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The Solution

M & S realized that survival in the digital era depends

on the use of information technology in general and

electronic commerce in particular. Electronic commerce

(EC, e-commerce) is the process of buying, selling,

transferring, or exchanging products, services, and/or

information via electronic networks and computers. M & S

initiated several EC initiatives, including the following:

Selling online. Like many other retailers, M & S sellssome of its merchandise online. Shoppers can collect

their merchandise in a shopping basket, pay online,

and receive the merchandise the next day (in the UK).

Online shoppers are encouraged to provide a UPC code

in order to get the same product they see at a physical

store, frequently at a lower price.

Security. A security system tracks transaction data inreal time, looking for fraudulent events. If any fraudu-

lent events are discovered, the system alerts the

in-store security staff in the affected store by sending

them a short text message via cell phone. Warehouse management. A mainframe-based ware-

house management system, known as the Multi-User

Warehouse System (MUWS), was installed first at M & Ss

Hardwick distribution center near Birmingham. Using

Microsoft.Net infrastructure, store sales are reported to a

data warehouse (a repository of corporate data), almost

in real time. The data are then available for decision

making on inventory replenishment (when and how

much to ship to each store). The data are also available

to the companys third-party logistics service providers,

who run the warehouse operation and deliveries.

Merchandise receiving. The process of matchingorders and invoices is automated, making it faster and

free of errors. Information about arriving goods is

passed automatically to both the warehouse and the

stores. This way MUWS can do a real-time check of

arriving and available stock. Also, the system enablesM & S to pay suppliers more quickly, which makes them

happier and more cooperative.

Inventory control. The warehouse management and

the merchandise receiving system, in addition to the

real-time data reporting, improve customer relation-

ships. Customers can find what they want because

replenishment is accomplished quickly (sometimes

within 30 minutes).

Speeding up the supply of fashion garments. Usingspecial software, merchandisers can access and change

allocation plans from any computing device (PC,

laptop, pocket PC) anywhere and at any time in

response to changing demand patterns. This is espe-

cially important for fashion garments, where meeting

ever-changing demand is critical for competitiveness.

Collaborative commerce. M & S can now pass moreaccurate forecast demands to its suppliers for fast deliv-

ery of goods, often directly to the M & S retail stores.

The new information system enables M & S to work with

suppliers to reroute merchandise to different depots and

change allocations to where they are needed.

The Results

M & Ss CEO, in a message to the shareholders (summer2002), indicated that a turnaround is underway. He sees

M & S as a leader and example setter in retailing, resulting

in increased profitability and growth.

ONLINE FILE W1.1MARKS & SPENCERA NEW WAY TO COMPETE

The Problem

Marks & Spencer (marksandspencer.com) is a UK-based, upscale, global retailer known for its high-quality, high-priced merchandise.

Operating in more than 30 countries, the company faces stiff competition, especially since the beginning of the economic slowdown

that started in 1999. Customer service became a critical success factor for Marks & Spencer. Other critical success factors included anappropriate store inventory system and efficient supply chain activities. To attract shoppers, the company had to reduce prices at its

stores, which drastically reduced profits. Several other big retailers were wrestling with similar problems, including Kmart, which had

to file for bankruptcy. Will Marks & Spencer (M & S), a world-class retailer, be able to survive?

Questions

1. List the business models used by M & S.

2. List the different EC transaction types used by M & S.

3. List some of the benefits M & S derives from EC.

4. Relate this case to supply chain management improvements.


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2 Part 1: Introduction to E-Commerce and E-Marketplaces

REFERENCES FOR ONLINE FILE W1.1Hayward, C. M & S Reveals Survival Secrets: Vandevelde

Cites a Mix of Short- and Long-Term Moves. FinancialManagement(UK), July 2002.

Marksandspencer.com. marksandspencer.com (accessedSeptember 2006).

Ody, P. Demand Reality. Retail Work, October 2002.


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Chapter One: Overview of Electronic Commerce 3

ONLINE FILE W1.2

E-COMMERCE SUPPORTS FIELD EMPLOYEESAT MAYBELLINEThe Problem

Maybelline is a leader in color cosmetic products (eye shadow,

mascara, etc.), selling them in more than 70 countries

worldwide. The company uses hundreds of salespeople

(field merchandising representatives, or reps), who visit

drugstores, discount stores, supermarkets, and cosmetics spe-

cialty stores to close business deals. This method of selling

has proven to be fairly effective, and it is used by hundreds

of other manufacturers in various industries (e.g., Kodak,

Nabisco, and Procter & Gamble). In all cases of field selling,

it is necessary for the selling company to know, as quickly

as possible, when a deal has been closed or if there is any

problem with the customer.

