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Business Function Support, University of Twente

Wrap Up + ERP and Electronic Commerce


Lecture 8 Chintan Amrit
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Business Function Support, University of Twente

Key Course Objectives


Differentiate a business process from a business function Explain why integrated <functional area> systems increases company wide efficiency Discuss the pros and cons of implementing an ERP Discuss the key issues in managing an ERP implementation Describe the key tools in managing an ERP implementation Explain the importance of ERP in the success and functioning of an e-commerce company
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Business Function Support, University of Twente

Key Course Objectives


Develop an Event Process Chain (EPC) of a business process Evaluate the value added by each step in a business process Develop process improvement techniques Learn to use ARIS Express for modelling business processes Learn the basic functions of SAP/Microsoft Dynamics ERP Learn to perform basic operations in the ERP
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Business Function Support, University of Twente

Introduction
Enterprise Resource Planning (ERP) programs: Core software used by companies to coordinate information in every area of business
Help manage companywide business processes Use common database and shared management reporting tools

Business process: Collection of activities that takes some input and creates an output that is of value to the customer

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Business Function Support, University of Twente

Functional Areas of Operation


Marketing and Sales (M/S) Supply Chain Management (SCM) Accounting and Finance (A/F) Human Resources (HR) Business functions: Activities specific to a functional area of operation

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Business Function Support, University of Twente

Functional Areas of Operation

Figure: Examples of functional areas of operation and their business functions 6


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Business Function Support, University of Twente

Introduction
Effectively competing in high-volume ecommerce may be impossible without the infrastructure provided by Enterprise Resource Planning (ERP) Companies can integrate ERP systems with the Internet and rent ERP software from special-purpose software companies

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Business Function Support, University of Twente

Introduction
XML is becoming the new markup language of the Internet Use of radio frequency identification (RFID) devices in managing movement of goods in the supply chain

Concepts in Enterprise Resource Planning, Third Edition


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Business Function Support, University of Twente

Electronic Commerce Background


Today most companies conduct at least part of their business operations through electronic commerce (ecommerce) E-commerce: conduct of business over the Internet Most of the business growth on the Internet has been in the area of business-to-business (B2B) ecommerce Business-to-consumer (B2C) e-commerce

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Business Function Support, University of Twente

Business-to-Business ECommerce
Buying and selling between two companies over the Internet Companies might be manufacturers, suppliers, wholesalers, or retailers Transforming the way companies work with each other

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Business Function Support, University of Twente

Business-to-Business ECommerce
Electronic Data Interchange (EDI)
Electronic computer-to-computer transfer of standard business documents Been used by companies since the 1960s Value-added network (VAN): intermediary Internet-based network run by an outside EDI service provider

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Business Function Support, University of Twente

Business-to-Business ECommerce
Electronic data interchange (EDI) (contd.)
Benefits of EDI:
Costs of paper, printing, and postage have almost disappeared Errors have been minimized Ordering is fast and efficient Suppliers and buyers are locked into business relationships
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Business Function Support, University of Twente

Business-to-Business ECommerce
Internet-based procurement
Use of Internet technologies for procurement activities Benefits:
Less expensive to use the Internet than private EDI networks Purchasing costs further reduced as suppliers compete for orders on buyers Web site
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Business Function Support, University of Twente

Business-to-Business ECommerce (contd.)


Internet-based procurement (contd.)
Electronic marketplace: gathering place for buyers and sellers on the Internet Exchanges: one type of B2B electronic marketplace
Typically, the focus is on a single industry

Private exchange
One type of industry marketplace Membership is restricted to select participants
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Business Function Support, University of Twente

Business-to-Business ECommerce (contd.)


Internet auctions and reverse auctions
B2B e-commerce allows companies to do online bidding through auctions and reverse auctions Reverse auctions: one buyer and many sellers Internet-based auctions are changing the way in which commodities are purchased
Internet has replaced the intermediary Pricing is open and dynamic

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Business Function Support, University of Twente

Business-to-Business ECommerce (contd.)


