Chapter 9Learning ObjectivesLearning Objectives (Cont.)Purchasing, Logistics, and Support ActivitiesPurchasing ActivitiesSlide 6Slide 7Logistic ActivitiesSupport ActivitiesKnowledge ManagementNetwork Model of Economic OrganizationElectronic Data Interchange (EDI)Early Business Information Interchange EffortsEmergence of Broader StandardsValue-Added NetworksDirect Connection between Trading PartnersIndirect Connection between Trading PartnersVANEDI on the InternetOpen Architecture of the InternetFinancial EDIHybrid EDI SolutionsSupply Chain ManagementValue Creation in the Supply ChainSlide 25Technology in the Supply ChainSlide 27Slide 28Enterprise Resource Planning SoftwareBusiness-to-Business (B2B) Commerce SoftwareSupply Chain Management Software1Chapter 9Strategies for Purchasing and Support Activities: From Electronic Data Interchange to Electronic Commerce2Learning ObjectivesIn this chapter, you will learn about:•Strategies that businesses use to improve purchasing, logistics, and other support activities•The ways that firms are creating network organizations•Electronic data interchange, how it works, and how businesses are moving it to the Internet3Learning Objectives (Cont.)•Supply chain management and how businesses are using the Internet and Web technologies to improve it•The software packages that companies are using to implement business-to-business electronic commerce and supply chain management4Purchasing, Logistics, and Support Activities•Electronic commerce possesses the potential for cost reduction and business process improvement in purchasing, logistics, and support activities.•An emerging characteristic of purchasing, logistics, and support activities is that they need to be flexible.5Purchasing Activities•Purchasing activities include:–Identifying vendors–Evaluating vendors–Selecting specific products–Placing orders–Resolving any issues that arise after receiving the ordered goods and services6Purchasing Activities•Procurement includes all purchasing activities, plus the monitoring of all elements of purchase transactions.•By using a Web site to process orders, the vendors in this market can save the cost of printing and shipping catalogs, and the cost of handling telephone orders.7Purchasing Activities•Products that companies buy on a recurring basis are called maintenance, repair, and operating (MRO) supplies.•One of the largest MRO suppliers in the world is W.W. Grainger.•McMaster-Carr is another major MRO supplier through WWW.•Office Depot and Staples are also examples in this area.8Logistic Activities•The classic objective of logistics is to provide the right goods in the right quantities in the right place at the right time.•Businesses have been increasing their use of information technology to achieve this objective.•FedEx and UPS have freight tracking Web page available to their customers.9Support Activities•Online Benefits is a firm that duplicates its clients’ human resource functions on a secure Web site that is accessible to clients’ employees.•Support activities include:–Finance and administration–Human resources–Technology development10Knowledge Management•Knowledge management is another support activity that intentional collection, classification, and dissemination of information about a company, its products, and its processes.•BroadVision has installed K-Net, or Knowledge Network, that organizes all information sources that its employees use regularly in their jobs.11Network Model of Economic Organization•The trend in purchasing, logistics, and support activities is a shift away from hierarchical structures toward network structures.•The Web is enabling this shift from hierarchical forms of economic organization to network forms.•The roots of Web technology for B2B transactions lie in electronic data interchange (EDI).12Electronic Data Interchange (EDI)•EDI is a computer-to-computer transfer of business information between two businesses that uses a standard format.•Transaction data in B2B transactions includes the information on paper invoices, purchase orders, requests for quotations, bills of lading, and receiving reports.13Early Business Information Interchange Efforts•In the 1950s, information flows between businesses continued to be printed on paper.•By the 1960s, businesses had begun exchanging transaction information on punched cards or magnetic tape.•In 1968, a number of freight and shipping companies formed the Transportation Data Coordinating Committee (TDCC) to create the TDCC standard format.14Emergence of Broader Standards •The American National Standards Institute (ANSI) has been the coordinating body for standards in the U.S. since 1918.•In 1979, ANSI chartered a new committee to develop uniform EDI standards. This committee is called the Accredited Standards Committee X12 (ASC X12).•In 1987, the United Nations published its first standards under the title “EDI for Administration, Commerce, and Transport (EDIFACT, or UN/EDIFACT).15Value-Added Networks•EDI reduces paper flow and streamlines the interchange of information among departments within a company and between companies.•Trading partners can implement the EDI network and EDI translation processes in several ways use either direct connection or indirect connection.16Direct Connection between Trading Partners•Direction connection EDI requires each business in the network to operate its own on-site EDI translator computer.•These EDI translator computers are then connected directly to each other using modems and dial-up phone lines or dedicated leased lines.17Indirect Connection between Trading Partners•Instead of connecting directly to each of its trading partners, a company might decide to use the services of a value-added network.•A value-added network (VAN) is a company that provides communications equipment, software, and skills needed to receive, store, and forward electronic messages that contain EDI transaction sets.18VAN •Companies that provide VAN services include General Electric Information Services, GPAS, Harbinger Corp., IBM Global Services, etc.•Cost is an issue to VAN. Most VANs require an enrollment fee, a monthly maintenance fee, and a transaction fee.19EDI on the Internet•Trading partners who had been using EDI began to view the Internet as a potential replacement for the expensive leased lines.•The major roadblocks to conducting EDI over the Internet