The Impact Of Ebusiness On Firms

Published Date: 02 Nov 2017

Ans: The impact of E-Business on firms and supply chain are as follows:

Impact of E-Business on firms

To assess the impact of e-business on firms, I will concentrate on the important sectors which are the Retail industry, Banking industry and the Travel and tourism industry.

Retail sector

Retailing is one of the most important industry sectors in the world. In 2004 the retail sector, the industry comprised of approximately 17 million firms that employed people. In the retail sector, e-business has had great impact on the value chain. It has made a great difference in terms of shelf life of products and stock rotation time. It also highlighted the relevance of inter-business exchanges.

In fact, retailers, beside their relationship with suppliers and consumers, have significant impact on intercompany exchanges through centre of distribution. In essence, retail companies will want to rationalize and reduce costs of supply and management of the supply chain, starting with purchasing cost. They will also want to differentiate their own offers from the competitors, exploiting customer relation management techniques as to communication, sales and customers' loyalty.

The UK figures released by the Office of National Statistics in February 2009 showed that internet retail sales, as a percentage of total retail sales, rose by 13.2% (average weekly value of £167 million). The study showed that the e-business retail market rose by 17% in July compared to July 2008, this increase has been driven by the clothing, accessories and electrical goods online retail sales.

Banking Industry

The introduction of E-business in the banking system has had a significant impact on banks operating system and their operations within physical branches. The most important form of e-business used by banks is the online banking which has help cut down cost. E-business has enabled banks to redefine their boundaries and also gained competitive advantage through it.

Internet banking is nowadays supported by advanced solutions which enable most everyday banking services to be conducted online. Studies also shows productivity growth rose in the EU from year 2000 onwards, while average working hours per employee has decreased subsequently, this study tells use e-business investment is largely substituting labour particularly in retail banking.

Travel and Tourism Industry

In the last few years travel pattern has changed. The travel sector is so large that even a small share of it produces a major online market. Taking the internet for example, it has had a very high impact on the air travel industry.

It can provide a direct connection between airlines and customers without the need to use travel agents or Computer Reservation Systems (CRS), thereby leading to cost savings in the distribution of air tickets the internet has become very extensive in the travel industries and its impact has been particularly significant on the distribution channel for air travels and the use of the Internet for searching and purchasing airline tickets has become common in travel markets.

The introduction of e-business to the airline industry has enabled most travelers to bypass travel agents altogether, with most agreeing that the most current air market will shift form traditional travel agents to internet based agents like. Recent studies show that firms that have reinforced their e-business strategy in the airline industry have had an increase in sales volume for airlines' website.

The internet has contributed strongly to the growth of most budget airlines taking easy jet as an example. Easy jet has never used the travel agent network; they rely on the internet because all their flights are booked online by customers.

Impact on Supply Chain

A production supply chain refers to the flow of physical goods and associated information from the source to the consumer. Key supply chain activities include:

Production planning

Purchasing

Materials management

Distribution

Customer service

Sales forecasting

These processes are critical to the success of any operation whether they’re manufacturers, wholesalers, or service providers. Electronic business and the Internet are fundamentally changing the nature of supply chains, and redefining how consumers learn about, select, purchase, and use products and services. The result has been the emergence of new business-to business supply chains that are consumer-focused rather than product-focused. They also provide customized products and services.

E-business impacts supply chain management in a variety of keyways.

These include:

Cost efficiency: 

E-business allows transportation companies of all sizes to exchange cargo documents electronically over the Internet. E-business enables shippers, freight forwarders and trucking firms to streamline document handling without the monetary and time investment required by the traditional document delivery systems.

By using e-business, companies can reduce costs, improve data accuracy, streamline business processes, accelerate business cycles, and enhance customer service. Ocean carriers and their trading partners can exchange bill of lading instructions, freight invoices, container status messages, motor carrier shipment instructions, and other documents with increased accuracy and efficiency by eliminating the need to re-key or reformat documents. The only tools needed to take advantage of this solution are a personal computer and an Internet browser.

Changes in the distribution system:

E-business will give businesses more flexibility in managing the increasingly complex movement of products and information between businesses, their suppliers and customers. E-business will close the link between customers and distribution centers. Customers can manage the increasingly complex movement of products and information through the supply chain.

Customer orientation:

E-business is a vital link in the support of logistics and transportation services for both internal and external customers. E-business will help companies deliver better services to their customers, accelerate the growth of the e-business initiatives that are critical to their business, and lower their operating costs. Using the Internet for e-business will allow customers to access rate information, place delivery orders, track shipments and pay freight bills.

E-business makes it easier for customers to do business with companies: Anything that simplifies the process of arranging transportation services will help build companies' business and enhance shareholder value. By making more information available about the commercial side of companies, businesses will make their web site a place where customers will not only get detailed information about the services the company offers, but also where they can actually conduct business with the company.

Ultimately, web sites can provide a universal, self-service system for customers. Shippers can order any service and access the information they need to conduct business with transportation companies exclusively online. E-business functions are taking companies a substantial step forward by providing customers with a faster and easier way to do business with them.