Information technology has been used extensively to

support field reps. Until 2000, Maybelline, as well as many

other large consumer product manufacturers, such as Kodak,equipped their reps with interactive voice response (IVR)

systems that enabled reps to enter information about their

daily activities every evening.

With the IVR system, the Maybelline reps completed

paper-based surveys for each store they visited. The reps noted

how each product was displayed, how much stock was avail-

able, how items were promoted, and so on. In addition to their

own companys products, the reps surveyed the competitors

products. In the evening, the reps translated the data from the

forms into answers that were then entered into the IVR. The

IVR asked the reps routine questions, and the reps answered by

pressing the appropriate telephone keys. The system had

problems: Frequently, reps were late in reporting. Even if theywere on time, information was inflexible, because the reports

were all menu driven. The system also consolidated informa-

tion, bundling and delivering it to top management as hard

copy. Unfortunately, these reports sometimes reached top man-

agement days or weeks too late, missing important changes in

trends and the opportunities to act on them in time.

Another problem was the systems inflexibility. The

reps answered only the specific questions that applied to a

situation. To do so, they had to wade through more than

50 questions, skipping the irrelevant ones. This was a waste

of time. In addition, some of the material that needed to be

reported had no matching menu questions. Considered a

success in the 1990s, the IVR system was unable to meet the

needs of the twenty-first century. It was too cumbersome toset up and operate and was also prone to input errors.

The Solution

Maybelline equipped its reps with a mobile system from

the MEI Group (formerly Thinque Corp.) (meicpg.com),

called Merchandising Sales Portfolio (MSP). It runs on

handheld, pen-based PDAs (from NEC) that are powered by

Microsofts CE operating system. The MSP system enables

the reps to enter their reports in handwriting directly from

the clients sites. From the handheld device, data can auto-

matically be uploaded to a Microsoft SQL Server database

at corporate headquarters every evening by accessing the

corporate intranet via a secure Internet connection

(a synchronization process). It also enables district

managers to send daily schedules and other important

information electronically to each rep.

The system also replaced some of the function of

Maybellines EDI system, a source of pride of the 1990s.

For example, the reps reports now include inventory-scanned

data from retail stores. These are processed quickly by an

order management system and passed whenever needed to

the shipment department for inventory replenishment.

In addition to routine information, the new system is used

for decision support. It is not enough to speed information

along the supply chain; managers need to know the reasons

why certain products are selling well, or not so well, in every

location. They need to know the conditions at retail stores that

affect the sales of each product, and they need to know it in a

timely manner. The new system offers that capability.

The Results

The MSP system provided Maybelline with an interactive link to

the mobile field force. Corporate planners and decision makers

can now respond much more quickly to situations that need

attention. The solution is helping the company forge stronger

ties with its retailers. It also considerably reduces the amount

of after-hours time that the reps spend on data transfer to

headquartersfrom 30 to 50 minutes per day to mere seconds.

The new system also performs market analyses that enable

managers to optimize merchandising and customer-service

efforts. It also enables Maybelline to use a more sophisticated

IVR unit to capture data for special situations. Moreover, it

provides browser-based reporting tools that enable managers,

regardless of where they are, to view retail information withinhours of its capture. Thanks to the error-checking and valida-

tion feature in the MSP system, there are significantly fewer

data-entry errors (because no rekeying is needed).

Finally, the quality of life of Maybelline reps has been

greatly improved. Not only do they save 30 to 40 minutes per

day, but their stress level and anxiety due to the possibility

of making errors has been significantly reduced. As a result,

employee turnover has declined appreciably, saving money

for the company.

Questions

1. IVR systems are still popular. What advantages do theyhave over systems that require reps to mail or fax

reports?

2. Explain why the MSP application is an e-commerceapplication. Compare it with the definitions and classi-

fications in the chapter.

3. The existing technology enables transmission of dataany time an employee can access the Internet with a

PC. Technically, the system can be enhanced so that

the data can be sent wirelesslyfrom any location as

soon as it is entered. Would you recommend such a

wireless system to Maybelline? Why or why not?

4. Summarize the advantages of the new MSP system over

the IVR.


