New ERP&Ecomm

8/3/2019 New ERP&Ecomm

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(E-commerce & ERP Notes By Mohd. Shahid (A.P.) ,PDMCE, Bahadurgarh)

(E-commerce & ERP Notes By Mohd. Shahid ,PDMCE , Bahadurgarh) 1

Q: Define EDI?Ans: An EDI stand for the Electronic Data Interchange is defined as the inter processcommunication (Computer application to computer communication) of businessinformation in a standardized electronic form. In short, EDI communications information

pertinent for business transactions between the computer systems of companies,government organizations, small business and banks. EDI developed in 1960s as a means of accelerating the movement of documents

pertaining to shipments and transportation. In mid 1980s, it used in wide range of industries automotive, retail, transportation and

international trade. It used in growing and become the standard by which organizations will communicate

with each other in the world of electronic commerce. Electronic commerce is often equated with EDI, so it is important to clarify that

electronic commerce embraces EDI and much more. In electronic commerce , EDI technique are aimed at improving the interchange of

information between trading partners, suppliers and customers by bringing down theboundaries that restrict how they interact and do business with each others.

EDI is one well known example of structured document interchange which enablesdata in the form of document content to be exchanged between software applicationsthat are working together to process a business transaction.

Q: What is Business to Consumers E-commerce? Write its classification?Ans: Business to consumer is a form of electronic commerce in which products andservices are sold from a firm or company to consumers.

Classifications:

Online intermediaries: Online intermediaries are companies that facilitate transactions between buyers and

sellers and receive a percentage of the transactions value. There firms make up thelargest group og B2C companies today. Three are two types of online intermediaries:Brokers and informedieries.

An infomediary is a website that provides specialized information on behalf of producers and goods and services and their potential customers.

(i) Advertising based models:

Q: What are the advantages and disadvantages of EDI?

Ans: Advantages of EDI:Electronic Data Interchange (EDI) is a set of standards for controlling the transfer of business documents such as purchase orders and invoices, between computers. The goalof EDI is the elimination of paperwork and increased response time. For EDI to beeffective, users must agree on certain standards for formatting and exchanginginformation, such as the X-400 protocol.Electronic Commerce includes electronic trading of goods, services and electronicmaterial.Ecoomerce in the process of formulating commercial transactions at a site


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remote from the trading partner and then using electronic communications to execute thattransaction.The direct advantages of EDI include: EDI has become a major means of business communications among large companies

in the U.S.

It generates the functional knowledgement whenever an EDI message is received it iselectronically transmitted to the sender. EDI eliminates the paper documents associated with common business

transaction.EDI orders are sent straight into the network and the only delay is howoften the supplier retrieves message from the system.

EDI saves time on the exchange of business transitions and has the potential forconsiderable savings in costs.

EDI can cut costs. Eliminate the errors. Straightway information and fast response.Indirect Advantages of the use of EDI can be: Reduce stock holding: It cut the cost of warehousing of keeping the double handling

goods and capital requirement to pay for the goods that are in store. Cash Flow: Speeding up the trade cycle by getting invoices out quickly, an direct

matched to the corresponding orders and delivers speed up payments and henceimprove cash flow.

Business opportunities: There is a increase in the number of customers, particularlylarge powerful ful customers that will only trade with suppliers that do business: viaEDI.

Customer Lock-in: An established EDI system should be of considerable advantageto the customer and suppliers. Switching to a new supplier requires that in electronictrading system and trading relationship be redeveloped, problem to be avoided if aswitch of supplier is not necessary.

Disadvantages of EDI Expensive and complex system. To incorporate EDI in the existing system needs more money to spend to upgrade the

system. Networking complexities and networking requires heavy investment. The need for extensive telecommunications capability, a major barrier in EDI

implementation. There must be specific point to point electronic path for the document to take. So

companies either required to develop extensive and expensive networks.

Q: What are the critical success factors in EDI implementation?Ans:1. Executive commitment is the most important factors in determining the success of an

EDI program. By its nature, EDI can change the way an organization does business.To enable such beneficial changes the executive driving a companys EDI program


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must build a common understanding regarding EDI among all affected departments,divisions and other organizational units.

