Concepts in

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Concepts in Enterprise Resource Planning 2nd
Edition Chapter 8 ERP and Electronic Commerce
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Chapter Objectives

• Describe business-to-business e-commerce
• Explain why ERP is essential to the success of a
  company engaged in e-commerce
• Describe what an application service provider
  (ASP) does
• Describe how ERP is delivered to users by an ASP
• Describe Web services and SAPs NetWeaver
• Describe the unique components of NetWeaver
• Explain why accessing an ERP system through a Web
  browser is efficient
• Define XML and its significance to ERP
• Define RFID and its future role in logistics and
  sales

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Introduction

• Competing effectively in high-volume e-commerce
  may not be possible without the infrastructure
  provided by ERP
• Integrating ERP systems with the Internet is
  becoming easier with new technologies like Web
  services and XML
• ERP systems are becoming more affordable as
  smaller companies rent ERP services

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Electronic Commerce Background

• E-commerce is the conduct of business over the
  internet
• Most business growth on the Internet has been
  business-to-business (B2B) e-commerce, rather
  than business-to-consumer (B2C) e-commerce
• B2B sales are expected to approach 1 Trillion in
  Europe by 2006
• B2B e-commerce is transforming the way companies
  work with each otherespecially for commodity
  products

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Electronic Data Interchange (EDI)

• Companies have been able to transfer purchase
  orders electronically since the 1960s through a
  system known as Electronic Data Interchange
  (EDI), originally using telephone lines
• EDI networks are expensive, so many companies
  subscribe to value-added networks (VAN), an
  intermediary Internet-based network
• EDI messages are standardized business
  transactions that follow a specific computer
  protocol

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Electronic Data Interchange (EDI)

• Benefits of EDI include
• Costs of paper, printing, and postage have almost
  disappeared
• Errors are minimized as orders are not manually
  entered into the suppliers information system
• Ordering is fast and efficient
• Large companies may require suppliers to use EDI,
  and may pay EDI costs for small suppliers
• EDI tends to lock buyers and suppliers into a
  long-term relationship
• An advantage as long as both parties remain
  satisfied

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Internet-Based Procurement

• Internet-based procurement
• Is less expensive than private EDI networks
• Reduces purchasing costs further as suppliers
  compete for orders on the buyers Web site
• Locking in suppliers often does not occur in
  Internet-based procurement
• Internet-based procurement has led to electronic
  marketplaces
• Marketplaces provide advantages for both buyers
  and sellers
• Exchanges are B2B marketplaces that typically
  focus on a single industry

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ChemConnect.com

• Buyers and sellers of chemical products can use
  the ChemConnect marketplace
• Buyers can find the best prices without
  traditional negotiations
• Contracts are completed faster between buyers and
  sellers
• Buyers and sellers can gain access to new
  worldwide markets and trading partners
• Instant market information is available to all
  parties

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Private Exchanges

• Companies like Siemens, Volkswagen and IBM have
  set up private exchanges
• Membership is restricted to select participants
• Volkswagen has slashed procurement costs in half
  and cut negotiations from three months to a day
• Jupiter Research estimates that one-third of all
  businesses with revenues over 1 billion will
  operate private exchanges

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Internet Auctions and Reverse Auctions

• Companies can use standard auctions to sell
  products or obsolete equipment
• Reverse auctions, with one buyer and many
  sellers, can be used to purchase commodity
  products that are widely available at recognized
  quality standards
• Internet auctions are challenging the role
  previously filled by traditional intermediaries
• Epsilon Products has used ChemConnect to reduce
  raw material costs by 5
• Increased competition from marketplaces creates a
  new emphasis on supply chain flexibility and costs

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Electronic Commerce Security

