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Essential components of e-commerce education: Supply chain and logistics management

Lian Ee
School of Information Systems
Curtin University of Technology



Introduction

The trend to offer goods and services over the Web or Internet has made the greatest change to businesses throughout the world. Most businesses want to transform their Web site into a profit centre. This is because of the many success stories about the Internet and e-commerce. Most people would have heard of amazon.com for purchase of books, or Dell Computer Corp for computers, or eTOYS for toys.

Last year, over $750 million US airline tickets were sold over the Web and the brokerage industry now manages $200 billion US worth of assets in online account (Gartner Group, 2000). There is a scramble by organisations to put their business on the Web. Fifty six percent (56%) of US companies hope to sell their products online in 2000 up from 24% in 1998 (NUA Internet survey, 2000). Online sale in 1999 reached an approximate $176.4 US billion (Internet Economy Indicators). Consumers and business will place more than 2 billion orders over the Internet in 2000 (Forester Research).

Australian businesses have already embraced the use of Internet in banks, financial institutions, automotive industry, executive recruitment, and travel industry and share broking. E-marketing is expected to grow between 70 to 110% each year between 1999 and 2003 (Gartner group, 2000). Gartner group also forecast that business electronic transaction value in Australia would grow from $12 US billion in 2000 to $299 US billion by 2004.

E-commerce education

The demand for e-commerce (EC) education is insatiable at the moment because of the Internet. Many institutions throughout the Asian region and Australia are jumping on the bandwagon to offer e-commerce degrees both Bachelors and Masters. In Western Australian there are large number of students in programs offered by Curtin University and Edith Cowan, both locally and overseas (Asian regions).

The test of a good program is when the graduates go out to work in the real world. Most e-commerce programs teach students the technology of the Internet, how to build web pages, how to attract uses to their site, how to market their product, how to reduce cost, how to make transactions, how to link the back end technology to the front end and how to secure payment (Powers, 1999). All these aspect of e-commerce education could easily be duplicated and improved on and they give no competitive advantage to a student applying for a job.

Students with the extra business knowledge of order fulfilment, logistics and supply chain management will be able to discriminate and market their knowledge and skills better and have a competitive edge over the others. Programs with these essential components will ultimately survive. While other programs, lacking the essential components of orders fulfilment, logistics and supply chain management of goods and services may fizzle out.

EC industry recognises the importance of logistics and supply chain management. Business analysts regard logistics and distribution systems as crucial to the success of any e-commerce operations. Wishlist, a large e-tailer, has recruited the previous operation manager of Coles Myer Logistics to run its operation (Utting, 2000).

Students doing EC with the School of Information Systems at Curtin Business School have the option of doing units in logistics and supply chain management.

Definition of e-commerce and e-business

Electronic commerce (EC) is an emerging concept that describes the process of buying and selling or exchange of products, services and information via computer network and Internet. The term e-commerce is defined by some as transactions conducted through the Internet between business partners. Therefore, the term electronic commerce seems to be fairly narrow to some people. E-Business on the other hand is a more accurate term to use. It refers to a broader definition of e-commerce, not just buying and selling but also servicing customers and collaborating with business partners, and conducting electronic transactions within an organisation (Turban et al, 2000). E-business is about the transformation of key business processes through the use of Internet technologies. It is about supply chain management, cycle time, speed, and globalisation, enhance productivity, reaching new customers and sharing knowledge across institutions. This paper takes the broader view of electronic commerce, which is e-business.

Web commerce involves end to end business processes. Companies using Web or e-commerce need to place as much focus on the back end process as well as the front end process (Roberts, 2000). Unfortunately physical products cannot be transmitted electronically they depend on good logistics and supply chain processes to expedite product movement. E-logistics, supply chain and logistics management using electronic means for communication, can provide both the front end and the back end logistics support.

Supply chain and logistics management

An essential component of e-commerce (EC) education is in the area of logistics and supply chain management. Integrated supply chain management is becoming recognised as a core competitive strategy. As organisations continue to seek to provide their products and services to customers faster, cheaper, and better than the competition, managers have come to realise that they cannot do it alone. They must work and cooperate with other organisations in their supply chain to succeed.

Supply chain encompasses all activities associated with the flow of goods and services, from raw material stage (extraction) through to the end user, as well as associated information flow both up and down the supply chain. The activities in logistics and supply chain management include transportation, information systems, sourcing and procurement, production scheduling, manufacturing, order processing, inventory, material handling, packaging, distribution, forecasting, customer service, marketing and disposal of packaging.

Many people take logistics and supply chain for granted and they notice it only when it is absent or lacking. In e-commerce customers get very dissatisfied if an order is not fulfilled due to bad logistics management. Good logistics increases the standard of living in the developed world. Goods and services are easily available in Australia, USA and some developed European countries where the infrastructure for transportation and communication are more sophisticated. Transportation in some less developed countries still depends on human strength, handcart, bicycles and even animals for pulling carts. Here the distribution of products is slow and the order cycle time is long through the supply chain.

A logistics system start with the order, which has to be communicated through the whole supply chain and go through the logistics processes until the final physical delivery of the goods to the satisfaction of consumer. The aim of the logistics and supply chain management is to reduce order cycle time, reduce cost, and expedite the fulfilment process to the satisfaction of the customer. The task of the logistician is to reduce inventory and add value to the product and services wherever possible.

Supply chain can be defined as a strategic concept that involves understanding and managing the sequence of activities from supplier to customer that add value to the product and supply chain pipeline (Figure 1).

