Overview

In this module, you will learn how businesses use Internet technology to enhance their logistical, support, and purchasing operations as well as to put outsourcing and offshore practices into practice. Utilizing Internet technology, businesses, governments, and other organizations are expanding the scope of their enterprise planning and control operations beyond the bounds of their own companies’ legal definitions to encompass components of other organizations. This module describes the expansion of inter-organizational communications and coordination using the growing network model of organization that was first proposed in module 1.

Today, businesses of all sizes use Internet technologies to buy goods, services, maintenance supplies, repair supplies, and operational supplies. Like how they manage their internal operations, more businesses are using these technologies to manage their external relationships with third-party logistics suppliers as well as their internal logistics and transportation operations. Government services and business services like payroll management and benefits are also increasingly offered online.

Lean production, just-in-time inventory management, and supply chain competitiveness are just a few of the supply chain management approaches that are being used because of the improved communication capabilities that the Internet and the Web now provide. Online technology can be used to adopt and improve supply chain management, which can aid in creating a consistent manufacturing strategy or making a particular supply chain more adaptable.

More and greater businesses are connecting online with the partners in their supply chain alliances to accomplish broad collaborative commerce goals and give the final consumer of their value chains’ goods and services more value. Less expensive implementation and operation costs have fueled an increase in the integration of inventory monitoring technologies like RFID with Internet technologies, and this trend is projected to continue.

Early industry electronic marketplaces sparked the creation of a variety of B2B online networks and marketplace models, including private stores, customer portals, private marketplaces, and marketplaces supported by industry consortia. Private industrial networks and private commercial exchanges are expanded forms of private marketplaces that have recently appeared.

Outsourcing and Offshoring

The hierarchical structures of organizations are giving way to more modern, adaptable network architectures. These network topologies are frequently made possible by the decreases in transaction costs that businesses experience because of using Internet and Web technologies to carry out commercial operations. Outsourcing is the practice of hiring companies to carry out particular tasks. the contracting out of design, implementation, or operating duties for an information systems project to another business.

Offshoring is a term used to describe outsourcing that is carried out by businesses located in other nations. Although outsourcing and offshore have been around for a long time, most of the tasks that were outsourced were often manufacturing-related.

Many businesses today outsource tasks like purchasing, R&D, record-keeping, and information management to countries with cheaper labor costs. Offshoring of this kind is frequently referred to as business process offshoring. Offshoring is carried out by or via non-profit groups that use the corporate activity to fund philanthropic or educational endeavors in less developed regions of the world.

Purchasing

Finding and assessing vendors, choosing certain products, placing orders, and resolving any issues that surface after getting the purchased goods or services is all included in purchasing activities. Late delivery, inaccurate amounts, wrong goods, and damaged goods are a few examples of these problems. Purchasing managers can play a vital role in maintaining and enhancing product quality and lowering costs by closely monitoring all pertinent aspects of buy transactions. In module 1, we covered how businesses might use an industry value chain to arrange the activities of their strategic business units. The supply chain of a specific strategic business unit refers to the portion of an industrial value chain that comes before it. The activities carried out by each predecessor in the value chain to design, produce, promote, market, deliver, and support each individual component of a product or service are all included in a company’s supply chain for that product or service.

Most firms’ purchasing departments have typically been tasked with finding the best deals on each of these components. Typically, purchasing staff accomplished this by locating suitable vendors and requesting them to draft bids outlining their proposed services and prices. The lowest offer that still matched the component’s quality requirements would then be chosen by the purchasing department. Due to the disproportionate emphasis on component costs at the expense of entire supply chain costs, including the cost to the manufacturing organization of managing such a large number of suppliers, the bidding procedure created a highly competitive environment with many providers.

Logistics

Providing the correct items in the right amounts at the right location and time is the traditional goal of logistics. The management of logistics plays a crucial supporting role in a company’s sales and purchasing operations. Businesses must make sure that both the products they sell to customers and the raw materials they acquire from suppliers and use to make those products are delivered on time. Another significant component of logistics is the management of materials as they move from the raw material storage area through the production processes to become completed goods. Managing the outbound movements of completed products and services as well as the incoming movements of supplies and materials falls under the category of logistics operations.

Thus, logistics activities include receiving, warehousing, inventory control, vehicle scheduling and control, and distributing finished goods. Due to their ability to minimize transaction costs and maintain constant connectivity amongst businesses involved in logistics management, the Web and Internet are offering an expanding number of opportunities to handle these activities more effectively. Automated warehouse operations supported by the web help businesses save millions of dollars annually.

