CUSTOMER SERVICE AND LOGISTICS PERFORMANCE

Despite the huge controversies about the future of the Internet, and more specifically of e-commerce, there seems to be at least one point on which almost everyone agrees: the order fulfillment process and product delivery, that is, distribution logistics. , is one of the main bottlenecks of e-commerce. We often come across in the press reports of negative experiences lived by consumers in their Internet shopping experiences: delays in delivery, cancellations due to lack of products, replacements, defective products, billing errors, difficulties in making returns, inability to complete the order , are some of the potential problems that can lead to a negative internet shopping experience. Some of these problems are more visible and frequent than others, but as a whole, they all contribute to generating frustrations and delaying the development of virtual retail.

Despite the importance of the problem, and the constant reporting of cases of dissatisfaction, there are still very few structured surveys that seek to identify the logistical performance of e-commerce as well as the main causes for this performance. The great effort that has been made by virtual retail companies to improve their logistical systems and offer a reliable and quality service to their customers, will only have results from the identification of the problems and their causes. Virtual retail logistics has unique characteristics that make it incompatible with traditional logistics, therefore requiring a learning effort for everyone involved in this type of activity; suppliers, carriers, logistics operators, and obviously virtual retail companies. The objective of this work is to contribute to the improvement of e-commerce logistics in Brazil, through the identification of the main problems and their causes. To achieve this objective, the Center for Studies in Logistics at Coppead – UFRJ conducted a survey, during the months of April and May 2000, with three of the best known virtual retail companies in Brazil.

CONCEPTUAL FUNDAMENTALS AND RESEARCH METHODOLOGY

Two basic concepts were used to guide the research; customer service and order cycle. According to the concept of customer service, the perceived quality of service results from the comparison between customer expectations and the performance of the service provider, in a set of dimensions that include the ease of completing the transaction, product availability, time delivery time, time consistency, supporting information system, fault remediation system, physical delivery performance, and flexibility. The supplier's performance is the result of a set of activities developed during the order cycle, that is, the process that begins when the customer begins to prepare his order, and ends when, finally, takes possession of the purchased goods and considers the transaction satisfactorily completed.

In order to conduct the study, researchers from the Center for Studies in Logistics – CEL ordered Brazilian Popular Music CDs through the websites of the chosen companies, indicating different addresses of cities located in all five geographic regions of Brazil for the delivery location. , that is, North, Northeast, South, Southeast and Midwest, including capitals and cities in the interior. In all, 30 volunteers were selected, each one residing in a different city, who volunteered to receive 3 CD's in their homes – one from each evaluated company – and answer about dates and conditions for delivering the products. Two forms of payment were used: credit card and bank slip. Parallel to the information provided by the volunteers, the CEL researchers continuously monitored each of the orders, using information obtained from the websites with the objective of examining the performance of the suppliers in the various stages of the order cycle, in the light of the dimensions of the customer service. The objective was to test the Internet shopping system from the consumer's perspective, so that the shopping experience could be portrayed from the point of view of those who are buying. It is good to remember that dissatisfied customers always have the alternative of looking for another virtual supplier, or going back to buying in traditional retail, which is their main point of reference, and with which they will compare their shopping experience in the virtual world.

According to the original sample, a total of 90 CDs would be purchased. The expected sample, however, suffered some reductions due to the withdrawal of research participants and problems in carrying out the financial transaction. In the latter case, there were 3 orders that were not carried out due to problems in releasing credit and 3 orders whose slips were not paid because it was not possible to identify, in a timely manner, the codes of the orders to which they referred. The final sample now has 71 orders paid for and monitored through status checks and contacts with volunteers at delivery addresses.

