1.
Information and entertainment products:◗ Paper-based documents: Books, newspapers, magazine journals, store coupons, marketing brochures, newsletters, research papers, and training materials
◗ Product information: Product specifications, catalogs, user manuals, and sales training manuals ◗ Graphics: Photographs, postcards, calendars, maps, posters, and x-rays
◗ Audio: Music recordings, speeches, and lectures ◗ Video: Movies, television programs, and video clips ◗ Software: Programs, games, and development tools
2.
Symbols, tokens, and concepts:◗ Tickets and reservations: Airlines, hotels, concerts, sports events, and transportation
◗ Financial instruments: Checks, electronic currencies, credit cards, securities, and letters of credit
3.
Processes and services:◗ Government services: Forms, benefits, welfare payments, and licenses ◗ Electronic messaging: Letters, faxes, and telephone calls
◗ Business-value-creation processes: Ordering, bookkeeping, inventorying, and contracting ◗ Auctions, bidding, and bartering
◗ Remote education, telemedicine, and other interactive services ◗ Cybercafes, interactive entertainment, and virtual communities
Online File W2.1
Examples of Digital Products
ONLINE FILE W2.2
HOW RAFFLES HOTEL IS CONDUCTING
E-COMMERCE
The Problem
Raffles Hotel, one of Singapore’s colonial-era landmarks, is part of a worldwide group of luxury and business hotels. Raffles Hotel operates in a very competitive environment. To maintain its world-renowned reputation, the hotel spares no effort on every facet of its operation. The success of the group and each of its hotels depends on the group’s ability to attract customers to its hotels and facilities and on its ability to contain costs. The group also operates the Swissôtel brand of hotels worldwide. Both the Raffles and Swissôtel brands share a reservation system.
The Solution
To maintain its image and contain costs, Raffles must address two types of issues—B2C and B2B. On the B2C side, Raffles maintains a diversified corporate portal, raffles.com, that introduces customers to the company and its services. The portal includes information on the hotels, a reservation sys-tem, links to travelers’ resources, a CRM program, and an online store for Raffles products. The Web site capitalizes on the underlying qualities of the luxurious Raffles hotel product to communicate to the online audience. It has a clearly defined and well-constructed navigation that integrates the brand-level site with the individual hotel Web sites.
The Web site uses an architecture with logical and consistent navigational tiers, which has proven to be a highly successful approach. Based on the individual hotel strategy, product mix, and target audience, the Web site navigation reflects the multitiered navigation structure. Each tier repre-sents an order of authority that helps lay out the organization of the Web site. The tiered structure moves users comfortably and easily toward a set of services, including the reservation process. This helps to focus on incremental reservations growth and dynamic content management.
The Web site has an integrated online reservation system that provides bookers with instant online booking facility. One section of the site, Raffles Direct, is designed to provide the corporate market with a user-friendly tool to book with their negotiated rates online. The strategic focus of using the Internet as a key driver for distribution is based on its being the ultimate direct-to-consumer distribution medium. It conforms to the lowest cost and most inexpen-sive method to distribute hotel room inventory. A direct-to-consumer model provides long-term competitive advantages. It decreases dependence on intermediaries, discounters, and traditional channels that are slowly becoming obsolete.
The Web site has recently been updated with improved booking functionalities and new interactive features. The site includes information in multiple languages to leverage the fast-growing Internet booking trends in some of the com-pany’s key markets.
On the B2B side, in 2006 hospitalitybex.com,an e-marketplace for the hospitality and service industry, was set up with a few strategic partners to offer a solution to
streamline the procurement process and enable the hospital-ity and service organizations to reduce costs across the supply chain by eliminating inefficiencies. The portal offers product and service sourcing, negotiation, selection, ordering, fulfillment, payment, and reporting. Buyers and suppliers have real-time access to business intelligence to assist in the successful and efficient management of their procurement and supply operations. All procurement activi-ties are deployed through the HospitalityBex data center, so users do not need to purchase or lease any new hardware or software. Buyers use online catalogs of more than 30,000 products and services including office stationery, laundry and cleaning products, and perishable goods, and submit order requests via a standard Web browser. User organizations incur considerable cost savings, because the portal aggregates orders through strategic partnerships with major suppliers and service providers. Procurement negotiations now take place online. Buyer–seller relationships have been strengthened by the private, online marketplace. The Results
Increased bookings through Raffles’ proprietary Web sites resulted in a strong growth of 77 percent in rooms revenue from this channel, exceeding both 2004’s strong growth of 64 percent and the industry-wide 2004 Internet growth rate of 32 percent (as reported by TravelCLICK in its 2004 eTRAK report).
