andrew wood, che yan cya --- top notch grade a in a-level , all the science subjects

Deg level 4 - 4508x – Andrew Wood A A A straight A course representative e-auction could benefit SME in container loading logistics ++++++++++++++++ ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ++++++++++++++++

Pre-doctorate - GRADUATE SCHOOL RESEARCH PROPOSAL

SME for BETTER way to achieve COST – SAVINGWith B2B e-auction ---- the upcoming NEXT GENERATION of e-marketplace

Perspective: [From a Managment Information Officer Perspective]

Proposed an Implementation of IT and web based application

in SME / 3PL for competitive advantageIdentify Visibility and Problem areaBuild up competitive advantage for the SME[small and medium enterprise manufacturer in Hong Kong and Pearl Delta River Area of China]

In this essay, 3PL is referring to a transportation company that provide logistics and shipping needs, and it does not

strategically allies with any one of the manufacturers or another company.

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ABSTRACT / EXECUTIVE SUMMARYThere are quite a number of successful electronic auction web sites. They bring in service providers and bargain

hunters together. As a result, more visibility and elasticity on the pricing. Small and Medium Enterprise Manufacturers

do not have much bargaining power, they requires middlemen for their export requirements. Some of them don’t even

have a Computer Network in their company. Therefore, Internet is the window that they could afford to see what

happen in the world. SME should use the Internet as their logistics bargaining tools. While in logistics industry, cargo

containers got universal standard sizes, therefore they could be stacked up easily like LEGO. In Hong Kong, we have

highly sophisticated container terminals. We also got super-terminal 1 in the Airport which is fully automated. However,

packing into a container are still done by Fork-Lift Drivers who use their own experience in a traditional way. Computer

software have been developed from packing up regular shape object, increase the utilization ratio significant and

reduce the amount of guesswork which is non-productive.

KEYWORDS: SME, Containers, Brokers, e-business, auction, pricing, Business Model[include Preface: perspective, abstract, keyword]TABLE OF CONTENTS

Section No. Page No

Part 1 Business objective and Industry background 3-- Hong Kong Logistics is transforming its role

Part 2 Vast business opportunity for loading shipping containers 4

Part 3 Current process analysis and the problem 6-- Problem identification-- Container Exchange-- Packing up of containers

Part 4 Using Cargo Manager software – A Quick Guide 8

OBJECTIVES OF THE LOADING PLAN 9Integrating the use of IT solution altogether 9

Part 5 The Proposed IT Integrated Solution for a 3PL company 10

Part 6 A successful business internet model e.g. e-auction 10

Brokerage business models for e-auction 11Compare and contrast of old business model with new e-business model 12Timing and service quality are the determining factor 13

AUCTION Pricing 13Reverse auction – alternative approach 13Web Surfers Loyalty Diagram 14

Part 7 System implementation consideration 15-- First stage >> provide shipping information and latest containers price-- Second stage >> for the existing middlemen

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-- Third stage >> same internet platform for SME and container service providers

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Implementation of Database System 16Testing : Focus on User acceptance test 17cost & benefit analysis & appraisal for the DSS 18

Part 8 Profitability measure 19

Part 9 Teaching objectives 20

Part 10 Middlemen provide Facilitating Function 20

Part 11 Teaching strategy: resistance during implementation phase 21

Part 12 Foreseeable Expected Result 23-- Lower Operation Cost-- General Collaborative Advantage

Part 13 Discussion – using value chain 24

Part 14 Conclusion 25

Part 15 References 26

Part 16 Appendix 27

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Business objective and Industry background

Hong Kong Logistics is changing its role:

(1) China relies less on Hong Kong for its container shipping services. Strong development of trade-supporting

services in the Pearl River Delta. As the Pearl River Delta continues to develop, its reliance on Hong Kong

resources is dropping. Take container shipping as illustration, 90% of the containers were shipped through Hong

Kong in the middle of 1990's, while the figure was only 70% last year. This should be an alarming signal for Hong

Kong to understand that China got better and better seaports now. It is estimated that the ratio will drop further to

only 50% by 2010

(2) Accession of China into WTO should benefit Hong Kong. When China's entry into the WTO and there will be a big

opening in the China market. After China's entry into the WTO, the imports and exports of the Mainland will expect

to grow at an annual rate of 10% in the next 10 years. Hong Kong will also benefit from the expansion of the trade

volume of the Mainland rapid growth of the GDP

(3) But it is worth to note that, more foreign-origin joint venture will develop its distribution channels and will make their

procurement directly in the Mainland. Hong Kong's trading firms will also increase their direct exports from the

Mainland, which in turn will accelerate the development of offshore trading and reshape Hong Kong's logistics

trade

(4) Logistics industry receives big support from the Hong Kong Government. In its 2002 Budget Report, the

government put it as one of the four pillar industries. Hong Kong's policies in developing the logistics industry. The

Hong Kong government considered the development logistics industry as a vital part of Hong Kong's economy in

its 2000 policy address, and set up a designated group to promote the industry.

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Logistic Development in Hong Kong provide vast business opportunity for loading and shipping containers

The Hong Kong port handled a world-record throughput of 19 million 20-foot equivalent units in 2002, an increase of

6.6 per cent over 2001. Hong Kong is changing from a re-export center to a multi-functional center for logistics

operations and administration. Hong Kong should expedite its development in logistics to reinforce and improve its role

as an international trading center. On the other hand, the ratio of re-exports to total trade, increased dramatically.

