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ventory costs. PricewaterhouseCoopers 20 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 21 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 22 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 Suppliers Connected to MarketPlace via Web or ERP Buyers Buyers connected to marketplace via EProcurement App B2B MarketPlace Profit Other Costs Purchases 100 100 45 50 45 5 5% A 5% reduction in purchase cost can result in a 50% increase in profit margin. +50% PricewaterhouseCoopers 23 The Costs Associated With Procuring Production Inputs Lower transaction costs coupled with the ability to enforce purchasing policy across the enterprise have been instrumental in driving Webbased MRO procurement. Two additional factors have accelerated the trend. The first factor is a defensive reaction by firms that note the cost savings being enjoyed by rivals switching to an ebusiness procurement mode. The secon