In 2005, the global portal community consists of over 5,900 organizations. Annually, more than 470,000 purchase-order transactions worth over $100 million are accrued. Forty-two active buying organizations including hotels, offices, and retailers from around the world provide more than $1 million in savings. The portal also generates regular reports for buyers, showing savings gained from this competitive pricing model. Buyers and sellers garner improvements by using technology to increase productivity per human capital, linking to supply chain solutions through the Internet, increasing inventory management, procurement operations, and B2B collaboration in a knowledge-based environment. The hotel was purchased in 2006 by an invest-ment group that has made it the second-largest luxury hotel chain in the world.
Questions
1. Identify the e-marketplaces in this case.
2. List all the EC mechanisms used by Raffles and how they are used.
3. What other EC mechanisms would you recommend to Raffles?
4. List the EC business models used by the company.
REFERENCES FOR ONLINE FILE W2.2
Raffles.com.
raffles.com
(accessed September 2006).
TravelCLICK. “Major Hotel Chains Grew Internet
Reservations by 24 percent 2004 YTD.”
Hotelonline.
com
, January 24, 2005.
hotel-online.com/News/
PR2005_1st/Jan05_eTRAK.html
(accessed September
2006).
Wikipedia. “Raffles Hotel.” 2006.
en.wikipedia.org/
wiki/Raffles_Hotel
(accessed August 2006).
ONLINE FILE W2.3
NTE EVENS THE LOAD
The hauling industry is not very efficient. Though trucks are likely to be full on outbound journeys, they are often empty on the way back. (About 50 percent of the trucks on America’s roads at any one time are not full.) National Transportation Exchange (NTE) has attempted to solve this problem.
NTE (nte.net) uses the Internet to connect shippers who have loads they want to move cheaply with fleet man-agers who have space to fill. NTE helps create what is called a spot market(a very short-term or one-time job market) by setting daily prices based on information from several hundred fleet managers about the destinations of their vehicles and the amount of space they have available. (Such a spot market differs from repetitive arrangements that are negotiated and secured by a long-term contract.) NTE also gets information from shippers about their needs and flexibility in dates. It then works out the best deals for the shippers and the haulers. When a deal is agreed upon, NTE issues the contract and handles payments. The entire process takes only a few minutes. NTE collects a commis-sion based on the value of each deal; the fleet manager gets extra revenue that the company would otherwise have missed out on; and the shipper gets a bargain price, at the cost of some loss of flexibility.
When NTE was first set up in 1995, it used a proprietary network that was expensive and that limited the number of buyers and sellers who could connect through it. By using the Internet, NTE has been able to extend its reach down to the level of individual truck drivers and provide a much wider range of services. Today, drivers can also use wireless Internet access devices to connect to the NTE Web site on the road.
In 2001, NTE expanded its services to improve inventory management, scheduling, and vendor compliance along the entire supply chain. NTE’s software is integrated with its cus-tomers’ operations and systems. The company also offers such value-added services as insurance, performance reporting, and customer care. NTE’s business is currently limited to ground transportation within the United States. In Hong Kong, Arena.com (arena.com.hk) provides similar port services with its product called LINE (Logistics Information Network Enterprise).
Questions
1. What type of transaction is done at NTE? What type of business model does NTE use?
2. What are the benefits of NTE’s services to truckers? To shippers?
REFERENCES FOR ONLINE FILE W2.3
Arena.com.
arena.com.hk
(accessed September 2006).
Davidson, J. “Driving Logistics Online Markets.” 2001.
nte.net/dynamic/articles/TW0401.pdf
(no longer
avail-able online).
The Economist.
“Business and the Internet.”
The Economist
,
June 26, 1999.
