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1 -COMMERCE O p e r a t i o n s M a n a g e m e n t 2nd Edition

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3 -COMMERCE O p e r a t i o n s M a n a g e m e n t 2nd Edition Marc J. Schniederjans University of Nebraska-Lincoln, USA Qing Cao Texas Tech University, USA Jason H. Triche Texas Tech University, USA World Scientific NEW JERSEY LONDON SINGAPORE BEIJING SHANGHAI HONG KONG TAIPEI CHENNAI

4 Published by World Scientific Publishing Co. Pte. Ltd. 5 Toh Tuck Link, Singapore USA office: 27 Warren Street, Suite , Hackensack, NJ UK office: 57 Shelton Street, Covent Garden, London WC2H 9HE Library of Congress Cataloging-in-Publication Data Schniederjans, Marc J. E-commerce operations management / Marc J. Schniederjans (University of Nebraska-Lincoln, USA), Qing Cao (Texas Tech University, USA), & Jason H. Triche (Texas Tech University, USA). -- 2nd edition. pages cm Includes bibliographical references and index. ISBN (hard cover : alk. paper) -- ISBN (soft cover : alk. paper) 1. Electronic commerce--management. 2. Industrial management. I. Cao, Qing. II. Triche, Jason H. III. Title. HF S '72--dc British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library. Copyright 2014 by World Scientific Publishing Co. Pte. Ltd. All rights reserved. This book, or parts thereof, may not be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording or any information storage and retrieval system now known or to be invented, without written permission from the Publisher. For photocopying of material in this volume, please pay a copying fee through the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA. In this case permission to photocopy is not required from the publisher. In-house Editor: Sandhya Venkatesh Printed in Singapore

5 xi To Vicky for your love and support To Tyson, Glenn, and Brenda for your encourgement, love, and support

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7 vii PREFACE These are exciting times in the history of e-commerce and for businesses operating in the growing e-commerce industry. While some companies are making a fortune others are going out of business. How can there be such differences in business performance outcomes? The answer to this question can always be found in understanding the way that e-commerce operations are managed. It is not luck or timing that helps a non-profitable operation become and maintain profitability, it is through the adaptive knowledge and skill of the people who run the business. The managers who run businesses are called, operations managers and as this book will show are critical to the success of all e-commerce business operations. Regardless of whether you are a vice president of operations or working as a supervisor in service shop, this book will help to make you aware of the issues, concepts, philosophies, procedures, methodologies, and practices of running e- commerce operations. The purpose of this book is to provide current research findings, strategies, and practices that can help operations managers run and improve their e-commerce operations. This book has been designed for an upperlevel undergraduate course or a graduate business or engineering management course on e-commerce operations management for university students. Decisionmakers who have to reengineer e-commerce operations can also use this book. This group of decision makers might include CEO s, vice presidents of operations, general managers, plant managers, supervisors, and industrial engineers. Other operations management and engineering faculty, trainers, and graduate students will also find this book presents a useful variety of new ideas for managing e-commerce operations. This book assumes that the reader has had some exposure to the terminology and technology commonly found in the field of operations management. The basic operations management or industrial management course that undergraduate students take in business degree programs constitutes sufficient prerequisite knowledge to satisfy the background to fully appreciate the content of this book. While most of the terminology necessary to fully utilize this book are actually defined in the book, readers can consult any basic operations management textbook or in either of the latest versions of the American Production and Inventory Control Society (APICS) Dictionary or Encyclopedia of Production and Manufacturing Management. Throughout this book, important

8 viii E-Commerce Operations Management terms are italicized and are usually followed by a definition. The location of the initial definitions can be found using the index at the end of the book. The contents of this book are organized into three parts. In Part I, Introduction and Critical Success Factors in E-commerce Operations Management, two chapters are presented that help to define the basic subject and terminology used in the book, as well as briefly identifying the major topics that make up the rest of the book. In Part II, Critical Success Factors of E-commerce Operations Management, eight chapters are each devoted to an individual topic that combines the subjects of operations management with leading-edge e-commerce subject material. Part III, Recent Trends in E-Commerce Technology, consists of two chapters that cover technology developments and in the field e-commerce. These chapters contents are based on the most recent research in their respective areas. They represent information on both how-to manage an e-commerce operation and what s happening in e-commerce. Collectively, they help to explain what is meant by the term e-commerce operations management. While many people have had a hand in the preparation of this book, its accuracy and completeness are the responsibility of the authors. For all the errors that this book may contain we apologize for them in advance.

