Supporting the User Interaction with Business. E MIS 300, Chapter 5
Basic Concepts • Electronic Commerce • Infrastructure for E-commerce – supporting the electronic business environment • Transaction Processing Systems – supporting the user interface with business • Enterprise Computing – information across the organization MIS 300, Chapter 5 2
Principles and Learning Objectives -1 • E-commerce is a new way of conducting business, and as with any other new application of technology, it presents both opportunities for improvement and potential problems. – Identify several advantages of e-commerce. – Identify some of the major challenges that companies must overcome to succeed in e-commerce and mcommerce. – Describe some of the current uses and potential benefits of m-commerce. – Identify several e-commerce applications. MIS 300, Chapter 5 3
Principles and Learning Objectives -2 • E-commerce requires the careful planning and integration of a number of technology infrastructure components. – Outline the key components of technology infrastructure that must be in place for e-commerce to succeed. – Discuss the key features of the electronic payment systems needed to support e-commerce. MIS 300, Chapter 5 4
Principles and Learning Objectives -3 • An organization’s transaction processing system (TPS) must support the routine, day-to-day activities that occur in the normal course of business and help a company add value to its products and services. – Identify the basic activities and business objectives common to all TPSs. – Explain some key control and management issues associated with TPSs. – Identify the challenges multinational corporations must face in planning, building, and operating their TPSs. MIS 300, Chapter 5 5
Principles and Learning Objectives -4 • Implementation of an enterprise resource planning (ERP) system enables a company to achieve many benefits by creating a highly integrated set of systems. – Discuss the advantages and disadvantages associated with the implementation of an ERP system. MIS 300, Chapter 5 6
An Introduction to Electronic Commerce • Business-to-consumer (B 2 C) e-commerce: customers deal directly with the organization, avoiding any intermediaries Amazon. com • Business-to-business (B 2 B) e-commerce: participants are organizations • Consumer-to-consumer (C 2 C) e-commerce: participants are individuals, with one serving as the buyer and the other, the seller E-bay. com B C C MIS 300, Chapter 5 7
The Supply Chain Suppliers Focal Firm (Producer or Service Provider) Buyers Procurement, inbound logistics, production, outbound logistics, sales, servicing The Value Chain coexists with the supply chain, adding “value” at every link in the chain MIS 300, Chapter 5 8
The E-Commerce Supply Chain Suppliers These links are all electronic. Info is maintained in data bases MIS 300, Chapter 5 Focal Firm (Producer or Service Provider) Buyers These links are all electronic. Info is maintained in data bases 9
E-Commerce Supply Chain Management • Supply chain management is a key value chain composed of: – Demand planning – Supply planning – Demand fulfillment • It’s actually a supply network. • The supply chain is the upstream aspect of the value chain. • The value chain is actually a value network. MIS 300, Chapter 5 10
The E-Commerce Supply Chain (continued) Figure 5. 1: Supply Chain Management MIS 300, Chapter 5 11
The E-Commerce Supply Chain (continued) • E-commerce supply chain management allows businesses an opportunity to achieve: – Increased revenues and decreased costs – Improved customer satisfaction – Inventory reduction across the supply chain MIS 300, Chapter 5 12
Mobile Commerce • Mobile commerce (m-commerce) relies on the use of wireless devices, such as personal digital assistants, cell phones, and smart phones, to place orders and conduct business • What does it mean to “be mobile”? • Issues confronting m-commerce – User-friendliness of the wireless device – Network speed – Security MIS 300, Chapter 5 13
Mobile Commerce (continued) • Handheld devices used for m-commerce have limitations that complicate their use • Wireless application protocol (WAP): a standard set of specifications for Internet applications that run on handheld, wireless devices MIS 300, Chapter 5 14
E-Commerce Applications: Retail and Wholesale • Electronic retailing (e-tailing): the direct sale from business to consumer through electronic storefronts, typically designed around an electronic catalog and shopping cart model • Cybermall: a single Web site that offers many products and services at one Internet location • Manufacturing, repair, and operations (MRO) goods and services MIS 300, Chapter 5 15
Manufacturing • To raise profitability and improve customer service, many manufacturers move their supply chain operations onto the Internet • Electronic exchange: an electronic forum where manufacturers, suppliers, and competitors buy and sell goods, trade market information, and run backoffice operations MIS 300, Chapter 5 16
Manufacturing (continued) Figure 5. 3: Model of an Electronic Exchange MIS 300, Chapter 5 17
Marketing • Market segmentation: the identification of specific markets to target them with advertising messages • Technology-enabled relationship management: use of detailed information about a customer’s behavior, preferences, needs, and buying patterns to set prices, negotiate terms, tailor promotions, add product features, and otherwise customize the entire relationship with that customer MIS 300, Chapter 5 18
Investment and Finance • Online stock trading – Portfolio tracker • Online banking – Electronic bill presentment MIS 300, Chapter 5 19
