Lecturer: Ellis E' Confer

1
Internet Supply Chain Management ECT 581
Winter 2003

• Lecturer Ellis E. Confer
• E-mail econfer_at_cs.depaul.edu
• Office Hours Tuesday 415 545 pm

2
Session Number 1

• Session Date January 7, 2002
• Session Objectives
• Introductions Administrative Items
• Course Overview
• Initial Course Topics
• Assignments
• Session Topics Introduction to Supply Chain
  Management B2B Systems
• Course Administration Overview
• Historical Perspective on Internet Ecommerce
  Evolution
• B2B Ecommerce Overview
• Supply Chain Management Overview     

3
ECT 581 Course Objectives

• To examine the links between business strategy,
  information system technology architecture, and
  technical platform implementation as it relates
  to Business-to-Business E-Commerce.

4
Course Description

• ECT 581 - Extranet Systems
• This course examines e-business strategies,
  architectures, technologies, approaches, and
  infrastructure requirements in the context of
  supply chain management (SCM). The focus is on
  the design, development, and implementation of
  e-business systems that facilitate the
  collaboration of an enterprise with its buyers
  and suppliers. Topics include SCM, global
  logistics management, messaging-based
  collaboration framework, extensible markup
  language (XML), extensible style sheet language
  (XSL), document type definition (DTD), and
  message queuing software. This course also
  examines the integration of e-business systems
  and back-end systems such as enterprise resource
  planning (ERP) systems, Web services, virtual
  private networks (VPN), and e-business security.
  Students will implement a collaborative extranet
  system component in team projects. Prerequisite
  ECT 555 and programming knowledge with Java and
  Visual Basic.

5
Prerequisites Text and Supplementary Reading
Materials

• Prerequisites ECT555, Design and Strategies
  for Internet Commerce, is a required
  prerequisite. D5420, Foundations of Distributed
  Systems, is recommended. Programming proficiency
  is required. It is very important that you have a
  good understanding of programming using Visual
  Basic and Java. Experience with VBScript is
  recommended.
• 1. Building B2B Applications with XML by Michael
  Fitzgerald published by John Wiley Sons, Inc.,
  Wiley Computer Publishing 2001, ISBN
  0-471-40401-2.
• 2. Introduction to Supply Chain Management, by
  Robert B. Handfield and Ernest L. Nichols, Jr.,
  Prentice Hall, 1999, ISBN 0-13-621616-1
• 3. Other books will be referred to and handouts
  and web-links will be given as appropriate.

6
Grading Procedure

• The students final grade will be based on a
  weighted average of the exam score, the project
  report deliverables, project presentation, and
  class participation. Weights are as follows
• Weight
• HW Assignments 15
• Project 20
• Initial Exam 20
• Midterm Exam 20
• Final Exam 20
• Class Participation 5
• Grades will be determined as follows
• 90 - 100 A 87 - 89 A-
• 80 - 86 B 77 - 79 B-
• 70 - 76 C 67 - 69 C-
• 60 - 66 D 0 - 60 F

7
Procedures and policies

• 1. No makeup exams will be given.
• 2. Homework assignments must be turned in on
  time.
• Late homework assignments will not be accepted.
• Turning in a hard copy version of an
  assignment is the most reliable way to ensure
  that assignments are received on time. When
  transmitting a soft copy of an assignment via
  email, make sure to give yourself adequate time
  for the mail to be delivered by no later than the
  day when the assignment is due. Email delivery
  problems do occur, please ask for a receipt of
  delivery.

