Download - Ecommerce Chap 13
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Chapter 13
Order Fulfillment, Logistics, Supply Chain Management
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Learning Objectives
1. Understand the role of order fulfillment and back-office operations in EC
2. Describe the process of order fulfillment3. Understand the concept of the supply chain, its
importance and management4. Describe the problems of managing the supply chain and
the use of innovative solutions there5. Describe the need for integrating information systems of
front office and back office6. Trace the evolution of software that support activities
along the supply chain and their management7. Understand the relationship among ERP, SCM and EC.
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The Y2K Order Fulfillment Problem
In Dec. 1999 Competition among E-Tailers increases
Special area: Toys; Big promotions, couponsDemand: very high, not anticipatedRetailers: were unable to meet demandCustomers: very unhappySimilar problems in gifts, book, etc.
Also: online retailers has warehousing and logistics problems
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Order Fulfillment
Taking orders may be the easiest part
Difficulties in groceries and fresh food
One reason: Customized productsSecond: Pull type manufacturing
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The Pull vs. Push Model
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Major Concepts
Order fulfillment: Deliver right order on time
Front office operations: Order taking, advertisement, CRM
Back office operations: Accounting, finance, inventor, packaging, logistics
Logistics: Managing the flow of goods, information and money along the supply chain
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The Process of Order Fulfillment
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The Steps of Order Fulfillment
1. Payment Clearance2. In-stock availability3. Packaging, shipment4. Insuring5. Production (planning,
execution)6. Plant services
7. Purchasing, warehousing
8. Demand forecast9. Accounting, billing10. Customer
contacts11. Returns (Reverse
logistics)
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Shipping a Tropical Fish
1. Placing order, payment2. Transfer order to petstore.com, check stock3. Use an wholesaler to get the fish4. Supplier finds fish, ships to wholesalers5. Wholesalers rushes to Petstore6. Petstore uses FedEx to ship to customer
with copy of credit card paymentDiscussion: What is the contribution of EC?
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Why Intermediaries?
1. Wholesaler and deliveries in the Petstore case
2. Wholesalers as an aggregators; between many sellers and buyers
3. Can a virtual store replace a retailer?4. Direct sales for large items5. Example: The Lego Co. case
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Channel Conflict
Elimination of Intermediary many create a conflict
Conflict between online and offline distribution
This may impact order fulfillment and returnsWhat if a manufacturer sells both wholesale
and retail? (Microsoft)Customized product by manufacturers: ideal
for direct sale
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Supply Chain ManagementDefinition: Flow of material, information,
money, etc. from raw material suppliers through factories to customers
It includes: organizations, procedures, peopleSCM: Integration of the business processes
along the chain, Planning, Organizing, control of many activities
Activities: Purchasing, delivery, packaging, checking, warehousing, etc.
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Components of the Supply Chain
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Components-Description
UpstreamUpstream: Suppliers, their suppliers (several tiers). From Raw material to the company
InternalInternal: All internal process that add value, conversion to find products
DownstreamDownstream: All activities in distribution and delivery to end customers
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Complex-nonlinear Supply Chain
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Benefits of SCM
Reduce uncertainty along the chainProper inventory levels in the chainMinimize delaysEliminate rush (unplanned) activitiesProvide superb customer serviceMajor contributor of success (ever
survival)
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Global Supply Chain
Can be very longPossible cross-broader problemsNeed information technology support
of: communication and collaboration
Possible delays due to: customs, tax, translations, politics
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Problems along the Supply Chain
Delays in production, distribution etc.Expensive InventoriesLack of partners’ coordinationUncertainties in deliveriesPoor demand forecastInterference with production Poor quality
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More difficulties
Virtual companies do not have logistics infrastructures
One company is a member of several supply chain
Conventional warehouses are too expensive
Need automatic warehouses with robots as pickers
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Preliminary Activities
Understand the supply chain (flow charts)
Study internal and external partsPerformance measurement are a must
(Benchmarking)Multidimension performance analysisa BPR may be neededPeople’s relationships are a must
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Areas of Opportunities
Manufacturing processesWarehousing operationPackaging and deliveryMaterial inspection/receivingInbound and outbound transportationReverse logistics (return)In-plant material handlingVendor management programCustomer order processing
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Areas of Opportunities (cont’d)Invoicing, auditing and other accounting
activitiesCollaboration procedures with partnersEmployee training and deploymentsLabor schedulingUse of teams and empowerment of employeesAutomation of processesUse of software for facilitating all the aboveInventory management and control
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Using Inventories
An insurance against stock outCan be in several placesCan be excessiveCan be insufficient
Example: Littlewoods stores; UK
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Proper SCN
Coordination is neededUnderstanding of the