E-commerce Technology, Infrastructure, and Development Figure 5. 4: Key E-Commerce Technical Components MIS 300, Chapter 5 20
Hardware • Storage capacity and computing power required of the Web server depends on: – Software that will run on the server – Volume of e-commerce transactions • Web site hosting MIS 300, Chapter 5 21
Software • Security and identification • Retrieving and sending Web pages • Web page construction – Static Web page – Dynamic Web page MIS 300, Chapter 5 22
Software (continued) • E-commerce software must support: – Catalog management – Product configuration – Shopping-cart facilities MIS 300, Chapter 5 23
Software (continued) Figure 5. 5: Electronic Shopping Cart MIS 300, Chapter 5 24
Electronic Payment Systems • Digital certificate: an attachment to an e-mail message or data embedded in a Web page that verifies the identity of a sender or a Web site • Electronic cash: an amount of money that is computerized, stored, and used as cash for e-commerce transactions MIS 300, Chapter 5 25
Electronic Payment Systems (continued) • Electronic wallet: a computerized stored value that holds credit card information, electronic cash, owner identification, and address information • Credit card • Charge card • Debit card • Smart card MIS 300, Chapter 5 26
An Overview of Transaction Processing Systems • Provide data for other business processes: – Management information system/decision support system (MIS/DSS) – Special-purpose information systems • Process the detailed data necessary to update records about the fundamental business operations • Include order entry, inventory control, payroll, accounts payable, accounts receivable, and the general ledger. MIS 300, Chapter 5 27
An Overview of Transaction Processing Systems (continued) Figure 5. 6: TPS, MIS/DSS, and Special Information Systems in Perspective MIS 300, Chapter 5 28
Traditional Transaction Processing Methods and Objectives • Batch processing system: method of computerized processing in which business transactions are accumulated over a period of time and prepared for processing as a single unit or batch • Online transaction processing (OLTP): computerized processing in which each transaction is processed immediately, without the delay of accumulating transactions into a batch MIS 300, Chapter 5 29
Traditional Transaction Processing Methods and Objectives (continued) Figure 5. 7: Batch Versus Online Transaction Processing MIS 300, Chapter 5 30
Transaction Processing Activities • TPSs – Capture and process data that describes fundamental business transactions – Update databases – Produce a variety of reports • Transaction processing cycle: the process of data collection, data editing, data correction, data manipulation, data storage, and document production MIS 300, Chapter 5 31
Transaction Processing Activities (continued) Figure 5. 8: Data Processing Activities Common to TPSs MIS 300, Chapter 5 32
Transaction Processing Activities (continued) • Data collection – Should be collected at source – Should be recorded accurately, in a timely fashion • Data editing • Data correction MIS 300, Chapter 5 33
Transaction Processing Activities (continued) • Data manipulation • Data storage • Document production and reports MIS 300, Chapter 5 34
Basic TPS Applications Table 5. 4: Systems That Support Order Processing MIS 300, Chapter 5 35
Order Processing Systems • • Order entry Sales configuration Shipment planning Shipment execution MIS 300, Chapter 5 36
Order Processing Systems (continued) • • Inventory control Invoicing Customer relationship management Routing and scheduling MIS 300, Chapter 5 37
Order Processing Systems (continued) Figure 5. 10: Order Processing Systems MIS 300, Chapter 5 38
Purchasing and Accounting Systems • Purchasing transaction processing systems include: – – Inventory control Purchase-order processing Receiving Accounts payable MIS 300, Chapter 5 39
Purchasing and Accounting Systems (continued) • Accounting transaction processing systems include: – – – Budget Accounts receivable Payroll Asset management General ledger MIS 300, Chapter 5 40
Purchasing and Accounting Systems (continued) Figure 5. 11: Integration of a Firm’s TPSs MIS 300, Chapter 5 41
TPS Control and Management Issues • Business continuity planning: identification of the business processes that must be restored first in the event of a disaster and specification of what actions should be taken and who should take them to restore operations MIS 300, Chapter 5 42
Transaction Processing System Audit • Does the system meet the business need for which it was implemented? • What procedures and controls have been established? • Are these procedures and controls being used properly? • Are the information systems and procedures producing accurate and honest reports? MIS 300, Chapter 5 43
International Issues • Issues that multinational corporations face in planning, building, and operating their TPSs – – Different languages and cultures Disparities in IS infrastructure Varying laws and customs rules Multiple currencies MIS 300, Chapter 5 44
Enterprise Resource Planning: An Overview of Enterprise Resource Planning • Enterprise resource planning (ERP) systems are used in large, midsized, and small companies • Real-time monitoring of business functions • Timely analysis of key issues, such as quality, availability, customer satisfaction, performance, and profitability MIS 300, Chapter 5 45
An Overview of Enterprise Resource Planning (continued) • Steps in running a manufacturing organization using an ERP system: – – Develop demand forecast Deduct demand forecast from inventory Determine what is needed for production Check inventory for needed raw materials MIS 300, Chapter 5 46
