1. Chap 8: E-Commerce
& Supply Chain Management

2. What is E-Commerce?
• E-commerce occurs whenever goods and services are
bought and sold over public and private computer
networks.
• Merchant companies take title to the goods they sell.
• Nonmerchant companies arrange for the purchase
and sale of goods without owning or taking title to
those goods

3. Examples

4. How do companies use e-commerce?
Example of Use of B2B, B2G, and B2C
 B2C transactions occur between a supplier and retail customer. The
supplier generally uses a Web storefront.
 B2B transactions occur between companies.
 B2G transactions occur between companies and governmental
organizations.

5. There are three types of nonmerchant e-commerce companies:
– Auctions match buyers and sellers using the e-commerce
version of standard auction where the auction company
receives a commission on each product that’s sold. eBay.com is
the best-known example.
– A clearinghouse provides goods at a stated price, arranges for
delivery but never takes title to the goods. The company
receives a commission on each product that’s sold. Amazon.com
is the best-known example.
– Electronic exchanges are a type of clearinghouse that’s similar
to a stock exchange. Whenever the company matches up buyers
and sellers and a transaction occurs, the exchange takes a
commission. Priceline.com is the best-known example.

6. How do companies use e-commerce?
 E-Commerce improves market efficiencies in a variety of ways, as this
figure shows. Customers benefit from the first two, disintermediation and
increased price information. Businesses benefit from increasing their
knowledge of price elasticity. Take out the
middleman!
Measures the
amount that demand
rises or falls with
price changes

7. Economic Factors that disfavor E-Commerce
– Channel conflicts that occur when a manufacturer competes with
its traditional retail outlets by selling directly to the consumer.
– Price conflicts that may occur by a manufacturer selling directly to
consumers and undercutting retailers’ prices.
– Logistics expenses increase when a manufacturer must process
thousands of small-quantity orders rather than a few large-quantity
orders.
– Customer-service expenses increase when a manufacturer must
begin dealing directly with customers rather than relying on
retailers’ direct relationships with customers.

8. Technology is needed for e-commerce
• E-commerce technology uses a three-tier architecture.
Each tier relates to a particular class of computers.
– The user tier uses personal computers and browser software
that requests and processes Web pages. Web page documents
are coded in HTML and are transmitted using HTTP protocols.
– The server tier uses Web server computers and processes
application programs that help manage HTTP traffic between
Web servers and users.
– The database tier uses computers that run a DBMS to process
SQL requests for retrieving and storing data.

9. How Three-tier Architecture
Operates
Fig 8-5 Three-Tier Architecture

10. Technology Required for E-Commerce
• A commerce server, part of the server tier, is
an application program that receives requests
from users via a Web server. When the
program receives a request, it takes some
action, like coordinating a customer checkout
process, and then returns a response to the
user via a Web server.
• A web farm is a facility that houses numerous
Web server computers.

11. Fig 8-6(a) Sample of Commerce Server Pages Fig 8-6(b) Shopping Cart Page
 These two figures are samples of Web pages on an e-commerce Web site.

12. Q2 – What technology is needed for e-commerce?
• Hypertext Markup Language (HTML) is the most common language
used to structure the layout of Web pages. It includes these
elements:
– A tag is a notation that defines a data element. <h2> and </h2> are
tags that indicates the text will be formatted as a level two heading.
– Hyperlinks serve as pointers to other Web pages. They include a URL
for another document within the same Web site or a different Web
site. In the figure on the next slide, the hyperlink
http://www.marvel.com leads a user to another Web site.
– Attributes provide properties for tags. In the sample HTML document
on the next slide, the attribute href= provides the value of the
hyperlink that follows.

13. Q2 – What technology is needed for e-commerce?
Fig 8-7(a) Sample HTML Document
Fig 8-7(b) HTML Document in Fig 8-7(a) rendered
using Internet Explorer
 THE HTML code on the left
produces the Web page on the
right.

14. Why is Web 2.0 important to business?
Comparison of Web 2.0 with Traditional Processing
 Web 2.0 is a loose cloud of capabilities, technologies, business models,
and philosophies that sets e-commerce apart from traditional software
processing. This chart compares the two.

15. What is Web 2.0?
• Web 2.0 is about linking people….
– People Sharing
– People Trading
– People Collaborating
• Social Networking…..

16. Why is Web 2.0 important to business?
• Software as a Service, part of the Web 2.0
movement, changes traditional thinking about
how software is created, provided to users,
and used to create value for the company that
owns it. Some of its characteristics include the
following:

17. What is Web 2.0?
– It uses thin-client programs
in browsers.
– The bulk of processing
occurs on servers
throughout the Internet.
– Companies that provide it
rely on advertising or
revenue other than license
fees.
– It’s perpetually labeled as
beta software because its
features and functions are
constantly changing.
– Companies who provide it
clash with traditional
software vendors who rely
on traditional software
programs to provide the
bulk of their revenue.
– It relies on viral marketing.
That is, users spread the
word about its virtues
rather than the company
that provides it.
– The more a Web 2.0-based
site is used, the more value
it attains

18. Q3 – Why is Web 2.0 important to business?
• Mashups are output from two or more Web sites
combined into a single user experience. Users create
their own mashups based on some portion of software
that’s provided by a Web 2.0 service and another
portion of software. An example is using Google Maps
to create a new service that pinpoints motocross trails.
• Participation and Ownership Differences
– Traditional sites are all about publishing with legal rights to
using the software locked down.
– Web 2.0 sites are all about participation with legal rights
only partially locked down.

