Electronic Commerce and Transaction Processing Systems Chapter 5: Electronic Commerce and Transaction Processing Systems Topics: An Introduction to Electronic Commerce E-Commerce Applications E-Commerce Technology Components Strategies for Successful E-Commerce An Overview of Transaction Processing Systems Enterprise Resource Planning Please turn off your cell phone.

An Introduction to Electronic Commerce Chapter 5.1 An Introduction to Electronic Commerce Key Terms Business-to-consumer (B2C) e-commerce Business-to-business (B2B) e-commerce Consumer-to-consumer (C2C) e-commerce Supply chain management Electronic data interchange (EDI) Mobile commerce (m-commerce)

E-commerce Business activities conducted using electronic data transmission involving computers, telecommunications networks, and streamlined work processes.

E-commerce History EDI Software VAN Company B EDI Software Company A Transaction EDI Software Company B Transaction EDI Software Company A Electronic Data Interchange (EDI) EDI uses private network communications networks called value-added networks (VANs) to transmit standardized transaction data between business partners and suppliers.

Benefits of E-Commerce? Businesses use E-Commerce to: Reduce transaction costs Speed the flow of goods and info Improve customer service Enable close coordination of actions among manufacturers, suppliers, and customers Gain access to worldwide markets

E-commerce can dramatically extend a businesses market E-commerce can dramatically extend a businesses market. Farmyard Nurseries customer base before and after e-commerce. http://www.farmyardnurseries.co.uk/mail.htm.

Challenges of E-Commerce Change distribution systems & work processes Integrate web-based order processing with traditional systems Companies face a series of challenges when converting to e-commerce business processes. First is to define an effective e-commerce strategy and model. A second challenge is restructuring traditional distribution systems and work processes to be able to handle direct shipment of single units to customers. Traditionally, manufacturers or vendors ship bulk quantities to resellers who sell individual items to consumers. When selling directly to consumers from a website, companies need a distribution system that can handle split-case distribution, where cases of goods are opened, individual items are warehoused, and individual items are shipped and tracked. This process is often outsourced to companies like Fedex. As we started to see with the failure and bankruptcy of “dot-coms” at the end of the twentieth century, business to consumer e-commerce is difficult and risky even for companies that exist only on the Internet; therefore, the transition from a “bricks and mortar” business model to an e-commerce model can be expected to present many challenges.

The E-Commerce Supply Chain Supply chain management is a key value chain composed of: Demand planning Supply planning Demand fulfillment

The E-Commerce Supply Chain Figure 5.1: Supply Chain Management

E-Commerce Segmentation Consumer to Consumer (C2C) eBay.com Half.com Business to Business (B2B) Private Business to Consumer (B2C) Amazon.com BestBuy.com Although we hear more about B2C e-commerce, the B2B market is larger and expected to grow faster. B2B e-commerce allows even small startup companies to sell to a global marketplace, as well as to compare prices from global suppliers. B2C e-commerce is not as widespread and will grow more slowly. Many consumers still have concerns about the privacy and security of personal information, such as credit card numbers, provided for e-commerce. However, as we gain experience in B2C e-commerce, technology and policy should improve to overcome these fears.

E-Commerce Segmentation Although we hear more about B2C e-commerce, the B2B market is larger and expected to grow faster. B2B e-commerce allows even small startup companies to sell to a global marketplace, as well as to compare prices from global suppliers. B2C e-commerce is not as widespread and will grow more slowly. Many consumers still have concerns about the privacy and security of personal information, such as credit card numbers, provided for e-commerce. However, as we gain experience in B2C e-commerce, technology and policy should improve to overcome these fears.

M-commerce M-commerce: E-commerce over mobile devices like smartphones. digital goods proximity payment systems distance goods http://www.dylanscandybar.com

E-commerce Applications Chapter 5.2 E-commerce Applications Key Terms Electronic retailing Cybermall Electronic exchange Market segmentation Technology-enabled relationship management Electronic bill presentment

E-Commerce Applications: Retail and Wholesale Electronic retailing (E-tailing): the direct sale from business to consumer through electronic storefronts, typically designed around an electronic catalog and shopping cart model www.sharperimage.com Cybermalls: a single Web site that offers many products and services at one Internet location http://eshop.msn.com Wholesale e-commerce: B2B Electronic Exchanges E-tailing, or electronic retailing, is the direct sale of goods or services from businesses to consumers through electronic storefronts. Typically, these websites include electronic catalogs and shopping carts (or baskets). This model is used for both retail and wholesale selling. A cybermall is a web site that offer many products and services. Many cybermalls consist of links to affiliated retailers. Purchases of manufacturing, repair, and operations goods and services are an example of wholesale e-commerce. eCommerce software and processes can help streamline and improve processes for managing manufacturing, repair and operations.

