Modularization of the front-end logistics services in e-fulfillment

Abstract

This study exploits service modularity in front-end logistics services in e-fulfillment, from a customer-centric approach, particularly in order management, delivery, and return. Through an online survey of UK customers, the service priorities of 494 respondents via AHP (Analytic Hierarchical Process) were analyzed. Extracting customers' service priorities, ordering behavior, and demographic information as input data, the clustering algorithm KAMILA (KAy-means for MIxed LArge data sets) was further applied. The three identified customer clusters (multichannel shoppers, infrequent shoppers, and online fans) provide preliminary evidence on how commonality and variability aspects of service modularity in front-end logistics services can optimize the number of service options and their performance levels. Therefore, our study, building on value co-creation and modularity, proposes a systematic way of exploiting service modularity for the customer segmentation process that addresses heterogeneous customer preferences cost-efficiently and uncomplicatedly. Furthermore, we provide a framework for the governance of front-end logistics services, guiding outsourcing decisions. Accordingly, it reveals the implications of customer priorities and service decomposition logic choices on value creation. Finally, the propositions formulated aim to develop theoretical foundations for explaining how the heterogeneity in customer priorities for logistics services can be managed with modularity, creating value both for customers and retailers.