Shipment tracking: 

E-business will allow users to establish an account and obtain real-time information about cargo shipments. They may also create and submit bills of lading, place a cargo order, analyze charges, submit a freight claim, and carry out many other functions.

In addition, e-business allows customers to track shipments down to the individual product and perform other supply chain management and decision support functions. The application uses encryption technology to secure business transactions.

Shipping notice: 

E-business can help automate the receiving process by electronically transmitting a packing list ahead of the shipment. It also allows companies to record the relevant details of each pallet, parcel, and item being shipped.

Freight auditing: 

This will ensure that each freight bill is efficiently reviewed for accuracy. The result is a greatly reduced risk of overpayment, and the elimination of countless hours of paperwork, or the need for a third-party auditing firm. By intercepting duplicate billings and incorrect charges, a significant percent of shipping costs will be recovered.

In addition, carrier comparison and assignment allows for instant access to a database containing the latest rates, discounts, and allowances for most major carriers, thus eliminating the need for unwieldy charts and tables.

Shipping Documentation and Labeling: 

There will be less need for manual intervention because standard bills of lading, shipping labels, and carrier manifests will be automatically produced; this includes even the specialized export documentation required for overseas shipments. Paperwork is significantly reduced and the shipping department will therefore be more efficient.

Online Shipping Inquiry: 

This gives instant shipping information access to anyone in the company, from any location. Parcel shipments can be tracked and proof of delivery quickly confirmed. A customer's transportation costs and performance can be analyzed, thus helping the customer negotiate rates and improve service.

Advanced E-Business & Supply Chain Management Enterprise

Ford Motor

Ford’s Tier 1 steel supply chain is a complex, multi-tier network comprised of Ford’s in-house procurement group, steel producers, and large and small contract manufacturer stampers. There are more than 1,200 participants across hundreds of companies in this network throughout North America and Europe. Ford depends on these companies to coordinate their activities to ensure that the carmaker’s assembly plants receive exact specified materials on precise schedules.

Ford's Business Challenge

To gain maximum control and cost savings in buying steel, Ford launched a centralized demand aggregation and remarketing program across its North American Tier 1 steel supply chain in 1995. Through this program, Ford combines the individual steel buys from its stampers and then negotiates larger orders with its steel suppliers. This gives Ford advantageous volume discounts. Ford then remarkets the steel to its stampers and manages all of the material, information and financial flows.

Ford has significantly grown the size and scope of this program each year. It currently procures more than $1 billion in steel annually, accounting for 2.5 million tons of steel and 2,600 unique parts and components. However, administrative inefficiencies have slowed critical information flows, such as financial dispute resolution.

The program’s burgeoning administration was highly inefficient for Ford’s in-house team and its supply network, limiting Ford’s future growth plans. The complex program involved more than 170 unique business processes administered via manual, paper-intensive workflows. Real-time data access and end-to-end visibility of key information was not available. These factors also limited Ford’s ability to easily review history and identify trends to make better strategic sourcing and material quality decisions.

Ford identified early in the development of e-Business that new, web-native technologies could provide a wide range of strategic advantages to an entire supply chain. The automaker viewed such a system as a critical component to streamlining and accelerating its steel procurement growth plans around the world, with other Ford Motor Company brands, and across other direct material supply networks.

In May 2000, Ford Motor Company selected New View to design and implement an New View Supply Network to provide secure, efficient, multi-enterprise connectivity and real time data visibility for Ford and its steel supply chain. The New View Supply Network features a single, integrated, hosted application that crosses the boundaries of enterprise and provides all participants of the supply chain with enhanced:

Visibility

Via a secure, web-based system, participants gain self-service, real-time data access and end-to-end visibility of the status of any business activity - anytime, from anywhere, with no costly IT requirements.

Collaboration

The Supply Network automates and integrates multi-enterprise workflow management for hundreds of business processes. Key e-enabled functions include demand aggregation, material specification communications, pricing management, and critical financial controls such as contract management and claims processing.

Control

The Supply Network also optimizes decision-making through information analytics, performance reports and data mining capabilities. Based on a comprehensive set of common standards and protocols in a single database, the New View Supply Network solution provides a strategic platform to rationalize material specifications and assess partner performance.

Ford's Successful Results

The first-ever system of its kind in the automotive industry, the New View Supply Network is a cornerstone of Ford's B-2-B strategy, enabling the automaker to lead important business process change throughout the steel industry.

Immediately following the system implementation in March 2001, Ford and its steel supply partners experienced significant efficiency benefits from the elimination of old, manual, paper-based systems, and the automation of more than 170 business processes.

By the end of 2001, Ford anticipates that its European and entire North American supply chain will be using the New View Supply Network daily, processing more than 1000 shipments a day. Ford plans to direct more than $1 billion of steel procurement through the system in its first year of use and to significantly grow volume the following year through program and geographic expansion.

While automating its steel procurement system yields important material and processing cost efficiencies, Ford recognizes that the New View Supply Network solution also gives the automaker an adaptable, web-based infrastructure to expand its demand aggregation/remarketing programs globally, to other brands, and to other direct materials.

