E-commerce in the supply chain.pdf

Version: April 26, 2000 Sunil Chopra is the IBM Distinguished Professor of Operations Management and Jan Van Mieghem is an Associate Professor of Operations Management; both are at the Kellogg Graduate School of Management at Northwestern University. Both are co-authors of Managing Business Process Flows (Prentice Hall 1999). Professor Chopra also is the co-author of the new textbook Designing and Managing Supply Chain Flows, (to be published by Prentice Hall), which inspired this article. Copyright ? 2000. All rights reserved, contact s-chopra@. 1 WHICH E-BUSINESS IS RIGHT FOR YOUR SUPPLY CHAIN? by Sunil Chopra and Jan A. Van Mieghem (Forthcoming in Supply Chain Management Review) The Internet is revolutionizing the way companies conduct business. Or is it? We argue that the value of the Internet for a firm is strongly dependent on the firm’s industry and on the strategy it pursues. A survey of firms with an online presence displays wide disparities in performance. While Dell has successfully used the Internet to boost revenues and earnings, Amazon lost $585 million on revenues of $1.6 billion in 1999. Firms that fully exploit the revenue enhancements and cost reduction opportunities offered by the Internet and optimally integrate e-business with existing channels are likely to be the big winners in the Internet age. The Role of E-business in a Supply Chain E-business involves the execution of business transactions over the Internet. Companies conducting e- business perform some or all of the following activities over the Internet across the supply chain: ? Providing product and other information ? Negotiating prices and contracts ? Placing and receiving orders ? Tracking orders ? Filling and delivering orders ? Paying and receiving payment. All these activities have been conducted in the past using existing channels such as retail stores, sales people, and catalogs. For example, companies like Lands End and W.W. Grainger have used catalogs to provide p