Aalsmeer Flower Auction is a flower auction located in Aalsmeer the Netherlands that offer global growers, wholesalers and exporters a central marketplace in which to trade flowers and plants. It is the largest flower auction in the world. The Aalsmeer location is the biggest trade center in the world. The auction building of the flower auction in Aalsmeer is the third largest building in the world in terms of floor space covering 990,000 m² (10.6 million sq ft). Around 20 million flowers from all over the world (Europe, Colombia, Ethiopia, etc) are traded on a daily basis at the Aalsmeer facilities. The center is known for its sophisticated facilities for processing and assembly, for example of small bouquets. The auction complex houses businesses in trade, export and the processing of decorative plants. The logistical services are completely geared to processing large quantities of products quickly and efficiently.
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The management board of the Aalsmeer Flower Auction has set up a team to develop new information system, in order to bring a large difference in this business sector with the development and enhancement of technology from traditional business to e-business. E-business activities are to increase the efficiencies and effectives of the business by managing the business into a more competitive and global business environment. These including increase the relationship within the suppliers and buyers by fulfil the whole business transaction and requirement. Such as providing fresher product with more varieties to choose, smaller quantities order and provide multiple deliveries each day. As the IT consultant in the team, I have to provide a new and better information system to increase the whole business flow. By this the report suggest to Aalsmeer Flower Auction (AFA) to organize the business and expand to wider market range.
2.0 Business and information requirement
2.1 Porters Five Forces
Porter assumes that any organization is subject to five forces from its direct business environment (Porter, 2001). The impact of each force will be analyzed and discussed from Aalsmeer Flower Auction’s perspective.
Industry Competitors are rivals within an industry (Siegel 2009). The way the competition in flower market is going is likely to drive AFA out of the market if they did not have quick respond to the change in the market. This is because there is already an alternative way of marketing flowers which is the electronic flower market.
The threat of entry by new competitors is relatively low. Due to the capital requirement and the internet as a new market channel, it lowers down the entry barriers for new competitors. The only threat is likely come from small auctions specialized in niche markets.
The products sold are flowers and potted plants, which are common goods and reasonably stable. But there is the low Threat of Substitutes on the service side terms, Dutch auction widely accepted as the most efficient price determination method for flower trade.
The Bargaining Power of Buyers is high with the mergers and acquisitions among retailers. Now buyers can gain economic of scale by increased buyer concentration and can have influence in fixing the price for the flowers.
The Bargaining Power of Suppliers is equally high whereby auctions are owned by grower cooperatives and growers are the suppliers of flowers. They also prefer electronic way of selling.
2.2 Information Analysis and Requirement
AFA needs to understand its capability in terms of cost to have an electronic auction market, so that AFA can prepare budget whereby the cost is very important in cost- benefit analysis to know if the benefits outweigh the cost. AFA also needs to understand the ability in term of knowledge to have a new information system such as the hardware and software requirement to set up an electronic auction market. Hardware consists of computer equipment used to perform input, processing and output activities (Wingfield, Nick, 2007). Software such as programs that allow a computer to process payroll, send bills to customers and provide managers with information to increase profits, reduce costs, and provide better customer. The system by AFA must be secure and users must have the trust in using the system because online trading involves the use of credit cards for payment, buyers and suppliers must be assured that their cards are safe. To build system is one thing and to maintain is another thing. Cost of maintenance needs to be considered and the availability of the system engineer (Liu, Zhuang, Zhang 2007).
2.3 Proposed information strategy
In response to the threats discovered that are likely to affect the flower auction market. A WEB-AUCTION SYSTEM through the use of a website is the best information strategy. A web-auction system is a system where by auction market can be practice online and is a way to connect buyers and sellers easily. Web auction sites are a place where businesses are growing their markets or reaching customers for a low cost per transaction and also transforming the customer-supplier relationship. One of the most popular auction sites is eBay, which often has millions of auctions occurring at the same time. (Stair and Reynolds 2010).
3.0 System Development Methodology
System development methodologies are based on basic software engineering models, such as waterfall model, and spirals model (Metropolis et al., 1980; Budde et al., 1984; Walt Scacchi, 2001; Ricky Don Preuninger, 2006).
