E-business Group 8

8/6/2019 E-business Group 8

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Which EWhich E--BusinessBusiness

isisRight forRight forYour Supply Chain?Your Supply Chain?


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What is EWhat is E--Business?Business?

EE--business is a collection of business models andbusiness is a collection of business models andprocesses motivated by Internet technology, and focusingprocesses motivated by Internet technology, and focusingon improving the extended enterprise performanceon improving the extended enterprise performance

EE--commerce is the ability to perform major commercecommerce is the ability to perform major commercetransactions electronicallytransactions electronicallyee--commerce is part of ecommerce is part of e--BusinessBusinessInternet technology is the driver of the business changeInternet technology is the driver of the business changeThe focus is on the extended enterprise:The focus is on the extended enterprise:

IntraIntra--organizationalorganizationalBusiness to Consumer (B2C)Business to Consumer (B2C)

Business to Business (B2B)Business to Business (B2B)

The Internet can have a huge impact on supply chainThe Internet can have a huge impact on supply chainperformance.performance.


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What is EWhat is E--Business?Business?

Business transacted over the InternetBusiness transacted over the Internet

Is product information displayed on the Internet?Is product information displayed on the Internet?

Is negotiation over the Internet?Is negotiation over the Internet?Is the order placed over the Internet?Is the order placed over the Internet?

Is the order tracked over the Internet?Is the order tracked over the Internet?

Is the order fulfilled over the Internet?Is the order fulfilled over the Internet?

Is payment transacted over the Internet?Is payment transacted over the Internet?


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The Retail IndustryThe Retail Industry

BrickBrick--andand--mortar companies establish virtualmortar companies establish virtualretail storesretail stores

WalWal--Mart, KMart, K--Mart, Barnes & Noble, Circuit CityMart, Barnes & Noble, Circuit CityAn effective approachAn effective approach -- hybrid stockinghybrid stockingstrategystrategy

High volume/fast moving products for localHigh volume/fast moving products for local

storagestorageLow volume/slow moving products for browsingLow volume/slow moving products for browsingand purchase on line (risk pooling)and purchase on line (risk pooling)


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Existing Channels for BusinessExisting Channels for Business

Product informationProduct information

Physical stores, EDI, catalogs, face to face, NegotiationPhysical stores, EDI, catalogs, face to face, Negotiation

Face to face, phone, fax, sealed bids, Face to face, phone, fax, sealed bids,

Order placementOrder placement

Physical store, EDI, phone, fax, face to face, Physical store, EDI, phone, fax, face to face,

Order trackingOrder tracking

EDI, phone, fax, EDI, phone, fax,

Order fulfillmentOrder fulfillment

Customer pick up, physical deliveryCustomer pick up, physical delivery


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Potential RevenuePotential Revenue

OpportunitiesOpportunitiesDirect sales to customersDirect sales to customers

24 hour access for order placement24 hour access for order placement

Information aggregationInformation aggregation

Information sharing in supply chainInformation sharing in supply chain

Flexibility on pricing and promotionFlexibility on pricing and promotion

Price and service discriminationPrice and service discrimination

Faster time to marketFaster time to market

Efficient funds transferEfficient funds transfer -- reduce working capitalreduce working capital


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The Computer Industry:The Computer Industry:

Dell onDell on--linelineCustomer Order and

Manufacturing Cycle

Procurement Cycle

Dell Supply Chain Cycles

Procurement cycle

Customer Order and

Manufacturing Cycle

Customer

Order Arrives

PUSH PROCESSES PULL PROCESSES


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Opportunities exploited by DellOpportunities exploited by Dell

Revenue opportunitiesRevenue opportunities


Direct salesDirect salesProviding customization and large selection informationProviding customization and large selection information

Flexibility on pricing and promotionFlexibility on pricing and promotion


Efficient funds transferEfficient funds transfer -- reduce working capitalreduce working capital

