Understanding Back-End Systems Chapter 9

Front-End Systems Front- end systems are those processes with which a user interfaces, and over which a customer can exert some control. For an E-Business, front-end systems are the Web site processes that customers use to view information and purchase products and services.

Back-End Systems Back-end systems are those processes that are not directly accessed by customers. Back-end systems include the business ’ s ERP and CRM systems that handle the accounting and budgeting, manufacturing, marketing, inventory management, distribution, order-tracking, and customer support processes.

Front- & Back-End Systems

Integrating the “ends” Online sales transactions are the ______ of an E-Business's operations. The sales and payment information gathered from online sales transactions must be integrated with other back-end processes.

Online Transaction Processing

Legacy System Integration There are several issues involving the integration of Web site systems with existing systems (legacy systems): – Real-time requirements vs. batch mode – Security Trust protections – method of securing system connection between supplier/shipping agent and e- business servers – Technology issues Integrating different systems sometimes requires middleware to allow for communication

Business Records Maintenance All businesses must keep records. Records of orders, payment and delivery, and customer data are necessary. Various regulations or laws require transaction records, such as sales tax records.

Records must be retained to meet regulator requirements. Regulations vary by purpose and by jurisdiction. Primary records include those records that provide supporting documentation for the key activities of an E-Business, including sales, order fulfillment, and payment activities. Secondary records include important information generated from E-Business activities but not used in daily operations. – Customer, web activity, & regulatory requirement records Business Records Maintenance

Backup and Disaster Recovery Most of the time things run well, but sometimes: – Computers “crash;” hardware or software fails. What is the failure rate of a hard drive? – “Mother Nature” happens: hurricanes, earthquakes, and tornados. The firm must have in place procedures to back-up and restore key data.

Some firms go to the extent of having backup data centers. If you outsource your Web and Internet services, be sure to review your vendor’s policies and plans for disaster recovery. Disaster Recovery – 9/11 – Power outage last fall Backup and Disaster Recovery (cont’d)

Disaster Recovery Plans Disaster Recovery Plans address several issues: – Access to telephones and communication lines – Scaled-down functional servers – Networking software and hardware – Relevant data and databases – Network configuration information

– Emergency duty rosters – Procedure for notifying employees where to report following a disaster – Contact information and building blueprints and specifications provided to police and fire departments – Emergency service agreements with outside electrical, telephone, and Internet service providers Disaster Recovery Plans (cont’d)

Disaster Recovery Options Hot-swappable drives Redundant array of independent disks (RAID) Uninterruptible power supplies (UPS) Generators Spare system (fail-over system) Mirrored servers

Order Fulfillment Order fulfillment may be the most critical part of an E-Business's operations. Failure to handle the order fulfillment process well can result in unhappy customers and bad-will. Fulfillment issues include inventory management, order picking and packaging, and shipping.

Inventory Management Many issues: – How is inventory stored? – How is inventory arranged in order to find specific items when they are ordered? – How is inventory movement (sales and replenishment) tracked? Tip – p. 320

Order Picking Firms that manage their own inventory have to manage any number of issues in addition to tracking and storage. Picking the correct items is a key element. Mis-picks are expensive. (p. 320)

Shipping and Delivery There are many shipping options – Post office – UPS – FedEx Many approaches to pricing shipping costs: – Build into cost of product – Charge as a % of order – Charge actual rate – Charge flat fee Tip – p. 323

Customers may be price sensitive. Customer options for delivery method may make sense. Customers sometimes shop for best price of goods including shipping costs. Shipping policy must be made very clear Shipping and Delivery (cont’d)

Returns Processing Most firms have a significant return rate; 10% is typical. Issues: – How to facilitate the customer return – How to minimize returns in the first place – How to resell or dispose of returned goods Must state a clear return policy

Return Services

International Shipping International shipping adds a layer of problems. Different shipping companies may be used. Additional paperwork needed for Customs clearances. Customs duties or taxes may be incurred. Export controls may effect transactions depending on the product and country of destination.

Outsourcing Fulfillments Management Fulfillment Houses (Third-party logistics – 3PL) – ShipMax.com – Fingerhut Business Services Outsourcing order fulfillment may be cost effective. Many large firms outsource at least part of fulfillment process. May be combined with shipping services.

Outsourcing Fulfillment Management Grow to $8.6 billion by 2004 Fulfillment house that targets e-businesses – third-party fulfillment logistics (3FL) – ShipMax.com, iFulFillment.com, e-fulfillment.com 3PL vs. 3FL Outpost.com – p. 329

Choosing a Fulfillment House A fulfillment house should: – Maintain adequate inventory levels to satisfy anticipated demand – Maintain a high order-fill rate (the percentage of orders that get filled on the same day) – Have a reasonable cutoff time for orders to be filled the same day

Choosing a Fulfillment House (cont’d) – Use a variety of well-known shipping companies – Support real-time communication to the E- Business on the status of inventories and orders, instead of simple batch processing – Add additional value by providing the option of credit card processing and customer service on behalf of the E-Business

Virtual Inventory An alternative to holding inventory either in- house or outsourcing The wholesaler keeps the inventory and ships on the order to the end consumer Advantages – Infinite scalability Disadvantages – Loss of control