Introduction to ERP Systems

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Introduction to ERP Systems

• Chapter 14 ERP and eCommerce

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Chapter 14 Objectives

• Types of EC
• B2C EC - opportunities
• B2B EC whats required, opportunities

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Electronic Commerce
Business to Business
B2B
Business to consumer
B2C
Consumer to consumer
C2C
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B to C Electronic Commerce Opportunities

• Internet allows firms to get closer to customers,
  cheaply
• Direct sales over the Web
• Interactive Marketing and Personalization
• M-Commerce and Next Generation Marketing
• Customer Self-Service
• Issues
• Cannibalization
• Existing channel partners
• New management practices
• Apple Store

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Direct Sales Over the Web

• Sell directly to consumers
• Eliminate the middleman
• Disintermediation
• Example of disintermediation selling a sweater

Cost
Manufacturer
Distributor
Retailer
Customer
48.50
40.34
20.45
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Reintermediation
Reintermediation The shifting of the
intermediary role in a value chain to a new
source ( e.g. Information Brokers)
Auto Dealer
Consumer
Info Broker (edmonds)
Auto Dealer
Consumer
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Interactive Marketing/Personalization

• eCommerce gives firms huge advantage over brick
  and morter firms regarding understanding
  behavior of customers.
• Understand user tastes
• Based on what they have viewed (or not viewed)
• How they behave on the site (e.g., abandoned
  shopping cart analysis)
• Based on what they have bought
• Pages then can be tailored (generally) and
  personalized to user interests

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Interactive Marketing/Personalization
How do web sites know its you?
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M-Commerce and Next Generation Marketing

• M stands for mobile
• Internet is moving into the wireless world on
  private and public networks (cell phones a good
  example)
• Firms can and will communicate with customers
  through
• Cell phones (you can surf the web on a phone
  today)
• PDAs
• Interactive TV
• Cars
• Virtually anywhere

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Mobile Customer personalization
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Self Service

• Big use of the web answer customer questions,
  let them help themselves
• Substitute the web for human contact
• Needs to be combined with human contact to be
  effective

Examples of web based self service? Whats the
value proposition of web based self service?
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B2B Business to Business

• Automation of transactions between businesses
• Fastest growing eCommerce
• Current estimate 80 of all eCommerce
  transactions are B2B
• 2004 revenue estimated to be 2.8 trillion WW
• Provides purchasers with
• More information (products, pricing)
• More options in terms of suppliers
• Convenience
• Reduced transaction costs

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B2B eCommerce

• EC has emerged as a critical aspect of doing
  business. For many firms there is no separating
  EC from regular commerce the two have become
  increasingly intertwined.
• For Cisco, orders over the web have increased
  from less than 10 in 1996 to roughly 85 in
  1999. As a result of these dramatic shifts, there
  has been an equally dramatic set of changes in
  the way business is done using EC.
• Increasingly, firms such as Cisco are using EC to
  simplify their business processes and improve
  customer relationships.

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Building blocks for EC

• What are some of the building blocks for EC?
• ERP provides a repository for the information.
• Communication networks facilitate access to the
  information.
• Wide availability and easy-to-use access make it
  possible to get ERP information over the Internet.

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ERP is a building block of EC

• ERP back room EC front room
• ERP system provides the central clearing house of
  real-time information.
• For example, at Compaq, virtually the entire base
  of global daily transactions are available in
  their ERP system.
• ERP provides the current inventory and pricing
  information, so that firms know what they have
  available to sell.
• The ERP provides much of the infrastructure of EC
  by providing basic information of this nature. As
  a result, the ERP systems can be at the center of
  the EC world.
• Danke
• What infrastructure did Danke need to put in
  place in order to get into eCommerce?

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Communication between enterprises for EC

• ERP is the backbone of EC.
• In the B to B world, there needs to be an
  exchange of information documents need to flow
  electronically its more complicated than B2C.
• Historically, EDI (electronic data interchange)
  has been used.
• EDI defines standard documents and attributes of
  documents and defines how/when documents can be
  sent and received (PO, Invoice)

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Communication between enterprises for EC

• Issues with EDI
• Expensive
• Complex
• Inflexible
• Today
• XML (not web forms)
• Syntax is similar to that of HTML
• Designed to complement HTML, not replace it by
  enabling exchange of different types of data over
  the web.
• Not just for text used for
• Audio, Images, Mathematical, chemical
  expressions, Applications (like EDI)

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XML - Example
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Widely available and easy-to-use user access

• All ERP systems today permit a wide range of
  activities to be done over the internet
• MYSAP from SAP
• All that is needed is
• Access to the web
• A browser
• High speed internet connectivity

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ERP and customer orders of goods

• Most benefit of B2B EC derive from allowing
  customers to place orders electronically, track
  orders to delivery
• Cisco
• Before EC 25 to 33 of the orders made by faxes
  had errors in them causing delayed shipments,
  change in the price.
• Issues forced customers to contact Cisco
  inconvenient AND requests in turn required
  increases in Ciscos personnel for responding to
  customer inquiries, raising cost and slowing down
  the process of delivering goods to the customer.
• As a result, Cisco turned to EC in order to
  facilitate the ordering processes.

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Beyond customer entering own orders

• System to system integration
• Cisco
• In 1998, Cisco began working with their biggest
  customers to integrate order information into
  those customers purchasing system.
• New configuration, order, and pricing information
  was made available once a day to those customers.
  
• Allowed customers can place orders from their own
  purchasing systems
• Eliminated need to duplicate the process by also
  entering the order at Ciscos website.
• Order data passed from client systems to Cisco
• Issues?

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Downside to direct customer order entry?

• Security concern that include protection of the
  ERP, the information, and transmission of data
  over the Internet.
• Firms may be concerned that customers have access
  to a window on the firms processes.
• Can see how responsive the company is
• Access to ERP would need to be accounted for in
  the capabilities of the hardware and software.
• Need bigger computers, lots of network bandwidth

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Why is direct customer access to ERP important?

• Improves order accuracy.
• Improved business relationships
• Makes the customer more reliant on supplier
• Why?
• Reduces the cost of customer inquiries and
  support.

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Other EC applications

• Vendor Managed Inventories
• Build to Order
• Links with Resellers
• Merge in Transit

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Vendor Managed Inventories

• Shift order process to the vendor
• Vendor responsible for managing inventory levels
  within customer locations
• Most famous example?
• Advantages to vendor and customer
• What are these?
• Approaches
• Provide the vendor with necessary data (e.g.
  sales information)
• Directly integrate at system level
• More complex sharing of MAPs requires
  significant systems integration

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Build to Order

• In industries with products that become obsolete
  quickly, build to forecast (BTF) can mean
  inventory that cant be sold
• BTO Build products only as you need them
• Substitute IT for Inventory
• What does this mean?
• Effective BTO systems need to leverage system to
  system links between customers, the manufacturer
  and suppliers

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Other Applications

• Supply Chain Linkage
• EC can facilitate linking partners in supply
  chain
• Ciscos ERP system links resellers of Cisco
  products and their distributors electronically
  for managing orders
• Many partners use the same information technology
  platform ERP/EC
• Referred to as a value web
• Merge in Transit
• A service that collects shipments from multiple
  suppliers and delivers to customer in a single
  shipment
• Dell arranges for monitors to be shipped from
  their suppliers to UPS destinations where they
  are merged with rest of delivery to customer
  single shipment sent to customers.
• Process involves merging and synchronization