Order fulfillment, logistics, and supply chain management

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Order fulfillment, logistics, and supply chain management

  1. 1. Chapter 15 Order Fulfillment, Logistics, and Supply Chain Management
  2. 2. Learning Objectives <ul><li>Understand the role of order fulfillment and back-office operations in EC </li></ul><ul><li>Describe the order fulfillment process </li></ul><ul><li>Understand the concept of the supply chain, its importance and management </li></ul><ul><li>Describe the problems of managing the supply chain and the use of innovative solutions </li></ul>
  3. 3. Learning Objectives (cont.) <ul><li>Describe the need for integrating information systems of front office and back office </li></ul><ul><li>Trace the evolution of software that supports activities along the supply chain and their management </li></ul><ul><li>Understand the relationship among ERP, SCM and EC </li></ul>
  4. 4. The Toy Order Fulfillment Problem <ul><li>Overall satisfaction with online purchasing declined significantly in December 1999 and January 2000 </li></ul><ul><ul><li>Order fulfillment infrastructure shown to be very weak </li></ul></ul><ul><ul><li>Toysrus.com and other toy e-tailers had the most critical problems </li></ul></ul>
  5. 5. The Toy Order Fulfillment Problem (cont.) <ul><ul><li>Fierce competition in the toy industry caused inventory deficiencies </li></ul></ul><ul><ul><ul><li>Offered free delivery </li></ul></ul></ul><ul><ul><ul><li>Offered $20 discount </li></ul></ul></ul><ul><ul><li>Orders could not be met in time for the holidays—so they gave out $100 coupons </li></ul></ul><ul><li>Amazon.com had to ship orders for several products in several shipments instead of one—raising the delivery cost </li></ul>
  6. 6. Order Fulfillment: Overview <ul><li>Introduction </li></ul><ul><ul><li>Taking orders may be the easiest part </li></ul></ul><ul><ul><li>Factors responsible for delays in deliveries: </li></ul></ul><ul><ul><ul><li>Inability to accurately forecast demand </li></ul></ul></ul><ul><ul><ul><li>Ineffective supply chains </li></ul></ul></ul><ul><ul><ul><li>Pull type manufacturing </li></ul></ul></ul><ul><ul><ul><li>Customized products </li></ul></ul></ul>
  7. 7. Figure 15-1 Push vs. Pull Supply Chains
  8. 8. Major Concepts <ul><li>Order fulfillment: Deliver right order on time </li></ul><ul><li>Front office operations: </li></ul><ul><ul><li>Order taking </li></ul></ul><ul><ul><li>Advertisement </li></ul></ul><ul><ul><li>CRM </li></ul></ul><ul><li>Back office operations </li></ul><ul><ul><li>Accounting Packaging </li></ul></ul><ul><ul><li>Finance Logistics </li></ul></ul><ul><ul><li>Inventory </li></ul></ul>
  9. 9. Major Concepts (cont.) <ul><li>Definitions of logistics: </li></ul><ul><ul><li>Managing the flow of goods, information and money along the supply chain </li></ul></ul><ul><ul><li>Aspect of military science dealing with procurement, maintenance, and transportation </li></ul></ul><ul><ul><li>Management of details of an operation </li></ul></ul><ul><ul><li>All activities involved in management of product movement </li></ul></ul><ul><ul><ul><li>Right product </li></ul></ul></ul><ul><ul><ul><li>Right place </li></ul></ul></ul><ul><ul><ul><li>Right time </li></ul></ul></ul>
  10. 10. Figure 15-2 Order Fulfillment and Logistics Systems
