. Other key user value creation factors include; the accessibility and friendliness of the ecommerce platforms, levels of communication between the business and customers and product quality(Chu & Liu, 2007).
2.4 Information Technology for Efficient Supply Chain Management and Analysis
E-commerce evolution and Internet-of-Things are vital factors that have led business retailers to improve their innovative business models. Consecutively there are factors like product quality and consumer demand affecting all factions of the supply chain in the food sector. New technologies like artificial intelligence, agricultural Internet of Things, warehouse and distribution environment monitoring, and intelligent scheduling system are the new technologies giving a competitive advantage to supply chains.
According to Fasanghari (2008) artificial intelligence is being applied in e-commerce platforms to collect consumer data. Gathered consumer data is used to analyze customer buying patterns, and preferences. This information is vital to all organizations because they can center their focus on the intended market. Additionally, artificial intelligence aids in the determination of demand for specific products. Collectors of consumer information using artificial intelligence can also pass up the information up or down the supply chain to other manufacturers, suppliers, food producers, content publishers among other stakeholders for better response and demand handling (Fasanghari, 2008). It is possible that artificial intelligence could automate decision making processes hence revolutionizing e-commerce supply chains. This new era of advanced technologies will witness a reinvention of business ecosystems and models. Customer experience will no longer be the same as the effectuation of new technologies on e-commerce. Artificial intelligence is an essential component that has allowed researchers to understand patterns and even forecast future trends. Businesses will no longer be caught off-guard because they can anticipate consumer trends and market reactions. Information technology can analyze data, provide data trends, and provide intelligent solutions for enterprises to make final decisions (Tseng, Wu and Nguyen, 2011).
De Barros et al. (2015) identifies agricultural Internet of Things is an information technology used in the production process of upstream. First of all, Internet of Things is usable in sourcing, logistics, manufacturing, demand management, preventive maintenance, and services. The use of the Internet of Things in e-commerce has led to better customer service, remote surveillance, advanced asset utilization, and improved understanding of consumer needs. An organization implementing the internet of things in their supply chains have experienced improved customer satisfaction because they can actively share and respond to changing consumer demand. According to Tseng, Wu and Nguyen (2011) agricultural Internet of Things records and stores the various data of the agricultural production base in the system and analyzes the situation of the production base in real time through the acquired data. At the same time, the unmanned plant protection machines for seeding or insecticide operations will also be used in the production process. The cooperation of the agricultural Internet of Things and unmanned plant protection machines has enabled the production base to be given the trend of scientific planting. Based on scientific judgments, agricultural production has become more efficient.
Warehouse and distribution environment monitoring, information management process, and intelligent dispatch management are information technology used in transportation and warehousing management of midstream. First of all, because of the particularity of fresh food, its requirements on the storage environment are extremely high. Only when the food is maintained at an appropriate temperature can the quality and safety of the food be guaranteed. Then the warehouse and distribution environment monitoring information technology can detect the temperature environment of the warehouse in real time and synchronize the collected temperature information to the data board through information management. Fasanghari (2008) highlights how staff can detect in time based on the synchronized information, such as the temperature can also be adjusted at any time when necessary, and all of these operations have become simple and visualized. At the same time, intelligent scheduling management is also used in the warehousing link. This information technology also provides scientific supply and demand forecasts for enterprises to solve supply and demand related problems through the acquired information and data, so as to avoid the occurrence of excessive or insufficient storage.
Tseng, Wu and Nguyen (2011) recognize intelligent scheduling systems and intelligent marketing systems are information technology used in logistics to customer in the downstream. E-commerce companies are also very important in the final delivery to consumers, because the delivery speed is also one of the most important factors for user satisfaction. For example, the delivery speed of the two companies can be delivered within half an hour after the order is placed, the delivery speed of another company is one hour, so consumers are more inclined to choose the company that will be delivered within half an hour. So how do platform achieve fast and reasonable distribution speed among enterprises is the algorithm model of intelligent scheduling. This algorithm model will calculate an optimal distribution order and distribution path through a series of indicators. E-commerce companies also use smart marketing systems to help platforms increase their idle utilization, because a fresh-food e-commerce, users will have a few time periods during the day when the demand for food is the largest, so even if it’s optimized for intelligence the scheduling algorithm model sometimes cannot achieve the optimal delivery experience due to the sharp increase in the order volume and the limited number of delivery personnel. Then the intelligent marketing system will analyze the user's behavior through some data to recommend preferential policies for the user. It is to try to prevent users from placing orders in a concentrated time period.
On the whole, all the information technology mentioned above plays a key value in the key processes of the upstream, midstream and downstream of the supply chain. It is not through the high-efficiency management achievements of one of the key processes to achieve overall high-efficiency management but the maximization of the overall efficiency management of the supply chain by improving the efficiency of each key stage (Tseng, Wu and Nguyen, 2011).
Chapter 3 – Methodology
3.1 Introduction of methodology structure
In the methodology of this part will introduce which supply chain management philosophy is the background to analysis this study, and the reasons for choosing this supply chain management philosophy; next, the second part will introduce why we need to analyze the data on user satisfaction. Will user satisfaction factors directly or indirectly affect the management direction of the enterprise? Next, I will explain what overall changes the enterprise has made in order to achieve user satisfaction factors or realize user value, that is, what information technology has been invested for the enterprise. The overall efficiency improvement, why choose these information technologies as a way for enterprises to improve efficiency, whether these information technologies can meet the end-user value that the enterprise wants to achieve.