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REFERENCES FOR ONLINE FILE W1.2Microsoft Corp. Case Industry SolutionsMaybelline.

microsoft.com/resources/casestudies (accessed May2002).

Seeley, R.,Wireless Storm Brewing?Atmag.com, February 1,2002. adtmag.com/article.aspx?id=6011&&page=(accessed May 2006).

ONLINE FILE W1.3

VOICE-BASED 511 TRAVELER INFORMATION LINETellme Networks, Inc. (tellme.com) developed the first voice-

activated 511 traveler information line in Utah, setting a

national example for future 511 services to be launched by

Department of Transportation (DOT) agencies on a state-by-

state basis in the United States. The 511 service debuted on

December 18, 2001. Simply by using their voices, callers on

regular or cell phones within the state of Utah are now ableto request and get real-time information on traffic, road con-

ditions, public transportation, and so on. The answers are

generated from the Internet and participating databases and

delivered by voice.

In July 2000, the U.S. Federal Communications

Commission (FCC) officially allocated 511 as the single

nationwide number for traveler information, in the same way

callers can dial 411 for directory assistance and 911 for

emergency services. Previously, state governments and local

transportation agencies used more than 300 local telephone

numbers nationwide to provide traffic and traveler informa-

tion. Now travelers can use one number to access travel

information whether they are touring the country or simply

driving home from work. The Utah 511 travel information line

is provided as a free service by the Utah DOT.

During the February 2002 Olympic Winter Games, callers

were able to request event schedules, driving directions,

up-to-the-minute news and announcements, and tips for

avoiding traffic congestion. The phone is the ideal medium

to make government services available and accessible to the

general public, said Greg OConnell, Director of Public Sector

Operations at Tellme. 511 is a new wave in public informa-

tion access (quoted at tellme.com).

The 511 application is a special use of voice portals

(see Chapter 9), which enable users to access the Web

from any telephone by voice. Martin Knopp, Director of

Intelligent Transportation Systems, Utah DOT, said, As the

national 511 working group has stipulated, voice recogni-

tion is the way for callers to access information on 511 . . .

In addition, there was no up-front capital cost and we wereable to leverage the same information and investment we

had made in our regular Web infrastructure (quoted by

Singer 2001).

Tellme Networks is revolutionizing how people and

businesses use the telephone by fundamentally improving

the callers experience with Internet and voice technologies.

Tellme enables businesses and governments to empower

their callers while slashing costs and complexity.

By May 2006, 28 systems in 24 states made 511

available to 93 million Americans. Since its inception

in 2001, over 50 million calls have been placed

(Deploy511.org2006).

Questions

1. Is this G2B or G2C? Explain.

2. Visit tellme.com and deploy511.organd find more infor-mation about this case. Summarize the benefits of 511

to the users.

3. What is the role of Tellme? What Internet technology isused?

REFERENCES FOR ONLINE FILE W1.3Deploy511.org. 511 Fact Sheet Brochure.deploy511.org/

docs/511%20Fact%20Sheet%20Brochure%202006.pdf(accessed September 2006).

Singer, M. Tell Me: The 511 in Utah. Silicon ValleyInternet.com, December 18, 2001. siliconvalley.

internet.com/news/article.php/3531_942671 (accessedSeptember 2006).

Tellme.com.tellme.com (accessed September 2006).


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ONLINE FILE W1.4

THE SUCCESS STORY OF CAMPUSFOOD.COMCampusfood.coms recipe for success was a simple one:

Provide interactive menus to college students, using the

power of the Internet to replace and/or facilitate the tradi-

tional telephone ordering of meals. Launched at theUniversity of Pennsylvania (Penn), the company takes

thousands of orders each month for local restaurants,

bringing pizzas, hoagies, and wings to the Penn community

and to dozens of other universities.

Founder Michael Saunders began developing the site

(campusfood.com) in 1997 while he was a junior at Penn.

With the help of some classmates, Saunders launched the site

in 1998. After graduation, he began building the companys

customer base. This involved expanding to other universities,

attracting students, and generating a list of restaurants from

which students could order food for delivery. Currently, some

of these activities are outsourced to a marketing firm,

enabling the addition of dozens of schools nationwide. In

2004, the company served 200 schools linked to over 1,000restaurants.

Financed through private investors, friends, and familymembers, the site was built on an investment of less than

$1 million. (For comparison, another company with services alsoreaching the college-student market invested $100 million.)

