Concepts in Enterprise Resource Planning

Third Edition

Chapter Eight ERP and Electronic Commerce

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 SAPs NetWeaver
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Objectives (contd.)
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, Third Edition

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 specialpurpose software companies NetWeaver: SAPs Web services platform

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Introduction (contd.)
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

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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

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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

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Business-to-Business E-Commerce (contd.)

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 Internetbased network run by an outside EDI service provider

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Business-to-Business E-Commerce (contd.)

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-to-Business E-Commerce (contd.)

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-to-Business E-Commerce (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-to-Business E-Commerce (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-to-Business E-Commerce (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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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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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:

FSs unintegrated information system would not be able to handle the additional Internet orders

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Fitter Snacker and E-Commerce (contd.)

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

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

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Application Service Providers (contd.)

Advantages of using an ASP
Affordability Shorter implementation time Expertise

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Application Service Providers (contd.)

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

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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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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
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NetWeaver Tools and Capabilities

SAPs 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
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NetWeaver Tools and Capabilities (contd.)

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

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NetWeaver Tools and Capabilities (contd.)

Master Data Management
Provides data consistency within a companys SAP system

Exchange Infrastructure
Allows different applications to share data Companies dont have to write code to enable different applications to transmit data

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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 SAPs Mobile Infrastructure and Business Intelligence modules

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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

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Duet (contd.)
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

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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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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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XML (contd.)
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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XML (contd.)

Figure 8-5 Fitter Snacker document in XML

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XML (contd.)
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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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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Radio Frequency Identification Technology (contd.)

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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Summary
E-commerce is transforming the way companies do business
Business-to-consumer e-commerce can:
Streamline a companys 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 ecommerce

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Summary (contd.)
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

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Summary (contd.)
SAPs 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
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