E-Commerce and Operations Management

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
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E-Commerce
The use of computer networks, primarily the internet, to buy and sell products, services, and information.

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

E-Commerce Definitions
Business-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 consumers Consumer-to-consumer (C2C) Consumers sell directly to each other. Consumer-to-business (C2B) Individuals sell services or goods to businesses

Types of E-Commerce Transactions

Business Consumer

Business

B2B GM/Ford/Daimlers Covisint exchange C2B Priceline, Travelocity

B2C Amazon, Dell, Net Grocer.com C2C Ebay

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Consumer

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 ecommerce 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 12 bottom line.

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 14 money that is only bits and bytes

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 Britains 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 Frances 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.esteel.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 19 Continents, and Club Corp, Called

Traditional Medical Supply Chain Manual processes

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Supplier

Distributor

Hospital

Group purchasing organization for small, independent hospitals 20

On-Line Medical Supply Chain

Automated webbased processes
On-line Global Health Care
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Supplier

Distributor

Hospital

Group purchasing organization for small, independent hospitals 21

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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E-Procurement
 Significant savings (10%)  Requires new skills and staffing in procurement area

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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 25

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  FedExs Virtual Orderintegrates different companies web catalogues and customer orders for Dell; and then fulfills orders and delivers them through its fleet of trucks and planes. 27

E-Commerce and JIT

 E-commerce coordinates the suppliers 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

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