MTI 425 - E-Commerce Initiatives (Chapter 6) PDF

MTI-425: Chapter 6
E-commerce initiatives
MTI-425: Innovación del Negocio basada en TI Profesor Pierre Hadaya
1 – Initiatives in the first wave of the transitional model

2 – Initiatives in the second wave
3 – Initiatives in the third wave
4 – Initiatives in the fourth wave
5 – Initiatives in the fifth wave

  EDI
  Transaction Delivery Networks
  Direct sales
  Direct procurement
  Electronic markets
  Sectorial platform
  …

  EDI
  Direct sales
  …
Who is Bulova?
•  Founded in 1875 with headquarters in New York, Bulova
Corporation is part of the American-owned and operated Loews
Corporation
•  In addition to its heralded line of Bulova fine watches and clocks,
the company offers wristwatch lines from Caravelle, Wittnauer and
Accutron
The business challenge

Bulova risked being charged vendor compliance fees for missing
performance benchmarks, such as proper routing of shipments when a
retailer’s EDI standards are not met
MTI-425: Innovación del Negocio basada en TI Source:

Profesor Pierre Hadaya Inovis
The solution
•  Inovis TrustedLink iSeries
•  TrustedLink iSeries converts Bulova’s internal application
data formats to and from Electronic Data Interchange (EDI)
formats and executes the commands for translation
processing between the firm and its customers

Main features/benefits
1.  Transaction-center monitoring: Powerful document management area
providing Bulova’s users with access to all inbound and outbound
documents. It also tracks which transactions have been processed at any
given moment.
2.  Backend integration (via ERP): At the end of the day, all shipments are
confirmed, shipping information is transmitted back through the system and
advance ship notices and order confirmations are transmitted to those
customers that require them. Items that are shipped reconcile to inventory,
the general ledger and accounts receivable
3.  Product tracking status: A barcode system in each step of product
transfer can track the exact product status
4.  Visual Mapper: Helps Bulova’s IT department to deploy new trading
partners a full 20 percent faster
5.  Sophisticated communications: Bulova can securely communicate with
customers with EDI via a Value-Added Network, or EDI over the Internet
using AS1or AS2 protocols
  EDI
  Direct sales
  …
•  Although it has been around for more than 30 years, EDI carries
less than 2% of the worldwide traffic in structured documents
•  The high costs (and high headaches) associated with setting up

and maintaining EDI have proven a formidable impediment to EDI
adoption – especially within small to medium sized enterprises
(SMEs)

Who is Do it Best Corporation?
•  Do it Best Corp. is a hardware and building materials buying cooperative
offering products and retail services to hardware, home center and
lumberyard retailers
•  Founded in 1945 as Hardware Wholesalers, Inc. (HWI), Do it Best Corp.

has 4,200 independently owned member-retailers worldwide
•  The $2.44 billion corporation offers more than 68,000 stocked items,
making its business-to-consumer website, doitbest.com, the “World’s
Largest Hardware Store”
•  Its member-retailers obtain products from seven distribution centers

around the United States or directly from manufacturers

Profesor PierreCycloneCommerce
Hadaya
The challenge
•  For Do it Best Corp. just 10 percent of its suppliers constitute 50
percent of the 1.5 million EDI documents transmitted via direct
connect or a Value Added Network (VAN) every year
•  Do it Best Corp. exchanges more than 125,000 documents per month

with these suppliers, including purchase orders, invoices and daily
product activity reports
•  Product activity reports provide 20 vendor managed inventory (VMI)

suppliers with sales activity data from the Do it Best Corp. retail service
centers. “We’re sending large-volume files containing sales data for
every SKU from every one of our warehouses six days a week,” says
James McLauchlin, EDI Analyst and Coordinator for Do it Best Corp.
“With a VAN, this can get expensive over time.”

Hadaya
The challenge (continued)
•  VAN costs exceeding $15,000 monthly—and rising
•  But high communication costs are not his only consideration. For Do it
Best Corp., fast turnaround is an essential component to a successful
EDI based credit authorization process. Slow data transmission means
delayed credit responses back to suppliers, which in turn results in
delayed same-day shipments to member-retailers
•  Do it Best Corp. found modem communications to be support-intensive

and unreliable, and suppliers requested a faster process
•  The company needed to find a secure way to move both VMI and non-
VMI partners to the Internet in order to make document exchange fast,
cost-effective, reliable and manageable

Hadaya
The solution
•  Do it Best Corp. initially rolled out Cyclone’s Transaction Delivery
Network gateway with its high-volume trading partners, who
account for 80% of the costs attributed to VAN and direct dial-up
communications methods
•  The Do it Best Corp. trading community now uses the Internet for
exchanging purchase orders, invoices, acknowledgements, credit
requests/confirmations, sales forecasts and daily product activity with a
growing percentage of its Value Chain
•  Cyclone handles multiple IP protocols and major security technologies,

so Do it Best Corp. trading partners do not have to alter existing IT
infrastructures. This makes it easy for the trading partner base to ramp
quickly as Do it Best Corp. and its EDI volume grow

Hadaya
The benefits
•  For Do it Best Corp. the most obvious result of implementing

Cyclone was immediate and substantial cost savings with its high-volume
VMI trading partners. “We saved almost 15 percent in VAN charges in the
first year,” says McLauchlin. “Cyclone paid for itself quickly in
communications savings alone.”
•  With Cyclone, rapidly and securely connecting trading partners over the
Internet translates to reduced data cycle times, providing Do it Best Corp.
suppliers with up-to-the-minute information for replenishment and order
processing

Hadaya
The benefits (continued)