8
ECT 581 Tentative Schedule of Discussions

• January 7 Course Administration
  Overview
•          Supply Chain Management Overview
•          B2B Ecommerce Overview
•          Business Trends Opportunities
  Challenges
•  
• January 14 Supply-Chain Management ERP
•          Supply Chain Value Chain
  Considerations (continued)
•          Enterprise Requirements Planning
•          Architectural Considerations
•  
• January 21 B2B Systems Architecture
  Key Technology
•          Architectural Considerations
  (continued)
•          Design Development Processes
•          Key Technology
•          XML

9
ECT 581 Tentative Schedule of Discussions
(continued)

• January 28 INITIAL EXAM
• 1st Homework Assignment Due
•   XML
•          XML as a Content Development Tool
  Internet-based EDI
•          Syntax Document Structure 
• February 4 XML (continued)
•  
• Project Abstracts Due
• February 11 XML (continued)
• Middleware
•         
• February 18 MIDTERM EXAM
• Middleware (continued)

10
ECT 581 Tentative Schedule of Discussions
(continued)
February 25 Security Considerations March
4 Security Considerations (continued) Future
Trends Emerging Techniques and Technology
Web services,
etc.. March 11 Project Final
Reports Due Project
Presentations Future Trends Emerging
Techniques and Technology (continued)   March
18 FINAL EXAM
11
Instructor background

• Professional experience
• 20 years experience as consultant and
  entrepreneur
• Stints with Accenture, IBM, Sybase, Tandem, CNA
  Financial
• Presently senior executive with consultancy
  software development firms
• Educational training
• BSEE from University of Michigan
• Concentration in digital design and solid state
  physics
• MBA from Indiana University
• Concentration in finance operations research
• One Favorite site www.allmusic.com (one of many)
• Leisure interests/hobbies gardening, music, fine
  dining, motorcycling, reading (non-fiction)

12
Logistics

• Class time Tuesday evenings from 545 pm to
  900 pm.
• Class location Loop Campus (TBD)
• Rest periods (two options to choose from)
• Option 1 One thirty (30) minute break _at_ 730 pm
• Option 2 Two fifteen (15) minute breaks _at_ 715
  pm 830 pm
• Office hours - Tuesday, 415 pm 545 pm in room
  TBD
• Email address econfer_at_cti.depaul.edu

13
Class Roster Info Sheets

• Send a note to the instructors email address
  including the following
• Your Name
• Your Major
• Profession (student or other)
• Favorite site (with url, if available)
• Favorite leisure interest or hobby (movies,
  music, dining, live entertainment, gardening,
  sport, etc.)
• Objectives for taking the course.

14
E-commerce B2B Marketplaces Origins and
Evolution
Discussion Agenda

• Objectives
• Discussion Baseline
• Evolutionary Perspectives Industry Comparisons
• Brief History of Ecommerce B2B Systems
• The BIG Picture B2B Market Perspective

15
E-commerce B2B Marketplaces Origins and
Evolution
Discussion Objectives

• Establish a discussion context regarding
  Ecommerce B2B marketplaces.
• Discuss historical and market perspective for
  the evolution of Ecommerce B2B marketplaces.

16
Mission Critical (Important) Terminology

• E-Commerce
• Business-to-Consumer (B2C)
• Business-to-Business (B2B)
• Supply Chain Management
• Business Process Re-engineering (BPR)
• Electronic Data Interchange (EDI)
• Intranet
• Extranet
• Security
• Firewall
• Virtual Private Network

17
E-commerce B2B Marketplaces Origins and
Evolution
Discussion Baseline Terminology Defined

• Electronic Commerce or E-commerce - the conduct
  of a financial transaction by electronic means
  more recently, the purchase of goods and services
  over the Internets World Wide Web. Includes the
  following types
• Business-to-Business or B2B E-commerce -
  inter-organizational E-commerce
• Business-to-Consumer or B2C E-commerce -
  electronic commercial interaction between the
  enterprise and the end consumer.
• Business-to-Employee or B2E E-commerce-
  intra-organizational E-commerce.
• Supply Chain - all organizations and processes
  related to products and services sourced by
  buying organizations, typically from raw
  materials through consumption.