E-Commerce Applications: Manufacturing To raise profitability and improve customer service, many manufacturers move their supply chain operations onto the Internet Electronic exchange: an electronic forum where manufacturers, suppliers, and competitors buy and sell goods, trade market information, and run back-office operations

E-Commerce Applications: Manufacturing Figure 5.3: Model of an Electronic Exchange

E-Commerce Applications: Marketing Market segmentation: the identification of specific markets to target them with advertising messages Technology-enabled relationship management: use of detailed information about a customer’s behavior, preferences, needs, and buying patterns to set prices, negotiate terms, tailor promotions, add product features, and otherwise customize the entire relationship with that customer

E-Commerce Applications: Marketing Supply chain management is an important value chain that includes demand planning, supply planning, and demand fulfillment. Supply chain processes are key candidates for conversion to e-commerce. Demand planning seeks to understand buying patterns and forecast demand for a product or service. Demand fulfillment processes include taking orders, verifying customer information and credit, agreeing to fill the order, managing unfilled, backlogged orders, and filling orders. Supply planning involves planning for the infrastructure supporting procurement and demand fulfillment – such as planning for transportation, distribution and procurement. In order to get benefits from converting supply chain management processes to e-commerce, such as increased revenues, decreased costs, improved customer satisfaction, and reduced inventory, all subprocesses involving communication or exchange of goods between all stakeholders, such as manufacturers, distributors, and retailers must be integrated. With such integration, costs can be cut by reducing time-consuming and labor-intensive steps throughout the supply chain; customer satisfaction, and therefore loyalty, can be improved by the ability to give customers more detailed information about order status; and by increasing the speed and accuracy of information, allowing inventory reductions, and thus, reduced capital tied up in inventory.

Investment & Finance Investment and Finance Auctions On-line Stock Trading www.sharebuilder.com On-line Banking electronic bill presentment The Motley Fool: http://www.fool.com Auctions http://www.ebay.com http://www.whattheheck.com/ebay/ E-tailing, or electronic retailing, is the direct sale of goods or services from businesses to consumers through electronic storefronts. Typically, these websites include electronic catalogs and shopping carts (or baskets). This model is used for both retail and wholesale selling. A cybermall is a web site that offer many products and services. Many cybermalls consist of links to affiliated retailers. Purchases of manufacturing, repair, and operations goods and services are an example of wholesale e-commerce. eCommerce software and processes can help streamline and improve processes for managing manufacturing, repair and operations.

E-commerce Technology, Infrastructure, and Development Chapter 5.3 E-commerce Technology, Infrastructure, and Development Key Terms Web site development tools Web page construction software E-commerce software Catalog management Product configuration software Electronic shopping cart Digital certificates Electronic cash Electronic wallet Smart card

E-commerce Technology, Infrastructure, and Development Cost, Availability, Reliability, Security, Redundency Catalog, Shopping Cart, Transaction Processing, Traffic Data Analysis Security, Encryption, Delivery, Tracking Supply chain management is an important value chain that includes demand planning, supply planning, and demand fulfillment. Supply chain processes are key candidates for conversion to e-commerce. Demand planning seeks to understand buying patterns and forecast demand for a product or service. Demand fulfillment processes include taking orders, verifying customer information and credit, agreeing to fill the order, managing unfilled, backlogged orders, and filling orders. Supply planning involves planning for the infrastructure supporting procurement and demand fulfillment – such as planning for transportation, distribution and procurement. In order to get benefits from converting supply chain management processes to e-commerce, such as increased revenues, decreased costs, improved customer satisfaction, and reduced inventory, all subprocesses involving communication or exchange of goods between all stakeholders, such as manufacturers, distributors, and retailers must be integrated. With such integration, costs can be cut by reducing time-consuming and labor-intensive steps throughout the supply chain; customer satisfaction, and therefore loyalty, can be improved by the ability to give customers more detailed information about order status; and by increasing the speed and accuracy of information, allowing inventory reductions, and thus, reduced capital tied up in inventory. Dedicated machine that can handle a lot of traffic. www.cnet.com Click Internet Services, E-commerce Hosting

