Transcript A Brief History of IT in the supply chain

A Brief History of IT in the
supply chain
• 1970s: Electronic Funds Transfer (EFT)
– Used by the banking industry to exchange account information
over secured networks
• Late 1970s and early 1980s: Electronic Data Interchange
(EDI) for e-commerce within companies
– Used by businesses to transmit data from one business to another
• 1980s –1990s: Growth in Enterprise software (from MRP)
– MRP->ERP->SCM->CRM->?
• 1990s: the World Wide Web on the Internet
– Cheaper to do business (economies of scale)
– Enable diverse business activities (economies of scope)
Computer networks
• Computers working together eg. internet
• Analog and digital signals
– Analog : a continuous wave form (used for
voice)
– Digital : a discrete wave form (used for data)
• Modem : translates digital
• WANs and LANs
analog
How are computers connected
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Local cable (parallel and serial)
Phone line and server
Local area network (file, print, mail)
Microwave
Infra-red
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Ways of sending data between 2
computers
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Manual (re-keying)
Floppy disk (file transfer) : manual
Batch file transfer (ftp or telnet) : automatic
Interface (system to system)
EFT
EDI
Internet
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Other types of electronic
transacting
• Bank transactions via the phone
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Top-up on mobile phone credit
Credit card payments by phone
Laser payments by phone
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• Bank transactions via the internet
– Bill payments
– Shopping on the internet
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How do we communicate with
vendors?
• Face to face meetings
product offer, price, discount
• Telephone
price, discount, delivery
• Post
contracts, PO’s, cheques
• Fax
contracts, PO’s, changes
• E-mail
contracts, PO’s, changes
What part of this communication
can be automated?
• Face to face meetings
product offer, price, discount
• Telephone
price, discount, delivery
• Post
contracts, PO’s, cheques
• Fax
contracts, PO’s, invoices
• E-mail
contracts, PO’s, invoices
Structured vs. unstructured info
Purchase Order
E-mail
Level of Integration between
trading partners
• Exchanges of information between partners can be
more or less structured:
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purchase orders
invoices
cheques
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Shared systems
face-to-face meetings between staff (time consuming)
• Traditionally, structured exchanges were paper
based => slow turnaround time
Electronic Data Interchange:
A Formal Definition:
“EDI is the transfer of structured data by
agreed message standards from
computer to computer by electronic
means”
EDI : characteristics
– Is it commercial trading documentation?
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Sales invoices
Purchase orders
Payments
Delivery notes
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– Is it a volume transaction?
– Is it between 2 organisations with a formal trading
relationship?
– IS there an agreed standard for message format?
Ordering on the internet = EDI?
• RyanAir example :
– Is it commercial trading documentation?
– Is it a volume transaction?
– Is it between 2 organisations with a formal
trading relationship?
– Is there an agreed standard for message format?
Electronic, but not EDI
Is EDI the same as EFT?
• Payroll payment example :
– Is it commercial trading documentation?
– Is it a volume transaction?
– Is it between 2 organisations with a formal
trading relationship?
– Is there an agreed standard for message format?
Electronic Data Interchange
• Direct computer to computer exchange
between 2 organisations of standard
business transaction documents
Vendor
Customer
Order
Invoice
EDI for purchasing, shipping &
payment
Vendor
Order
Processing
Material releases
Orders
Receiving discrepancies
Payment & remittance data
Receiving
Accounts
Receivable
Customer
Purchasing
Receiving
Price updates
Shipping notices
Invoice
Accounts
Payable
EDI benefits
• Saves money and time :
Make it easier to
place an order, but
harder to change
supplier
– Eliminates printing & handling of paper by sender
– Errors due to re-keying are minimised
– Less dependent on handwritten documents
• Strategic benefit : locks in the customer
• Reduced lead time for orders
• Automated triggers for stock re-ordering :
supports Just in Time (JIT) stock strategy
EDI disadvantages
• Requires high levels of commitment : burden for SME’s
• Installation difficulties
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integration with existing systems
selection of EDI standard
resources to configure, test and implement
upgrade existing infrastructure
Pressure on SME’s to hold stock for immediate needs
Can exclude supplier from major customer accounts
Loss of flexibility resulting from initial choices (lock-in)
Substantial benefits only with high volumes of data
Electronic Commerce suggests
new methods
• Invoice => Electronic Data Interchange instead of postal
service
• Payments => Electronic Fund Transfer instead of cheque
• Short messages => Electronic Mail instead of Phone
• Group discussions => Electronic Bulletin Boards or computer
conferencing instead of meetings
• Promotion => WWW instead of paper brochure
• Customer product query => on-line database instead of paper
catalogue
Framework of generic forms of
Electronic Commerce
Permanent
Ad Hoc
EDI
IOS data retrieval systems
Electronic meeting rooms
computer conferencing
Electronic catalogues
WWW home pages
Electronic Mail
Electronic file transfer
Structured
Unstructured
E-commerce applications
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Supply chain management
Video on demand
Remote banking
Procurement and purchasing
Online marketing and advertisement
Home shopping
Auctions
Ecommerce infrastructure
• Information superhighway infrastructure
– Internet, LAN, WAN, routers, etc.
– telecom, cable TV, wireless, etc.
• Messaging and information distribution
infrastructure
– HTML, XML, e-mail, HTTP, etc.
• Common business infrastructure
– Security, authentication, electronic payment,
directories, catalogs, etc.
Types of E-commerce
• B2B (inter-organizational)
– Supplier, inventory, distribution, payment
management
• Within B (intra-organizational)
• B2C (business to consumer)
– Financial management, purchasing products
and information
Traditional vs. Electronic Commerce
Source: Schneider and Perry
Advantages of Electronic Commerce
• Increased sales
– Reach narrow market segments in
geographically dispersed locations
– Create virtual communities
• Decreased costs
– Handling of sales inquiries
– Providing price quotes
– Determining product availability
Disadvantages of Electronic
Commerce
• Loss of ability to inspect products from
remote locations
• Rapid developing pace of underlying
technologies
• Difficult to calculate return on investment
• Cultural and legal impediments
The process of e-commerce
1. Attract customers
– Advertising, marketing
2. Interact with customers
– Catalog, negotiation
3. Handle and manage orders
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Order capture
Payment
Transaction
Fulfillment (physical good, service good, digital good)
4. React to customer inquiries
– Customer service
– Order tracking
Web-based E-commerce Architecture
Tier 1
Tier 2
Tier 3
Tier N
DMS
Client
Web Server
Application
Server
Database
Server