Unit 31: E-business Operations

Session 7

Learning Outcomes 2-1 Explain how electronic transactions can reduce paperwork and delay 2-2 Examine how EDI has laid the foundations for b2b e-business

Topics
Review of Last session Group Report Lecture
Electronic Transactions Electronic Data Interchange

Review of Last Session

Test of Baseline Knowledge -Review

What are paper-based transactions?

Electronic Transactions? Compare: differences and similarities What are EDIs? Research its history

CRITERIA 2-1

Explain how electronic transactions can reduce paperwork and delay

Electronic Transactions
Paper-based transactions Electronic transactions Diagrams for each Simplifies the process and reduces delays Need to keep records

2-1 Outcome
comparing paper-based transactions by use of

a diagram with electronic transactions for the complete purchasing process, emphasising how reducing paperwork simplifies the process and reduces delays caused by the transfer of information; need to keep records (transaction logs) in case there are problems later eg contract disputes

Purchase Process
Existence of demand or requirements Generation of requisition Preparation of Request for Proposal (RFP) or Request for Quotation (RFQ) Suppliers send quotations Review of quotes Preparation of purchase order (with TOR) Delivery of the products/service Recording of delivery Invoicing Payment

Sample Purchase Diagram

Traditional
Process
Generation of requisition Preparation of Request for Proposal (RFP) or Request for Quotation (RFQ) Suppliers send quotations Review of quotes Preparation of purchase order (with TOR) Delivery of the products/service Recording of delivery

Traditional
Paper works done for requisition RFP and RFQ documents prepared manually Quotation documents are done and sent manually Encoding of quotations and analysis is done Encoding of PO and TOR Delivery and inspection done manually Recorded manually

Invoicing
Payment

Invoicing done by suppliers

Payment by check

Electronic Purchasing
Process Generation of requisition Review of quotes Preparation of purchase order Delivery of the products/service Recording of delivery Invoicing Payment Electronic Requisition done via system/ RFQ and RFP incorporated Comparison system is included in the e-purchase software System generated PO and TOR Delivery and inspection done manually Bar code requirements automatically records delivery Invoicing may also be incorporated in the system Payment done through online fund transfer

Comparison of Traditional and Electronic Purchasing

Process
Existence of demand or requirements Generation of requisition Preparation of Request for Proposal (RFP) or Request for Quotation (RFQ)

Traditional
Yes Paper works done for requisition RFP and RFQ documents prepared manually

Electronic
Yes Requisition done via system RFP and RFQ are set-up online to be filled-up by suppliers

Suppliers send quotations

Review of quotes Preparation of purchase order (with TOR) Delivery of the products/service Recording of delivery

Quotation documents are done and sent manually

Encoding of quotations and analysis is done Encoding of PO and TOR Delivery and inspection done manually Recorded manually

No need
Comparison system is included in the e-purchase software System generated PO and TOR ready for printing Delivery and inspection done manually Bar code requirements automatically records delivery

Invoicing
Payment

Invoicing done by suppliers

Payment by check

Invoicing may also be incorporated in the system

Payment done through online fund

Advantages of Electronic Transactions

Reduces Errors Creates Transaction Database/ reduction of paperworks Increases Accountability Minimizes Fraud Quicker Transactions/ minimizes delays Eliminates Equipment Lowers Transaction Costs Faster Billing Recurring Billing

Record Keeping (Transaction details)

1. User Need for Product or Service

Purchase requisitions from internal users Forecasts and customer orders (electronically) Routine reordering systems (barcodes) Stock checks Material requirements identified during new product development

Record Keeping (Transaction details)

2. Purchase Approval and Supplier Evaluation Accreditation papers of suppliers for repetitive purchase Negotiated contract with supplier, with established terms for delivery, pricing, quality, etc., and the supplier has already been entered into the accounting system. RFQ format to suppliers (printed or online)

Record Keeping (Transaction details)

3. Bidding, Negotiation, and Supplier Selection Purchase approval document

Record Keeping (Transaction details)

4. Purchase Approval Electronic purchase order (PO), sometimes called a purchase agreement.

Record Keeping (Transaction details)

5. Release and Receive Purchase Requirements Delivery receipt (barcode or printed) Material packing slip, the bill of lading, and the receiving report Inspection document

Record Keeping (Transaction details)

6. Payment
E-check Fund transfer confirmation E-payment reference number

Criteria 2-2

Examine how EDI has laid the foundations for b2b e-business

Electronic Data Interchange (EDI)

History and development; Dedicated lines or networks, Formats Standardised transaction sets

Electronic Data Interchange (EDI)

the computer-to-computer interchange of strictly formatted messages that represent documents other than monetary instruments.
National Institute of Standards and Technology, 1996

History
1960s - companies developed in-house computer systems and internal networks to streamline business functions. 1968 establishment of TDCC 1975 establishment of first TDCC electronic standard 1978 TDCC renamed to Electronic Data Interchange Association (EDIA); further development of standards ANSI X12 1982 TRADACOM was introduced in the Europe retail markets 1985 EDIFACT was started through the United Nations

BENEFITS OF EDI
Provide strategic benefits by helping a firm 'lock in' customers

Prevents Time delays

Minimizes Labor costs Accuracy Information Access

Mode of Transmission

Dedicated lines (leased line) Dial-up Point-of-Sale (POS) Machine Manual Delivery Modem Internet Protocol Value Added Networks (VANs)

Sample Format - EDIFACT

 The UNA-segment describes the segment terminator, data element separator, component data element separator and release character ' => is a segment terminator + => is a data element separator : => is a component data element separator ? => is a release character

UNH+1+PAORES:93:1:IA'
This is the header segment which is required at the start of every message. This code specifies that the message name and version is PAORES 93 revision 1 and it was defined by the organisation IA (IATA).

IFT+3+NO MORE FLIGHTS'

- This is an "Interactive Free Text" segment containing the text "NO MORE FLIGHTS".

UNT+13+1'
This is the tail segment. It indicated that the message sent contains 13 segments.

Some major sets of EDI standards

UN/EDIFACT - predominant outside of North America. ANSI ASC X12 (X12) - predominant in North America. TRADACOMS -predominant in the UK retail industry. ODETTE - used within the European automotive industry

Infrastructure for EDI

1) Format standards to facilitate automated processing by all users, 2) Translation software to translate from a user's proprietary format for internal data storage into the generic external format and back again, 3) Value-added networks to solve the technical problems of sending information between computers, 4) Inexpensive microcomputers to bring all potential users even small onesinto the market, and 5) Procedures for complying with legal rules.

See you next meeting

END OF SESSION