3.2 The supply chain management philosophy of this study
In the above literature review, three approaches to supply chain management with different focuses are mentioned. The first definition of supply chain management focuses on how supply chain management integrates the entire chain; the second definition of supply chain management focuses on the management of some key activities and processes relevant to the supply chain; the third definition of supply chain management focuses on the execution of these key processes and activities in the supply chain (Papadonikolaki, 2020). The research takes the perspective of supply chain management as an overall management philosophy as the research background. This research agrees with the existence of the second philosophy and the third philosophy but does not believe that supply chain management is only the management of key behaviors or key activities but the integration and automation of the entire supply chain systems and processes to create business synergy. It is to integrate the two to look at supply chain management as a whole. It is said that supply chain management includes some key activities such as Mutually Sharing Information and some key processes such as demand management. Because if you look at the upstream, midstream, and downstream processes of the entire supply chain, the transparency and timeliness of information among multiple companies involved in the supply chain are extremely important for management. For example, the visualization of transportation routes is a key activity, but it is not only subordinate to upstream or downstream, it is a key activity throughout the entire supply chain, from upstream to downstream product transportation and transportation environment monitoring visibility. Another example is the prediction of supply and demand. As a key process, it does not only limit itself to a certain stage. According to Tan (2001) prediction of supply and demand is to obtain the behavior data of downstream consumers and calculate the future consumers through some complex indicators. At the same time, through the historical average supply of agricultural products of the upstream production base and some other data analysis, we can find out what time period and how much output the production base needs to complete in order to be able to roughly meet the consumer’s demand for agricultural products. Therefore, this study combines key activities and key processes to do overall research. The advantage of this research is that the research position will not be one-sided, and the efficiency management of the whole supply chain will be sorted out from a very macro and overall perspective.
3.3 The identification and impact of user satisfaction factors
Why should we analyze the user satisfaction factors first? The reason is that realizing user value and satisfying consumers' needs is the ultimate goal of an enterprise. Companies can’t just do things that satisfy themselves and move themselves. Companies need to trace the real user needs. With user needs or user pain points, the company will find a way to solve the user’s pain points or meet the real needs of users. So, every effort an enterprise is doing is paid for by someone. While achieving this goal, how companies can achieve a healthy, balanced and reasonable state of sustainable development between the cost of input and the needs of users is a problem that companies need to think about. A consumer once told a company that he wanted a fast horse. At this time, the company felt that the consumer's demand was for a horse, and then immediately arranged its own employees. Bringing a horse and handing it to consumers, the company felt that it was doing a good job and perfectly met the needs of consumers, but they did not dig deeper into the needs of consumers. Why does a consumer want a horse, because he wants to go to a city thousands of miles away to meet his family, he wants to go to this city is the ultimate demand, the customer may doesn’t care what kind of transportation he uses to go to this city. The company has provided him with a horse, so is there a better alternative solution to achieve this user demand? The case mentioned above means that digging and meeting the most real needs of users is what enterprises should do. So, for the field of fresh food e-commerce, what are the core needs of user. The two words of fresh food e-commerce can be disassembled. First, fresh food, users buy fresh products on the platform. Such fresh products have a short shelf life and are perishable, so users are most concerned about whether the last delivered product is of good quality and safety. Second, for e-commerce, since users place an order on the e-commerce platform to purchase products, another point that users care about is whether the delivery speed after placing the order meets the user's acceptable expectations. From a comprehensive point of view, the two satisfaction factors that users care most about are product quality and delivery speed(Papadonikolaki, 2020) User satisfaction factors are also directly or indirectly affecting the management efficiency of the enterprise. How the enterprise improves product quality and how the enterprise improve product delivery speed will be explained in the next department.
3.4 Information technology improves management efficiency
As mentioned above, product quality and product delivery speed are the two core satisfaction factors for users of fresh food e-commerce (Papadonikolaki, 2020). Satisfaction of these user values require businesses to make supply chain investments and develop models essential in creating value before the product is delivered to consumers. In order to introduce the information technology that can improve management efficiency in each stage of the supply chain, this research divides the supply chain management into three stages, namely the upstream "production and supply" stage of the supply chain, and the supply chain in the midstream "transportation and warehousing" stage and the downstream "distribution to consumer" stage of the supply chain. When the behavior of transportation logistics is mentioned in the middle and down reaches, it also takes into account the transportation of the middle reaches and the downstream distribution, there is a difference in focus (Sala, Rahim & Carretero, 2011).
In the upstream supply stage, this research focuses on the detailed introduction of two information technologies, the agricultural Internet of Things and unmanned plant protection machines. The purpose is that these two information technologies have obviously improved the quality control efficiency of product quality at the source supply stage. If we use traditional production methods to manually intervene to plant seeds and kill insects, the labor costs and time costs that may be invested will be a lot, and various deviations may also occur due to manual operations. But with the agricultural Internet of Things and unmanned plant protection machines, it is completely different. From the moment of planting, all the data of the production base is recorded and stored as the basis for future data analysis. The entire production process is mechanized, intelligent, and visualized. The scientific cultivation of products has been improved. Through the intervention of information technology, the efficiency of the supply chain in the production process has been greatly improved. At the same time, the control of product quality from the root has also been scientifically guaranteed.