9 ix CONTENTS Preface List of Tables and Figures vii xv PART I. Introduction and Critical Success Factors in E-Commerce Operations Management Chapter 1. Introduction 3 What is E-Commerce? 3 What is Operations Management? 6 What is E-Commerce Operations Management? 8 Why Study E-Commerce Operations Management? 9 How This Book is Organized to Help You Learn 11 Summary 13 Chapter 2. Research on Critical Success Factors in E-Commerce Operations Management 17 Strategic Planning 17 Research on Operations Management Strategic Planning 19 Research Relationship of OM on Information Systems Strategic Planning 23 Towards an E-Commerce Operations Management Strategic Planning Model 24 Critical Success Factors in E-Commerce Operations Management 27 An E-Commerce Operations Management Strategic Planning Model 37 Summary 39 PART II. Critical Success Factors of E-Commerce Operations Management Chapter 3. E-Commerce and Supply Chain Management 51 What is Supply Chain Management? 52

10 x E-Commerce Operations Management Why is Supply Chain Management So Important? 53 Controlling Variability across the Supply Chain 54 How Should a Supply Chain be Designed? 59 Supply Chain Architecture 65 The Relevance of E-Commerce to the Supply Chain 70 The Impact of E-Commerce on the Supply Chain 70 E-Commerce and Supply Chain Integration 71 Traditional E-Commerce vs. E-Supply Chain 72 The Importance of Electronic Data Interchange in E-Commerce and Supply Chain 73 An Approach to E-Technology Acquisition and Justification in Supply Chain Management 76 E-Commerce and Global Supply Chain Management 77 The Issue of Trust in Supply Chain Management 79 Summary 80 Chapter 4. E-Commerce and Product and Process Management 89 What are Product Design and Process Management? 90 BPR versus TQM 95 Why is Product and Process Design Management So Important? 95 E-Commerce Strategies for Product and Process Design 98 How E-Commerce Supports Product Development 102 Design for Manufacture and Assembly in E-Commerce Operations 103 Integrating ERP and E-Commerce Operations 108 Summary 111 Chapter 5. E-Commerce and Purchasing Management 117 What is Purchasing Management? 118 JIT Purchasing 118 JIT Supplier Selection 122 JIT Purchasing and Performance 123 Purchasing Management Framework 124 Future of Purchasing Management 127 Why is Purchasing Management So Important in E-Commerce? 128 E-Commerce Purchasing 129 A Model for E-Purchasing 131

11 Contents xi E-Commerce Purchasing Strategies 136 Improving E-Commerce Purchasing Process 137 Summary 138 Chapter 6. E-Commerce and Forecasting and Scheduling Management 145 What is Forecasting and Scheduling Management? 146 Why is Forecasting and Scheduling Management So Important in E-Commerce? 156 Integrating Forecasting into the E-Commerce Operations 159 Integrating Scheduling into the ERP System 161 Automating to Improve Scheduling 163 Summary 166 Chapter 7. E-Commerce and Inventory Management 171 What is Inventory Management? 172 Why is Inventory Management So Important for E-Commerce? 178 A Control System Approach to E-Commerce Inventory Management 180 Integration of E-Commerce Inventory Management with Enterprise-Wide Systems 183 Maximizing Order Picking Inventory Activities 187 E-Commerce Inventory Strategies 189 Summary 190 Chapter 8. E-Commerce and Quality Management 195 What is Quality Management? 196 Why is Quality Management So Important for E-Commerce? 204 Benchmarking for E-Commerce Business Operations and Supply Chain Quality 205 Integration Strategy for E-Commerce Technology and Quality Management 206 E-commerce Value Chain and Quality Management 210 Summary 214 Chapter 9. E-Commerce and Human Resource Management 221 What is Human Resource Management? 221 Why is HR Management So Important in an E-Commerce Setting? 228

