Ecommerce and Supply Chain Systems

1
Chapter 8

• E-commerce and Supply Chain Systems

2
Agenda

• Porters Five Competitive Forces Model
• E-commerce
• E-commerce and Market Efficiency
• E-commerce Economics
• Commerce Servers
• Supply Chain
• Structure
• Performance
• Profitability
• Bullwhip Effect
• Supplier Relationship Management
• Data Exchange
• EDI
• XML
• Discussion and Case Study

3
Porters Five Competitive Forces Model

• Five competitive forces for profitability
• Bargaining power of suppliers
• Bargaining power of customers
• New entrants to the market
• Rivalry among firms
• Threats of substitutions for products or services

4
Porters Model of Industry Structure
5
E-commerce

• Buying and selling of goods and services over
  public and private computer networks
• Definition of the U.S. Census Bureau
• Merchant companies as those that take title to
  the goods they sell
• Nonmerchant companies as those that arrange for
  the purchase and sale of goods without ever
  owning or taking title to those goods

6
E-commerce Merchant

• B2C (business-to-consumer) sales between a
  supplier and a customer
• A Web-based application or Web storefront where
  customers enter and manage their orders such as
  Amazon.com, REI.com, and LLBean.com
• B2B (business-to-business) sales between
  companies
• Suppliers, distributors, and retailers
• B2G (business-to-government) sales between
  companies and government organizations

7
E-commerce B2B, B2G, and B2C
8
E-commerce Nonmerchant

• Auction match buyers and sellers and support
  goods for sales through a competitive bidding
  process such as e-Bay
• Clearinghouses (exchanges) provide goods and
  services at a stated price, and arrange for the
  delivery of the goods but they never take title
  such as Amazon and electronic exchanges

9
E-Commerce Category
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E-commerce Market Efficiency

• Disintermediation the elimination of middle
  layers in the supply chain (direct sales form
  manufacturer to consumer)
• Flow of price information product price
  comparison by consumer
• Price elasticity price change based on the
  consumer demand
• Market efficiency as a whole

11
E-commerce Economics

• Channel conflict
• Price conflict
• Logistic expense
• Customer service expense

12
Commerce Server

• A computer using Web-based programs to support
  Web storefront
• Display products
• Support online ordering
• Process payments
• Interface with inventory-management
• Web technology
• SMTP (Simple Mail Transfer Protocol), FTP (File
  Transfer Protocol)
• HTML (Hypertext Markup Language)
• Hyperlink
• URL (Uniform Resource Locator)
• Web server Apache of Linux and IIS (Internet
  Information Server)
• Web browser (Netscape Navigator, Internet
  Explorer, and Mozillas FireFox)

13
Internet Protocols and Users
14
Commerce Server Three-Tier Architecture

• Three different classes of computers
• User tier browser to request and process Web
  pages
• Server tier generating Web pages for requests
  from browsers
• Web farm (a set of Web servers) to minimize
  customer delays for load balancing
• Database tier processing SQL requests to
  retrieve and store data

15
Three-Tier Architecture
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Supply Chain - Structure

• Definition a network of organizations and
  facilities to transform raw materials into
  products and deliver products to customers
• Entity customer, retailer, distributor,
  manufacturer, supplier, transportation company,
  and warehouse
• Relationship
• Each organization connected to just one level up
  (toward the supplier) and one level down (toward
  the customer)
• An organization can work with many organizations
  both up and down at each level

17
Supply Chain Relationships
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Supply Chain - Performance

• Facilities location, size, and operations
  methodology
• Inventory (raw materials, in-process work, and
  finished goods) size and management
• Transportation (movement of materials)
  in-house/outsourced, mode, and routing
• Information (request, respond, and inform one
  another) purpose, availability, and means

19
Supply Chain - Profitability

• The difference between the sum of the revenue
  generated by the supply chain and the sum of the
  costs that all organizations in the supply chain
  incur to obtain that revenue
• The maximum profit to the supply chain will not
  occur if each organization in the supply chain
  maximizes its own profits in isolation

20
Supply Chain Bullwhip Effect

• Definition
• The variability in the size and timing of orders
  increase at each stage up the supply chain (from
  customer to supplier)
• Not related to erratic consumer demand
• Reduce the overall supply chain profit
• Elimination
• Every participant in the supply chain has access
  to consumer-demand information from the retailer
• An inter-organizational information system for
  sharing data

21
Supplier Relationship Management

• SRM a business process for managing all
  contracts between an organizational and its
  suppliers for supplies, materials, or services
• Three basic processes source, purchase, and
  settle

22
SRM - Source

• Find vendors
• Assess capabilities
• Negotiate terms and conditions
• Formalize those terms and conditions
• Make contract

23
SRM - Purchase

• Request information, quotations, and proposals
  from would-be suppliers
• Approve purchase
• Create an order

24
SRM - Settle

• Receive goods and services
• Resolve receivables to order
• Pay according to terms and policy
• Cash management

25
Summary of SRM Processes
26
Integration of CRM and SRM

• SRM examines inventory, determines required
  items, and automatically creates the order via
  its connection to the suppliers CRM
• Suppliers CRM application interfaces with the
  purchasers SRM application to perform the
  ordering process as cheaply and efficiently as
  possible

27
Relationship between CRM and SRM
28
Data Exchange

• Telephone call for message
• Fax, postal mail, email for message and document
• Electronic Data Interchange (EDI)
• eXtensible Markup Language (XML)

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EDI

• A standard of formats for electronically
  exchanging common business documents
• Number of data fields
• Sending sequence
• Number of characters in each data field
• Standards with various versions
• Point-to-point network, value-added network, or
  Internet

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XML

• A new markup language by World Wide Web
  Consortium (W3C)
• A superior means for organizations to exchange
  documents for computer processing
• XML schema
• Service description

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XML Web Services

• Purpose a standard way for programs to access
  one another remotely
• Use service description to obtain details of
  programs existing on another computer and how to
  communicate with those programs
• Service user uses the information of service
  description to invoke the service
• XML format for all service data
• Benefit
• The automation of supply chain interactions
• Development tool
• Microsoft .Net
• IBM J2EE

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Web Services for Sharing Sales Data
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Discussion

• Problem Solving (235a-b)
• State the basic rules to prepare an employee for
  attending an inter-organization negotiation or
  collaboration meeting.
• Ethics (247a-b)
• State the basic ethic rule to prepare employees
  for the supply chain information sharing.
• Security (251a-b)
• State the solution and associated reasons to
  handle the installation of another companys
  programs in your organization.
• Reflections (253a-b)
• State your recommendations to the future business
  plan for Oracle and IBM related to the fate of
  relational database, SQL, and XML five years
  later.

34
Case Study

• Case 8-1 (258 260) questions 2, 3 and 5

35
Points to Remember

• Porters Five Competitive Forces Model
• E-commerce
• E-commerce and Market Efficiency
• E-commerce Economics
• Commerce Servers
• Supply Chain
• Structure
• Performance
• Profitability
• Bullwhip Effect
• Supplier Relationship Management
• Data Exchange
• EDI
• XML
• Discussion and Case Study