Chapter 9 Strategies for Purchasing and Support Activities Electronic Commerce Objectives ◆ ◆ ◆ ◆ ◆ Improving purchasing, logistics, and other support activities Creating network organizations that extend beyond traditional limits EDI, how it works, and how it is moving to the Internet Internet improvements to supply chain management Software packages for business-to-business e-commerce and supply chain management Purchasing, Logistics, and Support Activities ◆ Purchasing activities ● Identifying and evaluating vendors ● Selecting specific products ● Placing orders ● Resolving issues after receiving the ordered goods or services ◆ Specialized Web sites exist that offer high levels of product knowledge Neoforma Product Sourcing Web Site Figure 9-1 Logistic Activities Providing the right goods in the right quantities in the right place at the right time ◆ Managing the inbound movements of materials and supplies and the outbound movements of finished goods and services ◆ Support Activities ◆ Includes the general categories of ● Finance ◆ Making payments, processing customer payments, budgeting and planning ● Human ◆ and administration resources Hiring, training, evaluating employees, benefits administration ● Technology ◆ development Networking, published research, connecting outside sources of R&D services DigitalWork Small Business Support Activities Page Figure 9-2 Electronic Data Interchange ◆ ◆ ◆ The computer-to-computer transfer of business information between two businesses that uses a standard format In the 1950s, companies began to use computers to store and process internal data and information By the 1960s, companies began exchanging transaction information with each other on punched cards or magnetic tape Electronic Data Interchange ◆ ◆ ◆ Eventually, trading partners transferred data over telephone lines instead of shipping punched cards or tapes to each other In 1968, the Transportation Data Coordination Committee was formed, charged with exploring ways to reduce the paperwork burden Since 1918, the American National Standards Institute (ANSI) became the coordinating body for standards in the United States Electronic Data Interchange ◆ ◆ In 1979, ANSI charted the Accredited Standards Committee X12 (ASC X12) to develop EDI standards The current ASC X12 standard includes specifications for several hundred transaction sets (the names of the formats for specific business data interchanges) 10 Advantages of Using a Value Added Network ◆ ◆ ◆ ◆ Users support only one communications protocol The VAN records activity in an audit log, providing an independent record of transactions The VAN can provide translation between different transaction sets The VAN can perform automatic compliance checks to ensure the transaction set is in the specified EDI format 22 Disadvantages of Using a Value Added Network ◆ ◆ ◆ Most VANs require an enrollment fee, a monthly maintenance fee, and a transaction fee VANs can be cumbersome and expensive for companies with trading partners using different VANs Inter-VAN transfers not always provide a clear audit trail 23 EDI on the Internet Viewed as a replacement for expensive leased lines and dial-up connections ◆ Small companies can get back in the game of selling to large customers the demanded EDI capabilities of their suppliers ◆ Concerns about security and lack of audit logs continue to be a major roadblock ◆ 24 Open Architecture of the Internet ◆ The open architecture of the Internet allows trading partners virtually unlimited opportunities to customize their information interchanges 25 Open Architecture of the Internet ◆ A new ASC X12 Task Group has been charged with several broad objectives ● Converting the ASC X12 EDI data elements and transaction set structures to XML, retaining one-to-one mapping ● Developing XML data element names consistent with existing ASC X12 transaction sets ● Meeting the needs of app-to-app and human-to-app interfaces 26 Financial EDI A trading partner’s bank is called a Financial EDI (FEDI) ◆ Many trading partners are reluctant to send FEDI transfers for large sums of money over the Internet ◆ Companies may opt to establish an indirect connection through a VAN for the added security for FEDI transaction ◆ 27 Hybrid EDI Solutions Utilize the Internet for only part of an EDI transaction, ones where the transactions are not considered a negotiable instrument ◆ Bottomline Technologies PayBase package allows hybrid EDI ◆ NetTransact provides an interface for smaller businesses connected to the Internet, but not have EDI capability ◆ 28 NetTransact EDI-HTML Conversion Service Figure 9-8 29 Supply Chain Management Money can be saved and product quality can be improved through active negotiations with suppliers ◆ Supply chain management is used to establish long-term relationships (supply alliances) with a small number of very capable suppliers (tier one suppliers) ◆ 30 Supply Chain Management By working together, supply chain members can reduce costs and increase the value of the product or service to the ultimate customer ◆ With clear communication along the supply chain, each participant can know the demands of the ultimate customer and plot a strategy to meet those demands ◆ 31 Technology in the Supply Chain The Internet and the Web can be very effective communication enhancers ◆ Software can allow members to review past performance, monitor current performance, and predict future production levels of products ◆ 32 Advantages of Internet and Web Technologies in Supply Chain Management Figure 9-9 33 Software for Purchasing, Logistics, and Support Activities Enterprise resource planning (ERP) software is designed to integrate manufacturing, finance, distribution, and other internal business functions into one information system ◆ Major ERP vendors include Baan, J.D Edwards,Oracle, PeopleSoft, and SAP ◆ 34 Business-to-Business Commerce Software Designed to help companies build Web sites that host catalog and other commercial sales activities ◆ Major software packages include SellerXpert, ECXpert, LiveCommerceTransact, Net.Commerce, Site Server, and Ariba ◆ 35 Supply Chain Management Software Includes demand forecasting tools and planning capabilities to allow all supply chain members to coordinate their activities and adjust their production levels ◆ Two major firms offer supply chain management software ◆ ● i2 Technologies RHYTHM ● Manugistics 36 ... Internet Internet improvements to supply chain management Software packages for business-to-business e -commerce and supply chain management Purchasing, Logistics, and Support Activities ◆ Purchasing... connecting outside sources of R&D services DigitalWork Small Business Support Activities Page Figure 9-2 Electronic Data Interchange ◆ ◆ ◆ The computer-to-computer transfer of business information between... companies began exchanging transaction information with each other on punched cards or magnetic tape Electronic Data Interchange ◆ ◆ ◆ Eventually, trading partners transferred data over telephone lines