ONLINE FILE W2.4
INFOMEDIARIES AND THE INFORMATION
FLOW MODEL
EXHIBIT W2.4.1
Information Flow
Flow of Products/Services
Buyers Sellers Infomediary Services • Matching • Search/complexity • Privacy • Informational • Infrastructural • Content • Community Information on Products and Services Buyer Information Infomediary Services • Matching • Search/complexity • Privacy • Informational • Infrastructural • Content • CommunityRevenue from Sellers • Advertising • Transactions
• Membership/subscription fee
Revenue from Buyers • Membership/subscription fee • Transactions
• Fee for services Infomediaries
Source: Grover, V., and J. Teng, “E-Commerce and the Information Market. ” Communications of the ACM, © 2001 by ACM Inc.
ONLINE FILE W2.5
DIAMONDS FOREVER—ONLINE
The gem market is a global one, with hundreds of thousands of traders buying about $50 billion in gems each year. The age-old business is very inefficient: Several layers of interme-diaries can jack up the price of a gem 1,000 percent between its wholesale and final retail price.
Chanthaburi (Thailand) is one of the world’s leading centers for processing gems. That is where an American, Don Kogen, landed at the age of 15 to search for his fortune. He found it in about 10 years. After failing to become a gem cutter, Kogen moved into gem sorting, and soon he learned to speak Thai. For 3 years, he observed how gem traders hag-gled over stones, and then he decided to try the business himself. He started by purchasing low-grade gems from sell-ers who arrived early in the morning and then selling them for a small profit to dealers from India and Pakistan who arrived late in the day. This quick turnover of inventory helped him build up his capital resources.
Using advertising, he reached the U.S. gem market and soon had 800 potential overseas customers. Using faxes, he shortened the order time, which resulted in decreasing the entire time from order to delivery. These various business methods enabled Kogen to grow his mail-order business to $250,000 a year by 1997.
In 1998, Kogen decided to use the Internet. Within a month, he established a Web site (thaigem.com) and sold his first gem online. By 2001, the revenue from his online business reached $4.3 million, and it more than doubled (to $9.8 million) in 2002. Online sales account for 85 percent of revenues. The buyers are mostly dealers or retailers such as Wal-Mart or QVC, although he also sells to small buyers. Kogen buys raw or refined gems from all over the world, some online, trying to cater to the demands of his customers. Payments are made safely, securely, and conveniently using either PayPal (paypal.com) or Payzip (payzip.com).
Thaigem’s competitive edge is its low prices. The proxim-ity to gem-processing factories and low-cost labor enables
Kogen to offer prices significantly lower than his online com-petitors (such as Tiffany’s at tiffany.com). Kogen makes only 20 to 25 percent profit, about half the profit that other gem dealers make. Unsatisfied customers can return merchandise within 30 days, no questions asked. The company uses both e-procurement and traditional methods to buy the least expensive gems from 60 different countries. Delivery to any place in the world is made via FedEx, at about $15 per ship-ment. To make his business even more competitive, Kogen is trying to reduce Thaigem’s huge gems inventory, which in 2002 he turned over once in a year (his goal is to reduce turnover to 6 months).
Thaigem’s name is trusted by over 68,000 potential cus-tomers worldwide. Kogen himself enjoys a solid reputation on the Web. For example, he uses eBay to auction gems as an additional selling channel. Customers’ comments on eBay are 99 percent positive. By 2004, Thaigem had become the EC arm of Thaigem Global Marketing Ltd. and its sister company, NCS group (a gemstone wholesaler). Thaigem sells both B2B and B2C on the Web.
Questions
1. Describe Thaigem’s B2B and B2C business models, including its revenue model. How are logistics and pay-ments organized? (Visit thaigem.comfor details.)
2. During the 2000–2002 shakeout of dot-coms, Thaigem prospered. Why do you think it was not affected by the dot-com downturn?
3. Of the $45 billion annual sales in the gem industry, only about 3 percent are done online. Do you think that selling gems online will grow to more than 3 percent? Why or why not?
4. Go to bluenile.comand diamonds.com. Compare them with thaigem.com. How do they differ?
REFERENCES FOR ONLINE FILE W2.5
eBay.
stores.ebay.com
(accessed September 2006).