Secondly, in the transportation and warehousing stage of the midstream, this study chose the information technology of warehouse and distribution environment monitoring, information management process and intelligent dispatch management. The purpose is that these several information technologies ensure the quality and safety of products in the transportation and storage phases. Due to the particularity of fresh products, the environmental conditions for storing fresh products need to be monitored in real time. Therefore, the two technologies of warehouse distribution environment monitoring and information management used in transportation and storage can help enterprises to visualize information management at this stage. Additionally, in order to assist in improving the delivery speed, it is also important for companies to ensure a good and reasonable supply amount. Therefore, the intelligent scheduling management technology can help companies predict future supply and demand through data analysis and provide companies with a data basis for production and supply thus achieving the ultimate goal of meeting the delivery quality .
Then there is the stage of downstream distribution to consumers. This study expounds the two information technologies of intelligent dispatching system and intelligent marketing system to help increase the speed of product delivery. The intelligent scheduling system optimizes the distribution algorithm strategy through data analysis to achieve the fastest and reasonable distribution speed, which is a result that people cannot calculate. The intelligent marketing system is mainly introduced from an auxiliary perspective in this research. Because of the intelligent marketing strategy, it guides users to disperse the behavior of placing orders as much as possible in the free time period, so as not to cause "traffic jams", solving the distribution problem to a certain extent. So, the above-mentioned information technologies are all improve the management efficiency as a whole.
3.5 The method of collecting relevant data
The study data is majorly sourced from secondary sources such as past journal articles, data repositories, corporate data and trends and other publication media. The data will be obtained through case analysis and data analysis published on the official websites of fresh food e-commerce companies or official websites that provide third-party smart solutions ,analysis reports published by consulting companies that specialize in industry analysis and from data platform that provides data charts. These secondary data sources will be accessed through online libraries, corporate websites and reports and publication stores. At the same time, the following findings will specifically reflect the verification of the data, which will not be repeated here.
Chapter 4 – Understanding users and user satisfaction factors for fresh food and produce e-commerce
4.1 Fresh food e-commerce user portrait
The chapter analyses hoe businesses utilize technology to understand user satisfaction factors and how they use the information develop to consumer-oriented supply chain management practices in the fresh food and produce ecommerce business. Then let's analyze who the direct users of the fresh food e-commerce platform are and what characteristics they have, which is commonly known as user portraits. According to the data report of the third-party data provider platform research institute, the main user groups using fresh food e-commerce in China are concentrated in the first-tier and second-tier cities. The top three representative cities with the largest user groups are Beijing, Chongqing and Shanghai. Secondly, majority of the users who use the fresh food e-commerce platform are women, and the proportion of female users far exceeds that of male users (Deloitte, 2019). It is also understandable that majority of people using the fresh food e-commerce platforms do so for domestic food needs. Most of the cooking family members are women. Majority of users are 25 to 34 years old, and account for 55.7%. The user group in this age group alone is more than the total number of users in other age groups (Deloitte, 2019). Regarding academic qualifications, 47% of the users who use the fresh food e-commerce platform have a bachelor’s degree, and 51.6% of them have a bachelor’s degree or above, which means that the majority of users who use the fresh food e-commerce platform are highly educated. Concerning occupational distribution of the user groups, 52.5% of the users are white-collar workers in enterprises (Statista, 2019). White-collar employees generally have higher income and strong purchasing power. Through detailed analysis of the user portraits of the fresh food e-commerce platform, key user groups are mainly concentrated in the elites of first-tier and second-tier cities. This type of population is characterized by high education, high income, strong purchasing power, and there is a higher pursuit of quality of life, and more attention is paid to the quality of fresh products, but not very sensitive to prices (Deloitte, 2019).
Figure 2 - E-commerce users
(source: (International Trade Center, 2019))
Figure 3 - Basic portrait of fresh food e-commerce users
(source: iResearch, 2021)
Figure 4 - Basic portrait of fresh food e-commerce users
(source: (Deloitte, 2019))
4.2 User satisfaction factors for fresh food e-commerce
After understanding the main user groups of fresh food e-commerce, let’s take a look at the satisfaction factors of these users on the fresh food e-commerce platform. This is not only a factor valued from the user’s perspective, but also a factor that companies want to meet the value of users. The platform needs to continue to meet the real needs of users in order to have a healthy and stable development trend.
Figure 5: Source, Emerald Insight; Agri-fresh food supply chain quality (AFSCQ)
In other words, they are some key points that users will care about when using the platform. They are the delivery speed of the product, the safety of fresh food, the usability of the platform, the quality of fresh food, the platform-related services, the interactive design of the app, and the price of the product (statistics, 2017).
Figure 6; Satisfaction factors (source; ResearchGate)
If these satisfaction factors are summed up, it means that when users use the fresh food e-commerce platform, whether they can have a variety of complete and safe foods for them to choose and can also be used throughout the purchase process with a good sense of user experience. The price dimension in this chart has the lowest score compared to other user satisfaction dimensions, and it just proves that users who use fresh food e-commerce as described in user portraits are generally low-sensitive to prices. And among the many user satisfaction factors, the top two rankings are delivery speed and product quality and safety, indicating that users value these two factors most. If the fresh food e-commerce platform achieves these two key points, the user's expectations will then meet the user's core needs. Other user satisfaction factors can be used as the direction of the enterprise's lower priority efforts to give priority to satisfying the most real core needs of users.
Figure 5- Satisfaction of online shoppers with different aspects of fresh food platforms in China as of 2017
(Source: (statistics, 2017))
Through the above analysis of the user profile and user satisfaction factors of fresh food e-commerce, we also know what aspects fresh food e-commerce needs to pay attention if they want to maximize user satisfaction. In addition to having a good platform interaction design to optimize the user experience of using the app; having an excellent operation service team to manage the platform, at the same time, there is also a very important focus on ensuring the quality and safety of food and improving the delivery speed of logistics and distribution, so as to enhance the overall experience of user consumption. Only when the above points are reached can the platform be regarded as having a competitive advantage in the fresh food e-commerce industry.
