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Electronic Commerce
1 e-Commerce as the New Economy The new economy business traits can be summarized as: Create value largely through gathering, synthesizing and distribution of information Formulate strategies that make management of the enterprise and technology convergent Compete in real time rather than in “cycle time” Operate in a world characterized by low barriers to entry, near-zero variable costs of operation and shifting competition Organize resources around the demand side than supply side Manage better relationships with customers 2 How Do We Define e-Commerce?
Technology-mediated exchanges between
parties as well as electronically-based intra- or inter-organizational activities that facilitate such exchanges
3 Architectural Framework for Electronic Commerce 1) Application services 2) Brokerage and Data services, Data or transaction management 3) Interface and Support Layers 4) Secure Messaging, Security, and Electronic Document Interchange 5) Middleware and Structured document interchange 6) Network infrastructure and basic communications services
5 5) Middleware Services needed to solve all the interface, translation, transformation, and interpretation problems the ultimate mediator between diverse software programs that enables them talk to one another As computing is shifting from application centric to data centric, middleware services should focus on: – transparency – transaction security and management - authentication and authorization – distributed object management and services. Objects are defined as the combination of data and instructions acting on the data.
6 4) Secure Messaging, Security, and Electronic Document Interchange
Messaging can be defined as:
– the software that sits between the network infrastructure and the clients or e-commerce applications. – a framework for the total implementation of portable applications They offer solutions for communicating nonformatted (unstructured) data, letters, memos, reports, as well as formatted (structured) data such as invoices, PO. With messaging tools, people can communicate and work together more effectively, no matter where they are located. 7 3) Interface and Support Services Interfaces for e-commerce applications such as interactive catalogs, the customized interface to consumer applications such as home shopping. Support directory services, functions necessary for information search and access, which operate behind the scenes and attempt to organize the enormous amount of information and transactions generated to facilitate e- commerce. The difference - interactive catalogs deal with people, directory support services interact directly with software application.
8 2) Information Brokerage and Management
It provides service integration through the notion of
information brokerage, the development of which is necessitated by the increasing information resource fragmentation. Information brokerage is intermediary who provides service integration between customers and information providers, given some constraint such as a low price, fast service, or profit maximization for a client It also addresses the issue of adding value to the information that is retrieved. E.g. FX company provides not only the latest currency exchange rate, but also hedging and risk management etc. 9 (1) E-Commerce Application services:
Distinct Categories of e-Commerce
Business to Consumer (B2C) Business to business (B2B) Consumer to Consumer (C2C) Consumer to Business (C2B) Intraorganizational e-commerce
10 11 12 Global Supplier
Classic EDI
Procurement, distribution and logistics
Engineering Manufacturing Accounting,
and research and production finance and Internal management Private Commerce publishing
Advertising Sales Customer service
Consumer-oriented e-commerce Different types of Customers 13 e-commerce applications Business-to-consumer (b2c) Transactions
It refers to exchanges between business and
consumers, like the ones managed by Amazon.com, Yahoo We call this category marketplace transaction. The activities tracked are consumer search, frequently asked questions and service and support. Customers learn about products differently through electronic publishing Buy them differently using electronic cash and secure payment systems have them delivered differently loyalty may also be different
14 Consumer-Oriented (b2c) E-Commerce
Consumer-oriented application can be broadly classified
into – entertainment, such as movies on demand, multiuser games, on-line discussions – financial services, such as home banking, financial services, financial news – information, such as on-line databases – essential services, such as home shopping, electronic catalogs, telemedicine – education and training, such as interactive education, multiuser games, video conferencing, on-line databases
15 Operational rule of consumer-oriented e- commerce is simple: whenever the physical transfer of information is replaced with digital transmission, a winner might emerge if – the cost is comparable or less – use is more convenient or faster – the ability to underwrite technology investments, along with a vision to understand the demands of these new media
16 Mercantile Process Models from the Consumer’s Perspective Product/service search and discovery in the information space Comparison shopping and product Prepurchase selection based on various attributes preparation Negotiation of terms, e.g., price, delivery times
Placement of order
Purchase Authorization of payment consummation
Receipt of product
Customer service and support (if not Postpurchase
satisfied in X days, return product) interaction
Steps taken by customers in product/service purchasing
17 A successful on-line shopping environments should address these questions: How much time are buyers allocating and spending on their purchasing decisions with respect to various products? What factors account for the differences in consumer decision time? What technology can be used or designed to reduce decision time? What is the right shopping environment that keeps customers happy and wanting to return?
18 Mercantile Process Models from the Merchant’s Perspective Customer inquiry and order planning generation Presales Cost estimation and pricing of interaction product services
Order receipt and entry
Order selection and prioritization
Product/service production and Order scheduling delivery
Order fulfillment and delivery
Order billing and account/payment
management Postsales interaction Customer service and support
Order management cycle in e-commerce 19
Business-to-business (b2b) Transactions
We call this category market-link transaction.
