Adapted from E-Logistics

H. Donald Ratliffdon.ratliff@isye.gatech.edu

Pinar Keskinocakpinar@isye.gatech.edu

www.tli.gatech.edu

E-business: changes the way we think!!!

BuyingSelling FulfillmentInventoryTransportationSoftwareInvestmentOutsourcing

Internet

The worldwide number of Internet users: 196 million in 1999 (International Data Corporation)

The number of users is expected to reach one billion by 2008

Users who have been online for more than three years spend an average of 10.5 hours per week online, compared with 6.6 hours a week for newcomers

By 2002 there will be over 85 million smart hand-held devices in the world

E-commerce growth

E-commerce volumes double every 9-12 months

B2B volumes are expected to exceed B2C by a factor of 6 to 12 by 2005

By 2002, E-commerce revenues will exceed 1% of Global Economic Product

On-line Retail

founded 18731000 stores in the U.S.

on-line presence: May 1997

founded 19711100 stores in the U.S.on-line presence: late

1998

founded 1994no physical stores

on-line presence: July 1995

Revenues

1998 sales (mil. $)

0500

1,0001,5002,0002,5003,0003,500

Barnes &Noble

Borders Amazon.com

Store sales

On-Line sales

$3.1 B (+10%) $2.7 B

(+17%)

$0.6 B (+313%)

Profits

1998 A/T income (mil. $)

92.4 92.1

-124.5-150

-100

-50

0

50

100

150

Barnes & Noble Borders Amazon.com

Market Cap

40

30

20 $1.3 B$1.3 B

20015010050

$19.2 B$19.2 B

40

30$2.2 B$2.2 B

Amazon.com

$300 million distribution-center initiative Books, music videos, toys and

electronics New DCs in Nevada, Kentucky and

Kansas“Fastest expansion of distribution

capacity in peacetime history” Bezos

Ref: Wall Street Journal Sept 8, 1999

Challenges

Don’t outsource -- keep skills they develop

Design flexible DC’s -- don’t know what will go in them

Features: Orders with many address and message on

each Wish lists Tracking searches: Pokedex?

Package Delivery

E-services Shipment rating Document

preparation Tracking E-mail alerts Programmer APIs

UPS 55% of online Christmas

FedEx 1994 tracking web site “Smarter companies” Dismissed residential Dismissed mail order 10% of online Christmas

USPS Cheap home delivery 34% of online Christmas

Wall Street Journal Nov 4, 1999

Package Delivery Challenges

20 million customers expected to purchase over the Internet by 2007

Home Deliveries Currently 10% of the package delivery volume

Average revenues per delivery Commercial Areas: $28.00 Suburban Areas: $10.40

Core businessCapacityCost -USPS

E-Grocery

$450 billion brick-and-mortar industryE-grocery growth forecast

$148 million $3.5 billion by 2002

Webvan

Management Lewis Borders (Borders Books) George Shaheen (Andersen Consulting Chief Exec)

Financial ½ year revenue = $395,000 ½ year net loss = $33,500,000 Market cap = $4.9 billion

Logistics $1 billion with Bechtel Group for 26 giant warehouses Focus on automation (carousels)

Automation!

Ref: Wall Street Journal Sept 22, 1999

Delivery parametersWebVan

Free for orders > $50 $3.95 for orders < $50 or redeliver Scheduled 30 min window (2 pm to 10 pm)

Streamline $30/mo

Peapod $5-$20 per delivery in Chicago

HomeGrocer Free for orders > $75 90 minute window Next day delivery

Keys to home delivery

Efficient customer receivingRouting efficiency

Frequency Multi-product delivery Logistics expertise

B2C Personalization

Pink DotAmazon.comCDNowCollaborative filtering technology

Net Perceptions Andromedia

LikeMinds serverVignette

Ref: USA Today 11/15/99

Top 10 online businesses

Intel Corp. ($10.5 billion) Cisco Systems Inc. ($9.5 billion) IBM Corp. ($8.8 billion) Dell Computer Corp. ($6.1 billion) Federal Express Corp. ($5.6 billion) United Parcel Service of America ($5.4 billion) America Online Inc. ($4.4 billion) Ingram Micro Inc. ($3.0 billion) Nortel Networks Corp. ($2.4 billion) Tech Data Corp.($1.7 billion)

E-commerce revenues

Smaller number of clientsLarger volume per transaction/clientRestricted sales to certain clientsInterface with back-end systemsComplex buy/make/sell decisionsComputer to computer

B2B vs B2C

E-business transactions

Enterprise Resource Planning (ERP)

Intra CompanyRigid Interfaces

Electronic Business Integration (EBI)

Inter CompanyFlexible Interfaces

e-Procurement

Advantages Broader base of suppliers Automatic billing Lower transaction cost

Office DepotProcessing purchase order and paying

invoice >$100Using the Web $15 to $25

Shorter cycle time

e-Procurement

GE TPNPost Pre-screened suppliers Requests for Quotes (RFQs) Multi-round bidding process

