Electronic Commerce Chapter 5: Business-to-Business Strategies: From Electronic Data Interchange to Electronic Commerce Dr. Jing Zhou Dr. Jing Zhou - School of Computer Science, Communication University of China, Beijing; © 2007

2 Learning Objectives In this chapter, you will learn about: Strategies that businesses use to improve purchasing, logistics ( 物流 ), and other support activities Electronic data interchange and how it works How businesses are moving electronic data interchange operations to the Internet

3 Learning Objectives Cont ’ d Supply chain management ( 供应链管理 ) and how businesses are using the Internet and Web technologies to improve it Electronic marketplaces ( 电子集市 ) and portals ( 门户 ) that make purchase-sale negotiations easier and more efficient

4 Key Terms Accredited Standards Committee X12 公认标准委 员会 X12 American National Standards Institute 美国国家标 准协会 automated clearing house (ACH) 自动清算所 contract purchasing 合同采购 customer portal 客户门户 direction connection EDI 直接连接 EDI direct material 直接物料 EDI-capable bank 支持 EDI 业务的银行 EDI compatibleEDI 兼容

5 Key Terms EDI for Administration, Commerce, and Transport (EDIFACT or UN/EDIFACT) 管理、商务和运输的 EDI e-government 电子政务 e-procurement software 电子采购软件 e-sourcing 电子供应 financial EDI (FEDI) 金融 EDI financial VAN (FVAN) 金融 VAN independent exchange 第三方交易中心 independent industry marketplace 第三方行业电子集 市 indirect connection EDI 间接连接 EDI

6 Key Terms indirect material 间接物料 industry consortia-sponsored marketplace 行业共同电 子集市 Internet EDI 互联网 EDI knowledge management 知识管理 maintenance, repair, and operating (MRO) 保养、维修 和运营 nonrepudiation 不可否认 open EDI 开放式 EDI private company marketplace 专属电子集市 private store 专属店铺

7 Key Terms public marketplace 公共电子集市 purchasing card (p-card) 采购卡 radio frequency identification device (RFID) 无线射频鉴 别设备 replenishment purchasing 补货 / 给采购 sourcing 供应 spend 开支 spot market 现货市场 spot purchasing 现货采购 supply alliance 供应联盟 supply chain 供应链

8 Key Terms supply web 供应网络 third-party logistics (3PL) provider 第三方物流服务商 tier one supplier 一级供应商 tier two supplier 二级供应商 tier three supplier 三级供应商 transaction sets 报文标准 ultimate consumer orientation 最终消费者导向 value-added bank (VAB) 增值服务银行 vertical portal (vortal) 垂直门户

9 Purchasing, Logistics, and Support Activities Purchasing activities ( 购买活动 ) Include identifying vendors, evaluating vendors, selecting specific products, placing orders ( 下订单 ), and resolving any issues that arise after receiving the ordered goods or services Supply chain ( 供应链 ) Part of an industry value chain that precedes a particular strategic business unit

10 Purchasing, Logistics, and Support Activities Cont’d Procurement ( 采购 ) Includes all purchasing activities, plus monitoring of all elements of purchase transactions Also includes managing and developing relationship with key suppliers Supply management ( 供应管理 ) Term used to describe procurement activities

11 Purchasing, Logistics, and Support Activities Cont’d Sourcing ( 供应 ) Procurement activity devoted to identifying suppliers and determining their qualifications E-procurement or e-sourcing Use of Internet technologies in procurement and sourcing activities

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13 Direct vs. Indirect Materials Purchasing Direct materials ( 直接物料 ) Materials that become part of the finished product in a manufacturing process Replenishment/Contract purchasing ( 补货采购 / 合同采购 ) The company negotiates long-term contracts for most of the materials that it will need When actual demand is higher than company’s expected demand, it must buy additional material

14 Direct vs. Indirect Materials Purchasing Cont’d Purchases are made in a loosely organized market called a spot market ( 现货市场 ) This second type of direct materials purchasing is called spot purchasing ( 现货采购 ) Indirect materials ( 间接物料 ) Other materials that the company purchases, including factory supplies Office depot China Office depot China Staples Staples