  11. 11. The Steps of Order Fulfillment <ul><li>1. Payment Clearance </li></ul><ul><li>2. In-stock availability </li></ul><ul><li>3. Packaging, shipment </li></ul><ul><li>4. Insuring </li></ul><ul><li>5. Production (planning, execution) </li></ul><ul><li>6. Plant services </li></ul><ul><li>7. Purchasing, warehousing </li></ul><ul><li>8. Customer contacts </li></ul><ul><li>9. Returns (Reverse logistics) </li></ul><ul><li>10. Demand forecast </li></ul><ul><li>11. Accounting, billing </li></ul><ul><li>12. Reverse logistics </li></ul>
  12. 12. Shipping a Tropical Fish <ul><li>1. Placing order, payment </li></ul><ul><li>2. Transfer order to Petstore.com, check stock </li></ul><ul><li>3. Use a wholesaler to get the fish </li></ul><ul><li>4. Supplier finds fish, ships to wholesalers </li></ul><ul><li>5. Wholesalers rush to Petstore </li></ul><ul><li>6. Petstore uses FedEx to ship to customer with copy of credit card payment </li></ul><ul><li>Discussion: What is the contribution of EC? </li></ul>
  13. 13. Supply Chain Management <ul><li>Definition: Flow of material, information, money, etc. from raw material suppliers through factories to customers </li></ul><ul><li>It includes: organizations, procedures, people </li></ul><ul><li>SCM: Integration of the business processes along the chain, Planning, Organizing, control of many activities </li></ul><ul><li>Activities: Purchasing, delivery, packaging, checking, warehousing, etc. </li></ul>
  14. 14. Figure 15-3 An Automotive Supply Chain Source: Modified from Handfield and Nichols (1999), p. 3.
  15. 15. Benefits of SCM <ul><li>Reduce uncertainty along the chain </li></ul><ul><li>Proper inventory levels in the chain </li></ul><ul><li>Minimize delays </li></ul><ul><li>Eliminate rush (unplanned) activities </li></ul><ul><li>Provide superb customer service </li></ul><ul><li>Major contributor of success (ever survival) </li></ul>
  16. 16. Global Supply Chain <ul><li>Can be very long </li></ul><ul><li>Possible cross-border problems </li></ul><ul><li>Need information technology support of: </li></ul><ul><ul><li>Communication </li></ul></ul><ul><ul><li>Collaboration </li></ul></ul><ul><li>Possible delays due to: customs, tax, translations, politics </li></ul>
  17. 17. Typical Problems Along the Supply Chain <ul><li>Delays in production, distribution, etc. </li></ul><ul><li>Expensive Inventories </li></ul><ul><li>Lack of partners’ coordination </li></ul><ul><li>Uncertainties in deliveries </li></ul><ul><li>Poor demand forecast </li></ul><ul><li>Interference with production </li></ul><ul><li>Poor quality </li></ul>
  18. 18. More Difficulties <ul><li>Virtual companies do not have logistics infrastructures </li></ul><ul><li>One company is a member of several supply chain </li></ul><ul><li>Conventional warehouses are too expensive </li></ul><ul><li>Need automatic warehouses with robots as pickers </li></ul>
  19. 19. Bullwhip Effect and Information Sharing <ul><li>Flow of information to and from all participating entities </li></ul><ul><li>Information sharing between retailers and their suppliers </li></ul><ul><ul><li>Bullwhip effect refers to erratic shifts in orders up and down supply chain </li></ul></ul><ul><ul><li>Distorted information leads to: </li></ul></ul><ul><ul><ul><li>Inefficiencies Ineffective shipments </li></ul></ul></ul><ul><ul><ul><li>Excessive inventories Poor customer service </li></ul></ul></ul><ul><ul><ul><li>Missed production schedules </li></ul></ul></ul>
  20. 20. The Bullwhip Effect <ul><li>Slight changes in actual demand create problems </li></ul><ul><li>Partners build “just in case” inventories </li></ul><ul><li>Lack of trust among partners </li></ul><ul><li>Stockpiling results in huge cost </li></ul><ul><li>The manufacturers cannot plan production </li></ul><ul><li>Cannot order material from suppliers </li></ul>
