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A Brief History of IT in the supply chain

A Brief History of IT in the supply chain. 1970s: Electronic Funds Transfer (EFT) Used by the banking industry to exchange account information over secured networks Late 1970s and early 1980s: Electronic Data Interchange (EDI) for e-commerce within companies

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A Brief History of IT in the supply chain

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  1. A Brief History of IT in the supply chain • 1970s: Electronic Funds Transfer (EFT) • Used by the banking industry to exchange account information over secured networks • Late 1970s and early 1980s: Electronic Data Interchange (EDI) for e-commerce within companies • Used by businesses to transmit data from one business to another • 1980s –1990s: Growth in Enterprise software (from MRP) • MRP->ERP->SCM->CRM->? • 1990s: the World Wide Web on the Internet • Cheaper to do business (economies of scale) • Enable diverse business activities (economies of scope)

  2. Computer networks • Computers working together eg. internet • Analog and digital signals • Analog : a continuous wave form (used for voice) • Digital : a discrete wave form (used for data) • Modem : translates digital analog • WANs and LANs

  3. How are computers connected • Local cable (parallel and serial) • Phone line and server • Local area network (file, print, mail) • Microwave • Infra-red • …

  4. Ways of sending data between 2 computers • Manual (re-keying) • Floppy disk (file transfer) : manual • Batch file transfer (ftp or telnet) : automatic • Interface (system to system) • EFT • EDI • Internet • …

  5. Other types of electronic transacting • Bank transactions via the phone • Top-up on mobile phone credit • Credit card payments by phone • Laser payments by phone • … • Bank transactions via the internet • Bill payments • Shopping on the internet • …

  6. How do we communicate with vendors? • Face to face meetings product offer, price, discount • Telephone price, discount, delivery • Post contracts, PO’s, cheques • Fax contracts, PO’s, changes • E-mail contracts, PO’s, changes

  7. What part of this communication can be automated? • Face to face meetings product offer, price, discount • Telephone price, discount, delivery • Post contracts, PO’s, cheques • Fax contracts, PO’s, invoices • E-mail contracts, PO’s, invoices

  8. Structured vs. unstructured info Purchase Order E-mail

  9. Level of Integration between trading partners • Exchanges of information between partners can be more or less structured: • purchase orders • invoices • cheques • ……………. • Shared systems • face-to-face meetings between staff (time consuming) • Traditionally, structured exchanges were paper based => slow turnaround time

  10. Electronic Data Interchange: A Formal Definition: “EDI is the transfer of structured data by agreed message standards from computer to computer by electronic means”

  11. EDI : characteristics • Is it commercial trading documentation? • Sales invoices • Purchase orders • Payments • Delivery notes • … • Is it a volume transaction? • Is it between 2 organisations with a formal trading relationship? • IS there an agreed standard for message format?

  12. Ordering on the internet = EDI? • RyanAir example : • Is it commercial trading documentation? • Is it a volume transaction? • Is it between 2 organisations with a formal trading relationship? • Is there an agreed standard for message format? Electronic, but not EDI

  13. Is EDI the same as EFT? • Payroll payment example : • Is it commercial trading documentation? • Is it a volume transaction? • Is it between 2 organisations with a formal trading relationship? • Is there an agreed standard for message format?

  14. Electronic Data Interchange • Direct computer to computer exchange between 2 organisations of standard business transaction documents Vendor Customer Order Invoice

  15. EDI for purchasing, shipping & payment Material releases Orders Receiving discrepancies Payment & remittance data Vendor Customer Order Processing Purchasing Receiving Receiving Accounts Receivable Accounts Payable Price updates Shipping notices Invoice

  16. EDI benefits Make it easier to place an order, but harder to change supplier • Saves money and time : • Eliminates printing & handling of paper by sender • Errors due to re-keying are minimised • Less dependent on handwritten documents • Strategic benefit : locks in the customer • Reduced lead time for orders • Automated triggers for stock re-ordering : supports Just in Time (JIT) stock strategy

  17. EDI disadvantages • Requires high levels of commitment : burden for SME’s • Installation difficulties • integration with existing systems • selection of EDI standard • resources to configure, test and implement • upgrade existing infrastructure • Pressure on SME’s to hold stock for immediate needs • Can exclude supplier from major customer accounts • Loss of flexibility resulting from initial choices (lock-in) • Substantial benefits only with high volumes of data

  18. Electronic Commerce suggests new methods • Invoice => Electronic Data Interchange instead of postal service • Payments => Electronic Fund Transfer instead of cheque • Short messages => Electronic Mail instead of Phone • Group discussions => Electronic Bulletin Boards or computer conferencing instead of meetings • Promotion => WWW instead of paper brochure • Customer product query => on-line database instead of paper catalogue

  19. Framework of generic forms of Electronic Commerce Electronic meeting rooms computer conferencing Permanent EDI IOS data retrieval systems Electronic Mail Electronic file transfer Electronic catalogues WWW home pages Ad Hoc Structured Unstructured

  20. E-commerce applications • Supply chain management • Video on demand • Remote banking • Procurement and purchasing • Online marketing and advertisement • Home shopping • Auctions

  21. Ecommerce infrastructure • Information superhighway infrastructure • Internet, LAN, WAN, routers, etc. • telecom, cable TV, wireless, etc. • Messaging and information distribution infrastructure • HTML, XML, e-mail, HTTP, etc. • Common business infrastructure • Security, authentication, electronic payment, directories, catalogs, etc.

  22. Types of E-commerce • B2B (inter-organizational) • Supplier, inventory, distribution, payment management • Within B (intra-organizational) • B2C (business to consumer) • Financial management, purchasing products and information

  23. Traditional vs. Electronic Commerce Source: Schneider and Perry

  24. Advantages of Electronic Commerce • Increased sales • Reach narrow market segments in geographically dispersed locations • Create virtual communities • Decreased costs • Handling of sales inquiries • Providing price quotes • Determining product availability

  25. Disadvantages of Electronic Commerce • Loss of ability to inspect products from remote locations • Rapid developing pace of underlying technologies • Difficult to calculate return on investment • Cultural and legal impediments

  26. The process of e-commerce • Attract customers • Advertising, marketing • Interact with customers • Catalog, negotiation • Handle and manage orders • Order capture • Payment • Transaction • Fulfillment (physical good, service good, digital good) • React to customer inquiries • Customer service • Order tracking

  27. Web-based E-commerce Architecture Tier 1 Tier 2 Tier 3 Tier N DMS Client Application Server Database Server Web Server

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