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Chapter Twelve: Fulfilling E-Commerce Orders and Other EC Support Services 12-1

Online File W12.1 Order Fulfillment Troubles in Toyland

As the entire world watched the transition to the new millennium occur without any of the feared major Y2K problems, the B2Cindustry in general, and online toy retailers in particular, experienced a catastrophic logistics problem at the end of 1999.

According to reports by many popular media and EC research companies, overall satisfaction with online shoppingdeclined significantly in December 1999 and January 2000. Consumer frustration with late deliveries and with poor cus-tomer service before, during, and after purchases drove this decline. In general, e-tailers struggled to meet the demands oflast-minute holiday shoppers. It became clear during the period of peak demand that the order fulfillment infrastructure ofmost e-tailers was weak.

The situation was especially critical in the toy business, where competition was fierce. Many toy e-tailers promised topay delivery charges and even gave $20 discount coupons. The Toys “R” Us site (toysrus.com) averaged 1.75 million visitsfrom potential customers each day, and eToys (etoys.com) averaged 1.9 million. The number of toy orders far exceeded thecompanies’ projections. As a result, ToysRUs.com notified customers that only orders made prior to December 14 wouldarrive in time for the holidays. For orders made after that date, customers would have to pay a premium if they wanted toexpedite shipments. A few days prior to Christmas, toysrus.com notified some customers that the toys that they hadordered for the holiday (even some ordered before December 14) probably would not arrive in time and offered these cus-tomers $100 coupons as compensation. eToys and other e-tailers experienced similar problems. Amazon.com was forced toship multiproduct orders in several shipments instead of one, substantially increasing its expenses. It is no wonder thatconsumer satisfaction with online retailing fell. The e-tailers themselves undoubtedly felt considerable dissatisfaction withtheir order fulfillment record.

Toys “R” Us partnered with Amazon.com in 2000. Toys “R” Us handled the buying and management of inventorywhile Amazon.com was in charge of Web site development, order fulfillment, and customer service. By 2005 most of theseproblems were eliminated when demand forecasting was improved.

On July 1, 2006, the toy company left Amazon.com and opened its own independent Web site again. The companyhired Excel, a leading logistics provider, to deliver merchandise it sells through its site. The company also opened a574,000-square-foot fulfillment center in Groveport, Ohio, to support the product assortment on ToysRUs.com and meetincreased demand during holiday seasons.

REFERENCES FOR ONLINE FILE W12.1Bloomberg News. “Toys ‘R’ Us Falling Short on Christmas

Deliveries.” December 23, 1999.Business Wire. “Toys ‘R’ Us Opens New Fulfillment Center in

Groveport, Ohio, to Support Expanding Toysrus.comBusiness; World’s Greatest Online Toy Store Gears Up forPeak Selling Season.” September 14, 2006. findarticles.com/p/articles/mi_m0EIN/is_2006_Sept_14/ai_n26985694 (accessed March 2009).

Cooper, G. “Present Perfect.” DestinationCRM.com,November 2001. destinationcrm.com/articles/default.asp?ArticleID=1218 (accessed March 2009).

Taylor, C. “Christmas Postponed.” Time, December 26, 1999.time.com/time/magazine/article/0,9171,36503,00.html (accessed March 2009).

12-2 Part 5: EC Support Services

ONLINE FILE W12.2Application Case

HOW DELL FULFILLS CUSTOMER REPAIR ORDERSOne of Dell’s success factors is its superb logistics and orderfulfillment systems. Customer orders, which are receivedmostly online, are automatically transferred to the produc-tion area, where configuration determines which componentsand parts are needed to create the customized computer thatthe customer wants.

Once configuration is complete, the problem becomeshow to get all the needed components so that a computercan be ready for shipment the next day. As part of the solu-tion, Dell created a network of dedicated suppliers for just-in-time deliveries, as well as a sophisticated computerizedglobal network of components and parts inventories. Theglobal network is also used for product services (e.g., repairs,upgrades, demanufacturing, etc.).

Let’s examine how Dell provides service when a computerthat is in the customer’s possession needs to be repaired. Dellis trying to achieve for repairs, upgrades, and other servicesthe next-day shipment that it uses for new computers. Forrepair activities, Dell needs parts and subassemblies to bedelivered to hundreds of repair stations, worldwide, frominternal warehouses or external vendors. The search for theparts and their delivery must be done very quickly.

To facilitate this search for parts, Dell is using an onlineintelligent inventory optimization system from LPA software(now clickcommerce.com). The system can reconcile thedemand for parts with the action needed (e.g., repair,upgrade, transfer, or remanufacture). For example, the systemallows Dell to factor the yield on reusable parts into its

supply projection. This allows Dell to use repairable parts tocompress time and reduce costs, enabling a team of about10 employees to successfully process more than 6,000 serviceorders every day.