Figure 1

Figure 1: Logistics supply chain pipeline (after Coyle et al, 1996)

The study of supply chain management consists of three main components. They are flow of information and finances, flow of products, materials and service, and relationship and alliances within and among supply chain partners (Handfield and Nichols, 1999). The supply chain for a product may arise from a system of pipelines. For example, the final product of a car is a result of many supply chain pipelines. The tyres come from one part of the pipeline that source raw material (rubber) from different countries and metal rims for the tyres from another pipeline. The car electrical systems, machines, body chassis all come from different parts of the pipeline (see Figure 2).

Figure 2

Figure 2: Systems of pipeline

The flows of information and finances are shown in the integrated supply chain model (Figure 3) as thin dark arrows. The flows of products and materials are shown as the thick light arrows. Figure 3 is an adaptation from (Handfield and Nichols Jr., 1999). Information must be available, accurate, and timely and must flow freely between the supply chain members. Information is necessary to aids members in good and speedy decision making. Supply chain management espouses trust and good relationship between supply chain members. This promotes the establishment of alliances and relationship through the supply chain.

Figure 3

Figure 3: Integrated supply chain model

Customer service in logistics

A very important component of logistics and supply chain management is customer service. It is now the corporate hype to talk about customer relation management (CRM). Customer service is paramount in supply chain business. Every logistics activity is directed towards good customer service, however there should be a trade off between profit and customer service. Many customers using the Internet are unhappy about the service because the services they get do not meet their expectation. The sad reality is that despite the entire customer ordering and selection options the Internet provides, physical products cannot be shipped via the net (Yeremeyev, 2000). This is where the fulfilment business starts to play an important role in the new and demanding distribution environment.

Enslow in 1999 identified the fallacies of Web commerce fulfilment in his paper for Gartner Group. His seven fallacies were: '#1. We 're selling over the Web, so we must be making money over the Web, #2 Our differentiation will come from our front end processes, #3. We can always do back end integration later, #4 Our logistics operations can handle Web commerce fulfilment, #5 Our existing suppliers will support Web commerce, #6 Our order management systems can handle Web commerce and #7 We now sell effectively to anyone around the globe'.

All the fallacies about Web commerce fulfilment can be handled using current supply chain management concepts and E-logistics. Proper logistics and supply chain strategic planning is necessary to ensure success when introducing Web commerce for an organisation.

Inter-organisational information system

With supply chain working hand in hand with Web Commerce, for the new Internet economy the information technology professionals have to change their mind set. They have to think about proper logistics and supply chain support when they create Web sites. Putting a business on the Web is the easy part but supporting Web customer expectation needs business rethinking. Free sharing of accurate and timely information across the supply chain is a key factor for success, on several levels. The basic tools of communication are essential to the development of successful supply chain relationship. The sharing of information between and among several members of the supply chain requires a great deal of care and sophistication.

There is much good application software that can help managers to make speedy and effective decisions. Several reputable software houses provide software that can link enterprise resources with the Web or Internet. Many ERPs, enterprise resource planning software are being used in the e-commerce business so students need familiarity with them. Supply chain and e-commerce should be systemic in any information systems course to make it relevant to business in the current climate.

Conclusion

There is definitely a need for future managers, and entrepreneurs to study electronic commerce to cope with the new economy. Many higher institutions will jump on the bandwagon, or have already done so, to offer degrees in EC. Students have to shop around before committing one. The discriminating factor is the content of the course. Those that incorporate logistics and supply chain management and inter-organisational information systems will survive.

References

Coyle, J. J., Bardi, E. J. and Langley, C. J. Jr (1996). The Management of Business Logistics, 6 ed, West Publishing Company. New York.

Enslow, B., (2000). Internet Fulfilment: The Supply Chain Frontier. [viewed 14 Sep 2000] http://www.aset.com/ascet2d/white_paper/wp_3_enslow.html

Handfield, R. B. and Nichols, E. L. Jr (1999). Introduction to Supply Chain Management. Prentice Hall, New Jersey 07458, USA.

Huish, P. (2000). Web radically changing access to plant information. Material Handling and Distribution, March/April 2000, Sydney, Australia.

Leeuwen, H. V. (2000). The big four vie to become business-to-business links. The Financial Review, Wednesday 8 March.

Macquet, C. (2000). 220 successful supply chain cases. Material Handling and Distribution, March/April 2000, Sydney, Australia.

Messmer, E. (2000). Supply chain software meets e-commerce. Computerworld, June.

O'Byrne, R. (2000). Innovation the key as demand skyrockets. Material Handling and Distribution, March/April 2000, Sydney, Australia.

Powers, M. (1999). How to start a business website. A Third Millennium Press Book, Avon Books, New York.

Roberts, J. (2000). Getting organized for E-business. Gartner Column, April 2000, asiapac@gartner.com

Turban, E., Lee, J., King, D and Chung, H. M. (2000). Electronic Commerce: A Management Perspective. Prentice Hall, NJ 07458, USA.

Utting, D. (2000). Grim future tipped for some e-tailers. The West Australian, Thursday 2 May.

Yeremeyev, A. (2000). The impact of this 'e-stuff', on our 'f' business. Material Handling and Distribution, Jan/Feb, 2000, Sydney, Australia.

Please cite as: Ee, L. (2001). Essential components of e-commerce education: Supply chain and logistics management. In A. Herrmann and M. M. Kulski (Eds), Expanding Horizons in Teaching and Learning. Proceedings of the 10th Annual Teaching Learning Forum, 7-9 February 2001. Perth: Curtin University of Technology. http://lsn.curtin.edu.au/tlf/tlf2001/ee.html


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