  21. 21. Avoiding the Sting of the Bullwhip <ul><li>How to do it? </li></ul><ul><ul><li>Information sharing is a must and is facilitated by EDI, extranets, and groupware technologies </li></ul></ul><ul><li>Trust and agreements in regard to: </li></ul><ul><ul><li>Ordering and inventory decisions </li></ul></ul><ul><ul><li>Placing supply chain ahead of individual entities within the corporation </li></ul></ul><ul><li>Sharing information could save $30 Billion/year just in the grocery industry </li></ul>
  22. 22. Preliminary Activities <ul><li>Understand the supply chain (flow charts) </li></ul><ul><li>Study internal and external parts </li></ul><ul><li>Performance measurement are a must (Benchmarking) </li></ul><ul><li>Multidimension performance analysis </li></ul><ul><li>A BPR may be needed </li></ul><ul><li>People’s relationships are a must </li></ul>
  23. 23. Areas of Opportunities <ul><li>Manufacturing processes </li></ul><ul><li>Warehousing operation </li></ul><ul><li>Packaging and delivery </li></ul><ul><li>Material inspection/receiving </li></ul><ul><li>Inbound and outbound transportation </li></ul><ul><li>Reverse logistics (return) </li></ul><ul><li>In-plant material handling </li></ul><ul><li>Vendor management program </li></ul><ul><li>Customer order processing </li></ul>
  24. 24. Areas of Opportunities (cont.) <ul><li>Invoicing, auditing and other accounting activities </li></ul><ul><li>Collaboration procedures with partners </li></ul><ul><li>Employee training and deployments </li></ul><ul><li>Labor scheduling </li></ul><ul><li>Use of teams and empowerment of employees </li></ul><ul><li>Automation of processes </li></ul><ul><li>Use of software for facilitating all the above </li></ul><ul><li>Inventory management and control </li></ul>
  25. 25. Using Inventories <ul><li>Insurance against stock out </li></ul><ul><li>Can be in several places </li></ul><ul><li>Can be excessive </li></ul><ul><li>Can be insufficient </li></ul><ul><li>Example: Littlewoods stores; UK </li></ul>
  26. 26. Using Inventories <ul><li>Using inventories to solve supply chain shortages: </li></ul><ul><ul><li>Building inventories as insurance against uncertainty—products and parts flow smoothly </li></ul></ul><ul><ul><li>Very difficult to correctly determine inventory levels for each product and part </li></ul></ul><ul><ul><ul><li>Customized finished products can only stock components </li></ul></ul></ul><ul><ul><ul><li>Excessive levels are costly to store </li></ul></ul></ul><ul><ul><ul><li>Insufficient levels cannot protect against high demand or slow delivery times </li></ul></ul></ul>
  27. 27. Using Inventories (cont.) <ul><li>Example: Littlewoods Stores; UK </li></ul><ul><ul><li>Retail clothing industry is very competitive </li></ul></ul><ul><ul><li>Littlewoods instituted an IT-supported initiative to support supply chain efficiency; specifically, to deal with the overstocking problem </li></ul></ul>
  28. 28. Littlewoods Stores (cont.) <ul><li>Use a Web-Based performance reporting system that analyzes daily: </li></ul><ul><ul><li>Marketing and financial data </li></ul></ul><ul><ul><li>Merchandising </li></ul></ul><ul><ul><li>Space planning </li></ul></ul><ul><ul><li>Purchasing data </li></ul></ul>
  29. 29. Littlewoods Stores (cont.) <ul><li>Using data warehouse, DSS and other end-user oriented software system has helped: </li></ul><ul><ul><li>Reduce backup inventory expenses </li></ul></ul><ul><ul><li>Increased the ability to strategically price merchandise differently in different stores </li></ul></ul><ul><ul><li>Reduced the need for stock liquidations </li></ul></ul><ul><ul><li>Cut marketing distribution costs significantly </li></ul></ul><ul><ul><li>Increased the number of Web-based users </li></ul></ul>