Commerce One Electronic procurement Multiple languages/currencies International date Number and address formats International tax requirements

E-Cars

Ford Microsoft alliance Minority interest in CarPoint

GM 42 days to fill a special order New initiative

Toyota New system at a plant in Canada

Production within 5 days of orderAnother 10 days to the dealer

Ref: Wall Street Journal Aug 25, 1999, Sept 21 1999

Integrated Business Communities (IBCs)

Ford-Oracle (AutoXchange) Ford's extended supply chain online Ultimately $300 billion in annual

transactions

GM-Commerce One (GM MarketSite) Transactions between GM suppliers,

dealers and other business partners

Build to order

Direct salesVirtually integrated with suppliers and service

providers Daily production requirements to suppliers Inventory levels and replenishment needs Direct shipment from suppliers (e.g. Sony) Real time information on service measures High involvement in planning customers' PC needs

(e.g. Boeing) Inventory turns 30 times per yearFounded in 1984

                                             

B2B PersonalizationDell Computer

> 1,500 personalized Premier Pages for corporate customers, linked to the customer’s intranet.

Configure PCs, direct access to corporate-specified personal computers, negotiated discounts, records of orders and payments, track delivery status, access to technical support.

Staples Customized supply catalogs that can run on a

company’s intranet, containing only those items and prices negotiated in contracts with that company.

Maintain lists of previously ordered items: easy reordering

Price discounts, recommending new items

Collaboration

Collaborative forecasting Wal-Mart: Collaborative forecasting for a new test

product (medicine for flu and allergies). Incorporate information about everything from planned

changes in store layouts to precise meteorological data about pollen counts and when flu season will hit a certain region.

Eliminated a full 2 weeks of inventory from the supply chain, halved order cycle times and eliminated stock-outs.

Collaborative designCollaborative replenishment

Vendor-managed inventory (VMI) programs

CPFR

CPFR.orgCreate collaborative relationships between

buyers and sellers

Electronic Business Integration (EBI)

“Traditional” EDI 30 years Very rigid

XML (eXtensible Markup Language) Pure Internet standard - Feb 1998 Flexible “tags” Easy for humans to read Easy for machines to process Makes data portable Will rapidly replace EDI

Can FedEx reinvent itself?

Tracking shipments Discount air carriers Low cost truck lines Ocean carriers

Deal with Cisco Merge-in-transit Up to 100 shippers/merge Plan shipments and coordinate customs Command and control center Tens of millions of dollars

Wall Street Journal Nov 4, 1999

E-hubs

Trading hubs Products Logistics services

Transaction hubsDecision hubs

Why use a hub?

Volume efficiency (Do it cheaper!)

Special knowledge or technology (Do it better!)

Neutrality (Do it fairer!)Outsourcing (I don’t want

to do it!)

Info hubs

Trading hubs Products Logistics services

Transaction hubsDecision hubs

Truck Load-matching “Hubs”

DAT Services - 1978 Largest load-finding service

Internet Truckstop - 1995 1st exclusively internet

National Transportation Exchange 2,000-20,000 lb mySAP.com Marketplace portal

30 new load-matching sites last year

Source: Heavy Duty Trucking, 1999

Ocean Load-matching “Hubs”

Raterequest Request best rate Specify bid to match

Celarix

Trading hub issues

Catalog models Standards Updating

Auction models Price uncertainty Service uncertainty

Exchange models Price determination Service uncertainty

Info hubs

Trading hubs Products Logistics services

Transaction hubsDecision hubs

EDI hub

EDI via the internet - ECnetTM Focus on Electronics Manufacturing

                              

                                                                     

                                           

Ship & track hub

Shipment planning & bookingShip and delivery noticesElectronic paymentTracking and tracing

Celarix - iSuite UPS Worldwide - eLogistics.net

Buy & ship hub

Procurement consolidation

National Golf Course Owners

Info hubs

Trading hubs Products Logistics services

Transaction hubsDecision hubs

Route planning hub

Easyroute.comDescartesOn-line routingFocus on small fleets

“Do everything” hub

            

E-commerce in Asia

One in five CEOs of Asian companies expects to see a fifth of their revenue come from e-business in the next five years (Pricewaterhouse-Coopers and the World Economic Forum)

The number of Internet users in Asia will triple to 60 million by 2003 (Goldman Sachs)

E-commerce volume $35 billion by 2002 (International Data Corp)

E-business future

Opportunities New transportation

demand Capacity utilization Paperless transactions Visibility Connectivity

technology Decision technology Outsourcing

Concerns Speed of change Lack of expertise New technology Complexity Short lead-times

E-logistics opportunities

Collaboration Vendor managed

replenishment Fulfillment

Home delivery Personalization

Collaborative filtering Build to order Electronic Business

Integration (EBI) Tracking

Disintermediation Merge in transit Sourcing

Integrated Business Communities (IBCs) Trading exchanges Information exchanges

E-hubs Collective buying Planning

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