18
E-commerce B2B Marketplaces Origins and
Evolution
Supply Chain Context of E-commerce
B-to-B
B-to-C
Warehouse and Inventory Management
Customer Relationship Management
ProductDevelopment
Supplier Management
Transport
Category Management
Store Management
ProductDevelopmentManagement
E-ProcurementSoftware
Supply ChainManagement
CategoryManagement

• Product design
• Product development
• Vendor capacity
• Quality
• Sample management
• New product introduction

• Invoice processing
• Payment
• RFI/RFP
• Catalog development
• Vendor certification
• Item management
• Product availability
• Production planning
• Technical specifications
• Second- and third-tier suppliers

• Order management
• Product tracking
• Capacity management
• consolidation
• Replenishment
• Reverse logistics

• Goods-in scheduling
• New product introduction
• Planning for seasons and events
• Allocation

19
E-commerce B2B Marketplaces Origins and
Evolution Evolutionary Perspectives Industry
Comparisons

• There is no new thing under the sun
• Ecclesiastes, Chapter 1, Verse 9
• He who forgets the past is condemned to repeat
  it.
• Jorge Santayana

20
An Interesting Quote

• "Let us not forget that the value of this great
  system does not lie primarily in its extent or
  even in its efficiency. Its worth depends on the
  use that is made of it..For the first time in
  human history we have available to us the ability
  to communicate simultaneously with millions of
  our fellowmen, to furnish entertainment,
  instruction, widening vision of national problems
  and national events. An obligation rests on us to
  see that it is devoted to real service and to
  develop the material that is transmitted into
  that which is really worthwhile."
• Who said this? Bill Gates? Newt Gingrich? Al
  Gore? Alvin Toffler?

21
Perspective on the Internet, Ecommerce and
Earlier Technology Innovations

• Internet is a change agent in global commerce.
• There have been comparable periods of industrial
  change.
• Internet and Ecommerce evolution expansion is
  similar when compared and contrasted with
• railroad,
• telegraph,
• telephone, and
• radio.
• In all cases, early pioneers (practitioners,
  inventors, etc.) knew they were on to something.

22
E-commerce B2B Marketplaces Origins and
Evolution
Parallels between the evolution of telegraph,
radio, and the Internet.

• Each transmits intangible items (i.e.,
  information).
• Each shortened the time to transfer info.
• Their utility (i.e., their ability to deliver
  products services) is dependent on the efficacy
  and efficiency of their underlying network.
• All had initial usability, training,
  infrastructure problems.
• All have or are experiencing the S-curve in
  lifecycle product development.

23
E-commerce B2B Marketplaces Origins and
Evolution
Brief History of E-commerce and B2B marketplaces.

• E-commerce and B2B are not new concepts.
• Current systems emanated more directly from
  Electronic Data Interchange (EDI).
• EDI provides for the exchange transaction
  information over proprietary Value-Added Networks
  (VANs).
• EDI participants realized benefits such as
• reduction in process costs, and
• enhanced profitability.
• EDI participants also incurred significant
  expenditure in
• EDI deployment costs
• VAN charges.
• EDI limited to a few very large wealthy
  organizations.

24
E-commerce B2B Marketplaces Origins and
Evolution
Enter the Internet, B2B Marketplaces
Internet-based EDI!

• B2B extranet system deployment on the rise.
• Third-party B2B Market Makers are key movers in
  evolution of internet-based EDI.

25
Distinguishing B2B B2C

• B2B E-commerce is the exchange of products,
  services, or information between businesses
  rather than between businesses and consumers.
• e-Business.
• Suppliers and Big Cs - transactions between
  businesses.
• Focus on transaction efficiency.
• B2C E-commerce the retailing of goods and
  services directly to end consumers via the
  Internet.
• Suppliers little Cs transactions between
  goods and service providers and end consumers.
• Dis-intermediation.
• (theoretically) lowers inventory and
  distributions costs.

26
Electronic Data Interchange (EDI) defined

• EDI Inter-company, computer-to-computer
  communication of data which permits the receiver
  to perform the function of a standard business
  transaction and is in a predefined standard
  format.
• Old-school B2B E-commerce.
• Enables electronic intra-company exchange of
  purchase orders and other transaction documents.
• EDI based on standards-based protocols.

