E-Business and Supply Chain

8/2/2019 E-Business and Supply Chain

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E-business and Supply Chain

COSC 648

Sungchul Hong


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E-business and Supply Chain

E-business is the execution of business

transactions over the Internet. Supply chain

transactions that involve e-business includethe flow of information, product, and funds.


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E-business Supply Chain

Transactions over the Internet Providing information across the supply chain.

Negotiating prices and contracts with customers

and suppliers Allowing customers to place orders

Allowing customers to track orders

Filling and delivering orders to customers

Receiving payment from customers

c.f.) mail order, catalog, EDI with dedicated line


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How to use the Internet

Companies are using the Internet to conduct

a wide variety of supply chain transactions.


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Case 1

1. Dell displays all its product information

over the Internet. Customers are able to

identify all options available for a personalcomputer they want to purchase. Dell also

shares demand and inventory information

on-line with its suppliers.


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Case 2

Solectron, a contract manufacturer,

collaborates with PC companies on product

design.


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Case 3

eBay allows people to auction products over

the Internet.


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Case 4

Exchanges like Freemarkets.com allow

companies to auction their products and

services over the Internet and seek bidsfrom potential suppliers.


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B2C

A business-to-consumer (B2C) e-business

involves transactions between a company

and a consumer.

eBay, various Internet shopping malls


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B2B

A business-to-business (B2B) e-business involves

transactions between two companies.

W. W. Grainger and McMaster-Carr sellingmaintenance, repair, and operations (MRO)

supplies to other companies over the Internet.

i2, Ariba, Commerce One, and Greemarket.com;

these companies set up Internet exchanges and

auction sites for manufacturers dealing with

suppliers.


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On-line Retailing

The Boston Consulting Group estimated

that on-line retailer transactions exceeded

$36 billion in 1999. (2% of total retail salesacross all channels)


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B2B Supply Chain

E-business also grew significantly in 1999 in

B2B supply chains. B2B supply chain have used

the Internet in a variety of ways to improveperformance.


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B2B Example

Companies like W. W. Grainger, Cisco

Systems Inc., and Intel Corporation were

the first to move many supply chainprocesses on-line.

Companies like General Motors are setting

up e-business to handle procurement ofeverything from staples to steering wheels.


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B2B Example

At General Electric, employees order office

supplies from pre-qualified vendors over the

Internet. Ford Motor Co. is using the Internet to bring

together engineers from its operations all over the

world to collaborate on projects with a goal of

designing basic components that can be usedeverywhere.


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B2B Business

E-business is expected to provide

significant payoff in most B2B supply

chains. Speculation abounds that e-businesswill lead to reduced prices, higher

productivity, and lower labor costs.


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Setting Up an E-business

If a firm is to exploit the advantages of

setting up an e-business fully, it must

understand the key differences betweenusing the Internet and other channels for the

flow of information, products, and funds.


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Revenue Impact of E-business

Offering direct sales to customers

Providing 24-hour access from any location

Aggregating information from various sources Providing personalization and customization of

information

Speeding up time to market

Implementing flexible pricing

allowing price and service discrimination

facilitating efficient funds transfer


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Offering Direct Sales to

Customers An e-business allows manufacturers and

other members of the supply chain that do

not have direct contact with customers intraditional channels to enhance revenues by

bypassing intermediaries and selling

directly to customers.


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Providing 24-Hour Access from

Any Location

Unlike most retail stores, an e-business can

attract customers who may not be able to

place orders during regular business hoursbecause it is always open for placing orders.


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Aggregating Information from

Various Sources

An e-business allows a firm to increase

sales by offering information regarding a

very large selection of products.


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Providing Personalization and

Customization of Information

The Internet offers an e-business the ability to use

personal information to intelligently guide each

customers buying experience and increase sales.(Amazon.com)

In a B2B environment, firms can set up customer-

specific sites to display information on products

that the customer buys most frequently. e.g. LandsEnd (clothing)


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Speeding Up Time to Market

A firm with an e-business can increase

revenue by introducing new products much

faster than a firm that uses physicalchannels. There is no leg to fill the physical

channel.


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Implementing Flexible Pricing

An e-business can easily alter prices over

time by changing one entry in the database

linked to its Web site. This ability allows ane-business to maximize revenues by setting

prices based on current inventories and

demand.


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Allowing Price and service

Discrimination Potentially, an e-business can price-

discriminate and alter prices based on the

buying power of individual customers toenhance revenues.

e.g. Amazon.com

1 book v.s. many books


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Facilitating Efficient Funds

Transfer e.g. senator McCains campaign: collect $1

miilion dollars over his web site within 48

hours.


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Potential Revenue Disadvantages

of E-Business Immediate physical retailing is not possible.


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Cost Impact of E-Business

Reducing product handling with a shorter supply chain

Postponing product differentiation until after an order isplaced

Decreasing delivery cost and time with downloadableproduct

Reducing facility and processing costs

Decreasing inventory costs through centralization Improving supply chain coordination through

information sharing


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Reducing Product Handling with

a Shorter Supply Chain A manufacturer using e-business to sell

directly to customers is able to reduce

handling costs because fewer supply chainstages touch the product as it makes its way

to a customer.


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Postponing Product

Differentiation Until after an

Order Is Placed An e-business can significantly lower its

inventories if it can postpone the

introduction of variety until after thecustomer order is received.


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Decreasing Delivery Cost and

Time With Downloadable

Products MP3, CD, Software


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Reducing Facility and Processing

Costs An e-business can reduce facility costs by

centralizing all inventories and decreasing

the number of facilities required.


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Decreasing Inventory Costs

through Aggregation An e-business can aggregate inventories

because it does not have to carry inventory

close to the customer.


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Improving Supply Chain

Coordination through

Information

An e-business can easily share demand

information throughout the supply chain toimprove coordination.


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Potential Cost Disadvantages of

E-business Increase transportation costs due to

inventory aggregation

Increased handling costs if customerparticipation is reduced (grocery)

Large initial investment in information

infrastructure

Documents

E-Business and Supply Chain