Chapter 1, Heizer/Render, 5th edition
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Transcript Chapter 1, Heizer/Render, 5th edition
Operations
Management
E-Commerce and Operations
Management
Supplement 11
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-1
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-2
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-3
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Learning Objectives
When you complete this supplement, you should
be able to :
Identify or Define:
E-commerce
E-business
Online catalogues
Outsourcing
E-procurement
How E-commerce is changing the supply chain
Online auctions
Pass-through warehouses
Describe or Explain:
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-4
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
E-Commerce
The use of computer networks, primarily the internet,
to buy and sell products, services, and information.
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-5
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-6
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-7
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-8
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-9
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-10
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-11
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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.
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-12
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-13
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-14
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-15
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
E-Procurement
Purchasing or order release communicated over the
internet or via approved online vendor catalogues
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-16
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-17
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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)
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-18
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-19
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Traditional Medical Supply Chain
Manual processes
Supplier
Distributor
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
Hospital
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Group purchasing
organization for small,
independent hospitals
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
On-Line Medical Supply Chain
Automated webbased processes
On-line
Global Health
Care
Supplier
Distributor
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
Hospital
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Group purchasing
organization for small,
independent hospitals
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
E-Commerce and Requests for
Quotes (RFQs)
Extensive databases of supplier information, and
ability to rapidly transfer specifications to vendors
reduces time and costs
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-22
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-23
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
E-Procurement
Significant savings (10%)
Requires new skills and staffing in procurement
area
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-24
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-25
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Warehousing for E-Commerce
E-commerce warehouse is less a warehouse than
a “pass through facility.”
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-26
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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.
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-27
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
E-Commerce and JIT
E-commerce coordinates the supplier’s inventory
system with the service capabilities of the delivery
firm.
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-28
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Scheduling and Logistics
Improvements
Coordinated pickup and delivery
Fed Ex merges orders in transit
Logistics cost reduction
Greater capacity utilization
Transparency Masters to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
S11-29
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458