Reynolds: E-Business: A Management Perspective

1. Reynolds: E-Business: A Management Perspective Chapter 9: Reshaping Business Processes

2. Completing this Chapter will enable you to: Understand the main principles underlying efficient operational processes, supply chains and networks and their relevance to an organization’s overall business performance Appreciate the ways in which such processes can be supported, developed and restructured by the internet Gain specific insights into the features of electronic procurement and trends in the sourcing of goods and services by firms Understand the growing importance of information sharing and collaboration as a means of driving supply chain integration Appreciate the characteristics and consequences of both outsourcing and off-shoring of business processes by firms. “Technology has an impact of some sort in almost every area of operations management.” (Slack et al., 2006). Learning Outcomes

3. E-business & operations management principles • Managing the conversion of various kinds of inputs into outputs referred to as operations management • process design: designing the layout of the process and the equipment and human resources required to deliver the process; • planning and control: ensuring that business processes run efficiently and effectively in practice; • maintenance and improvement: preventing or reducing failure and continually improving business processes. • Internet technologies can • improve the flexibility of product or service provision • increase the capacity for production or service provision; and/or • reduce costs per unit produced or provided.

4. Enterprise resource planning • Large enterprise software suites increasingly span entire organizations • The global ERP market is expected to grow at an estimated 7 per cent per annum through to 2011 • ‘ERP systems are believed by many to deliver significant cost savings and increased profit to organizations based on reduced procurement costs, smaller inventories, more effective sales strategies, lower administration costs and reduced direct and indirect labour costs.’ Grant et al., 2006 • Challenges in exploiting ERP • the rising cost of ERP ownership • the difficulties of use often associated with ERP systems • a proliferation of business process requirements and • the difficulties of integration with other systems

5. E-business in supply chains & networks • Concept of the ‘extended enterprise’ • Move towards more dynamic, network-based enterprises • Need for more agile, open organizational information systems • Three ways in which the Internet can transform supply chain or network processes: • e-commerce: in helping networks of supply chain partners identify and respond quickly to changing customer demand; • e-procurement: in allowing firms to procure materials and value-added services; and • e-collaboration: in facilitating the co-ordination of activities between the supply chain partners beyond transactions—most notably in terms of information.

6. E-procurement • ‘Much of the hype surrounding B2B e-commerce is based on a naïve view of corporate procurement.’ New et al., 2002 • Benefits of e-procurement • a greater simplification, standardization, and transparency of procurement procedures • a reduction in duplication of procurement functions and offices • greater transparency and accountability of decision-making; and the • potential benefits of scale from consolidation of procurement processes • Barriers to development of e-procurement • a lack of awareness of and capability to implement e-procurement technologies within the firm; • a lack of suppliers within a particular marketplace; and • a resistance to change from traditional purchasing methods.

7. E-marketplaces • ‘electronic inter-organizational platforms through which multiple buyers and suppliers conduct transactions and interact with each other’ Holzmuller and Schluchter, 2002 • Genuine cost benefits • easier ordering processes; • a more transparent supplier base; • the possibility of reduced inventories; alongside • product price reductions; and a • reduction in purchase order costs • Continuing challenges • Complex internal politics • Competition from other B2B initiatives • Heavy financial & human resource investments • Continued requirement to build trust or relational capital

8. E-collaboration • Broader mechanisms of e-collaboration. These comprise a wide range of activities: from information sharing and integration to decision, process, and resource sharing. • ‘While e-Commerce and e-Procurement have captured most of the business press headlines … the promise of e-Collaboration may be far greater.’ Johnson and Whang, 2002 • Kinds of inter-organizational information systems • Enterprise Resource Planning (ERP) systems • Web services based on open systems • Enterprise portals or enterprise information portals (EIP) • Electronic hubs

9. Outsourcing & offshoring • Outsourcing: the delegation of control over activities to third-party business service companies • Offshoring: the movement of activities to non-domestic geographical locations • E-business technologies have both increased the scale and changed the character of restructuring in sourcing • Off-shoring has tended to take advantage of fast-growing emerging markets in which labour costs in particular are lower • Restructuring decision have implications not just for tasks, but for employees within particular occupations • ‘It is estimated that some 20% of all people employed carry out the kinds of tasks and functions that could potentially be carried out from any geographical location owing to technological advances in ICTs and the increased tradability of services.’ OECD, 2006

10. Drivers of outsourcing & offshoring • Outsourcing • Network & software ubiquity • Business process re-engineering • Cost pressure • Regulatory change • Improvements in educational provision in emerging markets • Labour force mobility • Offshorability: vulnerable occupations where • there is intensive use of ICT • output can be traded or transmitted with the help of ICTs • work comprises highly codifiable information or ‘knowledge’ content • work does not necessarily require face-to-face contact.

11. Long case 9.1: Alibaba.com • 42mn SMEs in China • Historical procurement challenges for foreign firms (supplier identification, quality, reliability and IP issues) • Internet and state encouragement has led to real growth in B2B marketplaces • Alibaba.com founded 1999 by Jack Ma & floated on HKSE in 2007. Its online marketplaces have 40mn members in 240 countries • Achieved revenues of $438mn in 2008 (+38%) • Taobao.com (2003) Asia’s largest retail marketplace in terms of gross merchandise volume • Questions • Why do domestic e-marketplaces, such as Alibaba, appear to have been more successful in China than foreign entrants such as eBay? What are the implications of your conclusions for the growth of truly international e-marketplaces? • What should Alibaba.com do next?

12. Long Case 9.2: Outsourcing to India • ‘With Anglicized names and feigned Western accents, Indians handle credit card problems and troubleshoot computers, collect debts and conduct customer satisfaction surveys.’ Time Magazine, 16 October, 2007 • BPO and ICT outsourcing employs 350,000 in India • India leads the world in offshore outsourcing, worth c. $47.8bn in 2008 (x10 1998) • Fastest growing areas • Advanced data management (ADM) • Software development & R&D • Remote infrastructure management (RIM) • Questions • What will determine whether banking customers continue to prefer speaking to their branches on the phone (whether locally or off-shore) or will take advantage of e-business interaction mechanisms, such as email or SMS? • What do you think are the biggest challenges facing the leading Indian BP outsourcing firms in developing their businesses, and how might these be overcome?