Meredith, R. “From Rocks to Riches.”
Forbes Magazine
,
August 8, 2002.
ONLINE FILE W2.6
ELECTRONIC CATALOGS AT OFFICEMAX
Boise Cascade Office Products, now a part of OfficeMax (officemaxsolutions.com), is a $5 billion office products whole-saler and retailer. Its B2B customer base includes over 100,000 large corporate customers and 1 million small ones, as well as individuals. The company’s 900-page paper catalog used to be mailed to customers once each year. Throughout the year, Boise also sent mini-catalogs tailored to customers’ individual needs based on past buying habits and purchase patterns. The company sells over 200,000 different items and has a global reach, allowing it to serve multinational companies.
In 1996, the company placed its catalogs online. Now customers view the catalog at officemaxsolutions.comand can order straight from the site or submit orders by e-mail. The orders are shipped the next day. Customers are then billed. In 1997, the company generated 20 percent of its sales through the Web site. In early 1999, the figure was over 30 percent. The company acknowledges that its Internet business is the fastest-growing segment of its business. By 2004, the majority of sales were made via the Internet.
Boise prepares thousands of individualized catalogs for its largest customers. As of 2002, the company has been sending paper catalogs only when specifically requested. As indicated earlier, the vast majority of customers use the
online catalogs. It used to take about 6 weeks to produce a single paper customer catalog, primarily because of the time involved in pulling together all the data. Now the process of producing a Web catalog that is searchable, rich in content, and available in a variety of formats takes only 1 week.
One major advantage of B2B customized catalogs is pricing. If everyone has the same catalog, you cannot show the customized price for each buyer, which is based on the contract the customer signed and on the volume of goods being purchased.
Boise estimates that electronic orders cost approximately 55 percent less to process than paper-based ones. The figure shows the process of working with the electronic catalogs.
As of 2005, Boise sells to small companies and individu-als under the OfficeMax brand (OfficeMax is a Boise company).
Questions
1. What are the advantages of the electronic catalog to Boise Cascade? To its customers?
2. What are the advantages of customized catalogs?
REFERENCES FOR ONLINE FILE W2.6
boiseoffice.com/about/ecommerce.shtm
(accessed April
2003).
Netscape Customer Profiles.
wp.netscape.com/solutions/
business/profiles/boisecascade.html
(accessed April
2003).
Internet Retailer. “
OfficeMax Drives Up Conversions
After Redesigning Site With Customer Input.”
February 10, 2006.
internetretailer.com/internet/
marketing-conference/98725-officemax-drives-up-conversions-after-redesigning-site-customer-input.
html
(accessed September 2006).
Officemaxsolutions.com.
officemaxsolutions.com
(accessed
February 2005).
ONLINE FILE W2.7
REVERSE MORTGAGE AUCTIONS IN SINGAPORE
Homebuyers like to get the lowest possible mortgage rates. In the United States, Priceline.com (priceline.com) will try to find you a mortgage if you “name your own price.” However, a better deal may be available to homebuyers in Singapore, where reverse auctions are combined with “group purchas-ing,” saving about $20,000 over the life of a mortgage for each homeowner, plus $1,200 in waived legal fees. DollarDEX (Dollardex.com2004) offers the service in Singapore, Hong Kong, and other countries.
Here is how DollarDEX arranged its first project: The site invited potential buyers in three residential properties in Singapore to join the service. Applications, including financial credentials, were made on a secure Web site. Then, seven lending banks were invited to bid on the loans. In a secure “electronic room,” borrowers and lenders negotiated. After 2 days of negotiations of interest rates and special conditions, the borrowers voted on one bank. In the first project, 18 borrowers agreed to give the job to United Overseas Bank (UOB), paying about 0.5 percent less than the regular mortgage interest rate. The borrowers negotiated the waiver of the legal fee as well. From this first project, UOB generated $10 million of business. Today, DollarDEX allows customers to participate in an individual reverse auction if they do not want to join a group.
The banks involved in the auctions can see the offers made by competitors. Flexibility is high; in addition to interest rates, banks are willing to negotiate down payment size and the option of switching from a fixed-rate to a variable-rate loan. On average, there are 2.6 bank bids per customer.