• E-commerce is threatened by security breaches
• Large firms have been shut down by various types
  of system attacks, such as denial-of-service
  attacks
• Denial-of-service (DoS) attacks occur when
  attackers block a Web site by a variety of means,
  including bombarding the system with messages
• Buy.com, Amazon, CNN.com, eBay ETrade, ZDNet and
  Yahoo were all shut down temporarily in February
  200 because of DoS attacks
• Yahoo lost approximately 500,000 from a
  three-hour attack
• Security is an on-going effort

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E-commerce and ERP

• E-commerce and ERP technologies are complements
• If the competition is using the Internet
  effectively, then a company needs to develop an
  Internet strategy
• Without integrated information systems, companies
  cannot support e-commerce effectively
• In 1999, eToys.com announced a week before
  Christmas that it would not be able to fill all
  Web orders
• Toys were in the warehouse, but the systems were
  not in place to process orders

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Application Service Providers

• An Application Service Provider (ASP) provides
  management of application programs over a network
• Companies using the ASP do not have to purchase
  the hardware or software or higher people to
  operate systems
• ASPs can also provide consulting services for
  software applications like ERP
• ASPs can provide access to expensive applications
  like ERP with much lower startup costs

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Application Service Providers

• ASP Advantages
• Affordability Many companies that previously
  couldnt afford ERP systems can now afford to
  lease it through an ASP
• Shorter implementation times Implementation time
  is shorter because the company does not have to
  purchase hardware and software and train
  technical staff
• Expertise ASPs are more likely to be able to
  hire and retain competent technical personnel
  than a small company can

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Application Service Providers

• ASP Disadvantages
• Security Companies turn their critical
  information over to a 3rd party
• ASP must be able to insure data integrity
• ASP may have better security and controls than a
  small company
• Bandwidth/response time Telecommunications
  channel between ASP and company must be able to
  handle volume of transactions
• Flexibility The ASP must be flexible in working
  with users and satisfying requests for
  modifications

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Application Service Providers

• ASP Disadvantages
• No frills An ASP may not be willing to support
  3rd party software or develop custom applications
  (e.g. ABAP programs)
• Technical, not business An ASP may know the
  technical aspects of the software but may not be
  capable of helping customers with business
  process and configuration decisions

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Another LookUsing ERP through an ASP

• In the 1990s, Universities that joined SAPs
  University Alliance program had to purchase a
  server (costing over 50,000) and had to train
  its own system administrators
• SAP had to provide technical support for over 100
  university installations
• SAP developed a hosting concept known as the
  University Competency Center (UCC)
• Five Universities serve as ASP for other members
  in the Alliance, providing customer technical
  support for educationa specialized task

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NetWeaver

• Web Services is the combination of software tools
  that lets various programs within an organization
  communicate with other applications
• NetWeaver is SAPs Web services platform
• FedEx built its package tracking system on Web
  services
• FedExs cost per inquiry has been reduced from
  2.14 to 0.04
• Travelers Insurance Company has cut its auto
  glass claim processing costs by 30 percent using
  Web services

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NetWeaver

• NetWeaver is a collection of components that
  supports business processes over the Internet
• Modules include
• Enterprise Portal
• Mobile Infrastructure
• Business Intelligence
• Master Data Management
• Exchange Infrastructure

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NetWeaver

• Enterprise Portal (mySAP.com)
• Gives users complete access (a portal) to all
  work on a single screen
• A portal is a customizable Web site that links
  to
• Internet
• e-mail
• Calendar
• SAP R/3 system
• Other systems
• Users can access all required information with a
  single sign-on
• Provides drag-and-relate capabilities

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NetWeaver

• Mobile Infrastructure
• Allows users to access and work with data
  through
• PDAs
• Cell phones
• Pagers
• Provides access to data within SAP and other
  company information systems
• A partnership between SAP and VoiceObjects AG
  will add voice capability to NetWeaver

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NetWeaver

• Business Intelligence (BI)
• BI incorporates data warehouse and data mining
  tools
• BI can be delivered in a personalized manner with
  Enterprise Portal
• Can integrate information from various sources
  within and outside the firm
• BI works with any database management software
  and any operating system

