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faster it can form and launch facilitate the operational excellent ? Broader munities to allocate RD cost ? Operational efficiencies via back office shared services ? Depth of industry and procurement knowledge and resources available to develop supplier contracts Company PricewaterhouseCoopers 17 The Impact of eBusiness on SCM eBusiness affects four broad categories that determine the production and transaction costs of a firm: – The cost of executing a sale – The costs associated with procuring production inputs – The costs associated with making and delivering a product or service – The cost associated with logistics PricewaterhouseCoopers 18 The Cost of eBusiness Sales Accessibility An eBusiness web site is open 24 hours per day, 7 days per week. A business no longer has to build separate physical establishments to attract a larger customer base. A virtual storefront also allows an ebusiness to manage one store instead of multiple stores, thus eliminating duplicate inventory costs. PricewaterhouseCoopers 19 The Cost of eBusiness Sales Order Rework Another aspect of eBusiness is that it enables more efficient order configuration. For example, both General Electric (GE) and Cisco Systems reported nearly onequarter of their preWebsite orders had to be reworked because of errorsa total of more than 1 million orders, in the case of GE. Since adopting a Webenabled customer interface, Cisco reports an error rate of only 2 percent. Produce or Service Output Critical Customer Requirement Defects: Service unacceptable to customer B A PricewaterhouseCoopers 20 The Cost of eBusiness Sales Fundamental Shift Clearly, eBusiness represents a fundamental shift in how the sales process is executed by a pany. As a result, eBusiness pels existing businesses to reexamine how they interact with customers, even as new entrants exploit eBusinesses to reach customer bases previously thought unreachable. Low High Cost of Sale “ OfftheRack” Customised Value Added of Sale Direct Sales ?Facetoface sales ?$500/sales contact ?Distributors/VARs ?$2300/sales contact ?Telephone sales and service ?$25 per sales contact ?No human contact ?$1 per sales contact Resellers Tele channel Electronic Channels Source: Dr. Rowland Moriarty, Cubex Corp. PricewaterhouseCoopers 21 The Costs Associated With Procuring Production Inputs Webbased procurement of maintenance, repair, and operations (MRO) supplies is expected to reach more than $100 billion worldwide by the year 2023. MRO prises those goods required to run a pany that are not raw materials used in the direct manufacture of a product or the provision of a service. Suppliers