MBA management

Introduction of E-Commere

The astonishing growth of internet and particularly the world wide wed has led to a critical mass of customer and companies participating in a global on-line market place. Business owners around the world are increasingly turning to internet to increase the efficiency and profitability. A large number of companies have come to the net to maintain a electronic presence, market products, generate sales leads, provide customer support and open up electronic stores that can be accessed by the internet users. Some benefit are enjoyed by these companies include lower purchasing cost, lower overheads etc. the internet also provides to be a great equalizer, allowing the smallest companies to compete against the giants in the industry.

The Advent of E-commerce

Electronic commerce is a general term applied to use of computers and telecommunication technologies to support trading in goods and services. It is defined as any from of business transaction in which the parties interact electronically rather than by physical exchanges or direct physical contact. In other words, it is a term for buying, selling, ordering, or delivering something electronically. The general idea about e-commerce is that it means online shopping.

Types of E-commerce

Business-to-business (B2B)
The internet can connect all business all business to each other, regardless of the location or position in the supply chain. This ability presents a huge threat to traditional threat to wholesaler and brokers. This category has been well established for several years.

Business-to-consumers (B2C)
The business-to-consumers is focused on the use of a virtual of the World Wide Web that allows an internet user to browse and order goods or services from storefronts online catalogue. This category largely equates to electronic retailing.

Business-within-business (intra-company)
Companies suited around the world are now implementing the applications of web based technology to improve and transform their business communication and processes. The-business-within-business e-commerce takes the intranet beyond its popular role as a corporate and product information center.

The Scope of E-commerce

E-commerce encompasses a broad range of activities. The core component includes trading of physical goods and services. The conventional activities include.

• Searching for product information
• Ordering product
• Paying for goods and services
• Customer service

E-commerce also includes the business activities:

• Pre-sales and post –sales support
• Internal electronic mail and massaging
• Online publishing of corporate documents and forms
• Managing corporate finance and personal systems
• Manufacturing logistic management
• Supply chain management for inventory
• Facilitation of contact between traders
• Tracking orders and shipments
• Advertising and promotion of products and services

E-commerce beneficiaries:

• Benefit to customers
• Access to more information
• Rapid response to needs
• Lower cost and prices
• Global choice
• Easier market research and comparison
• Benefit and opportunities to suppliers
• Shortened supply chain
• Substantial cost saving
• Mass customization
• Global presence
• Competition on specialty
• Improved competitiveness

Supply Chain Application

Supply chain application delivering the right product to the right place, at the right time and at the right price is one of the most powerful engines of business transformation. Supply chain application is a concept that is well known and well used throughout the business world today. It has brought along many changes in business that has produced long term benefits for companies and, most importantly, consumers.


Supply chain application is the oversight of materials, information, and finances as they move in a process from supplier to manufacture to wholesaler to retailer to consumer. Supply chain management involves coordinating and integrating these flows both within and among companies. It is said that the ultimate goal of any effective supply chain management system is to reduce inventory.

Supply chain management flows can be divided into three main flows.

• The product flow
• The information flow
• The finance flow

The product flow includes the movement of goods from a supplier to a customer, as well as any customer returns or service needs.

The information flows involves transmitting order sand updating the status of delivery.

The financial flow consists of credit terms, payment schedule and consignment and title ownership arrangements.

There are two main types of supply chain application software.

Planning application and execution application.

Planning application use advance algorithms to determine the best way to fill an order. Execution application track the physical status of goods, the management of materials, and financial information involving all parties supply chain application is based on open data models that support the sharing of data both inside and outside the enterprise (this is called the extended enterprise, and include key suppliers, manufactures, and end customer of specific company). And downstream (with a company’s suppliers) and a downstream (with a company’s clients) supply chain application has the potential to time the time-to-market of product, reduce costs, and allow all parties in the supply chain to better manage current resources and plan for future.

What is E-commerce?