15 Logistics Activities ( 物流活动 ) Include managing Inbound movements of materials and supplies Outbound movements of finished goods and services Objective of logistics To provide the right goods in the right quantities in the right place at the right time Logistics management Important support activity for both sales and purchasing activities

16 Logistics Activities Cont’d Receiving ( 收货 ), warehousing ( 仓储 ), controlling inventory ( 库存 控制 ), scheduling and controlling vehicles ( 车辆的调度和控制 ), and distributing finished goods ( 产成品的分销 ) are all logistics activities For example, the Schneider Track and Trace system delivers real-time shipment info to its customer J.B. Hunt lets its customer track their shipments themselves When transportation and freight companies engage in the business of operating all or a large portion of a customer’s materials movement activities, the company is called a third-party logistics provider ( 第三方物流服务商 )

17 Support Activities ( 辅助活动 ) Support activities Include categories of finance ( 财务 ) and administration ( 管 理 ), human resources ( 人力资源 ), and technology development Many companies can offer support activities services including human resources functions (Online Benefits), document storage services (CyLex Systems), and payroll processing (PayMaxx) Larger firms are building these functions into their intranets

18 Support Activities Cont’d In 1999 Ericsson launched an extranet which included a Web site Enabled recipients of payments from the company’s medical and retirement plans to track benefits Designed to facilitate knowledge management ( 知识管 理 ) Knowledge management Intentional collection, classification, and dissemination of information about A company, its products, and its processes

19 E-Government ( 电子政务 ) Use of electronic commerce by governments and government agencies to Perform functions for their stakeholders Employ people, buy supplies from vendors, and distribute benefit payments Collect taxes and fees from constituents ( 选民 )

20 E-Government Cont’d E-government can reduce administrative costs and provide better services to stakeholders The most common services offered are: access to the state laws and regulations, renewal of licenses, promotion of the state to businesses considering new locations ( 招商引资 ), job listings, promotion of tourism in the state ( 推广旅游 ), tax form and filing information, and information for companies that want to do business with the state

21 Network Model of Economic Organization One trend becoming clear in purchasing, logistics, and support activities is the shift away from hierarchical structures toward network structures Some researchers studying the interaction of firms within an industry value chain are beginning to use the term “supply web” instead of “supply chain” The emerging networks of firms are more flexible and can respond to changes in the economic environment much more quickly

22 Electronic Data Interchange (EDI ， 电子数据交换 ) Computer-to-computer transfer of business information between two businesses that uses a standard format of some kind EDI compatible ( 兼容 ) Firms that exchange data in specific standard formats Business information exchanged is often transaction data Most B2B electronic commerce An adaptation of EDI or based on EDI principles

23 Early Business Information Interchange Efforts 1950s Companies began to use computers to store and process internal transaction records In 1968 Number of freight and shipping companies formed the Transportation Data Coordinating Committee (TDCC) which was charged with exploring ways to reduce paperwork ( 文书工作 ) burden

24 Early Business Information Interchange Efforts Cont’d TDCC Created a standardized information set including all the data elements that the shippers ( 发货人 ) commonly included on bills of lading( 提货单 ), freight invoices( 运费发票 ), shipping manifests ( 载 货清单 ), and other paper forms

25 Emergence of Broader EDI Standards American National Standards Institute (ANSI) Has been coordinating body ( 协调组织 ) for standards in the United States since 1918 Does not set standards itself Has created a set of procedures for the development of national standards Accredits ( 授权 ) committees that follow those procedures

26 Emergence of Broader EDI Standards Cont’d Accredited Standards Committee X12 (ASC X12) Chartered by ANSI to develop uniform EDI standards in 1979 Include information systems professionals from over 800 businesses and other organizations Transaction sets ( 报文集 ) Names of formats for specific business data interchanges

