Can collaborative buffering strategies reduce distribution costs while improving product returns?: A case of an Asian e-retailer

Abstract

PurposeIn order to achieve competitive advantage over the physical marketplace, the e-retailers are insisted on endowing with lenient return policies. The piece-wise returns-and-reordering process incurs excessive buffering and unwanted logistics costs which raises overall fulfillment charges. The objective of this study is to re-design e-retail distribution policy by providing temporal storage at logistics service provides' (LSP) location. The impact of recurrent returns on pricing and profit margins are also investigated over time continuum.Design/methodology/approachA framework is developed to reduce the non-value added (NVA) storage and distribution efforts by providing collaborative buffering between LSP and e-retailer. The knapsack based buffering approach is tested and compared with traditional e-retail distribution practices. The revenue sharing concept is mathematically modelled and implemented in GAMS, which finally validated through multiple return scenarios.FindingsThe proposed model outperforms the existing one under all scenarios with different configuration settings of re-ordering, profit margins, and buffer time windows. The distribution cost is found, linearly related to the necessary product buffering space. The findings help to re-design sustainable return policies for individual products so that maximum customer value can be yield with minimum costs.Research limitations/implicationsThis study helps to determine the NVA efforts incurred while storing and delivering multi-time returned products to ensure desired service levels. The revenue sharing model provides pricing strategies for e-retail practitioners deciding which product should store in what quantity for how much time at the shipping agency location so that it fulfils the re-ordering at least waiting and sufficient buffering.Originality/valueThe proposed model extends the role of LPSs as temporary buffer providers to reduce returns-and-reordering fulfilment efforts in the e-retail network. This Collaborative framework offers an opportunity to amend the distribution contracts and policies time by time that enhances e-retailer's performance and customer satisfaction.

A Modernized Framework for Transportation Decision-Making in a Hyper-Integrated Global Supply Chain Environment

“…Daugherty, Bolumole, and Grawe (2018) suggest that consumer impatience creates new opportunities for firms to develop and quickly grow businesses for differentiated products or services. Therefore, the scalability of the transportation network to accommodate such business growth becomes an important consideration (Stank et al 2019; Shah and Singh 2021). For example, following struggling service levels to fulfill Christmas deliveries with legacy carriers in 2013, Amazon realized that the existing carriers could not accommodate Amazon’s growing e‐commerce volume much longer.…”

Horizontal collaboration in the last mile distribution: gauging managerial response to disruption and abnormal demand

“…, 2021; Speranza, 2018). Collaborative distribution can take a vertical form, which focusses on the beneficial vertical relationships between actors within a supply chain (Shah and Singh, 2021); or a horizontal form, which focusses on the cooperation between two or more actors operating at the same level, regardless of whether they are rivals or have different sizes (Mason et al. , 2007).…”

“…In the last two decades, both practitioners and scholars have paid much attention to improving distribution systems through collaboration, coining the term collaborative distribution and recognising it as one of the future trends in transportation and logistics (Aloui et al, 2021;Speranza, 2018). Collaborative distribution can take a vertical form, which focusses on the beneficial vertical relationships between actors within a supply chain (Shah and Singh, 2021); or a horizontal form, which focusses on the cooperation between two or more actors operating at the same level, regardless of whether they are rivals or have different sizes (Mason et al, 2007). Manufacturers and retailers have been working together for years using vertical cooperation not only in distribution but also in inventory management, forecasting and replenishment processes.…”

What should be lean buffer threshold for the forward-reserve warehouse?

“…Further, nowadays the DC operates with two regimes to handle product delivery and returns with flexible e-commerce policies. This reduces the NVA transportation efforts by creating temporal FBs at service provider's location (Shah and Singh, 2021). However, how the FB capacity can be changed to accommodate the demands and upstream processing variations is awaited to be addressed with respect to FRM.…”