1. E-commerce is the buying and selling the goods and service through digital communication. It also include inter-company function such as marketing, finance, manufacturing, negotiations and selling, that involves commercial transactions and use e-mail, edit, eft, file transfer, fax, video conferencing or interacting with remote computers. E-commerce also includes doing business on the web.

2. Beginnings of E-commerce
E-commerce started in the 1970s, when some business houses started creating private networks to share information with business partners and suppliers. This process, known as Edi, involving transmitting standardizes data, saved a great deal of paper and reduce the burden on the work force. EDI used the major components of E-commerce.

3. Benefits
Convenience, speed, reduced costs and wider choice are some of the main advantages of E-commerce. A seller can have access to a larger number of customers, even those located physically far away. The customer has a wider choice of seller are not required to meet at any one particular point, overhead costs are drastically cut. Customer’s demand can be met even at the most awkward hours, for no person is needed to conduct the trade.

These are two basic problem in the field of E-commerce security and privacy. In the absence of stringent and well defined cyber laws, money transfer has latent risks. Several cases of shipping off money illegally from customer’s accounts have come to light. Secondly, people feel very uncomfortable while giving information about their business on the net, for they are not sure of the confidently of this information. But these are teething troubles and will be taken care of in due course.

Advantages of E-commerce

Lower transaction costs - if an e-commerce is implemented well, the web can significantly lower both order taking costs up front and customer service costs after the sale by automating processes. 24/7- online shop don’t close.

Larger purchases per transaction - Amazon offers a feature that no normal store offers. When you read the description if the book, you also can see what other people who ordered this book also purchased. That is you can see the related books that people are actually buying. Because of features like these it is common for people to buy at a normal bookstore.

Integration into the business cycle - a web site that is well- integrated into the business cycle can offers customers more information than previously available. For example, if Dell tracks each computers through the manufacturing and shipping process customer can see exactly where their order is at any time. This is FedEx did when they introduced on-line package tracking-FedEx made more information available to the customer.

People can shop in different ways

Traditional mail order companies introduce the concept of shopping from home in your pajamas, and e-commerce offers this same luxury. New features that web sites offer include.

• The ability to build an order over several days
• The ability to configure products and see actual prices
• The ability to easily build complicated custom orders
• The ability to compare price between multiple vendors easily
• The ability to search large catalogs easily

Larger catalogs - a company can build a catalog on the web that would never fit in an ordinary mailbox. For example, Amazon sells 4,000,000 books and associated items. Imagine trying to fit all of the information available in Amazon’s database into a paper catalog.

Improved customer relations - with automated tools it is possible to interact with a customer in richer ways at virtually no cost. For example, the customer might get an email when the order is confirmed, when the order is shipped, and after the order arrives. A happy customer is more likely to purchase something else from the company.

The Business Model

E-commerce allows people to create completely new business models. In a mail order company there is a high cost of printing and mailing catalogs that often end up in the trash. There is also a high cost in staffing the order taking department that answers the phone. In e-commerce both the catalog distribution cost and the order taking cost fall towards zero. That means that it may be possible to offer products at a lower price, or to offer products that could not be offered before because of the change in cost dynamics.


For purpose of this policy, electronic commerce is defined as the use of electronic ordering and payment mechanisms via an interactive electronic mechanism such as the World Wide Web to effect remote payment for Stanford university goods or services. This policy does cover business-to-business e-commerce pursuant to which the university purchase goods or services or to electronic ordering and payment mechanism that are typically used between other business or institution and Stanford university, usually referred to as electronic data interchange or electronic funds transfer.


Electronic commerce provides a convenient way to handle business transaction such as conference registration or the purchase of course materials. However, reasonable step should be taken to protect the personal information and privacy of purchasers. It is also in the university’s best interest to facilitate the transfer of electronic commerce transaction data to its financial system. The purpose of this policy is to establish guidelines for electronic commerce.


a. relation to university mission - any use of electronic commerce at Stanford must be consistent which guide memo 15.3, unrelated business activity. Which prohibits the use of Stanford resources for any activity not related to the university’s mission.

b. authorized vendor - Stanford has contracted with an internet commerce transaction services vendor to handle the authorization and management of electronic orders. This arrangement allows the university to.

