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E-commerce @
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Air Products (A.P)Company overview
• Specialised in Industrial gases and Chemicals products
– Presence in steel, metal, glass, food processing….
• 18,000 Employees worldwide (15,000 in 97)
• $ 5.7 Billions sales in 2000 ($ 4.6 billions in 97)
• $ 2.7 Billions sales in industrial gases sales in 97 (4th world producer)
• Presence in 30 countries
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North America32%
Western Europe30%
Eastern Europe4%
South America7%
Southern Asia8%
Northern Asia15%
Africa, Middle East4%
The Industrial Gases (I.G.) Market
Consumption by region
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I.G. Market (2)Production by company
Air Liquid18%
Praxair16%
BOC15%Air Products
9%
Aga7%
Messer6%
Lindo6%
Other23%
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IT & the I.G. industry
• Most innovative in the Chemical sector– Standardized Services– Cost reduction
• Conviction of CEO: IT should be an integral part of the business
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AP Points of View
• John Pfeiffer, MIS VP ?-1996– Father of Internet at AP– Early 90’s: employees access to information on
the Internet– Predicted the demand growth for email and
internet access via graphical interface– Predicted the role of Internet in business
challenges
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AP Points of View
• Joe McMakin, MIS VP 1996 - ?– Internet will change the way we do business
• Steve Cameron, Communication Manager and Bill Townsend, IT Manager– Internet Economy will drive technological change
at AP– Web site is to be a transactionnal medium (1996)
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Problem Identification
• How to reoganize a company around Internet
• Traditional Brick and Mortar company
• Strong potential of Internet :– Growth in Productivity– Customized services– New sales channels– Marketing– Lower Cost
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Problem Identification
• Potential Problems– Initial Investment– Strategy to follow– Speed of Change– Resistance to change– Harmonisation of sites
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2 Different approaches
• Air Products– Internal approach– No or Few outside expertise
• Structural change• Testing approach
• BOC – External approach– Intervention of outside expertise (IBM&American Express)
• More Conjonctural approach• Fast Implementation
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AP: Internet will definitely change the business
• New competitors (intermediaries, Auctions, trading…)
• Intervention of IT in every part of the business
• Not only concern a presence on the web– Huge infrastructure to be built– Concerns in Internet, Intranet, Extranet– E-commerce needs convergence of those three elements
• 1st: Internet is a sales enabler
• 2nd: Internet will draw new business models– New sales channels– Value added marketing– Existing customers’ portal
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E-Business Evolution
• Evolution from marketing to transactional medium
• Marketing (On-line presence)– Institutional information– Brochures– Catalog– Possible contact (4% logged as potential sales)
• Interaction– Call me now Button– E-commerce solution– VAM to potential client
• Free MSDS• Product locators and specifiers
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E-business Evolution (2)
• Transaction– Real E-commerce
• Existing customers ordering on-line• Auctions• Participations to industry platforms• EDI• Real time access to information
– Order tracking– Invoicing– Order status– …etc.
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E-business Evolution (3)
• Transformation– Application of knowledge to others activities– New business models
• All web-based Business– Customers AND Suppliers
– Supply chain optimization– Advanced personalization
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Concerns
• Big investments to be made in the infrastructure
• Harmosation of Intranet sites
• Access to information
• Quality of info collected
• Multilingual Access
• Resistance to change– IT culture of the company plays a role in the education of
employees
• Communication cost
• Peoples and resources
• Convergence of Data (intranet, extranet, internet)
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Concerns for the Intranet
• Allows to centralize data
• Reduces cycle time
• Extend the sources of information– Pb: How to structure and organize them
• Gain in productivity• Do not inhibit creativity and initiative
• Link it to Internet– Separation of info– Created more added value
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Architecture WCA framework
• Customers– Searches info on products through the web– Searches Contacts for info or transaction– May try to buy on line– Ease the buying process of existing client– Info on delivery date, tracking of the order
• Products– Availability, location of products– Customization of orders– Price
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Architecture WCA framework
• Business Process– Process operation
• Get the relevant information throughout the organization• Assemble into a database within the intranet• Serve the required information to the customer on
internet– Architecture
• Software (ex: MFG PRO, SAP) capable of collecting the info.
• Presence in every involved department• 100% reliability
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Architecture WCA framework
• Participant– Every department that can deliver info (production,
invoicing, transport…)
• Information– Define what the customer’s want– Many steps of selection of information
• Technology– Necessity of building huge infrastructure
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Customer
ProductsStatus
Invoicing
Web site Ordering process
Customerstatus
Data Flow DiagramOrdering for existing customers
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Alternatives
• Do nothing
• Improve while keeping the same way of working
• Improve by injecting external expertise
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Do Nothing
• Stop the improvement process, Keep the existing
• Benefits:– No short term cost– Savings on R&D– Relocation of resources– No management of change
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Do Nothing (2)
• Disadvantages– Long term cost
• Increasing communication cost• Intranet inefficiency
– Too much unorganized information available (Quantity, not quality)
– Loss of competitive advantages• Loss of leadership (Image, sales)• Decreasing Productivity
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Keep the same way of working
• Continue the internal improvement process
• Benefits– Rely on internal expertise– Mastering of costs– Parallel evolution of process and employees
training• Less resistance to change
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Keep the same way of working (2)
• Disadvantages– Slow implementation
• Loss of ground face to competition– No optimal feedback– Human resources problems
• Recruitment• Competence
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Inject External Expertise
• Development through Consulting and Benchmarking
• Benefits– Keep Internal expertise– Avoid others’ mistakes and benefit from their
experience– Optimal feedback– Cost efficiency (no cost due to testing)
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Inject External Expertise (2)
• Disadvantages– Internal resistance of change– Consultants have no real experience of the
business and the firm– Gap between external methods and company’s
culture– Short term costs
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Decision grid
Decision Criteria
Risk Time CostResistance to Change
Quality (security and
service)Confidentiality Total
Coefficient 0,15 0,2 0,3 0,1 0,15 0,1 1Alternative 1 2 4 2 2 1 4 2,45Alternative 2 3 1 3 3 3 4 2,7Alternative 3 4 2 4 1 4 2 3,1
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Recommendations
• Take alternative 3: Inject external expertise
• Will allow to keep competive advantage
• Improve the intranet
• Do not be too much ahead of customers
• Do not give up traditional sales methods !
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Business Results-to-DateResult
Commitment Current
Status (run rates)
Projected Status (run rates)
Target
Internet Corporate Sales
$40 Million $100 Million $1 billion by 2003
New sales via the Internet
$125,000 $250,000 $100 million by 2003
eProcurement cost reduction
$3.0 Million $5.0 Million $10 million/yr by 2003
On-line Procurement
$50 Million $100 Million $100 million in FY01
Internet facilitated
transactions3.2% 6.5% 80% in 2003
SBU’s with an e-business
strategy
17 completed 17 completed 17 by FY01