E-Business: Supply Chain Management

• E-Business is the umbrella topic

Supply Chain

• It involves the flow of materials and information required to produce & distribute items
• iPhone is designed in California and assembled in China
• A supply chain is a collection of companies and processes moving a product from suppliers of raw materials, intermediate components, to final production, and then to the customer
• Upstream flow flows from sources of raw materials and components
• Downstream flows from the business to the customers

Supply Chain Planning (SCP)

• Managing the entire chain
• There are 4 steps to SCP
• Demand Planning and Forecasting involves historical data to predict demand
• Distribution Planning involves how to move products to distributors
• Production Scheduling coordinates product/service creation
• Inventory and Safety Stock Planning develops inventory estimates

Supply Chain Execution (SCE)

• This is the efficient flow of goods, information, and finances
• Product Flow is the movement of goods from supplier to producer to distributor to customer
• RFID (Radio Frequency Identification) is an important technology
• Information Flow is the movement of information as it relates to order processing and delivery
• Financial Flow is movement of financial assets
• Includes payment schedules or consignment ownership

Radio Frequency Identification

• RFID is identification via electromagnetic energy to transfer energy between reader and tag
• Line-of-sight reading is not necessary
• RFID tags can contain programmable information
• Reading can be done from a distance
• Transmission range spans from a few feet (passive tags) to hundreds of feet (active tags)

Supply Network

• It's a multi-tier supply chain when suppliers have suppliers of their own
• It involves transactional complexity and requires thousands of good-providing suppliers

Core Business Processes

• These are core operations involving procurement, production, and sales
• The 4 core processes are procure-to-pay, make-to-stock, make-to-order, and order-to-cash

Procure-to-Pay

• It is the process used in procuring goods from external vendors/suppliers
• Businesses purchase two types of goods
• Direct Goods are integrally involved in the production process
• Indirect Goods are involved in maintenance, repair, and operations
• Two purchasing methods used by firms:
• Contract purchasing, involving long-term written agreements
• Spot purchasing, involving immediate needs and larger marketplaces

Make-to-Stock / Make-to-Order

• MTS and MTO are the processes associated with producing goods
• Make-to-Stock involves goods produced based on forecasts, stocked in a warehouse, and pushing orders out to the customers
• Examples include TVs, home appliances, shoes, and most consumer goods
• Make-to-Order refers to raw materials, subcomponents, and accessories that are procured based on forecasts, and actual manufacturing starts after sales orders are received, where order is move through production process
• Examples include highly customisable goods, very expensive, low-volume goods, commercial aircrafts

Order-to-Cash

• This covers processes connected with selling a product or service

Business Models

• Business Model: A summary of a business' strategic direction that outlines how objectives are achieved
• Together, a business model answers product/service, pricing, promotion, and team management questions

Business Model Elements

• Presence of business: Where to sell goods
• Revenue strategy: How a firm generates revenue
• Pricing strategy: How a firm prices products/services
• Value proposition: Utility of product/service to customers
• Competitive environment: Existing market players and nature of competition
• Marketing strategy: Promotion plans
• Management team: Experience of the company's leadership

Presence of Business Types

• Brick and Mortar has only physical presence
• Click and Mortar has both physical and virtual presence
• Click Only has only virtual presence

Revenue Strategies

• Transaction fees involve paying a commission
• Examples: Paypal, eBay, Expedia and Credit cards
• Traditional sales involve purchasing on websites or stores
• Examples: Ikea, Apple
• Web/mobile advertising involves website or app ads
• Examples: Facebook, Twitter
• Subscription is a recurring fee for product/service access
• Examples: smartone, iCloud, Office 365
• Affiliate marketing is paying businesses for referring customers

Pricing Strategies

• Pricing is part of an integral marketing strategy
• Traditional pricing is based on supply & demand, fixed costs, and variable costs
• Price discrimination entails selling the same products at different prices depending on the customer
• Examples: Economy class on redeye flight vs regular daytime flight
• Versioning is creating multiple product versions at minimal cost
• Examples: Office Student, Office Business
• Bundling is the bulk sale of products at a cheaper price
• Includes BOGO deals & complementary goods(printer/ink)
• Dynamic pricing is price adjustments based on parameters of demand/supply
• Includes online auctions; surge pricing like Uber; flash marketing like Rue La La & Gilt Group
• Freemium allows basic feature usage at no cost but charges a fee for richer functionalities
• Examples: Spotify, In-app purchases
• Free trial allows user testing before purchasing

Value Proposition

• This involves the "why someone should do business with you"
• Market segment identification is important
• Mainstream products:
• Has a broader appeal to consumers, serves the majority of the market
• Examples: Ikea, ParknShop
• Niche products:
• Has a special taste, serves a minority of the market, with high/low-end products
• Examples: designer furniture, CitySuper

Long Tail

• This is a business strategy realizing profit by selling hard-to-find or niche items in low quantities to many customers
• It shifts sales from featured/popular to niche/obscure items as e-commerce grows

Competitive Environment

• Consider the impact of smartphones to the market
• These 5 forces impact business: Rivalry among existing firms, Threat of new entrants, Bargaining power of buyers, Bargaining power of suppliers, and Threat of substitute products or services
• Rivalry among existing firms: The number of competitors that undercut
• Threat of new entrants: Entry barrier affects ease of competitor
• Bargaining power of buyers: Independent customer ease charging higher prices
• Bargaining power of suppliers: Fewer suppliers means dependency
• Threat of substitute products: Options to forgo buying product lessens power