As of summer 2003, in addition to mortgages, DollarDEX offers car loans, insurance policies, and travel services. It also allows comparisons of mutual funds that have agreed to give lower front-end fees. It also offers insurance (including health, motor, home, home content, and SARS insurance). Customers also can choose one or more unit trusts in which to invest and set up online gift registries for weddings or specials events and invite friends to place funds in them. Reports and advice are available online as well as face-to-face.
Questions
1. How is group purchasing organized at Dollardex.com? What services are offered?
2. Why does a reverse auction take place?
3. Can this model exist without an intermediary?
REFERENCES FOR ONLINE FILE W2.7
DollarDEX.
dollardex.com
(accessed September 2006).
DollarDEX. “DollarDEX Launched Reverse Auction on
Mortgages.”
dollardex.com/SG/index.cfm?current=../
insights/home&type=press&start=640&searchText=
(accessed September 2006).
REFERENCES FOR ONLINE FILE W2.8
ACI World. “Study Predicts Doubling in Electronic Payment
Volumes by 2010.” May 4, 2006.
aciworldwide.com/news/
archnewsdetail.asp?news_id=471
(accessed August 2006).
Anonymous.“Is It a Phone or Is It a Wallet?”
Mobile Marketing
Magazine,
April 21, 2006.
mobilemarketingmagazine.
co.uk/stats/index.html
(accessed August 2006).
Burns, E. “Mobile Internet Population Grows.”
Clickz.com
,
August 14, 2006.
clickz.com/showPage.html?page=
3623146
(accessed August 2006).
Cellular-news.com.
“Increasing Consumer Adoption
of M-Payment Schemes,” May 10, 2006.
cellular-news.com/story/17313.php
(accessed August 2006).
Poropudas,T. “Mobile Retail to Generate over USD 63 Billion
Revenue by 2010.”
MobileMonday.com
, January 29,
2006.
mobilemonday.net/mm/story. php?story_id=4598
(accessed August 2006).
ONLINE FILE W2.8
M-COMMERCE STATISTICS
EXHIBIT W2.8
Statistics
Source
34.6 million mobile Internet users in June 2006. Burns (2006) 25 million wireless phones will be used as mobile Anonymous (2006)
wallets for payments by 2011.
$63 billion purchases via mobile phones by 2010. Innovative Poropudas (2006) use of technology such as mobile barcodes and integrating
RFID into a mobile device coupled with consumer demand for easy-to-use applications is driving up the adoption of mobile ticketing and mobile retail services.
$10 billion mobile payment revenue by 2010. ACI World (2006) M-payments to increase from 78 million in 2006 to Cellular-news.com (2006)
175 million in 2007.
ONLINE FILE W2.9
BOMBAY SAPPHIRE IN VIRTUAL GLASSES
Bacardi USA, marketer and distributor of Bombay Sapphire gin in the United States, was looking for a new way to market the product in a competitive market. In its print advertisements, the company had used one-of-a-kind martini glasses designed by big-name designers like Karim Rashid and Dakota Jackson to symbolize the “classiness” of the drink. Likewise, the company’s Web site was stunningly executed. However, it was a one-way communication effort—from the company to the consumer.
Bacardi decided to team up with MFP Interact (MFPI) and Mass Transmit to plan an interactive campaign for the product. They developed a “make-your-own-martini-glass” campaign, which was launched in October 2001 at
asexpressedbyyou.com. Visitors to the site can design their own martini glasses by manipulating properties such as transparency, scale, and color. Bacardi provided detailed specifications on how things could visually appear (e.g., only bright blues are available to match the brand). Site visitors
create their own virtual martini glasses and then e-mail them to friends.
The campaign showed early signs of success. Within the first month online, 8,921 glasses were designed, and two-thirds of the users agreed to receive advertisements for future Bacardi promotions. The average visit to this site is 5 to 20 minutes. Considering that the usual visit to a similar site is measured in seconds, this is a solid accomplishment. Consumer feedback is very positive, and the company plans to go global with the campaign.
