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purchase orders
invoices
cheques
.
phone inquiries (not totally reliable)
face-to-face meetings between staff (time consuming)
Ad Hoc
EDI
IOS data retrieval systems
Electronic catalogues
WWW home pages
Electronic Mail
Electronic file transfer
Structured
Unstructured
Frederic Adam, 2000
an EDI message:
Messages are made up of STANDARD
LOCATION SEGMENTS (LOC):
TYPE OF
DATA
TYPE OF PLACE
LOC+
POD+
CODE
USNYC 01:
CODE LIST
DECODED TEXT
NEW YORK, NY
BILATERAL LINK:
Multilateral Links:
MAIL BOX
POSTBOX
Advantages of VANS:
They enables ASYNCHRONOUS
COMMUNICATION
there is no need for DIRECT COMPUTER TO
COMPUTER COMPATIBILITY
PROTOCOL CONVERSION is straight forward
control and security of the messages are easier to
enforce
error handling is done by the carrier
Frederic Adam, 2000
Spread of EDI
EDI was originally limited to the automotive and
retail industries
now involves virtually every sector of business:
shipping
insurance
banking
government
customs
Benefits
Cost savings - reduction in data entry errors smaller staff
reduced lead time for orders
speed up communication
creates stronger ties between partners
improved customer service
Problems
Set up difficulties:
integration with existing systems
selection of EDI standard
With EDI
Processes can be integrated and computerised fully from
end to end
Data entry error is considerably reduced
Data transfer can be extended to give immediate feed-back:
order correctly received
goods not available
substitution good suggested
Introduction of EDI:
EDI can be introduced in two ways
pro-active way: company sets out to create a link with its suppliers
/ customers
reactive way: company is asked (forced??) to switch to EDI by
one of its customer / supplier
benefits can only be maximised if EDI is introduced in a proactive way (otherwise, standards are dictated by an organisations
partners)
companies need to formulate an EDI strategy - much like BPR (redesign processes to fully exploit EDI)
EDI in Ireland
Largest VAN in Ireland is called EIRTRADE
managed by Eircom
proposes a variety of services:
EDI trading service
E-Mail between customers
EIRTRADE VAN
Northern
Telecom
Other customers
Same day delivery
The Internet
Most of the business to business transactions
(including EDI) are carried out on the Net
Most of the business to customer are carried out
on the Web
Future of E-commerce is based entirely on the
development of this vast network
Number of Computers
Connected to the Internet
Internet Opportunities
Like the gold rush of 1849
A shop in 0.5 m2
Interactive advertising
A lot of very optimistic predictions
Frederic Adam, 2000
Internet Threats
Dangers inherent in a wait and see approach
Companies can be international competitors on the
WWW with little resources
Industries are radically changed by the WWW
WWW is becoming a crucial battleground
The Internet is like a set of cross roads where petrol
stations fight a tough price war; except with the
Internet, all companies are at the same cross roads
Electronic Commerce
As indicated by spread of EDI, phenomenon not
recent (gradual increase over 25 years)
Interest growing rapidly
Definition: automation of commercial transactions
using computer and communications technologies
commercial = transactions that involve the
exchange of goods, funds or obligations...
Precursors of E-Com
More than 2000 initiatives introduced over last 20
years
most successful (still exist besides the Web) was
Frances Minitel (1980)
infrastructure made available to companies to sell
services through telephone lines
France Telecom equipped entire user population within
2 years
hundreds of thousands of local and national services
But...
For example:
Instigation of electronic exchanges with emerging
nations / markets
simpler structure
less tradition bound
attracted to novel and efficient ways
little costs in competing in most distant of markets
Other experimentation include letting customers
deciding the price
Internet does create opportunities that could not be exploited otherwise
Frederic Adam, 2000
Types of e-commerce
Business to business:
EDI
largest in money terms (as in real world)
business to consumers:
WWW retailing and brokerage services
consumer to consumer:
free ads services / discussion groups
E-Commerce Challenges:
Speed = service is never too fast
Convenient = better integration along the supply
chain (end to end value stream)
Personalised = service is never too personalised
Price = products and services are never too cheap
= View the world from a customer perspective
(visionary?)
Constructing a E-Commerce
design
Example: Dell
Narrow focus on Supply chain innovation
quickly manufacturing and delivering inexpensive
top quality PCs
the three plants are located close to their suppliers
and operate in JIT
Orders follow machines across the floor
Automated customer requests mean operators are
shown by flashing colours what components to use
(i.e. what type of PC to assemble)
Frederic Adam, 2000
CRM
Frederic Adam, 2000
and maximise:
Customer satisfaction
speed of service
profit margin
Manufacturing
Other functions
Customer Relationship
Management
Cost of selling to a new customer is six times as high as to
existing customer
Each dissatisfied customer tells 8 to 10 people
1 extra % of customer retention can boost turnover by as much as
15%
Odds of selling to a new customer = 1/7 to an existing customer
= 1/2
70% of dissatisfied customers will do business again if they feel
their complains are handled well
90% of companies may not have the customer support required
for e-business
Why CRM?
Customers dont care about their suppliers
internal difficulties
They want to be able to access product and
services at the least cost
They want a single point of entry
Existing loyalty programmes dont go far enough
Supporting CRM
Definition
An integrated order acquisition strategy
Systems to streamline the set of activities the
business performs to acquire and fulfil orders
see figure attached
Goals of SCM
Focus on the most appropriate and profitable
opportunities
shorten sales cycles
increase repeat sales
improve visibility on orders
better information / forecasting
Why SCM?
