E-commerce is radically shifting how customers are interacting with businesses. No longer does a potential customer have to travel to a brick-and-mortar store to look through a limited selection. They can now go online and shop across a multitude of stores in a matter of seconds. As customers turn to the Internet to do their everyday shopping, businesses must shift their attention to the digital space. The FITTskills Global Value Chain training course outlines the rise of e-commerce and how it can benefit your business.
E-commerce involves conducting business operations using the Internet. Online business encompasses a wide range of functions and is completely reliant on I.T.
Up-front costs for web-based business operations are usually low and data can be exchanged between global organizations rapidly and cost effectively. An organization can track exactly what is happening in any part of the supply chain at any time. This knowledge can be used to anticipate problems, identify bottlenecks, and keep meeting consumer demand. E-commerce can deliver products directly from the manufacturer to end customer, and has led to the fast rise of online retailers, such as Walmart, Costco, and Home Depot, to provide their customers with online options. Inventory issues directly impact customers and can quickly impact an organization’s brand and reputation.
Advantages of e-commerce
The advantages of e-commerce include:
- Market access and competition: Buyers and sellers have access to goods, services and supply chains all over the world.
Global access to new markets means more product choices for consumers who can quickly research options and determine the most suitable choice. For sellers, it means more choice for non-core competency providers including suppliers, distribution and even third-party payment processing services.
- Improved communication: Buyers are able to communicate quickly with sellers and in many cases are able to track the status of their purchases online. Supply chains have constant inter-communication to mitigate production risks effectively.
- Real time access to data: Technologies enabling real time inventory and production statuses, and websites offering current marketing material, reduce time to market production and allow more immediate customer marketing feedback.
- Cost: For suppliers, online business and electronic communication reduces, and in some cases, removes the need for physical space for inventory and extra staff.
It can also cut some production and distribution costs if goods and/or services can be accessed online or downloaded by consumers.
E-commerce can also reduce marketing costs by sending targeted emails to customers as opposed to other marketing options. Finally, increased competition and not having to travel to purchase goods reduces costs for buyers.
An excellent example of a business taking full advantage of e-commerce opportunities is Sotheby’s. Sotheby’s is a large and growing online auction site that realized the merit of increasing its auction inventory to attract a bigger audience on the Internet. It revised its Internet strategy by opening its website, www.sothebys.com, to smaller dealers and auction sites, instead of competing directly with its competitors in the online auction business. With this approach, Sotheby experienced exponential growth in its inventory, which attracted a bigger market. Sotheby’s not only provides dedicated websites for its members, but it also handles all billing and collection, which has attracted thousands of participating collectible businesses with inventory to sell.
At the same time, Sotheby’s has remained focused on its high-end clients. It now offers an iPad application for international realty to attract consumers interested in purchasing multi-million dollar properties. The app was designed specifically for those who want to see more than just static photos and written descriptions when researching homes online. According to John Passerini, vice president of interactive marketing at Sotheby’s International Realty, the app allows buyers to understand the “context” of the properties they’re viewing, and where those properties are located in relation to nearby amenities like golf courses, vineyards, theaters and restaurants.
Barcoding and RFID Tags
With e-commerce becoming more prevalent and one of the unique selling points being able to track a purchase at every stage, having a way to easily identify products is essential for e-commerce. Bar codes are machine-readable representations of information that enable companies to label goods and track their movement through the supply chain. Barcoding facilitates monitoring of the supply chain in the manufacturing process, in warehouses, during shipping, and at point of sale. As products are sold, purchase orders for replacements can be transmitted automatically.
This immediate response reduces the risk and cost of carrying excess inventory.
In many cases, the supplier will produce more product in response to an order, and the supplier’s supply time will be shorter. Also, barcoding and other representations of information save administrative time, as they allow for easier processing of materials.
While still prevalent, barcoding systems are now being replaced by radio-frequency identification (RFID).
Radio frequency identification, or RFID, refers to technologies that use radio waves to automatically identify people or objects. The most common method is to store a serial number that identifies a person or object on a microchip that is attached to an antenna (the chip and the antenna together are called an RFID transponder or an RFID tag). The antenna enables the chip to transmit the identification information to a reader. The reader converts the radio waves reflected back from the RFID tag into digital information that can then be passed on to computers to make use of the information.
There are two types of RFID: active tags and passive tags. Active RFID tags have an internal power source and emit radio frequencies that can be detected by RFID readers or sensors up to hundreds of metres away. Passive RFID tags do not contain an internal power source. When they encounter radio waves from the RFID reader, the coiled antenna in the tag generates a magnetic field from which it can derive energy to transmit the RFID information.
Sensors for RFID tags can be located in warehouses, manufacturing sites, vehicles, and stores. Some systems permit precise tracking of shipments and estimated time of arrival using global positioning systems (GPS).
For foreign suppliers and buyers, the ability to track inventory throughout the global value chain anywhere on the globe provides more certainty.
Inventory tracking systems can feed into inventory management software and EDI systems to keep organizations informed to facilitate scheduling, planning and forecasting.
The use of barcodes and RFID tags allows the customer to actively track every step of the supply chain, from initial purchase all the way to delivery. This level of control creates a strong sense of customer satisfaction, which boosts the chances for returning customers.
How is your company embracing e-commerce? Let us know in the comments down below.