Netflix Process

Description of Technology The information systems that Netflix uses to run their business are proprietary software in other words, most of its technology was built in-house. Since Netflix technology was built inhouse, the company can be private about sharing the exact details about how exactly their technology works !c"regor #$$%&. The essential systems that Netflix uses are the following' supply chain management systems and customer relationships management systems. (ustomer )elationship !anagement Systems Netflix uses customer relationship management ()!& systems to serve customers more efficiently. ()! systems discover the needs, wants, and behaviors of the customers. This information is then placed in a data warehouse and then analy*ed by the ()! system. The goal of having ()! systems is to limit negative experiences with the company and provide positive experiences instead +aag %$&. ,ne of the most important technologies that support Netflix-s customer relationship management is its custom-built intelligent agent. .n intelligent agent is artificial intelligence software that helps or acts on behalf of the user to perform repetitive-computer related tasks +aag ##/&. 0n particular, Netflix uses a buyer agent, also known as a shopping bot. . buyer agent is an intelligent agent on a website that assists the consumer in finding a product or service that he or she wants +aag ##%&. Netflix- shopping bots use two techni1ues in order to predict customers- 232 preferences' collaborative filtering and adaptive filtering. (ollaborative filtering is when a customer is matched with a group of users who have similar tastes. Then, the customer is presented with common selections in that group +aag ##%&. .daptive filtering is when the consumer is asked to rate a product or situation and then monitored over time +aag ##4&. 5ltimately, Netflix will know what the customer likes and dislikes. 6y using a hybrid techni1ue, Netflix is able to give accurate, personal recommendations. Netflix has always used ()! systems to serve its customers better. !oreover, as time has passed, Netflix continues to improve its ()! systems to make the customer-s experience more en7oyable. 8or instance, Netflix-s website offers more than 7ust movie recommendations. 0t also allows one account to have several lists of movies, so that family members using one account can each create their own list. Since Netflix is an online service, it is important for them to have an interactive website. .ccording to +astings, Netflix-s warehouse employees never interact with the customers directly9 thus, Netflix focuses on developing an extremely personali*ed website #$$%&. Supply (hain !anagement Systems Netflix uses supply chain management S(!& systems to track its inventory and information as it moves through its business processes. 6y using S(! systems, Netflix can reduce the amount of inventory that Netflix keeps at its warehouses and deliver its 232s 1uickly. 0n order to reduce the amount of inventory kept at Netflix-s warehouses, one of Netflix-s proprietary S(! software can notify the workers where to ship its inventory as soon as it arrives in the warehouse. ,nce the inventory arrives at the warehouse, it is immediately sent off to its

next destination +aag :;<&. Therefore, inventory spends more of its time traveling and being used by a consumer and less time sitting idle in a warehouse. This method also ensures that the product reaches its next destination 1uickly. The company has always used S(! systems to run their business. +owever, they did not always use the same software as they do today. 0nitially in :<<<, Netflix had =% $$$ customers and :$$ support staff using packaged software for customer support. 0n order to serve the growing number of customers and continue to grow as a company, Netflix developed its own S(! software. Now, Netflix has >.% millions customers and only /% support staff. This is possible due to Netflix-s ?eb-based proprietary software that allows staff to handle higher volumes !argulius #$$%&. Netflix constantly tries to improve their S(! systems in order to keep their customers happy, reduce costs, and increase efficiency. .s an online 232 rental service, it is essential to Netflix-s business to have an excellent S(! system. 6y developing their custom-made systems, most of its inventory never even reaches the warehouse shelves. ,n any day, <;@ of their inventory is being circulated among the customers +aag :;<&. Examples (ustomer )elationship !anagement Systems Netflix uses an intelligent agent to provide its consumers with their own Apersonal box officeB !c"regor #$$%&. The intelligent agent, called (inematch, is a movie recommendation system that constantly gives the customer suggestions on movies that he or she might en7oy +aag :;<&. (inematch 7oins two methods collaborate filtering and adaptive filtering& to predict consumer preferences. 8irst, (inematch urges the customer to rate movies using a % star rating system. The more movies the customer rates, the more accurate his or her recommendations will become. 6y doing this, the system starts to find out what kind of movies he or she en7oys !c"regor #$$%&. (inematch collects the user-s rating and adds it to its huge database of user ratings for movies. Then, (inematch would take two movies and find two customers who have rated the two movies similarly "reene #$$4&. Thus, when (inematch gives recommendations, it recommends movies that the customer has not watched and received a high-rating from likeminded viewers (ohen #$$>&. (inematch is very valuable for the customers because they do not have to waste time looking for movies. 0n fact, 4$@ of movies that customers add to their list of movies come from recommendations !c"regor #$$%&. Netflix also uses electronic catalogues on its website. The catalogue allows customers to 1uickly search for movies and view movie information on its website +aag :==&. (ustomers can search for movies by genre, new releases, top :$$ or critics- picks Netflix #$$4&. The electronic catalogue makes looking for movies 1uick and easy. Supply (hain !anagement Systems Netflix-s S(! systems are strategic to the company9 thus, they are a trade secret Stevens #$$%&. +owever, here are a few general examples illustrating Netflix- S(! systems in action. .s mentioned above, one Netflix-s main S(! systems is ?eb-based proprietary software that tells the workers where to ship its inventory as soon as it arrives in the warehouse. This is how it works' as soon as a disk comes in, the worker checks to ensure that the right disk is in the right sleeve. Then, the disk-s serial number is scanned. Netflix-s proprietary software then checks many factors, such as the total inventory of the item, its locations, and the movies on customers- wish lists Stevens #$$%&. 0t then retrieves a name and address of the next person waiting for the 232, prints out a label, and the disk is dropped back into the mail +aag :;<&. Netflix-s S(! system also tracks inventory and determines the fastest route to get the disc into customers- hands'

