Download E-Commerce & Supply Chain Systems

Using MIS 2e
Chapter 8
E-Commerce & Supply Chain
Systems
David Kroenke
© Pearson Prentice Hall 2009
8-1
Study Questions
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Q1 – How do companies use e-commerce?

Q2 – What technology is needed for e-commerce?

Q3 – Why is Web 2.0 important to business?

Q4 – How can information systems enhance supply chain performance?

Q5 – How can information systems support supplier relationship management?

Q6 – How do organizations exchange data?

Q7 – How can organizations connect computer programs?
© Pearson Prentice Hall 2009
8-2

Q1 – How do companies use e-commerce?

Q2 – What technology is needed for e-commerce?

Q3 – Why is Web 2.0 important to business?

Q4 – How can information systems enhance supply chain performance?

Q5 – How can information systems support supplier relationship
management?

Q6 – How do organizations exchange data?

Q7 – How can organizations connect computer programs?
© Pearson Prentice Hall 2009
8-3
Q1 – How do companies use e-commerce?
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E-commerce occurs whenever goods and services are bought and
sold over public and private computer networks.
Merchant companies take title to the goods they sell.
Nonmerchant companies arrange for the purchase and sale of
goods without owning or taking title to those goods.
The chart below lists the types of merchant and nonmerchant
companies.
Fig 8-1 E-Commerce Categories
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Q1 – How do companies use e-commerce?
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B2C transactions occur between a supplier and retail customer. The
supplier generally uses a Web storefront.
B2B transactions occur between companies.
B2G transactions occur between companies and governmental
organizations.
Fig 8-2 Example of Use of B2B, B2G, and B2C
© Pearson Prentice Hall 2009
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Q1 – How do companies use e-commerce?

There are three types of nonmerchant e-commerce companies:

Auctions match buyers and sellers using the e-commerce version of
standard auction where the auction company receives a commission on
each product that’s sold. eBay.com is the best-known example.

A clearinghouse provides goods at a stated price, arranges for delivery
but never takes title to the goods. The company receives a commission
on each product that’s sold. Amazon.com is the best-known example.

Electronic exchanges are a type of clearinghouse that’s similar to a stock
exchange. Whenever the company matches up buyers and sellers and a
transaction occurs, the exchange takes a commission. Priceline.com is
the best-known example.
© Pearson Prentice Hall 2009
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Q1 – How do companies use e-commerce?
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E-Commerce improves market efficiencies in a variety of ways, as
this figure shows. Customers benefit from the first two,
disintermediation and increased price information. Businesses
benefit from increasing their knowledge of price elasticity.
Fig 8-4 E-Commerce Market Efficiencies
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Q1 – How do companies use e-commerce?
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Businesses need to consider the economic factors that may disfavor
their participation in e-commerce such as these:
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Channel conflicts that occur when a manufacturer competes with its
traditional retail outlets by selling directly to the consumer.
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Price conflicts that may occur by a manufacturer selling directly to
consumers and undercutting retailers’ prices.
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Logistics expenses increase when a manufacturer must process
thousands of small-quantity orders rather than a few large-quantity
orders.
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Customer-service expenses increase when a manufacturer must begin
dealing directly with customers rather than relying on retailers’ direct
relationships with customers.
© Pearson Prentice Hall 2009
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
Q1 – How do companies use e-commerce?
Q2 – What technology is needed for ecommerce?

Q3 – Why is Web 2.0 important to business?

Q4 – How can information systems enhance supply chain performance?

Q5 – How can information systems support supplier relationship
management?

Q6 – How do organizations exchange data?

