Electronic Commerce

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Electronic Commerce
MIS 6453 -- Spring 2006

• B2B eCommerce Issues

Instructor John Seydel, Ph.D.
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Student Objectives

• Summarize the various financial and information
  transactions typical among businesses
• Discuss how the Internet can/does improve B2B
  transactions
• Describe whats involved in electronic data
  interchange
• Discuss the contributions the Internet has made
  to supply chain management
• List and describe the various electronic
  marketplaces, portals, etc. made possible for B2B
  exchanges

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Agenda

• Some old business
• Wrap up discussion of eMarketing
• Complete initial HTML exercise
• Look at markup
• Review FTP process
• Next, lets discuss B2B issues via the KK team
• As warranted, some final overview ands summary
  comments regarding B2B ecommerce . . .

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Purchasing, Logistics, and Support

• Purchasing activities include identifying
  vendors, evaluating vendors, selecting specific
  products, placing orders
• Supply chain (network) part of an industry
  value chain that precedes a particular strategic
  business unit
• Procurement includes all purchasing activities,
  plus monitoring of all elements of purchase
  transactions
• Supply management term used to describe
  procurement activities
• Sourcing procurement activity devoted to
  identifying suppliers and determining their
  qualifications
• eProcurement or e-sourcing use of Internet
  technologies in procurement and sourcing
  activities

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Typical Purchasing Process
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Direct versus Indirect Materials

• Direct materials materials that become part of
  the finished product in a manufacturing process
• Replenishment purchasing the company negotiates
  long-term contracts for most of the materials
  that it will need
• Indirect materials other materials that the
  company purchases, including factory supplies

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Logistics Activities

• Managing
• Inbound movements of materials and supplies
• Outbound movements of finished goods and services
• Objective of logistics to provide the right
  goods in the right quantities in the right place
  at the right time
• Logistics management important support activity
  for both sales and purchasing activities

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Materials-Tracking Technologies

• Radio frequency identification devices (RFIDs)
• Small chips that use radio transmissions to track
  inventory
• New development is the passive RFID tag
• Passive RFID tag does not need a power source
• Small enough to be installed on the face of
  credit cards or sewn into clothing items
• Other AutoID technologies also (e.g., bar codes)

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Support Activities eGovernment

• Support activities include categories of
  finance and administration, human resources, and
  technology development
• Knowledge management intentional collection,
  classification, and dissemination of information
  about a company, its products, and its processes
• eGovernment use of electronic commerce by
  governments and government agencies to
• Perform functions for their stakeholders
• Employ people, buy supplies from vendors, and
  distribute benefit payments
• Collect taxes and fees from constituents

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Electronic Data Interchange

• Computer-to-computer transfer of business
  information between two businesses
• EDI compatible
• Firms that exchange data in specific standard
  formats
• Business information exchanged is often
  transaction data
• Most B2B electronic commerce uses an adaptation
  of EDI or is based on EDI principles

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Data Interchange History

• 1950s companies began to use computers to store
  and process internal transaction records
• In 1968 a number of freight and shipping
  companies formed the Transportation Data
  Coordinating Committee (TDCC)
• TDCC created a standardized information set

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Broader Standards

• American National Standards Institute (ANSI)
• Has been coordinating body for standards in the
  United States since 1918
• Does not set standards itself
• Has created a set of procedures for the
  development of national standards
• Accredits committees that follow set procedures
• Accredited Standards Committee X12 (ASC X12)
• Chartered by ANSI to develop uniform EDI
  standards
• Include information systems professionals from
  over 800 businesses and other organizations
• Transaction sets names of formats for specific
  business data interchanges
• In 1987 United Nations published first
  standards under the title
• EDI for Administration, Commerce, and Transport
  (EDIFACT, or UN/EDIFACT)
• Late 2000 ASC X12 organization and UN/EDIFACT
  group agreed to develop one common set of
  international standards

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Example ASC X-12 Transaction Sets
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Example UN/EDIFACT Transaction Sets
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EDI How it Works

• EDI implementation can be complicated
• Example
• Consider company that needs a replacement for one
  of its metal-cutting machines
• Paper-based purchasing process
• Buyer and vendor are not using any integrated
  software
• Information transfer between buyer and vendor is
  paper based

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The Old Way . . .
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The New Way
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EDI Connectivity

