acs 3907 e-commerce
TRANSCRIPT
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
ACS 3907E-Commerce
Lecture 10
Instructor: Kerry Augustine
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
BUSINESS VALUE CHAIN
2
Managing materials, services and information from suppliers through to the organization’s customers
2
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Business Value Chain Analysis
Value Chain Analysis (Michael Porter 1985) Is a process of analyzing an organization’s activities to determine where value is added to products and/or services and what costs are incurred in doing so.
3
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
The Business Value Chain - Primary Activities
Functional areas within an organization that process inputs and produce outputs. These activities may vary widely based on the unique requirements of a company’s industry
Primary Activities include:
• Inbound Logistics – receiving and stocking raw materials, parts, products
• Operations/Manufacturing – processing orders and raw materials into finished product
• Outbound Logistics – distribution of the finished product to customers
• Marketing and Sales – creating demand for the product (pre-sales activities)
• Customer Service – providing support for the product or customer (post-sales activities)
4
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
The Business Value Chain - Support Activities
Support activities are business activities that enable Primary Activities. These activities can be unique by industry but are generally more typical across industries.
Support Activities include:
• Infrastructure – hardware and software that must be implemented to support applications for primary activities
• Human Resources – employee management activities: hiring, interview scheduling, and benefits management
• Technology Development – the design and development of applications that support the organization
• Procurement – purchase of goods or services that are required as inputs to primary activities
5
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
A Business Value System – Organizational Focus
Moving the product efficiently from supplier to customer
Supplier Firm Distributor Customer
Logistics
Management
Distribution
Management
Information
Upstream flow is information received from another organization (i.e. from Company A to Company B Downstream Flow is information sent to another organization (i.e. from Company B to Company C )
6
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
A Business Value System – Organizational Focus
7
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
CUSTOMER RELATIONSHIP MANAGEMENT (CRM) SYSTEMS
88
Managing materials, services and information from suppliers through to the organization’s customers
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Information Systems Roles in the Value Chain
Customer Relationship Management (CRM) Systems
9
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Value Proposition Revisited
• 3 general categories of value discipline1. Customer intimacy
– Really try to understand individual customer’s needs– Establish one-to-one relationships, very personal– Key: personal service is an expensive commodity
2. Product leadership– State-of-the-art products, leading edge– Keep customers interested and excited– Key: state-of-the-art technology is expensive to produce/achieve
3. Operational excellence– Excels in operational efficiency, but usually no customization or after-
sales support– “if it’s not on time, it’s on us” type slogans– Key: time is very valuable to people
• Understand where your business fits in, and how it interacts with its customers
10
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Customer Relationship Management
• CRM = strategy for optimizing the lifetime value of customers
• Importance: widely held belief that it costs businesses 10 times more to recruit a new customer than to retain an existing customer
• Net churn metric:# Customers at Year Start – # Customers at Year End
# Customers at Year Start
– Simple (approximate) measure of customers lost
11
x 100
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Customer Relationship Management (CRM) Systems
• Capture and integrate customer data from all over the organization
• Consolidate and analyze the data
• Distribute results to various systems and customer touch points across the enterprise
• Provide a single touch point for the customer.
12
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
CRM systems examine customers from a multifaceted perspective. These systems use a set of integrated applications to address all aspects of the customer relationship, including customer service, sales, and marketing.
13
Customer Relationship Management (CRM) Systems
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
CRM Portal
Portal
14
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
• Array of tools for obtaining useful information from internal
and external systems and big data
• Data warehouses
• Data marts
• Hadoop
Business Intelligence Infrastructure
15
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
A contemporary business intelligence infrastructure features capabilities and tools to manage and analyze large quantities and different types of data from multiple sources. Easy-to-use query and reporting tools for casual business users and more sophisticated analytical toolsets for power users are included.
Business Intelligence Infrastructure
16
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
SUPPLY CHAIN MANAGEMENT (SCM) SYSTEMS
17
Managing materials, services and information from suppliers through to the organization’s customers
17
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Information Systems Roles in the Value Chain
Supply Chain Management (SCM) Systems
18
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Supply Chain Management (SCM)
Objective Applications that accelerate product development and reduce cost associated with procuring raw materials, components, and services from its suppliers
• Supply Chain – the suppliers that an organization purchases from directly • Supply Network – the suppliers that an organization purchases from directly and
its suppliers
19
Supply Chain Management applications can help organizations to gain competitive advantage and provide substantial payback in several ways by:
• Streamlining workflow and increasing employee productivity (i.e. efficiently managing business travel, time, and expenses by collaborating with suppliers in real time)
• Accelerating product development (i.e. enabled by the ability of organizations to swiftly react to market conditions)
• Streamlining cost and creating efficiencies across the supply network (i.e., supporting contract negotiation and measuring effectiveness of those agreements)
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Procurement
Procurement includes all of the activities involved in acquiring goods or services and managing their flow from the supplier within the company which is purchasing the goods or services to the semi-finished products and support materials which the company uses. It involves establishing a strong working relationship with the company’s supplier network and forms and integral part of the supply chain management process.
