2.3.3 Electronic commerce
Electronic commerce (e-commerce) is a rapidly growing field which is shaping the nature of the relationships among business firms. Most business activities today are conducted using electronic data transmission involving computers, telecommunication networks and streamlined work processes. Firstly there is the B2B or business-to-business e-commerce, in which e-commerce transactions are between organisations. The other form of e-commerce is the business-to-consumer e-commerce (B2C) in which consumers use the electronic media to purchase a product or service. The B2B e-commerce sector is a high growth sector with worldwide business-to-business transactions over the Internet projected to grow 18 fold between 2000 and 2004, from US$403 billion to over US$7,300 billion.(Iwata 2000). There are many reasons for this phenomenal growth. Businesses and individuals use e-commerce to reduce transaction costs, to speed the flow of goods and information and to improve the levels of customer service. It also enables close coordination of actions among manufacturers, suppliers and customers. Companies in the automotive and aerospace industries have been involved in e-commerce for decades through the use of EDI. The nature of e-commerce has of course changed with the advent of the internet. Internet EDI, because of its relatively low network costs, has greatly enhanced EDI usage by many other sectors.
Reading 2.6
Lee, HL & Whang, S (2001, November) 'E-business and supply chain integration', Stanford Global Supply Chain Management Forum , pp.1-20.
Activity 2. 4
Visit www.covisint.com and find out what this site is about.
The advantages of e-commerce are listed in your text. Go through the details in your text but consider the challenges. One tough challenge for e-commerce is the integration of new Web based e-commerce application systems with traditional main frame computer-based inventory control and production planning systems. The sales rep placing orders on the Web must be able to find out what products are in inventory and available for sale. This requires integration of Web-enabled front-end applications with traditional back-end applications, such as inventory control and production planning. One simple way to partly achieve this is to build internal communication standard (intranet) using the globally accepted Internet standards. This allows customers, suppliers or trade partners to interface smoothly. This enables paperless business transactions involving orders, purchases, payments, complaints handling, after sales consultancy services etc.
E-Commerce is a broad and rapidly evolving subject. You must remember that electronic commerce has evolved from the simple stage of exchange of information to the very complex stage of sharing of business processes among partners in the supply chain. This evolution is the very heart of the collaborative commerce we mentioned earlier. It is quite transparent that the new supply chain business models have been able to evolve only because the internet has been able to shape today's complex e-commerce environment.
Figure 2.3 Web based order processing. ( Stair & Reynolds 2001)
The following reading will provide you with up tp date industry focus on Internet based e-commerce business models.
Reading 2.7
Drayer, R (2002, 15 May) 'The foundation is in place-it's time to transform', Ascet , volume 4. [6 pages]
While Web-based e-commerce is reshaping the way business is conducted, there are many limitations of the Web centric B2B applications. The following reading highlights the problems associated with the current state of web technology and the current technology focus for emerging business models.
Reading 2.8
Radjou, N (2002, 15 May) 'The X Internet invigorates supply chain collaboration', Ascet , volume 4. [12 pages]
Activity 2. 4
Extract the following answers from this reading:
What are the limitations of Internet today?
Why the Internet has to change to meet evolving business needs?
What is the likely future role of Internet in business?
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