Campusfood.coms revenue is generated through transaction

feesthe site takes a 5 percent commission on each order from

the sellers (the restaurants).When you visit Campusfood.com, you can:

Navigate through a list of local restaurants, their hours of

operation, addresses, phone numbers, and other information.

Browse an interactive menu. The company takes a restau-

rants standard print menu and converts it to an electronic

menu that lists every topping, every special, and every

drink offered, along with the latest prices. Bypass busy telephone signals to place an order online,

and in so doing, avoid miscommunications.

Get access to special foods, promotions, and restaurant give-

aways. The company is working to set up meal deals that are

available online exclusively for Campusfood.com customers.

Arrange for electronic payment for an order.

University students who signed up at Titan Poker with a

special bonus code provided by Campusfood.com were eligi-

ble to play in a series of exclusive online poker tournaments

(in April 2006). Winners received special Campusfood Cash

coupons valued at $20,000, redeemable for food orders at

participating restaurants.

Questions

1. Classify this application by EC transaction type.

2. Explain the benefits of Campusfood.com for its studentcustomers and for the restaurants it represents.

3. Trace the flow of digitized information in this venture.

4. How does the outsourcing of the marketing activitiescontribute to the business?

5. What is the benefit of the Titan Poker contest to thecompany?

REFERENCES FOR ONLINE FILE W1.4Campusfood.com. campusfood.com (accessed August 2006).eMediaWire. Titan Poker Teams Up With Campusfood

for Tournaments Aimed at College Students.February 16, 2006. emediawire.com/releases/2006/2/emw346598.htm (accessed August 2006).

Prince, M. Easy Doesnt Do It. Wall Street Journal,July 17, 2000.


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ONLINE FILE W1.5

ORGANIZATIONAL RESPONSESStrategic Systems. Strategic systems provide organizationswith strategic advantages, enabling them to increase their

market share, better negotiate with their suppliers, or pre-

vent competitors from entering into their territory. There area variety of EC-supported strategic systems. One example is

FedExs tracking system, which allows FedEx to identify the

status of every individual package, anywhere in the system.

Most of FedExs competitors have already copied the FedEx

system. In response, FedEx has been forced to continuously

introduce EC innovations, but so are its competitors, espe-

cially UPS.

Agile Systems. Agile organizations have the ability to con-sistently improve productivityespecially during periods of

change. To create business agility, organizations use IT

in general and EC in particular. The solution provided by EC

enables capitalizing on changing industry, government,

and business requirements; assimilating required resourcesand business processes quickly to meet demand; promptly

adapting technology to fit new or modified business

processes; leveraging existing resources to do the above;

and doing it all economically.

Continuous Improvement Efforts and Business ProcessRestructuring and Management. Many companies continu-ously conduct programs to improve their productivity, quality,

and customer service. Two examples of how EC can help are

Dell and Intel. Dell takes its orders electronically and imme-

diately moves them via enterprise resource planning(ERP)

software (see Online Tutorial T1) into the just-in-time assem-

bly operation. Using an almost real-time extranet-based

monitoring system, Intel tracks the consumption of itsproducts by a dozen of its largest customers in order to plan

production schedules and deliveries.

However, continuous improvement programs may not be

a sufficient solution for some business problems. Strong busi-

ness pressures may require a radical structural change. Such

an effort is referred to as business process restructuringor

reengineering(BPR). E-commerce is frequently interrelated

with process restructuring that may be needed for implemen-

tation of EC initiatives such as e-procurement.

Customer and Partner Relationship Management. One ofthe major symptoms of the digital revolution is that the bar-

gaining power of customers is stronger than ever, and that

power is growing. The availability of information and theability to make quick comparisons online (e.g.,froogle.com)

increases this trend. Customers are called kings and

queens, and organizations must make their customers

happy in order to keep them. As discussed in Chapter 13 and

in Online File W1.6, this may be accomplished through

customer relationship management(CRM).

EC is not just about buying and selling. Supporting

CRM, as we will see throughout the book, and especially in

Chapter 13, is a major function of EC. Such support is done

by multiple technologies, ranging from computerized call

centers to intelligent agents. Some of the e-CRM topics

highlighted in this book are sales-force automation, call

center tools and operations, personalization, empowerment

of customers and frontline employees, support of mobile

employees, and partner relationship management.

Business Alliances. Many companies realize that allianceswith other companies, even competitors, can be beneficial.