Chapter 5 – Analyze the three parts of e-commerce supply chain
In the past few years, when the new retail concept of fresh food e-commerce was first introduced, many fresh food e-commerce platforms continued to emerge in the industry. However, after the big waves, the current mainstream platforms in the fresh food e-commerce market are divided into the following major classes. The first is its fresh food e-commerce model represented by leading Internet companies (including Alibaba’s Fresh Hema and Meituan’s Meituan Shopping). This type of platform is characterized by sufficient Internet traffic, capital, and resources to support, so the fresh food business layout will be more diversified (analysys, 2020). This type of platform has its own self-operated model, providing an integrated service model of supply, sales and distribution. The second type is represented by unicorn companies in the fresh vertical field (Miss Fresh and Dingdongmc). This type of platform uses diversified models such as pre-warehouse and community group buying to quickly replicate this type of business model (analysys, 2020). At the same time, it will also access some takeaway platforms to increase traffic entrance and delivery capabilities. The third is the business model represented by traditional supermarkets (Yonghui and Pagoda). The supply chain experience of these platforms is relatively richer, but online traffic is insufficient compared to Internet companies (analysys, 2020). Each of these three types of fresh food e-commerce models has its own advantages and disadvantages. The current business model is to strengthen management efficiency by focusing on its own characteristics and resources.
As mentioned above, fresh food e-commerce companies need to prioritize these two key points to meet user needs, namely ensuring food quality and safety and improving product delivery speed. When mentioning these two aspects, this study has to split to understand how the supply chain behind fresh food e-commerce works. Because of the particularity of the products sold on such platforms, how do these companies efficiently manage the supply chain behind them. Next, it will be divided into three modules for analysis, namely the upstream, midstream, and downstream of the fresh food supply chain.
5.1 Upstream (sourcing supply)
The chart below introduces the channels through which Chinese agricultural products are circulated to consumers in 2019. As shown in the data, we can roughly divide these agricultural product distribution channels into two major types, which are offline, which account for more than 90%. Retail circulation methods include farmer’s markets, large-scale comprehensive supermarkets, individual small vendors and convenience stores. The other mode is a new sales mode established by e-commerce platforms-online circulation methods. This is only the analysis data before the transition year of fresh food e-commerce in 2020. If the same dimension is analyzed from the perspective of 2021, the data model will be different, that is, the proportion of e-commerce models will increase. However, the channels through which agricultural products flow to the market will not change much, which will not affect the subsequent analysis ideas.
Figure 6 - Agricultural products in China, channel distribution in 2019
(Source: (deloitte, 2020))
After we understand which channels the consumer's "upstream" comes from, then we need to understand where the upstream of these sales locations comes from? The traditional main supply model of agricultural products is the participation of one or more roles of producers, processing manufacturers and distributors. The first producer is the direct producer of agricultural products, such as farmers, plantations and production bases; The second processing manufacturer purchases fresh products from the manufacturer and performs further processing and packaging; the third distributor is composed of distributors and wholesalers at all levels, and the original agricultural products or processed agricultural products flow to the market. It can be known from the path of traditional agricultural products from production to sales that fresh products have gone through multiple levels of circulation before they are delivered to consumers. The more "intermediaries", the higher the cost of the product and the higher the unit price of the final product. Therefore, the new supply model with e-commerce platform as the mainstream is gradually being known to everyone, that is, eliminating the intermediate circulation links, and the platform will directly cooperate with manufacturers to purchase and process fresh products as much as possible, or directly build production bases for production to achieve supply and sale integration model.
At present, there are two main models for the source supply of fruits in the fresh food field: one is the integrated production, supply and sales model taking Pagoda as an example. The company provides funds through signing an agreement with the ecological agriculture base, or through mergers and acquisitions and technology to ensure a stable supply of fruits in quantity and quality. Through this supply model, fresh food e-commerce companies can control and supervise product quality from the source of supply. The advantage of this model is that the company can strictly control the quality of fresh food, strictly control product quality damage, realize real-time monitoring of product quality control, and achieve the purpose of enhancing brand value, reducing risk costs, and increasing profits. The disadvantage is that the scale of the company is very demanding. Small companies cannot invest huge amounts of money to support the powerful agricultural production links behind them. Only large companies with capital and technology are qualified to support the ecological industry behind them.
The other is a buyer's supply model represented by Fruitday, omitting the middle layers of middlemen, such as fruit wholesale markets, brand distributors, and so on. The buyer model is to directly cooperate with the production base or fruit growers. When the fruit is not yet ripe, it has been booked by the company, and the quantity and category of the fruit that the partner needs to provide is confirmed. The advantage of this supply model is that the company saves the huge investment in self-built production bases and does not have high requirements on the company's scale. Even small companies can achieve stable upstream supply in this way. But the disadvantage is that the company has increased its dependence on agricultural product suppliers. If the company only deeply cooperates with a few production bases, the company can choose to supply limited scope. In this case, the fresh food e-commerce company is a passive role; If the company not only cooperates with a few fixed production bases, but constantly looks for high-quality suppliers to increase choices for its own supply channels, under this circumstance, enterprises have virtually increased the cost of finding high-quality suppliers and managing suppliers, and so on.