• Consistently require the vendor to take necessary and reasonable steps to ensure that transactions are secure.

• Assure appropriate integration with university financial systems.

• Ensure that parties comply with Stanford names use the private policies.

• Use tested emergency response and recovery producers.

• Leverage university transaction to reduce costs, and

• Provide current technology and support for developing applications.

Developments in Supply Chain Management

Six major movements can be observed in the evolution of supply chain management studies creation, integration, and globalization (lavassani et al., 2008), specialization phases one and two, and SCM 2.0.

1. Creation Era

The term supply chain management was first coined by an American industry consultant in the early 1980s however the concept of supply chain in management, was of great importance log before in the early 20th century, especially by the creation of the assembly line, the chacteristics of this era of supply chain management include the need for large scale changes, reengineering, downsizing driven by cost reduction programs, and widespread attention to the Japanese practice of management.

2. Integration Era

This era of supply chain management studies was highlighted with the development of electronic data interchange system in 1960s and developed through the 1990s by the introduction of enterprise resource planning systems. This era has continued to develop into the 21st century with the expansion of internet- based collaborative systems. This era SC evolution is characterized by both increasing value-added and cost reduction through integration.

3. Globalization Era

The third movement of supply chain management development, globalization era, can be characterized by the attention towards global systems of supplier relation and the expansion of supply chain of organization can be traced back to several decades ago(e.g the oil industry), it was not until the late 1980s that considerable number of organization started to integrate sources into their core business. This era is characterized by the globalization with the goal of increasing competitive advantage, creating more value-added, and reducing costs through global sourcing.

Supply Chain Management Objectives

The objective of every supply chain is to maximize the overall value generated. The value supply chain generates is the difference between what the final products is worth to the customer and the effect of supply chain expends in filling the customer’s request the difference between the revenue generated from the customer and overall cost across the supply chain. For example a customer purchasing a computer from dell pays 2000 which represents the supply chain receives. Dell and other stages of the supply chain incur cost to convey information and transport the item and transfer find of 2000 that the customer paid and sum of all the cost incurred.

Principles of Supply Chain Management

1. Introduction

Supply chain management has received a lot of attention and the terminology has been used (sometimes misused) by companies to describe the set of manufacturing and logistics processes the result in delivering a product to their customers. The supply chain encompasses all activities associated with the flow and transformation of goods from the raw materials stage, through to the end use as well as the associated information flows. Supply chain management is the integration of these activities through improved supply chain relationship to achieve a competitive advantage.

2. Supply chains extend beyond immediate customer and supplier.

If your company produces many product which have different customers, suppliers and delivery methods, how do you deal with the complexity of your supply chain? One approach used in the DAMA project was to pick a specific product, like a men’s nylon parka and trace the entire process step for the product from raw materials to its purchase by a consumer.

3. Supply chains are not constant.

Knowing that integration is difficult to accomplish, why would the companies want to spend the resources to synchronize their business processes? The study below shows why. There are big rewards for the successful partnerships.

4. Parallel data sharing is better than serial.

There is a somewhat obvious relationship between forecasting and lead-time that is frequently overlooked in supply chain planning. If a company could produce near perfect forecasts, the lead-time to acquire the forecasted product would be unimportant. The lead time could be very long, although the dilemma is in reality, the further out the selling period; the less accurate that forecast is likely to be. The forecast accuracy would not be as important because the company could respond to whatever the current demand was in a very short time.

5. Forecasting and lead-time are symbiotic.

The globalization of the US soft goods industry has caused many companies to examine the total cost of procurement. In general, the further the product is made from the US market, the lower manufacturing cost and the higher the logistics cost. A source on the side of the world may have the cheapest manufacturing cost, but it will cost more to deliver. Keeping the correct balance will pay off at the company’s bottom line.