20
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Procurement Process
21
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Purchasing Activities
• Include: – Identifying vendors, evaluating vendors– Selecting specific products– Placing orders– Resolving issues after receiving ordered goods/services (e.g., late
deliveries, incorrect quantities/items, defective items)
• Direct vs indirect materials purchasing:– Direct materials = those directly involved in production process, become
part of finished product– Cost of direct materials typically large portion of cost of finished product– Replenishing purchasing = companies negotiate long term contracts for
needed materials– Require good demand estimation – Spot purchasing = involves purchase of goods based on immediate needs– Indirect materials = those not directly involved in production process,
such as factory supplies, replacement parts, manufacturing machinery
22
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Electronic Data Interchange
• EDI = computer-to-computer transfer of business info using a standard format– First example of E-Commerce (in 1960’s)
– Attempts to standardize EDI format
– Information such as transactions, pricing, inventory
• EDI network– Companies may connect directly to each other
– Companies may connect via a value added network (VAN) service that provides communications equipment, software, skills to support EDI network
• See notes for more details
• B2B complexities – yields much potential for cost reduction and process improvement in purchasing, logistics, support activities is tremendous
23
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Companies use EDI to automate transactions for B2B e-commerce and continuous inventory replenishment. Suppliers can automatically send data about shipments to purchasing firms. The purchasing firms can use EDI to provide production and inventory requirements and payment data to suppliers.
Electronic Data Interchange (EDI)
Electronic Data Interchange
24
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
SCM – Example of a Supply Network
Nike’s Supply ChainThis figure illustrates the major entities in Nike’s supply chain and the flow of information upstream and downstream to coordinate the activities involved in buying, making, and moving a product. Shown here is a simplified supply chain, with the upstream portion focusing only on the suppliers for sneakers and sneaker soles.
25
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Push- versus Pull-Based Supply Chain Models
The Supply Network
The difference between push- and pull-based models is summarized by the slogan “Make what we sell, versus sell what we make.”
26
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
The Supply Network
• Push-based model (Derived Demand)
– Based on forecasts of demand for products, and products are “pushed” to customers
– suppliers are gaining access to an organization’s supply planning system to assure an ability to fulfill orders
• Pull-based model (Independent Demand)
– Supply chain driven by actual customer orders or purchases
– Producing organization is opening its systems to the customer to allow the customer to view inventory and production levels before placing orders
27
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Uncertainty In Demand
• Derived demand = demand of raw materials for production and manufacture– Can be met through calculations in manufacturing output, balanced
with demand forecasts for a given product
• Independent demand = consumer demand, more susceptible to market fluctuations and seasonal changes
• By coordinating the supply chain, businesses can reduce uncertainty in this area
28
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Inventory Costs
1. Carrying costs = costs to carry standard inventories and safety stock– Safety stock = goods needed to be kept on hand to satisfy consumer
demand
2. Ordering and setup costs – Ordering costs include costs for pacing orders, receiving and storage;
transportation and invoice processing– If manufacturing business: include production setup costs
3. Shortfall costs/stockout = lost sales due to lack of supply for consumers– Avoided by keeping an ample safety stock on hand– Tradeoff against carrying costs
• Best way to manage stockout is to determine the acceptable level of customer service for the business balance the need for high satisfaction with the need to reduce inventory costs
29
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Business-to-Business Commerce
31
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
B2B
• Characteristics:– Repeated sales
– Often fewer customers than B2C
– Buyer can still search for vendors
– Large volume purchases
– More complicated logistics
– Document exchange
32
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Business Value Chains
• Activities that a firm engages in to create final products from raw inputs
• Each step adds value
• Effect of Internet:
– Increases operational efficiency
– Enables product differentiation
– Enables precise coordination of steps in chain
| Copyright © 2013 Pearson Education, Inc.33
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
E-commerce and Business Value Chains
Figure 2.5, Page 97
| Copyright © 2013 Pearson Education, Inc.34
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Internet-Enabled Value Web
• Networked business ecosystem
• Uses Internet technology to coordinate the value chains of business partners
• Coordinates a firm’s suppliers with its own production needs using an Internet-based supply chain management system
| Copyright © 2013 Pearson Education, Inc.35
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
The value web is a networked system that can synchronize the value chains of business partners within an industry to respond rapidly to changes in supply and demand.