•  Cyclone reduces partner setup time to just hours, down from
days or weeks typically required for modem, custom FTP and other
alternatives
•  For Do it Best Corp.’s drop-ship suppliers, who sell directly to member

stores, McLauchlin reports improvements in invoice manageability and
reliability

Hadaya
  EDI
  Direct sales
  …
  Catalogue
  Auctions
  …

  Catalogue
  Auctions
  …
The vendor exposes

the price of its
products/services
B
$ B
S
The buyer purchases

the products/services at
B
the prescribed price
Product or service $ Price movement Iterations

$
S Buyer
Transaction initiated by the seller
Winner
S
Seller Transaction initiated by the buyer

The foundation of a suite of interactive networked applications
that provide immediate, open access to Cisco information,
resources, and systems
www.cisco.com
n et
Inter Big
customers
Internet
Inter
n et Partners
•  More than 200,000 registered users

•  $7 billion in transactions annually —
over $21 million daily

Services
•  Configuration tool •  Returns Tool
•  Pricing tool •  Returns Status Tool
•  Lead time tool •  Service Contract Tools
•  Ordering tool •  Product Upgrade Tool
•  Order Status Tool •  Notification Tools
•  Invoice Tools •  Billing Address Tool
•  Aged Account Summary Tool •  Etc.
Benefits
•  $30 million annually in cost savings
•  $250 million in savings by distributing 90 percent of Cisco software online-

over 65,000 downloads each week (First company to do this)
•  15% increase in productivity for Cisco's sales force
•  80% of non-technical support questions are answered online
•  Customer satisfaction increased from 3.4 to 4.2 (out of 5) since 1995
•  Nearly 100% of orders submitted online are accurate

  EDI
  Direct sales
  …
  Catalogue
  Reverse auctions
  RFQ(P) / bidding
  …

  Catalogue
  …
The quantity offered

is limited The buyers sets the
maximum price
$ $$
V V $
A
$$$
V
The process ends when
there is only one seller left
or at the end of the
prescribed time of the
buyer

$
S Buyer
Winner
S
Reverse electronic auction software application developed in six
weeks, for less than $20,000 by two people in GE's
transportation business (GETS)
Functionalities
•  Private reverse auctions
•  Most of the auctions are “non-binding events”, in which GE takes
the results and reviews other issues like product quality, suppliers’
reliability and shipping times before awarding a supply contract
•  GE is now looking to build a multivariate auction tool, which will
automatically evaluate suppliers on more than just price attributes
•  A new application is being designed to house the results of each
auction and compare results for future opportunities

Benefits
•  GE spends $50-$60 billion per year. Company officials believe
50%-60% of that amount can be auctioned
•  GE had more than 1,500 buyers using SourceBid
•  Business and digitization efforts will contribute $0.10 earning per
share growth in 2001
•  GE sells the tool to its Tier 1 suppliers to increase competition among
Tier 2 suppliers
•  GE sells the rewrite of the tool to any company (95% of the work done
for customers in 58 countries)
Amount spent through

Year Amount saved
reverse auctions
1999 $200,000 Unknown
2000 $6.4 billion $480 million
2001 $14-$15 billion $600 million
  Virtual Private Networks (VPN)

  EDI
  Direct sales
  …

  Multivendor catalogue
  Trading exchange
  Dynamic pricing
  …
  …

The sellers send their offer
(without knowing the The buyer announces the
competing offers) The quantity
conditions of its RFP
demanded is limited
Q/$ QQ/$
S S $
B
S Q/$$
S After receiving all the offers

and/or after the prescribed
time, the buyer chooses the
the best offer

$
S Buyer
Winner
S
Structured online RFQ (Request for Quotation)

creation and publishing
•  Founded 1995 •  Over 150,000 suppliers from

•  $14.0 billion in volume over 55 countries
•  $2.7 billion in savings •  Over 165 categories
•  Over 9,200 auctions •  Over 30 languages
•  100 buying companies
Value added services
•  Advanced, flexible RFQ/RFP formats (and soon a collaboration
platform with the acquisition of Adexa )
•  Asset management
•  Sourcing solutions
•  Integration with your organization's existing ERP/MRP systems
•  New opportunity identification
•  Supplier identification, recruiting, and screening
•  Post-bid analysis
•  Project management services
•  Provider of e-commerce solutions
Case Study
Member of FreeMarkets since 1998 (in 2003)
Conducted 4 RFQ events on FreeMarkets RFQ platform:

-  2 engines (to create electricity)
-  2 other complex products

How it works?
1) Before the event
•  P&W works with FreeMarkets to prepare the RFQ

•  FreeMarkets generates the RFQ
•  Appropriate technical documents and drawings are associated
to the RFQ
•  FreeMarkets sends the complete RFQ to all the suppliers
(chosen by both P&W and FreeMarkets) invited to participate
to the event
How it works?
2) During the event
•  At the appropriate date and time, suppliers are invited to log on

the FreeMarkets electronic platform
•  An event can last from 1 hour to 3 days, depending on the
product complexity and the number of lots to bid for
•  During the event, the suppliers can bid in real time
•  They can also compare their offer to the competition

How it works?
3) After the event
•  Each supplier sends its final offer to P&W (including possible

cost reductions)
•  P&W with FreeMarkets evaluates each of the offers based on
the determined criteria's (past experience, quality, delivery,
price, etc.)
•  P&W selects winning suppliers for each of the lots
Benefits
•  Up to 50% time reduction for the RFQ process
•  Up to 50% reduction in procurement costs
•  Outsource non-value added processes to FreeMarkets
•  Supplier screening conducted by FreeMarkets
•  Improved communication with suppliers
•  Use FreeMarkets expertise to find new suppliers

  RFQ(P) /bidding
  …
S B
Non-structured
negociation
$ $
S B
S B
Every seller indicates Every buyer indicates
the price and quantity the price and quantity
he’s willing to sell for he’s willing to pay

