E-business Opportunity for Information Service Providers in Taiwan

Signs of new opportunities for country economic growth are seen in the heightened interest in e-business and e-commerce stems from the transition into the knowledge-based economy. This new environment is characterized by global competition, faster flow of information and communication, shorter product life cycle, increasing business complexity and technological advances. Enterprises in Taiwan have grown to realize the importance of embracing innovative enhancements, such as investing in e-business technologies in particular, to maintain competitive edge and emerge as an industry leader.

However, the SMEs, particularly small businesses with limited resources and lack of in-house expertise, still find it hard to put their time and energy to invest in e-business.

As mentioned earlier in this Chapter 4, industry in Taiwan is mostly made up of SMEs, which accounts for 90% of the total amount of the whole business. If implemented successfully, e-business can benefit SMEs in terms of business expansion, cost cutting and performance efficiency. Support for SMEs is available from the government in order to ensure a fair chance for all enterprises to participate and promote overall industry competitiveness.

4.2.1 Embracing e-business with Application Service Provider (ASP)

The rise of broadband Internet access has enabled application service provider (ASP)

services are expected to help not only small businesses, but also large enterprises to realize e-business capability in the near future as a form of outsourcing. IT outsourcing is then being fueled by the rise of ASP. According to MIC, IT outsourcing is projected to reach NT$ 37.2 billion in 2018. IT outsourcing provided by the ASP is basically different from the traditional outsourcing way (see Table 4-4).

Table 4-4 Comparison of Traditional Outsourcing Service and ASP

Items Traditional Outsourcing ASP

Outsourced IT environments Mainframe computer Internet

Data resource management Hardware equipment Software application Software application process Customized Packaged

Software procurement process

Purchase or In-house

developed Rental basis

Service delivery Offline Online

Business model One-to-one One-to-many

Source: MIC (2000)

ASP offers its services mainly through two segments, the individuals and enterprises.

Services provided to the individuals include productivity software (like Microsoft Office), online games, antivirus programs, etc. Meanwhile, for enterprises, ASP provides mainly e-business or enterprise application software, such as ERP, SCM, CRM, etc. As the system integration becomes increasingly important, ASP has also expanded to include not only Internet Service Provider (ISP), IT Consultant and Independent Software Vendor (ISC), but also system integrator (SI) to deliver both software application and integration service.

According to a forecast by Gartner, Inc. Analysts (2015)⁴, worldwide spending on enterprise application software is expected to grow to more than $201 billion in 2019.

For SMEs and small businesses with limited capital resources for technology innovation, ASP is a cost effective alternative that helps encourage the active use of

4Gartner (2015). Forecast Analysis: Enterprise Application Software, Worldwide, 2Q15

business among all SMEs. It allows business customers to run the application without having to engage in a permanent cost or invest in costly hardware infrastructure.

4.2.2 Example of e-business development solutions offered by ASP - Company P a. Company Overview

Company P was established in 1996 and primarily focused on offering the most integrated enterprise application solutions to both worldwide logistics service providers and industry logistics business. It is the leading brand of logistics management system with a group of experts known for their extensive experience, particularly in freight forwarding. As the global economy becomes more competitive, the company seeks to expand beyond domestic borders and venture into foreign markets to capitalize on the opportunities presented in the emerging markets. In addition to the office in Taiwan, the company has expanded to cover China, Hong Kong and the USA, with over 80 specialists to provide consistent system services across the countries. Its business customers also include domestic and global large companies from a variety industries, as presented in Figure 4-7.

Figure 4-7 List of Company P’s Business Customers Source: Company Official Website

The company fully realized that computer systems today are all networked and more powerful on all metrics. They should be able to deliver timely and accurate information to managers, hold data in a clear and simple way, sync directly with the accounting system, and allow data exchange with external business partners.

increased efficiency and expanded productivity that significantly drives down overall costs. Hence, Company P always strives to provide a consistent and seamless end-to-end service for excellent customer experience. The company strongly believes that using computer systems to increase service quality is an essential strategy for success and survival in today’s increasingly competitive environment.

