Application of Value Stream Mapping in E-Commerce: History
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Hongrui Liu

In recent years, the e-commerce market has grown significantly, and the online retail market has become very competitive. Online retailers strive to improve their supply chain operations to reduce costs and to improve customer satisfaction. Value stream mapping (VSM), a tool created by the lean production movement to identify and reduce errors, losses, and lead time and to improve value-added activities, has been proven to be effective in many manufacturing processes. In this study, we investigate the application of value stream mapping (VSM) in the supply chain of an e-commerce retailer on Amazon. By visualizing the entire supply chain with VSM, the waste that is produced during the delivery process from the retailer to the customer was identified. 

  • e-commerce supply chain
  • value stream mapping
  • customer satisfaction
  • cost reduction

1. Introduction

E-commerce has been the fastest-growing channel in the retail industry over the last decade, and online buying and selling have become increasingly prevalent [1][2]. The coronavirus pandemic 2019 (COVID-19) has changed people’s life profoundly, and e-commerce has played an even more important role in maintaining the economic health of society [3]. Euromonitor estimates that 17% of goods will be bought online in 2021, nearly doubling from 2016. In 2020, the amount of goods bought online globally grew by 24%, reaching a total of USD 4.2 trillion worldwide, while stored-based sales declined by 7% [4]. With e-commerce, not only can buyers enjoy the convenience of buying items anytime, anywhere, but online channels also offer great opportunities for the retailers to sell their products directly to customers all over the world without the need for a physical store [5][6]. The advantages are even more obvious in the current pandemic situation, when shopping at physical stores is not convenient. At the same time, e-commerce has increased competition, as more businesses choose to sell their products online [7][8][9]. Online retailers face some unique challenges compared to those selling their products using the traditional brick-and-mortar selling model. For example, the delivery time is usually long, customer service is difficult since there is no direct interaction with the customer, and the product, information, and fund transactions heavily rely on e-marketplace platforms and third-party logistics. To remain competitive in the market, it is important for online retailers to understand their supply chain issues and to manage their supply chain effectively in order to reduce costs and to improve customer satisfaction [10][11].
A typical supply chain includes multiple stages, ranging from suppliers, manufacturers, distributors, retailers, and finally, to customers. In the e-commerce supply chain, an additional party may be needed to operate an e-marketplace. The different supply chain stages are interconnected to coordinate in terms of the exchange of products, information, and funds to meet the needs of customers [12][13][14]. If issues are present at any stage in the supply chain, then they could weaken the advantages of e-commerce and block the development of innovation [15]. A systematic view and analysis of all of the activities that are involved will be helpful in identifying issues and in ensuring effective coordination and integration in the supply chain to reduce costs and improve profitability [16][17].
Value stream mapping (VSM) is a lean methodology that can be used to systematically measure, evaluate, and integrate all of the activities that are involved in production processes to achieve a competitive advantage by reducing errors, losses, and lead-time and to improve value-added activities [18]. VSM was originally developed with the lean production movement and has mostly been used in the manufacturing industry. The concept of lean production was introduced by John Krafcik in 1988 [19] and James P. Womack in 1990 [20] as a management principle to elaborate the manufacturing method used by the Toyota Production System (TPS). This management principle has been recognized for its effectiveness in productivity, continuous improvement, product quality, and timely delivery to customers [21][22][23]. It utilizes graphical tools to show the key elements of a production system as well as the flow of materials and information in the production process. By helping us to understand how activities and operations are connected, VSM lays a basis for the process to be analyzed and drives improvement [24][25]. As the core idea of lean production is maximizing customer value while minimizing waste, which is the same as supply chain management in terms of its philosophical and operational goals and perspectives, we propose to investigate the application of VSM in the analysis of supply chain in e-commerce.
In this paper, the application of VSM in the e-commerce supply chain is explored through a carefully selected e-retailer from Shenzhen, China. The entire supply chain of this e-retailer is visualized using VSM to identify waste. The five whys method is then used to determine the root cause of the waste. The five whys s method is an iterative interrogative technique that can be used to seek the root cause of a problem by asking increasingly granular why questions [26]. Furthermore, a two-stage scoring method based on fuzzy set theory is developed to evaluate and compare the advantages and disadvantages of two different supply chain operation models in order to identify a strategy for improvement. The supply chain process under the new operating model is again visualized using VSM to compare it to the original one. The cost advantage and improvement in the supply chain process are analyzed.
The contribution of this work includes (1) the investigation and adaptation of the application of the lean tool, VSM, in the e-commerce supply chain to systematically assess and analyze the entire supply chain process, from suppliers to customers, to identify potential waste; (2) the integration of the five whys method with VSM to identify the root cause of waste; and (3) the development of a two-stage scoring method to evaluate different operation models. The research provides a systematic approach that can be used to access, evaluate, and improve the e-commerce supply chain that can be applied to all common e-businesses.