Questions
1. How is personalization done in this case?
2. Why do you think the glasses are virtual and not manufactured by the company?
3. What lessons for online branding can be learned from this case?
REFERENCES FOR ONLINE FILE W2.9
Bombaysapphire.com.
bombaysapphire.com
(accessed
September 2006).
Designerglasscompetition.com.
designerglasscompetition.com
(accessed August 2006).
Computer Power User.
“Raising Your Glass & Money.”
April 2002.
computerpoweruser.com/editorial/article.
asp?article=articles/archive/c0204/47c04/47c04.asp
&guid=
(accessed September 2006).
ONLINE FILE W2.10
ROSENBLUTH INTERNATIONAL MOVES TO AN E-BUSINESS
The Problem
Rosenbluth International, now part of American Express (americanexpress.com), is a major international player in the competitive travel agency industry. The digital revolution introduced the following threats to Rosenbluth and the travel agent industry in general:
◗ Airlines, hotels, and other service providers are attempting to bypass travel agents by moving aggressively to direct electronic distribution systems.
◗ Commissions caps have been reduced (from $50 to $10), and most major airlines have decreased travel agents’ commission percentages from 10 to 5 percent.
◗ Large numbers of new online companies (e.g., expedia.com) provide diversified travel services at bargain prices in an effort to attract individual travelers. However, these online services are now penetrating the corporate travel market as well.
◗ Competition among the major players is based on rebates. The travel agencies basically give part of their commission back to their customers by using the commission to subsidize lower prices.
◗ Innovative business models that were introduced by e-commerce, such as name-your-own-price auctions and reverse auctions, have been embraced by many companies in the travel industry, adding competitive pressures.
The Solution
Rosenbluth International responded to these new pressures with two strategies. First, the company decided to get out of the leisure travel business, becoming a pure corporate travel agency. Second, it decided to rebate customers with their entire commission. Instead of generating revenues by com-mission, Rosenbluth now bills customers according to the service provided. For example, fees are assessed for consulta-tions on how to lower corporate travel costs, for the develop-ment of in-house travel policies for corporate clients, for negotiating for their clients with travel providers, and for travel-related calls answered by the Rosenbluth’s staff.
To implement the second strategy, which completely changed the company’s business model, Rosenbluth now uses several innovative e-commerce applications. The company uses a comprehensive Web-based business travel manage-ment solution that integrates travel planning technology, policy and profile management tools, proprietary travel management applications, and seamless frontline
service/support. This browser-based service allows corporate travelers to book reservations any time, anywhere, within minutes. The specific tools in this system are:
◗ DACODA (Discount Analysis Containing Optimal Decision Algorithms) is a patented yield-management system that optimizes a corporation’s travel savings, enabling travel managers to decipher complex airline pricing and identify the most favorable airline contracts.
◗ Electronic messaging services allow clients to manage their travel requests via e-mail. These services use a Web-based template that permits clients to submit reservation requests without picking up the phone. Additionally, a structured itinerary is returned to the traveler via e-mail.
◗ E-Ticket tracks, monitors, reports on, and collects the appropriate refund or exchange for unused e-tickets. As the amount of e-tickets usage grows, so does the amount of unused e-tickets that need to be refunded or
exchanged.
◗ Res-Monitor, a patented low-fare search system, tracks a reservation up until departure time and finds additional savings for one out of every four reservations.
◗ A global distribution network electronically links the cor-porate locations and enables instant access to any trav-eler’s itinerary, personal travel preferences, or corporate travel policy.
◗ Custom-Res is a global electronic reservation system that ensures policy compliance, consistent service, and accurate reservations.
◗ IntelliCenters are advanced reservations centers that use innovative telecommunications technology to manage calls from multiple accounts, resulting in cost savings and per-sonal service for corporate clients.
◗ The Network Operations Center (NOC) monitors the many factors impacting travel, including weather, current events, and air traffic. This information is disseminated to the company’s frontline associates so they can inform their clients of potential changes to their travel plans. The NOC also tracks call volume at all offices and enables the swift rerouting of calls as needed.