27
Distinguishing Intranet Extranet

• Intranet defined
• An intranet is a corporate LAN or WAN that
  functions with Internet technologies behind the
  companys firewall.
• Extranet defined
• An extranet is a network that links the intranets
  of business partners using a virtually private
  network on the Internet.
• Designing extranets is difficult.
• Complexities of security, performance, management
  and policy.
• Extranet and B2B are not synonymous. Extranets
  can apply to B2C as well.

28
E-commerce B2B Marketplaces Origins and
Evolution
The BIG Picture B2B Current Market Perspective

• B2B E-commerce participants include
• Sellers and Buyers.
• Existing prominent, well-established firms that
  sell directly to business customers.
• Emerging Market Makers a new breed of
  intermediaries
• Market Makers further segmented as
• Vertical hubs industry-specific focus.
• Functional hubs business process focus.
• Catalog models demand/supply aggregation.
• Auction exchange models engaging in matching
  buyers sellers.
• Barter models reciprocal value exchange.

29
E-commerce B2B Marketplaces Origins and
Evolution
The BIG Picture Market Projections

• B2B worldwide revenue estimated to grow from 282
  billion in 1999 to 4.3 trillion by 2005.
• United States will remain the largest region for
  B2B e-commerce, with purchases increasing at a
  compound annual growth rate of 68 percent from
  2001 to 2005.
• Overwhelming majority of revenue growth expected
  to be derived from direct seller sites.
• Market maker subset will account for 15-20 of
  B2B e-Commerce, generating an estimated 400-500
  billion by 2003.
• Market cap for market makers estimated at
  revenue multiple of 2X-3X suggest B2B market
  maker capitalization of 560 billion to 13
  trillion.

Sources International Data Corp., March 2002
Merrill Lynch B2B Market Maker Book,
February 2000
30
E-commerce B2B Marketplaces Origins and
Evolution
Emergence of online exchanges - three forces
shaping the B2B marketplace
B2C (Business to Consumer) B2B (Business to
Business)
Industry-Centric Exchanges
B2B Market Opportunity 2.5 trillion by 2003
Market Makers

• Aerospace (Boeing)
• Automotive (GM/Ford)
• Agricultural (Cargill)
• Chemical (DuPont)
• Foods (GMA)
• Retailing (Sears/Carrefour, and WorldWide Retail)
• Utilities

• Vertical
• ProduceOnline.com
• Foodbuy.com
• Horizontal
• MRO.com
• PurchasePro.com

2000
1500
1000
500
0
1999
2000
2001
2002
2003
Technology Providers and Engines
Ariba Commerce One Oracle SAP i2 Manugistics
31
B2B Projections Remain High Despite Obstacles by
CyberAtlas Staff
(1/9/01) Electronic business-to-business (B2B)
sales will reach more than 5.2 trillion in 2004
through several different channels, including
Internet marketplaces, electronic data
interchange (EDI), hybrid EDI/Internet electronic
trading networks (ETNs), Internet
company-to-company links, extranets, and private
e-markets, according to Giga Information
Group.   Giga had forecast an estimated 3.3
trillion in B2B e-commerce sales for 2000, most
through traditional EDI networks.   As
business-to-business e-commerce matures, there
will be no single magic channel that meets all
companies needs, said Andrew Bartels, a Giga
Information Group VP and research leader. The
B2B e-commerce market --which will account for
approximately 38 percent of all B2B sales in 2004
--will get complicated because there will be a
need for a variety of electronic interactions,
each with its own set of strengths and
weaknesses, particularly in the areas of
reliability, security, customizability, and cost.
Because the lines between traditional EDI and
Internet channels are dissolving, companies now
have the flexibility to use different e-channels
for different customers or suppliers based on
strategic business goals.
32
B-to-B Commerce Will Reach 5.4 Trillion in 2006
(in billions)
Total B-to-B Commerce
Percentage of Total Penetration
Source 2001 Jupiter Internet B-to-B Commerce
Model, (US only)
33
Greatest Increases in B-to-B Commerce from
Computer/Telecom, Aerospace
Source 2001 Jupiter Internet B-to-B Commerce
Model, (US only)
34
Ariba was First B2B Firm to Profitability!
Wall Street Journal Friday, January 12, 2001
35
E-commerce B2B Marketplaces Origins and
Evolution
So what should we expect?

