DECISION SCIENCE GUIDE

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Critical Thinking Questions

  1. What kinds of issues should a firm consider before implementing an e-procurement system?
  2. Why would a manufacturer be reluctant to give certain suppliers access to its production schedules?

Decision Sciences On the Web

Industry Week magazine writes about developments in value-chain (supply-chain) management on a special section of its Web site (http://www.iwvaluechain.com/). Visit the site to find out how manufacturers are using information technology to squeeze more efficiency from their supply-chain partnerships.

  1. Read one or two of the latest headline stories. What are these companies doing to improve supply-chain management?
  2. Read the feature article "Think Before You Link." What pitfalls have companies encountered when implementing supply-chain management systems?

E-Business Case in Point: Eaton

  1. What effect is Eaton's e-commerce strategy likely to have on the inventory levels of its distributors?
  2. Should Aeroquip let its distributors and suppliers view inventory levels of raw materials and work-in-process as well as finished goods?

E-Business Case in Point: Specialized Bike Components

The S-Store is an unusual e-business because it's located on the Specialized Bike Components site (http://www.specializedbikes.com), with majority ownership and revenue sharing by the manufacturer's 1,100-plus U.S. bicycle dealers. Specialized, based in California, makes road and mountain bikes and accessories and distributes these products through independent bicycle dealers. By establishing the S-Store, Specialized aimed to cement relations with its dealers while allowing Web-minded consumers to buy the firm's products online.

On the S-Store site, consumers can order Specialized products, locate nearby dealers, find out about bicycle racing, and read detailed product information. Dealers can visit their part of the site, scroll through the online catalogue, and place wholesale orders for Specialized products.

Behind the scenes, Specialized uses supply-chain management software from Oracle (http://www.oracle.com) to speed dealer ordering, streamline order processing and fulfillment, and notify dealers when ordered items are not in stock. Preparing for the launch of the S-Store, Specialized also had to designate employees to handle online customer service, returns, and marketing. Since the S-Store opened in November 1999, it has received 2.7 million hits per month-with one in five consumer visitors making a purchase.

  1. Why would Specialized allow its dealers to share S-Store ownership and revenues?
  2. What choices would Specialized want to offer when notifying dealers that ordered items are out of stock?

Sources: Steve Hamm, "Oracle: Why It's Cool Again," Business Week, May 8, 2000, 114-126; Eric Ahrendt, "Dream Machines," Profit, May 2000, http://www.oracle.com/oramag/profit/00-May/p20bike.html.

 

E-Business and Decision Science

E-Business Case in Point: Hewlett-Packard

Many of Hewlett-Packard's inkjet printers were available with different features and options. Customers liked the wide range of choices, but it complicated the company's efforts to effectively forecast demand and manage inventory. Then Hewlett-Packard developed a set of algorithms covering the interrelationships among inventory costs, pricing, demand uncertainty, supply uncertainty, and related factors. These algorithms, accessed via the company's intranet, help product designers mathematically examine different product variations and their impact on supply-chain requirements.

Using the Web-based tools, Hewlett-Packard designers have developed new types of printers specifically designed to be enhanced with additional features and options further downstream in the value chain. This means the company can meet ever-changing customer needs without maintaining unnecessarily high inventory levels or producing too many unpopular models. "Reducing future uncertainty by investing in the design allows us to respond to market fluctuations quickly enough without excessive inventory cost," says the product manager for Deskjet printers.

  1. Why would Hewlett-Packard want to add features downstream in the value chain, rather than at the factory?
  2. Why are both demand and supply uncertainty important factors for the company to consider during the design phase of product development?

Source: Tim Stevens, "Designs in Sync," Industry Week's The Value Chain, June 12, 2000, http://www.iwvaluechain.com/features/articles.asp?articleid=842

 

Current events news summaries:

Larger companies used to insist that suppliers use electronic data interchange (EDI) to exchange information about orders and shipments. Internet technology is now helping businesses of all sizes manage supply-chain activities. What are the advantages?

http://www.iwvaluechain.com/Columns/Columns.asp?ColumnId=641

Home delivery of ordered goods is a key logistical element for e-businesses. How is HomeGrocer.com using delivery as a competitive tool?

http://www.time.com/time/digital/magazine/articles/0,4753,50333,00.html

Rare book dealers that want to sell on the Internet can use the Alibris Web site as an online catalogue and, for an additional fee, have Alibris manage their inventory. What are the benefits and limitations?

http://www.time.com/time/digital/magazine/articles/0,4753,47491,00.html


E-Business and Decision Science

E-Business Case in Point: Petopia

Order fulfillment is a critical element in e-commerce, yet major sites such as Toysrus.com and Macy's.com had major difficulties during last year's year-end holiday shopping rush. Both sites allowed customers to continue ordering products that were not in stock. This got customers steamed and resulted in a hefty fine from the U.S. Federal Trade Commission. Smaller e-businesses have had trouble, as well.

Managers of the pet supply site Petopia (http://www.petopia.com) were initially elated when 160,000 customers flooded the site with ordersóquadruple the level it had expected. However, the orders overwhelmed Petopia's distribution center, leading to delays in delivery and in answering customer inquiries about shipments. Petopia immediately apologized: "We were upfront with our customers about botching things," said a company official. As the company caught up on fulfillment, it sent every customer a free music CD for their pets. The apology and the gift helped repair relations with customers, leading 70% of Petopia's customers to place additional orders. Petopia didn't take any chances with the 2000 holiday shopping season, however. It invested $10 million to install updated customer-service software capable of handling twice as many customer orders and communications as in 1999.

  1. If the new system helps Petopia more easily track and plan for customer orders, what is the likely effect on the company's suppliers?
  2. How would you expect Petopia's new system to change the movement of goods through the company's supply chainóand why?

Source: Jeannette Brown, "Service, Please," Business Week, October 23, 2000, EB48-EB50.

Current events news summaries:

The Department of Defense is modernizing its procurement system by hiring Accenture (formerly Andersen Consulting) to develop a computerized system for buying and tracking the warehousing and delivery of 4 million non-weapon items such as office equipment and uniforms. What are the benefits?
http://www.washingtonpost.com/wp-dyn/articles/A60560-2000Nov26.html

Timely fulfillment of orders is a key issue for e-tailers this holiday shopping season. How are online stores preparing for this critical selling season?
http://www.cnn.com/2000/TECH/computing/11/21/etail.fulfill.idg/

Decision-science technology jargon changes quickly. Here's a primer to some of the latest terminology. What is a vertical marketplace?
http://www.cnn.com/2000/TECH/computing/09/15/it.lingo.guide.idg/

 


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