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Chapter 5:Electronic Commerce

and Transaction Processing Systems

• An Introduction to Electronic Commerce

• E-Commerce Applications

• E-Commerce Technology Components

• Strategies for Successful E-Commerce

• An Overview of Transaction Processing Systems

• Enterprise Resource Planning

Topics:

Please turn off your cell phone.

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An Introduction to Electronic Commerce

Chapter 5.1

• Business-to-consumer(B2C) e-commerce

• Business-to-business(B2B) e-commerce

• Consumer-to-consumer(C2C) e-commerce

• Supply chain management

Key Terms• Electronic data

interchange (EDI)• Mobile commerce

(m-commerce)

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E-commerce

Business activities conducted using electronic data transmission involving computers, telecommunications networks, and streamlined work processes.

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VANCompany B

Company A

EDISoftware

EDISoftware

Transaction

Transaction

Electronic Data Interchange (EDI)EDI uses private network communications networks called value-added networks (VANs) to transmit standardized transaction data between business partners and suppliers.

E-commerce History

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Benefits of E-Commerce?

Businesses use E-Commerce to: Reduce transaction costs Speed the flow of goods and info Improve customer service Enable close coordination of actions among

manufacturers, suppliers, and customers Gain access to worldwide markets

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Pre-E-Commerce Sales

Local90%

Rest of Wales9%

UK1%

Post E-Commerce Sales

Local25%

Rest of Wales36%

UK37%

World2%

E-commerce can dramatically extend a businesses market. Farmyard Nurseries customer base before and after e-commerce. http://www.farmyardnurseries.co.uk/mail.htm.

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Challenges of E-Commerce

Change distribution systems & work processes

Integrate web-based order processing with traditional systems

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The E-Commerce Supply Chain

Supply chain management is a key value chain composed of: Demand planning Supply planning Demand fulfillment

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The E-Commerce Supply Chain

Figure 5.1: Supply Chain Management

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E-Commerce Segmentation

Business to Business (B2B) Private

Business to Consumer (B2C) Amazon.com BestBuy.com

B2CC2C

B2B

Consumer to Consumer (C2C) eBay.com Half.com

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E-Commerce Segmentation

E-commerce Revenues

B2C

B2B

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

1999 2003

Sal

es (

Bill

ion

s)

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M-commerce

M-commerce: E-commerce over mobile devices like smartphones. digital goods proximity payment systems distance goods

http://www.dylanscandybar.com

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E-commerce Applications

Chapter 5.2

• Electronic retailing• Cybermall• Electronic exchange• Market segmentation• Technology-enabled

relationship management• Electronic bill presentment

Key Terms

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E-Commerce Applications: Retail and Wholesale

Electronic retailing (E-tailing): the direct sale from business to consumer through electronic storefronts, typically designed around an electronic catalog and shopping cart model www.sharperimage.com

Cybermalls: a single Web site that offers many products and services at one Internet location http://eshop.msn.com

Wholesale e-commerce: B2B Electronic Exchanges

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To raise profitability and improve customer service, many manufacturers move their supply chain operations onto the Internet

Electronic exchange: an electronic forum where manufacturers, suppliers, and competitors buy and sell goods, trade market information, and run back-office operations

E-Commerce Applications: Manufacturing

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Figure 5.3: Model of an Electronic Exchange

E-Commerce Applications: Manufacturing

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E-Commerce Applications: Marketing

Market segmentation: the identification of specific markets to target them with advertising messages

Technology-enabled relationship management: use of detailed information about a customer’s behavior, preferences, needs, and buying patterns to set prices, negotiate terms, tailor promotions, add product features, and otherwise customize the entire relationship with that customer

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E-Commerce Applications: Marketing

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Investment & Finance

Investment and Finance On-line Stock Trading

www.sharebuilder.com On-line Banking

electronic bill presentment The Motley Fool: http://www.fool.com

Auctions http://www.ebay.com http://www.whattheheck.com/ebay/

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E-commerce Technology, Infrastructure, and Development

Chapter 5.3

• Web site development tools

• Web page construction software

• E-commerce software• Catalog management

software

Key Terms• Product configuration

software• Electronic shopping cart• Digital certificates• Electronic cash• Electronic wallet• Smart card

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Dedicated machine that can handle a lot of

traffic.

Security, Encryption, Delivery, Tracking

Catalog, Shopping Cart, Transaction Processing, Traffic Data Analysis

Cost, Availability, Reliability, Security, Redundency

www.cnet.com

Click Internet Services, E-commerce Hosting

E-commerce Technology, Infrastructure, and Development

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Hardware

Storage capacity and computing power required of the Web server depends on: Software that will run on the server Volume of e-commerce transactions

Web site hosting www.dreamhost.com

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Software

Web site development tools Tools used to develop a web site, including

HTML or visual web page editor, software development kits, and web page upload support.