SEARCH RESULTS

• The preparation of the order

The first stage of the order cycle corresponds to order preparation and transmission activities. In this phase, the buyer needs to locate and identify the merchandise, obtain the necessary information to make the purchase decision, authorize the financial transaction and transmit his order to the website. Compared to traditional retailing, virtual retailing has advantages and disadvantages at this stage of the order cycle. The main disadvantage is the fact that, on the Internet, the potential buyer does not have the opportunity to physically examine the product before deciding to purchase. In addition, there are other inconveniences, such as the fact that the customer will not receive the product immediately, and that the financial transaction involves risks and takes time to be confirmed, in the case of the credit card, and requires an additional effort from the buyer in time and displacement, in the case of the bank slip, as it needs to be paid at the bank. To offset these disadvantages, virtual retail has the ability to offer a series of facilities to the potential buyer. The first is the convenience of being able to shop 24 hours a day, 7 days a week. The second is the ability to offer a rich set of information involving the location and identification of the product, comments from other consumers, information about price and shipping, and delivery time. Examined from this point of view, the researched sites presented several positive points and some problems. With regard to the location and identification of goods, as well as obtaining the necessary information to make the purchase decision, the sites surveyed offer good services. All three offer search engines that allow you to locate the product, by CD name and artist name. In addition, two of the three sites allow you to locate the CD by song name, and 1 even allows you to listen to the songs online. All 3 show photographs of the CDs, and provide information on price, shipping cost and delivery time for the products.

The first problems arise when closing the financial transaction and establishing the delivery period. Delays in releasing credit by the card company, delay in confirming payment by the bank, and even credit card refusal were some of the main problems encountered. The purchase through the bank slip tends to delay the transaction by 5 days on average. In addition, problems with confirming the financial transaction, involving bank slips and cards, resulted in the impossibility of consuming 7% of purchase intentions, a fact probably not registered by the site managers.

The lack of information about the availability of products in stock for immediate delivery is the second problem found in the survey. Of the three sites surveyed, only one of them informs about sold out products (unavailable for immediate delivery), which sometimes means buying a product that has a strong possibility of delay or even never being delivered.

Establishing delivery times is another important issue in this first phase of the order cycle. Although the companies indicate the estimated time for delivery, the established period only starts counting from the closing of the financial transaction. As this operation has an indefinite amount of time to be confirmed, the promised period is of little use to the customer. The use of one, or at most two alternatives for the whole country, further increases the uncertainty about the delivery date. One of the sites promises delivery in a maximum of 7 working days, after confirmation of the financial transaction, to all regions of the country. Another promises 7 days for the south and southeast regions, and 14 days for the other regions of the country, after the financial transaction. The third party promises delivery within 4 days, after confirming the financial transaction, and after the product is available, which can take up to 21 days. The survey results point to a large dispersion in actual delivery times, which varied between 1 and 50 days. Even for the same location as Belo Horizonte, the cycle time ranged from 2 to 22 days. All this is indicating the existence of problems and a limited view of the true order cycle time, when compared to the customer's view. For this, the period starts counting from the moment you decide to make the purchase and confirm your decision by transmitting the order. The use of working days is another limited perspective on the part of virtual stores. The wide variability in cycle time makes it impossible for the customer to estimate the receipt date. This is an important problem because, after all, if the customer goes to a physical store, which nowadays tends to be open every day, the transaction will be immediate, and he will leave the store with the products in hand.

• The order processing

The second step in the cycle is order processing. From the transmission of the order, by the buyer, it is up to the site to process and pass on the order information to the various entities involved in the process. Among them are the banks or card companies, to confirm the financial transaction, the Distribution Centers responsible for fulfillment – ​​order fulfillment –, and carriers, to schedule the collection of material at the Distribution Centers or with suppliers. While this procedure could be completely automated, the survey found a number of information quality issues. Changing the name of cities, or the address thereof, and mistakes regarding the zip code number were some of the main problems detected by the survey. The results are diversions and returns of goods, multiple delivery attempts, increased costs, and customer dissatisfaction.