Hardware Storage capacity and computing power required of the Web server depends on: Software that will run on the server Volume of e-commerce transactions Web site hosting www.dreamhost.com

Software Web site development tools Retrieving and sending Web pages Tools used to develop a web site, including HTML or visual web page editor, software development kits, and web page upload support. Retrieving and sending Web pages Web page construction Software that uses web editors and extensions to produce both: Static Web pages Dynamic Web pages

Software E-commerce software must support: Catalog management Automates the process of creating a real-time interactive catalog and delivering customized content to a user’s screen. Product configuration Software used by buyers to build the product they need online E.g. www.dell.com Electronic shopping cart A model used to track the items selected for purchase, allow shoppers to view what is in the cart, add new items to it, and remove items from it.

Software Figure 5.5: Electronic Shopping Cart

Electronic Payment Systems Digital certificate: an attachment to an e-mail message or data embedded in a Web page that verifies the identity of a sender or a Web site Electronic cash (e-cash or digital cash) any of several schemes that allow a person to pay for goods or services by transmitting a number from one computer to another http://www.paypal.com

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Electronic Payment Systems Electronic wallet: a computerized stored value that holds credit card information, electronic cash, owner identification, and address information Credit card e.g. VISA, MasterCard Charge card e.g American Express Debit card e.g. Bank Of America Smart card A credit card-sized device with an embedded microchip to provide electronic memory and processing capability FSU Card

An Overview of Transaction Processing Systems Chapter 5.4 An Overview of Transaction Processing Systems Key Terms Batch processing system Online transaction processing (OLAP) Transaction processing cycle Data collection Data editing Data correction Data manipulation Data storage Document production Order processing systems

An Overview of Transaction Processing Systems Provide data for other business processes: Management information system/decision support system (MIS/DSS) Special-purpose information systems Process the detailed data necessary to update records about the fundamental business operations Include order entry, inventory control, payroll, accounts payable, accounts receivable, and the general ledger.

An Overview of Transaction Processing Systems Figure 5.6: TPS, MIS/DSS, and Special Information Systems in Perspective

Traditional Transaction Processing Methods and Objectives Batch processing system: method of computerized processing in which business transactions are accumulated over a period of time and prepared for processing as a single unit or batch Online transaction processing (OLTP): computerized processing in which each transaction is processed immediately, without the delay of accumulating transactions into a batch

Transaction Processing Activities Transaction processing cycle: the process of data collection, data editing, data correction, data manipulation, data storage, and document production Data collection Data editing Data correction Data manipulation Data storage Document production and reports

Transaction Processing Cycle Supply chain management is an important value chain that includes demand planning, supply planning, and demand fulfillment. Supply chain processes are key candidates for conversion to e-commerce. Demand planning seeks to understand buying patterns and forecast demand for a product or service. Demand fulfillment processes include taking orders, verifying customer information and credit, agreeing to fill the order, managing unfilled, backlogged orders, and filling orders. Supply planning involves planning for the infrastructure supporting procurement and demand fulfillment – such as planning for transportation, distribution and procurement. In order to get benefits from converting supply chain management processes to e-commerce, such as increased revenues, decreased costs, improved customer satisfaction, and reduced inventory, all subprocesses involving communication or exchange of goods between all stakeholders, such as manufacturers, distributors, and retailers must be integrated. With such integration, costs can be cut by reducing time-consuming and labor-intensive steps throughout the supply chain; customer satisfaction, and therefore loyalty, can be improved by the ability to give customers more detailed information about order status; and by increasing the speed and accuracy of information, allowing inventory reductions, and thus, reduced capital tied up in inventory.

Order Processing Systems Systems that process order entry, sales configuration, shipment planning, shipment execution, inventory control, invoicing, customer relationship management, and outing and scheduling.