For example, General Motors, Ford, and others in the automo-

tive industry created a huge B2B e-marketplace called

Covisint (see Chapter 6). Other types of business alliances

include resource-sharing partnerships, permanent

suppliercompany relationships, and joint design and

research efforts. For additional details, see Chapter 14.

Electronic Markets. Electronic markets, private or public,can optimize trading efficiency, enabling their members to

compete globally. Most electronic markets require the collab-

oration of different companies, sometimes even competitors,

as will be shown in Chapters 6 and 7.

Reductions in Cycle Time and Time-to-Market. Cycle timereductionshortening the time it takes for a business to

complete a productive activity from its beginning to endis

extremely important for increasing productivity and competi-

tiveness. Similarly, reducing the time from the inception of

an idea to its implementation (time-to-market) is important,

because those who are first on the market with a product or

who can provide customers with a service faster than their

competitors enjoy a distinct competitive advantage.

Extranet-based applications can expedite the various steps in

the process of product or service development, testing, and

implementation. Examples of EC-supported cycle time

reduction are described in Online File 1.8.

Empowerment of Employees. Giving employees theauthority to act and make decisions on their own is a strat-

egy used by many organizations as part of productivity

improvement programs. Management delegates authority to

individuals or teams who can then execute the work faster

and with fewer delays. Empowerment of employees may

also be part of e-CRM. Empowered salespeople and customer

service employees are given the authority to make customers

happy and do it quickly, helping to increase customer loyalty.

EC allows the decentralization of decision making and

authority via empowerment and distributed systems, but

simultaneously supports a centralized control. Empowerment

can also be achieved by using automated decision systems(see Davenport 2006).

Supply Chain Improvements. EC, as is shown throughoutthe book, and especially in Chapters 7 and 13 and

Online Tutorial T1, can help reduce supply chain delays,

reduce inventories, and eliminate other inefficiencies. The

use of e-supply chain models to automate factory scheduling,

which reduces response time and inventory management,

was shown in the Dell opening case.

Mass Customization: Make-to-Order in Large Quantities.Todays customers demand customized products and services;

the business problem is how to provide customization and


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do it efficiently. This can be done, in part, by changing

manufacturing processes from mass production to mass cus-

tomization (Anderson 2002). In mass production, a company

produces a large quantity of identical items. Inmass cus-

tomization, items are produced in a large quantity but are

customized to fit the desires of each customer. EC is an

ideal facilitator of mass customization, for example, by

enabling interactive communication between buyers and

designers so customers can quickly and correctly configure

the products they want. Also, orders placed online can reach

production facilities in minutes. Note that mass customiza-

tion is not easy to achieve; however, EC can help. Mass cus-

tomization requires a build-to-order process, as described in

Appendix 2A in Chapter 2.

Intrabusiness: From Sales Force Automationto Inventory Control. One area where EC has made majorprogress in supporting organizational responses is applica-

tions inside the business. As shown in Online File W1.1

on Marks & Spencer and in the Maybelline Case (Online

File W1.2), support can be provided to field represen-

tatives, warehouse employees, designers, researchers,and office workers. The improvements in productivity

for these kinds of employees were fairly slow until the

introduction of EC.

Knowledge Management. Knowledge management (KM)refers to the process of creating or capturing knowledge,

storing and protecting it, updating and maintaining it, and

using it whenever necessary. Knowledge management programs

and software are frequently associated with EC. For example,

knowledge is delivered via corporate portals to assist usersor to teach employees. Also, EC implementation requires

knowledge, and EC activities such as market research create

knowledge. For more on the ECKM connection, see Chapter 8.

Questions

1. List the major business pressures faced by organizationstoday.

2. List the major organizational responses to businesspressures.

3. Describe how EC supports organizational responses tobusiness pressures.

4. Describe an agile organization.

REFERENCES FOR ONLINE FILE W1.5Anderson, D. Build-to-Order and Mass Customization.

Los Angeles: CIM Press, 2002.Davenport, T. H., Competing on Analytics, Harvard

Business Review, January 2006.


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REFERENCES FOR ONLINE FILE W1.6

Greenberg, P. CRM at the Speed of Light: Capturing andKeeping Customers in Internet Real Time, 3d ed. New

York: McGraw-Hill, 2004.Newman, D. Closing the CRM Loop Through Customer

Data Integration. DMReview, March 24, 2005.

Wikipedia.Customer Relationship Management.September 7,2006. en.wikipedia.org/wiki/Customer_Relationship_Management(accessed September 2006).