Dell Computer

The world’s No.1 computer systems company, Dell, delivers desktops, notebooks, workstations, servers and storage products for virtually any computing need. Dell’s competitive advantage is its direct customer focus. Interacting with customers by telephone or via the Internet, Dell custom-builds each system and delivers it faster than the competition can match. Dell uses supply chain management software to reduce inventories, improve material management and enhance relationships with suppliers.

With manufacturing facilities and sales offices throughout North America, Europe, Asia and South America, Dell keeps its 34,400employees close to the customer, meeting their unique needs one at a time. Dell’s new OptiPlex manufacturing facility is so efficient that it can produce more than 20,000 custom-built computers per day-at prices that beat many of its competitors’ off-the-shelf models.

Dell’s customer-centered business model generated US $31.8 billion in revenues over the last four quarters of 2001, with about half of its sales generated online. Today, Dell purchases almost 90 percent of its direct material supplies online. When the company builds a computer, components that are only a few hours old are delivered from supplier hubs co-located near manufacturing plants. Dell's online supply management has also allowed the company to increase its collaboration with suppliers and customers.

"Because we work directly with customers, we have the ability to connect and understand what products will be required and when," says Chong. "We can start the development cycle much more quickly with our partners. Whether it's a new midnight grey flat panel LCD because customers do not like the old beige or whatever colour scheme, we can start to plan those components and share information with our suppliers many months in advance of the product actually coming to market."

The new system has also led to changes in the workplace. For example, former administrative and purchasing staff now fills new roles as supplier relationship managers. They can step in if a human touch is needed to resolve invoice discrepancies, ordering delays, or quality concerns.

Dell’s new Supply Chain system connects suppliers with Dell’s Supply Logistic Centers, providing a global view of the long and short term materials needs in each Dell factory. Every link in the chain is connected, so every participant is working with accurate, timely information. That means supply chain operations are based on facts rather than forecasts, reducing waste, improving efficiency and responding immediately to customer needs.

Challenges to E-Supply Chain

Security Problems

When a company considers starting or joining an electronic supply chain, one of its first concerns would be the security over the Internet. Most organizations are addressing this issue by using the security measures like encryption to protect its data so that members of the supply chain can only see information that is relevant to them.

The Changes of Business Process

While the electronic supply chain presents its share of technical challenges, including change, the real challenge is the impact automation will have on the ideal business process. An electronic supply chain brings major changes in the way companies communicate with each other, from planning to purchase to ordering.

For the success of an electronic supply chain, organizations must be willing to collaborate data with its suppliers and customers over the Internet, dynamically exchanging information regarding inventory, production schedules, forecasts and promotion plans. Most organizations are still reluctant to share information like production schedules, fearing that they will somehow fall into the hands of their competitors. Companies fear that sharing too much information will harm their businesses.

Weaker Supply chain links

Smaller companies may not like being forced to join an electronic supply chain. The smaller companies are pressurized to automate or lose their businesses by big customers. The decision to take on the costs and headaches of automation is not their own, and the benefits of automation may accrue largely to their business partners and not to the smaller companies.

Since supply chain is a coordinated activity, the whole chain would suffer if one link were slow to provide the right information at the right time. A supply chain is only as strong as its weakest link, and there will inevitably be smaller, weaker members of any such chain.

Sharing benefits

Sharing financial benefits is an important success factor for many companies. For example, Bergen Brunswig, a pharmaceutical and medical surgical supply distributor in California, signs performance-based contracts with its supply chain partners.

If Bergen Brunswig manages to reduce supply chain costs by, say, 10 percent, Bergen splits the cost savings with the partners. Although there are a lot of challenges to the implementation of an e-supply chain, the gains to be realized with the e-supply chain outweigh the concerns and hence more and more organizations are moving towards automating their supply chain.

Conclusion

To survive in the present global competitive environment, organizations need to show an increased awareness to customers' needs. Hence, there is an increased focus on a customer-centric business models and integration of supply chains to enable collaboration between the supply chain partners.

The future of e-business in the process industries is coming into focus. Most people working in the process industries are already feeling the ripple effects described above at some level, but want more specifics. They want to know more precisely what e-business means for them and how they can prepare for it. In short, the future of e-business in the process industries is coming into focus and it looks, in many ways, like e-business in any other industry. Information is created and distributed in real time.

The e-business future for the process industries suggests that leading e-business manufacturers will know the true capabilities of their manufacturing enterprises. They will have consistent and interoperable business processes and use software and Web-based services to support those improved internal business processes. Leading manufacturers will answer their customers’ demands for improved customer service by providing windows into their operations. These windows will help integrate shared business processes such as improved product planning and collaborative forecasting.

Finally, Internet-based exchanges will streamline pricing and distribution. Commodity products will move more quickly and efficiently through the distribution network while specialized, value-added products command premium prices and become increasingly customized to end-user needs. As in other industries, e-business in the process industries entails a transfer of power from vendor to their customer. Vendors who understand and embrace this shift stand to reap significant benefits.

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