Lecture 2:
E-Business and E-Commerce
ISIT224 Management Information Systems
What Discussed in Last Lecture
• Digital organizations are emerging:
– Core business processes are accomplished through digital
networks
– Key corporate assets are managed digitally
– Significant business relationships are digitally enabled and
mediated
What is your understanding or experience with
e-business or e-commerce?
Lecture Outline
• What are business processes? How are they related to
information systems?
• What are enterprise resources planning (ERP) systems? How
are they supporting organizations?
• What are customer relationship management (CRM) systems?
How are they supporting organizations?
• What are supply chain management (SCM) systems? How are
they supporting organizations?
• What are emerging trends in e-commerce?
E-business and E-commerce
• E-business
– Use of digital technology and Internet to drive major
business processes
– To enable all parts of the business
• E-commerce
– Subset of e-business
– Buying and selling goods and services through Internet
ITs
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E-business
• E-Business is a way of describing the integration of
business strategies, processes and technologies
“e-Business applications are those that enable and manage
relationships between an enterprise, its functions and processes
and those of its customer, suppliers, value chain, community or
industry. These applications may not, themselves, be enterprise-
wide but are aimed at optimizing external relationships.”
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Source: Gartner Group
Business Processes
• Business processes
– Flows of material, information, knowledge
– Sets of activities, steps
• Businesses: Can be seen as collection of business processes
• Examples:
– Manufacturing and production
• Assembling the product
– Sales and marketing
• Identifying customers
– Finance and accounting
• Creating financial statements
– Human resources
• Hiring employees
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Example: The Order Fulfillment Process
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Business Process Management (BPM)
• Business Process Reengineering (BPR)
– The fundamental rethinking and radical redesign of
business processes to achieve dramatic improvements in
critical, contemporary measures of performance, such as
cost, quality, service, and speed.
• Business Process Improvement (BPI)
– Less radical, less disruptive, more incremental than BPR
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How IS Improves Business Processes
• Increasing efficiency of existing processes
– Automating steps that were manual
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How IS Improves Business Processes
• Enabling entirely new processes
– Changing flow of information
– Replacing sequential steps with parallel steps
– Eliminating delays in decision making
• E.g., downloading a song from iTunes
• E.g., buying a book or e-book from Amazon
(Amazon’s one-click purchase method)
– Supporting new business models
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How IS Improves Business Processes
• Traditional taxi:
– taxi company employees as taxi drivers passengers
• Uber: use unique business process to gain competitive
advantage
How IS Improves Business Processes
• The success of Uber model can be applied to various
industries
• There is an Uber for everything:
– Bannerman (Uber for private security)
– LawTrades (Uber for lawyers)
– Washio (Uber for laundry)
– Worthee (Uber for dog walking)
• Other IT/IS-enabled business models:
– User generated content
– Crowdsourcing
– Crowdfunding
E-business Architecture
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Legacy Systems Approach
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Enterprise Resource Planning (ERP) Systems
• Designed to correct a lack of communication among MIS
• Information systems that take a business process view of the
overall organization
– tightly integrate planning, management, use of all of an
organization’s resources
– by employing a common software platform and database
• Major ERP vendors
– SAP
– Oracle
– PeopleSoft (now an Oracle company)
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Enterprise Systems (ERP) Approach
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ERP Systems
• ERP is an umbrella term which reflects a modular
approach to optimizing an enterprises internal
value chain
– Suite of integrated software modules and a common
central database
• Collects data from many divisions of firm for use in
nearly all of firm’s internal business activities
• Information entered in one process is immediately
available for other processes
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ERP Systems
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ERP Software
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Example: SAP ERP Modules
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Three Main Business Processes Supported by
ERP Systems
• Procurement Process
– A cross-functional business process that originates when a
company needs to acquire goods or services from external
sources, and it concludes when the company receives and pays
for them
– Originates in the warehouse department (need to buy) and ends
in the accounting (send payment)
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Three Main Business Processes Supported by
ERP Systems
• Production Process
– A cross-functional process in which a company products
physical goods
– Originates and ends in the warehouse department (need to
product and reception of finished goods), but involves the
production department as well