27 Commonly used ASC X12 Transaction Sets

28 Emergence of Broader EDI Standards Cont’d In 1987 United Nations published first standards under the title EDI for Administration, Commerce, and Transport (EDIFACT, or UN/EDIFACT) Late 2000 ASC X12 organization and UN/EDIFACT group agreed to develop one common set of international standards

29 Commonly used UN/EDIFACT Transaction Sets

30 How EDI Works EDI Implementation can be complicated Example Consider company that needs a replacement for one of its metal-cutting machines ( 金属切割机床 ) Paper-based purchasing process Buyer and vendor are not using any integrated software for business processes internally Information transfer between buyer and vendor is paper based

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33 Direct connection ( 直接连接 ) EDI Direct connection EDI Requires each business in the network to operate its own on-site EDI translator computer EDI translator computers are connected directly to each other using Modems and dial-up telephone lines or dedicated leased lines ( 专线 )

34 Direct Connection EDI

35 Value-Added Networks ( 增值网 ) Indirect connection ( 间接连接 ) EDI To send an EDI transaction set to a trading partner VAN customer connects to the VAN then forwards EDI formatted message to VAN VAN logs the message and delivers it to trading partner’s mailbox Trading partner then dials in to the VAN and retrieves its EDI-formatted messages

36 Indirect Connection EDI through a VAN

37 Advantages of using a VAN Users need to support only the VAN’s one communications protocol The VAN Records message activity in an audit log ( 运行记录 ) Can provide translation between different transaction sets used by trading partners Can perform automatic compliance checking

38 Disadvantages of using a VAN Cost Most VANs require An enrollment fee ( 注册费 ), a monthly maintenance fee ( 月租费 ), and a transaction fee ( 交易费 ) Using VANs can become cumbersome and expensive for companies that Want to do business with a number of trading partners, each using different VANs

39 EDI on the Internet Initial roadblocks to conducting EDI over the Internet Concerns about security Internet’s inability to provide audit logs and third- party verification ( 第三方验证 ) of message transmission and delivery Nonrepudiation ( 不可否认 ) Ability to establish that a particular transaction actually occurred

40 Open Architecture of the Internet Internet EDI or Web EDI EDI on the Internet Also called open EDI Open architecture of Internet Allows trading partners unlimited opportunities for customizing information interchanges New tools such as XML Helping trading partners be even more flexible in exchanging detailed information

41 Financial EDI ( 金融 EDI ) EDI transaction sets that provide instructions to a trading partner’s bank Automated clearing house ( ACH, 自动清算所 ) system Service that banks use to manage accounts with each other EDI-capable ( 支持 EDI 业务 ) banks Equipped to exchange payment ( 付款 ) and remittance ( 汇款 ) data through VANs

42 Financial EDI Cont’d Value-added banks ( VABs, 增值服务银行 ) Banks that offer VAN services for nonfinancial transactions Financial VANs ( FVANs, 金融增值网 ) Nonbank VANs that can translate financial transaction sets into ACH formats

43 Supply Chain Management ( 供应链管理 ) When companies integrate their supply management and logistics activities across multiple participants in a particular product’s supply chain, the job of managing that integration is called supply chain management Supply chain management Was originally developed to reduce costs Is now used to add value in the form of benefits to the ultimate consumer at the end of the chain, which requires a more holistic view ( 全局的观点 ) of the entire supply chain

44 Supply Chain Management Cont’d Businesses that engage in supply chain management Establish long-term relationships with small number of capable suppliers – tier one suppliers ( 一级供应商 ) Tier one suppliers Develop long-term relationships with larger number of suppliers that provide components and raw materials – tier two suppliers ( 二级供应商 )

45 Supply Chain Management Cont’d Tier two suppliers Manage relationships with the next level of suppliers – tier three suppliers ( 三级供应商 ) Supply alliances ( 供应联盟 ) Long-term relationships created among participants in the supply chain

46 Internet Technologies and the Supply Chain Key elements of successful supply chain management Clear communications ( 明确的沟通 ) and quick responses ( 快速的响应 ) Technologies, especially Internet and Web technologies, can be very effective communications enhancers Major disadvantage of using Internet technologies in supply chain management The cost of the technologies