$
S Buyer
Winner
S

Trading platform for the chemical industry
•  Launched in 1995
•  11,000 prequalified members in 5,000 companies from 110
countries
Technology
Buyers partner Suppliers
Virtual
inventory
•  Petrochemical products
•  Plastics and polymers
•  Specialized chemical products
•  Pharmaceutical products
•  Agro products
•  Average transaction: $1.5 million US

•  Cost to the buyer or supplier: 0.2-2.0% fee per transaction
•  Up to 20% savings on procurement costs

  RFQ(P) /bidding
  …
S The marketplace
B
matches the order
in real time
$ $
S $ B
S B
Every seller indicates Every buyer indicates
the price he’s willing to the price he’s willing to
sell for pay

$
S Buyer
Winner
S

“Bandwidth exchange platform”
Sellers Pool of Buyers

Pool of sellers buyers
Electronic
intermediary
Arbinet brings buyers

and sellers together so
they can swap
bandwidth dynamically
(and in anonymity)
100 telecom carriers now use Arbinet-thexchange
to trade bandwidth online
Benefits
•  Neutral and unbiased
•  Maximize network utilization of carriers
•  Automated delivery of traffic: Interconnects all exchange members
through a central switching facilities
•  Spot market is replacing long term contracts
•  Offers a way for companies to price their services anonymously
•  Other value added services: credit risk assurance services offered in
partnership with GE Capital Commercial Services

  Virtual Private Networks (VPN)
  EDI
  Direct sales
  …
Pegasus Electronic Distribution (PED) is a universal electronic

reservations switch to connect hotel reservation systems

Global Distribution 130,000 NET
Systems
RESERVATIONS PER DAY
Travel 70% of all the electronic hotel Company’s
reservations made worldwide Hotels Web site
agent
Travel
agent
Pegasus
Travel
agent Electronic Central
Others Distribution Others
reservation
System
In 1999, Pegasus
processed online hotel
Internet reservations representing
Sites Others approximately $500
million in hotel sales
Consumer Company
Benefits
•  Linked to all major global distribution systems
•  Messages are transmitted through the PED switch in typically less
than one-half second (40 million a month)
•  99.9 percent functional reliability
•  Access to 350,000 travel agency throughout the world
•  More than 32,000 hotels are bookable online
•  More than 170 countries

  ERP
  Best-of-breed
  …

  ERP
  …
Who is Moneda de Chile?

•  Casa de Moneda de Chile, the oldest public institution in Chile, is
completely owned and directed by the Chilean government
•  Today, the organization that started as a medieval workshop producing

gold coins has more than 500 employees and offers 710 different
products in two core areas: the impression of security papers and public
documents and the stamping of metal, especially coins and medals

Profesor Pierre Hadaya SAP
Strategy and organizational changes require a new
business solution
•  The decision to implement an ERP solution at Casa de Moneda resulted
from the realization that the institution is facing the fiercest business
challenges in its history. Globalization also affects public services.
Deregulation of markets, especially in the public sector, brings new
opportunities as well as new participants. To compete effectively and to
capitalize on new opportunities, management decided that it had to adapt
the business model.
•  A key element of the new strategy is the expansion to new markets. Casa
de Moneda decided to reposition itself from a national producer to an
international service provider, addressing customers in the private sector,
such as private banks, as well as governmental entities. To be successful
in the global marketplace, Casa de Moneda also realized the need to
make the organization and its processes more efficient.

Achieving information integration and using best

practices
•  To cope with these challenges, Casa de Moneda knew that it must become
more competitive. The organization found itself in a highly dynamic market
where product quality, production planning, cost control, and competitive
prices are essential for survival.
•  Management realized that to face external challenges they would have to
conduct an internal review. Information quality was determined to be the
critical factor. “To make well-informed decisions we need reliable
information in real time. It was clear to us that our IT systems could not
provide that,” says Alfonso Stier, head of planning and IT at Casa de
Moneda.
•  Casa de Moneda had two self-developed systems that were not integrated,
which made it very time-consuming to find the appropriate information and
distribute it to decision makers. To have all critical information in one system
and to deliver it in real time quickly emerged as the main driver for a new
system.
Achieving information integration and using best
practices (continued)
•  After evaluating a number of ERP solutions, mySAP™ ERP emerged as the

solution that could best handle the institution’s requirements. Management
was especially impressed by the functional depth of mySAP ERP, which
enables the integration of all information and administrative processes into
a single system.
•  The best practices in mySAP ERP provided another important argument.
This aspect proved to be of critical importance, given the ongoing
organizational changes with new structures and redesigned processes.

The benefits
•  The organizational design has been changed and 19 profit centers have
been established
•  Together with selected suppliers, a just-in-time delivery process was
established, significantly reducing inventory costs
•  With mySAP ERP the organization was designed according to approved
best practices of successful private sector companies. This has been pivotal
in the transformation from a public service institution to a company led by
private sector principles

•  The primary goal of the installation has been accomplished: mySAP ERP
provides better business insight due to the high quality and availability of
business-critical information. This proved to be especially beneficial in the
areas of cost control and inventory planning and control:
1. For the first time it is possible to get a complete overview of all
costs and allocate them precisely to each product, enabling
the discovery of hidden costs
2. The precise knowledge of the current inventory status saves costs
in daily operations. For example, the production of bank notes
requires special paper that has to be imported from Europe, usually by
ship. Previously, the lack of inventory monitoring resulted in
situations where the paper for an order could not be delivered in time,
resulting in a special shipment by plane at considerably higher cost.
With mySAP ERP, this issue has been resolved

•  In addition to the real-time availability of information, there is another
unexpected benefit. Now that business information is delivered to all users’
desktops through mySAP ERP, the information itself is much more accepted
within the organization, improving internal communication and collaboration
dramatically. In addition, a significant increase in employee productivity was
achieved as information-gathering resources are freed up to concentrate
•  The benefits of mySAP ERP are also visible to Casa de Moneda’s
customers. Delivery times have been considerably reduced due to improved
order management, and the response time to customer requests has been
significantly shortened. Because the security paper and coin industry is
characterized by non-standard products, it is essential to react quickly to
customers’ demands for new, individual products. mySAP ERP provides
Casa de Moneda’s customer-facing units with the capability to immediately
calculate product cost and determine the final price much faster than before