In late 2002, Rosenbluth International opened a Web-based exchange where SMEs can post their travel needs. Airlines, hotel chains, and other suppliers can bid on the business. SMEs were, until then, shut out of the negotiated discount process; now, companies provide their needs, including travel policy and data on employees’ historical travel patterns. They also post desired discounts. The negoti-ation can be completed online. First introduced in North America, the exchange moved to include Asia and Europe in 2003.
The Results
In 1979, the company had $40 million in sales, primarily from leisure-oriented travelers in the Philadelphia area. By 1997 that figure had grown to over $3 billion, mainly due to several EC and IT innovations. Today, the company operates in 24 countries and has about 4,500 employees. Since the introduction of the Web-based solutions in 1997, sales increased to about $5 billion in 3 years (a 60 percent increase). The company not only survived the threats of elim-ination but also increased its market share and profitability.
Questions
1. Describe the strategy the company uses to counter dis-intermediation.
2. Explain how EC facilitated the strategy.
3. Analyze the competitive solution using Porter’s five-forces model.
4. Visit carlson.comto examine its EC initiatives. Compare them with Rosenbluth’s.
ONLINE FILE W2.11
Real-Time Demand-Driven Manufacturing
(DDM) Activities
Connect With the advantage of a robust supplier relationship management (SRM) system, manufacturers can communicate with certified suppliers to arrange the flow of supplies right into production lines based on demand. Inventory is reduced, and unnecessary transactions are eliminated, increasing profitability and efficiency.
Adapt Employees and production lines are much more flexible in a DDM environment. Proactive machine maintenance prevents line disruptions, and response time can be improved by as much as 70 percent. Factories carry less inventory, and productivity is increased.
Respond It is necessary to know the customers and respond to their demographic and other changes with CRM. Suppliers Certified suppliers can deliver parts straight to the point of need on the plant floor, resulting in fewer
transactions, smaller inventory levels, and greater efficiency. Procurement and supply chain management are simplified.
Human resources In addition to payroll, benefits, and safety, HR manages employee improvement and training. Factories pay for training so that workers who are skilled are better compensated. The factory is also more flexible when staffed with multiskilled workers.
Accounting Accounting is responsible for billing and paying for orders coming in and going out and for reconciling cost pools among product families.
Transactions Material movements and storage do not add value. Transactions occur only when material is pulled to the factory floor and when products are shipped.
Kanban Suppliers deliver components, and lines make products only when they receive a Kanban, a visual pull signal that some part is needed. Response is quick, overproduction is avoided, stock levels are kept low, and overhead is reduced.
Backflush All transactions are greatly simplified because RFID sensors detect finished products as they reach the end of the line, automatically sending a signal that relieves inventory in the DDM system. Storeroom The storeroom is used only to hold raw materials from uncertified suppliers so that it can be quality
checked before moving to the production lines.
Strategic planning Line design and capacity must be flexible. Better use of people and machines in response to customer demands ensures continuous productivity and profitability.
Engineering When even the tiniest part of a complex assembly changes, many other parts can be affected. Engineering ensures that all plans and products are updated when they should be.
Customer service Customer service representatives link the customers to the manufacturer by passing along orders, complaints, and service information so that the products, plants, and employees can be modified to better serve the customer.
REFERENCES FOR ONLINE FILE W2.10
Clemons, E. K., and L. H. Hann. “Rosenbluth
Inter-national: Strategic Transformation.”
Journal of MIS
, Fall
1999.
Rosenbluth.
rosenbluth.com
(accessed January 2002); now
part of American Express at
americanexpress.com/
businesstravel
(accessed September 2006).
REFERENCES FOR ONLINE FILE W2.11
PeopleTalk
. “Real Time Demand Driven Manufacturing.”
PeopleTalk
15, no. 3 (2004), pp. 14–15.
Brooks Software. “Manufacturing to Win: Solutions for the
Real-Time Enterprise,” 2006.
brookssoftware.com/
download/84_brooks_software.pdf#search=%22real%
20time%20demand-driven%20manufacturing%
20activities%22
(accessed August 2006).
