Concepts in Enterprise
Resource Planning
Third Edition
Chapter Eight
ERP and Electronic Commerce
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
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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
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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 specialpurpose software companies
• NetWeaver: SAP’s Web services platform
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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
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Electronic Commerce Background
• Today most companies conduct at least part of their
business operations through electronic commerce (ecommerce)
• 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) ecommerce
• Business-to-consumer (B2C) e-commerce
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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
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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 Internetbased network run by an outside EDI service provider
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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
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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
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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
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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
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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.
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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
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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
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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
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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
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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
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Figure 8-1 ERP responsibilities in-house versus with an ASP
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Application Service Providers (cont’d.)
• Advantages of using an ASP
– Affordability
– Shorter implementation time
– Expertise
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Application Service Providers (cont’d.)
• Disadvantages of using an ASP
–
–
–
–
–
Security
Bandwidth/response time
Flexibility
No frills
Technical, not business focus
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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XML (cont’d.)
Figure 8-5 Fitter Snacker document in XML
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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
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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
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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
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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 ecommerce
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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
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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
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