The Internet International computer network Connects companies and people around the world Enables the integration of internal information systems and enhanced communications between organizations Ties together global design, manufacturing, delivery, sales, and after-service Points which might be emphasized include: - Statistical process control measures the performance of a process, it does not help to identify a particular specimen produced as being “good” or “bad,” in or out of tolerance. - Statistical process control requires the collection and analysis of data - therefore it is not helpful when total production consists of a small number of units - While statistical process control can not help identify a “good” or “bad” unit, it can enable one to decide whether or not to accept an entire production lot. If a sample of a production lot contains more than a specified number of defective items, statistical process control can give us a basis for rejecting the entire lot. The issue of rejecting a lot which was actually good can be raised here, but is probably better left to later.

The Internet Reshaping how businesses think about delivering value to customers Prime benefits are speed and access Important vehicle for change in Operations Management Intranets are internal networks not available to external users Growing daily with over 300 million domains registered worldwide Points which might be emphasized include: - Statistical process control measures the performance of a process, it does not help to identify a particular specimen produced as being “good” or “bad,” in or out of tolerance. - Statistical process control requires the collection and analysis of data - therefore it is not helpful when total production consists of a small number of units - While statistical process control can not help identify a “good” or “bad” unit, it can enable one to decide whether or not to accept an entire production lot. If a sample of a production lot contains more than a specified number of defective items, statistical process control can give us a basis for rejecting the entire lot. The issue of rejecting a lot which was actually good can be raised here, but is probably better left to later.

Electronic Commerce E-commerce (or e-business) – the use of the internet to buy and sell products and services and exchange information Low cost rapid exchanges A whole new way of doing business “… all about cycle time, speed, globalization, enhanced productivity, reaching new customers and sharing knowledge across institutions for competitive advantage.” Louis Gerstner Former Chairman, IBM

E-Commerce Definitions Business-to-business (B2B) – Both sides of the transaction are businesses, non-profit organizations, or governments Business-to-consumer (B2C) – Transactions in which buyers are individual consumers Consumer-to-consumer (C2C) – Consumers sell directly to each other Consumer-to-business (C2B) – Individuals sell services or goods to businesses

E-Commerce Transactions Business Consumer B2B Global Health Care Exchange, Global Net Xchange B2C Amazon, Dell, Netgrocer.com C2B Priceline, Travelocity C2C eBay Figure S11.1

Economics of E-Commerce Costs of information exchange are dramatically reduced Barriers to entry are lower Time constraints almost disappear Information and communication is cheap and easy

Types of Information Product — drawings, specifications, video, or simulation demonstrations, prices Production Processes — capacities, commitments, product plans Transportation — carrier availability, lead times, costs Inventory — inventory tracking, levels, costs, and location Table S11.1

Types of Information Suppliers — product catalog, quality history, lead times, terms, and conditions Supply Chain Alliances — key contact, partners’ roles and responsibilities, schedules Supply Chain Process and Performance — process descriptions, performance measures such as quality and delivery Table S11.1

Types of Information Competitor — benchmarking, product offerings, market share Sales and Marketing — point of sale (POS) data entry, promotions, pricing, discounts Customer — sales history and forecasts Costs — market indexes, auction results Table S11.1

Benefits and Limitations Benefits of E-Commerce Improved, lower-cost information that makes buyers and sellers more knowledgeable has an inherent power to drive down costs Lower entry costs increase information sharing Available 24 hours a day, virtually any place in the world, enabling convenient transactions for those concerned Table S11.2

Benefits and Limitations Availability expands the market for both buyer and seller Decreases the cost of creating, processing, distributing, storing, and retrieving paper-based information Reduces the cost of communication Richer communication than traditional paper and telephone communication because of video clips, voice, and demonstrations Table S11.2

Benefits and Limitations Fast delivery of digitized products such as drawings, documents, and software Increased flexibility of location. (That is, it allows some processes to be located anywhere electronic communications can be established, and allows people to shop and work from home.) Table S11.2

Benefits and Limitations Limitations of E-Commerce Lack of system security, reliability, and standards Lack of privacy Some transactions are still rather slow Integrating e-commerce software with existing software and databases is still a challenge Table S11.2

Benefits and Limitations Lack of trust in (1) unknowns about the integrity of those on the other end of a transaction, (2) integrity of the transaction itself, and (3) electronic money that is only bits and bytes Security and risk are major factors in E-commerce Table S11.2

Product Design Easily shared knowledge and information allows quicker and lower cost design cycles that can involve participants in diverse locations Product data can be managed over the Internet Engineering changes and configuration management can be extended along the supply chain

Collaborative Project Management Project management software allows for establishing intranet sites for sharing documents and maintaining status reports Intranets can also be used for document libraries Students should understand both the concepts of natural and assignable variation, and the nature of the efforts required to deal with them.

E-Procurement Purchasing or order release communicated over the Internet Online catalogs allow quicker cost comparisons and bidding processes Catalogs can be provided by Vendors Intermediaries Buyers Once the categories are outlined, students may be asked to provide examples of items for which variable or attribute inspection might be appropriate. They might also be asked to provide examples of products for which both characteristics might be important at different stages of the production process.

Online Catalogs Vendor catalogs provide quick and easy access to the entire product line Available to anyone with Internet access Quick and easy to customize and adjust Reduced paper trails reduce purchasing costs This slide introduces the difference between “natural” and “assignable” causes. The next several slides expand the discussion and introduce some of the statistical issues.

Online Catalogs Intermediary catalogs facilitate buyers and sellers meeting Buyers can find multiple sellers on one site Buyer-focused exchanges allow groups of generally similar firms to join together to buy in larger quantities and more efficiently than if they worked independently This slide introduces the difference between “natural” and “assignable” causes. The next several slides expand the discussion and introduce some of the statistical issues.

Manual processes, including paper, phone, and fax Medical Supply Chain Current Supply Chain Suppliers Customers H H H Manual processes, including paper, phone, and fax Figure S11.2 H – Manufacturer – Distributor – Hospital H H Group Purchasing Organizations –

Automated Web-based processes Medical Supply Chain New Supply Chain Suppliers Customers H H H Online Global Health Care Exchange Automated Web-based processes Figure S11.2 H – Manufacturer – Distributor – Hospital H H Group Purchasing Organizations –

E-Procurement Online Auctions Maintained by buyers, sellers, or intermediaries May be used to sell excess raw material or discontinued or excess inventory Low cost and increased access to buyers

Inventory Tracking Technologies like bar code scanners, radio frequency, electronic communications can be used by almost any firm to track inventory in transit, on the shop floor, or in a warehouse

Inventory Reduction Warehousing for E-Commerce Managed by a logistics vendor Pass-through facility rather than storage Just-in-Time Delivery for E-Commerce E-commerce can improve communication and coordination E-commerce service companies manage complex transactions

Scheduling and Logistics Improvements Coordinated Pickup and Delivery Unified view of data Shipments can be merged in transit Reduced inventory and delays mean lower costs

Scheduling and Logistics Improvements Logistics Cost Reduction Carriers with unused capacity can find loads through Internet sites Logistics efficiency improves and costs are reduced