THE

ROBINSON BBA

CIS 2010 Information Systems

Electronic and Digital Commerce

e-Commerce in the business mainstream Digital channels for consumer sales and service Business-to-business commerce Digital supply chains

e-Commerce Learning Objectives

You should be able to:

Describe the meaning, objectives, and two principal

segments of electronic commerce. Identify the seven potential advantages of ecommerce compared to traditional commerce, and evaluate a business situation to determine which advantages could be achieved if an application is effectively implemented. Distinguish between the five business-to-consumer forms of electronic commerce. Determine when digital channels can be used to achieve specific business objectives while avoiding potential challenges

Prepared for use in CIS 2010 Introduction to Information Systems Copyright 2012 James A. Senn. All rights reserved.

What is the Internets main advantage today?

Advertising Change in general Changes in supply chain Increased speed Improved internal communications Internal process changes New direct sales channel New service delivery mechanism Offer new/more services/products Reduced price

What do you think? Put these in order Greatest business advantage to Least advantage

CEO View

What is the Internets main advantage today?

37% 13% 11% 10% 9% 8% 6% 5% 5% 4%
0% 10% 20% 30% 40%

New direct sales channel New service delivery mechanism Improved internal communications Internal process changes Increased speed Reduced price Change in general Changes in supply chain Offer new/more services/products Advertising
Source: A.T. Kearney

Prepared for use in CIS 2010 Introduction to Information Systems Copyright 2012 James A. Senn. All rights reserved.

CEO View

How can e-business improve future business practices?

Better/efficient information Better service to customers Business-to-business Buy/sell over the Internet Communication with clients Distribution to customers Enhancing/developing products Gain new customers worldwide Improve internal processes Interaction with business partners Reduce costs Supply chain efficiency

What do you think? Put these in order Most likely improvement to business practices to least likely improvement

CEO View

How can e-business improve future business practices?

31% 24% 16% 15% 15% 13% 13% 10% 9% 8% 7% 7%
0% 10% 20% 30% 40%

Better service to customers Improve internal processes Buy/sell over the Internet Distribution to customers Communication with clients Reduce costs Gain new customers worldwide Business-to-business Enhancing/developing products Supply chain efficiency Interaction with business partners Better/efficient information
Source: A.T. Kearney

Prepared for use in CIS 2010 Introduction to Information Systems Copyright 2012 James A. Senn. All rights reserved.

Marketplace Role
New & Growing
IT Users (M)
1,000

100

10 Automate Back-Office 0 1970

Automate Front-Office

1980

1990

2000

2010

Source: Adapted from IDC Executive InsightsTM, 1998

Marketplace Role
New & Growing
IT Users (M)
1,000

100

10 Automate Back-Office 0 1970

Automate Front-Office

Link Customers

1980

1990

2000

2010

Source: Adapted from IDC Executive InsightsTM

Prepared for use in CIS 2010 Introduction to Information Systems Copyright 2012 James A. Senn. All rights reserved.

Electronic Commerce
(e-commerce)
Use of communication networksdigital channels including the public Internet, to conduct commercial transactions between businesses or with consumers
Two principal types:

Business-to-Consumer (B2C) e-commerce: Electronic commerce carried out by an enterprise in order to serve its consumer customers. Business-to-Business (B2B) e-commerce: Companies doing business electronically with other businesses, including business customers and suppliers/vendors.

e-Commerce and e-business will be used as interchangeable terms

* Variations include C2C, C2G, and B2G; (G = government)

Potential Benefits of e-Commerce

Geographic Speed Productivity Information New

Reach

Sharing

Features Costs Advantage

Lower

Competitive

Prepared for use in CIS 2010 Introduction to Information Systems Copyright 2012 James A. Senn. All rights reserved.

Potential Benefits of e-Commerce

Geographic . . . Geographic distance does not create a barrier to reaching and Reach serving customers electronically or for interacting with suppliers. Speed . . . . . . . . Productivity. . .
Near-instant exchange of all information means the interaction between buyer and seller takes place at rapid speed. Individuals are more productive when they can do more work in a segment of time. Spending less time getting information means more time is available for its use, therein producing greater efficiency.

Information. . . . Virtually any form of informationtext, audio, video, graphics, or Sharing animationcan be transmitted to recipients located on the network. New Features . .
New features can be added to products and services offered over communication networks, such as personalization, automatic notification of activities, and instant delivery. The cost of business is reduced when companies and individuals can be reached quickly and without respect to geographic distance, while improved efficiencies may result from electronic information exchange.