Q7 – How can organizations connect computer programs?
© Pearson Prentice Hall 2009
8-9
Q2 – What technology is needed for e-commerce?
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E-commerce technology uses a three-tier architecture. Each tier
relates to a particular class of computers.
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The user tier uses personal computers and browser software that
requests and processes Web pages. Web page documents are coded in
HTML and are transmitted using HTTP protocols.
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The server tier uses Web server computers and processes application
programs that help manage HTTP traffic between Web servers and
users.
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The database tier uses computers that run a DBMS to process SQL
requests for retrieving and storing data.
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Q2 – What technology is needed for e-commerce?
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A commerce server, part of the server tier, is an application program
that receives requests from users via a Web server. When the
program receives a request, it takes some action, like coordinating a
customer checkout process, and then returns a response to the user
via a Web server.
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A web farm is a facility that houses numerous Web server
computers.
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Q2 – What technology is needed for e-commerce?
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This figure shows how the three-tier architecture operates.
Fig 8-5 Three-Tier Architecture
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Q2 – What technology is needed for e-commerce?
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These two figures are samples of Web pages on an e-commerce
Web site.
Fig 8-6(a) Sample of Commerce Server Pages
© Pearson Prentice Hall 2009
Fig 8-6(b) Shopping Cart Page
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Q2 – What technology is needed for e-commerce?
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Hypertext Markup Language (HTML) is the most common language
used to structure the layout of Web pages. It includes these
elements:
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A tag is a notation that defines a data element. <h2> and </h2> are
tags that indicates the text will be formatted as a level two heading.

Hyperlinks serve as pointers to other Web pages. They include a URL for
another document within the same Web site or a different Web site. In
the figure on the next slide, the hyperlink
http://www.prenhall.com/kroenke leads a user to another Web site.

Attributes provide properties for tags. In the sample HTML document on
the next slide, the attribute href= provides the value of the hyperlink that
follows.
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Q2 – What technology is needed for e-commerce?
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Fig 8-7(a) Sample HTML Document
© Pearson Prentice Hall 2009
THE HTML code on the left
produces the Web page on the
right.
Fig 8-7(b) HTML Document in Fig 8-7(a)
rendered using Internet Explorer
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
Q1 – How do companies use e-commerce?

Q2 – What technology is needed for e-commerce?

Q3 – Why is Web 2.0 important to business?

Q4 – How can information systems enhance supply chain performance?

Q5 – How can information systems support supplier relationship
management?

Q6 – How do organizations exchange data?

Q7 – How can organizations connect computer programs?
© Pearson Prentice Hall 2009
8-16
Q3 – Why is Web 2.0 important to business?
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Web 2.0 is a loose cloud of capabilities, technologies, business
models, and philosophies that sets e-commerce apart from
traditional software processing. This chart compares the two.
Fig 8-8 Comparison of Web 2.0 with Traditional Processing
© Pearson Prentice Hall 2009
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Q3 – Why is Web 2.0 important to business?
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Software as a Service, part of the Web 2.0 movement, changes
traditional thinking about how software is created, provided to users,
and used to create value for the company that owns it. Some of its
characteristics include the following:
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It uses thin-client programs in browsers.
The bulk of processing occurs on servers throughout the Internet.
Companies that provide it rely on advertising or revenue other than
license fees.
It’s perpetually labeled as beta software because its features and
functions are constantly changing.
Companies who provide it clash with traditional software vendors who
rely on traditional software programs to provide the bulk of their revenue.
It relies on viral marketing. That is, users spread the word about its
virtues rather than the company that provides it.
The more a Web 2.0-based site is used, the more value it attains.
© Pearson Prentice Hall 2009
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Q3 – Why is Web 2.0 important to business?
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Mashups are output from two or more Web sites combined into a
single user experience. Users create their own mashups based on
some portion of software that’s provided by a Web 2.0 service and
another portion of software. An example is using Google Maps to
create a new service that pinpoints motocross trails.
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Participation and Ownership Differences
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Traditional sites are all about publishing with legal rights to using the
software locked down.
Web 2.0 sites are all about participation with legal rights only partially
locked down.
© Pearson Prentice Hall 2009
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Q3 – Why is Web 2.0 important to business?
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Businesses can benefit from offering Web 2.0 services in the
following ways:
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Providing advertising that’s specific to user interests. Two popular
programs from Google are
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Ad Words in which advertisers pay for particular search words.
Ad Sense in which Google inserts ads on a Web site that match content on
the site. When someone clicks on the ad, Google pays the site owner a fee.
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Providing social networking services that connect people with similar
interests.
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Providing mashups between a business and its partners which combine
the content of their products. Watch a movie, see a piece of jewelry you
like, click on a link, and purchase the product.
© Pearson Prentice Hall 2009
8-20

Q1 – How do companies use e-commerce?