The topic of customer relationship management (CRM) has been closely related to EC since 1997, when EC and CRM were put

together for the first time as e-CRM. CRM has many definitions (Greenberg 2004). A panel of CRM experts, working with

CRMGuru.com, defined CRM as follows:

CRM is a business strategy to select and manage customers to optimize long-term value. CRM requires a

customer-centric business philosophy and culture to support effective marketing, sales, and service processes. CRM

applications can enable effective Customer Relationship Management, provided that an enterprise has the right

leadership, strategy, and culture.

CRM is a diversified field that can be divided into the following areas (Greenberg 2004; Wikipedia 2006; Newman 2005):

Operational CRM. Operational CRM is used for typical business functions involving customer services, order management,invoice/billing, or sales and marketing automation and management. It involves integration with all the functional areas, fre-

quently via ERP. EC transactions are closely related to operational CRM.

Analytical CRM. Analytical CRM involves the capture, storage, extraction, processing, interpretation, and reporting of customerdata to a user. Then, these data can be analyzed as needed. E-commerce can be closely related to analytical CRM. For example,

personalization of data required for one-to-one advertisement, a part of CRM, is done with EC tools.

Collaborative CRM. Collaborative CRM deals with all the necessary communication, coordination, and collaboration betweenvendors and customers. E-commerce tools, such as corporate portals, are very useful in supporting this type of CRM.

Online File W1.6 E-Commerce and CRM


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ONLINE FILE W1.7

THE INTERNET AND THE INTRANET SHORTENTIME-TO-MARKET FOR NEW PRODUCTSAND SERVICESThe Federal Drug Administration (FDA) must be extremely

careful in approving new drugs. However, the FDA is under

public pressure to approve new drugs quickly, especially

those for cancer and HIV. The problem is that to ensure qual-

ity, the FDA requires companies to conduct extensive

research and clinical testing. The development programs for

such research and testing require 300,000 to 500,000 pages

of documentation for each new drug. The subsequent results

and analyses are reported on 100,000 to 200,000 additional

pages. These pages are then reviewed by the FDA prior to

approval of a new drug. Manual processing of this informa-

tion significantly slows the work of the FDA, so that the total

approval process takes 6 to 10 years.

A software program offered a computerized solution.The software used a network-distributed document-

processing system that enabled the pharmaceutical company

to scan all related documents into a database. The docu-

ments were indexed and full-text search and retrieval

software was attached to the system. Using keywords,

corporate employees could search the database via their

companys intranet. The database was also accessible, via

the Internet, to FDA employees, who no longer had to spend

hours looking for a specific piece of data. Information could

be processed or printed at the users desktop computer.

These functions enabled the U.S. government to offer an

electronic submission and online review process for approval

of new drugs (fda.gov/cder).

This system helped not only the FDA but also the com-

panies researchers, who suddenly had every piece of required

information at their fingertips. Remote corporate and busi-

ness partners also could access the system. The overall result

was that the time-to-market of a new drug could be reduced

by up to a year. Each week saved translates into the saving

of many lives and also yields up to $1 million in profits. The

system also reduced the time it took to patent a new drug.

An example of an interesting use of this technology is

the case of ISIS Pharmaceuticals, Inc. (isispharm.com), which

developed an extranet-based system similar to the one

described here. The company uses DVDs to submit reports to

the FDA and opens its intranet to FDA personnel. This step

alone could save 6 to 12 months from the average 15-monthreview time. Simply by submitting an FDA report electroni-

cally, the company can save 1 month of review time. To cut

time even further, SmithKline Beecham Corporation is using

electronic publishing and hypertext links to enable FDA

reviewers to quickly navigate its submissions.

Entelos (entelos.com), a biotechnology firm, uses com-

puter software to simulate the behavior of the human body

and predict its response to various drugs. Pharmaceutical

companies approach Entelos with ideas for new drugs,

and Entelos simulates the drugs effect on hundreds of

patients who take the medication in hundreds of different

circumstances. Each trial can involve up to 13,000 simula-

tions. To handle this processing load, Entelos uses grid

computing to use processing power from 145 different

machines spread across its offices. Simulations that used

to take 2 years on a mainframe now take 1 month on the

grid (Metz 2003).The sports apparel company Fila uses data management

and collaboration software to reduce time-to-market and

product costs while improving product quality and informa-

tion exchange. The solution enabled Fila to better manage

and control access to product data and images throughout its

supply chain. The software also helps Fila gain greater trans-

parency and collaboration in its product development

process, a higher level of product analysis, and a better focus

on delivering the right Fila product to the consumer. For

further details, see Anonymous (2005).

