Electronic commerce fundamentals ch9

Electronic Data Interchange ◆ The computer-to-computer transfer of business information between two businesses that uses a standard format ◆ In the 1950s, companies began to use compute

Chapter 9 Strategies for Purchasing

and Support Activities

Purchasing, Logistics, and

Support Activities

◆ Purchasing activities

● Identifying and evaluating vendors

● Selecting specific products

Neoforma Product Sourcing Web Site

Figure 9-1

Logistic Activities

◆ Providing the right goods in the right quantities in the right place at the right time

◆ Managing the inbound movements of materials and supplies and the

outbound movements of finished goods and services

Support Activities

◆ Includes the general categories of

● Finance and administration

◆ Making payments, processing customer payments, budgeting and planning

● Human resources

◆ Hiring, training, evaluating employees, benefits administration

DigitalWork Small Business Support Activities Page

Figure 9-2

Electronic Data Interchange

◆ The computer-to-computer transfer of business information between two

businesses that uses a standard format

◆ In the 1950s, companies began to use computers to store and process internal data and information

◆ By the 1960s, companies began exchanging

Electronic Data Interchange

◆ Eventually, trading partners transferred data over telephone lines instead of shipping

punched cards or tapes to each other

◆ In 1968, the Transportation Data Coordination Committee was formed, charged with exploring ways to reduce the paperwork burden

◆ Since 1918, the American National Standards Institute (ANSI) became the coordinating body for standards in the United States

Electronic Data Interchange

◆ In 1979, ANSI charted the Accredited Standards Committee X12 (ASC X12) to develop EDI standards

◆ The current ASC X12 standard includes specifications for several hundred transaction sets (the names of the formats for specific

business data interchanges)

Commonly Used ASC X12 Transaction Sets

Figure 9-3

Electronic Data Interchange

◆ In the mid-1980s, the United Nations Economic Commission for Europe built

a common set of EDI standards based

on the American model

◆ In 1987, the EDI for Administration, Commerce, and Transport (EDIFACT,

or UN/EDIFACT) was developed

Commonly Used UN/EDIFACT Transaction Sets

Figure 9-4

Paper-Based Purchasing Process

◆ Paper-based purchasing process results in a paper document created at each information processing step that must be delivered to the department handling the next step

◆ Paper-based transfers between buyer and vendor can be delivered via mail,

The Paper-Based Purchasing Process

Figure 9-5

EDI Purchasing Process

◆ Mail service is replaced with the data communications of an EDI network

◆ Flows of paper have been replaced with computers running EDI translation software

The EDI Purchasing Process

Figure 9-6

Value Added Networks

◆ Trading partners can implement the EDI network and EDI translation

process in several ways, each using one of two basic approaches

● Direct connection

Direct Connection Between

Trading Partners

◆ Requires each business in the network

to operate its own on-site EDI translator computer

◆ EDI translator computers are connected

to each other using modems or dedicated leased lines

◆ Trading partners using different

Direct Connection EDI vs Indirect Connection EDI

through a VAN Figure 9-7

Advantages of Using a Value Added Network

◆ Users support only one communications protocol

◆ The VAN records activity in an audit log, providing an independent record of

transactions

◆ The VAN can provide translation between different transaction sets

Disadvantages of Using a

Value Added Network

◆ Most VANs require an enrollment fee, a monthly maintenance fee, and a transaction fee

◆ VANs can be cumbersome and expensive for companies with trading partners using

different VANs

◆ Inter-VAN transfers do not always provide a clear audit trail

EDI on the Internet

◆ Viewed as a replacement for expensive leased lines and dial-up connections

◆ Small companies can get back in the game of selling to large customers the demanded EDI capabilities of their

suppliers

● Developing XML data element names consistent with existing ASC X12

transaction sets

◆ Companies may opt to establish an indirect connection through a VAN for

Financial EDI

Hybrid EDI Solutions

◆ Utilize the Internet for only part of an EDI transaction, ones where the

transactions are not considered a negotiable instrument

◆ Bottomline Technologies PayBase package allows hybrid EDI

NetTransact EDI-HTML Conversion Service

Figure 9-8

Supply Chain Management

◆ Money can be saved and product quality can be improved through active negotiations with suppliers

◆ Supply chain management is used to establish long-term relationships

(supply alliances) with a small number

of very capable suppliers (tier one

Supply Chain Management

◆ By working together, supply chain members can reduce costs and increase the value of the product or service to the ultimate customer

◆ With clear communication along the supply chain, each participant can know the demands of the ultimate

Technology in the Supply Chain

◆ The Internet and the Web can be very effective communication enhancers

◆ Software can allow members to review past performance, monitor current

performance, and predict future production levels of products

Advantages of Internet and Web Technologies in

Supply Chain Management

Figure 9-9

◆ Major ERP vendors include Baan, J.D Edwards,Oracle, PeopleSoft, and SAP

Business-to-Business Commerce Software

◆ Designed to help companies build Web sites that host catalog and other

commercial sales activities

◆ Major software packages include SellerXpert, ECXpert, LiveCommerce-Transact, Net.Commerce, Site Server, and Ariba

Supply Chain Management Software

◆ Includes demand forecasting tools and planning capabilities to allow all supply chain members to coordinate their

activities and adjust their production levels

◆ Two major firms offer supply chain management software