Transcript Internet Pricing - Financial engineering

ORF 401 - Electronic Commerce
Spring 2009
Supply Chain Management
•
Can’t talk about e-commerce without discussing the process by which goods are
transformed from raw materials to final disposition. The major benefit of e-commerce
is the efficiency which it adds to this process.
• We have a Global Logistics Chain
XXX Cycle
Modern XXXXXXX
Traditional View:
Raw Materials
In reality the Cycle is
much more complicated
Refining and processing
Recycling
Part manufacturing
Finished goods assembly
Warehousing
Retailers
Consumers
April 6, 2009
Week 9
E-Commerce can
play an important
role in each node
and arc of the
Logistics Cycle
ORF 401 - Electronic Commerce
Spring 2009
Elements of Supply Chain Mgmt.
• Customer Asset Management- managing the flow of information about
customers
– Forecasting, Sales, Marketing, Customer Service, Cost Estimation,
Pricing, Order entry & reservations, Order selection
• A typical department store has 1 million SKUs (Stock Keeping Units)
• Integrated Logistics- managing the flow of information about customers
– Procurement, Inventory management, Warehousing, Transportation
• Involves an enormous volume of transactions
– much of which is done with EDI (Electronic Data Interchange) Standards
• (agile) Manufacturing- managing of the production process
– Production planning, Manufacturing, Assembly
• Financial & Account Mgmt- managing of financial flows with intermediaries
– Billing, Accounting, Payment mgmt
April 6, 2009
Week 9
ORF 401 - Electronic Commerce
Spring 2009
Transactions in Integrated Logistics
Sources of Supply
Units of Demand
35,000 Mining establishments
92,830,000 Household units
68,000 Agricultural, forestry
and fishery establishments
210,000 Transportation, communications
and utility establishments
355,000 Manufacturing establishments
440,000 Wholesale establishments
Billions of
transactions
5,807,000 Sources of supply
trading with each other
492,000 Contract construction est.
504,000 Financial, insurance and real
estate establishments
1,441,000 Retail establishments
98,637,000 Units of demand
1,811,000 service establishments
5,807,000 Sources of supply
April 6, 2009
Week 9
ORF 401 - Electronic Commerce
Spring 2009
Role of e-commerce in SCM
• Allows for different supply model:
– PUSH (build to stock) the traditional approach
• Anticipate demand, store supply inventories in nearby warehouses,
regular delivery to customers
• Works great as long as everything operates according to PLAN
– When the PLAN changes then the momentum associated with the PUSH
model causes problems
– PULL (Build to order) The demand drives the model in real time.
• Example: Person in supermarket checks out, bar codes are scanned
–
–
–
–
–
April 6, 2009
adjusted are demand forecasts, pricing and promotional activities
which adjust forecasts of warehouse inventories,
which adjust orders from suppliers,
which adjust orders from manufacturers,
which adjust orders of raw materials
Week 9
ORF 401 - Electronic Commerce
Spring 2009
Role of e-commerce in SCM
• The PULL model requires that all elements of the Logistics
Chain be agile,i.e. able to reach to changing conditions
– Example in the transportation area:
• 10 years ago the buzz word was “just in time” deliveries
– This just supports a planned PUSH type economy
• The new approach is to be able to manage and control the
transportation in a dynamic “real-time” environment
– It is now important that
» Know where everything is if I need to know it
» I have accurate ETA’s
» be able to redirect (control) the shipments
– Can’t manage nor control if I don’t know where it is and what
it’s state is.
• None of this can be done without e-commerce
April 6, 2009
Week 9
ORF 401 - Electronic Commerce
Spring 2009
Performance Measures
• Availability - Having the product where and when it is needed
– Stock-out Frequency - probability of stockout
– Fill Rate - Ratio of Units delivered / Units ordered
– Orders Shipped Complete
• Operational Performance
– Speed - elapsed time from when order is placed until it is delivered
– Consistency - Ratio of Units delivered / Units ordered
– Flexibility - ability to handle extraordinary requests (e.g., changes in destination,
new products, phase outs, recalls, rush orders)
April 6, 2009
Week 9
ORF 401 - Electronic Commerce
Spring 2009
Supporting Systems
• Strategic Planning Systems – Alliance, partnership acquisition formulation
• Tactical Planning – Vehicle routing & scheduling, Inventory mgmt., Facility location,
Integration and outsourcing
• Operational Control – Dispatch, Real-time decision systems, Customer service
• Management Systems
– Customer service measures, Production measurement, Quality
measurement, Asset management
• Transactional Systems
– Order entry, Shipping, Pricing, Receiving,
April 6, 2009
Week 9
ORF 401 - Electronic Commerce
Spring 2009
Integrated Logistics
• Inventory management
– Inventories can be a significant percentage of assets (~ 30%)
– Cost of inventory:
• Capital cost, Taxes, Insurance, Obsolescence, Storage
– Fear of Stock-out a major cause of inventories
• Perceived uncertainty Leads to excess hoarding ( and a hiding of the
hoarded inventory, which leads to more uncertainty)
– Role of e-Commerce
• No need for Point-of-Sale inventory
• Better visibility of information will reduce perceived Uncertainty
April 6, 2009
Week 9
ORF 401 - Electronic Commerce
Spring 2009
Transportation
• Function
– Product movement
– Product storage
• Participation
–
–
–
–
–
Shipper
Carrier
Consignee (receiver)
3rd party facilitator
Government
• Modes
• Economic factors
– Distance, Volume, Density,Speed, ETA reliability, Handling,
Liability (loss & damage), Deadheading
April 6, 2009
Week 9