• Currently experiencing the pause that
  refreshes.
• E-commerce will become mainstream and
  internalized by old economy firms.
• B2B uptake will continue with improved economy,
  probably tied to supply chain management
  improvements.
• Some signs that the pause may be coming to an
  end, particularly with respect to SCM.
• A number of small technological,
  micro-improvements will impact the E-commerce and
  the internet over the short-term.
• Last-mile infrastructure improvements will
  have significant impact on level of usage.
• Security will be of paramount concern and will
  garner significant expenditure.

36
Key Technology

• Key Ecommerce technology architecture components
  include the following
• web browsers
• application servers
• secure file transfer servers
• customer account management systems
• remote administration tools
• directory servers
• authentication systems
• commerce systems
• distributed computing infrastructures and
  databases
• messaging systems middleware
• firewalls and proxies
• security scanners

37
Remaining Mission Critical Terms

• Business Process Re-engineering (BPR) -
  fundamental rethinking and radical redesign of
  business processes to achieve dramatic
  improvements in critical performance measures
  such as cost, quality, service, speed.
• Security the combination of technology and
  policies designed to protect sensitive business
  information and to prevent fraud.
• Firewall a security screen placed between an
  organizations internal network and the external
  Internet.
• Virtual Private Network a wide-area network
  (WAN) created to link a company with external
  users (including mobile users, field
  representatives, or strategic allies).

38
B2B Supplier Marketplace Model Characteristics

• Supplier offers an e-store to promote sales.
• Customers are both consumers and business buyers.
• Popular type of initial e-marketplace.
• Auctions are becoming popular used to clear
  surplus inventories.
• ordered information.

39
B2B Buyer Marketplace Model Characteristics

• Buying company opens a bidding site to enhance
  its purchasing procedure.
• Model is unique to B2B not found in B2C.
• Online bidding can reduce the purchasing cost and
  cycle time.

40
B2B Intermediary-oriented Marketplace Model
Characteristics

• Third-party for buyers and sellers opens an
  intermediary e-store.
• E-store may be used for consumers and business
  buyers.
• Auction and bidding sites are gaining in
  popularity.
• Example might include an assembly company acting
  as an intermediary between allied customers and
  suppliers.

41
B2B Critical Success Factors

• Plenty of buyers and sellers you need both to
  make a market.
• Liquidity value of a market make r is a
  multiple of the value of the transactions flowing
  through it market makers (MMs) must be focused
  on generating industry-leading liquidity.
• Fragmentation MMs add most value in highly
  fragmented markets.
• Inefficiency MMs must add value to both sides
  of the trade.
• Management with domain expertise senior-level
  industry relationships and creditability
  facilitate industry buy-in.
• Early mover advantage Ebay only had a year
  head start in the C2C auctions business, but that
  was enough.
• Partnerships for distribution and logistics
  UPS doesnt transport lumber, resin, or HCL acid.
• Neutrality few business opt to do business
  with their competitors or with subsidiaries of
  competitors do not sacrifice liquidity to gain
  neutrality.
• Public currency with a billion dollar market
  cap, if you dont yet have a real business, then
  go and buy one in the end, real value/dollars
  count.

42
Technology Vendors Service Providers
43
B2B Business Cycle Primary B2B Business
Processes Key Applications

• B2B Business Processes
• Information Transfer
• Data Sharing
• Ordering
• Payment
• Customer Support Service

• Key Applications
• Distribution Control
• Inventory Management
• Supplier Relationships
• Payment Management
• Channel Management

44
Evolving B2B Trends XML

• XML (Extensible Markup Language)
• enables sharing of interactive documents across
  the Internet.
• offers format for representing data, a schema
  for describing data, and means for extending
  HTML.
• Key to transition from traditional EDI to
  Internet-based EDI.
• Processes most affected have been order
  fulfillment, production, logistics, and
  inventory.
• Electronics industry has taken the lead in XML
  use in the supply chain.
• Toshiba, Solectron, Intel, Ingram Micro ,
  American Express, Federal Express, and Cisco are
  key practitioners.