• Direct connection EDI
• Requires each business in the network to operate
  its own on-site EDI translator computer
• EDI translator computers are connected directly
  to each other using
• Modems and dial-up telephone lines or
• Dedicated leased lines
• Indirect connection EDI to send an EDI
  transaction set to a trading partner
• VAN customer connects to the VAN then forwards
  EDI formatted message to VAN
• VAN logs the message and delivers it to trading
  partners mailbox
• Trading partner then dials in to the VAN and
  retrieves its EDI-formatted messages

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Direct Connection EDI
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Indirect Connection VAN
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VAN Advantages/Disadvantages

• Advantages
• Users need to support only the VANs one
  communications protocol
• The VAN
• Records message activity in an audit log
• Can provide translation between different
  transaction sets used by trading partners
• Can perform automatic compliance checking
• Disadvantages
• Cost most VANs require an enrollment fee, a
  monthly maintenance fee, and a transaction fee
• Using VANs can become cumbersome and expensive
  for companies that want to do business with a
  number of trading partners, each using different
  VANs

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EDI and the Internet

• Initial roadblocks to conducting EDI over the
  Internet
• Concerns about security
• Internets inability to provide audit logs and
  third-party verification of message transmission
  and delivery
• Nonrepudiation ability to establish that a
  particular transaction actually occurred
• Open architecture of the Internet
• Has resulted in Internet EDI or Web EDI
• Allows trading partners unlimited opportunities
  for customizing information interchanges
• New tools such as XML helping trading partners
  be even more flexible in exchanging detailed
  information

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Financial EDI

• EDI transaction sets that provide instructions to
  a trading partners bank
• Automated clearing house (ACH) system service
  that banks use to manage accounts with each other
• EDI-capable banks equipped to exchange payment
  and remittance data through VANs
• Value-added banks (VABs) banks that offer VAN
  services for nonfinancial transactions
• Financial VANs (FVANs) nonbank VANs that can
  translate financial transaction sets into ACH
  formats

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Supply Chain (Network) Management

• Used to add value in benefits to the ultimate
  consumer at the end of supply chain
• Tier one suppliers develop long-term
  relationships with small number of suppliers
• Tier two suppliers manage relationships with
  the next level of suppliers
• Tier three suppliers provide them with
  components and raw materials
• Supply alliances long-term relationships
  created among participants in the supply chain
• Internet-supported SCM can provide needed
  flexibility, as well as reduced costs through
  better efficiency
• Key element of modern successful supply chain
  management
• Clear communications and quick responses
• However, cost of technologies required can be an
  impediment
• Trust a key issue
• Extensive information sharing is involved
• Continual communication helps to build trust

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Advantages of Using the Internet for SCM
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Portals and eMarketplaces

• Vertical portals (vortals)
• Offer a doorway (or portal) to the Internet for
  industry members
• Vertically integrated
• eMarketplaces
• Industry marketplaces focused on single
  industries
• Independent exchanges not controlled by a
  company that was an established buyer or seller
  in the industry
• Public marketplaces open to new buyers and
  sellers just entering the industry

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Private Exchanges

• Private store
• Has password-protected entrance
• Offers negotiated price reductions on limited
  selection of products
• Customer portal sites offer private stores
  along with services
• eProcurement software allows a company to manage
  its purchasing function through a Web interface
• Private company marketplace provides auctions
  request for quote postings, and other features
  
• Industry consortia-sponsored marketplaces
• Formed by several large buyers in a particular
  industry
• Covisint created in 2000 by a consortium of
  DaimlerChrysler, Ford, and General Motors
• Hotel Industry Marriott, Hyatt, and three other
  major hotel chains formed a consortium to create
  Avendra

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Marketplaces for B2B eCommerce
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Summary of Objectives

• Summarize the various financial and information
  transactions typical among businesses
• Discuss how the Internet can/does improve B2B
  transactions
• Describe whats involved in electronic data
  interchange
• Discuss the contributions the Internet has made
  to supply chain management
• List and describe the various electronic
  marketplaces, portals, etc. made possible for B2B
  exchanges

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Appendix
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Using SmartFTP

• Enables transferring files between computers
• Upload/download
• Client to server / server to client
• Assumes
• Local files stored in My Documents
• Server files stored in public_html
• Process (double-click on icon to start)
• Start by double-clicking SmartFTP icon (or
  navigate through Start Programs . . . )
• Open connection to server (enter values into
  textboxes)
• Host www.suse1.astate.edu
• Login your last name
• Password last 3 digits of student number plus
  first initial of last name
• Port 21
• Open Local Browser and navigate to My Documents
• Navigate server to public_html
• Tile windows horizontally
• Drag and drop to transfer files

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Value Chain for a Strategic Business Unit
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Industry Value Chain for a Wooden Chair