2. An EDI implementation consists of an internal and an external phase. During theinternal phase, the organization selects and implements the necessary translation andcommunications software and services, accomplishes the appropriate applications

integration and determines what procedures and guidelines are needed to supportelectronic business practices. In selecting an EDI VAN and translation software, oneshould consider the requirements of both phases.

3. EDI consists of standardize electronic message formats for common businessdocuments such as request for Quotation, Purchase order, Purchase change order, billof landing receiving advice, invoice and similar documents.

Q: Define EDI Layered ArchitectureAns: Electronic Data Interchange (EDI) developed in 1960s as a means of acceleratingthe movement of documents pertaining to shipments and transportation. After that thistechnique used in a wide range of industries automotive, retail, transportation and

international trade. Its use is growing and it is set to become the standard by whichorganizations will communicate formally with each other in the world of electroniccommerce. The aimed of EDI techniques are to improving the interchange of information

between trading partners, suppliers and customers by bringing down the boundariesthat restrict how they interact and do business with each other.

EDI is one well known example of structured document interchange which enablesdata in the form of document content to be exchanged between software applicationsthat are working tighter to process a business transaction.

EDI architecture specifies four layers: The semantic (or application) layer, thestandards translation layer, the packing (or transport) layer and the physical network

infrastructure layer. The EDI semantic layer describe the business application that is driving EDI.For aprocurement application, this translates into request for quotes, price quotes, purchaseorders, acknowledgments and invoices. This layer specific to a company and thesoftware it uses.

EDI semantic layer must be translated from a company specific form to a moregeneric form so that it can be sent to various trading partners who could be using avariety of software application at their end. What complicates matters is the presenceof two competing standards that define the content and structure of EDI forms:(i) The X12 standard ,developed by the American National Standard

Institute(ANSI)

(ii) EDIFACT developed by United Nations Economic Commission for Europe.EDI Semantic Layer Application level servicesEDIFACT business form standards

EDI standard layer ANSI X12 business form standardsElectronic mail X.435,MIMEPoint to point FTP , TELNETEDI transport layer

World Wide Web HTTPPhysical layer Dial-up lines, Internet, I-way


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EDI standard specify business form structure and to some extent influence contentseen at the application layer. For instance, a purchase order name field in an X12standard might be specified to hold a maximum of 50 characters. An applicationusing 75- character field length will produce name truncation during the translation

from the application layer to the standard layer. The EDI transport layer corresponds with non electronic activity of sending abusinesses form from one company A to company B. The business form could be sentvia regular postal service, registered mail, certified mail or simply faxed between thecompanies.

EDI document transport is more complex than simply sending e-mail messages orsharing files through a network, a modem, or a bulletin board. These EDI documentsare more structured than e-mail.

The relationship between EDI and e-mail can be ambiguous as email systems becomevery sophisticated and incorporate more and more form based features. A goodexample is Lotus Notes, which started as a simple form based mail system but has

evolved into a very sophisticated environment.

Q: What is the difference between EDI and E-mail?Ans:

EDI E-mail1. There is typically no human involvementin the processing of the information, as theinterface has software to softwareorientation. The data are structured in asoftware understandable way.

1. The data are not necessarily structured tobe software understandable. A human tosoftware interface is involved at aminimum of one end of the interchange.

2. The interchange is composed by one

software for interpretation by software. If areply is involved, it is composed bysoftware to be interpreted by software.

2. The message is composed by a human

and or interpreted by a human and or replyis composed by a human and or interpretedby a human.

Q: Define E-commerce?Ans: IBMs Definition of E-commerce is

The transformation of key business processes through the use of internettechnologies.

The conducting of business communication and transactions over networks and

through computers. As most restrictively defined, electronic commerce is the buyingand selling of goods and services and the transfer of funds, through digitalcommunications.

E-commerce also includes all inter-company and intra company functions (such asmarketing, finance, manufacturing, selling and negotiation) that enable commerce anduse electronic mail, EDI, file transfer, fax, video conferencing, workflow orinteraction with a remote computer.


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E-commerce also includes buying and selling over the World Wide Web and theinternet, electronic fund transfer, smart cards, digital cash (e.g. Mondex) and all otherways of doing business over digital network.

E-commerce describes the process of buying, selling, transferring or exchangingproducts, services and or information via computers network, including the internet.