The online system generates timely information aboutdemand forecast, the cost of needed inventory, and “days ofsupply of inventory.” It compares actual with forecasteddemand. This enables Dell to communicate critical informa-tion to external and internal customers, reducing orderfulfillment delays.

Producing or acquiring the required parts through com-ponent substitution, upgrades, and engineering changeorders must be effective in order to provide superb customerservice at a low inventory cost. The system also provides anonline standard body of knowledge about parts and planningstrategies.

Questions1. This process improves what portions of order fulfillment?

2. Enter dell.com and find information about how Dellconducts repair (warranty) customer service.

3. Relate this case to the discussion of “returns” in thischapter.

4. What competitive advantage is provided by this Dellsystem?

REFERENCES FOR ONLINE FILE W12.2dell.com (accessed March 2009). Xelus, Inc. “Case Study: Dell.” 1999. xelus.com/industries/

cs_dell.html (no longer available online).



PEACOCKS USES WIRELESS WMS TO SMOOTH ITS INTERNAL SUPPLY CHAINPeacocks of Wales (peacocks.co.uk) operates approximately250 retail stores, selling clothes and home furniture in Walesand southern England. The company had a problem with itsinternal supply chain: Its paper-based system of managingproduct distribution was prone to problems, such as incor-rectly completed pick-lists, wrongly picked items, transcrip-tion errors, delays in generating and receiving data, andmuch more. These interfered with the company’s growthstrategy and reduced its profit.

In 1997, Peacocks consolidated its six warehouses intoa single distribution center (100,000 square feet, 3 stories).Stores were ordering more than 4,000 SKUs each day. Theseneeded to be picked and shipped to stores effectively andefficiently. Using one place instead of six solved some ofPeacocks’ problems; however, the paper-based communica-tion system was still ineffective. With the paper-based picksystem, it was easy to run out of products at a specificlocation. When this occurred, the picker had to either waitfor more products to arrive or return to his or her originallocation. The paper-based pick system had delays built intoit, and stock problems were difficult to predict.

In 1998, the company began to replace its paper-basedsystem with a wireless system (from Symbol Technologies, adivision of Motorola). The fully automated distribution centernow is equipped with a hands-free, real-time put-away andpicking system. It is based on a combination of dozens ofwearable computers and several truck-mounted terminalssupported by a wireless LAN. The system provides real-timecontrol. Whether an item moves by hand or by truck, Peacocksknows precisely where it is. If at any point in the processsomeone is at the wrong location, handling the wrong product,or trying to send it to the wrong place, the system simplysends out an alert and prevents the action. When Peacocksreceives a delivery from a manufacturer, the consignment ischecked and the individual cartons from each delivery aregiven an identifying bar code label and scanned to reportreceipt. In this way, every item can be tracked through thedistribution center from the minute it arrives. The systemimmediately knows if there is a requirement at a pick location.

Once individual cartons are labeled, Peacock uses anautomated conveyor system to send cartons to either the pickface or to the pallet store, as directed by the wireless WMS.

Each member of the picking team wears a wrist-mountedterminal that receives picking instructions from Peacocks’ hostsystem via the wireless LAN. As empty trolleys arrive in thepick area, the picker scans a bar code on the empty trolley,and the terminal’s LCD screen tells the picker which aisle to goto, which location to pick from, and which items to pick.When a picker arrives at the pick face, the picker scans the barcode mounted at the end of the aisle. This verifies that thepicker is in the correct aisle. The picker then scans another barcode at the product location to verify that the location iscorrect. Finally, the picker scans each item as it is placed intothe trolley.

Once each pick is complete, the conveyor system takeseach trolley to the dispatch area to be loaded into crates fordelivery to a Peacocks store.

Because the data are sent to the host in real time asthe picking operation proceeds, the system knows whenstocks are approaching the replenishment level set byPeacocks. When an item needs to be replenished, the systemsends an alert to a truck-mounted terminal in the palletstore. As with the wrist-mounted terminals, an LCD screenon the truck terminal directs the driver to a precise locationin the pallet racking. On arrival at the location, the driveruses a handheld scanner to scan the location bar code. Thisconfirms that the truck driver is at the right location andselecting the right product.

The hands-free arrangement saves time and minimizesdamage to the devices. The system also is user friendly, sotraining is minimal.

Questions1. Describe Peacocks’ internal order fulfillment process.

2. Identify all segments of Peacocks’ supply chain that areimproved by the system and describe the improvements.

3. How has the new system corrected the previousproblems?

4. What are the advantages of wireless tools?

5. Investigate how RFID may improve this system inthe future.

REFERENCES FOR ONLINE FILE W12.3m o t o r o l a . c o m / s t a t i c f i l e s / B u s i n e s s / U S - E N /

EnterpriseMobility/homepage/index.html (accessedJune 2009).