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Three Main Business Processes Supported by
ERP Systems
• Order Fulfillment Process
– A cross-functional business process that originates when the
company receives a customer order, and it concludes when it
receives a payment from the customer
– Originates in the sales department (customer request to buy) and
ends in the accounting department (receive payment)
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Implementing ERP Systems
• On-Premise ERP Implementation
– Vanilla Approach: Implements a standard ERP package, using
the package’s built-in configuration options
• Quicker implementation
• Limited adaptation to the organization’s specific processes
– Custom Approach: Implements a more customized ERP system
by developing ERP functions designed specifically for that firm
• Conforms to the organization’s particular characteristics and
processes
• Expensive and risky
– Best of Breed Approach
• Mix and match core ERP modules (e.g. financial management,
HRM) as well as other specialized software (e.g. manufacturing,
warehousing, distribution) from different software providers to best
fit the organization’s unique internal processes and value chains
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Cost of Implementing ERP Systems
• A typical ERP
installation for a
mid-sized
enterprise:$150,000 -
$750,00
• Annual renewal fees:
$100,000 - $150,000
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Implementing ERP Systems
• SaaS ERP Implementation
– Utilizes software-as-a-service (SaaS) to acquire cloud-based
ERP systems
• Rents the software from ERP vendor who offers its products over
the Internet using the SaaS model
• The ERP cloud vendor is responsible for software updates, security,
and availability
– Advantages
• Anywhere access
• Avoid the initial hardware and software investment
• Solutions are scalable
– Disadvantages
• Security
• Reliability and availability
• Loss of control over strategic IT resources
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Benefits and Limitations of ERP Systems
• Benefits • Limitations
– Organizational flexibility and agility – Business processes in ERP software are
• Make organizations more flexible, often predefined by the best practices that
agile, and adaptive the ERP vendor has developed
• Respond quickly to changing • Hugh problem for companies with
business conditions and capitalize on well-established procedures
new business opportunities – ERP systems can be extremely complex,
– Decision support expensive, and time-consuming to
• ERP systems provide essential implement
information on business performance • Costs and risk of failure in
across functional areas implementing a new ERP system are
• Improves managers’ ability to make substantial
better and more timely decisions
– Quality and efficiency
• ERP systems integrate organizational
resources, resulting in significant
improvements in production,
distribution, customer service, and
other business processes
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Enterprise Application Integration (EAI)
• Enterprise Application Integration (EAI) System
– A system that integrates existing systems by providing layers of
software (middleware) that connect applications together
– Support implementation of “best of breed” ERP solutions by
connecting software modules from different vendors
– Functions
• Data integration
– Ensures that information in multiple applications is kept
consistent
• Communication between systems
– Extracts and implements consistent business policies or rules
from applications
• Access to system interfaces
– Provides a single consistent interface to different applications
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Enterprise Application Integration (EAI)
Number of point-to-point
connections:
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Enterprise Application Integration (EAI)
• Enabling organizations to utilize existing applications
– Eliminating many of the problems caused by isolated information
systems
• Open to integrate future technologies, future resources, future
customers, future business partners, and future enterprise value chains
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Enterprise Application Integration (EAI)
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Customer Relationship Management (CRM)
Systems
• CRM is concerned with managing the relationship
(business and the customer) from both perspectives
– Knowing the customer
– In large businesses, too many customers and too many ways
customers interact with firm
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CRM Systems
• CRM systems
– Capture and consolidate customer data
– Distribute customer information to various systems and customer
touch points across enterprise
– Provide single enterprise view of customers
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CRM Processes
• Begins with customer acquisition, where the organization solicits
prospects from a target population of potential customers
– A certain number of these prospects will make a purchase and thus
become customers
– A certain number of these customers will become repeat
customers
• The organization then segments its
repeated customers into low-value and
high-value repeat customers
• Over time all organizations inevitably
lose a certain percentage of customers
(customer churn)
• Goal: Maximize high-value repeat customers
while minimizing churns
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Customer Loyalty Management Process
Map
• This process map shows how a best practice for promoting customer loyalty
through customer service would be modeled by customer relationship
management software.
