Concepts in Enterprise Resource Planning 2nd Edition Chapter ERP and Electronic Commerce 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 SAP’s 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 Concepts in Enterprise Resource Planning, Second Edition 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 Concepts in Enterprise Resource Planning, Second Edition 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 other—especially for commodity products Concepts in Enterprise Resource Planning, Second Edition 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 Concepts in Enterprise Resource Planning, Second Edition 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 supplier’s 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 longterm relationship • An advantage as long as both parties remain satisfied Concepts in Enterprise Resource Planning, Second Edition Internet-Based Procurement • Internet-based procurement: • Is less expensive than private EDI networks • Reduces purchasing costs further as suppliers compete for orders on the buyer’s Web site • Locking in suppliers often does not occur in Internetbased 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 Concepts in Enterprise Resource Planning, Second Edition 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 Concepts in Enterprise Resource Planning, Second Edition 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 Concepts in Enterprise Resource Planning, Second Edition 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 Concepts in Enterprise Resource Planning, Second Edition 10 NetWeaver • Web Services is the combination of software tools that lets various programs within an organization communicate with other applications • NetWeaver is SAP’s Web services platform • FedEx built its package tracking system on Web services • FedEx’s 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 Concepts in Enterprise Resource Planning, Second Edition 21 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 Concepts in Enterprise Resource Planning, Second Edition 22 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 Concepts in Enterprise Resource Planning, Second Edition 23 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 Concepts in Enterprise Resource Planning, Second Edition 24 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 Concepts in Enterprise Resource Planning, Second Edition 25 NetWeaver • Master Data Management • Provides data consistency within a company’s 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 Concepts in Enterprise Resource Planning, Second Edition 26 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 Concepts in Enterprise Resource Planning, Second Edition 27 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 Concepts in Enterprise Resource Planning, Second Edition 28 Concepts in Enterprise Resource Planning, Second Edition 29 Another Look—XML, ERP and E-commerce • OxyChem realized tremendous customer service benefits when it linked its SAP system with a customer’s 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 customer’s raw material containers • ChemConnect Web site • OxyChem’s own Web portal Concepts in Enterprise Resource Planning, Second Edition 30 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 Concepts in Enterprise Resource Planning, Second Edition 31 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 • SAP’s R/3 software is RFID ready • With NetWeaver, SAP can link RFID with both SAP and non-SAP systems Concepts in Enterprise Resource Planning, Second Edition 32 Summary • • • E-commerce is transforming the way companies business Business-to-consumer e-commerce can streamline a company’s 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 exchanges— all with dynamic pricing—are 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 Concepts in Enterprise Resource Planning, Second Edition 33 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 Concepts in Enterprise Resource Planning, Second Edition 34 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 Concepts in Enterprise Resource Planning, Second Edition 35 ... Define XML and its significance to ERP • Define RFID and its future role in logistics and sales Concepts in Enterprise Resource Planning, Second Edition Introduction • Competing effectively in. .. members in the Alliance, providing customer technical support for education—a specialized task Concepts in Enterprise Resource Planning, Second Edition 18 Concepts in Enterprise Resource Planning, ... need for middleware • ERP systems are now ready to accept data in XML format Concepts in Enterprise Resource Planning, Second Edition 28 Concepts in Enterprise Resource Planning, Second Edition