3.1 Waterfall Methodology
This is a life cycle models that is most common and classic, also referred to as a linear- sequential life cycle model. The waterfall model is a sequential software development process, in which progress is seen as flowing steadily downwards (like a waterfall). The waterfall development model has its origins in the manufacturing and construction industries; highly structured physical environments in which after-the-fact changes are prohibitively costly, if not impossible. It is very simple to understand and use. In a waterfall model, each phase must be completed in its entirety before the next phase can begin. At the end of each phase, a review takes place to determine if the project is on the right path and whether or not to continue or to discard the project.
This model is simple, easy to use and easy to manage due to the rigidity of the model whereby each phase has specific deliverables and a review process. Does not require highly skilled term members whereby term members at AFA are not familiar with electronic auction, so they have no experience about e-commerce. Phases are processed and completed one at a time and are works well for smaller projects where requirements are very well understood. It is not expensive whereby AFA want to reduce its transaction cost and will adopt a system that supports its objective. There is also disadvantage of using this model whereby no working software is produced until late during the life cycle. Poor model for long and ongoing projects which requirements are at a moderate to high risk of changing.
Waterfall is most appropriate for development of transaction oriented system (Kellen 2008). Buying and selling is takes place in AFA as an auction house. Sellers bring its flowers for buyers to see and bid for it. They require a suitable system that will facilitate this market online. Waterfall is appropriate for project that has clear objectives and solution (Kellen 2008). The objective of AFA is clear and known. The solution to achieve those objectives are been discussed in the business and information requirement (Kellen 2008). Waterfall is appropriate in a situation where project requirement is stated unambiguously and comprehensively. Project requirement for AFA is clear and that is to open a website that allow suppliers to display their flowers and buyers can visit the website to browse and search for varieties of flowers and flowers pots, bid for the flowers and make payment online so AFA can have their commission as a mediator. Waterfall methodology of system development is appropriate in a situation where team members are inexperienced (Kellen 2008). Electronic auction market is a new system to AFA. Due to the threats to the business AFA decided to go online. Therefore electronic way of bringing buyers and sellers together is new to them. There is possibility that AFA team members are inexperience about online auction. For example user’s personal information and their financial details need to be protected. Waterfall is also appropriate in a situation where resources need to be conserved (Kellen 2008).As discussed in the information requirement above that AFA need information requirement about the security of the system. The proposed system for AFA WEB-AUCTION SYSTEM through a website needs to be secure due to the kind of information that will be passing through the system and to get fully trust from customer, supplier and buyers.
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3.2 Enterprise Resource Planning (ERP)
I suggest that the methodology should be implemented together with a new information system to ensure the success of transformation AFA into a web auction system. I would propose AFA to use Enterprise Resource Planning (ERP) in order to help the organization to cope with the environment changing. ERP is replacing the current system and all the business transactions will be done and manage easily by information system.
ERP is integrated of business management processes and Information Technology to achieve business objectives. ERP plays an important role in supporting the operating of an E-business enterprise. ERP combines the entire department into a single, integrated software program that runs off a single database so that the various departments can more easily share information and communicate with each other. As AFA transforms from traditional business into E-business, the processes supported by ERP include sales order processing, inventory management and control, production and distribution planning, logistics, accounting, finance, and human resource functions of AFA. ERP impact the organization, the system allows the communication between AFA and its customers with closer together in the supply chain.
Besides, ERP allows AFA to process daily business data such as sales, inventory, shipping, human resource requirements, and billing statements. AFA sales and marketing process can be maintained by ERP through sales analysis, sales planning, pricing analysis. In addition distribution progression includes order management, purchasing as well as logistic arrangement. Example is when customer orders an amount of flower to be delivered to a location; the logistic might send to the wrong place or send the wrong order. But with ERP, the system might help in communicate the correct information to different department for the right delivery. People in these different departments all see the same information and can update it. When one department finishes with the order it is automatically routed via the ERP system to the next department. To find out where the order is at any point, you need only log in to the ERP system and track it down. With luck, the order process moves like a bolt of lightning through the organization, and customers get their orders faster and with fewer errors than before. The ERP also benefits AFA administration in salary planning to accomplish financial record-keeping and managerial accounts payable and receivable. AFA can use ERP to improve the quality and effectiveness of customer service, production and distribution. With the installing of ERP system, AFA might be able to make a reduction in transaction processing cost. ERP provide cross-functional information on business performance to managerial level of AFA so that they are efficient in making better decision. Implementing ERP system provides more flexible organizational arrangements, management responsibilities, and job performance to AFA so that the organization can simply profit from new business opportunities. Applying of ERP is needed by AFA in order to gain the efficiency and awareness required to succeed in this florist industry and to provide a business with wide collection of functionalities supported by features like flexibility, modularity & openness, widespread, finest business processes and global focus. ERP system in an organization is an extremely complex process. It takes times and consideration for systematic planning, expert consultation and well structured approach.
