7-1

Agenda for this sessionAgenda for this session

• Business to consumer

• Business to business

• Implementation issues of note

• Portfolio discussion

7-2Business to consumer – Business to consumer – beyond retailingbeyond retailing

• Current Canadian data

• Providing information

• Providing service

• Providing entertainment

• The intelligent agent scenario

7-3

The The “current”“current” data data

http://www.statcan.ca/Daily/English/040923/d040923a.htm

In 2003, 3.2 million household up from 2.8 million the year before used e-commerce.

Shoppers – 4.9 million. Bought $3 billion on 21.1 million orders. Out of 688 billion of personal expenditure

7-4

The The “current”“current” data data

69% of e-commerce $ activity by Canadians was on Canadian sites.

60% of households regularly use the Internet for shopping

16% - travel arrangements

7-5

Most popular purchasesMost popular purchases

• Books, magazines, newspapers (30% of e-commerce households)

• Travel arrangements (22% up from 18%)• Biggest growth areas – consumer electronics

(+86%) and videos / DVDs (+68%)• Music downloading dropping• Growth areas (health products, beauty,

vitamins, clothing, jewelry, housewares, appliances)

7-6

Providing informationProviding information

Stock brokers Real estate

MLSbrokers

Travel sites Fare saver e-mails E-cruitment sites Finance advice Medical / legal advice

7-7

Providing servicesProviding services

Stock brokers Travel sites E-cruitment sites Banking Online bill presentment Online education Insurance Match making

7-8

Providing entertainmentProviding entertainment

• Broadcasting

• Music

• Video (in due course)

• Gambling and the other sins

• Online gaming

7-9

Some other B2C thoughtsSome other B2C thoughts

• What tools do traditional retailers have to offset B2C initiatives?

• Music in stores, music on websites?

• Giving control to the consumer

• Website predictability and store brand

• Cell phone spamming

• Contests

7-10

Business to BusinessBusiness to Business

• What is a supply chain and why is everyone talking about it?

• Net market vocabulary• Connecting businesses to businesses

using internetworking technologies.• The comparative importance of B2B

versus B2C.• Upstream, internal, downstream.

7-11

Business to BusinessBusiness to Business

• Businesses share information, much of it relatively structured.– Product– Customer– Transportation– Inventory– Sales and marketing– Supply chain

7-12

A supply chain is…A supply chain is…

• Network of facilities and distribution options for– getting inputs, typically materials, – processing them into intermediate and finished

products / services, – distributing finished products / services to

customers.

• Exist in both service and manufacturing organizations.

7-13

Supply chain considerationsSupply chain considerations

• Complexity of the chain may vary greatly from industry to industry and firm to firm.

• Supply chain management with vertical integration.

• Supply chain where the channel members are separate entities.

• Internal and external supply chains.

7-14

Some SCM historySome SCM history

• Supply chain is especially important in business models where:– there is significant value added processing – lots of suppliers on the input side in tiers– inventory and work-in-process costs are

expensive

• This traditionally meant manufacturers.• Others beginning to recognize the cost of

procurement and logistics too.

7-15

VocabularyVocabulary

– ERP– MRP / MRP II– MES– FCS– ATP– APS

7-16Applications - ATP Applications - ATP (Available To Promise)(Available To Promise)

• For dynamic interaction with existing and prospective customers

• Answers the question - Can I promise to have this to the customer and be confident (!) it will get there on time

• Should consider existing mix of orders, and production constraints

7-17

Applications - MRP II (Manufacturing Applications - MRP II (Manufacturing Resource Planning)Resource Planning)

• Based on infinite capacity assumption

• Primary focus on material

• Dynamic scheduling

• Producing the production schedule

• Who is doing what, when, in what order

• Problem - finite capacity constrained

7-18Applications - Demand forecasting and Applications - Demand forecasting and managementmanagement

• Typically based on statistical curve fitting against previous data

• ALN, and other AI tools beginning to emerge

• Distribution management

• Inter-plant optimization, including storage and forwarding considerations

7-19Questions and guesses for internet enabled Questions and guesses for internet enabled SCMSCM

• Integrating down to the production centre• Integrating with other company functions,

such as marketing, transportation• Integrating with other production facilities,

whether customers or suppliers• Integrating with other plants• Integrating planning, scheduling, with senior

management capital allocation

7-20What part of this is related to the Internet? What part of this is related to the Internet? (1)(1)

