Operations

Management

E-Commerce and Operations

Management
Supplement 11
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 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
 Pass-through warehouses
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 E-Commerce

The use of computer networks, primarily the internet,

to buy and sell products, services, and information.

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 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

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 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

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 Types of E-Commerce Transactions
Business Consumer

Business B2B B2C

GM/Ford/Daimler’s Amazon, Dell, Net
Covisint exchange Grocer.com
Consumer C2B C2C
Priceline, Travelocity Ebay

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 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 e-commerce
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 bottom
line.

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 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 money that is only bits and
bytes

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 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 Britain’s 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 France’s 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.e-steel.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 Continents, and Club
Corp, Called Aventra (aventra.com) – buys for
2,800 hotels
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 Traditional Medical Supply Chain
Manual processes

Group purchasing
organization for small,
independent hospitals
Supplier Distributor Hospital
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 On-Line Medical Supply Chain
Automated web-
based processes

On-line
Global Health
Care

Group purchasing
organization for small,
independent hospitals
Supplier Distributor Hospital
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 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

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 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
 FedEx’s “Virtual Order”integrates different
companies web catalogues and customer orders
for Dell; and then fulfills orders and delivers them
through its fleet of trucks and planes.

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 E-Commerce and JIT

 E-commerce coordinates the supplier’s 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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