Lower Costs . . .

Competitive . . . Those companies that develop and implement an effective Advantage electronic commerce strategy have business advantages over

others in their industry that cannot offer similar products, services, or operating activities.

Reduce for B2C discussions Commerce Chains

THE ENTERPRISE

Busine
Business Processes Work Processes Management Processes
THE ENTERPRISE

BUY SIDE (B2B)

SELL SIDE (B2C)

Catalog Order Entry

Procurement

Vendor Focused

Logistics Demand/ Supply Planning

Customer Focused

Relationship Support

cross

the functional

Prepared for use in CIS 2010 Introduction to Information Systems Copyright 2012 James A. Senn. All rights reserved.

un
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Sell-Side Strategies
Use of Digital Channels Objective Revenue generation Cost reduction Reach Richness Competitive impact Challenges Channel conflicts Cannibalization of existing channels

Sales

Service

- Primary Channel - Secondary Channel - Information & advice - Digital content

Marketing

- Interactive Marketing - One-to-One Marketing

(Customization)

Value Proposition
Defines the company is the eyes of the evaluator

Value = Desired benefits less costs incurred

in acquiring them.

Speed Convenience Price Personalization

(more)

Prepared for use in CIS 2010 Introduction to Information Systems Copyright 2012 James A. Senn. All rights reserved.

Attributes
Value proposition Brand Identify Stickiness Scalability Network externalities Customer service Asset utilization

Some

Impact of e-Commerce
on competition

Price transparency

vs. information asymmetry

Restructuring relationships Reach Richness

This list is not complete!

Prepared for use in CIS 2010 Introduction to Information Systems Copyright 2012 James A. Senn. All rights reserved.

B2B e-Commerce Learning Objectives

You should be able to:

Describe the distinction between supply and demand chains the

significance of the extended value chain in commerce

Identify the purpose of electronic data interchange and the

distinguishing features that account for its widespread use.

Demonstrate through an example the flow of both information

and goods in supply chains. Contrast situations where EDI is widely used and where it is not, describing the reasons for differences in usage. Distinguish between push and pull strategies in supply chain management, illustrating the difference with an example. Determine when disintermediation plays a role in the structure and operation of a supply chain. Describe the characteristics and benefits of private exchanges.

Commerce Chains Busine

THE ENTERPRISE

BUY SIDE (B2B)

Business Processes Work Processes Management Processes

THE ENTERPRISE

SELL SIDE (B2C)

Catalog Order Entry

Procurement

Vendor Focused

Logistics Demand/ Supply Planning

Customer Focused

Relationship Support

Supply Chain: The flow of parts, components, materials, funds, and information between a companys sources and its customers. Supply Chain Management: The oversight of activities interconnecting suppliers and buyers.

cross

the functional

Prepared for use in CIS 2010 Introduction to Information Systems Copyright 2012 James A. Senn. All rights reserved.

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Sell-Side Strategies
Use of Digital Channels Objective Revenue generation Cost reduction Reach Richness Competitive impact Challenges Channel conflicts Cannibalizationof existing channels

Sales

Service

- Primary Channel - Secondary Channel - Information & advice - Digital content

Marketing

- Interactive Marketing - One-to-One Marketing

(Customization)

Buy-Side Strategies
Use of Digital Channels Objective Velocity Supply chain integration Agility (Flexibility) Challenges Over/under supply Supply chain visibility Rethink the supply chain

Replenishment Manufacturing Logistics

- Periodic replenishment - Continuous replenishment - Build to stock (make and sell) - Build to order (sell and make)

- 3rd party logistics - Merge in transit

Prepared for use in CIS 2010 Introduction to Information Systems Copyright 2012 James A. Senn. All rights reserved.

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Traditional Business Setting

SUPPLIER MANUFACTURER DISTRIBUTOR RETAILER

CONSUMER

Raw Materials & Parts

Manufacturing

Distribution Packaging

Retailer

Consumer

Components

Finished Goods

Shipping Warehousing Final Delivery

Business to Business

Business to Consumer
GOODS INFORMATION

BUY SIDE (B2B)

Commerce Chains
THE ENTERPRISE
Business Processes Work Processes Management Processes

Rethinking the Supply Chain

SELL SIDE (B2C)

Extending the value chain Extended value chain: The sequence of value-adding activities that extend beyond the company boundaries

Prepared for use in CIS 2010 Introduction to Information Systems Copyright 2012 James A. Senn. All rights reserved.

