Electronic Commerce

B2B eCommerce Issues

MIS 6453 -- Spring 2006

Instructor: John Seydel, Ph.D.

Student Objectives

Summarize the various financial and information transactions typical among businessesDiscuss how the Internet can/does improve B2B transactionsDescribe what’s involved in electronic data interchangeDiscuss the contributions the Internet has made to supply chain managementList and describe the various electronic marketplaces, portals, etc. made possible for B2B exchanges

Agenda

Some old business Wrap up discussion of eMarketing Complete initial HTML exercise

Look at markup Review FTP process

Next, let’s discuss B2B issues via the K&K teamAs warranted, some final overview ands summary comments regarding B2B ecommerce . . .

Purchasing, Logistics, and Support

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

Typical Purchasing Process

Direct versus Indirect Materials

Direct materials: materials that become part of the finished product in a manufacturing processReplenishment purchasing: the company negotiates long-term contracts for most of the materials that it will needIndirect materials: other materials that the company purchases, including factory supplies

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 timeLogistics management: important support activity for both sales and purchasing activities

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)

Support Activities & eGovernment

Support activities: include categories of finance and administration, human resources, and technology developmentKnowledge management: intentional collection, classification, and dissemination of information about a company, its products, and its processeseGovernment: 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

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

Data Interchange History

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

Broader StandardsAmerican 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 standardsInclude information systems professionals from over 800 businesses and other organizationsTransaction sets: names of formats for specific business data interchangesIn 1987: United Nations published first standards under the titleEDI 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

Example ASC X-12 Transaction Sets

Example UN/EDIFACT Transaction Sets

EDI: How it Works

EDI implementation can be complicatedExample 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

The Old Way . . .

The New Way

EDI ConnectivityDirect 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 partner’s mailbox

Trading partner then dials in to the VAN and retrieves its EDI-formatted messages

Direct Connection EDI

Indirect Connection VAN

VAN Advantages/Disadvantages

Advantages Users need to support only the VAN’s 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

EDI and the Internet

Initial roadblocks to conducting EDI over the Internet

Concerns about security Internet’s inability to provide audit logs and third-party

verification of message transmission and delivery

Nonrepudiation: ability to establish that a particular transaction actually occurredOpen 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

Financial EDI

EDI transaction sets that provide instructions to a trading partner’s bankAutomated clearing house (ACH): system service that banks use to manage accounts with each otherEDI-capable banks: equipped to exchange payment and remittance data through VANsValue-added banks (VABs): banks that offer VAN services for nonfinancial transactionsFinancial VANs (FVANs): nonbank VANs that can translate financial transaction sets into ACH formats

Supply Chain (Network) Management

Used to add value in benefits to the ultimate consumer at the end of supply chainTier one suppliers: develop long-term relationships with small number of suppliers Tier two suppliers: manage relationships with the next level of suppliersTier three suppliers: provide them with components and raw materialsSupply alliances: long-term relationships created among participants in the supply chainInternet-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

Advantages of Using the Internet for SCM

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

Private ExchangesPrivate store

Has password-protected entrance Offers negotiated price reductions on limited selection of

productsCustomer portal sites: offer private stores along with serviceseProcurement software allows a company to manage its purchasing function through a Web interfacePrivate 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

Marketplaces for B2B eCommerce

Summary of Objectives

Summarize the various financial and information transactions typical among businessesDiscuss how the Internet can/does improve B2B transactionsDescribe what’s involved in electronic data interchangeDiscuss the contributions the Internet has made to supply chain managementList and describe the various electronic marketplaces, portals, etc. made possible for B2B exchanges

Appendix

Using SmartFTPEnables 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

Value Chain for a Strategic Business Unit

Industry Value Chain for a Wooden Chair