Symbol Technologies. “Case Study: Peacocks DistributionCentre.” 2004. Download at whitepapers.silicon.com/0,39024759,60089224p,00.htm (accessed March 2009).

symbol.com (accessed January 2007).



GROCERY SUPERMARKET KEEPS IT FRESH—WOOLWORTHSOF AUSTRALIADealing with early movers of pure e-tailing is a majorproblem for established retailing. How is a well-establishedmajor supermarket to respond? With huge investments inbrick-and-mortar stores, Woolworths of Australia founditself dealing with just this question. Three major playersdominate the grocery market in Australia: Coles Myers,Woolworths, and Franklins. These three companies controlsome 80 percent of the marketplace. Franklins, which isowned by a company in Hong Kong, takes a low-cost,minimum-service approach. The others, both Australian-based, provide a full range of products, including freshfoods and prepared meals.

Woolworths’ initial approach was to set up a standardWeb site offering a limited range of goods, but excluding per-ishable items. The delivery service was initially available onlyin areas near the company’s major supermarkets. Woolworthsfelt it had to respond to the newly emerging approaches fromonline entrepreneurs. If those organizations were allowed totake over a sizable segment of the market, it could be diffi-cult to recover it.

It was not long before management realized that thiswas not an effective approach. Woolworths’ staff had to walkthe aisles, fill the baskets, pack the goods, and deliver them.For an organization that had optimized its supply chain inorder to cut costs, here was a sudden explosion in costs.When gross margins are only 10 percent, and net marginsaround 4 percent, it is very easy to become unprofitable.

Furthermore, Woolworths has established its place inpublic perception as “the fresh food people,” with fruits andvegetables, freshly baked breads, meats, and prepared mealsbeing promoted heavily. If home shopping ignores these,Woolworths is avoiding its strengths.

Woolworths’ Homeshop, the second-generation homeshopping site (woolworths.com.au), was designed with fresh-ness in mind, and all the fresh foods are available for delivery.

Deliveries are arranged from major regional supermarkets,rather than from every local store. There is an AU$50 minimumorder, and a 7.5 percent surcharge for home delivery, as well asan AU$6 delivery charge. This helps in recovering the addi-tional costs, but an average order, around AU$200, still returnslittle profit.

New users can register only if deliveries are possible totheir postal address. On first use of the system, the customeris guided to find the products that they want with sugges-tions from the list of best-selling items. Alternatively, thecustomer can browse for items by category or search bykeyword. Items are accumulated in the “shopping trolley”(cart). The first order is entered into a master list for futureorders, as are subsequent orders.

When the customer has selected the required items,they select “checkout”; at that point, the total value iscomputed and the customer confirms the shopping list.Payment is made only at time of delivery using a mobile(cellular) electronic funds transfer (EFTPOS) terminal, andeither a credit card or a debit card. In this way, precisecharges can be made based on weight of meat or fish, aswell as allowing for out-of-stock items.

The customer has to set the delivery time and day. Ifthe customer is not home to accept the delivery, additionalcharges will be applied.

Additional services that are available include dietaryadvice, recipes, and recording of preferred food items.

Questions1. Describe the driver of the online initiative.

2. Describe the difficulties of moving online.

3. Find the status of online service today atwoolworths.com.au.

REFERENCE FOR ONLINE FILE W12.4Jordan, E. “Grocery Supermarket Keeps It Fresh: Wool-

worths of Australia.” Professor, Macquarie GraduateSchool of Management, Australia, August 2000.

Online File W12.5 Order Fulfillment at GroceryWorks


Each customer order is placed 6.5 to 9 hours ahead of delivery time.

Suppliers pick goods off their own shelves and package them forpickup, with orders sorted by customer and placed in coded bags.

GroceryWorks vans pick up the goods from suppliers.

Fresh goods from suppliers are sent along a conveyor belt; dry goodsare picked from GroceryWorks’ warehouse shelves.

GroceryWorks vans head to customers’ homes, stopping by supplierson their return trip to the local warehouse to pick up the next round of customer orders.

GroceryWorks truckspick up the next batchof fresh goods from vendors afterfinishing delivery tocustomers’ homes

Frozenfoodsvendor

Video store

Drycleaner

Customers’homes

Producevendor

Meatvendor

“Home meal”vendor

1

1

2

3

4

5

2

3

4

5

RECEIVINGRECEIVING

LOADINGLOADING

Dry goods

Picking zones

Conveyor belt

EXHIBIT W12.5.1

Source: Steinert-Threlkeld, T. “GroceryWorks: The Low-Touch Alternative.” Interactive Week, January 31, 2000.Originally published in Interactive Week, xplane.com. Reprinted by permission.