Electronic commerce security
Security is a major concern with e-commerce Denial of service (DoS) attacks
Attackers block access to a Web-based service through a variety of means, including bombarding a site with so many messages that the site cannot handle the volume

Measures used by companies to protect their networks, Web sites, and privacy of customer data
Virus-scanning software, encryption, intrusion detection, etc.
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Business Function Support, University of Twente

E-Commerce and ERP


Each technology complements the other, and each is necessary for success Back-office processing
Efficient back-office operation is crucial for any companys success E-commerce often exacerbates problems and reveals weaknesses in current back-office systems

Integrating Internet front-office operation and ERP back-office operation is fundamental in todays business environment
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Business Function Support, University of Twente

Using ERP through an Application Service Provider


Many companies today outsource some of their operations to an outside service provider Outside service provider sometimes called a third party Outsourcing can simplify management of ERP systems

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Business Function Support, University of Twente

Application Service Providers


Application service provider (ASP): company that provides management of applications for a company over a network
Network is usually the Internet

ASP owns the hardware and rights to the software ASP employs workers who run outsourced applications Users of the system are the companys employees

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Business Function Support, University of Twente

Figure: ERP responsibilities in-house versus with an ASP


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Business Function Support, University of Twente

Application Service Providers (contd.)


Advantages of using an ASP
Affordability Shorter implementation time Expertise

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Business Function Support, University of Twente

Application Service Providers (contd.)


Disadvantages of using an ASP
Security Bandwidth/response time Flexibility No frills Technical, not business focus

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Business Function Support, University of Twente

Application Service Providers (contd.)


Other considerations
Companies should carefully scrutinize the ASPs contract before signing it to uncover:
Hidden costs Other potential problems

SAP is offering an ASP version of its ERP product for midsized companies
Business ByDesign: delivered to customers over the Web

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Business Function Support, University of Twente

Accessing ERP Systems over the Internet


ERP vendors now offer access to their systems through a Web browser
Web browsers such as Microsoft Internet Explorer or Netscape Navigator

Users and systems administrators find it much more efficient to access ERP systems through the browser
Avoids the time-consuming installation of the standard ERP GUI
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Business Function Support, University of Twente

XML
Extensible Markup Language (XML)
New programming language of the Internet Uses tags that define the data contained within them

XML-coded data can go directly from a Web page into a database


Data does not have to pass through middleware or be rekeyed into the system

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Business Function Support, University of Twente

XML
Internet pages written in Hypertext Markup Language (HTML)
HTML specifies only how your information will look when viewed through a browser

XML users can create their own tags


Customized tags in the document describe, or define, the data

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Business Function Support, University of Twente

XML

Figure: Fitter Snacker document in XML


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Business Function Support, University of Twente

XML
ERP systems now accept data in XML format
Using XML, companies can transfer data from their Web sites directly into their ERP systems
Streamlines data entry, reduces errors, and reduces server loads

XML is very attractive to smaller companies


Small companies often transfer data over telephone lines or using fax machines Using XML makes electronic data transfer much more affordable
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Business Function Support, University of Twente

Radio Frequency Identification Technology


Radio frequency identification (RFID) technology
Becoming an efficient way of tracking items through a supply chain RFID device: small package, or tag, that includes a microprocessor and an antenna and can be attached to products

RFID technology has become inexpensive enough to be cost-effective Wal-Mart is in the process of implementing an RFID system for its supply chain
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Business Function Support, University of Twente

Radio Frequency Identification Technology


Pharmaceutical firms working toward adopting RFID technology
To comply with upcoming FDA regulations that would require track-and-trace technology on all drug packages to prevent counterfeiting

Procter & Gamble is using RFID technology to collect information about the sales of its products SAPs ERP software is RFID-ready Through NetWeaver, SAP can integrate RFID data into both SAP and non-SAP applications
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