These dramatic changes indicate that:

(1) Hong Kong as a re-export center. The ratio of total re-exports to GDP rose drastically from 15.5% in 1978 to

105.1% last year, the re-export industry contributing steadily to the economy; Now, having a special CEPA function

to China, an international gate to the whole world using Hong Kong as a base

(2) Domestic exports declined in terms of both absolute volume and in relation to total exports. Total value of domestic

down 34.4% from its peak in 1992. A sharp decline in the manufacturing sector contributed to the high

unemployment rates in Hong Kong in the recent years. This is unlikely to reverse in the coming decade or so

(3) Due to the 90s relocation of Hong Kong's manufacturing operation and expansion of the territory's processing trade

activities. More than 80% of the goods re-exported in Hong Kong last year were Mainland-related, out of which

70% were processing trade. Without the relocation and expansion of processing trade activities, the recovery and

development of Hong Kong's role as a re-export center could not have been succeeded. Interesting to note that,

the slowdown of Hong Kong's re-exports in recent years was also closely related to processing trade development

in the Mainland, especially the Pearl River Delta.

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Port Capability

In 2002, the port of Hong Kong handled 19.1 million TEU's of containers, making Hong Kong the world's leading

container port. During 2002, some 36,000 ocean-going vessels, and more than 120,000 river trade vessels, called at

Hong Kong. On an average day more than 1,200 ocean-going vessels and river craft enter or leave the port.

Being a major centre for ship owning and ship management, the number of vessels on the Hong Kong Shipping

Register as at December 2002 stood at 758 with a total gross tonnage of over 16.23 million. Hong Kong-flagged

vessels are free to call at ports in Mainland China and Taiwan. This is an interesting point, as this will encourage direct

competition of port trade, let the trade drift away from Hong Kong, only if those port could provide a fast, reliable and

effective service.

At present, there are eight container terminals in Kwai Chung. To meet the growing demands, Hong Kong is now

building a new terminal, the Container Terminal 9 (CT9) on Tsing Yi Island opposite to the existing eight terminals. The

CT9 will have six berths with a design capacity to handle more than 2.6 million TEUs of containers a year. The whole

terminal is expected to be fully operational in 2005. The channels to the Kwai Chung Port has been dredged to 15.5

metres to handle the largest container ships presently on the drawing board.

In short, Hong Kong should reinforce its cooperation with the Mainland Industrial entrepreneurs, especially the Pearl

River Delta, to develop itself into the most important logistics center in Asia-Pacific Area. Hong Kong should also pay

special attention on the rise of offshore trade and step up efforts. Although their back-end support of the banking and

insurance industry are not as good as Hong Kong’s providers. As long as the logistics industry can achieve greater

development, Hong Kong logistics provider would have a better prospect.

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Business PracticeThe cost of transporting products from warehouse to final destination often represents a significant

portion of the products’ total cost. In addition, better package, damage to products while in-transit

should be avoided. Consequently, warehouse is interested in utilizing as much of the space in the

cargo container as possible, while arranging the items in each load so that the probability of in-

transit damage is minimized.

Current process analysis and the problem

Problem identificationThe current practice is a market based competition environment for allocation container space and

dispatches the containers accordingly. Its sole aim is to create a work order for container space

allocation with a flexible / negotiable price tag and stick to it. Most of them are still negotiating the

old-fashioned way, through relationships, brokers, sales calls and alike. For one, the sea is usually

only part of the journey for a container. It will also probably go on a truck and a train, and typically

passes through customs twice (export and import port). This will usually present as a time-

consuming bottleneck.

The existing system uses the agent (broker) or multi-agent system to negotiate for a mutually

agreeable price. Then collection of the cargo from the manufacturer will be commenced.

Container ExchangeContainer exchange faced an uphill struggle. Shippers usually want an end-to-end solution; although paying a logistics

firm or freight forwarder (3PL) to provide it may cost them a bit more than they would pay in an open auction, the

overall savings on hassle and fuzzy often make it worthwhile.

We will mention about packing boxes into container as this is an area about container loading optimization which could

produce real cost saving for bulk packing, for manufacturers, for 3PL grouping cargo together.

Loading carton boxes of products from different customers into container is a complicated task. Firstly, the loader plans

the load in his head, sizing it up in broad terms - before he begins. There is a wide range of planning ability among.

(Picking and staging typically take twice as long as actually loading the trailer). An expert loader can arrange the boxes

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so that space is used efficiently and the likelihood of in-transit damage to the products is minimal. This expertise is

being spread the whole warehouse. The loaders vary in their ability to pack trailers efficiently when faced with

complicated loads (ones that are composed of varieties of products as opposed to loads composed of only one or two

product types). In addition, the loaders vary in their observance of loading policies and rules. The result is a wide

variance in how efficiently the trailers are used, and how to best load a truck. In this proposal, we will use a software or

two to address this problem directly.

Many experience loaders know the exact dimensions (width, depth and height) of all the common products, and are

quick at the arithmetic needed to plan a load.

Current practice of loading containerThe conventional method used by the warehouse for estimating how many boxes of various sizes can fit on a truck is

simplistic and does not perform well for complex loads. In addition, the loading plan could be drawn up by clerical

personnel in the office who have no experience in actually loading trucks. As a result, loading plans are often

generated that either severely under-utilize the trailers they are assigned to, or will not fit on them at all. The

manufacturer has found, however, that some of the people who actually load trucks at the warehouse develop

considerable expertise in packing them efficiently. This lead the warehouse to consider a decision support system that

could be used to produce better loading plan with best utilization ratio.

Packing up of containersWith reference to Dyckhoff's (1990) classification of packing issue, the scenario considered here can be broadly

characterized as being of type 3/B/O/R. In other words, it is assumed that consignment of goods is to be loaded into a

single container of known dimensions. Furthermore, the container and all objects to be packed are assumed to be

rectangular in shape.

