Group member: Li Yan, Tan Hee Liang, Weng Yongmei, Zhang Cheng

1. Construction and Management of a Supply Chain for an e-commerce website in Grocery IndustryProject for Group4 Group member: Li Yan, Tan Hee Liang, Weng Yongmei, Zhang Cheng

2. Design the Website and the supply chain • The nature of our website in the supply chain • We are a pure virtual EC website selling groceries • A retailer in the supply chain, we have suppliers upstream, corporate buyers & end users downstream • We hold our own inventory but we don’t have any physical store • Our mission is to provide customers with the most economical yet the widest choice of quality grocery items in a fast, cost-efficient and effective way • The nature of demand for our products • Customers decide what we carry • Grocery products are functional products • Stable, predictable demand and long life cycles • The supply chain for this functional products should be physically efficient and responsive to the market

3. Design the Website and the supply chain • Supplier analysis • Multiple choice, manufacturers and wholesalers to get the most original price • Continuous Replenishment Inventory control with us • IOIS to share inventory data, sales data, so we can cooperate very effectively and efficiently with each other. • With CRP and IOIS we also can simplify order process and reduce order process time • Customer analysis • Corporate buyers: B2B, regular and in relatively small number, most of the profit are from them • Individual end users: B2C • Customer strategy can be different

4. Design the Website and the supply chain • Service level • Delivery-to-doorstep service • Emergency delivery • Stock-out rate is about 1% • Goods return service • Design of the website (from management point of view) • Management department • Procurement and sourcing department • Order processing department • Technical support department • Information source department

5. Design the Website and the supply chain • Design of the website (from technology point of view) • Order-taking component • Goods returning component • Supplier component • Validation component • Billing and invoicing component • Electronic notification component • Managers component • Supply chain strategy • Automation, low inventory, effective products promotion, good customer service, free information sharing, 3rd party logistics

6. References • CS5262 IT and Supply Chain Management Notes • Robert B. Handfield, Ernest L. Nichols, Jr. Introduction to Supply Chain Management • Marshall L. Fisher What is the right supply chain for your product? In Harvard Business Review, March-April 1997 pp105-116 • Donald A. Hicks, Next Generation Supply Chain Strategic Planning Technology and Application, http://hicks.ASCET.com • H.E.Butt Grocery Company: A Leader in ECR Implementation

7. Overall Supplier Policy Multiple sourcing VS. Single Sourcing Advantages: 1.Avoid the risk of relying on a single supplier 2.Freedom to choose the best from all suppliers 3.Greater bargaining power Disadvantages: 1.Communication and relation is complicated 2.More training to suppliers needed 3.Not easy to keep the loyalty with the suppliers Local Sourcing mixed with Global Sourcing Advantages of local sourcing: 1.Better cooperation with suppliers 2.Easier delivery and less delivery cost 3.Emergency orders are easily met Advantages of global sourcing: 1.More variety of products to choose from 2.Lower prices generated from difference in labor cost and material cost between overseas market and local market Your Name Title & faculty

8. Requirements & Standards for suppliers • The Supplier Agreement • Inter-Organizational Information System (IOIS) • Lead-time Requirements • Suppliers’ ATP Record Required • Timely Delivery • Industry Knowledge and Integrity

9. Understanding Bullwhip Effect • Definition • Bad Effects: • excessive inventory investment • insufficient or excessive capacities • stock outs and backlogs(lost revenues) • poor customer service • Causes: • demand forecast update • order batches • price fluctuation • shortage gaming • Customer Retailer Supplier Manufacturer

10. Counteractions for Bullwhip Effect • Ordering Policies • CRP or VMI for products with little variation in demand • Normal ordering for products which vary greatly in demand • Emergency orders • Counteractions for Bullwhip Effect • Avoid multiple demand forecast updates by information sharing • Break the order batches • Stabilize the prices • Eliminating gaming in shortage situation

11. References • Robert B. Handfield and Ernest L. Nichols, Jr., Introduction to Supply Chain 1999 • Jayashankar M. Swaminathan and Norman M. Sadeh and Stephen F. Smith Effect of Sharing Capacity Information 1997 • Hau L. Lee and Paddy Padmanabhan and Seungjin Whang The Paralyzing Curse of the Bullwhip Effect in a Supply Chain 1995 • Troy J. Strader and Fu-Ren Lin and Michael J. Shaw Business-to-Business Electronic Commerce and Convergent Assembly Supply Chain 1999 • Efraim Truban, Jae Lee, David King and H. Michael Chung Electronic Commerce A Managerial Perspective 1999

12. Customer service • Customer Service Strategy • Customer Characteristics

13. Customer service • Customer Management • Service Strategy • Service Performance Index • Response Time • Service Level • Cycle Time • Inventory Turnover

14. Logistics process • Third-party logistics • Cross-docking • Warehouse management • Emergency Force

15. Information Management • Information System Architecture

16. Information Management • Information Management Strategy • Information Sharing • Mixed Decentralized and Centralized Information Management

17. References • Ronam McIvor, “A practical framework for understanding the outsourcing process”, Supply Chain Management: An International Journal”, Volume 5. Number1. 2000 pp.22-36 • Theodore P. Stank and Thomas F. Goldsby, “A framework for transportation decision making in an integrated supply chain”, Supply Chain Management: An International Journal”, Volume 5. Number2. 2000 pp.71-77 • Remkp I.van Hoek, “Postponement and the reconfiguration challenge for food supply chains”, Supply chain Management, Volume4. Number1. 1999. pp.18-34 • Tome Davis, “Effective Supply Chain Management”, Sloan Management Review/Summer 1993 • Jules Abend and Penny Gill, “Retail,E-Tail”, Supply chain management review, May/June 2000 • Dow Bauknight and Douglas J.Bade, “Fourth Party Logistics—Breakthrough Performance in supply chain outsourcing”, Supply Chain Management Review Global Supplement, Winter 1999.

18. Order fulfillment • Traditional retailer • Minimal differentiation of service level • Most orders are large and infrequent • Demand is stable and consistent • Delivery locations are concentrated and standard • e-tailer • More differentiation of service level • Most orders are small and frequent • Demand spikes are sporadic and consistent • Delivery locations are highly dispersed

19. Order fulfillment • Improve backend processes • infrastructure eg EDI, Internet, Extranet • integration of processes such as order fulfillment, warehouse management and distribution processes • Improve customer service • Availability to Promise • Realistic expectation • Get help from 3rd party logistics provided • Inventory management, warehouse management and fulfillment

20. Order fulfillment • Different distribution models • Own warehouse and distribution (Amazon.com ) • Own warehouse and 3rd party distribution (Toysmart.com ) • Pure-play. Supplier has own distribution network (Garden.com) • 3rd party logistics (Fogdog Sports) • Multi-channel (eWorldofSport.com)

21. Order fulfillment

22. References • Convenience is king,PricewaterhouseCoopers, 24 Jan 2000 • E-retailers learn delivery lesson,David Orenstein Computerworld, 03 Jan 2000 • Integration for online customer retention PricewaterhouseCoopers, 2000 • Internet retailers,Mark Emond,e-com advisor, vol.2 no.3, 2000 • Battle for holiday 2000 dot com retailers focus on order fulfillment to survive • Giftware Business News Watch, 2000 • The emergence of third-party logistics PricewaterhouseCoopers, 2000 • Stand (pick) and deliver,Constantine Von Hoffman CIO Magazine, 15 Apr 2000