Take the Global Tracking System for example, it allows users to receive real-time status information for cargoes from P.O., shipment, booking, sending cargo to warehouse, declaration, release, lading, storage, truck dispatch until delivery. The system not only boost operational efficiency within an organization, but also help build closer ties and cooperation between the logistics service providers and the business customers. In order to help business customers in realizing competitive advantage through logistics excellence, the company also put supply chain entities together and established LSPHUB in 2004 as a single platform for business customers to manage their shipments, PO and warehousing. At the end of the day, the main purpose is to utilize e-business to link upstream suppliers with downstream dealers so that business customers can achieve maximum benefit from a more integrated supply chain and transparent flow of information between the entities.

b. Products and Service

Company P develops, sells and supports a wide range of products that in some cases can be customized and adjusted to business customer requirements. It actually first came out with only freight forwarding and declaration system. But in response to the rapidly changing business environment, it eventually developed more product and software solutions to better meet customer demands for one-stop solution services. In general, the company focuses its product offerings in 9 categories:

1. E-Logistics HUB&B2Bi Solutions 2. Global Freight Forwarding System 3. International Express Work Hub 4. Cargo Tracking System

6. Vendor & PO Management/VMI 7. Warehouse Management

8. Trucking & Transfer System 9. Global Logistics Solutions

For the purpose of this study, the focus is centered on analyzing the Global Logistics Solutions provided by company P, while emphasizing on how these solutions apply to the business customers instead of the logistics service providers.

Global Logistics Solutions for industry logistics business generally comprises of business users such as suppliers, traders, manufacturers, distributors, retailers and warehouses. The platform itself support seamless system integration activities between the upstream and downstream supply chain, starting from shipping management, e-Billing, PO/VMI EDI, to warehouse and trucking management.

Shipping Management System

Timeliness in customer service is essential to creating a successful customer experience. In fact, it is one of the most heavily-weighted factors in company-customer relationship. Internal efficiency in an organization is essential to achieve this timeliness of customer service. In today’s fast-paced business environment, information system and technology have emerged as the important drivers to enhance internal efficiency.

Shipping Management System allows timely feedback o shipment status to shippers and automatically transfers and converts shipping information directly into custom clearance data to shorten the processing time in between. Manual data entry that usually makes the process longer and more laborious can now be replaced with the system. Also, human error can be reduced to a minimum.

Figure 4-8 Shipping Management System Source: Company Official Website

e-Billing System

The e-Billing system is fully integrated with company’s accounting ERP system.

Companies can preview and download all billing documents from the system.

Moreover, no manual supervision and corrections are required to ensure billing accuracy. The e-Billing system comes with automatic verification processes that allow companies to generate billing output with per-second accuracy to save transmission time.

Figure 4-9 E-Billing System

PO/VMI EDI

Through the PO and Vendor Management System, companies can effectively arrange and monitor shipment location in a real-time manner. The system uses international standard EDI code, which means it can support warehousing systems from anywhere in the world. Control of purchasing orders, logistics processes and procurement costs are generally executed on the Web to promote paperless business operations. The system also integrates well with company’s accounting ERP system.

Figure 4-10 Vendor & PO Management/VMI EDI System Source: Company Official Website

Warehouse Management System

Warehouse managers in a company are mostly in charge of multiple warehouses.

and operations might be challenging. As such, Warehouse Management System (WMS) is very important for warehouse managers. It is flexible and integrates well with front-end business systems, which is an important factor to be considered to achieve supply chain visibility. WMS provides real-time data to companies, and thus helping them in responding to customer queries quickly.

Figure 4-11 Warehouse Management System Source: Company Official Website

Trucking Management System

This transportation management system is a web-based service that uses GPS technology. It uses algorithms to create an optimal set of routes for each day’s deliveries, resulting in lower transportation costs for companies. Companies can fetch data analysis and chart reports to monitor irregular delivery patterns, drivers’

situation on the road and truck user rate. The system also has strict cost control and evaluation to ensure invoice’s due amount is collected and invoice is generated upon successful collection of payments.

