Chapter 4: E-Commerce and Supply Chain Management

Overview
This chapter describes the elements of the supply chain and its management. The
bullwhip effect is discussed. The various decisions in supply chain management are
discussed and evaluated. These include outsourcing, purchasing, use of technology,
warehousing and vertical integration. Finally, the performance measures and trends in
supply chain management are described.
Answers to Discussion Questions in Textbook
1. Discuss the different types of e-commerce.
E-commerce can be characterized by noting what entities are involved. Busines-tobusiness (B2B) concerns businesses working together to allow one to receive what it
needs as inputs from another. Business to consumer (B2B) is the retail activity. Here
companies use electronic means to deliver goods and services to consumers.
Consumer-to –consumer (C2C) occurs when consumers can sell directly to each
other, such as on the auction site, eBay. Peer-to-peer (P2P) links users, allowing them
to share information. Finally, m-commerce involves providing e-commerce access
using wireless technology.
2. Explain the different revenue models used in e-commerce.
Operators of e-commerce web sites can support their activities using one or more of
several revenue models. A site that attracts users and then displays advertisements
from other businesses is using the advertising revenue model. A site that charges a
fixed periodic fee for access to its content is using a subscription revenue model.
Some sites charge a fee for a completed transaction, such as a stock trade. This is the
transaction fee model. Companies that earn directly from what customers buy use the
sales revenue model. Finally, a site may earn its revenue by referring visitors to other
sites. This is the affiliate model.
3. Give two examples from the Internet for each of the different revenue models used in
e-commerce.
Revenue Model
Advertising
Subscription
Transaction fee
Sales
Affiliate

Examples
Yahoo.com, Mail.com
The Wall Street Journal on-line, Investors Business Daily online
Ameritrade, Datek
Amazon.com, Lands’end
Best20sites.com, Expatriate online

4. Describe the evolution of business-to-business (B2B e-commerce.

B2B can be said to have started in the 1970’s with automated order entry systems that used telephone connections. a company can emphasize short delivery times. For the next item you buy. . The criteria I used were speed of delivery. 8. the tier one supplier is a company that produces the final packaged product. How do supply chains for service organizations differ from supply chains for manufacturing organizations? Service supply chains typically do not include external suppliers. and regulations. From there. Firms may need to provide many market specific variants and versions of their products to meet local tastes. Longer delivery times can make forecasting less accurate. Explain the concept of partnering. The cans are produced by obtaining the raw materials from mines. In the late 1970s electronic data interchange (EDI) provided standards for the computer-to-computer exchange of information such as invoices and purchase orders. and manufacturing operations. 5. This can impact transportation. Currency fluctuations can change prices between contract and delivery. ability to customize. In addition. as well as processing operations. 7. Manufacturing supply chains typically include a greater variety of links in the chain in terms of the types of companies. which I purchased from Dell. Manufacturers have external suppliers in the different tiers. Dell offers specials to professors and students. 9. the availability of trained workers. They are then placed in a warehouse. including advantages and disadvantages. What criteria did you use to choose the supplier? My last major purchase was a new computer. 6. How can companies satisfy increasing customer expectations? Increased customer expectations can be satisfied by providing customers with value. The members of the supply chain can be dispersed around the world. quality guarantees or low prices. conditions. followed by a processing in a plant. price and features. For example. I recently bought some soft drinks in cans. Different countries will have varying levels of infrastructure development. The partners in the supply chain will not all use the same currency. The cans are then filled with the liquid at the bottling companies. Global supply chains face several additional challenges. excellent customer service. 10. This is referred to as product proliferation. they are shipped to the retailers who then sell to you and me. communications. This can increase shipping time and pipeline inventory. Describe the additional factors that affect global supply chains. Think of your last major purchase. determine its supply chain.

pallets. They can eliminate the need to unpack. 13. Warehouses allow us to consolidate the transport of products. Describe the kinds of information that are necessary in a supply chain. Electronic marketplaces allow easier communication between suppliers and customers. 15. or containers. The disadvantages are the violation of trust that can cause problems and the inability to quickly change suppliers if problems arise. and greater flexibility. RFID tags may be attached to cases. The use of a single supplier allows us to receive quantity discounts. or scan contents to be able to keep track of material movements and inventory levels. creating Industry Consortia. shared information and vision.Partnering is the development of a close relationship with a supplier. easily schedule deliveries. Sometimes. The benefit of using multiple suppliers is a lower risk of supply interruption. E-purchasing companies connect companies with suppliers of MRO supplies. Describe the role of warehouses in a supply chain. The advantages are the ability to reduce costs. based on trust. 12. the location of items within the warehouse. E-distributors can represent many different suppliers. Describe the current trends in e-commerce and how they affect supply chain management. the movement of products. RFID uses unpowered microchips to transmit encoded information to antennae. The presumption of trust may have caused the delay in detecting quality problems. On-line exchanges are third parties that create an on-line marketplace for a large number of buyers and sellers in a particular industry. . They may also automate the process using Value Chain Management (VCM). improve quality and planning. a consortium within the industry will set up the exchange. the possibility of better service and price. Recall the Ford/Firestone quality fiasco that is currently being litigated. We need to track sales. 11. mix products and provide service by being able to quickly send products to the customers. and know where items are in the production process. count. and form a good relationship. 14. Explain the benefits of using a single supplier as opposed to multiple suppliers. Describe radio frequency identification (RFID) and how it could be used by an organization.