Caterpillar, Inc., connects its engineering and manufac-

turing divisions with its suppliers, customers, and overseas

factories via an extranet-based global collaboration system

(Chapters 6 and 7). Requests for improved design flow are

available electronically to engineering and other related

departments. Cycle time is 70 percent shorter, and there are

fewer delays. General Motors and other car manufacturers

are using EC tools to cut time-to-market by more than

65 percent.

Finally, the Denver Museum of Nature and Science

reduced delivery time of requested information and images

from days to minutes using several EC tools.

Questions

1. How does the computerized drug application system

facilitate collaboration?

2. How are cycle time and time-to-market reduced in eachof these applications?


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REFERENCES FOR ONLINE FILE W1.7Anonymous. FILA Selects PTC Retail. Time-Compression

Magazine, Nov.Dec. 2005.Folio. SmithKline Beecham Streamlines Its Drug Approval

Process. folio.de/aktuell/IN300797.htm (no longeravailable online).

Metz, C. Grid Computing: Case StudyEntelos. PCMagazine, January 1, 2003.

Online File W1.8 Benefits of EC

Benefits to Organizations

ECs benefits to organizations are as follows.

Global Reach. EC expands the marketplace to national and international markets. With minimal capital outlay, a company can

easily and quickly locate the best suppliers, more customers, and the most suitable business partners worldwide. Expanding thebase of customers and suppliers enables organizations to buy cheaper and sell more.

Cost Reduction. EC decreases the cost of creating, processing, distributing, storing, and retrieving paper-based information.High printing and mailing costs are lowered or eliminated. Examples of potential cost reductions are provided in Online File W1.9.

Supply-Chain Improvements. Supply-chain inefficiencies, such as excessive inventories and delivery delays, can be minimizedwith EC. For example, by building autos to order instead of for dealers showrooms, the automotive industry is expecting to save

tens of billions of dollars annually just from inventory reduction.

Extended Hours: 24/7/365. The business is always open on the Web, with no overtime or other extra costs.

Customization. Pull-type production (build-to-order) allows for inexpensive customization of products and services andprovides a competitive advantage for companies that implement this strategy.

New Business Models. EC allows for many innovative business models that provide strategic advantages and/or increaseprofits. Combining group purchasing (Chapter 5) with reverse auctions is one example of an innovative business model.

Vendors Specialization. EC allows for a high degree of specialization that is not economically feasible in the physical world.For example, a store that sells only dog toys (dogtoys.com) can operate in cyberspace, but in the physical world such a store

would not have enough customers.

Rapid Time-to-Market. EC reduces the time between the inception of an idea and its commercialization due to improvedcommunication and collaboration.

Lower Communication Costs. EC lowers telecommunication coststhe Internet is much cheaper than VANs.

Efficient Procurement. EC enables efficient e-procurement that can reduce administrative costs by 80 percent or more, reducepurchase prices by 5 to 15 percent, and reduce cycle time by more than 50 percent.

Improved Customer Relations. EC enables companies to interact more closely with customers, even if through intermediaries. Thisallows for personalization of communication, products, and services, which promotes better CRM and increases customer loyalty.

Up-to-Date Company Material. Any material on the Web, such as prices in catalogs, can be correct up to the minute. Companyinformation can always be current.

No City Business Permits and Fees. Online companies that are not registered businesses with employees do not need anypermits to operate, nor do they pay license fees. If the business is registered, city fees and licenses apply.

Other Benefits. Other benefits include improved corporate image, improved customer service, ease in finding new businesspartners, simplified processes, increased productivity, reduced paperwork, increased access to information, reduced transporta-

tion costs, and increased operation and trading flexibility.

Benefits to Individuals (Consumers)

The benefits of EC to individuals are as follows.

Ubiquity. EC allows consumers to shop or perform other transactions year round, 24 hours a day, from almost any location.

More Products and Services. EC provides consumers with more choices; they can select from many vendors and from more products.


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Customized Products and Services. Dell customizes computers and sells them at competitive prices. Customers can get anincreased number of products (from shoes to dolls to cars) and services just the way they want them.

Cheaper Products and Services. EC frequently provides consumers with less-expensive products and services by allowing themto shop in many places and conduct quick comparisons.