• Fulfillment of the order

The third step corresponds to fulfilling the order, which involves confirming the financial transaction, separating the goods or your order from the supplier, packaging, issuing the tax documentation, and delivering it to the carrier. As previously described, the financial transaction confirmation phase represented a major source of problems perceived during the research, along with information errors. As the websites do not inform about the availability of the goods, it was not possible to detect the impact of this variable on the logistical performance. Of all 71 orders completed and paid for, in only one case was there formal cancellation of the order and refund of payment due to non-availability of the goods, a fact that took 50 days to be communicated.

• The delivery

The fourth stage of the cycle corresponds to the delivery of goods to the recipient. Although all three companies use logistics operators, around 75% of the orders carried out in the survey were delivered by the Post Office. This percentage, however, varied from company to company. Company 1 used Correios in 95% of deliveries, company 2 in 70%, and company 3 in 55%. At this stage, there is an important deficiency that urgently needs to be resolved: none of the sites provide tracking information for the goods after they are delivered to the carrier. A possible reason could be the fact that Correios, responsible for most deliveries, still does not have a tracking system. This fact makes the delivery service extremely vulnerable, making it impossible to develop efficient failure recovery systems, one of the crucial aspects in a logistics system that wants to guarantee consistency and reliability. In fact, in general, the tracking systems of the companies studied are quite precarious, especially when compared with the best international practices. Only one of the three companies studied provides an online tracking system, even so, only until the moment of delivery of the goods to the carrier. In the other two, the customer is obliged to send emails to ask for information about the status of the order, and the response is generally slow and often erratic.

The result of these shortcomings is reflected in the time and consistency of delivery times. Figure 1 below shows the histogram of the distribution of cycle times – lead time – for the 69 orders paid and delivered, excluding the time spent paying the bank slip. It is good to remember that 3 orders were never delivered, and that 6 orders were not completed due to difficulties in the financial transaction.

Examining figure 1 draws attention to the huge dispersion verified in delivery times, which ranged from 1 to 50 days. If examined solely by the median, whose value was 6 days, the result could, at first, be considered satisfactory given the promise of delivery in 7 days. Even if the average was chosen as the standard, which reached a value of 8,91 days, it could be said that the result would be adequate, as the promised times reach up to 25 days, depending on the region and the product chosen. But if examined through the more rigorous lens of the consumer, this would be a misguided assessment. A median of 6 days means that half of consumers would take more than 6 days to receive the goods. In the case of considering the average as a performance standard in this specific case, we would be assuming that around 30% of consumers would receive the goods within a period of more than 8,91 days. The right thing to do in these situations would be to work with some percentile, instead of the mean or median. For example, we could use the 90% or 95% percentile as the delivery standard, which in this case would mean that 90% of customers would be guaranteed to receive the goods within 17 days, or that 95% would be guaranteed to receive the merchandise in up to 33 days, which we agree with is an extremely long period for someone who is buying a Brazilian popular music CD.

This erratic performance pattern does not appear to be the privilege of any particular site. In fact, when examining the performance of each site separately, the same dispersion pattern is verified. In the case of company 1, delivery times varied between 1 and 50 days, in company 2 between 2 and 42 days, and in company 3, between 3 and 18 days. It is good to remember that in the case of company 3, two of the paid orders were never delivered to the indicated address.

But some could argue that this great dispersion is justified due to the great differences in distance and infrastructure between the places to which the goods were sent. After all, a delivery in São Luiz dos Montes Belos, in the interior of Goiás would be much more problematic than a delivery in Belo Horizonte. Arriving in Rio Branco, in the North of the country, is more complex than arriving in Brasília, the capital of the Republic, especially if we consider that all three virtual stores surveyed are located in the Southeast region of the country. In fact, one of the initial hypotheses of the research, which also served as one of the motivators for its realization, was that consumers in more distant and less developed regions, those who would most profit from e-commerce, would be the most affected due to delivery problems, facing extended deadlines. The research results revealed that this was a totally wrong hypothesis. In fact, the data indicate that long delivery times have nothing to do with more distant regions or lesser-known locations. An examination of the six worst and six best cases of on-time performance shows that all five regions surveyed appear in both situations, as can be seen from table 2.