  ERP
  …
Source: Light, B., C.P. Holland and K. Wills, ERP and Best of Breed: A Comparative
Analysis, BPMJ, Vol. 7., No. 3, pp. 216-224, 2001

Who is Global Entertainment?
•  The company's turnover is in the region of US$3 billion and it holds over
10,000 different stock keeping units
•  Over the past decade retailers of Global Entertainment's products have

increased the sophistication of inventory management requesting less
stock, more often
•  The product lifecycle has also reduced and a range of niche markets have
emerged such as those for Indie and dance music
•  There are two company divisions. Record Marketing manages the signing
of artists and marketing the resulting hard products such as compact
disks. Operations delivers the hard products to the consumer
The challenge
•  Operations was, and is still, not a core competence, although
management recognized that it was important
•  Operations was function rather than service driven and teams worked in
departmental silos
•  The dominant historical preferences and needs of the respective functions

meant that many different software applications and platforms were in
existence
•  There was also a lack of project management and systems development

standards throughout the IT function
•  The result was five disparate IT units and strategies

Best of breed IT strategy
•  Management realized that re-engineering the IT infrastructure of
Operations was only part of the work required. The company wanted to
encourage a group focus and overcome the historical tendency for
individualism
•  It was decided to develop a process orientation. This would also improve

service levels and cost efficiency
•  Global Entertainment decided to implement an integrated common

system to support this. The intention was to reduce multiple hardware
platforms to two or three, move to standard software and implement
custom developments where necessary
•  A BoB strategy was chosen due to the demanding functionality

requirements of business functions
Best of breed IT strategy (continued)

•  Single vendor systems were considered preferable, and evaluated, but
they did not support the functionality and business process requirements
•  The ERP packages were perceived as being aimed at specific functions

which had been expanded to enterprise systems and they were weak as
a result. The IT Director stated that the company would have to build
around an ERP system in order to satisfy functionality demands. He also
felt it would be easier to generate consensus to migrate to a specific
package if it were perceived as fulfilling the functionality and business
process requirements of the individual business area

The solution
The components that comprise the BoB were integrated using IBM’s message
queuing products
The implementation
•  Project management and implementation developed in-house. The
additional technical skills was outsourced from the respective component
vendors. A small number of contract programmers were also used
•  The company reengineered in line with packaged software as required
•  The company made the decision to change incrementally rather than

overnight
•  80/20 rule approach. Package would be implemented when the software

would meet 80% of desired functionalities. The remaining 20% would be
met by additional MIS developments outside the package. Modifications
to the source code were me kept to a minimum

ERP
Operations
Product Development (production, warehousing,
(CAD/CAM & PDM) distribution)

  RFID
  Design/production integration
  Shop floor integration
  Ground transportation optimization
  …
  RFID
  …

Supply chain/
Tag Antenna Reader Middleware transaction
execution

Profesor Pierre ePoly,
Hadaya 2005
  Requires direct visibility   Direct visibility not required

  Reads one article at a time   Many articles at a time
  Cheap   More expensive
  Adopted by many firms   Emerging technology
  Standardized (norms)   Not yet standardized
  Reading only   Read/write
  Requires an external database   Can store data or allow access to
  Provides only identification external data
information   Can store important information
(serial number, location, state,
etc.)
Hadaya 2005
Hadaya 2005
MTI-425: Innovación
IBM – RFID del et
Technology Negocio basada
standards en TI
– spt 2003 Profesor Pierre Hadaya
•  Transfers the information
•  Filters the information
•  Business rules
MTI-425: Innovación del Negocio basada en TI Profesor

Source: “RFID Pierre Hadaya
middleware solutions” VDC, 2004
Source:Innovación
MTI-425: “Evaluating
delRFID Middleware”
Negocio basada en Forrester,
TI 2004 Profesor Pierre Hadaya
Order personalization
A tag, capable of reading/writing, is programmed when a customer

order is entered:
•  The tag is attached on the car and updated during the production
process
•  This tracking makes sure that the customer gets exactly what he
ordered (ex. make, color, interior design, etc.)
•  International Paper has significant global businesses in paper,

packaging and forest products
•  With approximately 6.8 million acres of land managed in the
United States alone, International Paper is one of the world's
largest private landowners and operates according to the
principles of the American Forest & Paper Association Sustainable
Forestry Initiative
•  Has operations in nearly 40 countries
•  80,000 employees
•  Exports its products in 120 nations
•  Sales of almost $26 billion annually

The solution
•  Implemented 10 millions passive UHF EPC tags
Benefits
•  Improved inventory visibility

•  Reduced operation costs
•  Increased productivity
•  Diminished inventory
  RFID
  …

Percentage of locked-in product cost
VPDM PDM ERP
Over 90% of the ultimate cost to

manufacture a product is
determined in the conceptual
design phase of the product
lifecycle
Conceptual Detailed Production

design design
MTI-425: Innovación del Negocio basada en TI
Source: Profesor Pierre
Integrated Manufacturing Technology Roadmapping Hadaya
Initiative (1999)
Reduction of the development cycle time: from 60 to 30 months

Based on product and manufacturing process simulations: projected costs,
manufacturing feasibility, projected lead time, etc.
Improve plant flexibility, a car can be manufactured in different countries
(proximity to market, physical infrastructure optimization)
BMW investment: $30 billion DM in the next five years
Source: VDI Nachrichten, 18. Februar 2000
  RFID
  …
Vision: “All the plant’s machinery – trimmers, slitters, giant

corrugators, everything on the factory floor – feeds data to
the Internet, and to the rest of the company and the outside
world”
Rick Van Horne, Owner