Figure 4-12 Truck Management System Procedure Source: Company Official Website

Instead of merely selling products, Company P also provides the following services:

1. Logistics Information System for Consultation Services 2. 4PL Logistics Alliance Services

3. Great China Integrated Billing Monitoring & Management 4. Logistics Portal Site Services

5. Carriers/Airlines Integrated Services 6. Supply Chain Management

7. Global Logistics Integration & Management

For many years, Company P has been actively promoting its seamless systems integration and comprehensive consultancy services. These includes assisting business customers in the establishment of their internal SOP, planning and integration of their global information operations, systems and processes, as well as the integration of related systems solutions.

Through providing innovative services, the company aims to become the best system integration consultant for business customers, helps them grow abroad and further fosters industrial computerization.

c. Customers success stories on e-business strategies in supply chain integration Since it started out in 1996, Company P has seen some remarkable achievements along the way, particularly in providing and facilitating its customers to achieve supply chain integration. Two of its successful customer case studies are included in this study to allow the exploration and understanding of complex issues.

Company A

Not surprisingly, the global market share of Taiwan’s IT industry has grown dramatically in the last few decades. Company A has long been at the forefront of this growth. There were only a handful of employees back when the company first started as a motherboard manufacturer. Now it has become the leading technology company in Taiwan with employees all over the world. Its product lines are expanded to include almost every area of IT, including PC components, peripherals, tablets, servers, notebook and smartphones. Moreover, it is considered as one of the successful SCM players that gain and sustain its competitive edge through leveraging the management of its supply chains.

A large company like Company A often has to talk to multiple freight forwarders, select its preferred ones and manage them. In the past, information exchange and data transmission are processed by phone, fax, email, paper or verbal order among others. These processes are extremely time intensive and costly as it can take days to weeks for employees to receive the order information. With over 20 freight forwarders on hands, such labor-intensive manual activities are very inefficient to the overall company performance. They are the potential sources of human error that will ultimately increase labor expenses.

Figure 4-13 Buyer-Supplier Information Exchange Source: Epp (2001)

In response to that, the company decided to cooperate with Company P to develop their first ever supply chain management system in 2003. It offered web-based service and worked as an online platform that connected freight forwarders to Company A. The company used this platform to notify its many freight forwarders that it had particular items to be shipped overseas. Forwarders would then log in to the platform through a network and prepare quotations. They were expected to give a detailed breakdown of the shipping costs to give a clear idea of how their service package compares to their competition’s. One with the best deal and adequate experience on the desired route was later approved by Company A.

When Company A initiated a booking notification and created a request message online (or known as e-booking), an electronic notification would automatically be sent to the forwarder via email. The system gave Company A real-time visibility into forwarders response progress and allowed it to engage with its forwarders at a fast pace, all in all reducing the average quote cycle time in half.

Moreover, it also implemented an e-logistics project for a more effective SCM in 2004. The project involved integrating its notebook PC and motherboard assembly factories with 200 component suppliers, 50 logistics service providers, and 3 banks. An e-procurement and e-payment system were introduced along the project,

Companies usually carry safety stock in their inventories to reduce the risk of stock out in case there is unstable demand. But this often increases demand amplification throughout the chain and results in higher inventory level. As such, effective data sharing and data transparency are essential in supply chains to make necessary adjustments in advance and avoid the risk of overstocking. Therefore, it also incorporated VMI system so that components and materials for its notebook PC and motherboard can be tracked in real-time through the entire supply chain.

The system enables it to share information including order forecasts, order status, inventory and shipment with its upstream suppliers. Such integration processes have reportedly brought a 30% increase in productivity per man-year and customer service level as well as reduce the processing time by 30%.