Order Processing Systems The lifeblood of the organization! Supply chain management is an important value chain that includes demand planning, supply planning, and demand fulfillment. Supply chain processes are key candidates for conversion to e-commerce. Demand planning seeks to understand buying patterns and forecast demand for a product or service. Demand fulfillment processes include taking orders, verifying customer information and credit, agreeing to fill the order, managing unfilled, backlogged orders, and filling orders. Supply planning involves planning for the infrastructure supporting procurement and demand fulfillment – such as planning for transportation, distribution and procurement. In order to get benefits from converting supply chain management processes to e-commerce, such as increased revenues, decreased costs, improved customer satisfaction, and reduced inventory, all subprocesses involving communication or exchange of goods between all stakeholders, such as manufacturers, distributors, and retailers must be integrated. With such integration, costs can be cut by reducing time-consuming and labor-intensive steps throughout the supply chain; customer satisfaction, and therefore loyalty, can be improved by the ability to give customers more detailed information about order status; and by increasing the speed and accuracy of information, allowing inventory reductions, and thus, reduced capital tied up in inventory. Business Resumption Planning: Anticipating and minimizing the effects of disasters.

Order Process I ng Purchasing Order Entry System Order Process I ng Purchasing Accounts Payable System Customer Supplier Shipment Planning System Receiving System Shipment Execution System Purchase Order Processing System Invoicing System Inventory Control System Warehouse

TPS Control and Management Issues Chapter 5.5 TPS Control and Management Issues Key Terms Business continuity planning Transaction processing system audit Audit trail

TPS Control and Management Issues Business continuity planning: identification of the business processes that must be restored first in the event of a disaster and specification of what actions should be taken and who should take them to restore operations Audit trail: documentation that allows the auditor to trace any output from the computer system back to the source documents

Transaction Processing System Audit Does the system meet the business need for which it was implemented? What procedures and controls have been established? Are these procedures and controls being used properly? Are the information systems and procedures producing accurate and honest reports?

Enterprise Resource Planning Chapter 5.6 Enterprise Resource Planning Key Terms Best practices

Enterprise Resource Planning (ERP) From Webopedia.com: a business management system that integrates all facets of the business, including planning, manufacturing, sales, and marketing. Key: Real-time monitoring of business functions Current business conditions make enterprise-wide accessibility of information a key to success. ERP software offers that possibility. Deploying an ERP system allows a firm to replace numerous separate, sometimes isolated, inefficient legacy applications with a single set of integrated products. This improves the efficiency of systems and decreases the cost of maintaining old systems. This improves an organization’s ability to adapt to changing conditions. Implementing an ERP system also gives an enterprise the chance to upgrade and standardize hardware, software and databases, reducing support and operations costs. ERP systems are designed around the most effective and customer-oriented business practices found. Thus, deploying an ERP system will help an organization follow the industry’s best practices. Although the adoption of improved work processes can be beneficial, as noted on the next slide, this can also be a disadvantage. Often established processes must be re-engineered, possibly causing dissatisfaction or turnover among experienced employees. Since ERP systems maintain an integrated database, decisions can be made based on enterprise-wide data. This is far more efficient than trying to coordinate decisions across units. http://www.aim.fsu.edu/

ERP Benefits Eliminates costly, inflexible legacy systems Improved technology infrastructure Improved work processes Increased data access for decision making Disadvantages Expense & time Radical change Integrating with other systems One vendor risks Current business conditions make enterprise-wide accessibility of information a key to success. ERP software offers that possibility. Deploying an ERP system allows a firm to replace numerous separate, sometimes isolated, inefficient legacy applications with a single set of integrated products. This improves the efficiency of systems and decreases the cost of maintaining old systems. This improves an organization’s ability to adapt to changing conditions. Implementing an ERP system also gives an enterprise the chance to upgrade and standardize hardware, software and databases, reducing support and operations costs. ERP systems are designed around the most effective and customer-oriented business practices found. Thus, deploying an ERP system will help an organization follow the industry’s best practices. Although the adoption of improved work processes can be beneficial, as noted on the next slide, this can also be a disadvantage. Often established processes must be re-engineered, possibly causing dissatisfaction or turnover among experienced employees. Since ERP systems maintain an integrated database, decisions can be made based on enterprise-wide data. This is far more efficient than trying to coordinate decisions across units.

ERP Best practices the most efficient and effective ways to complete a business process

Review E-commerce supports electronic business transactions. Electronic Data Interchange (EDI) uses private VANs for e-commerce. B2B is huge compared to B2C and C2C. E-commerce benefits include streamlined business process and opportunities for small businesses. M-commerce is e-commerce over mobile devices.

Review Encryption and Digital Signatures provide security for e-commerce transactions. TPS facilitates and records business transactions. There are lots of different kinds of TPSs. Among the most important is the Order Processing System. ERP provides real time access to business processes.

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