causes/problemsInformation flow is a keyCommunication is importantIT is needed
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Information Technology for SCM
Links that enable communication/collaboration
Links the partnersProvide effective and efficient
solutionsExtremely importantNeed for information sharing
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IT as problem solver
Supply ChainProblem
IT solution
Linear sequence ofprocessing – too slow
Parallel processing, using workflow s/w
Waiting times betweenchain segments –excessive
Identify reason (DSS s/w) and expeditecommunication and collaboration (Intranets,GroupWare)
Existence of non-valuedadded activities
Value analysis (SCM s/w), simulation s/w
Slow delivery of paperdocuments
Electronic documents and communicationsystem (e.g. EDI, email)
Repeat process activities Electronic verifications (s/w agents),automation; eliminating human errors
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The bullwhip effect
Slight changes in actual demand create problems
Partners build “just in case” inventoriesLack of trust among partnersStockpilling result in huge costThe manufacturers can not plan
productionCannot order material from suppliers
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Avoiding the sting of the bullwhip
Information sharing is a mustTrust and agreementsHow to do it?$30 billion/year just in the grocery
industry
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IT solutionsAutomate order takingUse EDI/InternetWeb based ordering; intelligent agentsElectronic paymentsMake-to-order (JIT)Tracking systemsSupplier monitor and manage inventoriesInformation from POS to suppliersElectronic trading markets and exchanges
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Electronic trading markets/exchanges
One company with many suppliers (catalogs, auctions)
One company with many buyers (RFQ)
Exchanges controlled by few large companies (e.g. ANX)
3rd party managed exchangesVertical vs. Horizontal portals
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Non-supply Chain Partnerships
Starbucks: Coffee to retailers, customers Needed fast service; less expensive
Kozmo delivers in cities 30-60 minutesKozmo.com: Had a problem with drop boxes
for returnsPartnership: Place Kozmo’s drop boxes
inside starbuck coffee houses (open long hours) solve both problems
Amazon uses Kozmo for fast deliveries
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The Role of 7-Eleven & Convenience Stores
Can be used as a collection point for returns
Can be used as a pick up placeCan be used as a place for order
placingCan pay in cash/card to the storeReturns are a problem: up to 30%
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The role of FedEx & Similar Shippers
From a delivery to all-logisticsMany services (see Box 13.4)Complete inventory controlPackaging, warehousing, reordering
etc.Tracking services to customers
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Software Support
SCM activities Type of software
Upstream activities Suppliers’ management,ordering systems, ordertracking systems
Internal supply chainactivities
- Inventory management- Purchasing and order
management- Budgeting, cost control- Human resources information
Downstreamactivities
Saleperson productivity tools,online telemarketing, ad.Management etc.
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Integration-BenefitsAutomation of segments useful, but…Tangible benefitsInventory reduction, personnel reduction,
productivity improvement, order management improvement, financial cycle improvements.
Intangible benefits Information visibility, new / improved processes,
customer responsiveness, standardization, flexibility, globalization, and business performance.
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Integration along the Supply Chain
Need to streamline operationsNew business modelsNew organizational relationships
(virtual companies)Examples Warner Lamber and
Wal*Mart (Box 13.5)
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Areas of Integration
Order taking - production inventory levelsPayment info in B2B - Visa, Master Card, etc.Low inventory levels - automatic orderingOrder to manufacturing - generate a list of
needed resources & their availabilityChanges in an order - transmit to suppliers
and their suppliersTracking systems - available to customers
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Evolution of Software IntegrationCompletely Independent of each otherMRPMRP= Material Requirements Planning:
Inventory, productionMRPIIMRPII=Manufacturing Requirements Planning
more integrated, MRP+Finance+laborERP=Enterprise Resources Planning
All functional areasExtended ERPExtended ERP=Include suppliers, customers
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From SAP to mySAP.comSAP=Traditional ERP=Automate and Integrate
transactionsMySAP.com = web based comprehensive system
Workplace - a personalized, role-based interface Marketplace - one stop destination for business
professional to collaborate Business Scenarios - products for the Internet and
intranet Application-hosing - hosting Web applications for SMEs
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Enterprise Resource Planning (ERP)
ERPERP = Integrating business processes and activities in real time
Solves many supply chain problemsNecessary for medium to large corporationsHelpful also for some SMEsNeed to interface with EC order taking systemManages all routine transactions in the
Enterprise Recently extended to suppliers and customers
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Developing ERP Systems
Do it yourself, from scratch (only few will)
Use Integrated packages such as R/3 from SAP
“Best of Bread” approach, using integrating software
Rent in from ASP service
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Post ERP (2nd Generation)1st generation - transaction processing orientation
2nd generation including decision making capabilities EC requires decision support EC requires business intelligence
SCM software: Production Planning, Manpower utilization, Profitability models, market analysis.
Integration of SCM capabilitiesOther added functionalities: CRM, KM
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ASP
Leasing information systems application
Back to the days of “time sharing”A risk prevention strategyVery popular with ERP (expensive,
cumbersome)