An Overview of Enterprise Resource Planning (continued) • Steps in running a manufacturing organization using an ERP system (continued): – Schedule production – Assess need for additional production resources – Financial forecasting MIS 300, Chapter 5 47
Definition • The adoption of an integrated, comprehensive set of applications that communicate easily with one another to handle all of a firm’s business MIS 300, Chapter 5 48
Basic Philosophy • Division of labor, basis of bureaucracy isn’t whole story • Business is an integrated, tightly cohesive system • Structure follows form follows function follows information! • Redundancy, duplication are bad • Variety is the enemy MIS 300, Chapter 5 49
Typically, corporate IT use is … Management Level Sales EIS Production DSS Corporate Accountability Finance ESS Sales Mgmt Software Production Mgmt Application Accounting System Debt Management Application Sales POS System Production System Accounts Receivable Finance Spreadsheet MIS 300, Chapter 5 Division, Function, Responsibility 50
No aggregation or dissemination across levels of responsibility Fragmented, Fractured… Management Level Sales EIS Production DSS Corporate Accountability Finance ESS Sales Mgmt Software Production Mgmt Application Accounting System Debt Management Application Sales POS System MIS 300, Chapter 5 Production Accounts Finance No communication across functions. Spreadsheet System Receivable Division, Function, Responsibility 51
Integration Proceeds in Two Dimensions 1. Cross. Functional Production Corporate Finance Sales EIS DSS Accountability ESS Common data formats, real-time data processing, clientserver platforms, and Internet-based extranets enable data to move “seamlessly” across divisional boundaries, Production Debt lubricating Sales Mgmt the movement of semi-finished inventory, Accounting Mgmt Management product, Software etc. One barrier to integration is removed. System Application Common user interfaces enable better communication and movement of human resources among divisions Sales POS System MIS 300, Chapter 5 Production System Accounts Receivable Division, Function, Responsibility Finance Spreadsheet 52
Typically, corporate IT use is … Management Level Sales EIS Sales Mgmt Software Sales POS System MIS 300, Chapter 5 2. Vertically Integrated Production Corporate Finance DSS Accountability ESS Central repositories, common formats, real-time processing, updated Production mobile Debt security, Accounting Mgmt Management technologies enable System Application executives, managers, supervisors and workers at all levels to create, access, use, and update information according to Production Accounts Finance their Systemneeds. Receivable Spreadsheet 53
Result? And to CFO to update information for loan repayment, renegotiation Available to Sales Managers to forecast demand a. Intr net And to production management to monitor productivity, anticipate problems Ext ranet Sales data generated from POS MIS 300, Chapter 5 And to production stations for schedule generation And to all employees to keep them informed about working conditions And to customers to estimate delivery time, options, etc. 54
Why Is Enterprise Computing Important? • Integrates the supply chain • Provides for organizational learning • Introduces strong IT efficiencies through common approaches • Solves management problems of burgeoning IT costs (consolidation) • Recognizes IT’s central role in integration, lubrication of business processes MIS 300, Chapter 5 55
What Makes ERP/EC Difficult? • • Sheer volume of data Divisional lore Actual divisions of labor Human nature (undesirability of change) Poorly thought-through problem statement High initial cost Legacy systems, sunk costs Near-monopoly supplier situation (SAP, Bahn, Peoplesoft, Oracle are really only suppliers) MIS 300, Chapter 5 56
Advantages and Disadvantages of ERP • Elimination of costly, inflexible legacy systems • Improvement of work processes • Increase in access to data for operational decision making • Upgrade of technology infrastructure • Expense and time in implementation MIS 300, Chapter 5 57
Advantages and Disadvantages of ERP (continued) • • Difficulty implementing change Difficulty integrating with other systems Risks in using one vendor Risk of implementation failure MIS 300, Chapter 5 58
Summary • In business-to-consumer (B 2 C) e-commerce, customers deal directly with the organization • In business-to-business (B 2 B) e-commerce, the participants are organizations • In consumer-to-consumer (C 2 C) e-commerce, the participants are individuals • Supply chain management is composed of demand planning, supply planning, and demand fulfillment • Mobile commerce (m-commerce) uses wireless devices to place orders and conduct business MIS 300, Chapter 5 59
Summary (continued) • Transaction processing systems (TPSs) process the detailed data necessary to update records about the fundamental business operations • Transaction processing cycle: data collection, data editing, data correction, data manipulation, data storage, and document production • Order processing TPSs: order entry, sales configuration, shipment planning, shipment execution, inventory control, invoicing, customer relationship management, and routing and scheduling MIS 300, Chapter 5 60
Summary (continued) • Purchasing TPSs: inventory control, purchase-order processing, receiving, and accounts payable • Accounting TPSs: budget, accounts receivable, payroll, asset management, and general ledger • Enterprise resource planning (ERP) systems permit timely analysis of key issues, such as quality, availability, customer satisfaction, performance, and profitability MIS 300, Chapter 5 61
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