19. Businesses can benefit from offering Web 2.0 services in the following ways:
– Providing advertising that’s specific to user interests. Two
popular programs from Google are
• Ad Words in which advertisers pay for particular search words.
• Ad Sense in which Google inserts ads on a Web site that match
content on the site. When someone clicks on the ad, Google pays the
site owner a fee.
– Providing social networking services that connect people with
similar interests.
– Providing mashups between a business and its partners which
combine the content of their products. Watch a movie, see a
piece of jewelry you like, click on a link, and purchase the
product.

20. How can information systems enhance supply chain performance?
• Supply chains are networks of organizations and facilities that
transform raw material into products delivered to customers. The
diagram below depicts supply chain relationships.

21. How can information systems enhance supply chain performance?
• As this figure
shows, four
factors drive a
company’s
supply chain
performance:
facilities,
inventory,
transportation,
and
information.

22. How can information systems enhance supply chain performance?
• Information influences supply chain performance three ways:
– Purpose: Is the purpose of the information transactional or informational?
– Availability: Will they have access to the information they need when they
need it?
– Means: What means or methods will organizations use to transmit
information with others that need it?
• Supply chain profitability is determined by calculating the difference
between revenue generated by a supply chain and the costs that all
organizations in the supply chain incur to obtain that revenue.
• The maximum profit to a supply chain will not occur if each organization in
a supply chain maximizes its own profits in isolation from the other
participants in the supply chain.

23. How can information systems support supplier relationship management?
• Three information systems are involved in
supply chain management:
– supplier relationship management, or SRM, (a
business process for managing all contacts
between organization and its suppliers),
– inventory,
– and customer relationship management (CRM).

24. MRP Stands for Materials Requirements Planning

25. How can information systems support supplier relationship management?
• The term supplier, when used in the context of
a supplier relationship management system,
refers to any organization that sells something
to a company operating an SRM application.
• Information systems support these SRM
processes: source, purchase, and settle.

26. How can information systems support supplier relationship management?
 This diagram shows you how an SRM system is integrated with a CRM
system:
 The supplier’s CRM interfaces with the purchaser’s SRM application.
 Connect the CRM to the customer’s SRM to automate recurring purchases.
 SRM examines inventory, determines required items, and creates an order.

27. How do organizations exchange data?
• Companies must communicate with other companies in order to purchase
supplies, sell products, or generally do business. Some of the alternative
for exchanging data and messages are listed below.
• The first four alternatives require very little technology. The last three
require additional technology.
Fig 8-17 Alternatives for Interorganizational Message Exchange

28. Q6 – How do organizations exchange data?
• Electronic Data Interchange (EDI) has been used for more than 30
years as a way to standardize document formats for common
business transactions and is used primarily over point-to-point and
PDSN networks. “EDI over Internet” improves the flow of
documents but other technologies are even better.
• The eXtensible Markup Language (XML) promises to improve upon
EDI and the use of HTML on Web pages.
– Using HTML to create documents that businesses can use to exchange
information and transactions presents several problems.
• Tags used to format data don’t have consistent meanings between businesses.
• HTML only offers a fixed number of tags.
• The HTML language mixes the format, content, and structure of a Web page
without allowing data to be defined between businesses.

29. Q6 – How do organizations exchange data?
• The eXtensible Markup Language (XML) was developed by World
Wide Web Consortium (W3C) committee to help solve some of the
problems associated with using HTML for B2B e-commerce.
– XML requires placing the content, structure, and format of a Web page
into documents separate from the actual data on the page.
– Designers can create their own tags and specify the precise
arrangement of the tags in an XML schema document.
– Supply chains processes and activities can obtain document structures
from an XML schema and validate them through automation, saving
time and labor.
– Documents coded with the XML language contain more accurate and
more useful data for business transactions.

30. How can organizations connect computer programs?
• Some companies find it advantageous to have
programs on their computer systems directly
access programs on other companies’
computers by using remote computing, also
call distributed computing.

31. • One option is to develop proprietary distributed
applications.
– Teams from both entities work together to
• Determine application requirements, develop a design, and
write and test the programs.
• Decide on communications capabilities, operating systems,
and distributed computing techniques.
– These types of systems are difficult and very
expensive to develop and operate because of the vast
amount of coordination necessary to make them
work.

32. Q7 – How can organizations connect computer programs?
• An emerging Internet-based technology that
companies are turning to for
remote/distributed computing is called XML
Web services.
• These services use a service-oriented
architecture (SOA).
What is SOA?

33. • Web services offer these advantages:
– They provide a standardized way for programs to access
one another remotely without proprietary solutions.
– Standardization leads to the immediate accessibility of the
services.
– Service descriptions on one computer provide other
computers with information about available programs and
how to communicate with them.
– XML documents transmit the service data and define the
XML schema; program components of the XML Web
services automatically validate the data.

34. How can organizations connect computer programs?
 Web Services simplify the automation of supply chain interactions by
providing flexibility and by reducing the costs and time associated with
developing inter-organizational information systems.
 This figure shows how a retailer publishes a service description and makes
it available to others.