The following chart and data explain the current supply chain construction of five leading fresh brands in China, four of which have in-depth cooperation with production direct supply bases, that is, the above-mentioned buyer supply model is adopted; there is also a platform choose the self-built production bases as the main supply mode, and a small part of fresh products are supplemented by buyer mode (analysys, 2020). It can be seen that these two more common supply modes are widely adopted by enterprises, and most companies will adopt one of the supply modes or a combination of the two supply modes to complete the supply, which depends on the company evaluate the advantages and disadvantages of the two supply modes and choose which supply mode based on its current operating situation, no matter which supply plan is, it has gradually become the best choice for the fresh food industry to deploy the supply chain.
|
Enterprise Name |
Fresh purchase method |
|
Miss Fresh |
80% source direct sourcing; 300+ commodity buyers, 30+ countries and regions in-depth direct sourcing |
|
Dingdongmc |
Unified procurement + direct procurement accounted for more than 60% |
|
Fresh Hema |
500 production bases, 1/3 of fresh produce is directly purchased |
|
Yonghui |
Invest in the upstream, with a direct procurement ratio of more than 76%, and a national procurement team of more than 700 people |
|
Pagoda |
More than 100 direct procurement bases in China domestic |
Figure 7- Supply chain construction of some fresh food e-commerce companies
(Source: (analysys, 2020))
5.2 Midstream (transportation and warehousing)
When the upstream completes the task of purchasing, the next step is to consider how do enterprises transport the products to the sales place and how do they manage the storage of fresh food. At present, fresh food e-commerce companies have several warehousing management models, namely the pre-warehouse model, the platform-to-home model and the community group buying model.
Figure 8 - The several warehousing management models
(Source: (MobTech, 2019))
The first type of pre-warehouse mode means that the company establishes two types of storage centers. One is the central warehouse at the headquarters, which is mainly used to accept supplies from the middle and upper reaches, such as storing products directly from the place of production, and the other one is a small and medium-sized storage and distribution center. The small and medium-sized storage and distribution center is located 1-3 kilometers away from consumers, and its source of supply mainly comes from the central warehouse of the headquarters. Every time a consumer places an order on the app, the goods will be distributed and delivered by the nearby front warehouse, which is a small and medium-sized storage and distribution center. Take Figure 8 as an example. The companies marked in orange all use the pre-warehouse model to complete warehousing. They are Miss Fresh, Dingdongmc, and Pupu. The characteristic of these companies is that they have almost no owned offline fresh food retail stores, they supply products through the front warehouses that are relatively close to fulfill the user's order requirements on the app side. The advantage of this warehousing model is that products can be delivered to users at the fastest speed, which improves logistics efficiency and user experience, and simplifies the commodity distribution process. The disadvantages are obvious. Enterprises need to invest a lot of cost in establishing different types of storage centers and maintenance and management.
The second is the platform-to-home model. This model does not establish its own storage center, but whenever a consumer places an order on the app, the deliveryman goes to a nearby supermarket merchant to pick up the goods and then deliver them. Take figure 8 as an example. The companies marked as green in the figure all use the platform-to-home storage model. They are Yonghui, Fresh Hema and RT-Mart. These companies also have a common feature. They have their own fresh food e-commerce platform; they also have their own offline retail chain stores. It introduces offline traffic into the online platform, opening up a new Internet retail model that operates online and offline together. The advantage of this type of warehousing logistics model is that the investment cost is extremely low, and it can be directly stored in the warehouse of offline retail stores. It will not involve additional warehousing maintenance work, and there will be no restrictions on category supply. Many very wide chain stores and users can be covered within a period of time. The disadvantage is that this operating model platform will have more competitors, and there are also requirements for the scale and coverage of the enterprise. Small-scale offline fresh food retail stores cannot reach a wider user base and cannot highlight the competitive advantages of their own platforms.
The third is the community group buying model, which is an emerging business model recently launched by major e-commerce platforms. The meaning of this model is to use social platforms as the carrier, with a community or multiple communities as a unit, pre-integrate the needs of users and purchase products in the form of group purchases. Take figure 8 as an example. Three of the fresh food e-commerce platforms use the community store model. The first advantage of this model is the pre-sale model, which integrates the purchasing needs and quantities of the group in advance, reducing the inventory pressure caused by uncertain purchase quantities; the second advantage is the group purchasing model, which integrates delivery by the community, reduces the logistics cost of decentralized distribution; the third benefit is consumer psychology. Collective purchases will have a positive consumer atmosphere, stimulate users' desire to consume, and ultimately increase the success rate of placing orders. However, this model is also incomplete. In other words, this pre-sale group purchase consumption method cannot guarantee the efficiency of logistics. For users, they may not be able to predict the food or commodities they will buy in the next few days. Users may only know the products they need immediately, so the pre-sale model does not meet the needs of this part of the user; also, this purchasing method may have restrictions on the types of purchases, and not all product categories are in line with the nature of pre-sales. This may make most users not choose the consumption model of community group buying but choose the consumption model of placing orders and delivering them in time. Fresh food e-commerce companies can flexibly adopt and match any of the above three warehousing and distribution models to rationally operate their own platforms.
5.3 Downstream (distribution to consumers)
When the product is delivered to the sales area and completed the warehousing, the next step is to deliver the product to the hands of downstream consumers. No matter which warehousing and distribution model mentioned above, it needs the support of logistics distribution companies and different levels of distribution strategies. The company will analyze which logistics distribution model to use based on its own business planning and investment return ratio and other factors, use the company's self-operated logistics distribution model or use a third-party logistics company to complete the distribution. The instant dispatch and delivery strategy involved here is of vital importance to Internet e-commerce companies. Quoting a sentence from Meituan to illustrate the importance of the order distribution strategy "At present, various take-out platforms are launching a full range of competition in various dimensions such as high-quality supply, distribution experience, and software experience. Among them, delivery timeliness and punctuality rate are used as the performance link. An important indicator is one of the core competitiveness of the food delivery platform" (meituan, 2017).