THE RISE AND FALL OF KOZMO.COMThe idea sounded logical: Create an express delivery systemfor online orders and deliver within an hour. The idea is notnew. Domino’s Pizza built its fortune on this idea, and todaymany companies deliver pizzas, door-to-door, in less than anhour in thousands of cities worldwide.

Kozmo.com’s business model was based on this idea.But instead of pizzas, Kozmo.com envisioned the delivery offood items, rented videos, electronic games, and convenienceproducts. Also, the model targeted only large cities, espe-cially New York and Boston, where people use public trans-portation that may not be in operation at certain times.Items were delivered by “Kozmonauts”—employees withvans, bikes, or scooters. Orders were placed on the Internet,but telephone and fax orders also were accepted. The prod-ucts were delivered from Kozmo.com’s distribution centers.

The first logistics problem faced by Kozmo.com was thereturn of the rented videos. It was uneconomical to send theKozmonauts to collect them. So Kozmo.com built drop boxes(like the FedEx boxes), initially in New York. Many of theseboxes were vandalized. In an attempt to solve the problem,Kozmo.com partnered with Starbucks and moved the boxes toStarbucks cafés, some of which are open 24 hours a day. Inexchange, Starbucks became an investor in Kozmo.com.Kozmo.com started to deliver coffee products to Starbucks’customers, and Starbucks printed Kozmo.com’s logo on itscoffee cups.

With a venture capital investment of more than$250 million, the company expanded rapidly to 10 cities.During the initial period, delivery was free, and no minimumdollar amount of order was required. This strategy attractedmany customers but resulted in heavy losses, especiallyon small-value items. The company’s growth was rapid: By theend of 2000, it had 1,100 employees, and it launched an IPO.

Soon after, more problems started to surface. As withother B2C dot-coms, the more Kozmo.com sold, the largerthe losses grew. In response, Kozmo.com closed operationsin San Diego and Houston, imposed minimum charges, andadded more expensive items (such as rented DVD players)to its offerings. This helped to generate profits in New Yorkand San Francisco. However, with hundreds of dot-comsgoing out of business in late 2000 and early 2001, a majorfinancial backer withdrew its support. Kozmo.com eventuallyran out of cash and as a result had to close its doors onApril 11, 2001.

Questions1. Draw the supply chains for food and rented items at

Kozmo.com. What logistics problems did these supplychains present?

2. Compare Kozmo.com with Domino’s Pizza. Why didDomino’s do so well while Kozmo.com failed? Analyzethe situation from an order fulfillment point of view.

3. The partnership with Starbucks was said to beextremely innovative, but Kozmo.com canceled it whenits financial problems began. (Kozmo.com had paidmoney to Starbucks for permission to place the dropboxes.) Analyze this partnership.

4. Later in this chapter, you will learn about returns.After you have read that discussion, come back to thiscase and answer the following question: What advicecould you have given Kozmo.com regarding the returnof rented items? Also, recall the Netflix model inChapter 4.

REFERENCES FOR ONLINE FILE W12.6Blair, J. “Behind Kozmo’s Demise.” The New York Times,

April 13, 2001.Blair, J. “Online Delivery Sites Finding That Manhattan

Can Be a Hard Place to Make It.” The New York Times,October 2000.

kozmo.com (2002) (site no longer available).



OUTSOURCING LOGISTICS AT NATIONALSEMICONDUCTOR CORPORATIONNational Semiconductor Corporation (NSC) (national.com), basedin Santa Clara, California, is a manufacturer of state-of-the-artdigital technology. The company reported $2 billion in sales in2004, distributing semiconductor chips and related products tomore than 3,800 customers worldwide (National SemiconductorCorporation 2004). The company gains substantial savings on itsglobal supply chain costs by outsourcing its logistics activities,both for offline and online transactions. The primary function ofits 3PLs is to move freight by the most efficient means possible.The logistics providers offer advanced information technologyand broader global coverage, enabling NSC to concentrate on itscore competencies of designing and manufacturing its products.

Prior to 1992, NSC distributed directly from its manufac-turing plants, which are primarily located in Southeast Asia. Assales volumes grew and demands for faster delivery increased,NSC turned to FedEx to distribute from a base in Singapore.FedEx relied on its own air transportation equipment, whichrestricted NSC’s shipments to FedEx’s flights and routes.Therefore, in the late 1990s, NSC began looking for a single 3PLthat could provide flexible and efficient transportation. NSCchose UPS Logistics Group, which opened a state-of-the-artdistribution facility in Singapore in August 2000.

UPS’s centralized distribution center receives shipmentsfrom NSC’s plants in Singapore, Malaysia, and the Philippines.UPS Logistics performs the basic functions of receiving andstoring inventory; picking, packing, and shipping to cus-tomer specifications; and arranging outbound transportation.

