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The Business and Operations

Value Chain and How EC impact the conventional Value Chain

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Activity 2

Puzzle Challenge

Electronic Commerce is Interdisciplinary Management

information systems Accounting and

auditing Management Business law and

ethics Marketing

Computer sciences Consumer behavior

and psychology Finance Economic Production/Logistic

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Competitive AdvantageDerives from the value a company

creates for its buyers: Low cost

Selling equivalent product at below-competitor prices

Differentiation In a unique way relative to its competitors

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Value Chain Concept An instrument to analyze a firm’s competitive

advantages Provides a systematic means of displaying and categorizing

activities

Primary

Activities

Support A

ctivities

InboundLogistics

ServicesOperations OutboundLogistics

MarketingAnd Sales

Corporate Infrastructure

Human Resources Management

Technology Development

Procurement

Margin

Margin

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The Value Chain Primary activities

Inbound logistics Operations Outbound logistics Marketing & sales Service

Supporting Activities

Corporate infrastructure

Human resource management

Technology development

Procurement

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Primary Activities Inbound logistics

Materials receiving, storing, and distribution to manufacturing premise.

Operations Transforming inputs into finished products.

Outbound logistics Storing and distributing products.

Marketing and Sales Promotion and sales force.

Service Service to maintain or enhance product value.

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Supporting Activities Corporate infrastructure

Support of entire value chain, such as general management, planning, finance, accounting, legal services, government affairs, and quality management.

Human resource management Recruiting, hiring, training, and development.

Technology development Improving product and manufacturing process.

Procurement Function or purchasing input.

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Application and benefits of electronic commerce Inbound logistic

A large department store chain is linked directly to several of its textile suppliers.This hookup has not only improved delivery and permitted inventory reduction; it has also provided the chain the flexibility to meet changing demand almost immediately.

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ExampleExample

Application and benefits of electronic commerceOperations and product structure

A major insurance company thought of its business as a provider of diversified financial services and as a bit-moving company. It improved its services to policyholders by allowing them immediate on-line checking of status for claims processing.

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ExampleExample

Application and benefits of electronic commerceOutbound logistic

An international delivery company offering free, state-of-the-art program download and shipment tracking application program for e-business integration. These empowered businesses to serve existing and emerging markets more effectively and more responsively.

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ExampleExample

Application and benefits of electronic commerceMarketing and sales

A large pharmaceutical company offers on-line order-entry services to pharmacies for itself and a consortium of allied, non-competing companies. This service has increased its market share and derived sizable added revenues from its consortium partners.

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ExampleExample

Application and benefits of electronic commerceService

A large manufacturer of industrial machinery has installed an expect maintenance system in its home-office computer. When a machine failure occurs on a customer’s premises, the machine is connected over a telephone lint to the manufacturer’s computer, which performs a fault analysis and issues instructions to the machine operator.

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ExampleExample

Application and benefits of electronic commerceCorporate infrastructure

In some instances IT has dramatically enhanced coordination through fairy simple by but powerful tools such as voice mail, e-mail. These tools have dramatically accelerated the depth and breadth of communication

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ExampleExample

Application and benefits of electronic commerce Human resources

The corporate management committee members of an oil company has full-on-line access to the detailed personnel files of the 400 most senior members in the corporation, compete with such data as five-year performance appraisals, photographs, and lists of positions each person is backing up. The company believes this capability has facilitated its important personal decisions.

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ExampleExample

Application and benefits of electronic commerceTechnology development

CAD/CAM (computer-aided design and manufacturing) technology has fundamentally changed the quality and speed up the manufacturing process.

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ExampleExample

Application and benefits of electronic commerceProcurement

A retailer, by virtue of its large size, has succeeded in its demand for on-line access to the inventory files and production schedules of it suppliers. This access has permitted the company to mange its inventories more tightly than before and to pressure suppliers on price and product availability.

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ExampleExample

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Can you think of other examples?

Sourcing Upstream focuses in B2B activities Downstream focuses in B2C activities

Upstream Internal Downstream

Assembly/Manufacturing and

Packaging

DistributionCenters

Retailers

Customers

Supply Chain Model

1st TierSupplier

2nd TierSupplier

2nd TierSupplier

2nd TierSupplier

1st TierSupplier

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What Business PurchaseManufacturing Inputs

Manufacturing inputs are the raw material and components that go directly into a product or a process. Spot sourcing

Operating Inputs (MRO) Operating Inputs tend not to be industry

specific

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Systematic Sourcing Involves Negotiation Tend to be long term Static Price

Spot Sourcing Fulfil an immediate need Lowest possible cost

How Business Purchase

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Traditional Sourcing Issues Insufficient Supplier / Buyer Information

Geographical Restriction Buyers/ Suppliers connection and

experience Fragmented Market

Continuously changing parts and suppliers

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Traditional Sourcing IssuesSpot Sourcing

Short time frame Lower Buyer’s bargaining power

Manual Process Inefficient and information duplication Purchased from non-approved suppliers Ordering rules difficult to enforce Slow ordering process

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Definition of E-SourcingUsing the Internet/www and related

tools to buy goods and services

Using the Internet/www to support processes to buy goods and services

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E-marketplaceBuyers and sellers could be brought

together in cyberspaceReducing NxN interactions to Nx1

interactions among the players

P6P6

P2P2

P5P5

P1P1

P4P4

P3P3 P6P6

P2P2

P5P5

P1P1

P4P4

P3P3E-MarketsE-Markets

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Examples of E-marketplace (1)Power.National.com

Designer’s web bench Output-oriented site

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Examples of E-marketplace (2)Chemweb.com

Chemistry, biology, lab supplies and reagents

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Examples of E-marketplace (3)TradeWeb.com

Bond market

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Examples of E-marketplace (4)PlasticsNet.com

Market place for industry professionals

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Examples of E-marketplace (5)Seafax.com

All you need for Food Industry

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Example of e-marketplace (6)www.hktaiga.com The Global Apparel

Trade Gateway

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