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Which EWhich E--BusinessBusiness
isisRight forRight forYour Supply Chain?Your Supply Chain?
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What is EWhat is E--Business?Business?
EE--business is a collection of business models andbusiness is a collection of business models andprocesses motivated by Internet technology, and focusingprocesses motivated by Internet technology, and focusingon improving the extended enterprise performanceon improving the extended enterprise performance
EE--commerce is the ability to perform major commercecommerce is the ability to perform major commercetransactions electronicallytransactions electronicallyee--commerce is part of ecommerce is part of e--BusinessBusinessInternet technology is the driver of the business changeInternet technology is the driver of the business changeThe focus is on the extended enterprise:The focus is on the extended enterprise:
IntraIntra--organizationalorganizationalBusiness to Consumer (B2C)Business to Consumer (B2C)
Business to Business (B2B)Business to Business (B2B)
The Internet can have a huge impact on supply chainThe Internet can have a huge impact on supply chainperformance.performance.
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What is EWhat is E--Business?Business?
Business transacted over the InternetBusiness transacted over the Internet
Is product information displayed on the Internet?Is product information displayed on the Internet?
Is negotiation over the Internet?Is negotiation over the Internet?Is the order placed over the Internet?Is the order placed over the Internet?
Is the order tracked over the Internet?Is the order tracked over the Internet?
Is the order fulfilled over the Internet?Is the order fulfilled over the Internet?
Is payment transacted over the Internet?Is payment transacted over the Internet?
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The Retail IndustryThe Retail Industry
BrickBrick--andand--mortar companies establish virtualmortar companies establish virtualretail storesretail stores
WalWal--Mart, KMart, K--Mart, Barnes & Noble, Circuit CityMart, Barnes & Noble, Circuit CityAn effective approachAn effective approach -- hybrid stockinghybrid stockingstrategystrategy
High volume/fast moving products for localHigh volume/fast moving products for local
storagestorageLow volume/slow moving products for browsingLow volume/slow moving products for browsingand purchase on line (risk pooling)and purchase on line (risk pooling)
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Existing Channels for BusinessExisting Channels for Business
Product informationProduct information
Physical stores, EDI, catalogs, face to face, NegotiationPhysical stores, EDI, catalogs, face to face, Negotiation
Face to face, phone, fax, sealed bids, Face to face, phone, fax, sealed bids,
Order placementOrder placement
Physical store, EDI, phone, fax, face to face, Physical store, EDI, phone, fax, face to face,
Order trackingOrder tracking
EDI, phone, fax, EDI, phone, fax,
Order fulfillmentOrder fulfillment
Customer pick up, physical deliveryCustomer pick up, physical delivery
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Potential RevenuePotential Revenue
OpportunitiesOpportunitiesDirect sales to customersDirect sales to customers
24 hour access for order placement24 hour access for order placement
Information aggregationInformation aggregation
Information sharing in supply chainInformation sharing in supply chain
Flexibility on pricing and promotionFlexibility on pricing and promotion
Price and service discriminationPrice and service discrimination
Faster time to marketFaster time to market
Efficient funds transferEfficient funds transfer -- reduce working capitalreduce working capital
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The Computer Industry:The Computer Industry:
Dell onDell on--linelineCustomer Order and
Manufacturing Cycle
Procurement Cycle
Dell Supply Chain Cycles
Procurement cycle
Customer Order and
Manufacturing Cycle
Customer
Order Arrives
PUSH PROCESSES PULL PROCESSES
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Opportunities exploited by DellOpportunities exploited by Dell
Revenue opportunitiesRevenue opportunities
24 hour access for order placement24 hour access for order placement
Direct salesDirect salesProviding customization and large selection informationProviding customization and large selection information
Flexibility on pricing and promotionFlexibility on pricing and promotion
Faster time to marketFaster time to market
Efficient funds transferEfficient funds transfer -- reduce working capitalreduce working capital
Revenue negativesRevenue negatives
Longer response time than store and no help withLonger response time than store and no help withselectionselection
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Opportunities exploited by DellOpportunities exploited by Dell
Cost opportunitiesCost opportunities
Direct sales eliminating intermediaryDirect sales eliminating intermediary
Customer participation: Call center & catalog costsCustomer participation: Call center & catalog costs
Information sharing in supply chainInformation sharing in supply chain
Reduce facility costsReduce facility costs
Geographical Centralization and reduced inventoriesGeographical Centralization and reduced inventories
Outbound transportation costs increaseOutbound transportation costs increase
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Retailing:Retailing:
Amazon.comAmazon.com
P blis er
istrib tor
Am zo
stomer
Am zo ly i
P blis er
W re o se (?)