IT Architecture
In
te
rn
et
Clients
t
r ne Machinery
te
In
Inte
rne
t
Wire
Ca
wireble &
t
less
ne
le
r
te
ss
In
Suppliers Employees
Employees
Profesor Pierre Hadaya
How it works?
Step 1
•  A customer places an order via Corrugated’s website
Step 2
•  At Corrugated’s site, the Visual Basic scheduling
program suggests the best production schedule
•  An employee approves and/or modifies the computer-
generated production plan and downloads it into the
database
•  At the scheduled time, software downloads the order
to the machinery
Step 3
•  According to the customers’ specifications,
machines slice, dice and score the sheets
How it works?
Step 4
•  An employee wraps the finished sheets and slaps on
a bar code, which has been printed automatically
•  Conveyor belts take the package to the shipping
department, which scans the bar code and adds a
shipping label
Step 5
•  A wireless PC on a forklift directs the operator to take
the package to the correct trailer
Step 6
•  A truck comes in, logs on to the network to see
which trailer it’s supposed to take
Benefits
•  35% diminution in paper waste, one of the plant’s major costs
•  Turnaround time on orders has fallen from 2.5 days to 18 hours
•  Customer service has dropped from 6 to 3 employees while doubling the
numbers of daily orders (800 daily orders)
•  70% of the orders come from the Internet
•  The system is available to everyone, from the machinist on the shop floor to
customers off-site, in real-time, with no delay
Corrugated Supplies developed a new business model (with new core

competencies)
The firm can be hired to build a company factory from the ground up,
incorporating its new technology system
  RFID
  …
Transcore DAT Services Network
Electronic platform where customers can negotiate the day-

to-day movement of shipments and equipment online
Note: This configuration is also a configuration of the fourth wave

Customers
Transcore DAT Carriers
Services Network
Technology provider
intermediaries
•  20,000 participants
•  80,000 Internet sessions daily
•  Links to 1,200 truck-stop monitors
•  Assists in moving about one million truckloads of goods every week
Applications and Services
•  DATConnect.com (Post and search for loads and trucks)
•  DAT Partners (An online business environment featuring the most effective
freight movement service in the industry, plus communication and
research tools)
•  Driver Products (Services designed specifically for the professional driver)
•  Customer Contact Center "
•  Faxback (Handy way to receive your searches)

Customers
Transcore DAT Carriers
Services Network
Technology
provider
Intermediaries
•  20,000 participants
•  80,000 Internet sessions daily
•  Links 1,200 truck-stop monitors
•  Assists in moving about one million truckloads of goods every week
•  80% of that traffic is conducted between customers and dedicated freight
renders and preferred partners
Transcore DAT
Services Network
Customers can create their private online network for regular

contracted business with established groups of partners
with whom they have long term relationships
  Inter-enterprise integration
  CRM
  Collaborative engineering
  Collaborative Planning and Forecasting
Replenishment (CPFR)
  Supply chain optimization
  ….

  CRM
  ….

Benefits
Intel can now:
•  Change internal data sources and infrastructure without
affecting the external interface
•  Support hundred of trading entities with one centralized system
•  Rapidly engage new trading entities over shared infrastructure
•  Reduce development time and staff

Source: Cadence
  CRM
  ….

Who is Tata Motors?
•  India’s largest integrated automaker, with a line-up that includes
commercial, utility, and passenger vehicles
•  Market shares approaching 60 percent for commercial vehicles

and 20 percent of India’s passenger car market
Business challenges
•  Needed a centralized customer database and standardized business
processes
•  Needed to communicate better with more than 1,600 dealer locations and
respond promptly to customer requests
•  Required better feedback on product quality and more effective

measurement of campaigns and programs
Solution
•  Deployed Siebel CRM applications throughout Tata Motors
organization and extensive dealer network with more than 1,600
locations
Solution components
•  Siebel Automotive
•  Siebel Business Analytics
•  Siebel Customer order Management
•  Database: Oracle
•  Hardware: IBM
•  Back Office: SAP

Source: Cadence
Benefits
•  Improves demand forecasting, planning, and logistics and inventory
management
•  Offers 360-degree view of customer and vehicle information and

streamlines workflow to enhance customer service and improve efficiency
•  Enhances product quality and increases revenues from both vehicle sales
and after-sales parts business

Source: Cadence
  CRM
  ….

Project: rocket combustion chamber development
Howmet Corporation (Whitehall, MI):

responsibility for casting
producability and costs
Boeing-Rocketdyne (Canoga
Park, CA): team leadership,
conceptual design, and
combustion and thermal analysis
Lockheed Martin (Huntsville,
AL): created launch vehicle
requirements
MacNeal Schwendler
(Costa Mesa, CA): Raytheon (Dallas, TX): provided
structural analysis CAD modeling, manufacturing
expertise and producability assessment as
well as program budget tracking
"Internet Notebook: Virtual

workspace common to the
project partners"

Project: rocket combustion chamber development
Benefits:
•  Reduction:
•  Number of parts from hundreds to six;
•  Development cycle time by 50%, from two years to
one;
•  Manufacturing cycle time by 63%, from two years
to nine months
•  Created a knowledge repository for re-use on
subsequent projects;
•  Improved product quality;
  CRM
  ….