The software for devising loading optimizing solution should be user friendly, reliable and able to produce good packing

results. In the CD attached, please found the software file called Cargo Manager, CM45evaluation, It does require

installation.

The enclosed software will plan exactly where and in what orientation the products in each load are to be placed in a

container. Workers on the loading docks should follow these loading plans in order to fit all of the products on their

respective containers. The format of the loading plans must be clear, concise, and unambiguous. Therefore, this

software is chosen to illustrate and the graphics of packing is easy to understand

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The loading plan convey the following information to the loader:

1. Location and orientation of each box

2. Row by Row packing of each type of product

3. 3D view of the loading plan

Cargo manager software – Quick Guide on How to use it[Page 8: One page user guide for the Cargo Manager Software]

These steps are in order to help the first time user. This is much more sophisticated function for the experience users

1. Click on [New Data] – a new set of problem

2. DATA FILE – may make some change to previous consignment data

3. Input the

Dimension

Characteristics

Quantity

4. Case Weight = 500KG (e.g.)

5. Number to be packed = 3 (e.g.), more varieties of boxes, the better its performance

6. Click on [Add Items]

In the next screen

Title is CARGO SUMMARY

It provide a quick summary of data entered

Please look at the left hand side only

7. Then click on [Pack Calculation] --- it refers to packing of a single container in this sample run

8. Put in a filename = andrew01

In the next screen

Title is INPUT SPECIFICATION

9. Just click on [CONTINUE]

10. Then click on [DRAW]

Here

[ALL] means overall impression

[BACK] means remove last group of cases drawn

[NEXT] means cargo loading begin, it will draws in series of stages

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[2D views] is also available, just like the container is being X-rayed and project everything with overlapping

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OBJECTIVES OF THE LOADING PLANThe main objective for the loading plan was a complete and understandable representation of these sequence of steps

required in the task. By meeting warehouse’s objective, the load plan format shall also meet the customer’s objectives,

which are:

1. Maximize container utilization by enabling less experienced loaders to load trailers in a manner similar to the best

loaders

2. Minimize in-transit damage to products by ensuring conformity to the manufacturers rules and policies for how

products are loaded such as fragile product

Integrating the use of IT solution altogether : Web e-auction, DB for 3PL offer services

to manufactures, 2 choices of cargo management software [cargo manager] & [3D visualiser]

The procedure for a 3PL company to use the software that are enclosed in the CD would be – stage 2 implementation

A. Record the new cargo order using the Microsoft Access Database i.e. type in the company name to look up the

data of the consignment company and its contact

B. As it is a 3PL company, the company will use an on-line auction portal web site ( not included in the CD, but on the

internet site, such as www.freight-traders.com claim that it could perform such auction) I did also have some free

software that could be set up to perform such e-auction function, I find that it is important to re-design a similar web

portal using. NET technology that will specifically consider all the needs for the cargo industry. As it has to be done

from scratch, and it will be a medium size computer project, therefore, I will just use existing web site as my

illustration for the implementation phase

C. After getting an even lower price from the e-auction, the 3PL have to update the Microsoft database and pick up

the cargo immediately, then TICK the checkbox, Pick up Already, In this case, the word in RED “Currently” will

disappear to indicate that the 3PL should not look for an even lower price in the market.

D. i.e. if the 3PL company did negotiate an ideal transport price yet(e.g. 3PL could get a transportation company to

quote its tariff price), it can also put it down in the database while do not TICK the checkbox, the word “Currently”

will still appear in the database beside the price, so that the 3PL could continue to make further contact to get an

even lower price or use this current price as a reference during bidding

E. Since cargo from various manufacturers should be re-group together by the 3PL. Therefore the 3PL could use the

cargo manager software (in CD, cm45evaluation software that need to be installed) to pack various cargo. The

following point should be noted: high utilization is good, but it is not the best solution. Therefore, I would

recommend lessen the height and width and length of the cargo containers by 5% in each dimension. That

software does allow these adjustment when it is purchased. In this way, even the carton box expand due to the

humid weather, we would allow all cargo would safely be packed into the container, although a few inches of the

space is not utilized fully. It is better to have 95% space efficiency only rather than late in delivery to the port.

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http://www.freight-traders.com/


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The Proposed IT Integrated Solution for a 3PL companyUsing the above procedures and the 3 software that could be used for every container. This is my proposed 3PL

company IT solution on how to use the integrated solution to fulfill customer need. It is time saving, sophisticated and

quick. Allow best allocation for company resources. No longer calling every transport company that someone know and

try to engage in a lengthy negotiation for the best price and reliable service to ship the cargo via the container.

A successful business Internet model e.g. e-auctionThis business model is based on lower transaction costs and fast rate for moving cargo

Proposed Internet Business ModelThe model must have competitive advantage over the existing business practice.

A good Internet business model must provide

Customer value

Scope

Price

Revenue sources

Connected activities

Capabilities

Since our e-auction is a brokerage model, our Internet portal as a market makers that bring buyers and sellers together

and charge a few % commission for the transactions that they made. If we implement it for a 3PL e-auction business, it

will be B2B and B2C. While if we implement the e-auction portal web site for the manufacturer directly, it will be B2C, of

course, we assume that each and every of our manufacturer is our valuable customer in this case. I think that it is B2C

because it will inherit all the characteristics of other B2C portal web sites. i.e. The customers will log onto the web site

regularly in order to see the price trend and recent contract values.

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Types of Brokerage business models for e-auctionBrokerage business models could be further classified into:

Buy/sell fulfillment

Market exchange

Buyer aggregator

Distributor

Virtual auction broker

Reverse auction : price come down as time go on

Classified

Search agent (search for appropriate logistics provider)

All these Internet business models must be designed in a way to make money for the 3PL. Rather than try to

enumerate the numerous and changing business models in different industries.

