An electronics manufacturer discovered that it was losing a lot of business to competitors that had invested in e-business. Managers were alarmed to realise that, in some cases, business was being lost because competitors had reduced their prices to levels that were very difficult for them to match. Their reaction was to set up an e-business unit of their own with the objective of cutting prices across the board and suffer what they hoped would be short term losses in order to maintain a presence in the market. Using the data gathered on-line, the company was able to calculate the life time value of its customers and, consequently, the extent of the short term loss it was worth suffering in order to retain the customer long term. E-business developments will inevitably lead to a need for better understanding of supply chains and value chains .
Supply chains are likely to be shortened and the value that can be made along the chain threatened.
Consequently, there will be a need for more efficiency and less risk in order to control costs . Analytical techniques exist that can help you to get a better grip on e-business. The UK has more OR practitioners than any other EU country and so there is an opportunity for the UK to gain a competitive edge. Operational Research practitioners can design systems for e-businesses that can inform the business case for a new operation, provide insight into the impact of the new business on all of the business s processes and simulate a range of probable scenarios and outcomes. In addition, OR techniques can be used to analyse supply and value chains , assess business risks and manage customer relationships .