National Semiconductor’s IT systems were developed in-house and are coordinated with those of UPS Logistics.The integrated systems enable customs clearance, labeling,

and trade compliance. UPS provides the telecommunicationsnetwork, the interface between NSC and UPS Logistics thatexchanges files, balances inventory, and handles other supplychain functions. With its highly automated IT system, UPSLogistics can go for days without talking to NSC unless thereis a need for an expedited shipment or a shipment problemdevelops.

NSC has realized savings of 50 percent in its globallogistics costs since it began outsourcing its logistics in1992. With UPS Logistics, it is saving 10 percent over theFedEx system. With additional savings from other innovationsUPS has provided, NSC may see potential savings of between15 percent and 20 percent. For NSC, outsourcing its interna-tional logistics needs has proven to be a cost-effective SCMsolution. The benefits of advanced information technology,carrier flexibility, and logistics expertise have made its rela-tionship with UPS Logistics one that will continue to developand thrive.

NSC continuously adds new products. Since 2008–2009,a major new area is energy-efficient ICs and power manage-ment: Outsourcing of logistics is paying off, so the companycontinues with this strategy. As a global company, pressreleases are available in eight different languages.

Questions1. Why did NSC elect to use a 3PL?

2. Why did NSC move to UPS?

3. What are the major services that UPS provides to NSC?

REFERENCES FOR ONLINE FILE W12.7Coia, A. “Leaving Logistics in Capable Hands.” World

Trade Magazine, July 2002.national.com (accessed March 2009).National Semiconductor Corporation. 2004 Annual Report.

2004. national.com/invest/2004annual/glance.html(accessed March 2009).

UPS. “National Semiconductor Gains Flexible GlobalDistribution to Move Billions of Chips Worldwide.”July 2004. Available for download at jobfunctions.bnet.com/abstract.aspx?docid=59594 (accessed March 2009).

ups.com (accessed July 2009).


Online File W12.8 Players and Challenges in B2B Fulfillment

Players Challenges

Shippers (sellers) Mix of channels, choice of logistics partners, go solo or use aggregation, what to out-source, integration of strategic, tactical, and operational decisions

Receivers (buyers) Solo and/or consortia buy sites, supply chain collaboration, total delivered costs, whento buy

Carriers Self-service Web sites, links to vertical transportation e-marketplaces, institutional dragThird-party logistics

providers (3 PLs)Cooperation from carriers, breadth of modes/services, IT resources, customer acquisition

Warehouse companies Location, operational intensity, capital investment, mode of automation, choice ofbuilders

Vertical e-marketplaces Where is the “ship-it” button? Who’s behind it? What services are offered?Transportation

e-marketplacesMoving beyond spot transactions to ASPs and value-added services, neutrality versus

alignment, market mechanisms (e.g., bidding)

Logistics software application vendors

Comprehensive solutions, e-marketplace involvement, strategic partnerships, integra-tion with existing software


INGRAM MICRO—WORLD-CLASS COMPUTER PRODUCTSDISTRIBUTOR AND E-COMMERCE PROVIDERAn OverviewIngram Micro (ingrammicro.com) is the world’s largest tech-nology distributor and a leading technology sales, marketing,and logistics company. As a vital link in the technology valuechain, Ingram Micro creates sales and profitability opportuni-ties for vendors and resellers through unique marketing pro-grams, outsourced logistics services, technical support,financial services, and product aggregation and distribution.

Since its beginning in 1979, Ingram Micro has connectedtechnology solution providers with vendors worldwide, identify-ing markets and technologies that shape the IT industry. Today,Ingram Micro remains at the forefront of the global technologymarketplace, bringing the latest products and services to mar-ket and finding new ways to bring value to our customers. As of2009, the company offers a broad array of solutions and ser-vices to approximately 170,000 resellers by distributing andmarketing hundreds of thousands of IT products worldwide fromnearly 1,400 suppliers. Through Ingram Micro Logistics, thecompany provides customizable services for order managementand fulfillment, contract manufacturing, contract warehousing,product procurement, product pack out and cartonization,

reverse logistics, transportation management, customer care,credit and collection management services, and other valuechain services. Ingram Micro serves 150 countries and is theonly global IT distributor with operations in Asia.

Ingram Micro’s MissionMicro Ingram’s mission is to be an indispensable businesspartner—the most valued bridge between vendors andcustomers—and to measurably contribute to the growth andprofitability of customers—both vendors and resellers—in amanner that is difficult to replicate or substitute. For ven-dors, Ingram Micro’s goal is to create value through effi-ciency, demand generation, and access to markets andcustomers. For resellers, Ingram Micro provides unique offer-ings that create sales and profit opportunities, includingvaluable vendor relationships, sales programs, access tocredit, and training and development.

