COMP 2113 COMP 2113 Electronic CommerceElectronic Commerce

Week 10Week 10

April 2008April 2008

Week 10: E-Business & Week 10: E-Business & Supply Chain ManagementSupply Chain Management

Objectives:Objectives: Explain the advantages of applying e-business Explain the advantages of applying e-business

technologies to business processestechnologies to business processes Distinguish between e-commerce, e-business, and Distinguish between e-commerce, e-business, and

supply chain managementsupply chain management Explain the purpose, limitations, and dangers Explain the purpose, limitations, and dangers

associated with web-based supply chain mgtassociated with web-based supply chain mgt Relate EFT to its B2C equivalentRelate EFT to its B2C equivalent

What is E-Business What is E-Business really about?really about?

Using a Web site for a single business function such as making a sale is only the beginning...

The true value of e-business only becomes clear when it penetrates to the core of the businesse.g. IBM have made huge cost savings

What is E-Business about?What is E-Business about?

When ALL business functions become e-functions…something profound happens…

Operations become:more efficientmore nimbledramatically less expensive

What is E-Business about?What is E-Business about?

This is NOT about incremental improvementbut major organisational change…

Highly radical… implies a fundamental redesign of the enterprise

Web sites offering incremental solutions for e.g. B2C e-commerce may be a good start…but this is very much just a start!

Business Functions hugely Business Functions hugely enhanced by communication enhanced by communication

technologiestechnologies E-procurement E-procurement

EDI or web-basedEDI or web-based Electronic stock controlElectronic stock control

EDI or web-basedEDI or web-based Ordering (EDI) and Payment (EFT)Ordering (EDI) and Payment (EFT) E-deliveryE-delivery

EDI or web-basedEDI or web-based

E-procurementE-procurement

Improves communications & Improves communications & relationships with suppliersrelationships with suppliers

Greater scope for potential Greater scope for potential suppliers to become visiblesuppliers to become visiblee.g. via specialist e-procurement websitese.g. via specialist e-procurement websites

Increased competition between Increased competition between supplierssuppliersso improved serviceso improved service

E-procurement websitesE-procurement websites Third Party runs the website to Third Party runs the website to

bring buyers and sellers togetherbring buyers and sellers together Often operate in a single retail Often operate in a single retail

sectorsectorimproves efficiencyimproves efficiency

Provide auctionsProvide auctionsfacility for buyersfacility for buyersfacility for sellersfacility for sellers

Electronic “Just-in-Time” Electronic “Just-in-Time” Stock ControlStock Control

Suppliers communicate directly Suppliers communicate directly with the business’s internal with the business’s internal systemssystems

Orders for new raw materials Orders for new raw materials automatically generated when automatically generated when stock levels fall below certain limitsstock levels fall below certain limits

““Just-in-time” Stock ControlJust-in-time” Stock Control Works well if:Works well if:

excellent communications with excellent communications with suppliersupplier

supplier can deliver the goods supplier can deliver the goods promptlypromptly

All goes pear-shaped very quickly if All goes pear-shaped very quickly if deliveries can’t get throughdeliveries can’t get throughe.g. during a fuel crisis…e.g. during a fuel crisis…

Supply Chain Supply Chain CommunicationsCommunications

Must be fast & reliableMust be fast & reliable Common agreed format (EDI)Common agreed format (EDI)

started in early 1980sstarted in early 1980suse still increasinguse still increasinggreat scope for cost-cuttinggreat scope for cost-cutting

““open standard” format (web-based)open standard” format (web-based)favoured over EDI - cost & flexibility?favoured over EDI - cost & flexibility?

What is EDI? (Electronic What is EDI? (Electronic Data Interchange)Data Interchange)

The direct, application-to-application transmission of business documents e.g.stock informationpurchase ordersinvoicesremittance advice

What makes EDI so effective for E-business?

Business documents sent directly from an organisation’s internal applications to a trading partner’s computer systemprovides a truly integrated information flowincreases productivitymakes it possible to exchange data without

needing to re-key transaction information

Other effects of EDI Minimises staff involvement

reduces the delays and errors that accompany the manual processing of business documents

Helps organisation control costs Increases efficiency Improves customer service levels Therefore saves money through:

decreased safety-stock inventory levelsdiminished administrative requirements

EDI standards

A series of uniform message formats used to create electronic versions of traditional paper documents:initially used by specific industries for the

exchange of documents within that industry also by specific companies for the

exchange of documents with their many suppliers

EDI Management Software

Software that extracts outgoing data from and inserts incoming data into internal computer applications

It also includes:translation software enabling a computer to

“speak the language of EDI”appropriate communication software

allowing sending and receiving computers to communicate EDI transactions accurately and efficiently

EDI Translation Software

Accommodates many EDI standards Includes features and functions that

help manage overall EDI activity Some companies choose to develop

their own EDI translation software Many find their needs are best met with

a software package provided by a company that specialises in EDI

The Whole Package – Supply Chain Management, and changes of terminology

After the boom-and-bust, e-commerce was no longer a sexy word…

To sell the ideas behind e-commerce more effectively…E-commerce became e-businessE-business using EDI and/or the web

became “Supply Chain Management”

Benefits of Supply Chain Management

Improved speed, economy, accuracy in handling business documents

More specifically:convenient exchange of business

documents during or outside office hoursreduced business transaction costsreduced information float

Benefits of Supply Chain Management

Improved customer service Faster inventory replenishment and

better overall inventory control Reduced inventory carrying cost Reduced safety stock Advanced notification of shortages,

cuts, substitutions

Benefits of Supply Chain Management

More reliable forecasting for supplier and vendor Improved shipping, receiving and cargo tracking Quick, accurate and automatic reconciliation of

documents Opportunity to negotiate better discounts &

payment terms Improved cash flow management More efficient data flow with & between

businesses More productive trading partner relationships

Business Information that can be exchanged electronically

Purchasing? Finance and Accounting? Marketing? Inventory Management? Insurance? Logistics? Manufacturing?