For an internet firm keep on making money, it must keep offering customers something that they value: it includes,

latest price trends for different route, finding a reliable and cheaper logistic company that care about your transportation

needs.

Customer value can take the form of differentiated (e.g. dangerous chemicals) or lower-cost service. The right way is to

offer the right customers the right value.

The overall strategy and the mission statement must be: it must outperform for value-added activities that is superior to

the existing industry capabilities. In that sense, competitive advantage must be a function of the distinctiveness of the

capabilities. The aim is to produce reliable logistics bidders with all the above components that can be profitable. An

important issue is that the information must be provided in real-time.

To organise the event for e-auction, everyone may able to bid between 4 to 5 pm only. The portal web site should

produce previous historical records as a reference guide [keep the interested parties keep on browsing the site], the

satisfactory of the shipment and any damage of the products must be available to the management for evaluation of

the bidders quality service performance.

Once the portal web site starts making money, the competitors usually want a piece of the pie. A firm with such

competitive advantage should expect keen competitors reaction and whether they have sufficient competitive

advantage that allow the form to make sustainability of profits.

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Since the traditional old business model is our major competitor, we are going to compare the old model with the e-auction new

model

Component of Business Model

Area to address for the Traditional model that use phone and existing networking

Area of concern specific for the internet e-auction model

Pricing How does the firm price the service?

Just slight cheaper than competitor is good

enough?

How does the e-auction make pricing different?

Will it reach a narrow price range later or the

competition become keener?

Connected

activities

What set of activities does the firm have to

perform to offer this value and when?

How time-consuming is the existing methodology?

Calling one company, then another is a way to

go??

How many new activities must be performed to

achieve saving of the shipping?

How much better can the Internet help everybody

to perform existing activities

HR requirement Are the traders got all its contacts? How long does it need to train new personnel to

bid in the e-auction and follow up the shipping?

Customer Value Is the firm offering its customer something

distinctive or at a lower cost than its competitor

The uniqueness of internet auction that allow the

firm to offer its customer something distinctive

Sustainability How does the existing firm that makes it difficult

for other firm to imitate them? How does the firm

keep making money if the only strategy is to offer

slightly lower price than your close competitor?

Does the internet make sustainability easier or

more difficult? How can the web portal site take

advantage of it

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Timing and service quality are the determining factors to establish competitive advantage

Of course, a popular platform of e-auction could benefit everyone and fair to every participant who offers good services

in the market. The Internet e-auction allow saving on calling people, talking on the phone, negotiating skill etc. Services

could be varies between different logistics operators, so all-participating Logistics Company must be assessed by an

appointed insurance agency on their reliability record. The web portal must only allow those logistics providers with a

very good and reliable service record and reasonable % of damages to the product while the cargo was in transit. This

is to assure the customer of good service level and they could pick any of the lowest 3 bidders to perform the shipping

service to them. i.e. the name of the service providers could be disclosed after designated time

In the cargo industry, the most critical factors that determine whether the implemented e-auction business model is

successful or not. It will be market share and margins. That is how the firm should measure it success with the e-

auction web portal.

Market share must be increasing in the first few years of the business. As it is a knowledge-based service. In the initial

implementation stage, the firm must strive for the higher market share. Margins is the profit, obviously, e-auction could

provide saving of time for the bidder, saving of money for the SME business, therefore, the firm might charge the

successful manufacturers who gain a cheap shipping service this way. Margins or profit should reflect how much

saving will the e-auction model provide and the sincerity of the portal web site company to ask the SME business about

the shipping process: e.g. is the bidder service satisfactory, do they have good customer service for tracking enquiry,

any damage of the product before the arrival of the final destination. Only this way, it could strengthen the customer

loyalty using the e-auction site again

AUCTION PricingIn our auction pricing model, the SME manufacturer solicits bid from many of the shipping bidder and let the best

bidder win. This removes the disadvantage of the traditional method of one-to-one bargaining. One perceived problem

with auctions is that buyers can collude to hold down the price of a particular service. The other problem is bringing

together many buyers and sellers. Hopefully, our business model and country-less boundary of the Internet would bring

enough sellers and buyers together.

Reverse auction – we might consider itWe must mention reverse auction. Just like priceline.com for airline industry, the price should come down when the

deadline is closer. Priceline.com was one of the pioneers of the reverse auction model. A frequent flyer user of

Priceline proposes a price that he is willing to pay for e.g. ticket to LA for tonight, if an airline is willing to sell tickets at

that price, the deal is consummated and priceline will get the deserved commission from the seller. We could

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implement this reverse auction system in the proposed e-auction model. Say the manufacturer offer a price that keep

on rising until someone make the first bid, then asking price come down again until no one make a bid on a lowest

price. The reverse auction could be a Selling point of our e-auction model for SME business as astute manufacturers

can cater all the seller’s surplus profit. Now they have the option of choosing a price and giving countless vendors the

chance to bid. We do realize that manufacturers already swallow the cost of fluctuation currency movement while

financial spectators who manufacture nothing in the trading floor wins whichever the currency move (i.e. straddle

position of trading practice). Our proposed model should address the excessive profit that the cargo brokers trade

about container space or a committed shipment that is not done by itself but just searching for another small transport

company who is willing to do it for a very low price and profit the margin by doing no real work. As a conclusion, this

proposed e-auction model should address the most important issue that the Hong Kong Government concerned >>>

How to revitalise Hong Kong manufacturing industry, can the government really help them to save real money for

shipping expenses. Therefore, they could be even more competitive in term of pricing with their Pearl River Delta

counterparts.