To accomplish its mission, the company is using theWeb and advanced EC methods, especially in the logisticsareas. Ingram Micro has transformed itself from a technologydistributor to a global Internet business and SCM firm.

(continued)


ONLINE FILE W12.9 (continued)

Before the InternetPrior to using the Internet as an EC tool, Ingram relied heavilyon its knowledgeable and powerful sales force to interfacewith its customers, from managing orders to anticipatingcustomers’ preferences, needs, and likely purchases, as wellas for postorder and account information that clients neededto track and manage their orders.

Putting the Back-End Systems on the NetTwo main issues were addressed during the creation of a newelectronic interface for Ingram’s customers: appearance andnew information needs. Customers needed accurate content inuser-friendly and readable form that was capable of manipu-lation. The information had to be available in an attractiveand simple-to-understand fashion. Customers also needed adifferent way of doing business, including order processing.This meant changing Ingram’s way of transforming its inter-nal data and processes into external information. How wouldthese be achieved? By defining how customers would use thecompany’s information and how and when they would use theservices.

Challenges in E-Logistics and E-FulfillmentIngram Micro faced a number of challenges.

1. Accuracy and customer expectations. Although its historiccustomers, including resellers and manufacturers, under-stood the channel process and the likely delays and prob-lems, Ingram Micro’s new customers expected a simple orderprocess, immediate order verification, continual access toorder information, and timely and near-flawless delivery.Therefore, new functions and enhanced information wereadded to the original logistics and fulfillment business.

2. Expanding the concept of “customer.” The companywas serving only corporate buyers, not the millions ofcorporate end users and e-commerce consumers. Ingram’sinternal point of view had to be adjusted to ensure theaccommodation of new needs and perspectives of thenew customer base.

3. Making information more accessible. The biggest chal-lenge was pulling an enormous amount of mainframe datainto DSSs and databases that were easily accessible via theWeb. The key was creating and maintaining an environmentwhere mainframe-knowledgeable personnel could workeffectively and quickly with Web designers and programmers.

4. Making the data eye-friendly. It was a huge effort toturn the data into easily interpreted information for thosewithout eyes trained to read mainframe information.

5. Integrating disparate systems. Stand-alone systems inthe company’s warehouse (used to make personalizeddelivery and label-printing possible) had to be altered toaccept new types and amounts of data as well as toprocess them correctly. Another issue was the separationand security of customers’ data.

Use of Outside Expertise, Hardware, and SoftwareAlthough most of the resources were internal, some outsideexpertise, hardware, and software were used. The external

resources included those well versed in the most current Webtechnologies and programming methods to enhance speed.Cross-corporation teams were created to develop projectsbetween Ingram and their customers.

The E-Logistics and E-Fulfillment FrameworkThis framework is a virtual, mainframe-based fulfillment pow-erhouse with several external faces and connectivity options.Real-time communication is via exchanges (e.g., EDI or XML)with companies’ Web sites, ERP systems, order managementsystems, and e-commerce engines. Ingram hosts a number ofB2B storefronts targeting specific customers. Joint develop-ment efforts allow resellers and vendor partners to completetheir business models by “plugging in” to Ingram’s logisticsengine.

The ResultsIngram now serves millions of customers in a historiccapacity (meeting needs directly) and millions of newcustomers (meeting needs indirectly and transparently).The company now performs its operations with much moreexacting intent.

Ingram’s Advice for Implementation of E-Logistics and E-FulfillmentGetting assistance from the best, either through consultingor outsourcing, is a key to implementation. Even when theconcept is simple, the execution may be unpredictable andcomplex. Know your customers, know your limits, and knowyour customers’ limits. Identify critical success factors, bothfrom your company’s point of view and your customers’points of view.

Ingram continues to offer its services to customers whocan use them. The customers benefit by being able to focuson their own core competencies while using Ingram’s com-prehensive infrastructure.

Ingram Micro LogisticsIngram Micro Logistics provides supply chain services formanufacturers, publishers, brick-and-mortar retailers, andWeb marketers. The supply chain solutions of Ingram MicroLogistics help 2,000 technology suppliers reach 170,000customers. The solutions can be implemented using itsinfrastructure, the consumer’s own existing infrastructure,or other third-party facilities.