  CRM
  ….
CPFR operates as a set of business

processes in which trading partners
agree to:
•  Mutual objectives and measures
•  Develop joint sales and operational plans
•  And electronically collaborate to generate and
update sales forecasts and replenishment
plans
Support for the standard is growing rapidly with more

than 100 companies (Andersen, Eastman Kodak, JC
Penney, etc.) participating in its adoption and
refinement
Pilot Description Results
Kimberley •  2,100 stores, 14 distribution •  Store-in-stock levels improved
Clark and centers (DCs), and 15 SKUs. •  Adjusted DC replenishment logic
•  Utilized Kmart-developed Internet •  Reduced overall inventory required
Kmart
site •  Improved joint focus on specific goals
through front-end agreement
Nabisco and •  First-phase pilot managed 22 •  Nut category sales grew 16.3%
Wegmans Planters Nuts SKUs at Wegmans’ •  Private-label nut sales grew 15.7%
DC (Utilized spreadsheet and e- •  Planters Nuts sales grew 53.9%
mail) •  Days of inventory on hand down by 2.5 Pet-
•  Second-phase pilot managed 20 snack category sales grew 7%
Milk-Bone SKUs (Used Manu- •  Private-label sales grew 31%
gistics software) •  Milk-bone sales grew 8%
Wal-Mart and •  22 branded underwear items in •  Sales up 45%

Sara Lee 2,400 stores •  Inventory up only 12%
•  Collaborated via spreadsheets •  Market share up 10%
Branded
•  Retail turns up 30%
Apparel •  Retail weeks-on-hand down 23%
•  Gross margin return on inventory
investment up 49%
•  In-stock up 2.7%
MTI-425: Innovación del Negocio basada en TI Source: Supply Chain Management

Profesor Review, 2000
Pierre Hadaya
•  A CPFR strategy does not necessarily require the use of complex

information systems
•  However, IS solutions allow firms to optimize some of the 9 steps of

the CPFR model developed by VICS (ex. mySAP SCM 4.0 can
optimize steps 3 to 9 of the model)

  CRM
  ….
Second-generation
•  Exchange inventory and product data in real time with both suppliers and
clients
•  Supply chain optimization by bringing Cisco’s suppliers and customers on the
same electronic platform (including Ariba’s Commerce Services Network
members)
The electronics and IT industry Software to integrate Cisco's

effort to standardize B2B electronic platform to its customers
transactions information systems

Manufacturer
I I
•  Engineering design I
•  Forecast
•  Demand forecast
•  PO & design specs
•  PO and Design specs
•  WIP updates
•  WIP update
•  Shipment notice
•  Shipment notice
Wafer Internet Assembler

fabricator
Technologies
TSMC ERP, SCM, PDM, CAD/CAM ASAT
Taiwan Hong Kong
I I
Benefits
I
•  Up to 50% reduced cycle times (30% average: 12 weeks down to 8)

•  25% average reduced inventory level ($2 million savings per year)
•  Increased visibility of the manufacturing process
•  Shorter new product introduction (engineering and ramp-up phases)
•  Increased customer satisfaction

  CRM
  Vendor Managed Inventory (VMI)
  ….
Is a global, independent e-business exchange providing the

automotive industry with leading collaborative product
development, procurement and supply chain tools
www.covisint.com
“co” as in collaboration
“vi” as in visibility
“int” as in integration
Mission
•  Save the industry billion with the efficiencies of its electronic marketplace
•  Shave up to $3,000 off the price of a new car
Other
partners
Suppliers
Service providers
Technology partners
Hardware
Software "
Telecom/
infrastructure

Categories of services
Product
development
•  Virtual project
Supply chain workspace
•  Forecasting
•  Logistics
Procurement
•  Catalogue
•  Auctions
•  Quote management

•  Asset management
Profesor Pierre Hadaya
Share of worldwide OEM purchasing volume
Covisint exchange
Private exchange
Not committed
MTI-425: Innovación del Negocio basada en TI Profesor Pierre HadayaDeutsche Bank, 2000
Source:
Covisint’s supply chain network (2001) Other Tier 1 and
Suppliers Tier 2
suppliers
Engineered Steal Production capacity

Designer Transport
components
Generic PVC
Integrator
Recuperation
Procurement
Engineering
Distribution
After-sales
and design
Production
Sales and
marketing
logistics
Internal
service
Clients
Other Tier 1, Tier 2,

Suppliers
Tier 3 and Tier 4

suppliers
Steal
Designer Engineered Transport Production capacity

components
Integrator
Generic PVC
Recuperation
Procurement
Engineering
Distribution
After-sales
and design
Production
Sales and
marketing
logistics
Internal
service
Etc.
Car rental Services &

parts distributors
Dealers
Clients
Corporate & Corporate & Corporate & Corporate &

private customers private customers private customers private customers

Saving $ (%Total savings)
Dealer Procure-
ment
Inventory Sales and
marketing $145 (12%)
$45 $62 $38
OEM Engineering
and design
Procure-
ment
Internal
logistics
Produc-
tion
Sales and
marketing
Distrib-
ution
After-
sales $566 (48%) 78%
$160 $100 ind. $25 $83 $60 $25 $60
$53 dir.
Tier 1 Engineering
and design
Procure-
ment
Internal
logistics
Produc-
tion
Sales and
marketing
Distrib-
ution
After-
sales $212 (18%)
$36 $45 ind. $14 $52 $14
$51 dir.
Tier 2 Engineering
and design
Procure-
ment
Internal
logistics
Produc-
tion
Sales and
marketing
Distrib-
ution
After-
sales $159 (13%)
$42 ind. $7 $30 $7
$73 dir.
Tier 3 Engineering
and design
Procure-
ment
Internal
logistics
Produc-
tion
Sales and
marketing
Distrib-
ution
After-
sales $87 (7%)
$12 ind. $2.5 $9 $2.5 Is it
$61 dir.
worth
Tier 4 Engineering
and design
Procure-
ment
Internal
logistics
Produc-
tion
Sales and
marketing
Distrib-
ution
After-
sales $19 (2%) it?
$2 ind. $0.5 $2 $0.5
$14 dir.
$1,188 (100%)
Dealer Procure-
ment
Inventory Sales and
marketing Per activity saving $
$45 $62 $38
Engineering 28%
OEM Engineering
and design
Procure-
ment
$100 ind.
Internal
logistics
Produc-
tion
Sales and
marketing
Distrib-
ution
After-
sales
Procurement 27%
$160 $25 $83 $60 $25 $60
$53 dir.
Engineering 17%
Tier 1 Engineering
and design
Procure-
ment
Internal
logistics
Produc-
tion
Sales and
marketing
Distrib-
ution
After-
sales
Procurement 45%
$36 $45 ind. $14 $52 $14
$51 dir.
Procurement 72%
Tier 2 Engineering
and design
Procure-
ment
Internal
logistics
Produc-
tion
Sales and
marketing
Distrib-
ution
After-
sales
- Direct 45%
$42 ind. $7 $30 $7
$73 dir.
Procurement 84%
Tier 3 Engineering
and design
Procure-
ment
Internal
logistics
Produc-
tion
Sales and
marketing
Distrib-
ution
After-
sales
- Direct 70%
$12 ind. $2.5 $9 $2.5
$61 dir.
Procurement 84%
Tier 4 Engineering
and design
Procure-
ment
Internal
logistics
Produc-
tion
Sales and
marketing
Distrib-
ution
After-
sales
- Direct 74%
$2 ind. $0.5 $2 $0.5
$14 dir.