Reverse auction method: shippers offer their cargo to the lowest bidder, at the mean time shippers list the availability of

cargo and carriers list the availability of space, and then bidding directly at designated time over price

Web surfers Loyalty Diagram – idea generated by andrew woodThis diagram indicates that every web site should have as many features as possible to keep people re-visiting

Place to Hange.g. Chatroom

Loyalty / Confidence Sentimental Valuethrough Collectors siteCustomer Care/ as it means somethingCustomer Service:e.g. Amazon e.g. ebay

Informational WEB surfers EducationalWith trend analysis will revisit eg students log into thee.g. Financial certain sites university portal Graphs frequently

because

Perishable Info Financialeg Olympics updates e.g. Banks

e-banking

Appeal / Reason

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CampaignWeb Siteeg Green Peace

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System implementation consideration

First stageThe web portal site could provide shipping and latest containers price/ square foot and route information to the existing

container space agents. Once they get used to visit the site, we will have lots of web surfers for our proposed site.

We should collaborate with medium-size manufacturers in PRD and Hong Kong as they have a big interest in

eliminating the time waste on discussing with those container space agents (Broker). They could have various ad hoc

orders to ship urgent order from time to time, the firm could help them to contact with those container space agents.

This should build up the firm reputation in logistics field during the first stage. Forward Planning is the essence in this

stage. This should determine whether the future e-business model is viable or not. Just look at the IP of the surfers.

We would know whether we could expand our network in the future. i.e. do the visitors keep on coming back and

increasing in web traffic.

Sites that list all the available carriers and their rates for a given commodity, origin and destination

Second stageThe web portal site could be a 4PL company, here, I am referring those company who try to help out existing

transportation company and container space agents to have e-auction that encourage the existing agents to use the e-

auction web site to find a cheaper price that could earn them more profit. The site could also provide on-line access

Cargo manager Software (the software is enclosed in the CD submitted, it has to be installed, file name -- cm45eval)

and 3Dvisualiser software Software (the software is enclosed in the CD submitted; it has to be installed, file name

3Dvisualiser). This allow and encourage a frequent access to the web site, they will be willing to give the e-auction a go

so they don’t need to call every service providers they know for the shipping services. This stage is also important to

eliminate all the unreliable service providers. We must guarantee our participants service quality before moving on to

the third stage in the implementation

Not are all freight carriers as they might seem. Some have better reliability records than others and some can handle

bigger shipments, for instance. Carriers could be suspicious of any marketplace that might cut their prices by treating

their service as an undifferentiated commodity. And on the shipper’s side, long service-contracts have the additional

advantage of locking in availability and price over a set period

When we introduce the model to the manufacturers directly, we have to evaluate the impact and reaction carefully,

The main resistance to the new change would be

Will the E-COMMERCE eliminate THE TRANSPORT INTERMEDIARY completely?

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Third stageWe have to do the second stage first because those existing container space agent (broker) would be the resistance

force when we introduce our e-auction (reverse auction is a possible alternative) for the manufacturers in Hong Kong

and PRD region. They could see the auction going on in the portal web site. They could see how much money the

manufacturers could really save if they participate in the e-auction too. This will be the bread-winner / milk cow if we

could encourage enough manufacturers actively seeking a good low price to ship their product.

Please also try out the Cargo Handler. MDB in the CD which is written by Andrew Wood from scratch. The objective is

for the manufacturer to get another lowest bid while time pass on. When the product is picked up, the shipping price is

fixed and can’t be change any more. There are some of the automatic features and assumption in the Microsoft Access

Database. (like total calculation). Here, I would make an assumption that the price would go down when the shipping

schedule (when the ship leave the port of Hong Kong to the port of Long Beach in California of USA)

Implementation of Database System 5 phases for system implementation

Phase for system implementation of the DB Main Tasks

Requirement Analysis Define business requirement and carry gap analysis

DB software Design Software used, functional specification, Platform(s)

Software Development Involve user in early prototyping, determine interfaces

System installation User Acceptance test

Training Training for Users and computer administrator

e.g As our users are outsiders that could be anywhere in

the world, we need to adopt a training interface that they

could learn where-ever they want and encourage those

SME customer to utilise the web site information and

possible e-transaction. The best approach could be found

in a similar training site:

http://www.microsoft.com/seminar/default.aspx

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http://www.microsoft.com/seminar/default.aspx


Testing : focus on User acceptance test When we implement any of the 3 phases of the portal web site, it is vital that the target user can use it via the Internet

browser. If possible, it is important for the web master to have some feedback whether the portal web site is user-

friendly from the very beginning of the design process, it will eliminate a lot of testing and maintenance at a later stage.

Make sure the whole programming go through smoothly. A proper software testing procedure involve 3 phases, namely

testing with test data: the project team compiles and thoroughly tests the system with test data. The test data are

appropriately compiled so that all program and system options and all error and validation routines are tested. The test

is repeated and modifications are made until all subsystems function properly.

Then we carry out testing with Live Data: Live data are actual data that have already been processed through the

existing system. Testing with live data provides an extra level of assurance that the system will work properly when

implemented. The programmer will compile test data that will test all possible option. The ultimate test is to have

“parallel run” to the existing system (it could be a traditional one: using phone lines to talk to various parties only)

against live data. During system testing with live data, the real users should get involved. Then it will represent a true

picture of training need and they could enter live data to perform routine transaction. Testing and modification must be

continued until the programmer project team and participating users are satisfied with the results of the test.

The Final step is User Acceptance testing.