Ingram Micro Logistics’ integrated supply chain solu-tions help customers to:

◗ Increase turns and reduce inventory◗ Change from fixed to variable cost structure◗ Reduce cycle time from overseas manufacturing points to

customer locations◗ Extend customer reach with integrated retail/Web

presence

The Logistics NetworkIngram Micro Logistics operates an integrated network ofAdvanced Logistics Centers (ALCs) in the United States andCanada, with more than 3 million square feet of warehousing

(continued)


ONLINE FILE W12.9 (continued)

space. Strategically located to offer 2-day ground service to98 percent of the population, the ALC network can accommo-date up to 15 million orders per year. Customers shipped toinclude:

◗ Distributors◗ Resellers◗ Retail distribution centers and more than 10,000 retail

locations◗ End-user customers at homes and businesses

Also, specialized programs available in Ingram MicroLogistics ALCs include:

◗ Product launch and replenishment◗ Turnkey manufacturing and assembly◗ JIT, vendor-managed inventory, and retail hub◗ Transportation management

◗ Customization and postponement◗ Reconfiguration and refurbishment

Questions1. Describe the improvements in Ingram’s back-end

system.

2. What improvements in logistics and e-fulfillment weremade?

3. What infrastructure was needed for the new systems?

4. What role did XML play?

5. List the implementation lessons.

6. What are the benefits of the new systems to Ingram’scustomers?

REFERENCES FOR ONLINE FILE W12.9ingrammicro.com (accessed April 2009). im-logistics.com/IML (accessed April 2009).


Online File W12.10 General Resources About Intelligent Agents

The following are some of the best general resources on software agents:

◗ One of the best places to start is the University of Maryland’s Web site on intelligent agents (agents.umbc.edu). Start withAgents 101 at agents.umbc.edu/introduction. The site has downloadable papers and reports and an extensive bibliographywith abstracts (see “Publication and Presentation”).

◗ BotSpot (botspot.com) has comprehensive information about e-commerce agents and other agents. See also internet.com.◗ MIT Media Lab (search for media projects at media.mit.edu) provides a list of agent projects and much more.◗ The American Association of Artificial Intelligence provides comprehensive information about agents at aaai.org.◗ The Computer Information Center in the United Kingdom provides a comprehensive knowledge base about intelligent

agents at compinfo.co.uk/ai/intelligent_agents.htm.◗ Comprehensive knowledge bases about agents are available at agent.org and 123-bots.com.◗ Carnegie Mellon University has several agent-related programs (search for software agents at cs.cmu.edu/~softagents).◗ IBM has several agent-development projects (research.ibm.com/iagents and alphaworks.ibm.com).◗ Stanford University has several research teams developing agent technology (search for Knowledge Systems Laboratory at

stanford.edu).◗ Agentland.com is another “must” place to visit. It contains an up-to-date list of dozens of agents classified into

e-commerce and entertainment. Some of the agents and development tools can be downloaded.◗ The Computer Information Center (compinfo-center.com) facilitates collaboration and technology transfer about agent

development.◗ The University of Michigan has several agent development projects (eecs.umich.edu). An extensive list of resources also is

available at ai.eecs.umich.edu.◗ The National Research Council of Canada (nrc.ca) provides an artificial intelligence subject index for agents.◗ Botknowledge.com provides considerable information about all types of bots.◗ The Xerox Palo Alto Research Center (parc.com) provides information on software agents in general and on multiagent sys-

tems in particular. In addition to references, articles, and application cases, you can find a list of leading vendors, somewith customers’ success stories. Related intelligent systems are covered as well.

◗ Microsoft employs dozens of agents (or “wizards”) in most of its software products. For details, see Microsoft’s SMSOperations Guide (Microsoft 2003). With the Microsoft Agent set of software services, developers can easily enhance theuser interface of their applications and Web pages with interactive personalities in the form of animated characters. Thesecharacters can move freely within the computer display, speak aloud (and display text on screen), and even listen for spo-ken voice commands (see msagentring.org). You can download Microsoft Agent at microsoft.com/products/msagent.

Periodicals and MagazinesThe following periodicals and magazines often feature articles on agents and agent-related technologies:

◗ AI Magazine◗ Journal of Artificial Intelligence Research◗ Annals of Mathematics and AI◗ Expert Systems◗ IEEE Intelligent Systems


Online File W12.11 Characteristics of Software Agents: The Essentials

Although there is no commonly accepted definition for the term software agent, people think of several possible traits whenthey discuss software agents. Four of these traits—autonomy, temporal continuity, reactivity, and goal driven—are essentialto distinguish agents from other types of software objects, programs, or systems. Software agents possessing only some ofthese traits are often labeled simple or weak. Virtually all commercially available software agents are of this sort.

Besides these essential traits, a software agent may also possess additional traits such as adaptability, mobility,sociability, and personality. Typically, these latter traits are found in more advanced research prototypes. In this section,we will consider the essential traits first.

The Essential Traits of Software AgentsThe following are the major traits of software agents.

