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

2. Concepts in Enterprise Resource Planning, Third Edition2 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

3. Concepts in Enterprise Resource Planning, Third Edition3 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

4. Concepts in Enterprise Resource Planning, Third Edition4 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

5. Concepts in Enterprise Resource Planning, Third Edition5 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

6. Concepts in Enterprise Resource Planning, Third Edition6 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

7. Concepts in Enterprise Resource Planning, Third Edition7 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

8. Concepts in Enterprise Resource Planning, Third Edition8 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

9. Concepts in Enterprise Resource Planning, Third Edition9 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

10. Concepts in Enterprise Resource Planning, Third Edition10 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

11. Concepts in Enterprise Resource Planning, Third Edition11 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

12. Concepts in Enterprise Resource Planning, Third Edition12 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

13. Concepts in Enterprise Resource Planning, Third Edition13 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.

14. Concepts in Enterprise Resource Planning, Third Edition14 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

15. Concepts in Enterprise Resource Planning, Third Edition15 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

16. Concepts in Enterprise Resource Planning, Third Edition16 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

17. Concepts in Enterprise Resource Planning, Third Edition17 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

18. Concepts in Enterprise Resource Planning, Third Edition18 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

19. Concepts in Enterprise Resource Planning, Third Edition19 Figure 8-1 ERP responsibilities in-house versus with an ASP

20. Concepts in Enterprise Resource Planning, Third Edition20 Application Service Providers (cont’d.) Advantages of using an ASP –Affordability –Shorter implementation time –Expertise

21. Concepts in Enterprise Resource Planning, Third Edition21 Application Service Providers (cont’d.) Disadvantages of using an ASP –Security –Bandwidth/response time –Flexibility –No frills –Technical, not business focus

22. Concepts in Enterprise Resource Planning, Third Edition22 Application Service Providers (cont’d.) 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

23. Concepts in Enterprise Resource Planning, Third Edition23 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

24. Concepts in Enterprise Resource Planning, Third Edition24 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

25. Concepts in Enterprise Resource Planning, Third Edition25 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

26. Concepts in Enterprise Resource Planning, Third Edition26 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

27. Concepts in Enterprise Resource Planning, Third Edition27 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

28. Concepts in Enterprise Resource Planning, Third Edition28 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

29. Concepts in Enterprise Resource Planning, Third Edition29 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

30. Concepts in Enterprise Resource Planning, Third Edition30 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

31. Concepts in Enterprise Resource Planning, Third Edition31 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

32. Concepts in Enterprise Resource Planning, Third Edition32 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

33. Concepts in Enterprise Resource Planning, Third Edition33 XML (cont’d.) Figure 8-5 Fitter Snacker document in XML

34. Concepts in Enterprise Resource Planning, Third Edition34 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

35. Concepts in Enterprise Resource Planning, Third Edition35 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

36. Concepts in Enterprise Resource Planning, Third Edition36 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

37. Concepts in Enterprise Resource Planning, Third Edition37 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

38. Concepts in Enterprise Resource Planning, Third Edition38 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

39. Concepts in Enterprise Resource Planning, Third Edition39 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