  30. 30. Proper SCM <ul><li>Proper SCM and inventory management requires coordination of all activities and links in the supply chain to: </li></ul><ul><ul><li>Ensure that goods move smoothly and on time from suppliers to customers </li></ul></ul><ul><ul><li>Keep inventories low </li></ul></ul><ul><ul><li>Keep costs down </li></ul></ul>
  31. 31. Proper SCM (cont.) <ul><li>Coordination is needed because: </li></ul><ul><ul><li>Supply chain partners depend on each other </li></ul></ul><ul><ul><li>Partners don’t always work together toward the same goal </li></ul></ul><ul><li>To properly control uncertainties it is necessary to: </li></ul><ul><ul><li>Understand the causes/problems </li></ul></ul><ul><ul><li>Determine how uncertainties will affect other activities up and down the supply chain </li></ul></ul><ul><ul><li>Formulate ways to eliminate or reduce uncertainties </li></ul></ul>
  32. 32. Proper SCM (cont.) <ul><li>Information flow is a key: communications between business partners should be: </li></ul><ul><ul><li>Effective </li></ul></ul><ul><ul><li>Efficient </li></ul></ul><ul><li>Support is needed to ensure this communication and is enabled by: </li></ul><ul><ul><li>IT support </li></ul></ul><ul><ul><li>EC support </li></ul></ul>
  33. 33. EC Solutions Along the Supply Chain <ul><li>Automate order taking </li></ul><ul><ul><li>Use EDI/Internet </li></ul></ul><ul><ul><li>Web-based ordering; intelligent agents </li></ul></ul><ul><li>Electronic payments </li></ul><ul><li>Inventory reduction (made-to-order pull process) </li></ul><ul><ul><li>Improved inventory management </li></ul></ul><ul><ul><li>Decreased administrative costs </li></ul></ul>
  34. 34. EC Solutions Along the Supply Chain (cont.) <ul><li>Digitization of products—instant order fulfillment </li></ul><ul><li>Back-office interface </li></ul><ul><ul><li>Shortens cycle time </li></ul></ul><ul><ul><li>Eliminates errors </li></ul></ul><ul><li>Collaborative commerce among members of the supply chain </li></ul><ul><ul><li>Shortens cycle time </li></ul></ul><ul><ul><li>Minimizes delays and work interruptions </li></ul></ul><ul><ul><li>Lower inventories </li></ul></ul><ul><ul><li>Lower administrative costs </li></ul></ul>
  35. 35. Innovative Solutions to Order Fulfillment Problem <ul><li>Examples of solutions to order fulfillment: </li></ul><ul><ul><li>Real-time video (Webcam) </li></ul></ul><ul><ul><ul><li>Move inventory 70 times/year </li></ul></ul></ul><ul><ul><ul><li>FAO Schwartz demonstrates famous store in New York </li></ul></ul></ul><ul><ul><li>MailBoxes Etc. and Innotrac Corp. </li></ul></ul><ul><ul><ul><li>Comprehensive system </li></ul></ul></ul><ul><ul><ul><li>Software connects e-tailers and order management systems </li></ul></ul></ul>
  36. 36. Innovative Solutions to Order Fulfillment Problem (cont.) <ul><li>Role of 7-Eleven & convenience stores </li></ul><ul><ul><li>Can be used as a collection point for returns </li></ul></ul><ul><ul><li>Can be used as a pick-up place </li></ul></ul><ul><ul><li>Can be used as a place for order placing </li></ul></ul><ul><ul><li>Can pay in cash/card to the store </li></ul></ul><ul><ul><li>Returns are a problem: up to 30% </li></ul></ul>
  37. 37. Innovative Solutions to Order Fulfillment Problem (cont.) <ul><li>Relysoftware.com helps find: </li></ul><ul><ul><li>“Forwarders”—intermediaries that prepare goods for shipping for companies </li></ul></ul><ul><li>Relysoftware.com also helps: </li></ul><ul><ul><li>Forwarders find the best prices on air carriers </li></ul></ul><ul><ul><li>Carriers fill up empty cargo space by bidding it up </li></ul></ul>