Also known as Interorganization e-commerce. It refers to the full spectrum of e-commerce that can occur between two organizations. This includes purchasing and procurement, supplier management, inventory management, channel management, sales activities, payment management &service and support. Businesses, governments, and other organizations depend on computer-to-computer communication as a fast, economical, and a dependable way to conduct business transactions. B-to-B transactions include the use of EDI and electronic mail for purchasing goods and services, buying information and consulting services, submitting requests for proposals, and receiving proposals.
20 b2b and EDI
EDI developed in 1960s as a means of accelerating
the movement of documents pertaining to shipments and transportation. In mid-1980s, the technique was used in may industries - automotive, retail, international trade etc. It is still growing now and is set to become the standard by which organizations will communicate formally with each other in e-commerce Might be replaced by XML in the future
21 Some Definition of Electronic Data Interchange (EDI) the transmission, in a standard syntax, of unambiguous information of business or strategic significance between computers of independent organizations. the interchange of standard formatted data between computer application systems of trading partners with minimal manual intervention. the electronic transfer, from computer to computer, of commercial and administrative data using an agreed standard to structure an EDI message. the electronic transfer from one computer to another of computer processable data using an agreed standard to structure the data.
22 EDI in Action
EDI takes what has been a manually prepared form or a
form from a business application, translates that data into a standard electronic format, and transmit it. At the receiving end, the standard format is “untranslated” into a format that can be read by the recipient’s application. Hence, output from one application becomes input to another through the computer-to-computer exchange of information. Result is elimination of delays and errors inherent in paper-based transaction.
23 Buyer Seller Purchase request Finance Finance initiated in the department department organization Bill
Payment
Paper-based Sales Purchasing Paper-based mailroom department department mailroom Order Order delivery confirmation
Inventory and Receiving Shipping Manufacturing
warehousing department department department Product delivery
Information flow without EDI 24
Buyer Seller Purchase request Finance Finance initiated in the Billing department department organization details Purchase-order Payment delivery EDI-capable Sales Purchasing EDI-capable computer department department computer Automated- Order confirmation
Inventory and Receiving Shipping Manufacturing
warehousing department department department Product delivery
Information flow with EDI 25
Tangible Benefits of EDI
EDI can be a cost- and time-saving system because:
– automatic transfer of information from computer to computer reduce errors – EDI produce acknowledgement of receipt of data - invoice is not necessary, and thus save efforts and reduce cost for companies dealing with thousands of suppliers and tens of thousands of purchase order a year, the saving from EDI are significant. e.g. RJR Nabisco cut the processing of purchase order from about $100 to 93 cents saving accrue from the following improvements: – reduced paper-based systems – improved problem resolution and customer service – expanded customer/supplier base
26 Inter-organisational electronic commerce (b2b) Supplier management – Electronic applications enhance business partnerships by reducing purchase order (PO) processing costs and cycle times, and by increasing the number of POs processed with fewer people.
27 Inter-organisational electronic commerce (b2b) Inventory management – Electronic applications helps to reduce inventory levels, improve inventory turns, and eliminate out-of-stock problems. – EC can shorten the order-shop-bill cycle and can also track their documents to ensure that they were received.
Distribution management – Electronic applications facilitates the transmission of shipping documents such as bills of lading, purchase orders, advanced ship notices, and claims and enable better resource management by ensuring the documents themselves contain more accurate data. 28 Inter-organisational electronic commerce (b2b) Channel management – Electronic applications can quickly disseminate information about changing operational conditions to trading partners. Technical, product, and pricing information that once required repeated telephone calls and countless labor hours can now be posted to electronic bulletin board. Payment management – Electronic applications link companies with suppliers and distributors so that payments can be sent and received electronically. – Electronic payment reduces human error, increases the speed at which companies compute invoices, and lower transaction costs. 29 Consumer to Consumer (C2C) exchanges involve transactions between and among consumers. These can include third party involvement, as in the case of the auction website Ebay. Examples: other examples?
30 Consumer-to-Business (c2b) c2b is when consumers band together to present themselves as a buyer in group. Example: www.speakout.com
31 Intraorganizational Transactions
We call this category market-driven transactions
A company becomes market driven by – dispersing throughout the firm information about its customers and competitors – spreading strategic and tactical decision making so that all units can participate – continuously monitoring their customer commitment by making improved customer satisfaction an ongoing objective Three major components of market-driven transactions are: – customer orientation through product and service customization – cross-functional coordination through enterprise integration – advertising, marketing, and customer service
32 Intra-organisational electronic commerce Workgroup communications – These applications enable managers to communicate with employees using e-mail, videoconferencing, and bulletin boards. – The purpose is to improve the internal communication effectiveness especially for international companies. Electronic publishing – Electronic publishing applications enable companies to organize publication, and disseminate human resources manuals, product specifications, meeting minutes and company announcements. – The benefits are clear: reduction of printing cost and speed up internal communication.
33 Intra-organisational electronic commerce Sales Force productivity – These applications improve the information flow between the production and sales forces. – Internal parties can get the most updated market intelligence information which can be used to formulate the most effective company strategy.
34 Internal Information Systems
better utilization of corporate information in operational
and analytical decision is important corporate data provide the building blocks to form the information and knowledge that underlie the operations of all enterprises corporate information is created, managed, and stored in many forms and places, and its value is contingent on the ability of workers to access, manipulate, change and distribute it
