sealPurdue News

December 1998

E-business clicks for consumers, stockholders

WEST LAFAYETTE, Ind. -- Consumers and stockholders stand to be on the winning end of the on-line business phenomenon, says a Purdue University marketing and e-commerce expert.

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"The efficiency of e-business is starting to bring down the cost of manufacturing goods and marketing services of all kinds," says Patrick Duparcq, assistant professor of management. "And the savings from doing business on the Internet will eventually be passed along to the customers, and more value will be added for the stockholders, particularly in manufacturing."

Duparcq teaches courses on electronic commerce at Purdue, Northwestern and Tilburg University in the Netherlands. He also is involved in the electronic commerce education initiative for Hewlett-Packard Inc. and helps Motorola University develop its on-line strategy.

It's the Internet's ability to integrate business functions that Duparcq says will create the efficiency in operations and eventual cost-savings.

"The Internet does three things for users," he says. "It aggregates, integrates and cooperates.

"For instance, if I'm shopping for a car, there are several activities made easier and faster on the Internet. I can compare prices and models and safety features. I can also check out how much my car insurance will go up if I buy a certain vehicle, contact the bank on-line about a car loan, and calculate a car payment, all at the same time. In other words, the Internet helps to aggregate in one instant and one place a multitude of consumer activities: one-stop-shopping convenience for the customer.

"A purchasing manager at an auto manufacturing operation can do the same thing for car parts, pricing and cost assessment. Moreover, connected suppliers can automatically replenish inventories." That's the integration function.

Duparcq says e-business also can strengthen the relationship between manufacturers and suppliers. That's the cooperative function of the Internet.

"A company with an effective e-business strategy is able to build strategic partnerships with its suppliers," he says. "For instance, once an order is placed on the front end of the manufacturing operation, data is transmitted simultaneously to the supplier and to the internal departments like scheduling and production, helping them staff and plan. That way the supplier is able to respond to real consumer demand, does not have to warehouse parts that aren't needed, and can forecast what its customers are going to need based on real numbers, not on speculation. That's a cost-savings and a valuable benefit for both."

Case in point? The Dell Computer Co. The company mass customizes computers, meaning that it doesn't make anything until it receives an order.

"Dell currently turns over its parts inventory every eight days," Duparcq says. "That's a small fraction of the industry average, and Dell plans to cut it down to four days within the next 12 months or so."

He says that Dell already has a cash conversion cycle of negative eight days. That means Dell is paid by its customers eight days before it has to pay its suppliers.

"Because Dell is in such solid financial shape, it can pass along the savings to consumers or its stockholders, or it can invest in an even leaner operation," he says. "I think the Internet will be able to do that for manufacturers of all types of products. But they need to start thinking about cooperation, integration and aggregation. Sales alone won't create the benefits."

The Gartner Group, an e-business research organization, predicts that by the year 2003, 70 percent of all business relationships will be "nontraditional" -- either long-term strategic, as in suppliers and manufacturers, or very short-term tactical, like consultants -- and most will be driven by an on-line infrastructure.

"That's why e-commerce courses like those at Purdue, Northwestern, Vanderbilt and other universities are always full," Duparcq says. "Business and management students are looking ahead to the future of business and realize that new skills will be needed."

Source: Patrick Duparcq, (765) 494-4461; e-mail,

Writer: Kate Walker, (765) 494-2073; e-mail,

Purdue News Service: (765) 494-2096; e-mail,

Erica Hill, who earned her master's degree in management in May, is one of many management students at Purdue benefiting from new courses in e-business offered by Patrick Duparcq.
Color photo, electronic transmission, and Web and ftp download available. Photo ID: Duparcq.e-com
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