  38. 38. Same Day, Even Same Hour Delivery <ul><li>Role of FedEx and similar shippers </li></ul><ul><ul><li>From a delivery to all-logistics </li></ul></ul><ul><ul><li>Many services (see Box 13.4) </li></ul></ul><ul><ul><li>Complete inventory control </li></ul></ul><ul><ul><li>Packaging, warehousing, reordering, etc. </li></ul></ul><ul><ul><li>Tracking services to customers </li></ul></ul>
  39. 39. Same Day, Even Same Hour Delivery (cont.) <ul><li>Supermarket deliveries </li></ul><ul><ul><li>Transport of fresh food to people who are in homes only at specific hours </li></ul></ul><ul><ul><li>Distribution systems are critical </li></ul></ul><ul><ul><li>Fresh food may be spoiled </li></ul></ul>
  40. 40. E-Markets and Exchanges <ul><li>Types: </li></ul><ul><ul><li>One company with many suppliers (RFQ) </li></ul></ul><ul><ul><li>Catalogs, auctions </li></ul></ul><ul><ul><li>One company with many buyers (RFQ) </li></ul></ul><ul><ul><li>Exchanges controlled by few large companies (e.g., ANX) </li></ul></ul><ul><ul><li>3 rd -party managed exchanges </li></ul></ul><ul><ul><li>Vertical vs. Horizontal portals </li></ul></ul>
  41. 41. Figure 15-4 Proposed Order Fulfillment for Groceryworks Source : Steinert-Threlkeld (January 31, 2000). Originally published in Interactive Week, www.xplane.com
  42. 42. Automated Warehouses <ul><li>B2C order fulfillment—send small quantities to a large number of individuals </li></ul><ul><ul><li>Step 1: retailers contract Fingerhut to stock products and deliver Web orders </li></ul></ul><ul><ul><li>Step 2: merchandise stored SKU warehouse </li></ul></ul><ul><ul><li>Step 3: orders arrive </li></ul></ul><ul><ul><li>Step 4: computer program consolidates orders from all vendors into “pick waves” </li></ul></ul>
  43. 43. Automated Warehouses (cont.) <ul><ul><li>Step 5: picked items moved by conveyors to packing area; computer configures size and type of packing; types special packing instructions </li></ul></ul><ul><ul><li>Step 6: conveyer takes packages to scanning station (weighed) </li></ul></ul><ul><ul><li>Step 7: scan destination; moved by conveyer to waiting trucks </li></ul></ul><ul><ul><li>Step 8: full trucks depart for Post Offices </li></ul></ul>
  44. 44. Handling Returns <ul><li>Necessary for maintaining customer trust and loyalty </li></ul><ul><ul><li>Return item to place it was purchased </li></ul></ul><ul><ul><li>Separate logistics of returns from logistics of delivery </li></ul></ul><ul><ul><li>Allow customer to physically drop returned items at collection stations </li></ul></ul><ul><ul><li>Completely outsource returns </li></ul></ul>
  45. 45. Outsourcing Logistics: The UPS Strategy <ul><li>UPS provides broad EC services: </li></ul><ul><ul><li>Electronic tracking of packages </li></ul></ul><ul><ul><li>Electronic supply chain services for corporate customers by industry including: </li></ul></ul><ul><ul><ul><li>Portal page with industry-related information </li></ul></ul></ul><ul><ul><ul><li>Statistics </li></ul></ul></ul><ul><ul><li>Calculators for computing shipping fees </li></ul></ul><ul><ul><li>Help customers manage electronic supply chains </li></ul></ul>
  46. 46. The UPS Strategy (cont.) <ul><li>UPS provides broad EC services </li></ul><ul><ul><li>Improved inventory management, warehousing, and delivery </li></ul></ul><ul><ul><li>Integration with shipping management system </li></ul></ul><ul><ul><li>Notify customers by e-mail of: </li></ul></ul><ul><ul><ul><li>Delivery status </li></ul></ul></ul><ul><ul><ul><li>Expected time of arrival of incoming packages </li></ul></ul></ul>