Revenue negativesRevenue negatives

Longer response time than store and no help withLonger response time than store and no help withselectionselection


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Opportunities exploited by DellOpportunities exploited by Dell

Cost opportunitiesCost opportunities

Direct sales eliminating intermediaryDirect sales eliminating intermediary

Customer participation: Call center & catalog costsCustomer participation: Call center & catalog costs

Information sharing in supply chainInformation sharing in supply chain

Reduce facility costsReduce facility costs

Geographical Centralization and reduced inventoriesGeographical Centralization and reduced inventories

Outbound transportation costs increaseOutbound transportation costs increase


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Retailing:Retailing:

Amazon.comAmazon.com

P blis er

istrib tor

Am zo

stomer

Am zo ly i

P blis er

W re o se (?)

Ret il tore

stomer

Bookstore ly i

Pull Pull


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Opportunities exploited by AmazonOpportunities exploited by Amazon

Revenue opportunitiesRevenue opportunities


Providing large selection and other informationProviding large selection and other informationAttract customers who do not want to go to storeAttract customers who do not want to go to store

Flexibility on pricingFlexibility on pricing

Efficient funds transferEfficient funds transfer

Revenue negativesRevenue negatives

Intermediary (distributor) reduces marginIntermediary (distributor) reduces margin

Longer response time than bookstoreLonger response time than bookstore


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Potential opportunities exploitedPotential opportunities exploited

by Amazonby AmazonCost opportunitiesCost opportunities

Reduce facility costsReduce facility costs

Geographical centralization and reduced inventories:Geographical centralization and reduced inventories:Most effective for low volume, hard to forecast books,Most effective for low volume, hard to forecast books,least effective for high volume best sellersleast effective for high volume best sellers

Cost increasesCost increases

Outbound transportation costs increaseOutbound transportation costs increaseHandling cost increaseHandling cost increase


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OpportunitiesOpportunities

Going onGoing on--line, by itself, offers lower cost advantagesline, by itself, offers lower cost advantages(may be some disadvantages) than in Dell model(may be some disadvantages) than in Dell modelgiven current form of booksgiven current form of books

Cost and availability advantages are more significantCost and availability advantages are more significantfor low volume booksfor low volume books

OnOn--line channel has significant cost benefit ifline channel has significant cost benefit if booksbooks

are downloadableare downloadable


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How should bookstoreHow should bookstore

chains react?chains react?An on line channel allows it to match AmazonsAn on line channel allows it to match Amazonsrevenue advantagesrevenue advantages

Use a hybrid approach in stocking and pricingUse a hybrid approach in stocking and pricingHigh volume books for local storageHigh volume books for local storage

Low volume books for browsing and purchase on lineLow volume books for browsing and purchase on line

Pricing varies by delivery and pick up optionPricing varies by delivery and pick up option


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Grocery onGrocery on--lineline

Manufacturer

Online Grocer

ustomer

On-Line upply ain

Manufacturer

Ware ouse (?)

upermarket

ustomer

upermarket upply ain


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OpportunitiesOpportunities

Negligible opportunity to compete on cost, exceptNegligible opportunity to compete on cost, exceptmaybe for specialized low volume itemsmaybe for specialized low volume items

Competition has to be on convenience or some otherCompetition has to be on convenience or some otherform of value addedform of value added

Greatest opportunity may be for supermarket chainsGreatest opportunity may be for supermarket chainsto expand value offeringto expand value offering


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Key MessagesKey MessagesSome supply chains are better suited to exploit theSome supply chains are better suited to exploit thecost benefits of going oncost benefits of going on--lineline

Ability to increase processes in pull phaseAbility to increase processes in pull phase

Ability to delay product differentiationAbility to delay product differentiation

Big inventory benefit from geographical centralizationBig inventory benefit from geographical centralizationSignificant facility cost reduction on centralizationSignificant facility cost reduction on centralization

Transport to customer is a small fraction of product costTransport to customer is a small fraction of product cost