At this point in system testing, all the bugs must be eliminated. It should be navigation-friendly and user-friendly. The

system will be presented to the scrutiny, by the real users and their company’s sales manager who will ultimately utilize

our system for e-auction. The purpose of this last test is called user acceptance testing. It is to get the user’s stamp of

approval.

Finally, since it is a new e-auction system that does not exist in Hong Kong for this particular business operation

before, a pilot system should be developed. Better know the user response early, encourage every sample users to try

out the new system, as it does save time and facilitate the existing process.

Some Examples of e-acutioniMark.com uses an auction model to sell used capital equipment

Adauction.com auctions off perishable online and print advertising inventory.

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Cost & benefit analysis & appraisal for the DSS implementation

Appraisal of the e-auction business model after implementation

Profit margin, market share and revenue growth are good predictors of profits. They were driven by the components

and linkages of a business model. We could measure how good a business model in at least three levels

Measures of profitability

Profitability prediction (benchmark of the progress)

Business model component attributes

Business model appraisal attributes consists of all the following factors

Profitability measures

1. Earning

2. Cash flow

Profitability predictor measures

1. Margins

2. Market share

3. Revenue share growth rate

Component attribute measures

1. Value

2. Price

3. Activities

4. Revenue

5. Implementational

6. Capabilities

7. Sustainability

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Profitability measure for the SME – will our e-business model give them additional unexpected benefit?Without a profit, no company can survive. We should use earning and cash flow analysis. Internet are real time, will this

e-auction site provide unexpected fast response and short lead-time to the SME needs? How could the web portal site

be organised in a way that is beneficial to SME, providing with all the vital information (e.g. hyperlink) that they need?

Looking into the far future, what should be the directives in developing the sites e.g. SME may not have a database,

could we build a online database for them to use via the Internet Explorer Browser, will those information be integrated

into the Hong Kong Government e-business project in the future? Everything comes with a price, However, if we have

a good online web base system for one company, we could support more and more SME companies with the same

system. Therefore, I will address the most vital issue in this essay topic as follow:

Analysis of the cost:

There will be Inventory Costs: cost that related to goods in transit. Cost saving will be achieved by shorten the cargo

movement

There will also be Documentation Costs: shipment information, customs clearances, insurance certificates,

Booking notices, bills of lading [Internet could provide electronic bills of lading] purchase and transmit insurance

certificates, submit data to customs and receive clearances to release cargo, transmit and receive shipment status

information to and from shippers and agents across the globe, and store selected data on back office systems for

billing and accounting purposes.

Therefore collaborate computer systems / online web based database system could improve efficiency and accuracy,

streamline the documentation process, reduce labor and achieve cost reduction. As a conclusion, Documentation is a

costly process that could be done for SME in the distant future, proper EDI and automation will allow the SME gaining

significant competitive advantage.

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Teaching objectives:

To point out the critical success factors, constraints, processes and information requirements when the new e-auction system be developed

To identify the benefits gained and cost saving for the SME with the new DSS. Look closely into the difficulties and challenges that SME are facing and the importance of what the e-auction portal web site could provide

Middlemen provide Facilitating FunctionWith the book of Bill Gate published in 1999

Book title: Business @ the Speed of Thought

There is a chapter called “The Middleman Must Add Value”

As Quote >>

Now that customers can deal directly with manufacturers and service providers, there is little value

added in simply transferring goods or information. Various commentators have predicted the "death

of the middleman." Certainly the value of the "pass-through" middleman is quickly falling to

zero. . . . In the future travel agents will need to do more than book tickets . . . . If you’re a middleman, the Internet’s promise of cheaper prices and faster service can "disintermediate" you, eliminate your role of assisting the transaction between the producer and the consumer.

For service industry, Bill Gate observes that the Internet transform the service industry either to be

a high volume, low cost provider OR a high-niche, customer-service provider

He then draws a conclusion that because very few companies in any market can be the high volume providers, most companies will look into benefit of internet to their business model for not just to reduce costs, but also to deliver new services. This will be the noticeable impact of e-auction to the existing model that compete on pricing level.

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Teaching strategies: Resistance during implementation of the e-auction proposalThe best strategies that could derive from such a project would be People Management and Brand Management, as

this e-auction business would create big opposition from the existing containers’ operators.

Cut out the middleman and reduce costs

Taking over the role of transport intermediary In the industry, there are significant number intermediary who use their network in the old-fashioned way (phone and

negotiation) to shop around for the lowest price.

Undoubtedly, the new system can make the whole process become more transparent; arrange everything faster and

cheaper, e-auction offer great business opportunities who are flexible enough to adapt.

There are vast opportunities in international transport industry. There are plenty areas of inefficiency that could

address. Making things running more smoothly and quickly reduce the overall risk when business could aggregate the

demand, providing reliable and comprehensive service to the customer.

In change management, we learnt to take care of people attitude. People do not always follow the easiest and the best

method as they fear technology as a threat. With High Uncertainty: Greatest fear of mankind. However, in logistics

management, it is important to bring out the best of such decision support system. The system would facilitate the

process. Shorten the time of negotiation, increase visibility of the price level. During implementation, we should

highlight the benefit that would bring to the existing operation (stage 2 of the implementation), for instance, less phone

call need to be made, increase existing operator competitiveness by using the extra time to have more business deal.

This should lessen the bad feeling about the new technology on their existing business. However, in stage 3 of the

implementation where the e-auction will introduce to the manufacturers, those middlemen will certainly feel that the e-

auction is a threat. They would have bad mouth about the new service. However, I proposed to implement stage 2 first

because it would lessen such feeling.

