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
SHMECs 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
Companys 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 companys 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 required zero inventory
Me-online acted only as a third party provider providing buyers and sellers a
trading platform
Procurement was based only on buyers' requirement from specific sites in terms of
market demand

PLAN FOR SHMEC TO GET RID OF HUGE OLD INVENTORY

Take a deep discount on some of the inventory and promote the sale to drive
traffic to its site or sell it to retailers
Group like inventory together, selling it as a bundle
Use the available customer information to see if it can match some of the
customers requirements with the old inventory

SHMEC POSITION ON IT FRONT

After the change

Type of IT

Score

Reason

Function IT

The staff had enough IT resources to manage

day to day activities. But handling emergency
situations was an issue.

Network IT

The Company area network did not have

facility to obtain broad feedback on
important matters.
Without proper IT, it was not easy to monitor
the and control the jobs of all employees.

Enterprise IT

Suppliers ERP system had problems

connecting with me-online system.
Providing solutions to customer problems
was not in an internet exchange platform.

SHMEC POSITION ON IT FRONT

Before the change

Type of IT

Score

Reason

Function IT

Records were maintained manually.

Network IT

The Company area network did not have

facility to obtain broad feedback on
important matters.
Without proper IT, it was not easy to monitor
the and control the jobs of all employees.

Enterprise IT

Manual records were not easily accessible to

all departments. These records were lost
when the staff resigned.
They did not have a system to monitor the
demand requirements, thus they had to
increase supply to run the business. This
resulted in increased inventory levels.

IMPACT OF SHMEC's NEW BUSINESS MODEL ON ITS

ORGANIZATIONAL STRUCTURE, KNOWLEDGE AND THE SKILLS
NEEDED

A separate product resource department ensured that only qualified suppliers

registered online
A Standard e-business trading system with fixed procedures regulated the
behaviour of sales staff. A single policy was established for all departments
Existing employees were already familiar with IT applications. However,
advanced training would have to given as the complexity of the system increases.
With the e-business system, barriers to information flows were reduced, enhancing
capabilities of handling and responding to information
Evolution of a new 'core competency' based on holding and processing 'critical /
vital information

CHALLENGES SHMEC WOULD FACE BY EXTENDING ITS MODEL TO

GLOBAL MARKET

The web design must be restructured to address language, payment

currencies/credit cards, local contacts, guarantees/warrantees, etc
SHMEC should rethink its distribution channel. Distribution through air and water
freights must be developed into their model
E-commerce laws in the target countries must be analyzed as restrictions in ecommerce vary from country to country
SHMEC issues VAT invoices directly online. But in a global market, the VAT rates
and tax rules are different. SHMEC will have to make major modifications in their
model to address this
Since e-business can be accessed from anywhere in the world, SHMEC would be
subject to liability in that jurisdiction. Any issues or disputes arising out of the
transaction may lead to unforeseen tangles