Ret il tore
stomer
Bookstore ly i
Pull Pull
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Opportunities exploited by AmazonOpportunities exploited by Amazon
Revenue opportunitiesRevenue opportunities
24 hour access for order placement24 hour access for order placement
Providing large selection and other informationProviding large selection and other informationAttract customers who do not want to go to storeAttract customers who do not want to go to store
Flexibility on pricingFlexibility on pricing
Efficient funds transferEfficient funds transfer
Revenue negativesRevenue negatives
Intermediary (distributor) reduces marginIntermediary (distributor) reduces margin
Longer response time than bookstoreLonger response time than bookstore
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Potential opportunities exploitedPotential opportunities exploited
by Amazonby AmazonCost opportunitiesCost opportunities
Reduce facility costsReduce facility costs
Geographical centralization and reduced inventories:Geographical centralization and reduced inventories:Most effective for low volume, hard to forecast books,Most effective for low volume, hard to forecast books,least effective for high volume best sellersleast effective for high volume best sellers
Cost increasesCost increases
Outbound transportation costs increaseOutbound transportation costs increaseHandling cost increaseHandling cost increase
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OpportunitiesOpportunities
Going onGoing on--line, by itself, offers lower cost advantagesline, by itself, offers lower cost advantages(may be some disadvantages) than in Dell model(may be some disadvantages) than in Dell modelgiven current form of booksgiven current form of books
Cost and availability advantages are more significantCost and availability advantages are more significantfor low volume booksfor low volume books
OnOn--line channel has significant cost benefit ifline channel has significant cost benefit if booksbooks
are downloadableare downloadable
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How should bookstoreHow should bookstore
chains react?chains react?An on line channel allows it to match AmazonsAn on line channel allows it to match Amazonsrevenue advantagesrevenue advantages
Use a hybrid approach in stocking and pricingUse a hybrid approach in stocking and pricingHigh volume books for local storageHigh volume books for local storage
Low volume books for browsing and purchase on lineLow volume books for browsing and purchase on line
Pricing varies by delivery and pick up optionPricing varies by delivery and pick up option
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Grocery onGrocery on--lineline
Manufacturer
Online Grocer
ustomer
On-Line upply ain
Manufacturer
Ware ouse (?)