In stage 3 of the implementation where the e-auction is introduced to the manufacturer. The keyword at this stage

would be brand management. We must be sure every 3PL logistic provider that supply the logistics service is quality

guaranteed as this would affect their confidence in the new web-based company. For example, the 3PL service quality

must be checked and make sure that even they bid it at a low price, they would provide good cargo service and

customer service to the manufacturers directly. For instance, the lead time to pick up the cargo must be short, the

cargo must not be damaged during transit, arrival of the whole consignment must be done on time, and payment must

be processed safely.[VeriSign etc] With any complaint, suitable compensation must be provided by the 3PL. Reliability

is the only essence in this stage, not even the price level of the successful bids

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Why price level is not important at all? It is because courier and famous shipping line such as FedEx, OOCL charge

excessive premium to ship the cargo? Why the business are willing to pay for it without any hesitation? It is simply

because they can do it promptly and they are reliable.

In our case, Reliability is simpler to be said rather than done, not all 3PL providers provide good training to their front-

line employee. Will they handle the cargo carefully; will they pack and ship the cargo just in time? If there is more than

1% of the cargo shipment that is unsatisfactory, it would ruin the whole phase 3 of the implementation. As the

manufacturers will no longer trust the e-auction system as some of those providers who provide the lowest bid but let

down the manufacturers and its customer who suppose to receive their Christmas order on time.

In conclusion, by implementing phase 3, the middlemen profit will disappear, the manufacturers will then have great

saving via e-auction. But all the participants in e-auction must be reliable. This could only be done if the 3PL providers

are selected by an authorize insurance broker who is able to access the previous insurance claim by these 3PL

providers. The 3PL must be chosen by its reliability of its service. Otherwise, we should not implement phase 3 at all as

this is the most risky phase among 3 stages. Having said that, If implement successfully, it would make the e-auction a

household brand name for such business (with proper Brand Management). Otherwise, if there was lots of unreliable

service, missed payment or damaged good during transit, it would break the whole e-auction initiative. This is why

priceline.com is successful and my model is more or less the same. In priceline.com case, the less popular airlines do

not have to reduce their listed price while keeping all the remaining seats on the plane filled within the last few hours

before departure. Priceline receives a tiny amount of commission. Leveraging the unique attributes of the Internet,

priceline finds sellers willing to meet buyers' needs and price, thus facilitating thousands of buyer-driven transactions

each day. The customers keep going back because of its convenient service. Of course, just like what we just

mentioned here, the strategic alliance with reliable airlines is the key to make priceline.com so successful. The

customer has no knowledge about which airline that they will travel until they pay for the ticket.

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Foreseeable Expected Result

Lower Operation CostWe should also assess whether improved information / operation will bring significant cost saving. Advantages can be

seen in monetary or non-monetary terms. Monetary benefit can be quantified as a saving. In the case of the SME, if it

would establish a contract in the open market for the shipped cargo, it implies that the previous middlemen premium

will be eliminated. Non-monetary cost saving, for example, human resources used in making such transaction could be

reduced. This will result in saving. With less human resources used to compare the price and calling the 3PL, SME

should spare those resources to get more overseas manufacturing orders.

For transportation need, the service industry is measures of its performance by the speed and accuracy of cargo

delivery. If the new e-auction bidder provide same level of accuracy of on-time delivery and spoilage rate of the cargo

in transit is the same; then every saving in transportation can be realised completely.

General Collaborative AdvantageCollaborative Advantage is equally applied to every body. For instance, the 3PL could save time and market coverage

by participating in the bidding process. Although market margin could reduce, we cannot underestimate the increase in

volume by exposing itself to more SME.

3PL and SME could use the Cargo Manager Software to utilize the cargo container space, this would reduce reliance

on the fork-lift truck expert to pack the cargo. The database could be used by the SME to look for the best provider “

Less Money for good value ”

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DiscussionLet’s look at the typical value chain of a SME manufacturer and see how our e-auction would help.

The company will have its inbound logistics stage that involves the shipment of raw materials. In the delivery issue, our

Database model does not expand to help in such stage. However, the manufacturer could still use the cargo handling

software and make suggestion to packing of raw materials to the suppliers. This would certainly improve the

relationship if this can produce saving for the supplier to ship those materials. Then there could be strategic

collaboration or bigger bargaining power in the price negotiation. The operations / manufacture part of the value chain,

our IT model did not cover. We are actually focusing on the outbound logistics stage that involves order processing and

shipping. Our IT solution will make the outbound logistics more smooth, more sophisticated and leverage a good deal

with big saving. In order for the 3PL to get business, it could either produce high quality, fast and reliable service or

lower price but good enough service.

How does the Internet affect the Value Chain activityInternet allows participant to better assess and inform the market needs. Only with more direct contact with the

manufactures, the 3PL could stimulate the demand of their service. In the past, there is less visibility of pricing except

the container exchange brokers, using internet, the 3PL bidder could have a bigger customer base In conclusion, it

brings in iterative problem solving skill for the 3PL, the 3PL will continue to discovering what the clients want (just dried

cargo service or handling of special chemicals), what price will the SME willing to pay, they also have to get feedback

from the customer after they perform the service and see whether all customer needs were fulfilled (e.g. they might

realise if they could co-ordinate with SME for JIT delivery to get rid of the SME warehouse, they might won a steady

service contract rather than go through the bidding procedure again -- cargo by cargo).

NOTE:Iterative problem solving skill means 3PL participants will go through the

Problem finding ( will direct contact with the few manufacturer be a good thing?)

