Category Archives: The Role of Technology in Operations

E-tailers (Goods and Services)

E-tailers (Goods and Services)

E-tailers are firms that provide goods and services through the Internet. Pure e-tailers are those firms that conduct business exclusively through
the Internet. such as Amazon.corn or e-trade. These services typically have their counterparts in brick-and-mortar establishments. In many cases. however. e-tail operations are part of a larger organization that also has brick-and-mortar location . such as Barnes and Noble or Wall- lart. Some of these firms (often referred to as bricks and clicks or clicks and mortar) such as The Gap also provide access to their websites at their brick-and-mortar locations, thereby making the difference between the two even fuzzier. The major challenge for pure e-tailers that sell goods is to have the necessary infrastructure in place that can efficiently and quickly deliver the goods to its customers. The lack of such infrastructures was clearly evident during the 199Q holiday season when many irate customers who had made purchases through the Internet didn't receive delivery until
well into January 2000. Some e-tailers such as Amazon have elected to build their own infrastructures in terms of distribution centers. while others have elected to partner with established brick-and-mortar retail operations. E-tailers that offer services typically do not need the supply chain infrastructure required of those e-tailers that provide goods. This allow" for faster entry into the market. significantly less investment costs, and consequently a quicker return on investment. For example. the online
travel industry is one of the first e-service industries that is generating profits. A major challenge for pure e-tailers is the lack of tangibi lit). With a brick-and-mortar operation. the customer has a place to go for customer service or to voice a complaint. There is nothing more frustrating for a customer than to wait endlcsxly 011 the phone for customer service, and to have no other recourse, as is the C<l"C when dealing with pure c-tailcrx.

The Role of Technology in Operations l~l Equally important for e-tailers is how they can differentiate themselves in the marketplace. Without differentiation. these services offer only commodities, and therefore must
compete solely on price. This translates into very small profit margins, which cannot sustain growth.

Types of E-Services

Types of E-Services

E-services can be divided into several broad categories that are defined by the types of individuals and/or organizations that provide and use these services. Three of these major categories are referred to as (a) business-to-consumer (B2C). (b) consumer-to-consumer (C2C), and (c) business-to-business (B2B). In addition. there are also e-services that can involve a government agency, which are referred to as either government-to-business (G2B) or government-to-consumer (G2C), Within these broad categories. there are several different types of services that can be provided. We present five of these services within the e-service framework: (a) e-tailers, (b) customer support, (c) network providers, (d) information providers, and (e) application service providers, Some firms provide only one type of service. while others may provide several. For example, an e-tailer will often also provide customer support.

Electronic Data Interchange (EDI)

Electronic Data Interchange (EDI)

Electronic data interchange (EDI) can be defined as the electronic exchange of data in highly specified formats that takes place typically
between organizations. Some of the different types of transactions that can be done through EDI include (a) requests for quotations, (b) purchase orders. (c) acknowledgments and confirmations, (d) invoicing. and (e) payment . While the use of EDI is very fast and efficient. it does have everal shortcomings. First, companies must pain ta kingly link their operations to a specific EDl software and then synchronize protocols ( such as which version of the software they use) with the firms with which they want to conduct business. The format for EDI is very inflexible and often does
not adapt well to new applications. In addition, EDl moves data in batch mode and. consequent
then? i a time delay from hen the data are sent to when they are actually received

(although it is still much faster than non electronic methods). For example. at Boston Scientific's Customer Fulfillment Center in Quincy, Massachusetts, incoming EDI orders from customers are accumulated in batches and downloaded for processing every 30 minutes.
In addition. EDl transmissions typically take place through a third party such as General Electric Information Systems that is referred to as a value-added network (VAN). The cost of using a VAN can be quite expensive, often into the $1O,OOOsper month for medium
to large companies. . Because of the many shortcomings and high costs of EDl, the extranet will most likely
replace EDl in the future as a medium of communication. This is already happening with many firms that are now connected electronically with their suppliers through an extranet.
These suppliers now need only an extranet connection and a web browser in place of the. dedicated EDl software and connections to a VAN.

Extranet

Extranet

An extranet is defined as a network that allows specific external sources. be
they individuals or organizations, to have limited access to a firm. As an example. an extranet will link a company with an approved group of suppliers. Electronic data interchange (to be discussed shortly) is a good example of an extranet. Organizations use an extranet to share classified or highly sensitive data with their business partners. For example, through an extranet,
Procter & Gamble has access to Wal-Mart's sales and inventory data. By sharing such data. these two firms both benefit through lower costs of production and distribution as well as improved levels of customer service to the consumer.

Intranet

Intranet

An intranet is a network that operates only internally within an organization.
As such, only those individuals who work within the organization have access to its intranet. Quite often the intranet is used to communicate among employees and as means for management to disseminate information quickly. For example, both Wal-Mart and FedEx have intranets that provide employees at all locations with up-to-date information on new procedures, changes in company policies, performance measurements, and recognition
of outstanding employees. The FedEx intranet even includes its own television station that broadcasts company-related news 24 hours a day.