Ecommerce Chap 13


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Ecommerce Chap 13

  1. 1. Chapter 13 Order Fulfillment, Logistics, Supply Chain Management 1
  2. 2. Learning Objectives1. Understand the role of order fulfillment and back-office operations in EC2. Describe the process of order fulfillment3. Understand the concept of the supply chain, its importance and management4. Describe the problems of managing the supply chain and the use of innovative solutions there5. Describe the need for integrating information systems of front office and back office6. Trace the evolution of software that support activities along the supply chain and their management7. Understand the relationship among ERP, SCM and EC. 2
  3. 3. The Y2K Order FulfillmentProblem In Dec. 1999 Competition among E-Tailers increases Special area: Toys; Big promotions, coupons Demand: very high, not anticipated Retailers: were unable to meet demand Customers: very unhappy Similar problems in gifts, book, etc. Also: online retailers has warehousing and logistics problems 3
  4. 4. Order Fulfillment Taking orders may be the easiest part Difficulties in groceries and fresh food One reason: Customized products Second: Pull type manufacturing 4
  5. 5. The Pull vs. Push Model 5
  6. 6. Major Concepts Order fulfillment: Deliver right order on time Front office operations: Order taking, advertisement, CRM Back office operations: Accounting, finance, inventor, packaging, logistics Logistics: Managing the flow of goods, information and money along the supply chain 6
  7. 7. The Process of OrderFulfillment 7
  8. 8. The Steps of OrderFulfillment1. Payment Clearance 7. Purchasing,2. In-stock availability warehousing3. Packaging, shipment 8. Demand forecast4. Insuring 9. Accounting, billing5. Production (planning, 10. Customer contacts execution) 11. Returns (Reverse6. Plant services logistics) 8
  9. 9. Shipping a Tropical Fish1. Placing order, payment2. Transfer order to, check stock3. Use an wholesaler to get the fish4. Supplier finds fish, ships to wholesalers5. Wholesalers rushes to Petstore6. Petstore uses FedEx to ship to customer with copy of credit card paymentDiscussion: What is the contribution of EC? 9
  10. 10. Why Intermediaries?1. Wholesaler and deliveries in the Petstore case2. Wholesalers as an aggregators; between many sellers and buyers3. Can a virtual store replace a retailer?4. Direct sales for large items5. Example: The Lego Co. case 10
  11. 11. Channel Conflict Elimination of Intermediary many create a conflict Conflict between online and offline distribution This may impact order fulfillment and returns What if a manufacturer sells both wholesale and retail? (Microsoft) Customized product by manufacturers: ideal for direct sale 11
  12. 12. Supply Chain Management Definition: Flow of material, information, money, etc. from raw material suppliers through factories to customers It includes: organizations, procedures, people SCM: Integration of the business processes along the chain, Planning, Organizing, control of many activities Activities: Purchasing, delivery, 12 packaging, checking, warehousing, etc.
  13. 13. Components of the SupplyChain 13
  14. 14. Components-Description Upstream: Suppliers, their suppliers Upstream (several tiers). From Raw material to the company Internal: All internal process that add Internal value, conversion to find products Downstream: All activities in distribution Downstream and delivery to end customers 14
  15. 15. Complex-nonlinear SupplyChain 15
  16. 16. Benefits of SCM Reduce uncertainty along the chain Proper inventory levels in the chain Minimize delays Eliminate rush (unplanned) activities Provide superb customer service Major contributor of success (ever survival) 16
  17. 17. Global Supply Chain Can be very long Possible cross-broader problems Need information technology support of: communication and collaboration Possible delays due to: customs, tax, translations, politics 17
  18. 18. Problems along the SupplyChain Delays in production, distribution etc. Expensive Inventories Lack of partners’ coordination Uncertainties in deliveries Poor demand forecast Interference with production Poor quality 18
  19. 19. More difficulties Virtual companies do not have logistics infrastructures One company is a member of several supply chain Conventional warehouses are too expensive Need automatic warehouses with robots as pickers 19
  20. 20. Preliminary Activities Understand the supply chain (flow charts) Study internal and external parts Performance measurement are a must (Benchmarking) Multidimension performance analysis a BPR may be needed People’s relationships are a must 20
  21. 21. Areas of Opportunities Manufacturing processes Warehousing operation Packaging and delivery Material inspection/receiving Inbound and outbound transportation Reverse logistics (return) In-plant material handling Vendor management program Customer order processing 21
  22. 22. Areas of Opportunities(cont’d) Invoicing, auditing and other accounting activities Collaboration procedures with partners Employee training and deployments Labor scheduling Use of teams and empowerment of employees Automation of processes Use of software for facilitating all the above Inventory management and control 22
  23. 23. Using Inventories An insurance against stock out Can be in several places Can be excessive Can be insufficient Example: Littlewoods stores; UK 23
  24. 24. Proper SCN Coordination is needed Understanding of the causes/problems Information flow is a key Communication is important IT is needed 24