upermarket
ustomer
upermarket upply ain
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OpportunitiesOpportunities
Negligible opportunity to compete on cost, exceptNegligible opportunity to compete on cost, exceptmaybe for specialized low volume itemsmaybe for specialized low volume items
Competition has to be on convenience or some otherCompetition has to be on convenience or some otherform of value addedform of value added
Greatest opportunity may be for supermarket chainsGreatest opportunity may be for supermarket chainsto expand value offeringto expand value offering
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Key MessagesKey MessagesSome supply chains are better suited to exploit theSome supply chains are better suited to exploit thecost benefits of going oncost benefits of going on--lineline
Ability to increase processes in pull phaseAbility to increase processes in pull phase
Ability to delay product differentiationAbility to delay product differentiation
Big inventory benefit from geographical centralizationBig inventory benefit from geographical centralizationSignificant facility cost reduction on centralizationSignificant facility cost reduction on centralization
Transport to customer is a small fraction of product costTransport to customer is a small fraction of product cost
Allare achievedifproductis downloadable
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B2B:B2B: Tradeindia.comTradeindia.comRevenue opportunitiesRevenue opportunities
24 hour access for order placement24 hour access for order placement
Large selection information with simple searchLarge selection information with simple search
Display of substitutable productsDisplay of substitutable productsFlexibility on pricing and promotionFlexibility on pricing and promotion
Ability to alert customer of order statusAbility to alert customer of order status
Faster time to marketFaster time to market
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B2B: Matching DemandB2B: Matching Demand
Shortage and Surplus CapacityShortage and Surplus Capacity
Potential opportunitiesPotential opportunities
Ability to aggregate and display all available surplusAbility to aggregate and display all available surpluscapacitycapacity
Better match of surplus capacity and unmet demandBetter match of surplus capacity and unmet demand
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Key MessagesKey Messages
Significant B2B opportunity to use Internet to reduceSignificant B2B opportunity to use Internet to reducecost and improve efficiency of existing processescost and improve efficiency of existing processes
Significant B2B opportunity to improve collaborationSignificant B2B opportunity to improve collaborationwithin existing supply chainswithin existing supply chains
Auction opportunity for B2B is primarily for matchingAuction opportunity for B2B is primarily for matchingdemand shortage with surplus capacity, not for basedemand shortage with surplus capacity, not for base
loadload
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EE--businessbusiness
Opportunities:Opportunities:Reduce Facility CostsReduce Facility Costs
Eliminate retail/distributor sitesEliminate retail/distributor sites
Reduce Inventory CostsReduce Inventory CostsApply the riskApply the risk--pooling conceptpooling concept
Centralized stockingCentralized stocking
Postponement of product differentiationPostponement of product differentiation
Use Dynamic Pricing Strategies to Improve SupplyUse Dynamic Pricing Strategies to Improve SupplyChain PerformanceChain Performance
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EE--businessbusiness
Opportunities:Opportunities:Supply Chain VisibilitySupply Chain Visibility
Reduction in the Bullwhip EffectReduction in the Bullwhip Effect
Reduction in InventoryReduction in InventoryImproved service levelImproved service level
Better utilization of ResourcesBetter utilization of Resources
Improve supply chain performanceImprove supply chain performance
Provide key performance measuresProvide key performance measures
Identify and alert when violations occurIdentify and alert when violations occur
Allow planning based on global supply chain dataAllow planning based on global supply chain data
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Distribution StrategiesDistribution Strategies
WarehousingWarehousing
Direct ShippingDirect Shipping
Lead times reducedLead times reducedsmaller truckssmaller trucks
no risk pooling effectsno risk pooling effects
CrossCross--DockingDocking
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WalWal--Marts remarkable successMarts remarkable success
A focus on satisfying customer needsA focus on satisfying customer needsproviding customers access to goods when and where theyproviding customers access to goods when and where theywant themwant themcost structures that enable competitive pricingcost structures that enable competitive pricing
This was achieved by wayThis was achieved by way the company replenishedthe company replenishedinventoryinventory the centerpiece of its strategy.the centerpiece of its strategy.WalWal--Mart employed a logistics technique known asMart employed a logistics technique known ascrosscross--dockingdocking
goods are continuously delivered to warehouses where theygoods are continuously delivered to warehouses where theyare dispatched to stores without ever sitting in inventory.are dispatched to stores without ever sitting in inventory.
This strategy reduced WalThis strategy reduced Wal--Marts cost of salesMarts cost of salessignificantly and made it possible to offer everydaysignificantly and made it possible to offer everydaylow prices to their customers.low prices to their customers.
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Distribution Strategies
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DirectDirect--toto--Consumer:Cost TradeConsumer:Cost Trade--OffOff
Cost Tr d -Off f or B yPC.com
$0$2$4
$6$8
$10$12$14$16
$18$20
0 5 10 15
Numberof C's
Cost($
million
Total Cost
Inventory
Transportation
Fixed Cost
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