COMP 2113 Electronic Commerce

1. COMP 2113 Electronic Commerce Week 10 April 2008

2. Week 10: E-Business & Supply Chain Management • Objectives: • Explain the advantages of applying e-business technologies to business processes • Distinguish between e-commerce, e-business, and supply chain management • Explain the purpose, limitations, and dangers associated with web-based supply chain mgt • Relate EFT to its B2C equivalent

3. What is E-Business 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 business • e.g. IBM have made huge cost savings

4. What is E-Business about? • When ALL business functions become e-functions… • something profound happens… • Operations become: • more efficient • more nimble • dramatically less expensive

5. What is E-Business about? • This is NOT about incremental improvement • but 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!

6. Business Functions hugely enhanced by communication technologies • E-procurement • EDI or web-based • Electronic stock control • EDI or web-based • Ordering (EDI) and Payment (EFT) • E-delivery • EDI or web-based

7. E-procurement • Improves communications & relationships with suppliers • Greater scope for potential suppliers to become visible • e.g. via specialist e-procurement websites • Increased competition between suppliers • so improved service

8. E-procurement websites • Third Party runs the website to bring buyers and sellers together • Often operate in a single retail sector • improves efficiency • Provide auctions • facility for buyers • facility for sellers

9. Electronic “Just-in-Time” Stock Control • Suppliers communicate directly with the business’s internal systems • Orders for new raw materials automatically generated when stock levels fall below certain limits

10. “Just-in-time” Stock Control • Works well if: • excellent communications with supplier • supplier can deliver the goods promptly • All goes pear-shaped very quickly if deliveries can’t get through • e.g. during a fuel crisis…

11. Supply Chain Communications • Must be fast & reliable • Common agreed format (EDI) • started in early 1980s • use still increasing • great scope for cost-cutting • “open standard” format (web-based) • favoured over EDI - cost & flexibility?

12. What is EDI? (Electronic Data Interchange) • The direct, application-to-application transmission of business documents e.g. • stock information • purchase orders • invoices • remittance advice

13. What makes EDI so effective for E-business? • Business documents sent directly from an organisation’s internal applications to a trading partner’s computer system • provides a truly integrated information flow • increases productivity • makes it possible to exchange data without needing to re-key transaction information

14. 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 levels • diminished administrative requirements

15. 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

16. 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

17. 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

18. 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-business • E-business using EDI and/or the web became “Supply Chain Management”

19. Benefits of Supply Chain Management • Improved speed, economy, accuracy in handling business documents • More specifically: • convenient exchange of business documents during or outside office hours • reduced business transaction costs • reduced information float

20. 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

21. 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

22. Business Information that can be exchanged electronically • Purchasing? • Finance and Accounting? • Marketing? • Inventory Management? • Insurance? • Logistics? • Manufacturing?

23. Supply Chain Networks and VANs(Value Added Networks) • Make e-communication easier and more convenient • possible 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

24. 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

25. VALUE-ADDED SERVICE PROVIDER (VASP) • Optional Additional Services: • web-based trading solutions • in-network translation betweenEDI standards • envelope or segment conversion • media conversion of EDI data to human-readable format & subsequent mailing or facsimile transmission to a non-EDI trading partner

26. 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 systems • automatically processed • interfaced with internal applications

27. 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

28. B2B models beyond EDI • a. Internet procurement between known partners • Internet replaces traditional EDI links • may also lead to joint product planning • b. Electronic catalogues • supplier makes available a catalogue over the Internet that can be accessed by purchasers: • 3 types - purchaser-led, supplier-led, 3rd-party-led

29. 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

30. B2B models beyond EDI • Web-based “marketplace” concept might develop • Could become the electronic versions of the old physical trading exchanges idea: • London metal Exchange • International petroleum Exchange • Could include: • electronic order placement • direct links to ERP systems

31. Marketplaces/Business Hubs • Some business hubs e.g. Clearlybusiness.com • 40% owned by Barclays • 60% by Freeserve • aim to provide a range of 3rd-party services...

32. Marketplace Services • Access via portal route • Development of a B2B marketplace • E-settlement service (ordering, invoicing, payment) • both parties can track transaction progress • reconcile this with internal systems • Development of e-trust services (digital signatures and transfer authorities)

33. 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 catalogues • auctions • requests for quotations

34. 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

35. 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

36. 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 EFT • e.g. to put funds very quickly into their account

37. Electronic Funds Transfer (EFT) • High street” Merchant Services not cheap • e.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...

38. 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 anyway • reduces costs • so everyone gains...

39. Issues for E-Business • Larger businesses can afford the massive costs of going completely electronic • been moving that way for decades • What of the SME? • slower at computerisation • slower at using EDI/EFT • slower at using websites for trading/marketing • soon in the unenviable position of either becoming an e-business or falling out of the supply chain??

40. Issues for E-businesses • Large organisations have headaches as a result of massively computerising • Websites frequently attacked by hackers • danger of data loss • or data espionage • Own staff also a threat • often due to incompetence… • plenty of recent examples

41. What Price Information Security? • Data is usually not lost through lack of technology but lack of IT knowledge • Maybe businesses became e-businesses too quickly? • failed to get right procedures in place? • failed to provide enough of or the right staff training? • It will be expensive for such businesses to catch up… • but even more expensive from loss in public confidence in their business practices….

42. 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?type=RESOURCES&itemId=1074408749 • Next week: • E-business/E-commerce strategy; the exam • Future developments for e-business… • m-commerce, anyone?