• Internet-based customer requests such as through your extranet

• Responding instantly to promise date requests

• Participating in web-enabled Internet based trading exchanges and supplier hubs

• Sharing schedules and demand forecasts with trading partners

7-21What part of this is related to the Internet? What part of this is related to the Internet? (2)(2)

• Smaller lots and more production runs - i.e., mass customization

• Web interface lowers training requirements • Self-service support • Operate as a networked business system

across the Web • SCM - purchased as a product or service

7-22

B2B VocabularyB2B Vocabulary

• Exchanges

• Supplier oriented markets

• Buyer oriented markets

• Intermediary oriented markets

• Procurement – supply (hand and glove)

• Back end systems

• Portals and vortals

7-23

RecapRecap

• Internet is an enabling technology– based on a series of open standards– using a common infrastructure– and a user-friendly interface that lowers training

time.

• In combination with other MIS applications – can increase coordination effectiveness– at relatively low cost.

• Since most of the coordination costs are be-tween companies, that’s where the payoff is.

7-24

Chapter 7

Implementation

McGraw-Hill/Irwin Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.

7-25Exhibit 7-1: Framework for ImplementationExhibit 7-1: Framework for Implementation

Business Model

Human Assets

Processes

Organizational Structure

SystemsCulture

Leadership

Partnerships

7-26Why Does Implementation Matter?Why Does Implementation Matter?

• Inappropriate strategy can be partially offset by proper implementation, but poor implementation will usually result in a company performing poorly in the marketplace

7-27Exhibit 7–2: Why Does Implementation Matter?Exhibit 7–2: Why Does Implementation Matter?

Success

All that can be done to assure success has been done.

Success

All that can be done to assure success has been done.

Roulette

Good execution will either mitigate poor strategy or hasten failure because strategy is not sound.

Trouble

Poor execution hampers good strategy. Managers may never become aware of strategic soundness because of execution inadequacies.

Failure

Bad strategy is difficult to diagnose because it is masked by poor execution.

Two things are wrong, making problems more difficult to fix.

Failure

Bad strategy is difficult to diagnose because it is masked by poor execution.

Two things are wrong, making problems more difficult to fix.

Poor

Good

Appropriate Inappropriate

Strategy

Source: Modified version of materials in Thomas V. Bonoma, The Marketing Edge (New York: The Free Press, 1985).

7-28Implementation Challenges for Implementation Challenges for Online FirmsOnline Firms

Six implementation challenges of online firms:1. Higher visibility to errors

– Internet firms are closely monitored by the media, thus mistakes become magnified

2. Lower switching costs– It costs a consumer very little to switch from one site

to another (click of the mouse) LET’S TALK ABOUT THIS

3. More dynamic competitive environment– Low barriers to entry result in opportunities for

competitors and new entrants, when implementation is poorly executed LET’S TALK ABOUT THIS

7-29Implementation Challenges Implementation Challenges for Online Firmsfor Online Firms (cont’d) (cont’d)

4. More fluid organizational boundaries– Increases contact between partnering

organizations, but elevates the complexity of the interactions

5. More dynamic market environment– Companies must implement quickly in order to

adjust to the changing marketplace

6. More complex linkages– Increased linkages result in a more bureaucratic

process, thus slowing the decision process LET’S TALK ABOUT THIS

7-30Exhibit 7-3: Challenges Exhibit 7-3: Challenges of Online Implementationof Online Implementation

Customer Driven

Customer Driven

Organization Driven

Organization Driven

More visibility of errors = Stronger

competitive implications of errors

More visibility of errors = Stronger

competitive implications of errors

Lower switching barriers = Increased importance of good

implementation

Lower switching barriers = Increased importance of good

implementation

More complex linkages = Increased

complexity of implementation

More complex linkages = Increased

complexity of implementation

More fluid organizational boundaries =

Increased complexity of implementation

More fluid organizational boundaries =

Increased complexity of implementation

More dynamic competitive

environment = Increased complexity

of implementation

More dynamic competitive

environment = Increased complexity

of implementation

7-31

Human AssetsHuman Assets

• Recruitment– Refers to the formal task of searching for the right

employees

• Selection– Is the process of making hiring decisions and formal job

offers

• Development– Providing the employee a professional development plan to

accentuate individual strengths and improve on weaknesses

• Retention– Constantly evaluating and “ranking” employees to ensure

the company provides the best work environment and best total compensation packages

7-32

ProcessesProcesses

• Patterns of interaction, coordination, communication, and decision-making that employees use to standardize how work is done.