Allare achievedifproductis downloadable


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B2B:B2B: Tradeindia.comTradeindia.comRevenue opportunitiesRevenue opportunities


Large selection information with simple searchLarge selection information with simple search

Display of substitutable productsDisplay of substitutable productsFlexibility on pricing and promotionFlexibility on pricing and promotion

Ability to alert customer of order statusAbility to alert customer of order status



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B2B: Matching DemandB2B: Matching Demand

Shortage and Surplus CapacityShortage and Surplus Capacity

Potential opportunitiesPotential opportunities

Ability to aggregate and display all available surplusAbility to aggregate and display all available surpluscapacitycapacity

Better match of surplus capacity and unmet demandBetter match of surplus capacity and unmet demand


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Key MessagesKey Messages

Significant B2B opportunity to use Internet to reduceSignificant B2B opportunity to use Internet to reducecost and improve efficiency of existing processescost and improve efficiency of existing processes

Significant B2B opportunity to improve collaborationSignificant B2B opportunity to improve collaborationwithin existing supply chainswithin existing supply chains

Auction opportunity for B2B is primarily for matchingAuction opportunity for B2B is primarily for matchingdemand shortage with surplus capacity, not for basedemand shortage with surplus capacity, not for base

loadload


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EE--businessbusiness

Opportunities:Opportunities:Reduce Facility CostsReduce Facility Costs

Eliminate retail/distributor sitesEliminate retail/distributor sites

Reduce Inventory CostsReduce Inventory CostsApply the riskApply the risk--pooling conceptpooling concept

Centralized stockingCentralized stocking

Postponement of product differentiationPostponement of product differentiation

Use Dynamic Pricing Strategies to Improve SupplyUse Dynamic Pricing Strategies to Improve SupplyChain PerformanceChain Performance


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EE--businessbusiness

Opportunities:Opportunities:Supply Chain VisibilitySupply Chain Visibility

Reduction in the Bullwhip EffectReduction in the Bullwhip Effect

Reduction in InventoryReduction in InventoryImproved service levelImproved service level

Better utilization of ResourcesBetter utilization of Resources

Improve supply chain performanceImprove supply chain performance

Provide key performance measuresProvide key performance measures

Identify and alert when violations occurIdentify and alert when violations occur

Allow planning based on global supply chain dataAllow planning based on global supply chain data


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Distribution StrategiesDistribution Strategies

WarehousingWarehousing

Direct ShippingDirect Shipping

Lead times reducedLead times reducedsmaller truckssmaller trucks

no risk pooling effectsno risk pooling effects

CrossCross--DockingDocking


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WalWal--Marts remarkable successMarts remarkable success

A focus on satisfying customer needsA focus on satisfying customer needsproviding customers access to goods when and where theyproviding customers access to goods when and where theywant themwant themcost structures that enable competitive pricingcost structures that enable competitive pricing

This was achieved by wayThis was achieved by way the company replenishedthe company replenishedinventoryinventory the centerpiece of its strategy.the centerpiece of its strategy.WalWal--Mart employed a logistics technique known asMart employed a logistics technique known ascrosscross--dockingdocking

goods are continuously delivered to warehouses where theygoods are continuously delivered to warehouses where theyare dispatched to stores without ever sitting in inventory.are dispatched to stores without ever sitting in inventory.

This strategy reduced WalThis strategy reduced Wal--Marts cost of salesMarts cost of salessignificantly and made it possible to offer everydaysignificantly and made it possible to offer everydaylow prices to their customers.low prices to their customers.


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Distribution Strategies


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DirectDirect--toto--Consumer:Cost TradeConsumer:Cost Trade--OffOff

Cost Tr d -Off f or B yPC.com

$0$2$4

$6$8

$10$12$14$16

$18$20

0 5 10 15

Numberof C's

Cost($

million

Total Cost

Inventory

Transportation

Fixed Cost


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E-business Group 8

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