TODAY’S CLASS 5:00-6:30 Case discussion: Webvan 6:30-6:45 Break 6:45-7:40 Logistics support for e-Business

GUEST SPEAKER Thursday, April 5 11:00-12:15 or 12:30-1:45 Room 216 Chris Wand and Daniel Feld SOFTBANK Venture Capital Topic: “Incubators for e-startups”

NEXT CLASS GUEST SPEAKER DON HAZELL BEA Systems Topic: “Practitioners Perspective on Implementing e-Business Solutions”

Crossfire April 17 Traditional financial Traditional financial Valuation valuation models valuation models PROs CONs April 24 Research value of Research value of Metrics ONLINE data sources OFFLINE data sources

Targeted Families for Online Grocery Retailing 1. Both parents working 100% - If working 70%, similar behavior as a non-working parent 2. With Children - larger shopping baskets - More likely to be home from 16:00 to 19:00 Research by: Le Shop, 2000

Customers: Acquisition Cost Vs. Lifetime Value Grocery Industry 3 year lifetime * 40 orders/year * $100 average order = $12,000 Book Industry 3 year lifetime * 3 orders/year * $ 40 average order = $ 360 Acquisition Costs: Net Catalog Bricks-&-Mortar Books $8 $79 $59 Groceries $2,918 $2,989 $2,969

Online Grocery Shopping ADVANTAGES: - Fewer opportunities for impulse buying - Help in planning meals - Can buy in their own terms and shop any time - Time saving - Avoid crowded stores and parking lots - Access to larger selection and product information DISADVANTAGES: - Cannot inspect food before purchase - Miss spontaneity of discovering new/seasonal products - Miss the social opportunity to interact - Concern about fraud and privacy

Traditional Retail Store Value Chain 1. Case of cereal arrives at distribution center 2. Case of cereal is taken off the truck 3. The case of cereal is stored in distribution center 4. When the store needs cereal, a case is loaded on truck 5. Case of cereal arrives at the store 6. Store clerks store cereal case in the backroom 7. When needed, cereal case unpacked and stored in shelf 8. Old/outdated stock is removed 9. Customer put cereal in shopping cart 10. Cashier rings up the cereal 11. Clerk puts cereal in the bag 12. Customer transport cereal home

FOLLOW-UP “A fight for survival” Due to run out of cash at the end of Fall’2001 A revamped business plan provided cash to Dec. 01 It will need between $40-60 M to fund 2002. Stock has plummeted 95% Feb 2000: Closed operations in Dallas

THE PRIMARY OBJECTIVES OF WEBVAN CASE STUDY WERE: 1) Discuss how to create value for the customers and how e-businesses should tackle fulfillment issues. 2) Explore the issue of fulfillment: how to overcome the physical distance from distribution center to the customer’s doorstep. 3) Given that no model has yet become profitable, speculate on when and if these models will turn a profit.

What is Supply Chain Management? “Optimizing the overall activities of companies working together to create bundles of goods and services”

Why Such an Attention to Supply Chain Management over the Internet? “Existing supply chains are mostly outdated for the e-business era, in which inventories and costs must be eliminated wherever they are found.”

Big Picture Demand Chain Management

IBM’s Case of Integrated SC - 0 - “Rapid Response” Revenue $1.7B Cumulative Savings: 2-23 Days 27-44 Days Cycle Time (Order entry to Delivery) 77-95% 30-60% On-Time Delivery More than 80% “Pull” Replenishment 20 Days 45+Days Supply/Demand Planning Time Now Before

IBM’s Case of Integrated SC (Continuation) Total Savings: More than 85 % 40% Internal Satisfaction with Procurement 6 Pages 40+ Pages Average Length of Contracts 30 Days 6-12 Months Contract Cycle Time 1 Day Purchase Order Processing Time Now Before

Dell Model – Fulfillment Logistics

Homework due next session Prepare Case: Chapter 6 Read two articles: “Change without pain” and “Redesigning Business”