Retrieving and sending Web pages Web page construction

Software that uses web editors and extensions to produce both:

Static Web pages Dynamic Web pages

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Software

E-commerce software must support: Catalog management

Automates the process of creating a real-time interactive catalog and delivering customized content to a user’s screen.

Product configuration Software used by buyers to build the product they

need online E.g. www.dell.com Electronic shopping cart

A model used to track the items selected for purchase, allow shoppers to view what is in the cart, add new items to it, and remove items from it.

25Figure 5.5: Electronic Shopping Cart

Software

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Electronic Payment Systems

Digital certificate: an attachment to an e-mail message or data embedded in a Web page that verifies the identity of a sender or a Web site

Electronic cash (e-cash or digital cash) any of several schemes that allow a person to

pay for goods or services by transmitting a number from one computer to another

http://www.paypal.com

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Is it safe to provide your bank information using this form?

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Electronic Payment Systems

Electronic wallet: a computerized stored value that holds credit card information, electronic cash, owner identification, and address information

Credit card e.g. VISA, MasterCard Charge card e.g American Express Debit card e.g. Bank Of America Smart card

A credit card-sized device with an embedded microchip to provide electronic memory and processing capabilityFSU Card

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An Overview of Transaction Processing Systems

Chapter 5.4

• Batch processing system• Online transaction

processing (OLAP)• Transaction processing

cycle• Data collection• Data editing

Key Terms• Data correction• Data manipulation• Data storage• Document production• Order processing systems

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An Overview of Transaction Processing Systems Provide data for other business processes:

Management information system/decision support system (MIS/DSS)

Special-purpose information systems Process the detailed data necessary to update

records about the fundamental business operations

Include order entry, inventory control, payroll, accounts payable, accounts receivable, and the general ledger.

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An Overview of Transaction Processing Systems

Figure 5.6: TPS, MIS/DSS, and Special Information Systems in Perspective

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Traditional Transaction Processing Methods and Objectives Batch processing system: method of

computerized processing in which business transactions are accumulated over a period of time and prepared for processing as a single unit or batch

Online transaction processing (OLTP): computerized processing in which each transaction is processed immediately, without the delay of accumulating transactions into a batch

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Transaction Processing Activities

Transaction processing cycle: the process of data collection, data editing, data correction, data manipulation, data storage, and document production Data collection Data editing Data correction Data manipulation Data storage Document production and reports

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Transaction Processing Cycle

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Systems that process order entry, sales configuration, shipment planning, shipment execution, inventory control, invoicing, customer relationship management, and outing and scheduling.

Order Processing Systems

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Order Processing SystemsThe lifeblood of the organization!

Business Resumption Planning: Anticipating and minimizing the effects of disasters.

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Customer

OrderEntry

System

OrderEntry

System

ShipmentPlanning System

ShipmentPlanning System

InventoryControl System

InventoryControl System

ShipmentExecutionSystem

ShipmentExecutionSystem

Invoicing System

Invoicing System

Order

ProcessIng

Supplier

Purchasing

PurchaseOrder

Processing System

PurchaseOrder

Processing System

ReceivingSystem

ReceivingSystem

AccountsPayableSystem

AccountsPayableSystem

Warehouse

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TPS Control and Management Issues

Chapter 5.5

• Business continuity planning

• Transaction processingsystem audit

• Audit trail

Key Terms

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TPS Control and Management Issues

Business continuity planning: identification of the business processes that must be restored first in the event of a disaster and specification of what actions should be taken and who should take them to restore operations

Audit trail: documentation that allows the auditor to trace any output from the computer system back to the source documents

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Transaction Processing System Audit

Does the system meet the business need for which it was implemented?

What procedures and controls have been established?

Are these procedures and controls being used properly?

Are the information systems and procedures producing accurate and honest reports?

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Enterprise Resource Planning

Chapter 5.6

• Best practices

Key Terms

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Enterprise Resource Planning (ERP)

From Webopedia.com: a business management system that integrates all facets of the business, including planning, manufacturing, sales, and marketing.

Key: Real-time monitoring of business functions

http://www.aim.fsu.edu/

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ERP

Benefits Eliminates costly,

inflexible legacy systems

Improved technology infrastructure

Improved work processes

Increased data access for decision making

Disadvantages Expense & time Radical change Integrating with other

systems One vendor risks

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ERP

Best practices the most efficient and effective ways to

complete a business process

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Review

E-commerce supports electronic business transactions.

Electronic Data Interchange (EDI) uses private VANs for e-commerce.

B2B is huge compared to B2C and C2C. E-commerce benefits include streamlined

business process and opportunities for small businesses.

M-commerce is e-commerce over mobile devices.

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Review

Encryption and Digital Signatures provide security for e-commerce transactions.

TPS facilitates and records business transactions.

There are lots of different kinds of TPSs. Among the most important is the Order Processing System.

ERP provides real time access to business processes.

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Questions?

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