The following video shows the connection between eCommerce supply chain and logistics using India as the example. “It is very simple logic that if you want to control eCommerce, you must control logistics.”

Business Process Support Activities

Tasks related to finances and administration, managing human resources and developing innovative technologies all assist various business operations. Processing client payments, planning capital expenditures, budgeting, and planning to guarantee that there will be enough money on hand to satisfy the organization’s commitments as they become due are all examples of finance and administration business processes. Administration activities can include the organization’s maintenance of its database and computing infrastructure. The hiring, training, and evaluation of employees, the provision of benefits, and adherence to legal requirements for record-keeping are all examples of human resource processes. Research scientists can collaborate virtually through networking, sharing research findings, online publication of academic papers, and links to other sources of research and development services, among other things, in the development of technology.

Governments Involvement

Governments also engage in business-like activities, such as hiring personnel, purchasing materials from suppliers, and disbursing a variety of benefit payments. From government websites, citizens can download blank tax forms, passport applications, and other papers. Governmental organizations can use the Internet to make the collection of various taxes and levies from their constituents more effective, if not more enjoyable.

E-government is the term used frequently to describe the use of Internet technology by governments and government organizations to carry out these tasks. Trillions of dollars in tax, license, and other fee money are collected by the Financial Management Service (FMS) of the U.S. government. In addition, it disburses trillions of dollars in tax refunds, Social Security benefits, and veteran’s benefits. Most of this financial activity is handled by the FMS through its Pay.gov website. The Treasury Direct website, which is run by the U.S. government’s Bureau of Public Debt, enables individuals to purchase savings bonds and financial institutions to acquire treasury bills, bonds, and notes. National governments in other nations use e-government to cut expenses associated with administration and improve services to stakeholders.

By utilizing Web technology to meet the needs of its stakeholders, most individual states can lower their service costs while delivering those services more effectively.

Network Model

Now that the Internet exists, highly specialized businesses may effectively trade services. This transition from hierarchical to network types of economic organization is made possible by the Web. Compared to organizations with a hierarchical structure, these new networks of companies are more adaptable and can react to changes in the economic environment much faster. But electronic data interchange, or EDI, a hierarchically structured method of inter-firm information transfer, is where Web technology for business-to-business transactions first emerged.

EDI

EDI is the computer-to-computer exchange of business data between two organizations using a predetermined standard format. Trading partners are the two companies that are exchanging information. Businesses are deemed to be EDI-compatible if they exchange data in a certain set of standard formats. The business data that is exchanged is frequently transaction data, but it may also contain other data that is relevant to transactions, like price quotes and requests for order status. Information that is often found on paper documents is included in transaction data for business-to-business (B2B) transactions. Over 75% of all information transmitted between U.S. trading partners comes via invoices, purchase orders, requests for quotes, bills of lading, and receiving reports.

Approximately 25 years before the term “electronic commerce” was coined, EDI was the first type of electronic commerce to be widely utilized in business. It continues to play a significant role in B2B, handling an estimated $4 trillion in transactions annually globally. Because most B2B electronic commerce is built on or modified from EDI, it is crucial to understand EDI. Additionally, EDI is still the most widely used technology in online B2B transactions, thus it is crucial. Currently, the dollar volume of EDI transactions is almost equivalent to the sum of the volumes of all other B2B transaction technologies.

This video explains EDI and its benefits.

Supply Chain

Strategic partnerships, alliances, and long-term agreements are frequently used by businesses to forge connections with other organizations that are part of the supply chains for the goods they produce or sell. Suppliers assist their clients in the creation of new products, the definition of product features, the rewriting of product specifications, and the identification of necessary product enhancements. These interactions can be complex. Instead, then negotiating with a substantial number of suppliers every time they need to purchase materials or supplies, businesses can frequently cut costs by forging close ties with a small number of suppliers. The process of managing this integration is known as supply chain management, and it occurs when businesses integrate their supply management and logistics activities across many players in the supply chain of a certain product. The result of supply chain management is to produce a product that is of a higher quality or costs less. Online Business Marketplaces and Networks.

Many industry-focused hubs started to emerge in the late 1990s, creating marketplaces and auctions where businesses in the sector could interact and conduct business. The concept was that these hubs would provide industry participants with a portal or doorway to the Internet. These hubs were known as vertical portals because each hub would provide services to a single industry and was vertically integrated.

The video shows how the world is changing through B2B Marketspace

https://youtu.be/hnQMutiNJqw