© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license. All rights reserved. INTERNET MARKETING : INTEGRATING ONLINE AND OFFLINE STRATEGIES Chapter 2 The Internet Value Chain

2 SIMPLE, QUICK, AFFORDABLE eZconnect BUILDING A VALUE HERMAN MILLER

3 FROM CHANNEL OF DISTRIBUTION TO VALUE CHAIN

4 CORE MARKETING PROCESSES Supply Chain Management Product Development And Management Customer Relationship Management

5 VALUE-CREATING ACTIVITIES

6 SUPPLY CHAIN MANAGEMENT PROCESSES 1. Selecting/Qualifying Desired Suppliers 2. Establishing/Managing Inbound Logistics 3. Designing/Managing Internal Logistics 4. Establishing/Managing Outbound Logistics 5. Designing Work Flow in Product-Solution Assembly 6. Running Batch Manufacturing 7. Acquiring/Installing/Maintaining Process Technology 8. Order Processing/Pricing/Billing/Rebates/Terms 9. Managing (Multiple) Channels 10. Managing Customer Services

7 FAST ZARA Figure 2-3 Source:

8 FROM A TRADITIONAL CHANNEL TO A VALUE CHAIN

9 Manage Supply Chain as Single Organization Close Customer Relationships  Customer Segments  Customer Experience and Relationships Cost Control Creates Customer Value Speed and Agility Extensive Metrics in Real Time Targeting Global Growth HOW DOES DELL DO IT?

10 CREATING A VIRTUAL VALUE CHAIN

11 BENEFITS OF INTEGRATED VALUE CHAIN Customer Centric Include Both Supply Chain & Channels of Distribution Extended Enterprise/Permeable Boundaries Provide Increased Customer Value  Improved Business Processes  New Technology Like RFID Specialized Value Propositions for Customer Segments

12 Electronic Data Interchange (EDI) Enterprise Resource Planning (ERP) Web Services INTEGRATING BUSINESS PROCESSES

13 EDI - Paperless Transaction Processing Order Entry Generates Electronic PO Order Electronically Transmitted to Seller Order Moves into Seller’s Electronic System Electronic Acknowledgment Sent System Generates Instructions to Ship from Warehouse Electronic Invoice Sent to Purchaser Payment Made by Secure EFT

14 EDI is ”OLD TECHNOLOGY” Pre-dates Internet Requires Proprietary Systems and Value-Added Networks Expensive, Difficult To Use Internet Has Made Somewhat Easier, Less Expensive To Use

15 ERP - Integrating Internal Systems Internal Business Process Integration Necessary To External Systems Like EDI Automation and Integration Of All Internal Systems  Order Processing, Production Planning & Scheduling, Inventory Control, Distribution, Customer Relationship Management

16 REASONS FOR ERP Integrate Financial Data into Single Database Customer Order Data Moves Electronically/ Seamlessly Through System Standardize and Speed Up Manufacturing Reduce Inventory Levels Standardize and Make Accessible Human Resources Information

17 Communications Between Enterprises Using Standard Hardware and Software WHAT IS “WEB SERVICES”?

18 Enterprises Can Communicate With One Another Over The Common Platform of the Internet Independent of Systems Behind Enterprise Firewalls  Do Not Have to Replace Existing Systems “The Applications Interface, Not The Users” (Webopedia) WHY IS WEB SERVICES IMPORTANT?

19 Applications Programming Interfaces (APIs)  Amazon, eBay and Many Others Use Free APIs That Allow Other Sites to Connect Easily  For Example, Google provides an API That Allows Sites to Use Google Maps on their Site and to Create Informational Overlays on the Maps AN IMPORTANT APPLICATION OF WEB SERVICES

20 Transponder In an Automobile source: Cow With RFID Chip Source: htttp://en.wikipedia.org THE RFID FUTURE

21 eRETAIL ASSOCIATION SCHEMATIC

22 MORE APPS AS CHIP PRICES DROP

23 Velocity (speed) Visibility (transparency) Variability (choice) Volume (scale) BENEFITS OF BUSINESS PROCESS TRANSFORMATION

24 SUMMARY Speed, Price, Quality (not necessarily in that order) Are Key Customer Requirements Virtual Value Chains Provide Them By  Cutting Transaction Costs  Reducing Error Rates  Cutting Order Cycle Time Set Objectives Based On Customer And Corporate Requirements Use Appropriate Metrics To Evaluate Integration Of Systems INSIDE The Enterprise And BETWEEN Enterprises Is Key RFID Technology Will Speed/Give Access