Transcript Chapter 1, Heizer/Render, 5th edition

Operations
Management
E-Commerce and Operations
Management
Supplement 11
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Principles of Operations Management, 5e, and Operations
Management, 7e
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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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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
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Learning Objectives
When you complete this supplement, you should
be able to :
Identify or Define:
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E-commerce
E-business
Online catalogues
Outsourcing
E-procurement
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How E-commerce is changing the supply chain
Online auctions
Pass-through warehouses
Describe or Explain:
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E-Commerce
The use of computer networks, primarily the internet,
to buy and sell products, services, and information.
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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
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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
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Types of E-Commerce
Transactions
Business
Consumer
Business
B2B
GM/Ford/Daimler’s
Covisint exchange
B2C
Amazon, Dell, Net
Grocer.com
Consumer
C2B
Priceline, Travelocity
C2C
Ebay
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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
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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
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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
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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.
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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
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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
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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
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E-Procurement
Purchasing or order release communicated over the
internet or via approved online vendor catalogues
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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
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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)
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Internet Trading Exchanges Continued
 Steel and metal products: such as New View
Technologies (exchange.e-steel.com); and MetalSite (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
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Traditional Medical Supply Chain
Manual processes
Supplier
Distributor
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Hospital
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Group purchasing
organization for small,
independent hospitals
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On-Line Medical Supply Chain
Automated webbased processes
On-line
Global Health
Care
Supplier
Distributor
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Hospital
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Group purchasing
organization for small,
independent hospitals
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E-Commerce and Requests for
Quotes (RFQs)
Extensive databases of supplier information, and
ability to rapidly transfer specifications to vendors
reduces time and costs
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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
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Management, 7e
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E-Procurement
 Significant savings (10%)
 Requires new skills and staffing in procurement
area
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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
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Management, 7e
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Warehousing for E-Commerce
 E-commerce warehouse is less a warehouse than
a “pass through facility.”
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Management, 7e
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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.
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Management, 7e
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E-Commerce and JIT
 E-commerce coordinates the supplier’s inventory
system with the service capabilities of the delivery
firm.
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Management, 7e
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Scheduling and Logistics
Improvements
 Coordinated pickup and delivery

Fed Ex merges orders in transit
 Logistics cost reduction

Greater capacity utilization
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Management, 7e
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