Problem solving (the ultimate goal it to help the manufacturer to resolve logistics need as the way that they prefer)

Choice (3PL would have to make quick decision during bidding whether they will take up a bid or not)

Execution (3PL must able to execute the logistic procedure for the customer)

Control and Evaluation (3PL will re-evaluate each bid contract to see whether they maintain a satisfactory profit margin and make some re-

adjustment in the next bidding session)

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ConclusionMore visibility is the most valued benefit that the Internet brings to us. By enhancing interaction

with the concerned parties, our DSS model could let SME have a big saving and answer on many

cost-effectiveness issues, namely: 1) time and resources to pack a container correctly, 2) How to

group the manufacture products into carton boxes, say, package of 12 or package of 24, 3) what

should be the dimension of carton box, 4) where to find a reliable 3PL who could provide logistics

fulfillment with reasonable price, and 5) Keep records of the updated transportation cost of every

consigment.

Around three-quarters of the world’s US$50-billion container business is still done under service

contracts. Previous bidding information should increase number of participants in the e-auction

web portal as everyone want to know whether they are paying more than they should ! The portal

web site should synergise value-added benefits such as raise the efficiency, eliminate non-value-

added process and lowering cost. Set up realistic target is crucial: a successful and sustainable

commercial web site should gain popularity, provide extra-ordinary customer value and being built

on a sound business model. Distintermediation is possible if stage 3 of the implementation

proposal is launched. That would bring enormous direct cost saving to the SME.

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ReferencesImplementation of On-line Decision Support Systems in Norasia Container Line: A Case StudyP277-290 International conference on Supply Chain Management and Information Systems – walter chung

International MarketingTerpstraAbout Export Pricing and Terms

Internet Business Models and Strategies Text and CasesAfuah

http://www.microsoft.com/seminar/default.aspxvarious presenters

The Characteristics and Prospects of Hong Kong's Trade TransformationHong Kong Trade development Council Journal

The Three-Dimensional Bin Packing ProblemMartello Operational Research Volume 48 Number 2 March – April 2000

The container loading problemPisinger D 1997 In Proceedings NOAS’97

Business @ the Speed of ThoughtBill Gate 1999

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Appendix -- Live data from http://www.shipguide.com/paceast.html

Searched all voyages From Hong Kong to Long Beach, CA for 2004

30 matching voyages were found.

To Departure Arrival Transit Service Vessel Voyage

Long Beach Fri Jan 2 Thu Jan 15 13 days CAL-J Pohang Senator 0029ELos Angeles Sun Jan 4 Sat Jan 17 13 days CAL-Y Ming South 65ELong Beach Tue Jan 6 Sat Jan 17 11 days CAL-C Suez Canal Bridge 09ELong Beach Fri Jan 9 Thu Jan 22 13 days CAL-J Hanjin Helsinki 0014ELos Angeles Sun Jan 11 Sat Jan 24 13 days CAL-Y Ming North 67ELong Beach Tue Jan 13 Sat Jan 24 11 days CAL-C Long Beach Bridge 10ELong Beach Fri Jan 16 Thu Jan 29 13 days CAL-J Peking Senator 0032ELos Angeles Sun Jan 18 Sat Jan 31 13 days CAL-Y YM Wilmington 24ELong Beach Tue Jan 20 Sat Jan 31 11 days CAL-C Tsing Ma Bridge 09ELong Beach Fri Jan 23 Thu Feb 5 13 days CAL-J Portland Senator 0028ELos Angeles Sun Jan 25 Sat Feb 7 13 days CAL-Y Ming West 69ELong Beach Tue Jan 27 Sat Feb 7 11 days CAL-C James River Bridge 09ELong Beach Fri Jan 30 Thu Feb 12 13 days CAL-J Pusan Senator 0031ELos Angeles Sun Feb 1 Sat Feb 14 13 days CAL-Y Ming East 66ELong Beach Tue Feb 3 Sat Feb 14 11 days CAL-C Chiswick Bridge 09ELong Beach Fri Feb 6 Thu Feb 19 13 days CAL-J Pudong Senator 0030ELos Angeles Sun Feb 8 Sat Feb 21 13 days CAL-Y Ming South 66ELong Beach Tue Feb 10 Sat Feb 21 11 days CAL-C Golden Gate Bridge 09ELong Beach Fri Feb 13 Thu Feb 26 13 days CAL-J Pugwash Senator 0028ELos Angeles Sun Feb 15 Sat Feb 28 13 days CAL-Y Ming North 68ELong Beach Tue Feb 17 Sat Feb 28 11 days CAL-C Bremen Bridge 11ELong Beach Fri Feb 20 Thu Mar 4 13 days CAL-J Punjab Senator 0033ELos Angeles Sun Feb 22 Sat Mar 6 13 days CAL-Y YM Wilmington 25ELong Beach Tue Feb 24 Sat Mar 6 11 days CAL-C Akinada Bridge 10ELong Beach Fri Feb 27 Thu Mar 11 13 days CAL-J Yokohama Senator 0029ELos Angeles Sun Feb 29 Sat Mar 13 13 days CAL-Y Ming West 70ELong Beach Tue Mar 2 Sat Mar 13 11 days CAL-C Chicago Bridge 09ELong Beach Fri Mar 5 Thu Mar 18 13 days CAL-J Portugal Senator 0031ELos Angeles Sun Mar 7 Sat Mar 20 13 days CAL-Y Ming East 67ELong Beach Tue Mar 9 Sat Mar 20 11 days CAL-C Rotterdam Bridge 09E

The above data has been adopted as an illustration into the Database which is in the CD

Sample online auction web site that could be installed

http://download.com.com/3001-2649-10104788.html

[there are a few more from other experimental software sites]

http://www.yourphppro.com/version/en-us/content/page_15_0_2.html

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http://www.fuzzymonkey.org/cgi-bin/download.cgi?file=sql-classifieds

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andrew wood, che yan cya --- top notch grade a in a-level , all the science subjects

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