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48 Increasing Supply Chain Efficiencies Many companies are using Internet and Web technologies to manage supply chains that yield increases in efficiencies These companies have found ways to increase process speed, reduce costs, and increase manufacturing flexibility Examples Boeing, the largest producer of commercial aircraft Dell Computer, famous for use of Web to sell custom- configured computers

49 Using Materials-Tracking ( 物料跟踪 ) Technologies with EDI and EC In many industries, the integration of bar coding and EDI has been prevalent for tracking materials movement In the 2nd wave of electronic commerce, companies are integrating new types of tracking, such as radio frequency identification devices (RFIDs, 无线射频标签 ) The passive ( 被动 ) RFID tag Includes information about the inventory item Can be made cheaply and in small size Does not need a power source

50 Creating an Ultimate Consumer Orientation ( 最终的消费者导向 ) One goal of supply chain management is to help each company in the chain focus on meeting needs of consumer at the end of the supply chain, which are often called ultimate consumer orientation One company pioneering the use of Internet technology to facilitate creating ultimate consumer orientation is Michelin North America Most IT and purchasing managers believe that IT helps to improve their firm’s relationships with suppliers and supply chain management

51 Building and Maintaining Trust in the Supply Chain Major issue for most companies to form supply chain alliances Developing trust Key elements for building trust Continual communication ( 持续的沟通 ) and information sharing ( 信息共享 )

52 Building and Maintaining Trust in the Supply Chain Cont’d Procurement professionals build trust on years of doing business with the same vendor Vendors send sales representatives to call on buyers regularly Vendors participate in trade shows ( 贸易展 ) and conferences Vendors are finding that the Web gives them opportunity to stay in contact with customers more easily and less expensively

53 Electronic Marketplaces ( 电子集 市 ) and Portals ( 门户 ) Many business researchers and consultants believe that the Web provides opportunity for companies to establish information hubs ( 信息中心 ), marketplaces, and auctions ( 拍卖中心 ) Vertical portals (vortals, 垂直门户 ) Offer a doorway (or portal) to the Internet for industry members Vertically integrated – each hub would offer services to just one industry

54 Independent Industry Marketplaces ( 独立的行业集市 ) Industry marketplaces ( 行业集市 ) Focused on a single industry Independent exchanges ( 第三方交易中心 ) Not controlled by a company that was an established buyer or seller in the industry ( 非本行业 某家公司所控制 ) Public marketplaces ( 公共电子集市 ) Open to new buyers and sellers just entering the industry

55 ChemConnect Home Page

56 Private Stores ( 专属商店 ) and Customer Portals ( 客户门户 ) Private store Has password-protected entrance Offers negotiated price reductions on limited selection of products Customer portal sites Offer private stores along with services such as part number cross-referencing ( 零件编码表 ), product usage guidelines, safety information, and other services

57 Private Company Marketplaces ( 专 属公司电子集市 ) E-procurement software Allows a company to manage its purchasing function through a Web interface Private company marketplace A marketplace that provides auctions, request for quote postings, and other features many of which are similar to those of e-procurement software

58 Industry Consortia-Sponsored Marketplaces ( 行业共同电子集市 ) Formed by several large buyers in a particular industry Covisint Created in 2000 by a consortium of DaimlerChrysler, Ford, and General Motors In the hotel industry Marriott, Hyatt, and three other major hotel chains formed a consortium to create Avendra

59 Characteristics of B2B Marketplaces

60 Summary Companies are using Internet and Web technologies To improve purchasing, logistics, and support activities EDI First developed by freight and shipping companies to reduce the paperwork burden Internet Now providing the inexpensive communications channel that EDI lacked

61 Summary Supply chain management Incorporates several elements that can be implemented and enhanced through use of Internet and Web Models for B2B electronic commerce Independent industry marketplaces Private stores, customer portals Private company marketplaces Industry consortia-sponsored marketplaces

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