Description
e-business strategy adopted at ME-Online. It talks briefly about the successful implementation of the business model of Me-Online to overcome the inherent problems associated with inventory, bad debts and so on. It finally wounds up with the challenges which lay ahead for the company. It also tries to analyze on what precautions the company should take in the second phase of the implementation.
E-business Transformation at Me-online
Shanghai Mechanical and Electrical Equipment Co. Ltd started its operations in 1955 as mechanical and electrical equipment distribution company. In 1998 it changed its ownership structure and retained is original focus and included distribution of variety of machines, forging tools and equipment of common use. In the brick and mortar model, as a distributor, it had to accumulate lot of inventory for supplying to its customers. This reduced their liquidity and increased their risk to price fluctuations of products sold. SHMEC being a very old company it used sell products on credit to maintain it existing relationships thus increasing its risk to bad debts. In 2001, it planned to launch a B2B e-business solution where it provided an online interface for buyers and sellers. The suppliers uploaded the information of their products, their products were distributed by an external logistic company without any additional charges, making their products cheaper through this route. The buyers gave the orders online which were delivered by the logistic company and Me-online would charge a certain percentage as profit. The first phase of Me-online was very successful. Problem SHMEC wanted to initiate the second phase of development of Me-online where in it could integrate directly with the supplier inventory management system. This would enable it to serve the customers better. They also thought of spinning off Me-online as a separate entity. Through its second phase it wanted to target retails customers having short lead times and small quantities. It also wanted to set up appropriate human resource system. Analysis In the first phase Me-online was successfully able to integrate its internal systems but it will face a greater difficulty in integrating with supplier inventory management systems. As each of the supplier would use a different method of inventory control (FIFO, LIFO, etc) plus would have inventory system as a part of a larger system like ERP. Implementing this will be difficult but can be achieved.
It can easily implement the human resource system but to make it work effectively it will have to change the internal culture of the organization. Once it has integrated successfully with the supplier it will be able to target retail customers with the help of its logistic partner and its existing distribution network. As of now Me-online is generating just 10-20% of total SHMEC revenue. Also, Me-online was able to achieve success due to the experience of SHMEC in distribution as a brick and mortar company. Thus, if they plan to spin-off Me-online as a separate entity it will lose the advantage of experience of its employees in distribution. To add to it, it might not be able to sustain the growth of 20-30%. Thus, it is better not to spin Me-online as a separate entity.
doc_867963443.docx
e-business strategy adopted at ME-Online. It talks briefly about the successful implementation of the business model of Me-Online to overcome the inherent problems associated with inventory, bad debts and so on. It finally wounds up with the challenges which lay ahead for the company. It also tries to analyze on what precautions the company should take in the second phase of the implementation.
E-business Transformation at Me-online
Shanghai Mechanical and Electrical Equipment Co. Ltd started its operations in 1955 as mechanical and electrical equipment distribution company. In 1998 it changed its ownership structure and retained is original focus and included distribution of variety of machines, forging tools and equipment of common use. In the brick and mortar model, as a distributor, it had to accumulate lot of inventory for supplying to its customers. This reduced their liquidity and increased their risk to price fluctuations of products sold. SHMEC being a very old company it used sell products on credit to maintain it existing relationships thus increasing its risk to bad debts. In 2001, it planned to launch a B2B e-business solution where it provided an online interface for buyers and sellers. The suppliers uploaded the information of their products, their products were distributed by an external logistic company without any additional charges, making their products cheaper through this route. The buyers gave the orders online which were delivered by the logistic company and Me-online would charge a certain percentage as profit. The first phase of Me-online was very successful. Problem SHMEC wanted to initiate the second phase of development of Me-online where in it could integrate directly with the supplier inventory management system. This would enable it to serve the customers better. They also thought of spinning off Me-online as a separate entity. Through its second phase it wanted to target retails customers having short lead times and small quantities. It also wanted to set up appropriate human resource system. Analysis In the first phase Me-online was successfully able to integrate its internal systems but it will face a greater difficulty in integrating with supplier inventory management systems. As each of the supplier would use a different method of inventory control (FIFO, LIFO, etc) plus would have inventory system as a part of a larger system like ERP. Implementing this will be difficult but can be achieved.
It can easily implement the human resource system but to make it work effectively it will have to change the internal culture of the organization. Once it has integrated successfully with the supplier it will be able to target retail customers with the help of its logistic partner and its existing distribution network. As of now Me-online is generating just 10-20% of total SHMEC revenue. Also, Me-online was able to achieve success due to the experience of SHMEC in distribution as a brick and mortar company. Thus, if they plan to spin-off Me-online as a separate entity it will lose the advantage of experience of its employees in distribution. To add to it, it might not be able to sustain the growth of 20-30%. Thus, it is better not to spin Me-online as a separate entity.
doc_867963443.docx