AutonomyAutonomous software agents can perform certain tasks automatically according to the rules and inference mechanisms givenby the designer. As Maes (1995) points out, regular computer programs respond only to direct manipulation. In contrast, asoftware agent senses its environment and acts autonomously upon it. A software agent can initiate communication, monitorevents, and perform tasks without the direct intervention of humans or others. For more, see Greenwald et al. (2003).

Autonomy implies that an agent takes initiative and exercises control over its own actions (Huhns and Buell 2002)and thus displays the following characteristics:

◗ Goal orientation. Accepts high-level requests indicating what a human wants and is responsible for deciding how andwhere to satisfy the requests. These are referred to by Hess et al. (2000) as homeostatic goal(s).

◗ Collaboration. Does not blindly obey commands but can modify requests, ask clarification questions, or even refuse tosatisfy certain requests.

◗ Flexibility. Actions are not scripted; the agent is able to dynamically choose which actions to invoke, and in whatsequence, in response to the state of its external environment.

◗ Self-starting. Unlike standard programs directly invoked by a user, an agent can sense changes in its environment anddecide when to act.

Autonomous agents can be resident or mobile (see Zhang et al. 2004).

Temporal ContinuityA software agent is a program to which a user assigns a goal or task. The idea is that once a task or goal has been dele-gated, it is up to the agent to work tirelessly in pursuit of that goal. Unlike regular computer programs that terminatewhen processing is complete, an agent continues to run—either actively in the foreground or sleeping in the background—monitoring system events that trigger its actions. You can think of this attribute as “set and forget.”

ReactivityA software agent responds in a timely fashion to changes in its environment. This characteristic is crucial for delegationand automation. The general principle on which software agents operate is “When X happens, do Y,” where X is somesystem or network event that the agent continually monitors (Gilbert 1997).

Goal DrivenA software agent does more than simply respond to changes in its environment. An agent can accept high-level requestsspecifying the goals of a human user (or another agent) and decide how and where to satisfy the requests. In some cases,an agent can modify the goals or establish goals of its own.

Other Common TraitsSome software agents also possess other common traits.

Communication (Interactivity)Many agents are designed to interact with other agents, humans, or software programs. This is a critical ability in view ofthe narrow repertoire of any given agent. Instead of making a single agent conduct several tasks, additional agents can becreated to handle undelegated tasks. Thus, communication is necessary in these instances. Agents communicate by follow-ing certain communication languages and standards, such as Agent Communication Language (ACL) and Knowledge Queryand Manipulation Language (KQML) (see en.wikipedia.org/wiki/Agent_Communication_Language anden.wikipedia.org/wiki/Knowledge_Query_and_Manipulation_Language).

(continued)


Online File W12.11 (continued)

Intelligence and LearningCurrently, the majority of agents are not truly intelligent because they cannot learn; only some agents can learn. This learninggoes beyond mere rule-based reasoning, because the agent is expected to use learning to behave autonomously. Althoughmany in the artificial intelligence (AI) community argue that few people want agents who learn by “spying” on their users,the ability to learn often begins with the ability to observe users and to predict their behavior. One of the most commonexamples of learning agents is the wizards found in many commercial software programs (e.g., in Microsoft Office applica-tions). These wizards offer hints to the user based on patterns the program detects in the user’s activities. Some of the newerInternet search engines boast intelligent agents that can learn from previous requests the user has made.

For a comprehensive discussion of these and additional characteristics, see Gudwin and Queiroz (2006).

REFERENCES FOR ONLINE FILE W12.11Gilbert, D. “Intelligent Agents: The Right Information at

the Right Time.” IBM white paper, May 1997.citeseer.nj.nec.com/context/1105800/0 (no longeravailable online).

Greenwald, A., N. R. Jennings, and P. Stone, (Eds.).“Agents and Markets.” Special issue, IEEE IntelligentSystems, November–December 2003.

Gudwin, R., and J. Queiroz. Semiotics and Intelligent SystemsDevelopment. Hershey, PA: The Idea Group, 2006.

Hess, T. J., L. P. Rees, and T. R. Rakes. “Using AutonomousSoftware Agents to Create the Next Generation DSS.”Decision Sciences, 31, no. 1 ( July 2000).

Hill, T. R., and M. Roldan. “Toward Third GenerationThreaded Discussions for Mobile Learning: Opportunitiesand Challenges for Ubiquitous Collaborative Environ-ments.” Information Systems Frontiers (February 2005).

Huhns, M. N., and C. A. Buell. “Trusted Autonomy.”IEEE Internet Computing (May–July 2002).

Maes, P. “Artificial Intelligence Meets Entertainment:Life-like Autonomous Agents.” Communications of theACM (November 1995).

Zhang, N., O. Shi, M. Merabti, and R. Askwith. “Auto-nomous Mobile Agent Based Fair Exchange.” ComputerNetworks (December 20, 2004).

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