To give a more intuitive example, the same two fresh food e-commerce platforms are used by tens of millions of users, and they will generate huge orders every day. If the quality and service of the two platforms are comparable. But in the link of delivery to consumers, platform A can be delivered within 30 minutes of placing an order, but platform B needs at least 60 minutes to be delivered, so platform B will have a significant decline user experience in this link. Which platform will consumers tend to choose? The answer is undoubtedly the A platform. If enterprises want to shorten the delivery time, a simple and direct solution is to hire more delivery staff, expand the scale of capacity to improve the user experience of instant delivery. The problem is that this simple and direct method will also cause a large degree of cost input for the company. The company wants to control costs and optimize the user experience, so how do companies balance the relationship between the two will be one of the issues that companies think about, and it is also an important point for e-commerce companies to gain a competitive advantage. Meituan is a leading food delivery platform in China, providing users with consumer goods retail and home delivery services. The technology team of Meituan, a leading company in the distribution field, has launched an O2O instant delivery intelligent dispatch system, which uses complex data models and related strategies to shorten delivery time and improve user experience. The following high-tech modules will introduce Meituan's powerful intelligent dispatching system in detail.
Chapter 6 – Information technology in fresh supply chain management
After analyzing every link of the supply chain: sourcing supply, transportation, warehousing, and logistics distribution, what kind of operating mode does the company use that best fits its own and choose the most suitable operating method can achieve rapid growth and improve organizational efficiency. Now we can understand what information technology can help improve the overall efficiency and meet the core needs of consumers in every link of the supply chain or throughout the entire supply chain.
6.1 Upstream (supply and production)
Each link in the supply chain plays an important role to varying degrees, and the same is true for the upstream supply and production links. If the entire supply chain is to be circulated in a healthy manner, product control must be done at the source of supply. A lot of information technology will be involved in the upstream supply and production link to provide an intelligent production environment for fresh food enterprises. It is now commonly known as smart agriculture. It includes information technology such as the agricultural Internet of Things, drone plant protection, smart planting technology and smart breeding technology, etc. The investment in information technology has greatly improved the efficiency of the production process, and this information technology has gradually covered most of the production bases. The following figure estimates the market size of smart agriculture in 2017 and 2022. The data shows that the estimated market size in 2022 has increased by nearly 14% compared to 2017 (statista, 2018). It can be seen that with the current level of technology and technological awareness, smart agriculture will be widely used by enterprises and become the preferred solution for agricultural production bases.
Figure 9 - Forecast market value of smart agriculture worldwide in 2017 and 2022
(Source: (statista, 2018))
Take DJI, a domestic technology company in China, as an example. The smart agriculture developed by DJI integrates the above-mentioned information technologies to provide global users with smart agriculture solutions based on drone technology. As shown in the figure 10-12 below, the general implementation path of this smart agriculture solution is: the first step is to formulate the drone spraying route and spray the medicament milliliters through the scale of the vegetation and the special needs of the vegetation and other data; the second step is through the supporting mobile equipment to perform real-time monitoring, and people can adjust the drone spraying route and flying height and other indicators; in the third step, after the vegetation spraying operation is completed, the relevant data will be stored and displayed to the user in the form of a data board, including data such as the total operating acres, the total amount of pesticides used, and the flight trend can be viewed. (DJI, n.d.)
Figure 10 - Step 1: according to the scale of the production site, vegetation requirements and other data to formulate the spraying route, spraying medicament milliliters, etc.
(Source: (DJI, n.d.))
Figure 11 - Step 2: Real-time monitoring and adjustment of the drone's spraying route, flying height, etc.
(Source: (DJI, n.d.))
Figure 12- Step 3: UAV operation data result board, including data such as the total operation acres, total drug consumption and flight trends
(Source: (DJI, n.d.))
Next, here will analyze the efficiency improvement brought by smart agriculture to the production base through real cases provided by DJI. An astragalus production base employed 15 people during the operation of artificial astragalus insecticide last year. The total operation cycle is 15 days. Each spraying requires at least 20,000 yuan in labor costs and at least 60,000 yuan in labor costs per quarter. The disadvantages of artificial insecticide operations are the lack of labor and the uneven manual spraying. If the pesticides are sprayed by drones, users only need to invest in a set of DJI plant protection drones worth 40,000 yuan, hire 2 people to operate, and spray the pesticides in 6 days. The advantage of the latter's use of technology to replace manpower is that the operation cycle is greatly reduced, the cost is greatly reduced, the spraying effect is uniform, and the drone can be repeatedly operated, flexibly used, and operated independently. In addition, DJI collected the effect data on the production base within 72 hours after the application, that is, under the premise of no external factors, such as no rain within 72 hours, the insecticide was applied the mortality rate of aphids in the area is over 95%, and the control effect has reached the expected goal.
|
|
Manual work |
Drone work |
|
Staff needed |
15 people |
2 people |
|
Work period |
15 days |
6 days |
|
Total expense |
60000 yuan/quarter |
40000 yuan |
|
Advantages |
- |
Low input cost and uniform spraying |
|
Disadvantages |
Large investment cost, uneven spraying |
- |
Figure 13 - manual work vs. drone work
(Source: (DJI, n.d.))