Increase of self-service ordering (limited choice and
interaction - e.g. second hand cars)
excessive cost of pre-sales technical support
Increasing cost and volume of errors in ordering cycle
increasing diversity of channels for selling
increasing complexity of products
increasing complexity of markets (deregulation,
mergers etc)
admin functions
HR
manufacturing / MRP
order processing etc
single point of entry for all data: sits on top of a single database of
shared data
data is released from one module into the relevant modules once it
has been checked
ERPs have the potential to solve the back end headaches of ecommerce solutions
Benefits of ERP
Understanding the implications of changes in production
schedule (by de-expediting parts)
Keeping inventory low (25% decreases reported) while
removing risk of stock-outs
Better planning leading to:
reduction in lead times
better use of capacity
lowered risk of obsolete production (e.g. engineering firms)
Buying ERPs
Many suppliers: SAP / Baan / JD Edwards / QAD
always implemented through a distributor
advantages are numerous (as against building)
Future trends
A bit of a jungle - needs for standards
Risk element is great for all partners involves especially customers
Application Service Provider Industry Consortium
created end of 1999
Code of good practice ready in January 2000
creation of a certification that guarantees service and
gives protection to customer (Ernst / Young and
Deloite / Touche)
Frederic Adam, 2000
HR management
travel expenses, payroll, personnel planning
Potential partners
Pure play ASPs - 100% new
ISP and Telecom companies - own the
infrastructure
Software vendors - own the licences
Hardware vendors - own the platform
Distributors - own the customers
No one has all the required competence
Conclusion on ERP
Whether traditional or ASP - matching the business
processes to the functionality
obtain agreement from all actors
be ready for fundamental change
dont lose sight of the specificities of the firm
try an incremental implementation rather than a
culture shock
leave the door open for change after the ERP
implementation
Frederic Adam, 2000
Company background
Manufacture and distribute industrial process
equipment
$8 billion turnover
rapid expansion from 1945 to 1985 by opening new
sites and buying smaller firms
30,000 staff on four continents
find themselves too expensive and too slow
three plant closures and 10,000 staff lost
return to profitability but fear that it may not be enough
Frederic Adam, 2000
Information Systems
Each plant had own systems (MRP, planning,
scheduling)
corporate finance IS only integrated one
problems resulting:
integration often impossible
scheduling incompatible => no end-to-end vision of
processes as soon as more than 1 plant involved
no overall planning
order acquisition entirely manual (faxes and phones)
no integration of key functions - e.g. HR
also, processes complex on factory floors
target sites:
8 manufacturing
4 order entry
headquarters
e.g. Dell
anti e.g.: Boeing wrote off $2.6 billion in Oct. 1997:
raw material and internal assembly shortages
unhappy customers
Definition
Complex network of relationships that organisations
maintain with trading partners to source,
manufacture and deliver its products
includes material, information and financial flows
as shown below
Information Flows
Product
Supplier Flow
Product
Manufacturing Flow
Product
Distribution Flow
Payment Flows
Product
Retailer Flow
Consumer
Goal of SCM
Delivering the best value proposition: what the customer want,
how and when its wanted, at the lowest possible price
to achieve this companies need rapid, cost effective and
flawless demand fulfilment
Involves taking responsibility for what happens outside the
walls of the organisation
linkage with suppliers
minimising the cost of order delivery process by trading off
cost of inventory, transport, handling etc...
Elements of SCM
Two key elements are
planning
forecast of demand,
inventory simulation
manufacturing planning...
Execution
procurement
manufacturing
distribution...
SC Planning
Two types of software:
SC Execution
order acquisition
production / purchase of goods
replenishment
distribution
reverse logistics (dealing with returns - up to 14%)
Frederic Adam, 2000
Problems with SC
Lack of knowledge of the end-to-end demand
function
inconsistent / out-of-date data about SC (poor
decision making)
lack of process integration with partners
need for fundamental structural changes
Solutions
Enable information sharing
robust communication process
Types of SCM
Integrated Make-to-stock
smoothing demand in mass production industries
linked to postponement in distribution channel
Continuous replenishment
customer-demand pull system across firms
ECR, QR
Build-to-order
efficient SCM allows return to BTO model
inventory substituted with information (Dell)
Market evolution
market is growing
wholesalers are best distribution channel
manufacturers can concentrate on R&D
wholesalers are transforming their offering into information-based services
Frederic
Adam, 2000
Continuous replenishment
e-business foundation
blueprint for value creation
capacity evaluation
current business and capabilities
e-business design
how the value is packaged into product, services and sites?
Value proposition
Knowledge building
much to learn on customers and their perception of value
Why are doing things the way we are?
Specific questions:
Capability evaluation
What can we do now?
Organisation specific assets
staff
E-Business design
Category killer (first mover)
Channel reconfiguration (change access to customers,
suppliers etc..)
transaction intermediary (internet for operational support)
Infomediary (reduction of search cost)
self-service innovator (total service to customer)
Supply Chain innovator (integration of SCM agents)
Channel Mastery
CVS
24 hour service
lower price because of lower transaction costs
instantaneous access to selected sources of info
remove barriers to offer transparency / remove
inefficiency in brokering business
No precedent / no given way to do business
E-trade statistics
Selection of customers
Ecom breaks barrier to entry for customer as well
as supplier
In a garage, only customers with cars, on the web...
Little info available about customers
how to detect the most profitable ones?
Can companies really turn anyone down?
Adoption of technology
Guru claim
Productivity
Actual
development
Managers
interest
Time
Frederic Adam, 2000
Organisational stages
EBusiness
Conducting any kind of business via an electronic
channel
Electronic Commerce
Web
Commerce
Electronic
Business
Internet
Commerce
ICDT Model:
Most Ecom Strategies will include
one or more of these aspects
Virtual
Virtual
Information
Communication
Space
Space
Virtual
Virtual
Transaction
Distribution
Space
Space
Time
Frederic Adam, 2000
today
Time
Frederic Adam, 2000