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Supply Chain Flow

Goods, Information, and Funds Flow Upstream and Downstream in the Supply Chain

UPSTREAM (supply)

Information Flow

Funds Flow

DOWNSTREAM (demand)

IMPROVEMENT: Paperless electronic direct exchange between hub and spoke companies

EDI is for Inter-organization Business Transactions

Exchange of electronic documents between computers / applications of trading partners (i.e., buyers and sellers)

Supplier
Request for quote Purchase order, purchase order change, receiving notice payment advice

Purchaser
Note: EDI is here to stay. However, EDI will gradually move to Internet technology

Deposit Notice Payment Remittance Notice

Response to request for quote Purchase order acknowledgment status response, shipping notice, invoice EDI Network (Value Added Network--VAN)

Payment Authorization

Payment Remittance Notice

Payment remittance notice Electronic transfer of funds

Supplier's Bank

Purchaser's Bank

Prepared for use in CIS 2010 Introduction to Information Systems Copyright 2012 James A. Senn. All rights reserved.

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EDI Standard Transaction Formats

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. Purchase order Purchase order acknowledgment Purchase order change request Purchase order change acknowledgment
Note: EDI is here to stay. However, EDI will gradually move to Internet technology

Invoice Payment/remittance advice Request for quote (RFQ) Reply to request for quote

Transmission Details

Business Transaction Details

The

EDI Envelope

Shipping notice Transmission Details Receiving advice Receiving notice Planning schedule with release capability Price/sales catalog Data element dictionary

Replenishment in Conventional Supply Chain

Information Flow

Prepared for use in CIS 2010 Introduction to Information Systems Copyright 2012 James A. Senn. All rights reserved.

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Push vs. Pull Strategy

Push Strategy Make and Sell Goods are manufactured and placed in inventory. manufacturing is driven by forecast. Sales force and sales promotions encourage buyers to select goods from inventory when possible. Buyer purchase orders may be driven by forecast or replenishment needs.

Pull Strategy Sell and make Goods are manufactured in response to actual demand and shipped to buyer. Sales force and sales promotions encourage buyers to select goods from inventory when possible. Buyers provide sales information to manufacturers who in turn determine the timing and need for replenishment.

Traditional business models have relied on push strategies. Interest is growing in implementing more efficient pull strategies.

IMPROVEMENT: Letting demand drive supply chain processes Improved visibility in supply chain

Supply Chain Featuring

Sense and Respond

Point of sale data direct from retailer to manufacturer can synchronize demand and resupply process, eliminating conventional order cycles
Manufacturer determines need for transfer of goods

Funds flow

Manufacturer Benefits
Reduced shipment variation Lower finished product inventories Increased volume due to fill rates Reduction in raw materials inventories Damage/return reduction Reduction in packaging materials inventories Reduced administration Improved return on assets Lower deductions

Retailer Benefits
Reduced inventory Improved inventory turns Improved service levels/fill rates Improved cash flow Reduced administration Improved return on assets Less damage handling Produce freshness Lower deductions Improved invoice error rates

Prepared for use in CIS 2010 Introduction to Information Systems Copyright 2012 James A. Senn. All rights reserved.

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(aka Efficient Consumer Response; continuous replenishment) EXPENSE TYPE Cost of Goods Marketing Selling/Buying BUSINESS BENEFIT Reduced product losses due to damage Reduced manufacturing expenses Reduced trade and consumer promotion expenses Fewer product introduction failures Less field and headquarters resources (fewer Special pricing deals, automated ordering, Reduced deductions, simplified administration) More efficient use of warehouses and trucks Reduced clerical and accounting staff Automated ordering, higher sales per square foot

Benefits of Implementing Sense and Response

Logistics Administration Store Operations

Source: Adapted from Kurt Salmon Associates, Inc. Efficient Consumer Response: Enhancing Consumer Value in the Grocery Industry

IMPROVEMENT: Eliminating unnecessary steps and expense in the supply chain

Eliminates unnecessary intermediaries from supply channel

Disintermediation

Distributor is likely to be disintermediated from supply channel when

Buyer does not judge that value is added by dealing with a member of supply channel (e.g., distributor)

Information technology provides effective means of interacting directly With other channel members, avoiding intermediaries

Prepared for use in CIS 2010 Introduction to Information Systems Copyright 2012 James A. Senn. All rights reserved.

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