Introduction to Management Information Systems
Chapter 8 E-Commerce and
Supply Chain Management
HTM 304
Fall 07
E-Commerce
Concept:
“Buying and selling goods and services over public
and/or private computer networks”
? Reading news from yahoo.com
is not e-commerce!
? Pay for subscription to WSJ.com
is e-commerce!
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Two types of E-Commerce companies
US Census Bureau defines two types of e-commerce
companies
Merchant companies
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Nonmerchant companies
(Those who take title to the
goods they sell. They buy &
resell goods)
(Those that arrange for the
purchase and sale of goods
without owning or taking titles.)
– Business-to-consumer (B2C)
– Auctions
– Business-to-business (B2B)
– Clearinghouses
– Business-to-government(B2G)
– Exchanges
E-Commerce Merchant Companies
Three major types
(usually involves different procedures)
-- B2C, sell directly to consumers
web storefront for customers to arrange and place order
-- B2B, sell to companies
sales between companies, wholesales, bargained prices, etc.
usually provide special portal.
-- B2G, sell to government
some say it is a variation of B2B; generally involves
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different procedures, such as reverse auction.
B2B example: OfficeMax sells to CSUSM
Special group id/password
Used to order item for organization
Tailored catalog (may or may not be the
best price, depending on the bargaining
power)
Special delivery process
Generally ties in with the sellers’ CRM
system
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3 types overview in a Supply Chain structure
B2C, first application and created huge buzz.
relatively easy to create and manage.
B2B and B2G: great potential but not fully understood.
could involve significant business process redesign and system revolution
The development and progress may be observed during your career
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Nonmerchant E-commerce
E-commerce auctions
Clearinghouses
buyer names the price
seller names the price
Enables auction company
to offer goods for sale
Arrange for delivery of
goods but don’t take title
Supports competitive
bidding process
Creates many new
research issues (e.g. id
management, multiauctions, shill-biddings,
buy-it-now, etc.)
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Electronic Exchange
bid-ask prices (double auction)
Match orders (similar to
stock market)
Major Types of Auction Mechanisms
English Auction
A.K.A. “first price open auction”, “open out-cry auction”
The bidder continuously raise their bids. The highest bidder wins and pays his bid
(the highest bid = the first price)
What do you know about the highest bid?
In theory, the first price = second highest bidder’s willingness-to-pay.
How much is the first bidder willing to pay? Higher, never know the exact amount.
Vickery Auction – designed by William Vickery, Nobel price winner
All the bidders write down their evaluation and submit it in a sealed envelope.
The highest bidder wins but pay the second highest bid (second price)
All rational bidder’s best strategy is to write down their TRUE evaluation
eBay’s current agent bidding mechanism is a variation.
Dutch Auction
Starts with a high asking price, which is gradually lowered.
The bidder decides when to buy it.
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Issues in Auction
Auctions are good for price discovery
Good for selling unique, non-standardized products  improve
efficiency.
Competition is more intense  bring in extra excitement, sometimes
help increase the price
Winner’s curse may prevent bidders telling the truth
A phenomenon that the winner ends up paying too high: your
winning means you paid more than others want to pay, also means
you may not sell higher in resale.
English Auction yields the highest winner’s curse.
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Issues in Online Auction
Internet brings more bidders together,
good for the seller to find the best price
However, many similar auctions going on
simultaneously, distracts buyers
Main research issues:
Last minute bidders
Shill-bidding
Trust issue: “how do you trust someone you’ve never met?”
Escrow service: www.escrow.com
Reputation Systems: How it works? Potential issues?
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E-Commerce: business/technology
E-commerce improves market efficiency
Disintermediation  change of supply chain structure
Flow of price information: Customers compare prices and
rate vendors
Vendors’ better sales strategy:
Losing-bidder auction prices
Price experimentation
More accurate information of customer preference
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Economic issues in E-Commerce
Four major issues:
Channel Conflict
Price conflict
Logistics expense
Customer service expense
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3-Tier Web Storefront Architecture
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Three Tier Architecture
“Tier” – class of computers:
Three different classes of computers are involved in a typical estorefront application:
User Tier:
Hardware: user computers (low hardware requirements)
Software: web browser (IE, Firefox, etc.) + others (flash player, etc.)
Server Tier:
Hardware: web Farm = web server computers (speed + reliability)
Software: Apache server, IIS, Web applications (HTM 484G web
programming)
Database Tier:
Hardware: DBMS computers (strong reliability/storage requirements)
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Software: Database Systems Applications (HTM 411 Database)
Info Flow: Typical Steps of Online Shopping
Step 1: type in the web address
of the store in your web browser.
Protocol: http. Used to transfer webpages over Internet (app. layer)
Request a webpage from Amazon.com web server.
Language used to interact between user-tier computer and web server:
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HTML: HyperText Markup Language
Step 2:
Get response from the
web server, obtaining
the webpage.
Normally, one company
will have multiple web
servers to better
respond the customers.
Servers sometimes are
located in different
cities. Why?
Receives your request and send you the webpage.
Sometimes run applications to track your activity (e.g. clicks and
mouse movements, the time spanned browsing, etc…)
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Step 3:
Search for the product.
Requests are sent through the
web server to the database.
Database receives “query” and
“report” requests and send
corresponding result to the web
servers.
Web Server(s) run applications to
display the search result to the
viewer on the user-tier browser
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Step 4:
Click to view the details of the product.
-- call for another query in the database to
display the details. (SQL language: Structured
Query Language)
-- “add to shopping cart” and check out -> call
for web applications to generate an order.
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 Each product is not a unique web page! All
are the same page defining the display and
calling the relative record from the database to
display.
Step 5:
If you haven’t signed in yet, you
will see this page when you start
checking out.
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Exercise yourself: which tiers
computers are involved in this
process. Give a brief description.
Step 6:
Entering your personal information.
Explain the process of this page.
a) Search the database to find
your stored information
b) If you choose not to use the
same info, you can enter new
info
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Step 7:
Review order and place your order
a) The transaction record will be
written into the database.
b) Multiple tables in the database
will be updated.
c) The web applications are tightly
integrated with the database
design (E-R modeling)
Summary of E-Commerce
Ability to identify whether an web activity is E-commerce
Ability to identify the two types of e-commerce companies
Merchant companies (3 major types of merchant companies: B2C, B2B,
B2G)
Nonmerchant companies (give example)
Explain why E-commerce improves efficiency
Describe the 3-tier architecture for a web storefront
Names of the computers
Identify interactions among the three tiers
Name the major language used to interact
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between two adjacent tiers (HTML and SQL)