6. Manufacturing and logistics cost have inverse relationship.

The voluntary inter- industry commerce standards group has developed a set of business processes called collaborative planning, forecasting and replenishment which start with the premise that there should be one agreed upon view of demand.CPFR pilots between retailers and their suppliers have shown that sharing views of demand data demand data and collaborative on the differences result in increased sales, higher in-stock positions and lower inventory. This is accomplished because forecasting and planning processes increase in accuracy, which makes the supply chain responsive to the consumer.
Business-to-business transactions in E-commerce


The real power of e-commerce lies not in the direct sale of product to consumer but in the integration of relationship among merchants and suppliers for prompt, quality customer service. Business-to-business e-commerce is industrial and marketing among the processes it handles are fulfillment and procurement. As soon as an online purchase is entered and payment is approved through a credit card clearance procedure a message is generally displayed saying, thank you for your order. The amount of Sxxx will be charged to your credit card. The product should reach within 5 to 7 working days. The moment the message is displayed on the customer’s monitor, an electronic order is sent to the vendor to fill the order and ship it directly to the customer. Doing this electronically means reduced inventory and quicker service. However business to business is more than fulfillment there is the potential for the internet to become like a central computer system for all industries. Companies can conveniently and quickly check their supplier’s inventories or make instant purchases. Overhead should decline as web- driven systems eliminate many of the traditional workers who do the faxing and handle purchase orders. Competing online should also force prices for materials and supplies to drop dramatically. An extranet is shared intranet, deploying e-commerce within the larger community of an organization, including its vendors, contractor, and key customer. Extranet is an extended networks that share information with business partners via the internet. It is said that more than 90% of business that sell goods to other companies will be doing business on the web.

Supply chain management

It means integrating the networking and communication infrastructure between business and suppliers to ensure the right product in the right place, at the right time at the right place and in the right condition this is an integral part of the business-to-business frame work. Supply chain management cuts across application infrastructure and business relationship. it transforms the way companies deal with suppliers, partners, and even customers. The goal is to improve efficiency and profitability, but it also means creating new opportunities for everyone involved. Supply chain management employs powerful tool that allow companies to exchange information in an effort to reduce cycle times, to have quicker fulfillment of orders, to minimize excess inventory, and to improve customer service. This communication is done quickly from one database to another. According to information week research survey of 300 IT executive using supply chain system are better collaboration with business partners, lower operational costs, and reduced cycle times. In supply chain management, the name of the game is collaboration with business partners, lower operational costs, and reduced cycle times. Business-to-business pave the way for a new business model for the digital economy. It is distinct network of suppliers, distribution, internet service providers, and customer that use the internet for communication and transaction handling. As communication tools get better and cheaper, transaction costs should drop. With the internet,many transaction costs are approaching zero. People around the world can now quickly and cheaply access the information that need almost instantly. Companies can also add value to a product or service from any location, at any time, day or night.

Business-to-consumer transaction in E-commerce


Business-to-consumer is the interface where consumers access a merchant’s web site for the purpose of buying merchandise or requesting service. The focus of this e-commerce application is on the consumer’s use of a merchant’s web storefront or website. Consumers anywhere can browse and order goods or services online anytime. This approach is modeled on the traditional shopping experience found in stores like Safeway, K-mart.

Electronic Data Interchange (EDI)

Electronic data interchange (EDI) is the inter organizational exchange of business documents in structured machine process able form.

Electronic data interchange can be used to electronically transmit document such as purchase orders, invoices, shipping bills, receiving advice and other standard business correspondence between trading partners.

EDI can also be used to transmit financial information and payments carried out over EDI are usually referred to as electronic funds transfer (EFT).

EDI should not be viewed as simply a way of way of replacing paper documents and traditional methods transmission such as mail phone or in person delivery with electronic transmission.