  The conceptual framework of PLM

  Lifecycle support
  Environmental Product Declaration
  Lifecycle Assessment
  ….

  ….
In the past Today
Firms in Supply chains in

competition competition
Needed Requires
Information systems Information systems

centralized on the firm centralized on the product
ERP PLM
To manage resources at To manage resources at the
the level of the firm level of the product
Improves information management
throughout the product lifecycle
Customers Suppliers
•  Created once
Shared •  Reused many times
data •  Accessible from anywhere
Product
integrator
ISO 14040
The responsibility of the suppliers is extended
throughout the product lifecycle
1.  Integration
PLM makes the product information accessible outside the
engineering department :
•  Production (iPPE)
•  Sales
•  Maintenance
2. Collaboration
PLM makes the product information accessible to every
member of the supply network to allow collaboration

Design Sales & Production Maintenance
Customer Relationship
Management
Supply Chain
Management
Product Lifecyle
Management
first product start of end of obsolescence

idea production production of product
PLC Dominant Functionality
PDM SCM CRM rSCM
ERP
Critical Gate Critical Gate Critical Gate Critical Gate
Design Production Support Recovery

Pij Chain Chain Chain Chain
Product Start of Product’s Product’s Product

Idea Production Delivery End of Life Recycling
iPPE
Design Production Support Recovery

Network Network Network Network
Product Life Cycle Chains + Product Life Cycle Networks
i : Product Family
j : Version
Product System
Manufacturer
Development
as engineered
Market Entry
as built as shipped
Production After Sales

Order Delivery
Planning Services
as sold as planned as maintained

JIT to Line Field
Service
Purchasing Customer
Support
Supplier Service Provider
PLM Product Process Factory

Structure Model Layout
IPPE
PDM
Collaborative
Engineering &
Document management Project
System Management
PLUS
• Quality Management
• Asset Life Cycle Management
• Environment, Health and Safety (EH&S)
Three solutions at the heart of PLM
1. ERP providers
2. PDM and CAD/CAM providers

  ….

  ….
70% of total lifecycle

costs of a complex
product are related to
product support
Some participants:
Airbus Marconi Saab
Boeing Northrop Grumman Swedish MoD
British Aerospace NATO CALS UK MoD
Lockheed Martin Rolls-Royce US DoD

The Product LifeCycle Support (PLCS) project is an international industry/
government initiative to give industry and its customers a common standard
for product support information. PLCS seeks to reduce lifecycle costs, and
increase product availability by improving the quality and accessibility of
technical information needed to support a complex product in operational use
(Product Life Cycle Support as part of the ISO/STEP family of standards).
Project Scope:
•  Support Engineering
•  Configuration Management and Change Control
•  Inventory Management
•  Product Maintenance
Beginning of the project: November 1999
A service provided by Boeing to airlines

Boeing manages airlines supply chain network for exchange parts
Includes Boeing’s and its suppliers’ parts
Reduces inventory costs of the airline industry
http://www.boeing.com/commercial/gain/

Traditional Boeing Traditional airlines
activities activities
Boeing becomes responsible for:

• Purchasing spare parts
• Spares inventory management
• Logistics, deployment at point of use
Boeing and the other parts suppliers

own the parts until installation!
Traditional Boeing New Boeing

activities activities
GAIN’s core technologies and competencies:

• Supply-chain management system for the network
• Airlines’ inventory monitoring
• Suppliers forecast demand and plan production accordingly
• Parts engineering and maintenance
Are already existing upstream in the organization

  Change management
  ….
I I
OPERATIONS
S80 2.9 ENERGY/CAR 100 EXHAUST EMISSIONS

46% CO 93% I
HC 88%
MATERIAL UTILIZATION NOx 88%
EVAPORATION OF HYDROCARBONS
86% 50 94%
SOLVENT EMISSIONS CARBON DIOXYDE EMISSION

91% 23%
MANUFACTURING 50 100
100 50 RECYCLING
DEALERSHIPS
1% Certified LABELLING OF PLASTICS
18% Trained 100%
OWN OPERATIONS 50
60% DISMANTLING
42% Self-assessed 50%
Torslanda 5% certified
USE OF RECYCLED PLASTICS
plant SUPPLIERS 100 53%
(Sweden) ENVIRONMENTAL
MANAGEMENT
  Change management
  ….
Sales & distribution I

I
Procurement
I
3G infrastructure
3G technical
specifications
Environmental
specifications
Conception Manufacturing Recycling
Diminish energy Banned Minimal emissions 100% recyclable

consumption substances
MTI-425: Chapter 6
E-commerce initiatives

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MTI-425: Chapter 6

MTI-425: Innovación del Negocio basada en TI Profesor Pierre Hadaya

1 – Initiatives in the first wave of the transitional model

MTI-425: Innovación del Negocio basada en TI Profesor Pierre Hadaya

MTI-425: Innovación del Negocio basada en TI Profesor Pierre Hadaya

MTI-425: Innovación del Negocio basada en TI Profesor Pierre Hadaya

MTI-425: Innovación del Negocio basada en TI Profesor Pierre Hadaya

The business challenge

MTI-425: Innovación del Negocio basada en TI Source:

MTI-425: Innovación del Negocio basada en TI Source:

MTI-425: Innovación del Negocio basada en TI Profesor Pierre Hadaya

• The high costs (and high headaches) associated with setting up

MTI-425: Innovación del Negocio basada en TI Profesor Pierre Hadaya

• Founded in 1945 as Hardware Wholesalers, Inc. (HWI), Do it Best Corp.

