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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

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Outline - Continued
INVENTORY TRACKING INVENTORY REDUCTION

SCHEDULING AND LOGISTICS IMPROVEMENT


Warehousing for E-commerce Just-in-Time Delivery for E-commerce

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:

Describe or Explain:

E-commerce E-business Online catalogues Outsourcing E-procurement

How E-commerce is changing the supply chain Online auctions Pass-through warehouses
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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Transparency Masters to accompany Heizer/Render Principles of Operations Management, 5e, and Operations Management, 7e

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

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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

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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/Daimlers Covisint exchange C2B Priceline, Travelocity


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B2C Amazon, Dell, Net Grocer.com C2C Ebay


2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Consumer

Transparency Masters to accompany Heizer/Render Principles of Operations Management, 5e, and Operations Management, 7e

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 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

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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

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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

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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

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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

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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

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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 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) Retail goods: setup by Sears and Frances 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

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Traditional Medical Supply Chain


Manual processes

Supplier

Distributor

Hospital

Group purchasing organization for small, independent hospitals


2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Transparency Masters to accompany Heizer/Render Principles of Operations Management, 5e, and Operations Management, 7e

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On-Line Medical Supply Chain


Automated webbased processes
On-line Global Health Care

Supplier

Distributor

Hospital

Group purchasing organization for small, independent hospitals


2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Transparency Masters to accompany Heizer/Render Principles of Operations Management, 5e, and Operations Management, 7e

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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

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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

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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

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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

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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 FedExs Virtual Orderintegrates 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 suppliers 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 Greater capacity utilization

Logistics cost reduction

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