12 xii E-Commerce Operations Management Improving Organization Structure to Overcome Complexity in E-Commerce Operations 230 A Human Resource Strategy for E-Commerce 233 How E-Commerce is Altering International Service Industries 235 Virtual Teamwork to Improve Operations 235 Summary 240 Chapter 10. E-Commerce and Reengineering and Consulting Management 245 What is Reengineering Management? 246 What is Consulting Management? 254 Why Are Reengineering and Consulting Management So Important for E-Commerce? 257 A Methodology to Determine if Reengineering or Consulting is Needed in E-Commerce Operations 258 Implementing Business Process Reengineering Using the Internet 261 Reengineering E-Commerce Supply Chain Buyer-Supplier Interface 264 Summary 266 PART III. Recent Trends in E-Commerce Technology Chapter 11. Mobile Commerce 275 What is M-Commerce? 275 What is the Current M-Commerce Market? 278 What is M-Banking? 287 What are M-Payments? 291 Summary 295 Chapter 12. Cloud Computing 301 What is Cloud Computing? 301 How can Cloud Computing be Defined? 302 What is the Current Cloud Computing Usage? 307 What are the Current Cloud Computing Offerings? 308 Public, Private or Somewhere In-Between? 314 What Does the Cloud Bring to E-Commerce? 317 What are Some of the Cloud Computing Issues? 319 Summary 323

13 Contents xiii Epilogue: E-Just-In-Time 327 What is E-Just-In-Time? 327 Index 337

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15 xv LISTS OF TABLES AND FIGURES TABLES Chapter 1 Table 1. Categories of e-commerce 5 Table 2. Types of e-business models 7 Table 3. Benefits of e-commerce 10 Chapter 2 Table 1. Critical success factors and related research 28 Chapter 3 Table 1. Controlling mechanisms for the bullwhip effect 57 Table 2. Basic JIT principles 60 Table 3. Major components of trust in e-commerce 81 Chapter 4 Table 1. Design improvement methods 91 Table 2. Key factors in make-or-buy decisions 94 Table 3. BPR vs. TQM 96 Table 4. How Internet technology helps to achieve agility 99 Table 5. Stage-gate system components 104 Table 6. Impact of e-commerce on stage-gate system 106 Table 7. CSFs in the implementation of ERP 110 Chapter 5 Table 1. JIT purchasing principles 119 Table 2. JIT supplier selection criteria 122 Table 3. Dimensions of excellence in purchasing management: Benchmarking 125 Table 4. Purchasing life cycle 132 Table 5. Variables of the model for e-commerce purchasing behavior 134 Table 6. Benefits of using B2B online auctions for both buyer and supplier 138

16 xvi E-Commerce Operations Management Chapter 6 Table 1. Popularity of forecast methods worldwide 148 Table 2. Production processes and scheduling methods 149 Table 3. Scheduling techniques 151 Table 4. JIT production management principles 154 Table 5. Sequencing rules in a JIT system with multi-lines 155 Table 6. Sequencing rules in a JIT system with a serial line 156 Table 7. Effective scheduling using APS 158 Table 8. AARIA design principles 162 Table 9. Agent characteristics 164 Table 10. Roles of agents 165 Chapter 7 Table 1. JIT inventory management principles 176 Table 2. Impact of benefits of inventory management on e-commerce operations 178 Table 3. Benefits of integrated e-commerce inventory system 185 Table 4. Types of demand and JIT/lean strategies 188 Chapter 8 Table 1. Philosophical components of quality management 197 Table 2. Quality management methodologies 199 Table 3. JIT Quality management principles 202 Table 4. Lean management attributes on quality 203 Table 5. Operations process performance measures 207 Table 6. Supply chain performance measures 208 Table 7. Determinates of service quality 211 Chapter 9 Table 1. Important JIT workforce characteristics and rankings 223 Table 2. JIT HRM factors 223 Table 3. Advanced issues involving JIT and HRM 224 Table 4. HRM in reengineered organizations 227 Table 5. Benefits of B2E 230 Table 6. Market vs. hierarchical networks 232 Table 7. Three e-commerce strategic concepts 234 Table 8. Barriers of global e-commerce 235 Table 9. Analyses of global service industries 236