45
Supply Chain Considerations

• What is the Supply Chain?
• All organizations and processes related to
  products and services sourced by Buying
  Organizations, typically from raw materials
  through consumption.
• What is Supply Chain Management?
• Supply Chain Management (SCM) is the management
  of all activities along the supply chain from
  suppliers to internal logistics within a company
  and to distribution to customers.
• Contrasted with the Value Chain
• Value chain is a series of activities a company
  performs to achieve its goal by adding additional
  values as each activity proceeds to the next one.

46
Supply Chain Considerations
B-to-B
B-to-C
Warehouse and Inventory Management
Customer Relationship Management
ProductDevelopment
Supplier Management
Transport
Category Management
Store Management
ProductDevelopmentManagement
E-ProcurementSoftware
Supply ChainManagement
CategoryManagement

• Product design
• Product development
• Vendor capacity
• Quality
• Sample management
• New product introduction

• Invoice processing
• Payment
• RFI/RFP
• Catalog development
• Vendor certification
• Item management
• Product availability
• Production planning
• Technical specifications
• Second- and third-tier suppliers

• Order management
• Product tracking
• Capacity management
• consolidation
• Replenishment
• Reverse logistics

• Goods-in scheduling
• New product introduction
• Planning for seasons and events
• Allocation

47
SCM Objectives

• Optimize the sharing of information across
  organizational boundaries
• Focus on value of time, efficiency.
• Attempt to gain time-based competitive advantage.
• Potential linkage to greater customer
  satisfaction, increased sales, enhanced product
  quality, and profitability.

48
Supply Chain Performance Metrics

• Products services offered
• Sales
• Market share
• Cost
• Quality
• Delivery
• Cycle times
• Assets utilized
• Responsiveness
• Customer service

49
New Imperatives of Supply Chain Management

• Build flexibility.
• Plan and measure accurately.
• Develop logistically separate operations where
  appropriate.
• Get lean by emphasizing simplicity and speed.
• Optimize timely information transfer.
• Mass-customize, treat customers unequally
  segment and stratify.
• Operate globally.
• Practice virtuality and collaborative management.
• Exploit electronic commerce.
• Leverage people,
• Operationalize new product introductions and
  phaseouts.

50
Supply Chain Example Apparel Industry
Customer
Retailer
Apparel Manufacturer
Information
Product
Textile Producer
Yarn Maker
51
Supply Chain Example Health Care Products
Customers
Hospitals/Drug Stores
Distributors
Information
Product
End Product Manufacturer
Raw Material Supplier
52
SCM Success Factor Effective and Timely
Information Management

• Successful SCM often times tied to
• coherent information technology strategy and
  appropriate architecture.
• information systems that diffuse organizational
  boundaries.
• Supply chain links suppliers, distributors,
  buyers, assemblers, etc. as virtual organization
• Embraces concept of the Inter-organizational
  Information Systems (IOIS)
• Systems that cross organizational boundaries.
• Requires technology that enables electronic link
  between organizations.
• Automates manual and paper-bound work.
• Earliest forms of these systems were time-sharing
  services, online databases, EFT, EDI.

53
Information and Technology Applications for SCM

• Internet-based Ecommerce
• EDI
• Intranet/Extranet
• Traditional EDI
• Bar Coding and Scanning
• Data Warehouse
• Decision Support Systems

54
Major SCM Service Providers

• Deloitte Consulting
• Keane Consulting
• Price Waterhouse Coopers
• IBM Global Services KPMG
• Cap Gemini Ernst Young
• Accenture
• Computer Science Corporation

55
Next Session Highlights

• Review of Supply Chain Concepts
• Reading Assignment covering first 3 sessions
• Introduction to Supply Chain Management
  Handfield Nichols Chapters 1 5
• Building B2B Applications with XML Fitzgerald
  Chapters 1
• Also begin review of Microsofts MSMQ Review
  Guide (accessible through the class web site
  under the Reference Articles link)