Extending the Value Chain: The Value Web
37
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Industry Value Chains
• Set of activities performed by suppliers, manufacturers, transporters, distributors, and retailers that transform raw inputs into final products and services
• Internet reduces cost of information and other transactional costs
• Leads to greater operational efficiencies, lowering cost, prices, adding value for customers
| Copyright © 2013 Pearson Education, Inc.38
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
B2B Business Models
• Net marketplaces
– E-distributor
– E-procurement
– Exchange
– Industry consortium
• Private industrial network
| Copyright © 2013 Pearson Education, Inc.39
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Two Main Types of Internet-Based B2B Commerce
1. Net marketplaces: – Bring together potentially thousands of sellers and buyers in single
digital marketplace operated over Internet
– Transaction-based
– Support many-to-many as well as one-to-many relationships
2. Private industrial networks: – Bring together small number of strategic business partner firms that
collaborate to develop highly efficient supply chains
– Relationship-based
– Support many-to-one and many-to-few relationships
– Largest form of B2B e-commerce
| Copyright © 2013 Pearson Education, Inc.40
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Two Main Types of Internet-Based B2B Commerce
Figure 12.8, Page 774
| Copyright © 2013 Pearson Education, Inc.
41
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Net Marketplaces
• Ways to classify Net marketplaces:– Pricing mechanism, nature of market served, ownership
• By business functionality– What businesses buy (direct vs. indirect goods)
– How businesses buy (spot purchasing vs. long-term sourcing)
– Four main types
• E-distributors
• E-procurement
• Exchanges
• Industry consortia
| Copyright © 2013 Pearson Education, Inc.42
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
E-distributors
• Most common type of Net marketplace
• Electronic catalogs representing products of thousands of direct manufacturers
• Typically, independently owned intermediaries
• Offer industrial customers single source to purchase indirect goods on spot basis
• Typically, horizontal
• Usually, fixed price—discounts for large customers
• Example: W.W. Grainger
| Copyright © 2013 Pearson Education, Inc.43
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
E-distributors
Figure 12.10, Page 777
| Copyright © 2013 Pearson Education, Inc.
44
©Bowen Hui, Beyond the Cube Consulting Services Ltd.45
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
E-procurement Net Marketplaces
• Independently owned intermediaries
• Connect hundreds of suppliers of indirect goods
• Firms pay fees to join market
• Long-term contractual purchasing of indirect goods
• Revenues from transaction fees, licensing consultation services and software, network fees
• Offer value chain management (VCM) services
• Many-to-many market
• Example: Ariba
| Copyright © 2013 Pearson Education, Inc.46
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
E-procurement Net Marketplaces
Figure 12.11, Page 779
| Copyright © 2013 Pearson Education, Inc.
47
©Bowen Hui, Beyond the Cube Consulting Services Ltd.48
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Exchanges
• Independently owned online marketplaces
• Connect hundreds to thousands of suppliers and buyers in dynamic, real-time environment
• Vertical markets, spot purchasing in single industry
• Charge commission fees on transaction
• Variety of pricing models
• Tend to be buyer-biased
• Suppliers disadvantaged by competition
• Many have failed due to low liquidity
| Copyright © 2013 Pearson Education, Inc.49
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Exchanges
Figure 12.12, Page 780
| Copyright © 2013 Pearson Education, Inc.
50
©Bowen Hui, Beyond the Cube Consulting Services Ltd.51
©Bowen Hui, Beyond the Cube Consulting Services Ltd.52
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Industry Consortia
• Industry-owned vertical markets
• Purchase of direct inputs from set of invited participants
• Emphasize long-term contractual purchasing, stable relationships, creation of data standards
• Ultimate objective:– Unification of supply chains within entire industries through common
network and computing platform
• Revenue from transaction and subscription fees– Many different pricing mechanisms
• Can force suppliers to use consortia’s networks
| Copyright © 2013 Pearson Education, Inc.53
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Industry Consortia
Figure 12.13, Page 782
| Copyright © 2013 Pearson Education, Inc.
54
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Aerospace and Defense Industry
55
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Pure Types of Net Marketplaces
Figure 12.9, Page 776
| Copyright © 2013 Pearson Education, Inc.
Partstore.com Merx.com
dgMarket.com
Exostar.comAriba Supplier Network
56
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
Private Industrial Networks
• Private trading exchanges (PTXs)
• Web-enabled networks for coordination of trans-organizational business processes (collaborative commerce)– Direct descendant of EDI; closely tied to ERP systems
– Manufacturing and support industries
– Single, large manufacturing firm sponsors network
• Range in scope from single firm to entire industry
• Example: Procter & Gamble
| Copyright © 2013 Pearson Education, Inc.57
©Bowen Hui, Beyond the Cube Consulting Services Ltd.
P&G’s Private Industrial Network
Figure 12.15, Page 787
| Copyright © 2013 Pearson Education, Inc.
58