Although the long delivery times, and especially their great variability, are the most striking problems in the logistical performance of the analyzed companies, a series of other flaws also occurred in customer service. Among them, errors in the information and billing systems (7% of cases), product damage (3% of cases), delivery to the wrong address (3% of cases), and unavailability of the product sold (1% of cases) stand out. cases).

CONCLUSION

The widespread opinion that logistics represents one of the main barriers to the development of electronic commerce, and more specifically virtual retail, was fully confirmed by this research. When examining the order cycle process, and the sites' performance in terms of customer service, a number of shortcomings became evident. As a result, customer service, as measured by delivery times and their consistency, has been severely compromised.

The existence of this problem had already been detected, due to the continuous reports of the great national press. From this point of view, the results obtained do not bring great news. The surprise was to verify that the true causes of the problems are not those naturally assumed. It is generally thought that the task of delivering the product to the final consumer is the greatest difficulty in virtual retail. After all, door-to-door delivery across the country of a large number of orders is quite a challenge. However, research has clearly shown that, at least in the case of CD deliveries, this is not a problem, at least so far. And the reason for this is the existence of Correios, which with its huge operational network is capable, for example, of making a delivery in Londrina, Paraná within 24 hours after the transmission of the order, or in São Luiz do Maranhão and Goiania, in Goiás, in 48 hours, or even São Luiz de Montes Belos, in Goiás, and Rio Branco, in Acre, within 72 hours. In fact, when comparing the performance of Correios with the logistics operators, who also participated in the delivery process, it is evident that their performance was superior. Although it delivered 75% of all orders, Correios was responsible for 90% of the 12 best performing deliveries and only 50% of the 12 worst performing deliveries. Therefore, its superiority in terms of delivery times is clear.

These data are definitive proof that it is possible to deliver within an absolutely acceptable time frame, provided that all phases prior to the delivery activity occur without problems. Research has clearly shown that, unfortunately, this is not always the case. During the order cycle, a series of poorly structured activities and processes result in errors and delays that negatively impact the final result perceived by the customer. The first of these problems occurs before the transaction even starts. By establishing absolutely inaccurate delivery times (since they only start counting from events over which they have no control, such as payment confirmation made by banks and credit release made by card companies), virtual commerce companies create the first condition for the large dispersions of delivery times that were verified in the survey.

The use of bank slips, a way of facilitating purchases for those who do not have a credit card or do not feel confident using them on the Internet, was one of the main factors responsible for the large dispersion, represented by the long terms. Just remember that, although the numbers of orders placed by bank slip and card were practically the same, purchases by bank slip were responsible for 80% of the 10 orders with the worst performance in terms of delivery time, and only 10% in the case of the 10 orders with better performance.

The second set of problems has to do with poorly designed or poorly implemented operating systems and processes. The frequent informational errors verified in the survey, including changing cities, errors in the recipient's address, and in billing, generate serious problems in the next phase of delivery.

This problem is made even more serious by the fact that companies have not yet implemented an end-to-end tracking system, which starts when the order is received and ends with the satisfactory delivery of the goods to the customer. This makes it difficult to create a failure recovery system, which is fundamental in any reliable logistics system. After all mistakes can always happen. The fundamental thing is to detect them as quickly as possible, so that it is possible to correct them, minimizing their impact on the quality of the service.

Despite all the difficulties, virtual retail has advanced rapidly in Brazil. The problems observed are natural in all businesses undergoing implementation, especially when it comes to activities resulting from innovations. Seeking to discover the problems and being able to solve them is, however, a fundamental condition for long-term success. Like any new industry, virtual retail will inevitably move towards business concentration. In this process many will be acquired or disappear. Those who are more agile and capable of perfecting their operations will survive.
ⁱBank slips from one of the evaluated companies are sent to the billing address registered during the purchase. The order number is not identified on the slips, which made it difficult to control payments for purchases made. It was requested that the bank slip number be matched to the order number, however, this information was only answered after the end of the period established for placing orders.

Authors: Paulo Fleury and Maria Fernanda Hijjar