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NetWeaver

• Master Data Management
• Provides data consistency within a companys SAP
  system
• The grocery industry could save 25 to 50
  billion if suppliers could synchronize their
  data, such as product numbers, with retail
  outlets
• Exchange Infrastructure
• Allows different applications to share data
  without writing code

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Accessing ERP over the Internet

• ERP vendors offer access to their systems over
  the Internet using a Web browser
• Easier to administer than special-purpose GUI
  software
• Software upgrades are easier to administer, as
  only server (and not end-user) software needs to
  be upgraded

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XML

• Extensible Markup Language (XML) is the new
  programming language of the Internet
• XML uses tags to define the data contained in Web
  pages
• XML tags give specific meaning to data
• HTML only specifies how information will look on
  a Web page
• XML-coded data can go directly from a Web page to
  a database without the need for middleware
• ERP systems are now ready to accept data in XML
  format

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Another LookXML, ERP and E-commerce

• OxyChem realized tremendous customer service
  benefits when it linked its SAP system with a
  customers SAP system
• This experience caused OxyChem to embark on a
  mission to link its SAP system with the
  information systems of its 5,000 customers
• OxyChem has developed four linking strategies
• XML-based ERP to ERP
• Physical probes in customers raw material
  containers
• ChemConnect Web site
• OxyChems own Web portal

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Radio Frequency Identification

• Radio Frequency Identification (RFID) technology
  is becoming an efficient way of tracking items in
  the supply chain
• An RFID device is a small package, or tag, with a
  microprocessor and antenna
• Information from the RFID tag is transmitted via
  radio waves to a receiver when interrogated by an
  RFID reader
• Does not require line-of-site contact like a bar
  code reader

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Radio Frequency Identification

• Wal-Mart is driving the implementation of RFID
  with its suppliers
• Wal-Mart will connect RFID data with its Retail
  Link system, where buyers and suppliers can check
  inventory levels, sales and more
• Proctor Gamble is using RFID technology to
  improve demand management in its supply chain to
  avoid the bullwhip effect
• SAPs R/3 software is RFID ready
• With NetWeaver, SAP can link RFID with both SAP
  and non-SAP systems

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Summary

• E-commerce is transforming the way companies do
  business. Business-to-consumer e-commerce can
  streamline a companys ordering operations and
  record information about customers that can be
  used to plan marketing campaigns, making the
  company more competitive.
• Business-to-business e-commerce is changing the
  way companies buy and sell goods. New forms of
  procurement such as auctions, reverse auctions,
  and trading exchangesall with dynamic
  pricingare replacing the traditional
  intermediary.
• ERP is an essential component for all forms of
  e-commerce. An integrated information system is
  required to provide speed and consistency in
  transaction processing and other back-office
  operations.

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Summary

• Application service providers (ASPs) are allowing
  companies to use ERP without a large initial
  investment, making ERP systems available to
  smaller companies. There are risks associated
  with using an ASP, however, and the decision to
  buy or lease must be weighed carefully.
• Web Services, a combination of software tools
  that lets various programs within an organization
  communicate with other applications, are gaining
  popularity.
• SAP's Web services platform is NetWeaver, which
  includes those tools for seamless Web
  connectivity, and also modules such as Business
  Intelligence, Mobile Infrastructure and Master
  Data Management.

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Summary

• Users of ERP systems often access those systems
  through a Web browser rather than the ERP
  systems' graphical user interface (GUI).
• XML, extensible markup language, defines data on
  a Web page. ERP systems are using XML to
  integrate systems between suppliers and customers
  for easy data transfer.
• RFID devices, or radio frequency identification
  devices, are used in tracking items in transit.
  RFIDs are particularly useful in supply chain
  processes for shipping and receiving cases and
  pallets of items. ERP vendors are developing the
  capability to incorporate RFID technology into
  ERP software.