But it should be seen not as end but as means to streamline procedures and improve efficiency and productivity.

Electronic data interchange is a structured transmission of data between organizations by electronic means. It is more than mere E-mail; for instance, organization might replace bills of lading and even cheques with appropriate EDI message.

It also refers specially to a family of standard, including the X12 series. EDI also exhibits its pre-internet roots, and the standard tend to focus on ASCII-formatted single messages rather than the whole sequence of condition and exchanges that make up an inter-organization business process.

Electronic data interchange is simply a set of data definition that permit business forms that would have been exchanged using paper in the past, to be exchanged electronically. This simple set of definitions has spurred a number of organization to put in place an operational environment in which the exchange of electronic business forms substitute for the exchange of paper forms.

This has resulted, in some cases, in the establishment of an EDI environment, which arguably represent the most advanced state of electronic commerce today, causing some of view EDI and electronic commerce as one and the same. We view EDI only as a subset of electronic commerce, albeit a very. As such, EDI provides an excellent example of working electronic commerce environment and is a good starting point for examining electronic commerce. Electronic data interchange aims at single point collection of data for use by various agencies participating in a common activity.

Objective of EDI

The basic documents for transaction of business will be taken once by one agency, and other agencies will take the information from the agency, electronically, avoiding the need to either physically take the document from one office to another or keying in the data again and again involving the attendant problems of manual labor and errors creeping in at each stage of data entry.

Standards of EDI

EDI has been established within various industries as a reliable and efficient from of data transmission. It is a technical representation of a business conversation between two entities, either external or internal or internal. From its inception, EDI was applied differently within these industries and therefore different standard were set up.

Benefits of EDI

Within various industries, EDI has been used to great advantage, and many benefits have been expounded in its regard. EDI’s benefits relate to environment impact, improved time efficiency, improved accuracy and increased flexibility, enhanced partnership, labor cost, shipping. EDI creates a system where by documents and data can easily be transported from one source to another, and is able to overcome incompatibility issues.

Specifications of EDI

Organizations that send or receive documents from each other are referred to as trading partners in EDI terminology. The trading partners agree on the specific information to be transmitted and how it should be used. This is done in human readable specification. While the standards are analogous to building codes, the specification are specification are analogous to blue prints. Larger trading hubs have existing message implementation guideline which mirror their business processes for processing for processing EDI and they are usually unwilling to modify their EDI business practices to meet the needs of their trading partners.

Transmission of EDI

Trading partners are free to use any method for the transmission of documents. In the past one of the more popular methods was the usages of a bisync modem to communicate through a value added network (VAN). Some organization have used direct modem connection and bulletin board system (BBS), and recently there has been a move towards using some of the many internet protocols for transmission, but most EDI is still transmitted using a VAN. In the healthcare industry, a VAN is referred to as a clearing-house.
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Review Questions
  • 1. Define supply chain management.
  • 2. What are the objectives of supply in chain management?
  • 3. What are the principles of supply chain management?
  • 4. What are the advantages of supply in chain management and explain them?
  • 5. Explain any four principles of supply chain management.
  • 6. What do you mean by Business-to-Business transactions in E-Commerce?
  • 7. What are the two processes that Business-to-Business E-commerce handle?
  • 8. What is extranet in business to business transactions? Comment.
  • 9. What do you mean by Supply Chain Management?
  • 10. What is the aim of Supply Chain Management?
  • 11. What to you understand by the term Business-to-Consumer transactions in E-Commerce?
  • 12. What are the varities of options available in payment?
  • 13. Define Electronic Data Interchange (EDI)
  • 14. How Electronic Data Interchange is used?
  • 15. Define the objectives of EDI.
  • 16. Define the standards and benefits of EDI.
  • 17. Define the specifications of EDI.
  • 18. Define the transmission of EDI.
  • 19. What is the popular method use in transmission of EDI?
  • 20. What is VAN referred to?
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