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E-Commerce and Operations Management

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Outline THE INTERNET ELECTRONIC COMMERCE

E-commerce Definitions ECONOMICS OF E-COMMERCE PRODUCT DESIGN E-PROCUREMENT

Online Catalogues RFQs and Bid Packaging Internet Outsourcing On-line Auctions

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Outline - Continued INVENTORY TRACKING INVENTORY REDUCTION

Warehousing for E-commerce Just-in-Time Delivery for E-commerce

SCHEDULING AND LOGISTICS IMPROVEMENT Coordinated Pickup and Delivery Logistics Cost Reduction

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Learning Objectives

When you complete this supplement, you should be able to :

Identify or Define: E-commerce E-business Online catalogues Outsourcing E-procurement

Describe or Explain: How E-commerce is changing the supply chain Online auctions Pass-through warehouses

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E-Commerce

The use of computer networks, primarily the internet, to buy and sell products, services,

and information.

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E-Business

“… all about cycle time, speed, globalization, enhanced productivity, reaching new customers and sharing knowledge across institutions for competitive advantage.”

Louis Gerstner,

Chairman, IBM

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E-Commerce DefinitionsBusiness-to business (B2B) Both sides of the transaction are

businesses, non-profit organizations, or governments.Business-to-consumer (B2C) E-commerce transactions where

customers are individual consumersConsumer-to-consumer (C2C) Consumers sell directly to each

other.Consumer-to-business (C2B) Individuals sell services or goods to

businesses

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Types of E-Commerce Transactions

Business Consumer

Business B2BGM/Ford/Daimler’s Covisint exchange

B2CAmazon, Dell, Net

Grocer.com

Consumer C2BPriceline, Travelocity

C2CEbay

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Types of Information Offered by Business-to-Business Applications Product - drawings, specifications, video or

simulation demonstrations, prices Production Processes - capacities,

commitments, product plans Transportation - carriers, lead times, costs Inventory - inventory tracking, levels, costs,

and location

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Types of Information Offered by Business-to-Business Applications

- Continued Suppliers - product catalogue, quality history,

lead times, terms, and conditions Supply Chain Alliances - key contact,

partners’ roles and responsibilities, and schedules

Supply Chain Process and Performance - process descriptions, performance measures such as quality and delivery

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Types of Information Offered by Business-to-Business Applications

- Continued Sales and Marketing - point-of-sale (POS)

data entry, promotions, pricing, discounts Customer - sales history and forecasts

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Security in the E-Commerce Environment

Serious issue! Multiple deprivation of service attacks on e-

commerce web sites 2/6 - 2/11, 2000; also, the attack of October 21, 2002, which flooded all 13 of the root servers of the Internet Domain Name System (DNS) (on main internet servers)

Security of data, proprietary business information Impact on the volume of sales and on the bottom

line.

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Benefits of E-commerce Improved, lower cost information Lower entry costs Available 24/7, virtually anywhere in the world Availability expands markets for both buyers and sellers Decreases the cost of paper-based information Reduces the cost of communication Provides richer communication than traditional means Fast delivery of digitized products Increased flexibility of location

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Limitations of E-commerce Lack of system security, reliability and standards Lack of privacy Insufficient bandwidth Integrating e-commerce software with existing

software is still a challenge Lack of trust in (1) unknowns on the other end of

the transaction, (2) integrity of the transaction itself, and(3) electronic money that is only bits and bytes

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Impact on Product Design

Shorter life cycles require faster product development and lead to time-based competition

Greater use of shared knowledge and collaboration - decreased development costs

More data sharing with suppliers and strategic partners

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E-Procurement

Purchasing or order release communicated over the internet or via approved online vendor catalogues

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Online Catalogues

Information about products made available in electronic form via the Internet. Provided by vendors Developed by buyers Provided by intermediaries

Often incorporate voice and video

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Internet Trading Exchanges Health care products: set up by Johnson & Johnson, G.E.

Medical Systems, Baxter International, Abbott Laboratories, and Medtronic Inc.; called the Global Health Care Exchange (ghx.com)

Defense and aerospace products: created by Boeing, Raytheon, Lockheed-Martin, and Britain’s BAE Systems; called the Aerospace and Defense Industry Trading Exchange (exostar.com)

Food, beverage, consumer products: set up by 49 leading food and beverage firms; called Transora (transora.com)

Retail goods: setup by Sears and France’s Carrefour; called Global Net Xchange, for retailers (gnx)

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Internet Trading Exchanges - Continued

Steel and metal products: such as New View Technologies (exchange.e-steel.com); and Metal-Site (metalsite.com)

Construction Industry: set up by Bechtel, Flour, and G.E. Power Systems (citadm.com) is one of 5 construction industry exchanges

Hotels: created by Marriott and Hyatt, and later joined by Fairmont, Six Continents, and Club Corp, Called Aventra (aventra.com) – buys for 2,800 hotels

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Traditional Medical Supply ChainManual processes

Hospital

Group purchasing organization for small, independent hospitals

DistributorSupplier

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On-Line Medical Supply Chain

On-line Global Health

Care

Automated web-based processes

Hospital

Group purchasing organization for small, independent hospitals

DistributorSupplier

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E-Commerce and Requests for Quotes (RFQs)

Extensive databases of supplier information, and ability to rapidly transfer specifications to vendors reduces time and costs

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Online Auctions

Useful for disposing of excess raw material, and discontinued and excess inventory

Online auctions lower entry barriers and increase the potential number of customers

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Significant savings (10%) Requires new skills and staffing in

procurement area

E-Procurement

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Inventory Tracking

Mass customization requires knowledge of location of all goods

Requires data collection, barcode technology, RF and electronic communications to track inventory in transit, on the shop floor, and in the warehouse

Customers can learn what is happening with their order

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Warehousing for E-Commerce

E-commerce warehouse is less a warehouse than a “pass through facility.”

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FedEx and Dell Computer

FedEx operates warehouses that pick, pack, test, and assemble products, then handle delivery and even customs clearance

FedEx’s “Virtual Order”integrates different companies web catalogues and customer orders for Dell; and then fulfills orders and delivers them through its fleet of trucks and planes.

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E-Commerce and JIT

E-commerce coordinates the supplier’s inventory system with the service capabilities of the delivery firm.

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Scheduling and Logistics Improvements

Coordinated pickup and delivery Fed Ex merges orders in transit

Logistics cost reduction Greater capacity utilization