Q2 – What technology is needed for e-commerce?

Q3 – Why is Web 2.0 important to business?


Q4 – How can information systems enhance
supply chain performance?
Q5 – How can information systems support supplier relationship
management?

Q6 – How do organizations exchange data?

Q7 – How can organizations connect computer programs?
© Pearson Prentice Hall 2009
8-21
Q4 – How can information systems enhance supply chain performance?

Supply chains are networks of organizations and facilities that
transform raw material into products delivered to customers. The
diagram below depicts supply chain relationships.
Fig 8-10 Supply Chain Relationships
© Pearson Prentice Hall 2009
8-22
Q4 – How can information systems enhance supply chain performance?
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The figure below shows a supply chain for a ski equipment retailer.
Fig 8-11 Supply Chain Example
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Q4 – How can information systems enhance supply chain performance?
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As this figure
shows, four
factors drive a
company’s
supply chain
performance:
facilities,
inventory,
transportation,
and
information.
Fig 8-12 Drivers of Supply Chain Performance
© Pearson Prentice Hall 2009
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Q4 – How can information systems enhance supply chain performance?
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Information influences supply chain performance three ways:
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Purpose: Is the purpose of the information transactional or
informational?
Availability: Will they have access to the information they need when
they need it?
Means: What means or methods will organizations use to transmit
information with others that need it?
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Supply chain profitability is determined by calculating the difference
between revenue generated by a supply chain and the costs that all
organizations in the supply chain incur to obtain that revenue.
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The maximum profit to a supply chain will not occur if each
organization in a supply chain maximizes its own profits in isolation
from the other participants in the supply chain.
© Pearson Prentice Hall 2009
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Q4 – How can information systems enhance supply chain performance?
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The bullwhip effect in supply chains occurs when the variability in size
and timing of orders increases at each stage up the chain.
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Distributors, manufacturers, and suppliers must carry larger inventories
than should be necessary to meet real demand because of the large
fluctuations in orders.
It reduces the overall
profitability of a supply
chain.
It can be eliminated by
giving all supply chain
participants consumerdemand information directly
from retailers through
interorganizational
information systems
Fig 8-13 The Bullwhip Effect
© Pearson Prentice Hall 2009
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
Q1 – How do companies use e-commerce?

Q2 – What technology is needed for e-commerce?

Q3 – Why is Web 2.0 important to business?

Q4 – How can information systems enhance supply chain performance?

Q5 – How can information systems support
supplier relationship management?

Q6 – How do organizations exchange data?

Q7 – How can organizations connect computer programs?
© Pearson Prentice Hall 2009
8-27
Q5 – How can information systems support supplier relationship management?

Three information systems are involved in supply chain
management: supplier relationship management, or SRM, (a
business process for managing all contacts between organization
and its suppliers), inventory, and customer relationship
management (CRM).
Fig 8-14 B2B in One Section of the Supply Chain
© Pearson Prentice Hall 2009
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Q5 – How can information systems support supplier relationship management?
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The term supplier, when used in the context of a supplier
relationship management system, refers to any organization that
sells something to a company operating an SRM application.
Information systems support these SRM processes: source,
purchase, and settle.
Fig 8-15 Summary of SRM Processes
© Pearson Prentice Hall 2009
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Q5 – How can information systems support supplier relationship management?
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This diagram shows you how an SRM system is integrated with a
CRM system:
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The supplier’s CRM interfaces with the purchaser’s SRM application.
Connect the CRM to the customer’s SRM to automate recurring
purchases.
SRM examines inventory, determines required items, and creates an order.
Fig 8-16 ERP II in One Section of the Supply Chain
© Pearson Prentice Hall 2009
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
Q1 – How do companies use e-commerce?