Supply Chain Networks and VANs

(Value Added Networks) Make e-communication easier and more

convenientpossible to complete communications to all

partners in a single transmission Acts as a clearing-house to free businesses

from transmitting documents one-by-one to each trading partner – otherwise very costly!

Post documents to EDI mailboxes for retrieval at convenient times

Connect incompatible computers Safeguard data integrity & protect systems

security

VALUE-ADDED SERVICE PROVIDER (VASP)

Basic “Supply Chain” Service:essential mailbox and communications

services that functionally define all EDI networks

may vary significantly among service providers

can have a major impact on a company’s EDI effectiveness

VALUE-ADDED SERVICE PROVIDER (VASP)

Optional Additional Services:web-based trading solutionsin-network translation between

EDI standardsenvelope or segment conversionmedia conversion of EDI data to

human-readable format & subsequent mailing or facsimile transmission to a non-EDI trading partner

How does EDI work?

Sender: extracts required electronic information from business applications

Transmits this information via telecoms line or Internet

Receiver:directly imports information into information

systemsautomatically processedinterfaced with internal applications

Web-based Data Interchange

EDI standards still tend to be proprietary, and different for different industries

Web-based communication:much cheaper than EDI (reduced comms

charges)follows an International format

B2B models beyond EDI

a. Internet procurement between known partnersInternet replaces traditional EDI linksmay also lead to joint product planning

b. Electronic cataloguessupplier makes available a catalogue over

the Internet that can be accessed by purchasers:

3 types - purchaser-led, supplier-led, 3rd-party-led

B2B models beyond EDI Marketplaces that enable companies to

sell/buy materials in an openmarket environment - either with set prices or in open bidding.

Can be organised:within an industry (vertical)across industries (horizontal)

e.g. retail-led eBay and QXL auction sites

B2B models beyond EDI

Web-based “marketplace” concept might develop

Could become the electronic versions of the old physical trading exchanges idea:London metal ExchangeInternational petroleum Exchange

Could include:electronic order placementdirect links to ERP systems

Marketplaces/Business Hubs

Some business hubs e.g. Clearlybusiness.com40% owned by Barclays60% by Freeserve

aim to provide a range of 3rd-party services...

Marketplace Services

Access via portal route Development of a B2B marketplace E-settlement service (ordering,

invoicing, payment)both parties can track transaction progressreconcile this with internal systems

Development of e-trust services (digital signatures and transfer authorities)

Aeroxchange A B2B exchange set up by a number of

airlines (including AirCanada, Cathay pacific, Lufthansa, SAS, KLM)

Created a number of services that add to a full Internet-enabled supply chain management infrastructure:build and search interactive cataloguesauctionsrequests for quotations

Aeroxchange

Architecture of Aeroxchange based on a B2B platform provided by Oracle

Access to site via a secure connection using 128-bit SSL encryption

Also maintains a profile of member companies and identifiesdesignated users and their access profiles

Electronic Funds Transfer (EFT)

Enables B2B financial transactions to happen on-line

Equivalent to B2C payment system Uses the International Banking network

to transfer funds digitally As with B2C solutions, a merchant

services provider is needed to provide secure access

Electronic Funds Transfer (EFT)

For B2B solutions, funds often need to be transferred electronically directly to/from bank accounts

Anyone can use a merchant service for EFTe.g. to put funds very quickly into their

account

Electronic Funds Transfer (EFT)

High street” Merchant Services not cheape.g £15 for a single funds transfer to/from a

customers bank account Cheaper to use EFT via a telecoms

connection Even cheaper via the the Internet...

E-delivery

Delivery information can be sent electronically

Business competitors can use this information for collaborative purposes to deliver each others goods....sale already made anywayreduces costsso everyone gains...

Issues for E-Business

Larger businesses can afford the massive costs of going completely electronicbeen moving that way for decades

What of the SME?slower at computerisationslower at using EDI/EFTslower at using websites for trading/marketingsoon in the unenviable position of either becoming

an e-business or falling out of the supply chain??

Issues for E-businesses

Large organisations have headaches as a Large organisations have headaches as a result of massively computerisingresult of massively computerising

Websites frequently attacked by hackersWebsites frequently attacked by hackers danger of data lossdanger of data loss or data espionageor data espionage

Own staff also a threatOwn staff also a threat often due to incompetence…often due to incompetence… plenty of recent examplesplenty of recent examples

What Price Information What Price Information Security?Security?

Data is usually not lost through lack of Data is usually not lost through lack of technology but lack of IT knowledgetechnology but lack of IT knowledge

Maybe businesses became e-businesses too Maybe businesses became e-businesses too quickly?quickly? failed to get right procedures in place?failed to get right procedures in place? failed to provide enough of or the right staff failed to provide enough of or the right staff

training?training? It will be expensive for such businesses to It will be expensive for such businesses to

catch up…catch up… but even more expensive from loss in public but even more expensive from loss in public

confidence in their business practices….confidence in their business practices….

More reading

Supply Chain Management – electronic resources for UK businesses:http://www.nb2bc.co.uk/supply_chain_solutions http://www.businesslink.gov.uk/bdotg/action/detail?ty

pe=RESOURCES&itemId=1074408749

Next week:E-business/E-commerce strategy; the examFuture developments for e-business…

» m-commerce, anyone?