1.E-Commerce and Operations Management

2. 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

3. 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

4. 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

5. E-Commerce

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

6. 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 7. 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

8. Types of E-Commerce Transactions Business Consumer Business B2B GM/Ford/Daimlers Covisint exchange B2C Amazon, Dell, Net Grocer.com Consumer C2B Priceline, Travelocity C2C Ebay 9. 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

10. 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

11. 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

12. 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.

13. 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

14. 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

15. 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

16. E-Procurement

Purchasing or order release communicated over the internet or via approved online vendor catalogues

17. 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

18. 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)

19. 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

20. Traditional Medical Supply Chain Manual processes Hospital Group purchasing organization for small, independent hospitals Distributor Supplier 21. On-Line Medical Supply Chain On-line Global Health Care Automated web-based processes Hospital Group purchasing organization for small, independent hospitals Distributor Supplier 22. E-Commerce and Requests for Quotes (RFQs)

Extensive databases of supplier information, and ability to rapidly transfer specifications to vendors reduces time and costs

23. 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

24.

Significant savings (10%)

Requires new skills and staffing in procurement area

E-Procurement 25. 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

26. Warehousing for E-Commerce

E-commerce warehouse is less a warehouse than a pass through facility.

27. 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.

28. E-Commerce and JIT

E-commerce coordinates the suppliers inventory system with the service capabilities of the delivery firm.

29. Scheduling and Logistics Improvements

Coordinated pickup and delivery

• Fed Ex merges orders in transit

Logistics cost reduction

• Greater capacity utilization