2. History

Supply chain management in e-commerce has attracted the attention of professionals and managers worldwide since the 1990s and has been investigated in a number of publications [27]. Early studies on the e-commence supply chain were focused on the structure in creating and implementing an integrated e-supply chain system [28][29][30]. Research then shifted to the operation and management of the e-supply chain after e-commerce merged into the retail market and became more mature. For example, shipping costs and free shipping policies for online retailers were studied in [31][32]. The practical operation of e-procurement was studied in [33][34]. Transportation costs were identified as being a critical part of the total logistic costs in e-commerce, and an efficient intermodal transportation auction was proposed in [35]. Channel selection with multiple selling channels and pricing strategies were investigated in [36]. The online scheduling of order batching and delivery were examined in [37]. The influence of consumer channel loyalty and the market power structure on the pricing strategies of online selling was investigated in [38]. The impact of knowledge management and organizational innovativeness on e-commerce supply chain performance was examined in [39][40]. Reference [41] studied the decision-making and coordination of an e-commerce supply chain with manufacturer fairness concerns. The implementation status of e-commerce and e-health in the United Kingdom is reviewed in [42]. The e-banking market in Europe was explored in [43]. A recent survey paper by Kumar [44] showed that e-commerce research is expanding to embrace emerging tools, business models, and applications focusing on the vibrant growth in e-commerce. Existing studies on e-commerce supply chain management are mostly focused on a specific issue or stage of the supply chain. There is a lack of a systematic methodology that can be used to assess and evaluate the entire e-commerce supply chain process and to drive improvement.
VSM utilizes graphical tools to show information flow and material flow from raw materials to the deliveries, which provides a systematic view of the processes that are involved in completing a product or a service and drives improvement [18]. VSM is a lean production methodology that was made popular by Rother and Shook in 1999 [45]. As the lean concept is originated from the manufacturing industry, early studies related to VSM focused on theories and practical procedures of VSM in manufacturing sector applications [18][46][47]. Inspired by the VSM research in the manufacturing sector and the effectiveness of the methodology, research efforts have implemented VSM in other sectors to achieve improvements in productivity [48]. For example, the application of VSM is explored in the product development process to identify waste, inefficiency, and non-value-added steps [49]. VSM is used to improve environmental sustainability [50][51][52]. VSM has attracted a great deal of interest in a wide range of service sectors to improve health care efficiency [53][54] and sales processes [55]. The graphical view of VSM helps to understand the processes that are involved in providing a product or service to identify waste, while the five whys method can be used to drill down the root cause of waste. The five whys method is the practice of asking the question of why something is how it is five or more in order to arrive at the root cause of the failure [56]. The method was originally developed by Sakichi Toyoda and was used in the Toyota Motor Corporation during the evolution of its manufacturing methodologies [56][57]. Since then, the method has been widely used in different problem domains because it is very intuitive, easy to apply, and has great adaptivity. The details of the methodology and its implementation procedures can be found in many Lean and Six Sigma handbooks [56]. The five whys method has been proven to be effective in identifying the root causes of failures in many manufacturing and service sector case studies [57][58][59][60][61][62][63].

3. Findings

Recently, e-commerce has become one of the most important pillars of the economy, and the e-commerce supply chain is continuously being improved to increase efficiency and to reduce costs. One important part of successful supply chain management is the ability to visualize each link in the supply chain [64][65]. In this paper, we developed an easy-to-follow methodology to systematically assess, evaluate, and the improve e-commerce supply chain by utilizing VSM. The methodology has some novel features that contribute to the existing research and industry practitioners.
First, the methodology integrates VSM, the five why method, and a scoring system into a systematic tool that visualizes supply chain process, identifies waste and root causes and provides solutions for industry practitioners.
Second, a two-stage scoring method was designed to evaluate the supply chain operation options. The first stage of the scoring system utilizes fuzzy set theory that allows the importance of the logistic factors to be expressed as a range between 0 and 1, which is more practical. The key factors that were identified in the first stage are mapped to service features offered by different logistic operation models. This makes the service features more intuitive to business managers who may have limited knowledge of detailed logistic terms and facilitates the final evaluation of each logistic operation model. A simple yet effective four-quadrant scoring methodology was then used in the second stage to obtain final scores for different logistic operation models. The methodology is demonstrated through a typical Amazon e-retailer case study. The parties and activities involved, the links in-between, and the flow of information and products in the supply chain process are visualized through the construction of the VSM. The entire supply chain process flow is better understood, and the potential waste is easily identified. The root cause of the waste was then determined using the five whys method. The two-stage scoring method was used to evaluate and compare two logistic models to identify a strategy for improvement. The methodology is effective in improving e-commerce supply chain efficiency, customer satisfaction, and cost reductions.

This entry is adapted from the peer-reviewed paper 10.3390/su14020713

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