Taking the Hema fresh food e-commerce company under Alibaba as an example, in the upstream production link, Fresh Hema also chose to cooperate with XAG, a precision agriculture smart solution provider (XA, 2021). It is summarized in the following three parts. The first step is to carry out digital construction to establish high-precision digital maps and smart agricultural systems for agricultural bases; the second step is to realize intelligent production operations through agricultural drones and agricultural robots, and their operating trajectories can be located. The accuracy is up to centimeter level, and the atomized particles of the insecticidal spraying are within the range of 85-550 microns and can be adjusted to any value within this range to achieve a fine and uniform spraying effect; the third step is after the completion of the production operation intelligent production management uses data collected in daily operations as an important evaluation basis to improve the quality of decision-making for production managers. At the same time, various environmental indicators of the base can also be viewed in real time through a small program on a mobile device. Adjustment and optimization. For example, the recordable information includes the fertilizer application dosage and the number of harvests in the base. The environmental information that can be viewed includes temperature, humidity and weather. The adjustable resource allocation includes agricultural supplies and equipment scheduling in different fruit and vegetable growing areas. The transparency of production link information and intelligent facilities have undoubtedly improved the overall efficiency of the production base and achieved the goal of scientific production. Through the analysis and summary of the above cases, the solution of smart agriculture is the best choice for the production base.
6.2 Midstream (transportation and storage)
In the transportation and warehousing links in the midstream, a lot of information technology will be involved to empower fresh food e-commerce companies, such as warehouse distribution environment monitoring, information management processes, and intelligent capacity scheduling. For the fresh food supply chain, because of the particularity of fresh food, excessive inventory will cause food to rot over time, but too little inventory cannot meet the needs of users in time due to insufficient supply. And the impact of insufficient supply may loss some of the customers. Fresh products have very strict requirements on the storage environment. For example, the suitable temperature for most fruits is above zero degrees Celsius and below ten degrees Celsius to store, and they must not freeze. Therefore, the fresh food supply chain needs to efficiently manage the vital link of warehousing in order to ensure the product quality and safety.
First introduce the information technology called intelligent scheduling management used in the transportation and warehousing process. This technology includes many algorithm models, such as intelligent supply and demand prediction models, which analyze the historical sales data of products through intelligent algorithms. And combined with external parameters, such as the off-peak season of the product and the promotion period of the event, etc., the supply and demand related problems can be solved through scientific supply and demand forecasting (longshine, 2021). Secondly, this technology also includes the function of automatic replenishment. Through real-time monitoring of customer inventory and transportation conditions, combined with customer demand and demand fluctuation cycles, the inventory holding, periodic ordering, transportation, and other costs are added to commodity prices. The replenishment model is calculated according to the lower total cost, forming a reasonable order quantity and replenishment cycle (longshine, 2021). There is also the secondary dispatch between storage locations, which is also a scientific method to avoid unnecessary execution costs, and to carry out reasonable transportation execution and secondary dispatch.
Additionally, take Jiuyescm, a leading domestic fresh produce supply chain service platform, as an example. In the transportation and warehousing links, companies use internet of things technology to achieve real-time environmental detection and full-process information visualization management. With the goal of ensuring the distribution temperature and the principle of minimizing cost, the company designs different fresh supply chain solutions for customers (jiuyescm, 2017). For example, different packaging consumables are designed for different seasons. In summer, foam boxes, insulation bags, ice packs and dry ice are used, and dry ice is not used in winter. In winter, the number of ice packs is designed according to different temperatures in northern and southern cities. In addition to controlling the packaging materials of fresh products, temperature sensing technology is also used to monitor the storage environment in real time, and the warehouse continuously monitors temperature and humidity 24 hours a day. Through advanced information technology, the quality of fruits and vegetables can be managed in a meticulous and timely manner, and the quality and efficiency of product transportation can be improved. This operation helps companies reduce the costs caused by the corruption of fruits and vegetables during transportation, and at the same time saves system maintenance work. There will be no restrictions on staff who do not have computer or electronic expertise. The ability to manage and monitor the environment of the cold chain at any time is an indispensable monitoring system in transportation. The information shown in the following figure is the temperature condition of the environment where the food at each node is located, and the temperature from the origin to the destination is managed visually. It can be seen that the whole process informatization management reduces a lot of risks for enterprises, and also greatly improves the management efficiency of enterprises in transportation and storage.
Figure 14 - Real-time monitoring of transportation environment
(Source: (jiuyescm, 2017))
6.3 Downstream (distribution to consumers)
Some smart technology systems will be involved in the downstream distribution to consumers to support e-commerce companies to achieve efficient operations. One of the intelligent systems is called the intelligent dispatching system. The following takes the leading intelligent dispatching system of the domestic Meituan company——the O2O instant delivery intelligent dispatching system as an example. "In the past year or so, the Meituan distribution team has continued to exert efforts in machine learning, operational optimization, simulation technology, etc., and conducted in-depth research, and comprehensively applied the above technologies based on the characteristics of instant delivery scenarios. "Super Brain"-O2O Instant Distribution Intelligent Scheduling System" (meituan, 2017) .