We define E-commerce in the following three aspects:(i) From a communication perspective: E-commerce is the delivery of

information, products/services or payment via telephone lines, computernetwork or any other means.

(ii) From a business Perspective: E-commerce is the application of technologytowards the automation of business transactions and workflows.

(iii) From a Service Perspective: E-commerce is the tool that addresses the desireof firms, consumers and management to cut service costs while improving thequality of goods and increasing the speed of service delivery.

(iv) From a Learning Perspective -commerce is enabler of online training and

education in school, universities and organization.

Q: Briefly mention the need for E-commerce. What are the advantages anddisadvantages of E-commerce?Ans: Earlier companies used private networks to exchange orders and invoiceinformation but now E-commerce has made a shift in business paradigm to integrate thevarious business processes through dissemination of real time information and it is astage in the evolution of information management technique. This business to businesselectronic communication is growing rapidly due to electronic data interchange (EDI).Forexample the internet can be used for the purchase of books that are then delivered by

post or the booking of tickets that can be picked up by the clients when they arrive at theevent. However the internet is not only the technology used for this type of service andthis is not the only use of the internet in e-commerce.

Advantages of E-commerceThe advantages of e-commerce are as follows: Electronic medium or EDI helps in transmitting EDI standard documents from

business to business over web transport protocols. For purely electronic products orinformation based services the web setting offers distinct advantages. For example,purchased software can be downloaded directly from the web.similarly, onlineservices such as tax preparation or electronic news and analysis, meet their basic

fulfillment obligation directly through the web. Low volume trade partners (such as one time or emergency suppliers, merelyprospective customers, or ordinary retail customers) are now prime candidates toparticipate in web commerce.

Small business and individual consumers previously all but ineligible for e-commerceare now right in middle of it.


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No need of setting up of private network individually for business by companies.Private networks are appropriate for trade partners where as a web connection is oftenalready setup before anyone even contemplates doing commerce over the connection.

Product Promotion. Internet e-commerce allows direct selling of the product and it does not require retail

premises. Direct saving: Selling online cuts out the costs of the retail premises and potentially

reduces the staff requirement. Save time and manpower Information from customers can be used to customize products or could be the spark

that inspires new products and services.

Disadvantages of E-commerceThe limitation of E-commerce can be classified as technological and non-technological.(i) Technological: For the E-commerce system itself, there is no universally accepted standard for

quality, security and reliability.(ii) Non Technological: The lack of trust is one main reason why customers are unwilling to accept E-

commerce due to privacy and security concerns. The danger of hackers accessing customer files and corrupting accounts is also related

to privacy and legal issues. Example is furniture companies many websites that allowcustomers to browse but most customers wants to feel touch the items before theymake a decision.

Some organizations are under an unencrypted payment environment, in which acustomers number might be stolen in the payment process; however, recent paymentsystems such as Pay Pal can solve this kind of problems.

ELECTRONIC PAYMENT SYSTEM

Overview of Electronic Payment systems: Electronic payment systems are becoming central to online business process

innovation as companies look for ways to serve customer faster and at lower cost.Emerging innovations in the payment for goods and services in electronic commercepromise to offer a wide range of new business opportunities.

Electronic payments systems and e-commerce are linked given that on-lineconsumers must pay for products and services.Clearly, payment is an integral part of the mercantile/business process and prompt payment is crucial/essential.

If the claims and debits of the various participants individuals, companies, banks andnon banks-are not balanced because of payment delay or even worse default then theentire business chain is disrupted.

Hence the important aspect of ecommerce is prompt and secure payment, clearingand settlement of credit or debit claims.

To avoid the problems faced by the ancient traders like conflicting local laws andcustomer regarding commercial practices and incompatible and nonconvertible


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currencies that restricted trades, traders invented various forms of paymentinstruments(promissory notes, bills of exchange, gold coins and barter).Themerchants also developed commercial law surrounding the use of these instrumentsthat proved to be one of the turning points in the history of trade and commerce.

Everyone agrees that the payment and settlement process is potential/jams in the fast

moving electronic commerce environment if we rely on conventional paymentmethods such as cash, checks, bank drafts or bill of exchange. Electronic replicas of these conventional instruments are not well suited for the speed

required in ecommerce purchase processing. For instance, payments of small denominations (micro payments) must be made and

accepted by vendors in real time for snippets (bits and pieces) of information.Conventional instruments are too slow for micro payments and high transaction costsinvolved in processing them add greatly to be overhead.