Company I

Coming a long way in its 60 years of business since it started out in the 1940s, Company I has grown rapidly to become the internationally known home furnishing company with operations in 42 countries. As of 2016, it had a total number of 183,000 employees worldwide and carried over 9,500 products including home furniture and accessories. The Swedish-based company is also the world’s largest furnishing retailer with more than 300 stores and 30 franchised units.

Forging Ahead into Age of E-commerce

In 2006, Company I launched an ecommerce platform in selected areas across the UK. The company has relied on the customers to drive out of town to its huge stores and get them to tote purchases all the way home by themselves for many years. This time around, it is investing in online shopping and positioning itself to offer a platform that can respond to changing consumers, including mobile. The initial plan was to focus on testing the new online platform in the UK before eventually aimed at all markets around the world. The CEO then revealed that online sales exceeded 1 billion euros for the first time in 2015, accounting for about 3 percent of total sales. The company expects the online business to generate 10 percent of the company’s total revenue by 2020. It also wants to be active online in all its current markets in the near future.

With such rapid expansion plans and strong expectations, the company works constantly to improve and optimize its distribution processes. It was well aware of the need for a track and trace solution to give out real-time visibility of the stock information status from the time it leaves the distribution center to the time its arrival at customer’s home. It wanted to improve the information regarding the status of stock deliveries that the customer service team provides to customers, so that the time taken to solve customer queries can be kept to a minimum.

The company used to depend heavily on its paper-based system which lead to a considerably large number of errors because the system was completely inadequate. Occasionally, errors would occur here and there throughout the process of deliveries to customers. The most common errors happened during the process of loading items to the delivery truck, or when there were late delivery or failed delivery attempts. As a result, many items constantly got mislaid and undelivered stock had to be returned to the warehouse. Worse was, the company did not even notice why and how the numbers became increasingly inaccurate as the errors happened at the same time the company were replenishing large volumes of stock.

Supply Chain Strategy for E-commerce

An advanced data capture solution system was later deployed at the company on a range of wireless handheld devices. The devices used were from Motorola’s MC9090 Series, which was a combination of mobile computers and printers. The solution system allowed these devices to integrate directly with the company’s existing Delivery Management System to provide real-time information on every item that left the Distribution Center.

Drivers could view the list of visits for their shifts on that day through the mobile computers. This process was made possible by linking the mobile computers directly to the Delivery Management System. Once connected, the mobile computers would retrieve route data from within and present it out on the screen.

In fact, the mobile computers not only can show a list of visits, but also the customer information details, address and any additional remarks for each visit.

starting from scanning the items, marking them delivered or collected, to labelling items that were damaged and should be returned to the warehouse. The result was then automatically sent back to the Delivery Management System.

The fact that the system has the ability to capture a range of delivery data and send the information back within a short time at any time of the day really helped customer services team to proactively respond to customers’ queries. Alternative arrangements with the customers or replacements for any damaged goods could be managed ahead of time before the truck arrives back at the warehouse. As such, the company is able to process more orders while at the same time maintain top-notch service level.

Meanwhile in Taiwan, the company outsourced its deliveries to a local logistics service provider (LSP). Information exchange and order management were executed through manually checking order forms one by one in the earlier days.

However, such a paper-based system is set to create a realistic workload as stream of order increases. Another problem is that the LSP is primarily responsible for maximizing fleet availability and utilization of cargo space loading area. Manual calculation of container or truck loading might not always lead to the optimal solution. All these factors, though do not necessarily bring direct impact to Company I, will still affect the company’s timeliness in its delivery to customers, resulting in a lower overall customer satisfaction.

However, such a paper-based system is set to create a realistic workload as stream of order increases. Another problem is that the LSP is primarily responsible for maximizing fleet availability and utilization of cargo space loading area. Manual calculation of container or truck loading might not always lead to the optimal solution. All these factors, though do not necessarily bring direct impact to Company I, will still affect the company’s timeliness in its delivery to customers, resulting in a lower overall customer satisfaction.