Concepts in Enterprise Resource Planning Third Edition Chapter Eight ERP and Electronic Commerce.

Concepts in Enterprise Resource Planning Third Edition

Chapter EightERP and Electronic Commerce

Concepts in Enterprise Resource Planning, Third Edition 2

Objectives

After completing this chapter, you will be able to:

• Describe business-to-business e-commerce

• Explain the importance of ERP to the success of a company engaged in e-commerce

• Describe the function of an application service provider (ASP)

• Describe the delivery of ERP services through an ASP

• Describe Web services and SAP’s NetWeaver


Objectives (cont’d.)

• 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


Introduction

• Effectively competing in high-volume e-commerce 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

• NetWeaver: SAP’s Web services platform


Introduction (cont’d.)

• 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


Electronic Commerce Background

• Today most companies conduct at least part of their business operations through electronic commerce (e-commerce)

• 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) e-commerce

• Business-to-consumer (B2C) e-commerce


Business-to-Business E-Commerce

• 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


Business-to-Business E-Commerce (cont’d.)• 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


Business-to-Business E-Commerce (cont’d.)• Electronic data interchange (EDI) (cont’d.)

– 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


Business-to-Business E-Commerce (cont’d.)• 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 buyer’s Web site


Business-to-Business E-Commerce (cont’d.)• Internet-based procurement (cont’d.)

– 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


Business-to-Business E-Commerce (cont’d.)• 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


Business-to-Business E-Commerce (cont’d.)• 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.


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

company’s 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 today’s business environment


Fitter Snacker and E-Commerce

• Currently, Fitter Snacker has neither a Web-based ordering system nor an ERP system

• FS executives looking at two IS investment options:– Implement a Web-based ordering system, or– Implement an ERP package

• If Web-based ordering system implemented without implementing an ERP package:– FS’s unintegrated information system would not be able

to handle the additional Internet orders


Fitter Snacker and E-Commerce (cont’d.)• An attractive Web site does not provide enough

benefit on its own for an e-commerce business to stay afloat

• Conventional back-office systems must be in place and operating correctly for the business to flourish


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


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 company’s employees


Figure 8-1 ERP responsibilities in-house versus with an ASP


Application Service Providers (cont’d.)

• Advantages of using an ASP– Affordability– Shorter implementation time– Expertise



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



• Other considerations– Companies should carefully scrutinize the ASP’s

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


NetWeaver

• Web services: combination of software tools that lets various programs within an organization communicate with other applications– Also known as SOA, or service-oriented architecture

• Benefit of adopting SOA– Ability to add new applications quickly

• Implementing SOA is not easy

• Return on an SOA investment is often difficult to determine


NetWeaver Tools and Capabilities

• SAP’s NetWeaver: collection of components that support business transactions over the Internet– Modules included: Enterprise Portal, Mobile

Infrastructure, Business Intelligence, Master Data Management, and Exchange Infrastructure

• Enterprise Portal– mySAP.com– Gives users complete access, or a portal, to all their

work on a single screen, using links to all major aspects of their jobs


NetWeaver Tools and Capabilities (cont’d.)• Mobile Infrastructure

– Allows users to access and work with data through mobile devices such as PDAs, cell phones, and pagers

• Business Intelligence (BI)– Incorporates a data warehouse and data mining tools– Can be delivered in a personalized manner with

Enterprise Portal


NetWeaver Tools and Capabilities (cont’d.)• Master Data Management

– Provides data consistency within a company’s SAP system

• Exchange Infrastructure– Allows different applications to share data– Companies don’t have to write code to enable different

applications to transmit data


NetWeaver at Work for Fitter Snacker

• Amy Sanchez: salesperson, works from home– She logs on to SAP system with her laptop computer,

using the SAP GUI

• Donald Brown: salesperson, deals with distributors– Tester for new NetWeaver SAP server– Every day logs on to his Enterprise Portal– Also uses SAP’s Mobile Infrastructure and Business

Intelligence modules


Duet

• Microsoft and SAP have been working on Duet

• Intended to let companies access SAP data and processes using the familiar Microsoft Office interface

• Goal of Duet– Expand and simplify adoption of SAP ERP by making

workers more efficient

• Duet has numerous advantages


Duet (cont’d.)

• Duet brings its own challenges– Companies must be using a relatively current version of

SAP ERP– Companies must run Microsoft server software– May require company to use other SAP products

• Growing competition between SAP and Microsoft in the ERP software market


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


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


XML (cont’d.)

• 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


XML (cont’d.)

Figure 8-5 Fitter Snacker document in XML


XML (cont’d.)

• 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


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


Radio Frequency Identification Technology (cont’d.)• 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

• SAP’s ERP software is RFID-ready

• Through NetWeaver, SAP can integrate RFID data into both SAP and non-SAP applications


Summary

• E-commerce is transforming the way companies do business– Business-to-consumer e-commerce can:

• Streamline a company’s ordering operations

• Record information about customers

• Business-to-business e-commerce is changing the way companies buy and sell goods

• ERP is an essential component for all forms of e-commerce


Summary (cont’d.)

• Application service providers (ASPs) are allowing companies to use ERP without a large initial investment– Make ERP systems available to smaller companies– Decision to buy or lease must be weighed carefully

• Web services, or service-oriented architecture, offers a combination of software tools that lets various programs within an organization communicate with other applications


Summary (cont’d.)

• SAP’s Web services platform is NetWeaver– Includes tools for seamless connectivity of diverse

applications through the World Wide Web

• Users of ERP systems often access those systems through a Web browser

• XML, or Extensible Markup Language, defines data on a Web page– ERP systems are using XML to integrate systems

between suppliers and customers

• RFID devices, or radio frequency identification devices, are used in tracking items in transit

Concepts in Enterprise Resource Planning Third Edition Chapter Eight ERP and Electronic Commerce.

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