ONLINE FILE W2.12
CISCO’S VIRTUAL CLOSE
Cisco Systems, the company that supplies the vast networks that connect computers to the Internet, is using technology to develop a product, Virtual Close, with which a company can close its accounting records (its “books”) more quickly. This will be done by connecting the accounting and financial records of an entire company, even one with operations in dozens of countries, via an intranet. Cisco’s infrastructure will permit information sharing almost instantly.
Cisco is implementing such a system for itself. Closing the quarterly accounts used to take up to 10 days. Within 4 years, the chief financial officer worked the close down to 2 days (and significantly cut its cost). Cisco achieved its goal within 5 years: It now closes its books at the end of the quarter, the month, and the year by noon the next day.
The advantages for Cisco and any other company that uses Virtual Close are as follows:
◗ It provides strategic advantage to corporations, enabling them to make better decisions.
◗ Companies can become proactive, spotting problems at any time, instead of just once a quarter. Problems that
would otherwise have remained unseen for months can be quickly addressed and their damage minimized.
◗ New opportunities can be detected early, allowing compa-nies to exploit them quickly.
◗ Virtual Close will enable quick “drill-down” analysis, which locates the causes of either poor or excellent performance. ◗ It will bring huge productivity gains related to corporate
financial reporting.
Implementing Virtual Close in a large company is a lengthy process that may end in failure due to the project’s complexity. However, not implementing it might result in a competitive disadvantage.
Questions
1. What are the advantages of a virtual close?
2. How can Cisco benefit, as a vendor, from marketing this concept?
3. Is this EC? Why or why not?
REFERENCES FOR ONLINE FILE W2.12
Cisco.com.
newsroom.cisco.com/dlls/company_overview.
html
(accessed September 2006).
Hartman, A.
Ruthless Execution
. Upper Saddle River, NJ:
Prentice-Hall, 2004.
McClenahen, J. “The Book on the One-Day Close.”
IndustryWeek
, April 2002.
industryweek.com/Current
Articles/asp/articles.asp?ArticleId=1230
(accessed April
2007).
Moore, G.
Dealing with Darwin.
New York: Penguin
Group, 2005.
ONLINE FILE W2.13
Comparison of Traditional HR with E-HR
Key HR Process
Traditional HR
E-HR
Acquiring Human Resources
Recruitment and selection • Paper resumes and paper postings • Electronic resumes and Internet postings • Positions filled in months • Positions filled in weeks or days • Limited by geographical barriers • Unlimited access to global applicants
Selection • Costs directed at attraction • Costs directed at selection
• Manual review of resumes • Electronic review of resumes (scanning) • Face-to-face (ftf) process • Some distance interviewing (still ftf) Rewarding Human Resources
Performance evaluation • Supervisor evaluation • 360-degree evaluation
• Face-to-face evaluation • Appraisal software (online and hard copy) Compensation and benefits • Time spent on paperwork • Time spent on assessing market salaries
(benefits changes)
• Emphasis on salary and bonuses • Emphasis on ownership and quality of life
• Naïve employees • Knowledgeable employees
• Emphasis on internal equity • Emphasis on external equity • Changes made by HR • Changes made by employees online Developing Human Resources
Training and development • Standardized classroom training • Flexible online training
• Development process is HR driven • Development process is employee driven Career management • HR lays out career paths for • Employees manage their careers with HR
employees
• Reactive decisions • Proactive planning with technology • Personal networking (local area only) • Electronic and personal networking Protecting Human Resources
Health and safety • Building and equipment safety • Ergonomic considerations
• Physical fatigue • Mental fatigue and wellness
• Mostly reactive programs • Proactive programs to reduce stress • Limited to job-related stressors • Personal and job-related stressors Employee relations/legal • Focus on employee–management • Focus on employee–employee relations
relations
• Stronger union presence • Weaker union presence
• Equal employment opportunity • Intellectual property/data security • Sexual harassment/discrimination • Inappropriate uses of technology • Task performance monitoring • Use of technology monitoring/big brotherg Retaining Human Resources
Retention strategies • Not a major focal point • Currently the critical HR activity • Online employee opinion surveys • Cultivating an effective company culture • Mundane tasks done by technology,
freeing time for more interesting work Work–family balance • Not a major focal point • Development and monitoring of programs
• Providing childcare and eldercare • Erosion of work-home boundaries