Therefore new methods of payment are needed to meet the emerging demands of ecommerce. These neo-payment instruments must be secure, have a low processingcost, and accepted widely as global currency tender.

DIFFERENT TYPES OF ELECTRONIC PAYMENT SYSTEM

Q: Write different types of Electronic Payment system?Ans: Electronic Payment systems are proliferating(grow) in banking, retail ,health care

,on-line markets, and even governments-in fact ,anywhere money need to changehands.

Organizations are motivated by the need to deliver products and services more costeffectively and provide a higher quality of services to customer.

Research into electronic payment systems for consumers can be traced back to the1940s, and the first applications-credit cards-appeared soon after. In 1970s, theemerging electronic payment technology was labeled electronic funds transfer (EFT).

EFT is defined as Any transfer of funds initiated through an electronic terminal,telephonic instrument, or computer or magnetic tape so on as to order, instruct, orauthorize a financial institution to debit or credit an account.

EFT utilizes computer and telecommunication components both to supply and totransfer money or financial assets. Transfer is information based andintangible/vague/unclear. Thus EFT stands in marked contrast to conventional moneyand payment modes that rely on physical delivery of cash or check (or other paperorders to pay) by truck, train, or airplane.

Work on EFT can be segmented into three broad categories:1. Banking and financial payments

Large-scale or wholesale payments (e.g., bank to bank transfer) Small scale or retail payments(e.g., automated teller machines and cash

dispensers) Home banking(e.g., bill payment)


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2. Retailing payments Credit cards(e.g. ,VISA or MasterCard) Private label credit/debit cards(e.g., J.C. Penney card) Charge cards(e.g., American express)

3. On-line electronic commerce payments Token based payment systems Electronic cash(e.g., DigiCash) Electronic Checks(e.g., NetCheque) Smart cards or debit cards(e.g., Mondex Electronic Currency Card) Credit card based payment systems Encrypted credit cards(e.g. World wide web form based encryption) Third party authorization numbers(e.g., First Virtual)

Q: Write different E-Commerce payment system ModelsAns:An e-commerce payment system facilitates the acceptance of electronic payment foronline transactions. Also known as financial electronic data interchange (FEDI), e-commerce payment systems have become increasingly popular due to the widespread useof the internet based shopping and banking.

E-Commerce payment system Models

Customer to BusinessIn C2B arrangement customer pay business through electronic transaction. The bestexample of C2B E-Commerce model is debit cards, credit cards and pay pal.

Business to BusinessIn business to business model one business pays to other business by using electronicchannels. Online order management and payment systems are common examples whichcompany employee to purchase products and payment through application or onlinewebsite.

Business to Consumer In this type of arrangement business devise a way to transfer funds from business toconsumer. EMV (Euro, master, VISA) international payment gateways credit cardsystems allow the banks to assign line of credit to their customer for cash and purchase

transaction over different electronic channels.

Consumer to ConsumerAfter rapid growth of C2B and B2B electronic payment systems the needs of consumer toconsumer system arise to great extent. This system allows the electronic transfer of fundpayment from one consumer to other. Now a days banking system C2C transaction


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through debit cards and internet banking, customer just need to know the account numberto transfer funds from one account to other account electronically.

Business to EmployeesThis model suites the corporate model where company have wide spread operation with

thousands of employers. Business can transfer salary at the end of each monthelectronically by employing electronic banking system. This model will reduceadministration and financial tasks and time and increase accuracy and security by directlydepositing the amount to employees account rather than handing physical cash to them.

Q: What is Electronic money?Ans: Electronic money (also known as e-money , electronic cash , electronic currency ,digital money , digital cash or digital currency ) refers to money or scrip which isexchanged only electronically. Typically, this involves use of computer networks, theinternet and digital stored value systems.

Electronic Funds Transfer (EFT) and direct deposit are examples of electronic money.Also, it is a collective term for financial cryptography and technologies enabling it.Technically electronic or digital money is a representation, or a system of debits andcredits, used to exchange value, within another system, or itself as a stand alone system,online or offline. Also sometimes the term electronic money is used to refer to theprovider itself. A private currency may use gold to provide extra security, such as digitalgold currency. Also, some private organizations, such as the US military use privatecurrencies such as Eagle Cash.Many systems will sell their electronic currency directly to the end user, such as Paypal,Web Money and Wirex, but other systems, such as Liberty Reserve, sell only throughthird party digital currency exchangers.

