During the 1990s’, the favored method of exchanging information between trading partners was Electronic Data Interchange (EDI) and all major ERP vendors added EDI facilities to their products. However, EDI didn’t achieve its desired outcome as each organization needs its customized EDI (to account for its unique data format), high foundation cost (requiring privately run Value Added Network), and little cohesion or standardization. A majority of organizations didn’t use EDI functionality while implementing their ERP systems.
Since the mid-1990s, when the internet and intranet technologies were introduced, electronic commerce has grown at an exponential rate (e-commerce). E-commerce involved buying products through the internet (comprising advertising needs, issuing an invitation to tender, reverse auction, etc.), selling products through the internet (comprising electronic auction, publishing electronic catalogs), and handling related processes electronically like receiving invoices, making payment, and monitoring performance.
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Response of ERP vendors:
ERP vendors weren’t agile to quickly respond to the changing need where customers and suppliers, wanted information, contained within the backend ERP software system, for effective collaboration, better information flow, and minimizing cost across the availability chain. Customers demanded supply status, billing information, and warranty compliance online whereas suppliers wanted online information on inventory, supply schedule, and payment status. ERP products have rigid architecture, and any modification/ development requires complex coding, and developing a link between backend ERP with front web-based e-commerce, was a challenging task.
ERP vendors skilled this challenge through their effort to enable their products. they need to develop some functions in-house but also used/ acquired third-party products such as a storefront. they need to develop new workflows encompassing vendors, customers, shippers, distributors, and bankers. they need to make these workflows web-enabled by adopting open standards such as Java and XML.
Another challenge faced by the ERP vendors for web-enabling their products was security issues referring to e-commerce transactions, which are administered by Virtual Private Network (VPN) over the internet backbone. they need to adopt authentication tools such as electronic signatures and digital certificates, Secured Electronic Transactions (SET), and confidentiality through symmetric key encryption/ public-key cryptography.
E-commerce transactions are often broadly classified under e-procurement and e-selling, particularly in the context of business-to-business transactions. Some details under these classifications are given below:
A typical e-procurement requirement of a corporation is depicted below:
· Electronic tendering comprising of tender publication, submission, shortlisting, evaluation, and award. A facility for evaluating IT/service contracts with a complex evaluation matrix is available.
· Quantity agreed upon is met Consolidation of called quantity for achieving agreed-upon quantity discounts vis-à-vis called quantity.
· Facility for publication and updating of electronic catalogs by vendors.
· Analytics for spend analysis that’s used for strategic decisions, supplier relationship management, and minimization of maverick buying.
· Through a business-to-business marketplace, facilities for reverse auctions are available.
For meeting the above requirement, ERP vendors administered integration of web-based front end with the generation of demand (planning module), preparation of order (procurement module), receiving of products (warehouse module), payment (account payable module), dealt by the back-end ERP system.
the most important change that has been brought by e-commerce in respect of selling and marketing goods is creating a new sales channel based on the web. This has impacted retail sectors in a big way through increased sales, expanded market reach including overseas markets, improved customer loyalty, and reduction of the transaction cost.
E-sales enhance value in respect of the following business processes:
· Reaching the customer quickly and in a transparent way through the method of electronic auction.
· Processing customer orders promptly through storefront web applications.
· Checking the credentials of the customer.
· Arrange drop shipments where the closest distributorships are goods.
· Providing facility to the customer to test the status of order through the web.
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Integration of the web system with the back-end ERP system was completed to meet the above requirements. Before accepting an order, the item’s ATP (Available to Promise) status is checked in the planning module. For quoting a price, dispatching of excellent and receiving of payment, sales, warehousing, and assets modules of ERP system are interrelated.