Distribution Strategy of Volvo Cars Last-Mile Logistics with Direct to End-Consumer Sales
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Dis tribution strategy of Volvo Cars last-mile logistics with direct to end-consumer sales Master’s thesis in Supply Chain Management MARCUS BROSTRÖM ROBERT SVANTESSON DEPARTMENT OF TECHNOLOGY MANAGEMENT AND ECONOMICS DIVISISION OF SERVICE MANAGEMENT AND LOGISTICS CHALMERS UNIVERSITY OF TECHNOLOGY Gothenburg, Sweden 2021 www.chalmers.se Report No. E2021:034 REPORT NO. E 2021:034 Distribution strategy of Volvo Cars last-mile logistics with direct to end-consumer sales MARCUS BROSTRÖM ROBERT SVANTESSON Department of Technology Management and Economics Division of Service Management and Logistics CHALMERS UNIVERSITY OF TECHNOLOGY Gothenburg, Sweden 2021 Distribution strategy of Volvo Cars last-mile logistics with direct to end-consumer sales MARCUS BROSTRÖM ROBERT SVANTESSON © MARCUS BROSTRÖM, 2021. © ROBERT SVANTESSON, 2021. Report no. E2021:034 Department of Technology Management and Economics Chalmers University of Technology SE-412 96 Göteborg Sweden Telephone + 46 (0)31-772 1000 Cover: Volvo Cars, 2021 Gothenburg, Sweden 2021 Distribution strategy of Volvo Cars last-mile logistics with direct to end-consumer sales MARCUS BROSTRÖM ROBERT SVANTESSON Department of Technology Management and Economics Chalmers University of Technology Abstract The development of e-commerce has evolved fast during the past decades within all commercial products with several different pick-ups and delivery options, return options, and interaction of both online and offline interaction. Companies are required to adapt to new trends and customer behavior which is also affecting the sales and distribution of cars. The impact of Covid-19 has enabled companies to move into more digital interaction with its customers due to limited physical interaction, which has also led to a demand for better remote communication. The thesis has investigated the direct-to-consumer strategy, including what digital and operational capabilities are necessary to establish a successful last-mile delivery of cars in the automotive industry. The data collected through the literature review and interviews complemented each other and was presented in the empirical findings. From the empirical findings, it can be concluded what and how trends and customer behavior shapes OEM's business model, challenges and opportunities with benchmarking last-mile delivery services in the e-commerce industry, and what digital and operational capabilities can support last-mile logistics. Furthermore, the SWOT analysis and Porter's five forces regarding the empirical findings were discussed in the last chapter. These models provided valuable insights into Volvo's strengths, weaknesses, opportunities, and threats regarding implementing the direct-to-consumer strategy and last-mile delivery services. Additionally, Porter's five forces give a broader picture of shaping strategy to be profitable in a market characterized by fierce competition. Keywords: Distribution, Strategy, Last-mile logistics, Business model, Wholesale model, Automotive industry, E-commerce, Direct sales. v Acknowledgement . It has been a developing journey with many learnings and challenging parts but help from both internal and external actors has made this project feasible. We want to thank Volvo Cars and our company supervisor Ove Lindmark for his support and dedication during this Master´s thesis. He has shown a genuine interest during the process and provided us with helpful suggestions along the way. We also want to thank all internal and external interview participants at Volvo Cars for taking the time to share their knowledge and expertise with us. They provided us with valuable insights which were hard to find in the literature and widened our perspectives regarding our research questions. Finally, we want to thank our supervisor and examiner at Chalmers, Gunnar Stefansson, who has guided us through this Master´s thesis and provided us with the proper guidelines and valuable inputs. Gothenburg, May 2021 _________________________ _________________________ Marcus Broström Robert Svantesson vi Table of content Abstract ....................................................................................................................................................... v 1. Introduction .................................................................................................................................... 1 1.1 Background................................................................................................................................... 1 1.2 Introduction of Volvo Cars .................................................................................................... 2 1.3 Purpose ........................................................................................................................................... 2 1.4 Research questions ............................................................................................................. 2 1.5 Scope and limitations............................................................................................................... 2 2. Literature review.......................................................................................................................... 2 2.1 Business model ........................................................................................................................... 3 2.1.2 Traditional business model in the automotive industry ............................... 4 2.1.3 Emerging business model in the automotive industry ................................... 5 2.1.4 Agent model ......................................................................................................................... 7 2.1.5 Trends & Customer behavior ...................................................................................... 9 2.1.6 Transformation from indirect to direct sales ................................................... 10 2.2 Distribution channels ........................................................................................................... 12 2.2.1 Single-channel logistics, multi-channel logistics and Omni-channel .... 12 2.2.2 Customer journey, Customer experience and Touchpoints ...................... 13 2.2.3 The role of dealership .................................................................................................. 14 2.2.4 Build to order and Build to stock ........................................................................... 14 2.3 Distribution services ............................................................................................................. 15 2.3.1 Last-mile delivery .......................................................................................................... 15 2.3.2 Third Party Logistics .................................................................................................... 16 2.4 Digital & Operational capabilities ................................................................................... 16 2.4.1 Platforms ............................................................................................................................ 16 2.5 Tools and Methods ................................................................................................................. 17 2.5.1 Porter’s five forces ........................................................................................................ 17 2.5.2 SWOT analysis ................................................................................................................. 18 3. Methodology ................................................................................................................................ 21 3.1 Research Strategy ................................................................................................................... 21 3.2 Ethics ............................................................................................................................................ 21 3.3 Trustworthiness ...................................................................................................................... 22 3.4 Start-up with Volvo Cars ..................................................................................................... 22 3.5 Interviews held with Volvo, affiliates and LSP ......................................................... 23 3.6 Research Approach ................................................................................................................ 24 4. Empirical findings ..................................................................................................................... 25 viii 4.1 Volvo's wholesale model ..................................................................................................... 25 4.2 Benchmarking last-mile delivery services in e-commerce compared with the automotive industry ............................................................................................................. 26 4.2.1 Challenges when benchmarking with e-commerce ...................................... 26 4.2.2 Opportunities when benchmarking with e-commerce................................ 28 4.3 Consumer trends within automotive .......................................................................... 32 4.3.1 Digital interaction .......................................................................................................... 32 4.3.2 Ownership ........................................................................................................................