  25. 25. Information Technology for SCM Links that enable communication/collaboration Links the partners Provide effective and efficient solutions Extremely important Need for information sharing 25
  26. 26. IT as problem solverSupply Chain I T solut ionProblemLinear sequence of Parallel processing, using workflow s/wprocessing – too slowWaiting times between Identify reason (DSS s/w) and expeditechain segments – communication and collaboration (Intranets,excessive GroupWare)Existence of non-valued Value analysis (SCM s/w), simulation s/wadded activitiesSlow delivery of paper Electronic documents and communicationdocuments system (e.g. EDI, email)Repeat process activities Electronic verifications (s/w agents), automation; eliminating human errors 26
  27. 27. The bullwhip effect Slight changes in actual demand create problems Partners build “just in case” inventories Lack of trust among partners Stockpilling result in huge cost The manufacturers can not plan production Cannot order material from suppliers 27
  28. 28. Avoiding the sting of thebullwhip Information sharing is a must Trust and agreements How to do it? $30 billion/year just in the grocery industry 28
  29. 29. IT solutions Automate order taking Use EDI/Internet Web based ordering; intelligent agents Electronic payments Make-to-order (JIT) Tracking systems Supplier monitor and manage inventories Information from POS to suppliers Electronic trading markets and exchanges 29
  30. 30. Electronic tradingmarkets/exchanges One company with many suppliers (catalogs, auctions) One company with many buyers (RFQ) Exchanges controlled by few large companies (e.g. ANX) 3rd party managed exchanges Vertical vs. Horizontal portals 30
  31. 31. Non-supply ChainPartnerships Starbucks: Coffee to retailers, customers Needed fast service; less expensive Kozmo delivers in cities 30-60 minutes Had a problem with drop boxes for returns Partnership: Place Kozmo’s drop boxes inside starbuck coffee houses (open long hours) solve both problems Amazon uses Kozmo for fast deliveries 31
  32. 32. The Role of 7-Eleven &Convenience Stores Can be used as a collection point for returns Can be used as a pick up place Can be used as a place for order placing Can pay in cash/card to the store Returns are a problem: up to 30% 32
  33. 33. The role of FedEx &Similar Shippers From a delivery to all-logistics Many services (see Box 13.4) Complete inventory control Packaging, warehousing, reordering etc. Tracking services to customers 33
  34. 34. Software SupportSCM act ivit ies Type of sof t w areUpstream activities Suppliers’ management, ordering systems, order tracking systemsI nternal supply chain - I nventory managementactivities - Purchasing and order management - Budgeting, cost control - Human resources informationDownstream Saleperson productivity tools,activities online telemarketing, ad. Management etc. 34
  35. 35. Integration-Benefits Automation of segments useful, but… Tangible benefits Inventory reduction, personnel reduction, productivity improvement, order management improvement, financial cycle improvements. Intangible benefits Information visibility, new / improved processes, customer responsiveness, standardization, flexibility, globalization, and business performance. 35
  36. 36. Integration along theSupply Chain Need to streamline operations New business models New organizational relationships (virtual companies) Examples Warner Lamber and Wal*Mart (Box 13.5) 36
  37. 37. Areas of Integration Order taking - production inventory levels Payment info in B2B - Visa, Master Card, etc. Low inventory levels - automatic ordering Order to manufacturing - generate a list of needed resources & their availability Changes in an order - transmit to suppliers and their suppliers 37 Tracking systems - available to customers
  38. 38. Evolution of SoftwareIntegration Completely Independent of each other MRP= Material Requirements Planning: MRP Inventory, production MRPII=Manufacturing Requirements MRPII Planning more integrated, MRP+Finance+labor ERP=Enterprise Resources Planning All functional areas Extended ERP=Include suppliers, customers ERP 38
  39. 39. From SAP to mySAP.comSAP=Traditional ERP=Automate andIntegrate = web based comprehensivesystem Workplace - a personalized, role-based interface Marketplace - one stop destination for business professional to collaborate Business Scenarios - products for the Internet and intranet Application-hosing - hosting Web applications for 39 SMEs
  40. 40. Enterprise ResourcePlanning (ERP) ERP = Integrating business processes and activities in real time Solves many supply chain problems Necessary for medium to large corporations Helpful also for some SMEs Need to interface with EC order taking system Manages all routine transactions in the Enterprise Recently extended to suppliers and customers 40
  41. 41. Developing ERP Systems Do it yourself, from scratch (only few will) Use Integrated packages such as R/3 from SAP “Best of Bread” approach, using integrating software Rent in from ASP service 41
  42. 42. Post ERP (2nd Generation)1st generation - transaction processing orientation2nd generation including decision making capabilities EC requires decision support EC requires business intelligenceSCM software: Production Planning, Manpowerutilization, Profitability models, market analysis.Integration of SCM capabilitiesOther added functionalities: CRM, KM 42
  43. 43. ASP Leasing information systems application Back to the days of “time sharing” A risk prevention strategy Very popular with ERP (expensive, cumbersome) 43