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Operations Management E-Commerce and Operations Management Supplement 11. 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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operations management e commerce and operations management supplement 11
Operations ManagementE-Commerce and Operations ManagementSupplement 11

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

outline
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

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

outline continued
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

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

learning objectives
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

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

e commerce
E-Commerce

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

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

e business
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

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

e commerce definitions
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

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

types of e commerce transactions
Types of E-Commerce Transactions

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

types of information offered by business to business applications
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

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

types of information offered by business to business applications continued
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

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

types of information offered by business to business applications continued1
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

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

security in the e commerce environment
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.

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

benefits of e commerce
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

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

limitations of e commerce
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

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

impact on product design
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

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

e procurement
E-Procurement

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

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

online catalogues
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

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

internet trading exchanges
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)

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

internet trading exchanges continued
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

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

traditional medical supply chain

Manual processes

Group purchasing organization for small, independent hospitals

Supplier

Distributor

Hospital

Traditional Medical Supply Chain

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

on line medical supply chain

Automated web-based processes

On-line Global Health Care

Group purchasing organization for small, independent hospitals

Supplier

Distributor

Hospital

On-Line Medical Supply Chain

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

e commerce and requests for quotes rfqs
E-Commerce and Requests for Quotes (RFQs)

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

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

online auctions
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

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

e procurement1
E-Procurement
  • Significant savings (10%)
  • Requires new skills and staffing in procurement area

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

inventory tracking
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

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

warehousing for e commerce
Warehousing for E-Commerce
  • E-commerce warehouse is less a warehouse than a “pass through facility.”

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

fedex and dell computer
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.

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

e commerce and jit
E-Commerce and JIT
  • E-commerce coordinates the supplier’s inventory system with the service capabilities of the delivery firm.

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

scheduling and logistics improvements
Scheduling and Logistics Improvements
  • Coordinated pickup and delivery
    • Fed Ex merges orders in transit
  • Logistics cost reduction
    • Greater capacity utilization

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458