In the case of Octopus Card in Hong Kong, deposits work similarly to banks'. AfterOctopus Card Limited receives money for deposit from users, the money is deposited intobanks, which is similar to debit-card-issuing banks redepositing money at central banks.

Some community currencies, like some LETS systems, work with electronic transactions.Cyclos Software allows creation of electronic community currencies.

Ripple monetary system is a project to develop a distributed system of electronic moneyindependent of local currency.

Off-line 'anonymous' electronic moneyIn the use of off-line electronic money, the merchant does not need to interact with thebank before accepting a coin from the user. Instead he can collect multiple coins Spent byusers and Deposit them later with the bank. In principle this could be done off-line, i.e.the merchant could go to the bank with his storage media to exchange e-cash for cash.Nevertheless the merchant is guaranteed that the user's e-coin will either be accepted bythe bank, or the bank will be able to identify and punish the cheating user. In this way a


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user is prevented from spending the same coin twice (double-spending). Off-line e-cashschemes also need to protect against cheating merchants, i.e. merchants that want todeposit a coin twice (and then blame the user).

Q: What is digital token based electronic payment system, illustrate with example?

Ans:Digital token based electronic payment systems: None of the banking or retailing payment methods is completely sufficient in their

present form for the consumer oriented e-commerce environment. Their deficiency is their assumption that the parties will at some time or ot her be in

each others physical presence or that there will be a sufficient delay in the paymentprocess for frauds, overdrafts, and other undesirables to be identified and corrected.

These assumptions may not hold for ecommerce and so many of these paymentmechanisms are being modified and adapted for the conduct of business overnetworks.

Entirely new forms of financial instruments are being developed. One such new

financial instrument is electronic tokens in the form of electronic cash/money orchecks.

Electronic tokens are designed as electronic analogs of various forms of paymentbacked by a bank or financial institution. Simply stated, electronic tokens areequivalent to cash that backed by a bank.

Electronic tokens are of three types:1. Cash or real-time: Transactions are settled with the exchange of electronic

currency. An example of on-line currency exchange is electronic cash (e-cash).2. Debit or prepaid: Users pay in advance for the privilege of getting information;

Examples of prepaid payment mechanisms are stored in smart cards andelectronic purses that store electronic money.

3. Credit or postpaid: The server authenticates the customers and verifies with thebank that funds are adequate before purchase. Examples of postpaid mechanismsare credit/debit cards and electronic checks.

Q: Write notes on the following:(i) E-cash(ii) E- checks(iii) E-billing

Ans: (i) Electronic Cash (e-cash):

Electronic cash (e-cash) is a new concept in on-line payment systems because itcombines computerized convenience with security and privacy that improve onpaper cash. its versatility opens up a host of new markets and applications.

E-cash presents some interesting characteristics that should make it an attractivealternative for payment over the internet.

E-cash focuses on replacing cash as the principal payment vehicle in consumer-oriented electronic payments.


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Cash remains the dominant form of payment for three reasons:(i) Lack of trust in the banking system(ii) Inefficient clearing and settlement of noncash transactions and(iii) Negative real interest rates paid on bank deposits. The large number of cash indicates an opportunity for innovative/new business

practice that revamps the purchasing process where consumers are heavy users of cash. To really displace cash, the electronic payment systems need to have some qualities

of cash that current credit and debit cards lack. For example, cash is negotiable, meaning it can be given or traded to someone else.

Cash is legal tender, meaning the payee is obligated/compelled to take it. Cash is bearer instrument, meaning that possession is prima facie proof of

ownership. also, cash can be held and used by anyone even those who dont havebank account, and cash places no risk on the part of the acceptor that the medium of exchange may not be good.

(ii) Electronic checks (e- checks): Electronic checks are another form of electronic tokens. They are designed to

accommodate the many individual entities that might prefer to pay on credit orthrough some mechanism other than cash.

Buyers must register with a third party account server before they are able to writeelectronic checks. The account server also acts as a billing service.