CRM systems
help to identify
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Example: SAP CRM Modules
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CRM Systems Components
• Operational CRM systems
– Customer-facing applications
– Support front-office processes that directly interact with
customers (i.e., sales, marketing, and service)
• Analytical CRM systems
– Based on data warehouses populated by operational CRM
systems and customer touch points
– Provide business intelligence by analyzing customer behavior
and perceptions
• Analyzes customer data (OLAP, data mining, etc.)
• E.g., Customer lifetime value (CLTV)
• Collaborative CRM
– Integrate communications between the organization and its
customers
– Enable customers to provide direct feedback to the organization
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Operational and Analytical CRM
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Operational CRM Systems
• Operational CRM packages typically include tools for:
– Sales force automation (SFA)
• Automatically record all sales transaction
• Contact management system from all contact points
• Product knowledge system
– Configurators: product-building features that enable
customers to model the product to meet their specific
needs
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Operational CRM Systems
• Operational CRM packages typically include tools for:
– Marketing automation
• Capturing prospect and customer data
• Enable marketers to identify and target their best
customers
• Scheduling and tracking direct-marketing mailings or e-
mail
• Cross-selling
• Up-selling
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Operational CRM Systems
• Operational CRM packages typically include tools for:
– Call center and customer service support
• Automate service requests, complaints, product returns,
and requests for information
• Web-based self-service capabilities
– Search and comparison capabilities
– Technical and other information and services
– Customized products and services
– Personalized Web pages
• E-mail and automated response
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Operational CRM Systems: New Application
• CRM New Application: Chatbot
– A chatbot is a computer program or an artificial intelligence which
conducts a conversation via auditory or textual methods.
• Pizza Hut: through Facebook Messenger and Twitter; suggests recent
orders to the customer and take payment from the messaging app.
• Uber: users can now hail a ride through Facebook Messenger directly
with the Uber chatbot
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Analytical CRM Systems
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CRM Systems: New Application
• On-Demand CRM System
– Hosted by an external vendor (e.g., Salesforce.com) in the
vendor’s data center
– Use software as a service (SaaS) model
• Social CRM
– Incorporating social networking technologies
– Company social networks
– Monitor social media activity; social media analytics
– Manage social and web-based campaigns
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Supply Chain
• The flow of materials, information, money, and services
from raw material suppliers to the end customers
• Three components
– Upstream: where sourcing and procurement from external
suppliers occurs
– Internal: where packaging, assembly, or manufacturing take
place
– Downstream: where distribution takes place, frequently by
external distributors
Upstream Downstream
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Nike’s Supply Chain
Supply Chain
• Three flows
– Material (product) flows: Physical products, raw materials, supplies, etc.
– Information flows: Demand, shipments, orders, returns, schedules, etc.
– Financial flows: Money transfers, payments, credit card information and
authorization, payment schedules, e-payments, credit-related data, etc.
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Supply Chain Management
• During the flows, issues may happen:
– parts shortages, underutilized plant capacity,
excessive finished goods inventory, high
transportation costs
• Inefficiencies waste up to 25 percent of operating
expenses
What causes inefficiencies in a supply
chain?
• Uncertainties and untimely information
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Supply Chain Management
• Because of uncertainties, manufacturers keep a
safety stock
– Safety stock: Buffer for lack of flexibility in supply
chain
• Perfect information can result in a just-in-time
strategy
– Components arrive as they are needed
– Finished goods shipped after leaving
assembly line
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Supply Chain Management
• Safety stock Bullwhip effect
– Information about product demand gets distorted as it
passes from one entity to next across supply chain
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The Bullwhip Effect
Electronic Data Interchange (EDI)
• A communication standard that
enables the electronic transfer of
routine documents between
business partners
– UN/EDIFACT (ISO9735)
– ANSI ASC X12
• Allows companies to do
computer-assisted ordering
(CAO)
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Push- Versus Pull-Based Supply Chain Models
• Push-based model (build-to-stock)
– Earlier SCM systems
– Schedules based on best guesses of demand
• Pull-based model (demand-driven)
– Web-based
– Customer orders trigger events in supply chain
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Push- Versus Pull-Based Supply Chain Models
Key difference: “Make what we sell, not sell what we make.”
