CONCEPTS IN ENTERPRISE RESOURCE PLANNING THIRD EDITION
Chapter EightERP and Electronic Commerce
Objectives
Concepts in Enterprise Resource Planning, Third Edition
2
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.)
Concepts in Enterprise Resource Planning, Third Edition
3
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
Concepts in Enterprise Resource Planning, Third Edition
4
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.)
Concepts in Enterprise Resource Planning, Third Edition
5
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
Concepts in Enterprise Resource Planning, Third Edition
6
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
Concepts in Enterprise Resource Planning, Third Edition
7
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.)
Concepts in Enterprise Resource Planning, Third Edition
8
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.)
Concepts in Enterprise Resource Planning, Third Edition
9
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.)
Concepts in Enterprise Resource Planning, Third Edition
10
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.)
Concepts in Enterprise Resource Planning, Third Edition
11
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.)
Concepts in Enterprise Resource Planning, Third Edition
12
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.)
Concepts in Enterprise Resource Planning, Third Edition
13
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
Concepts in Enterprise Resource Planning, Third Edition
14
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
Concepts in Enterprise Resource Planning, Third Edition
15
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.)
Concepts in Enterprise Resource Planning, Third Edition
16
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
Concepts in Enterprise Resource Planning, Third Edition
17
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
Concepts in Enterprise Resource Planning, Third Edition
18
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
Concepts in Enterprise Resource Planning, Third Edition
19
Figure 8-1 ERP responsibilities in-house versus with an ASP
Application Service Providers (cont’d.)
Concepts in Enterprise Resource Planning, Third Edition
20
Advantages of using an ASP Affordability Shorter implementation time Expertise
Application Service Providers (cont’d.)
Concepts in Enterprise Resource Planning, Third Edition
21
Disadvantages of using an ASP Security Bandwidth/response time Flexibility No frills Technical, not business focus
Application Service Providers (cont’d.)
Concepts in Enterprise Resource Planning, Third Edition
22
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
Concepts in Enterprise Resource Planning, Third Edition
23
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
Concepts in Enterprise Resource Planning, Third Edition
24
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.)
Concepts in Enterprise Resource Planning, Third Edition
25
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.)
Concepts in Enterprise Resource Planning, Third Edition
26
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
Concepts in Enterprise Resource Planning, Third Edition
27
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
Concepts in Enterprise Resource Planning, Third Edition
28
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.)
Concepts in Enterprise Resource Planning, Third Edition
29
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
Concepts in Enterprise Resource Planning, Third Edition
30
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
Concepts in Enterprise Resource Planning, Third Edition
31
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.)
Concepts in Enterprise Resource Planning, Third Edition
32
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.)
Concepts in Enterprise Resource Planning, Third Edition
33
Figure 8-5 Fitter Snacker document in XML
XML (cont’d.)
Concepts in Enterprise Resource Planning, Third Edition
34
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
Concepts in Enterprise Resource Planning, Third Edition
35
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.)
Concepts in Enterprise Resource Planning, Third Edition
36
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
Concepts in Enterprise Resource Planning, Third Edition
37
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.)
Concepts in Enterprise Resource Planning, Third Edition
38
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.)
Concepts in Enterprise Resource Planning, Third Edition
39
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