The system first adjusts the order structure by optimizing the set delivery fee and the estimated delivery time; after receiving the order, it considers the location of the rider, the situation of the order in transit, the performance of the rider, the average meal speed of the merchant, the difficulty of delivery, the weather condition, the geographical road condition, future order quantity and some other factors, reasonably allocate the order to the most suitable rider at the right time, and predict the timeout of the order at any time during the execution of the rider, and dynamically trigger the change dispatch operation to achieve the dynamic optimal match between the order and the rider (meituan, 2017). At the same time, after the system dispatches the order, it prompts the rider of the estimated mealtime and reasonable delivery route of the merchant and realizes efficient interaction with the rider through voice; after the rider sends the order, the system predicts the order demand and the distribution of transportation capacity. Inform riders of the capacity demands of different business districts and realize capacity scheduling during leisure time (meituan, 2017). Through the introduction of the above technologies and models, the user experience and delivery costs have been continuously improved: the average delivery time of orders has dropped from 41 minutes in 2015 to 32 minutes, and further shortened to 28 minutes (meituan, 2017). On the other hand, under the premise of a steady increase in rider salary, the average delivery cost per order has also been reduced by more than 20% (meituan, 2017).
The above is a rough introduction to the seemingly simple distribution path through the complete path of the rider receiving, delivering, and completing the order. In fact, it contains a lot of data analysis information, complex distribution strategies, and corresponding technical implementation methods. In addition to the powerful intelligent scheduling system to optimize the delivery experience, e-commerce companies also use intelligent marketing systems to help the platform improve its idle utilization rate. According to the data chart below (see figure 15), the fresh food e-commerce platform's active periods of the day are divided into peaks (busy periods) and valleys (free periods), which means that a few hours before the mealtime belongs to the peak period of user activity, and that is the peak. Because users need to purchase timely fresh food through the platform, as the lunch and dinner time approach, the scale of user activity is also decreasing, and the user activity of the fresh food e-commerce platform has shown a sharply decreasing trend after 19:00., which is the valley value (analysys, 2020). The occurrence of this situation also causes the platform to have a shortage of delivery manpower during the peak period. At this time, the intelligent marketing system will regularly push some marketing activities to disperse the order volume during the busy period. For example, after lunch twelve o’clock, a time-limited spike activity is used to promote user activity; or after dinner eight o’clock in the evening, an advance reservation activity is used, and the reserved goods will be delivered before ten o’clock the next day morning. Regardless of the marketing method, the purpose is to increase the number of orders placed during the free time, that is, to increase the utilization rate of the free time.
Figure 15: Trends in the scale of time-sharing behavior of fresh food e-commerce users in 2020
(Source: (analysys, 2020))
Chapter 7 – Limitation of project
This research has some external constraints, which limit the dimension and completeness of the analysis of the fresh food e-commerce field. The first constraint is that the fresh food e-commerce sector is not yet mature enough. Currently, it is only deployed in first-tier and second-tier developed cities, and the scope of data collection is limited. Secondly, the fresh cold chain logistics and other infrastructures are not sufficiently complete. The circulation rate of the cold chain is relatively low, so it will affect the cost analysis of the enterprise. Therefore, when the data volume is limited and the data model is not sound, it will affect the accuracy of the data evaluation to a certain extent. The second constraint is that the supply chain models of each head fresh e-commerce are different, so it is difficult to integrate and quantify the performance of the enterprise, so it is difficult to do the comparative analysis on the data side, and it is difficult to evaluate the specific operation mode of the supply chain based on the indicators. Only the supply chain management mode that is most suitable for the scale of the enterprise is the best solution.
Chapter 8 – Conclusion and Further research recommendation
Driven by the core needs of consumers, the fresh e-commerce platform constantly optimizes its management efficiency to meet the ultimate goal of user value. In this study, the upstream, midstream and downstream of the supply chain are split to analyze the information technology investment of each stage. Every invested technology plays a value in its own stage, and through the integration, circulation and sharing of information and data, each stage cooperates with each other to achieve better efficiency management. Through the new retail mode of the Internet, coupled with the use of a large number of advanced technologies, such as artificial intelligence, big data analysis, Internet of things and intelligent integrated warehousing and logistics system, driven by data, the overall efficiency of fresh e-commerce has been improved, and the user experience has also been improved. Secondly, the operation mode of fresh e-commerce is divided into several major categories. Enterprises lay out their own platform ecology according to their own advantages and resources. No matter which operation mode is, in essence, it meets the needs of users for the convenience and quality assurance of fresh purchasing. The key for enterprises to highlight their competitive advantages is to enable the front-end and back-end of the fresh platform by using big data and other technologies. In order to improve the efficiency of the whole supply chain, reduce operating costs, and achieve user value and profitability.
Under the influence of the Covid-19, the fresh electricity supplier ushered in the dividend period of the traffic, and the active users of fresh electricity suppliers are also growing steadily, so in the vertical field of mobile e-commerce, fresh electricity suppliers still have great potential. In the field of fresh e-commerce in the future, there is still room for the efficiency of the supply chain to rise, and there will not be a case that a fresh e-commerce company monopolizes this vertical industry, and the market pattern will be the common long-term survival of a variety of regional operation modes.
Based on the above research constraints and conclusion, the following are the corresponding suggestions about this topic for future research. After that, the research in this field can expand the scope of data collection. With the rapid development of fresh e-commerce, its regional coverage will be more and more extensive, so the volume of user data will be increased, and the extended data will be obtained to help analysis. Even the scope of analysis can be limited to China, but also can be extended overseas to find some differences in the management of fresh food supply chain in some different countries or regions. Through the comparison of differences in this dimension, the study evaluates whether there is room for improvement in the management efficiency of fresh food supply chain, and what specific direction to improve.
Chapter 10 – References
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