8or example, an order placed by a customer in !anhattan will be assigned to the distribution center in nearby 8lushing, New Cork. 0f the 232 is not available, the system will poll the next-closest distribution center, in Stamford, (onnecticut. 0f that center doesnDt have it, the system contacts the next closest, and so on until the 232 is located even if that means sending it from NetflixDs main library in San Eose, (alifornia&. 0f the disc is not found, the system will look for the customerDs second choice back in 8lushing. No matter where the disc is sent from, the system knows to print a return label to the 8lushing facility to minimi*e return-mail times. (ohen #$$>& Threats Netflix has a variety of threats. The immediate threats that come to mind are the ones that were described in the external factors, which include Netflix imitators, such as 0ntelliflix, and substitutes, such as a 6lockbuster and ?almart. +owever, Netflix has many other treats. ,ne of Netflix-s threats is the negative publicity that it receives from high-volume renters. These customers are not profitable for Netflix. They declare and believe that the company purposely sends them 232s as a slower rate, which is a practice that they refer to as AthrottlingB !c"regor #$$%&. +astings says that high-renters do get lower priority than lowvolume renters, but only when there is a short supply of a 232 or if a warehouse becomes overwhelmed with demand. Thus, he denies any other accusations from these members. .nother threat is per-per-view-premium cable. These services allow customers to pick what they want to watch in the comfort of their home Washington University in St. Louis). .nyone with cable, satellite, or digital service can obtain pay-per-view and premium cable. !oreover, some customers might even feel more comfortable using pay-per-view or cable since they are more familiar with it. There are, after all, customers that may not fee comfortable using their credit card on the 0nternet. There are also on-line video rental services, such as !ovielink, which offer a limited number of movies for download directly onto the computer. .fter the download finished, the customer can watch the movie on his or her computer Washington University in St. Louis. 3ideo-on-2emand, in particular, has attracted lots of attention. This is because it offers a wide variety of films that can be downloaded to a television set through a set-top box. .lthough the technology re1uired for 3ideo-on-2emand is expensive now, it will probably become more prevalent in the future Washington University in St. Louis). .nother threat is peer-to-peer software, such as 6it Torrent, which allow users to download movies from other users on a peer-to-peer network. 5sers can often find ripped copies of a movie online, download it, and watch it. 0f the user wishes, he or she can also burn the movie onto a 232 and watch it with a 232 player. Recommendation Netflix-s website should inform members when they are going to be closed for maintenance. This announcement can be in the form of a mass email or simply a text posting on the website a few days prior stating when the site will be closed. The website should also have Netflix-s customer support number more easily available to the customers. The website is so interactive and personal, but having to search for a simple contact number seems creates a ma7or flaw. i!liography "reene, Fate. ANetflix' 232s at Cour 2oor.B PC Magazine. :< 8ebruary #$$>. :4 November #$$4 G http'HHwww.pcmag.comHarticle#H$,/:/<,;</#=;,$$.aspI.

---. AThe J: !illion Netflix (hallenge.B Technology Review. ,ct. #$$4. :% Nov. #$$4 Ghttp'HHwww.fastcompany.comHmaga*ineH<<HopenKcustomer-netflix.htmlI. +aag, Stephen, !aeve (ummings, 2onald E. !c(ubbrey, .lain Linsonneault, and )ichard 2onovan. Management Information Systems for the Information Age. >rd ed. Toronto, ,N' !c"raw-+ill )yerson, #$$4. !c"regor, Eena. A+igh-tech .chiever' Netflix.B Fast Company. ,ctober #$$%. :% November #$$4 G http'HHwww.fastcompany.comHmaga*ineH<<HopenKcustomer-netflix.htmlI. !argulius, 2avid M. A6reaking .way.B InfoWorld #=./< #$$%&' #;. Stevens, Marry. A?e Try +arder9 .t Netflix the technology is the operations. 6ut can that business model handle its rapid growthN.B CI! Insight. :.%< #$$%&' := pars. :; November #$$4 Ghttp'HHpro1uest.umi.comHp1dwebN didO<:%4=$$<:P8mtO>Pclient0dO:#%#$P)QTO>$<P3NameOLQ2I.