Me online case stude

Topics: Supply and demand, Inventory, Holding cost Pages: 14 (1118 words) Published: November 2, 2014
E-BUSINESS TRANSFORMATION AT

ME-ONLINE
GROUP 09
TEAM MEMBERS
AMAR PRATAP (2014PGP030)
ARUN N (2014PGP061)
MILAN BHATI(2014PGP081)
DIVYA MATHUR (IPM2011026)
RAJ THILAK RA (2014PGP286)
RASHI GEHLOT (IPM2011081)
SAWAN KUMAR (IPM2011095)

PROBLEMS FACED BY SHMEC WITH OLD MODEL
• Under ‘first buy and sell later” arrangement, company has to bear inventory accumulation, Inventory loss and depreciation because of disequilibrium between demand and supply
• In absence of effective management measure high account receivable leads to high bad debts
• Due to lack of information technology application tool, company relied on manual book keeping for record of procurement, sale and inventory. Business staff has monopoly over such crucial information which slowed information processing and delayed response to customers and suppliers

• SHMEC’s slow processing of capital , logistic and information could not keep pace with rapid changes in market

PROBLEMS FACED BY SHMEC WITH OLD MODEL (CONT.)
• Fluctuating prices had lowered profit
• Company’s limited liquid capital made it impossible to significantly change its financial status
• Business staff did SHMEC procurement, and there was less transparency in the process
• Buyers settled issues such as choice of supplier, quantities of products to be procured and time of payment. It was often contrary to company’s interest

INVENTORY HOLDING COST
Before
• Before e-business model company had to bear high inventory holding cost, which was blocking its liquid assets
• By the year end 2000, company had an inventory pileup worth over Rmb 10 million
After
• After e-business model, SHMEC pay only 30% down payment to supplier after receiving order and before delivering it to the customer. It makes remaining payment after the order is received by the customer. In that way SHMEC is able to save several millions of inventory holding cost in each transaction

REDUCTION IN BAD DEBT WITH IMPLEMENTATION OF NEW MODEL
• Effective monitoring of the activities of the sales staff and the distribution sites • Strict assessment policy for its sales staff. Payment settlement was a parameter in the assessment of distribution sites and sales staff

• Credit lines granted to users had to have prior approval • Sales staff and managers at different levels were made responsible for bad debts • With the implementation of the CRM, the barriers to information flows were removed. Sales staff had access to sufficient information to effectively decide on who to give credit to

• A uniform credit policy was established as compared to the traditional model in which each department had its own policy and distributed on credit based on personal relationships

RAPID TURNOVER IN SALES FORCE
• Fixed procedures as per the e-business trading system regulated the behaviour of the sales staff. Distribution rights were set by computers
• All authorizations were managed with the principle of inter restriction and inter monitoring
• The Sales Staff were losing their traditional view of the ownership of the customer • High level of control that was brought about with the introduction of new model faced extraordinary resistance from its employees

• SHMEC had to take initiatives to change the mind-set of the staff for smooth implementation of the e-business and to maintain staff turnover ratios to acceptable levels

FLOW OF INFORMATION, PHYSICAL GOODS AND MONEY – BEFORE
CHANGE
Order

Money

Distributor Members

Goods

Resource Provider

Warehouse

Goods

Money

Goods

Order
Chain Stores
Goods

End User

FLOW OF INFORMATION, PHYSICAL GOODS AND MONEY – AFTER CHANGE

Product
Money
Order
Logistics Provider
Order
Resource Provider

Product
Equipment info

Order

Transaction Platform

Money

Distributor Members
Order
Product

Information

Product

End User

REDUCTION IN INVENTORY WITH THE NEW MODEL
• The new business model was order driven and thus...
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