Instant Delivery. In the cases of digitized products, EC allows for almost instant delivery.

Information Availability. Consumers can locate relevant and detailed product information in seconds rather than days orweeks. Also, multimedia support is cheaper and better.

Participation in Auctions. EC makes it possible for consumers to participate in virtual auctions. These allow sellers to sellthings quickly, and buyers can locate collectors items and bargains.

Electronic Communities. EC allows customers to interact with other customers in electronic communities (Chapter 17) andexchange ideas as well as compare experiences.

No Sales Tax. In many countries, online business is exempt from sales taxes.

Benefits to Society

The benefits of EC to society are as follows.

Telecommuting. More individuals can work at home and do less traveling for work or shopping, resulting in less traffic on theroads and reduced air pollution.

Higher Standard of Living. Some merchandise can be sold at lower prices, allowing less-affluent people to buy more andincrease their standard of living.

Homeland Security. EC technologies facilitate homeland security by improving communication, coordination, informationinterpretation, and more, as demonstrated in Insights and Additions 1.2.

Hope for the Poor. Because of EC, people in developing countries and rural areas are now able to enjoy products and servicesthat were unavailable in the past. These include opportunities to learn a skilled profession or earn a college degree.

Availability of Public Services. Public services, such as health care, education, and distribution of government social services,can be done at a reduced cost and/or improved quality. For example, EC provides rural doctors and nurses access to information

and technologies with which they can better treat their patients.

ONLINE FILE W1.9

CUTTING ORGANIZATIONS COSTS WITH ECThe following are examples of potential cost reductions due

to the use of EC:

It costs a bank $1.08 to perform a simple teller transac-

tion at a branch. On the Web, the same transaction costs

between $0.02 and $0.10.

The cost of issuing and processing an airline ticket on the

Web is $1. With a physical system the same transaction

costs $8.

It costs $70 to arrange an average medical appointment,

including lab work, over the phone (counting the time of

the employee involved), but only $10 on the Internet.

Each transaction to process one order of appliances and

other high-cost items costs a brick-and-mortar retailer

$12 to $20. Selling over the Internet reduces the cost to $2.

It costs between $3 and $15 for a vendor to handle a

customer-service call. Letting the customers do it by

themselves (e.g., track orders using automatic e-mail

reply, use FAQs to answer routine inquiries) reduces thecost to $1 per inquiry.

Procuring a sales order in large companies can cost

between $100 and $140 in administrative costs per order.

In e-procurement, the cost ranges between $7 and $10.

The administrative cost to send a bill (invoice) is $1.60. This

amount can be cut in half if bills are sent electronically.

It costs the U.S. government $0.43 to issue a paper check

versus $0.02 to issue the same payment electronically.

When conducting electronic bidding, item cost can be

5 to 15 percent lower than in a manual bidding system.


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REFERENCES FOR ONLINE FILE W1.9Internet news services, various news items, 19992003.

Online File W1.10 Basic Resources for E-Commerce

The following are representative sources of information on EC:

Vendors, News, EC statistics and More

wikipedia.org/wiki/e-commerce

cio.com/research/ec/and searchcio.techtarget.com

electronicmarkets.org

ecommercetimes.com

ecommerce.internet.com

reuters.com/ecommerce

forrester.com

Conferences

Many conferences are dedicated to e-commerce. Well-known conferences are:

The Annual Bled Conference (bledconference.org)

The Annual Conference of ICEC (see icec.net)

The Congress on the Management of E-Business (eworldcongress.smu.ca)

IEEE Annual Conference on E-Commerce (ece.uci.edu/cec07)

ACM Conference on Electronic Commerce (stiet.si.umich.edu/ec07)

Journals

Electronic Commerce Research (jecr.com)International Journal of Electronic Commerce (gvsu.edu/ssb/ijec)

Journal of Organizational Computing and Electronic Commerce (leaonline.com/loi/joce)

Electronic Markets Journal (electronicmarkets.org)

Journal of Electronic Commerce Research (online csul6.edu/business/ijec)

Journal of Electronic Commerce in Organization (ISSN: 15392937)

International Journal of Web Services Research (ISSN: 153983062)

International Journal of E-Business Research (ISSN: 15481131)

International Journal of Electronic Government Research (ISSN: 15483886)

Journal of Cases on Electronic Commerce (ISSN: 15480623)

turban online w1

Documents