  47. 47. The UPS Strategy (cont.) <ul><li>Representative tools </li></ul><ul><ul><li>7 transportation and delivery applications </li></ul></ul><ul><ul><ul><li>Track packages </li></ul></ul></ul><ul><ul><ul><li>Analyze shipping history </li></ul></ul></ul><ul><ul><ul><li>Calculate exact time-in-transit </li></ul></ul></ul><ul><ul><li>Downloadable tools </li></ul></ul><ul><ul><ul><li>Proof of delivery </li></ul></ul></ul><ul><ul><ul><li>Optimal routing features </li></ul></ul></ul><ul><ul><li>Delivery of digital documents </li></ul></ul><ul><ul><li>Wireless access to UPS system </li></ul></ul>
  48. 48. Supply Chain Components <ul><li>Upstream: like placing orders: </li></ul><ul><ul><li>Suppliers, their suppliers (several tiers) </li></ul></ul><ul><ul><li>From raw material to the company </li></ul></ul><ul><li>Internal: all internal processes that add value, conversion to find products </li></ul><ul><ul><li>Production scheduling </li></ul></ul><ul><ul><li>Costing </li></ul></ul><ul><ul><li>Inventory control </li></ul></ul>
  49. 49. Supply Chain Components (cont.) <ul><li>Downstream: all activities in distribution and delivery to end customers </li></ul><ul><ul><li>Sales </li></ul></ul><ul><ul><li>Customer billing </li></ul></ul><ul><ul><li>Delivery scheduling </li></ul></ul>Supply
  50. 50. Software Support <ul><li>Salesperson productivity tools </li></ul><ul><li>Online telemarketing </li></ul><ul><li>Ad management etc. </li></ul>Downstream activities <ul><li>Inventory management </li></ul><ul><li>Purchasing order management </li></ul><ul><li>Budgeting, cost control </li></ul><ul><li>Human resource information </li></ul>Internal supply chain activities <ul><li>Supplier management </li></ul><ul><li>Ordering systems </li></ul><ul><li>Order tracking systems </li></ul>Upstream activities Type of Software SCM Activities
  51. 51. Integration-Benefits <ul><li>Tangible benefits </li></ul><ul><ul><li>Inventory reduction </li></ul></ul><ul><ul><li>Personnel reduction </li></ul></ul><ul><ul><li>Productivity improvement </li></ul></ul><ul><ul><li>Order management improvement </li></ul></ul><ul><ul><li>Financial cycle improvements </li></ul></ul><ul><li>Intangible benefits </li></ul><ul><ul><li>Information visibility </li></ul></ul><ul><ul><li>New/improved processes </li></ul></ul><ul><ul><li>Customer responsiveness </li></ul></ul><ul><ul><li>Standardization </li></ul></ul><ul><ul><li>Flexibility </li></ul></ul><ul><ul><li>Globalization </li></ul></ul><ul><ul><li>Business performance </li></ul></ul><ul><li>Automation of segments useful, but integration brings: </li></ul>
  52. 52. Integration Along the Supply Chain <ul><li>Need to streamline operations </li></ul><ul><li>New business models </li></ul><ul><li>New organizational relationships (virtual companies) </li></ul><ul><li>Examples Warner Lambert and Wal-Mart (Box 15.6) </li></ul>
  53. 53. Areas of Integration <ul><li>Order taking - production inventory levels </li></ul><ul><li>Payment info in B2B - Visa, MasterCard, etc. </li></ul><ul><li>Low inventory levels - automatic ordering </li></ul><ul><li>Order to manufacturing - generate a list of needed resources & their availability </li></ul><ul><li>Changes in an order - transmit to suppliers and their suppliers </li></ul><ul><li>Tracking systems - available to customers </li></ul>