Q2 – What technology is needed for e-commerce?

Q3 – Why is Web 2.0 important to business?

Q4 – How can information systems enhance supply chain performance?

Q5 – How can information systems support supplier relationship
management?

Q6 – How do organizations exchange data?

Q7 – How can organizations connect computer programs?
© Pearson Prentice Hall 2009
8-31
Q6 – How do organizations exchange data?
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Companies must communicate with other companies in order to
purchase supplies, sell products, or generally do business. Some of
the alternative for exchanging data and messages are listed below.
The first four alternatives require very little technology. The last three
require additional technology.
Fig 8-17 Alternatives for Interorganizational Message Exchange
© Pearson Prentice Hall 2009
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Q6 – How do organizations exchange data?
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Electronic Data Interchange (EDI) has been used for more than 30
years as a way to standardize document formats for common
business transactions and is used primarily over point-to-point and
PDSN networks. “EDI over Internet” improves the flow of documents
but other technologies are even better.
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The eXtensible Markup Language (XML) promises to improve upon
EDI and the use of HTML on Web pages.
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Using HTML to create documents that businesses can use to exchange
information and transactions presents several problems.
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Tags used to format data don’t have consistent meanings between
businesses.
HTML only offers a fixed number of tags.
The HTML language mixes the format, content, and structure of a Web page
without allowing data to be defined between businesses.
© Pearson Prentice Hall 2009
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Q6 – How do organizations exchange data?
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The eXtensible Markup Language (XML) was developed by World
Wide Web Consortium (W3C) committee to help solve some of the
problems associated with using HTML for B2B e-commerce.
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XML requires placing the content, structure, and format of a Web page
into documents separate from the actual data on the page.
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Designers can create their own tags and specify the precise
arrangement of the tags in an XML schema document.
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Supply chains processes and activities can obtain document structures
from an XML schema and validate them through automation, saving time
and labor.
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Documents coded with the XML language contain more accurate and
more useful data for business transactions.
© Pearson Prentice Hall 2009
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
Q1 – How do companies use e-commerce?

Q2 – What technology is needed for e-commerce?

Q3 – Why is Web 2.0 important to business?

Q4 – How can information systems enhance supply chain performance?



Q5 – How can information systems support supplier relationship
management?
Q6 – How do organizations exchange data?
Q7 – How can organizations connect computer
programs?
© Pearson Prentice Hall 2009
8-35
Q7 – How can organizations connect computer programs?

Some companies find it advantageous to have programs on their
computer systems directly access programs on other companies’
computers by using remote computing, also call distributed
computing.
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One option is to develop proprietary distributed applications.

Teams from both entities work together to
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Determine application requirements, develop a design, and write and test the
programs.
Decide on communications capabilities, operating systems, and distributed
computing techniques.
These types of systems are difficult and very expensive to develop and
operate because of the vast amount of coordination necessary to make
them work.
© Pearson Prentice Hall 2009
8-36
Q7 – How can organizations connect computer programs?

An emerging Internet-based technology that companies are turning
to for remote/distributed computing is called XML Web services.
These services use a service-oriented architecture (SOA).

Web services offer these advantages:

They provide a standardized way for programs to access one another
remotely without proprietary solutions.

Standardization leads to the immediate accessibility of the services.

Service descriptions on one computer provide other computers with
information about available programs and how to communicate with
them.

XML documents transmit the service data and define the XML schema;
program components of the XML Web services automatically validate
the data.
© Pearson Prentice Hall 2009
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Q7 – How can organizations connect computer programs?
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Web Services simplify the automation of supply chain interactions by
providing flexibility and by reducing the costs and time associated
with developing interorganizational information systems.
This figure shows how a retailer publishes a service description and
makes it available to others.
Fig 8-19 Example of Web Services for Sharing Sales Data
© Pearson Prentice Hall 2009
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