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Supply Chain Management (SCM) Systems
• Tie together the people and processes (both internal and
external), associated with its flow of goods and services
– i.e., deliver the right application to a right place at a right time
• The enterprise value chain now consists of the following
components:
– Replenishment
– Procurement
– Planning
– Product development
– Logistics
– Supply network
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SCM Systems Components
• Supply Chain Planning
– E.g., demand planning and forecasting, distribution planning,
production scheduling, inventory and safety stock planning
• Supply Chain Execution
– E.g., management of product flow, information flow, and financial
flow
• Supply Chain Visibility and Analytics
– Visibility: to track products as they move through the supply chain but
also to foresee external events
– Analytics: the use of key performance indicators to monitor
performance of the entire supply chain
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Example: SAP SCM Modules
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New SCM Applications
• Internet-Driven Supply Chain
• Internet enables move from sequential supply chains to
concurrent supply chains
– Sequential supply chain
• Information and materials flow sequentially from company
to company
– Concurrent supply chains
• Information flows in many directions simultaneously among
members of a supply chain network
Internet-Driven Supply Chain
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New SCM Applications
• Warehouse Robotics in the Supply Chain
– New development in 2018, Climb warehouse racks to pick from
any level
– Warehouse efficiencies, reduced costs of warehouse labour
• E.g., Amazon began using these robots in 2014, and there are
now more than 15,000 of them in 10 of its warehouses
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New SCM Applications
• Driverless Delivery
– The first driverless car trials in Australia took place in Adelaide
in 2017 and automated trucks have already been a reality in
Western Australia’s mining industry for some years
– Domino’s: Robotic Unit in Australia, the world’s first
autonomous delivery vehicle in 2016
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New SCM Applications
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E-BUSINESS = ERP+CRM+SCM+BI+KM+EC
Supply Chain Management Customer Relationship Management
“Virtual
Partners” Administration
informal information Business and Distribution
sharing deals Partners operations channels
Customers
Potential
BI, KM, and
customers /
CT for Product Legally Logistics influencers
external and services defined and
information creation Enterprise fulfillment
Potential
competitors
Supply Product
Chain Marketing,
Industry and services
Suppliers sales and,
workers creation
service
Electronic Commerce Back Office Web Commerce Front Office
Source: Gartner Group
History of E-commerce
• E-commerce: Use of the Internet and Web to transact
business.
– Digitally enabled commercial transactions between and
among organizations and individuals
• Began in 1995 and grew exponentially
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E-Commerce Models
• Categorized by the nature of the participants:
– Business-to-consumer (B2C)
• Example: BarnesandNoble.com, Apple.com
– Business-to-business (B2B)
• Example: Alibaba.com
– Consumer-to-consumer (C2C)
• Example: eBay, Taobao.com, Qoo10
• Categorized by platform
– Traditional e-commerce
– Mobile commerce (m-commerce)
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Bringing Digital and Physical Retailing Together
• Advantages of Digital • Advantages of Physical
– Rich product information – Edited assortment
– Customer reviews and tips – Shopping as an event and an
– Editorial content and advice experience
– Social engagement and two-way – Ability to test, try on, or
dialogue experience products
– Broadest selection – Personal help from caring
– Convenient and fast checkout associates
– Price comparison and special – Convenient returns
deals – Instant access to products
– Convenience of anything, – Help with initial setup or ongoing
anytime, anywhere access repairs
– Instant gratification of all senses
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Omnichannel Retailing
• An integrated sales experience that
melds the advantages of physical
stores with the information-rich
experience of online shopping.
– Turn physical shopping into an
entertaining, exciting, and
emotionally engaging experience
– Bring physical and digital retailing
together
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Redesign Shopping Experience
• Turn stores to an exciting, entertaining,
emotionally engaging experience
– Interactive displays (e.g. Disney stores)
– Tablets to provide sales associates with
information about the customers
• Application of VR and AR technologies in e-
commerce
– Jaguar AR experience during I-PACE car
in Berlin
– Ikea APP named Place
•
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Summary
• E-business architecture
– Evolution from TPS, MIS to ERP systems
– Enterprise application integration (EAI)
– Customer relationship management and CRM systems
• Components and new applications
– Supply chain management and SCM systems
• Supply chain models, EDI
• Components and new applications
• Trends in e-commerce
– Omnichannel retailing
– Redesign shopping experience
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