• Its member-retailers obtain products from seven distribution centers

MTI-425: Innovación del Negocio basada en TI Source:

• Do it Best Corp. exchanges more than 125,000 documents per month

• Product activity reports provide 20 vendor managed inventory (VMI)

MTI-425: Innovación del Negocio basada en TI Source:

• Do it Best Corp. found modem communications to be support-intensive

MTI-425: Innovación del Negocio basada en TI Source:

• Cyclone handles multiple IP protocols and major security technologies,

MTI-425: Innovación del Negocio basada en TI Source:

• For Do it Best Corp. the most obvious result of implementing

MTI-425: Innovación del Negocio basada en TI Source:

The benefits (continued)

• For Do it Best Corp.’s drop-ship suppliers, who sell directly to member

MTI-425: Innovación del Negocio basada en TI Source:

MTI-425: Innovación del Negocio basada en TI Profesor Pierre Hadaya

MTI-425: Innovación del Negocio basada en TI Profesor Pierre Hadaya

MTI-425: Innovación del Negocio basada en TI Profesor Pierre Hadaya

The vendor exposes

The buyer purchases

Product or service $ Price movement Iterations

MTI-425: Innovación del Negocio basada en TI Profesor Pierre Hadaya

MTI-425: Innovación del Negocio basada en TI Profesor Pierre Hadaya

• More than 200,000 registered users

MTI-425: Innovación del Negocio basada en TI Profesor Pierre Hadaya

MTI-425: Innovación del Negocio basada en TI Profesor Pierre Hadaya

• $30 million annually in cost savings

• $250 million in savings by distributing 90 percent of Cisco software online-

• 15% increase in productivity for Cisco's sales force

• 80% of non-technical support questions are answered online

• Customer satisfaction increased from 3.4 to 4.2 (out of 5) since 1995

• Nearly 100% of orders submitted online are accurate

MTI-425: Innovación del Negocio basada en TI Profesor Pierre Hadaya

MTI-425: Innovación del Negocio basada en TI Profesor Pierre Hadaya

MTI-425: Innovación del Negocio basada en TI Profesor Pierre Hadaya

MTI-425: Innovación del Negocio basada en TI Profesor Pierre Hadaya

The quantity offered

Product or service $ Price movement Iterations

MTI-425: Innovación del Negocio basada en TI Profesor Pierre Hadaya

MTI-425: Innovación del Negocio basada en TI Profesor Pierre Hadaya

Amount spent through

 Virtual Private Networks (VPN)

MTI-425: Innovación del Negocio basada en TI Profesor Pierre Hadaya

MTI-425: Innovación del Negocio basada en TI Profesor Pierre Hadaya

MTI-425: Innovación del Negocio basada en TI Profesor Pierre Hadaya

S After receiving all the offers

Product or service $ Price movement Iterations

MTI-425: Innovación del Negocio basada en TI Profesor Pierre Hadaya

Structured online RFQ (Request for Quotation)

• Founded 1995 • Over 150,000 suppliers from

•  The high costs (and high headaches) associated with setting up

•  Founded in 1945 as Hardware Wholesalers, Inc. (HWI), Do it Best Corp.

•  Its member-retailers obtain products from seven distribution centers

•  Do it Best Corp. exchanges more than 125,000 documents per month

•  Product activity reports provide 20 vendor managed inventory (VMI)

•  Do it Best Corp. found modem communications to be support-intensive

•  Cyclone handles multiple IP protocols and major security technologies,

•  For Do it Best Corp. the most obvious result of implementing

•  For Do it Best Corp.’s drop-ship suppliers, who sell directly to member

•  More than 200,000 registered users

•  $30 million annually in cost savings

•  $250 million in savings by distributing 90 percent of Cisco software online-

•  15% increase in productivity for Cisco's sales force

•  80% of non-technical support questions are answered online

•  Customer satisfaction increased from 3.4 to 4.2 (out of 5) since 1995

•  Nearly 100% of orders submitted online are accurate

  Virtual Private Networks (VPN)

•  Founded 1995 •  Over 150,000 suppliers from

•  P&W works with FreeMarkets to prepare the RFQ

•  At the appropriate date and time, suppliers are invited to log on

•  Each supplier sends its final offer to P&W (including possible

•  Average transaction: $1.5 million US

•  Today, the organization that started as a medieval workshop producing

•  After evaluating a number of ERP solutions, mySAP™ ERP emerged as the

•  Over the past decade retailers of Global Entertainment's products have

•  The dominant historical preferences and needs of the respective functions

•  There was also a lack of project management and systems development

•  The result was five disparate IT units and strategies

•  It was decided to develop a process orientation. This would also improve

•  Global Entertainment decided to implement an integrated common

•  A BoB strategy was chosen due to the demanding functionality

•  The ERP packages were perceived as being aimed at specific functions

•  The company reengineered in line with packaged software as required

•  The company made the decision to change incrementally rather than

•  80/20 rule approach. Package would be implemented when the software

  Requires direct visibility   Direct visibility not required