The Internet

1
The Internet

• International computer network
• Connects companies and people around the world
• Enables the integration of internal information
  systems and enhanced communications between
  organizations
• Ties together global design, manufacturing,
  delivery, sales, and after-service

2
The Internet

• Reshaping how businesses think about delivering
  value to customers
• Prime benefits are speed and access
• Important vehicle for change in Operations
  Management
• Intranets are internal networks not available to
  external users
• Growing daily with over 300 million domains
  registered worldwide

3
Electronic Commerce

• E-commerce (or e-business) the use of the
  internet to buy and sell products and services
  and exchange information
• Low cost rapid exchanges
• A whole new way of doing business

4
E-Commerce Definitions

• Business-to-business (B2B) Both sides of the
  transaction are businesses, non-profit
  organizations, or governments
• Business-to-consumer (B2C) Transactions in
  which buyers are individual consumers
• Consumer-to-consumer (C2C) Consumers sell
  directly to each other
• Consumer-to-business (C2B) Individuals sell
  services or goods to businesses

5
E-Commerce Transactions
Figure S11.1
6
Economics of E-Commerce

• Costs of information exchange are dramatically
  reduced
• Barriers to entry are lower
• Time constraints almost disappear
• Information and communication is cheap and easy

7
Types of Information

• Product drawings, specifications, video, or
  simulation demonstrations, prices
• Production Processes capacities, commitments,
  product plans
• Transportation carrier availability, lead
  times, costs
• Inventory inventory tracking, levels, costs,
  and location

Table S11.1
8
Types of Information

• Suppliers product catalog, quality history,
  lead times, terms, and conditions
• Supply Chain Alliances key contact, partners
  roles and responsibilities, schedules
• Supply Chain Process and Performance process
  descriptions, performance measures such as
  quality and delivery

Table S11.1
9
Types of Information

• Competitor benchmarking, product offerings,
  market share
• Sales and Marketing point of sale (POS) data
  entry, promotions, pricing, discounts
• Customer sales history and forecasts
• Costs market indexes, auction results

Table S11.1
10
Benefits and Limitations

• Benefits of E-Commerce
• Improved, lower-cost information that makes
  buyers and sellers more knowledgeable has an
  inherent power to drive down costs
• Lower entry costs increase information sharing
• Available 24 hours a day, virtually any place in
  the world, enabling convenient transactions for
  those concerned

Table S11.2
11
Benefits and Limitations

• Availability expands the market for both buyer
  and seller
• Decreases the cost of creating, processing,
  distributing, storing, and retrieving paper-based
  information
• Reduces the cost of communication
• Richer communication than traditional paper and
  telephone communication because of video clips,
  voice, and demonstrations

Table S11.2
12
Benefits and Limitations

• Fast delivery of digitized products such as
  drawings, documents, and software
• Increased flexibility of location. (That is, it
  allows some processes to be located anywhere
  electronic communications can be established, and
  allows people to shop and work from home.)

Table S11.2
13
Benefits and Limitations

• Limitations of E-Commerce
• Lack of system security, reliability, and
  standards
• Lack of privacy
• Some transactions are still rather slow
• Integrating e-commerce software with existing
  software and databases is still a challenge

Table S11.2
14
Benefits and Limitations

• Lack of trust in (1) unknowns about the integrity
  of those on the other end of a transaction, (2)
  integrity of the transaction itself, and (3)
  electronic money that is only bits and bytes

Security and risk are major factors in E-commerce
Table S11.2
15
Product Design

• Easily shared knowledge and information allows
  quicker and lower cost design cycles that can
  involve participants in diverse locations
• Product data can be managed over the Internet
• Engineering changes and configuration management
  can be extended along the supply chain

16
Collaborative Project Management

• Project management software allows for
  establishing intranet sites for sharing documents
  and maintaining status reports
• Intranets can also be used for document libraries

17
E-Procurement

• Purchasing or order release communicated over the
  Internet
• Online catalogs allow quicker cost comparisons
  and bidding processes
• Catalogs can be provided by
• Vendors
• Intermediaries
• Buyers

18
Online Catalogs

• Vendor catalogs provide quick and easy access to
  the entire product line
• Available to anyone with Internet access
• Quick and easy to customize and adjust
• Reduced paper trails reduce purchasing costs

19
Online Catalogs

• Intermediary catalogs facilitate buyers and
  sellers meeting
• Buyers can find multiple sellers on one site
• Buyer-focused exchanges allow groups of generally
  similar firms to join together to buy in larger
  quantities and more efficiently than if they
  worked independently

20
Internet Trading Exchanges
Retail goods setup by Sears and Frances
Carrefour called GlobalNetXchange for retailers
(gnx.com) Health care products set up by
Johnson Johnson, GE Medical systems, Baxter
International, Abbott Laboratories, and Medtronic
Inc called the Global Heath Care Exchange
(ghx.com)
Table S11.3
21
Internet Trading Exchanges
Defense and aerospace products created by
Boeing, Raytheon, Lockheed-Martin, and Britains
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)
Table S11.3
22
Internet Trading Exchanges
Steel and metal products such as New View
Technologies (exchange.e-steel.com) and
Metal-Site (metalsite.com) 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
Table S11.3
23
E-Procurement

• RFQs and Bid Packaging
• Database of history improves vendor selection
• Electronic files speed decisions
• System is faster and less expensive
• Internet Outsourcing
• Outsourcing support systems like payroll,
  accounting, human resources, and travel

24
E-Procurement

• Online Auctions
• Maintained by buyers, sellers, or intermediaries
• May be used to sell excess raw material or
  discontinued or excess inventory
• Low cost and increased access to buyers

25
Inventory Tracking
26
Inventory Reduction

• Warehousing for E-Commerce
• Managed by a logistics vendor
• Pass-through facility rather than storage
• Just-in-Time Delivery for E-Commerce
• E-commerce can improve communication and
  coordination
• E-commerce service companies manage complex
  transactions

27
Scheduling and Logistics Improvements

• Coordinated Pickup and Delivery
• Unified view of data
• Shipments can be merged in transit
• Reduced inventory and delays mean lower costs

28
Scheduling and Logistics Improvements

• Logistics Cost Reduction
• Carriers with unused capacity can find loads
  through Internet sites
• Logistics efficiency improves and costs are
  reduced