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

2. 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”

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

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

5. 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

6. 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 = $
Acquisition Costs:
Net Catalog Bricks-&-Mortar
Books $ $ $59
Groceries $2,918 $2,989 $2,969

7. 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

8. 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 Old/outdated stock is removed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

9. 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

10. 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.

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

17. 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.”

18. Big Picture
Demand
Chain
Management

19. 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

20. 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

21. Dell Model – Fulfillment Logistics

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