17 List of Tables and Figures xvii Table 10. Characteristics of virtual teams 237 Table 11. Types of virtual team 238 Table 12. Solutions to global virtual teamwork 239 Chapter 10 Table 1. Areas where consulting is commonly used 254 Table 2. Activities consultants perform for their clients 255 Table 3. Areas where consultants can improve e-commerce operations 258 Table 4. Typical survey questions for a gap analysis 260 Table 5. Reasons for using the Internet with BPR 262 Table 6. Features of an Egalitarian organization culture 263 Table 7. Organizational targets of change 264 Table 8. Benefits of reengineering e-commerce supply chain operations 265 Epilogue Table 1. The comparison of traditional JIT principles with those of e-jit 330 FIGURES Chapter 1 Figure 1. Intranet and extranet 5 Figure 2. OM production process 8 Figure 3. Disintermediation 11 Chapter 2 Figure 1. Organizational planning 19 Figure 2. Operations management strategy model 20 Figure 3. Information systems relationship with OM strategy model 23 Figure 4. Simplified e-commerce strategy model 25 Figure 5. E-commerce operations management strategy model 26 Figure 6. E-commerce operations management strategy model 38 Chapter 3 Figure 1. Components of a typical supply chain 53 Figure 2. Bullwhip effect in supply chains 55 Figure 3. Traditional business computer supply chain 61

18 xviii E-Commerce Operations Management Figure 4. Dell's direct model of a supply chain 61 Figure 5. E-supply chain assessment 72 Chapter 4 Figure 1. Stage-gate system 105 Chapter 5 Figure 1. A model for e-commerce purchasing behavior 133 Figure 2. A model of supplier s impact on buyers adoption and purchase intent 137 Chapter 6 Figure 1. Planning, scheduling, and sequencing 150 Figure 2. Architecture of VMSA 165 Chapter 7 Figure 1. Inventory ordering cost curve 173 Figure 2. Inventory carrying cost curve 173 Figure 3. Total ordering and carrying cost curves 174 Figure 4. Forecast demand using inventory control system algorithmic approach 181 Figure 5. Supply of inventory available to service customer demand 182 Figure 6. Intranet and extranet 184 Figure 7. Integrated technology-based inventory system 187 Figure 8. Order picking cell based on JIT and lean management principles 189 Chapter 8 Figure 1. Taguchi quality loss function 197 Figure 2. Quality methodologies: Statistical process control chart 200 Figure 3. Quality methodologies: Check sheet 200 Figure 4. Quality methodologies: Pareto chart 201 Figure 5. Quality methodologies: Causes and effect diagram 201 Figure 6. A procedural framework for a service quality program 213 Chapter 9 Figure 1. Objective organization model 231

19 List of Tables and Figures xix Chapter 10 Figure 1. Expected improvement in quality or productivity under a CI program 247 Figure 2. Expected improvement in quality or productivity under a reengineering program 247 Figure 3. Opportunity loss of quality under discontinuous improvement 249 Figure 4. Reengineering life cycle 250 Figure 5. Reengineering procedure 252 Figure 6. Process flowchart of a reengineered inventory requisition process 253 Figure 7. Organizational change process for consulting 256 Figure 8. Gap chart 261 Chapter 11 Figure 1. M-commerce research streams 279 Figure 2. Palm Pilot connected to a mobile phone for mobile connectivity 284 Figure 3. M-banking from Bank of America 288 Figure 4. Credit card swiper from a mobile phone 292 Figure 5. QR code sample 293 Chapter 12 Figure 1. Sample system architecture diagram 306 Figure 2. Main cloud computing offerings 308 Figure 3. Offsite/in-house cloud hosting 314 Epilogue Figure 1. JIT and e-jit compared 328 Figure 2. E-JIT role changes in marketing, customers, and operations management 329 Figure 3. Productivity cycling process and e-jit 335