  54. 54. Evolution of Software Integration <ul><li>Completely Independent of each other </li></ul><ul><ul><li>MRP= Material Requirements Planning: </li></ul></ul><ul><ul><ul><li>Inventory </li></ul></ul></ul><ul><ul><ul><li>Production </li></ul></ul></ul><ul><ul><li>MRPII=Manufacturing Requirements Planning </li></ul></ul><ul><ul><ul><li>more integrated </li></ul></ul></ul><ul><ul><ul><li>MRP+Finance+Labor </li></ul></ul></ul>
  55. 55. Evolution of Software Integration (cont.) <ul><li>Completely Independent of each other </li></ul><ul><ul><li>ERP=Enterprise Resources Planning </li></ul></ul><ul><ul><ul><li>All functional areas </li></ul></ul></ul><ul><ul><li>Extended ERP includes </li></ul></ul><ul><ul><ul><li>Suppliers </li></ul></ul></ul><ul><ul><ul><li>Customers </li></ul></ul></ul>
  56. 56. From SAP to mySAP.com <ul><li>SAP=Traditional ERP=Automate and Integrate transactions </li></ul><ul><li>MySAP.com = Web-based comprehensive system </li></ul><ul><ul><li>Workplace - a personalized, role-based interface </li></ul></ul><ul><ul><li>Marketplace - one stop destination for business professionals to collaborate </li></ul></ul><ul><ul><li>Business Scenarios - products for the Internet and intranet </li></ul></ul><ul><ul><li>Application-hosing - hosting Web applications for SMEs </li></ul></ul>
  57. 57. ERP Benefits <ul><li>ERP = Integrating business processes and activities in real time </li></ul><ul><li>Solves many supply chain problems </li></ul><ul><li>Necessary for medium to large corporations </li></ul><ul><li>Helpful also for some SMEs </li></ul>
  58. 58. ERP Implementation <ul><li>Need to interface with EC order taking system </li></ul><ul><li>Manages all routine transactions in the enterprise </li></ul><ul><li>Recently extended to suppliers and customers </li></ul>
  59. 59. Developing ERP Systems <ul><li>Do-it-yourself, from scratch (only few will) </li></ul><ul><li>Use Integrated packages such as R/3 from SAP </li></ul><ul><li>“Best of Bread” approach, using integrating software </li></ul><ul><li>Rent in from ASP service </li></ul>
  60. 60. Post-ERP (2nd Generation) <ul><li>1st generation - transaction processing orientation </li></ul><ul><li>2nd generation </li></ul><ul><ul><li>Including decision-making capabilities </li></ul></ul><ul><ul><li>EC requires decision support </li></ul></ul><ul><ul><li>EC requires business intelligence </li></ul></ul><ul><li>SCM software: Production Planning, Manpower utilization, Profitability models, market analysis </li></ul><ul><li>Integration of SCM capabilities </li></ul><ul><li>Other added functionalities: CRM, KM </li></ul>
  61. 61. ASP and ERP Outsourcing <ul><li>Why ASP or lease? </li></ul><ul><ul><li>Leasing information systems application </li></ul></ul><ul><ul><li>Back to the days of “time-sharing” </li></ul></ul><ul><ul><li>A risk prevention strategy </li></ul></ul><ul><ul><li>Very popular with ERP (expensive, cumbersome) </li></ul></ul>
  62. 62. Managerial Issues <ul><li>Planning for order fulfillment is a critical task, especially for virtual EC vendors </li></ul><ul><li>Dealing with returns can be a complex issue </li></ul><ul><li>Partnerships and alliances can improve logistics and alleviate supply chain problems </li></ul><ul><li>Many software products are available to improve SCM and logistics </li></ul><ul><li>EC must be tightly connected with back-office operations </li></ul>
  63. 63. Managerial Issues (cont.) <ul><li>It is necessary to integrate it with EC front-office operations </li></ul><ul><li>Importance of creation of logistics system for EC and how to use EC applications to improve the supply chain </li></ul><ul><li>Software integration may require considerable time and money </li></ul>

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