• These must be configured by online firms

during implementation:– Resource-allocation processes– Human resources management processes– Manufacturing and distribution processes– Payment and billing processes– Customer support/handling processes

7-33Online and Offline IntegrationOnline and Offline Integration

• Types of Hybrid organizations:1. Single-Organization: Advantages

– Flexibility between channels– Consistent integration of online and offline

customer service– Managing a consistent brand– People- employees have option of learning

broader set of skills and capabilities– Taxes– Valuation– Systems

7-34Online and Offline IntegrationOnline and Offline Integration (cont’d) (cont’d)

2. Dual-organization: Advantages– Coordination and cooperation processes– License to cannibalize– People- two separate organizations for

recruiting– Allocations– Sales Tax exemption for Online sales

7-35Exhibit 7-4: Single Organization versus Exhibit 7-4: Single Organization versus Dual OrganizationDual Organization

CEO of company

• Company strategy

• Human assets

• Operations

• IT infrastructure

• Processes

• Culture

• Online and offline partnerships

Single Organization

Online CEO

• Online strategy

• Human assets

• Operations

• IT infrastructure

• Processes

• Culture

• Partnerships

Offline CEO

• Offline strategy

• Human assets

• Operations

• IT infrastructure

• Processes

• Culture

• Partnerships

Dual Organization

Company CEO

7-36Four Types of Online Supply ChainsFour Types of Online Supply Chains

1.Business-to-Consumer(B2C)– E-tailer has significant flexibility in its supply

chains

• One advantage is online retailers do not have to have the physical product in stock– Four types of B2C supply-chain models:– A. Stock-it-yourself– B. Outsource warehousing– C. Drop shipping– D. Fulfillment intermediaries

7-37Online Supply ChainsOnline Supply Chains (cont’d) (cont’d)

2. Business-to-Business(B2B)– Estimated to be 3 to 10 times larger than the B2C

market– Advantages include: lower input prices, reduced

inventory, reduced transaction costs, faster delivery, and better customer service

3. Consumer-to-Business(C2B)– Organize consumers together to create group-buying

power in order to reduce costs

4. Consumer-to-Consumer (C2C)– Firm facilitates person-to-person interaction, e.g., Ebay

7-38Exhibit 7-5: Four Types of Supply Exhibit 7-5: Four Types of Supply Chains Found OnlineChains Found Online

B2C - Business to ConsumerB2C - Business to Consumer

Stock it yourself.

Outsource warehousing

Drop shipping

Fulfillment intermediaries

Stock it yourself.

Outsource warehousing

Drop shipping

Fulfillment intermediaries

B2B - Business to BusinessB2B - Business to Business

Customer centric

Vertical hubs

Customer centric

Vertical hubs

C2C - Consumer to ConsumerC2C - Consumer to Consumer Much like a vertical hub (many websites

facilitate customer-to-customer sales)

Provides a forum for buyers and sellers to meet and trade directly

A global marketplace with a large and interested trading company

C2B - Consumer to BusinessC2B - Consumer to Business

Individual consumers place bids with businesses (such as Priceline) and businesses decide whether to sell

Individual consumers place bids with businesses (such as Priceline) and businesses decide whether to sell

7-39Getting Things Done: Getting Things Done: Integrative Resource SystemIntegrative Resource System

• Principle 1: Execution Is Led by Senior Management—Not the Troops

• Principle 2: Hold People Accountable for Meeting the Numbers

• Principle 3: It Is Not Just About the Numbers; It Is Also About the Process

• Principle 4: Continuous Improvement Is Still Relevant and Important

• Principle 5: The Customer Is the Starting Point

• Principle 6: Hire and Develop the “Doers”

7-40

RecapRecap

• Your future - demand driven supply chain

• B2B, B2C, C2C, G2C, G2B

• Changing the very notion of the “firm” to a networked model

• At the beginning, middle, and end of the day is a value proposition.