4.0 Impact and Effectiveness of the New System
The impact and the effectiveness of the new system can be perceived in the following three ways:
4.1 Impact and Effectiveness in Organization
By switching to an e- commerce system AFA will be able to achieve its business objective. E-commerce will enable innovation, redefine the value chain, reduce transaction costs, strengthen the link with wholesalers and retailers, and finally increase market share. AFA develops a website that allows sellers to displays their product via internet and buyers to browse the site to buy the products. It is a new way of doing business as far as AFA is concern. And this is too make sure that AFA can be reach from any part of the world as long as they have internet connection and computer. These manage to increase the market share of AFA. With invention of the new system by removing the non value added chain activities and add value added activities in the organization, AFA will need to redefine the value chain within the organization. Removing non value added activities AFA will able to reduce transaction cost by activities like pushing flowers cart round the auction house is no more useful and can be eliminated. Switching from traditional to e- commerce would eliminate some costs originally incurred in the transaction of flower by AFA, such as cost incur in storing the flowers and space. With e-commerce the flowers does not need to be kept in AFA warehouse and AFA does not need very big space to transact flowers. However, in the short run the costs incur in the development of the system might quite be high. AFA needs to do costs benefit analysis to know if the benefit outweigh the costs incur before implementing the e- commerce. More detailed information about varieties of flowers, delivery dates and current status can increase customer loyalty. In addition, the ability to consistently meet buyers’ desired delivery dates with more varieties and fresher products, and small quantities eliminates any incentive for buyers to seek other sources of supply.
4.2 Impact and Effectiveness in Management
Management of organization is responsible for making decision for the organization. Now that AFA is organizing the auction via e-commerce, the flow of information is accelerated because electronic connections and communications are already established. As a result, information can flow easily, directly, and rapidly from buyer to seller. By switching to e- commerce, AFA will be able to study the trend of the auction market and this will enable for market forecast that predicts high demand for which type of flower people order for most, by this AFA will need to source for this kind of flowers that is on high demand. AFA will needs to makes decision regarding the kind of flowers to display on their site and other decisions as regard the whole organization. With the aid of electronic market decision can be make easily and fast.
4.3 Impact and Effectiveness in Employee
People can be the most important element of e-commerce. They make difference between success and failure for most organization. E-commerce needs people who have expert knowledge about information technology. Information systems personal include all people who manage, run, program and maintain the system. AFA needs skilled people like this to run the organization now that they are adopting e-commerce. However, to the employees in AFA has to use with it since this is a new way of trading that there is the possibility that they do not have the required knowledge about e-commerce. AFA will needs to employed competent staff that run the organization perfectly. In addition to the elimination of some activities that are non value added, AFA will also retrench some staff, that services are no longer required.
Buyers and suppliers will also benefit from the new information system. Buyers have the opportunity of browsing and searching for varieties of flowers online and bid for their favorite. Suppliers do not have to transport their flowers to the auction house any longer, pictures of flowers and flower plants can be display via the internet. AFA still maintain their role as market mediator.
To ensure that the information system will provides the greatest level of benefit, it must be designed specifically for the business entity. Although many software packages can provide a level of utility to a business enterprise, it is important that the system that a business implements addresses the informational needs and usage behaviour of every individual who will participate in the operational effort. This means that any enterprise, whether large or small, must clearly understand its information needs to maximize the benefit of any system it chooses to implement. Implementing the new system involves user training, the successful conversion of data from the old system to the new, upgrading and or installing any needed equipment to support the system, and bringing the new system on-line.
Although evaluation should be taking place in every phase of analysis and design, users often cannot predict what issues will arise until the new system has been implemented. This is often the first opportunity users have to experience the application as a whole, and thus to critique what and how the application performs in relation to their expectations and experience. Implementing should include ongoing user evaluation of the system after installation.
It is highly recommended that AFA should establish a website that support online auction market. They should make sure that the site is as much as possible be user friendly to attract customers, suppliers and buyers. They should make sure that the site is fast and secure to increase the trust customers will have for them. As for the traditional auction house they should still maintain it on small scale.
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