The registration procedure can vary depending on the particulars account server andmay require a credit card or a bank account to back the checks.

Transfer electronic check

Once registered, a buyer can then contact sellers of goods and services. To completea transaction, the buyers sends a check to the seller for a certain amount of moneythese checks may be sent using e-mail or other transport methods.

Payer Payee

Bank AccountingServer

Forward check for payerauthentication

Depositcheck


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When deposited, the check authorizes the transfer of account balances from theaccount against which the check was drawn to the account to which the check wasdeposited.

The e-check method was deliberately created to work in much the same way as aconventional paper check.

The account holder will issue an electronic document that contains the name of thepayer, the name of the financial institution, the payers account number, the nameof the payee and the amount of the check.

Most of the information is in encoded form. Like paper check, an e-check will bearthe digital equivalence of a signature: a compound number that authenticates thecheck as coming from the owner of the account. And, again like a paper check, ane-check will need to be endorsed by the payee, using another electronic signature,before the check can be paid.

Properly signed and endorsed/approval checks can be electronically exchangedbetween financial institutions through electronic clearinghouses, with theinstitutions using these endorsed check as tender to clear up account.

The specifies of the technology work in the following manner: On receiving thecheck, the seller presents it to the accounting server for verification and payment.The accounting server verifies the digital signature on the check using he Kerberosauthentication scheme.

In the language of Kerberos, an electronic check is a specialized kind of ticketcreated by the Kerberos system. A users digital signature is used to create oneticket a check which the sellers digital endorsement transforms into another anorder to a bank computer for fund transfer.

Subsequent endorsers add successive layers of information onto the tickets,precisely as a large number of banks may wind up stamping the back of a check along its journey through the system.

Electronic checks have the following advantages: They work in the same way as traditional checks, thus simplify customer education. Electronic checks are well suited for clearing micro payments; their use of

conventional cryptography makes it much faster then the system based on publickey cryptography(c-cash).

Financial risk is assumed by the accounting server and may result in easieracceptance. Reliability and scalability are provided by using multiple accountingservers. There can be an interaccount server protocol to allow buyer and seller tobelong to different domains, regions, or countries.

A prototype electronic check system called NetCheque was developed atinformation science institute by Clifford Neumann.

(Kerberos is a computer network authentication protocol, which allows nodescommunicating over a non-secure network to prove their identity to one another in asecure manner. It is also a suite of free software published by Massachusetts Institute of Technology (MIT) that implements this protocol. Its designers aimed primarily at aclient-server model, and it provides mutual authentication both the user and the server


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verify each other's identity. Kerberos protocol messages are protected againsteavesdropping and replay attacks.

Kerberos builds on symmetric key cryptography and requires a trusted third party.Extensions to Kerberos can provide for the use of public-key cryptography during certain

phases of authentication.)

Q: Explain Credit card and Debit card. Which is better for use and why?Ans: CREDIT CARD: Every time you use a credit card, you are borrowing money that is made available to

you by a bank or other financial institution. the institution pays the debt to the vendor,and in turn you pay the money back to the institution.

By signing up for a credit card, you agree to pay back the money that you borrowed,in addition to any interest drawn on the amount you borrowed.

DEBIT CARD: You have a debit card in your wallet or purse right now, since many ATM cards are

programmed to have debit options. Issued by your bank, debit cards take fundsdirectly from the money that you have in your bank account-in sense acting like acheck, just faster.

With a debit card, you dont have to carry cash or checks, and it is very convenient toshop at a variety of places including gas stations, grocery stores, restaurants and retailstores.

They provide instant access to your money and are accepted worldwide. Debit cardsare used like credit cards, meaning that the store you are shopping at swipe them,and then you sign off on the receipt. You dont have to show a picture ID, and there is

usually no PIN number for you to punch in.

Which is better? The features that make debit cards convenient-instant access to your money, lack of a

PIN number, and not having to drag out your photo ID when you use it make fraudthat much easier.

Unless reported quickly, theft of you debit card can quickly devastate your bank account. This is the difference between credit and debit cards.

Credit card companies are held to restrict liability laws; the limits consumer limitsliability for credit card fraud to $50. for example if you notice suspicious charges on

your credit card statement such as double billing or incorrect charge, the credit cardcompany is obligated to investigate if you send in a written request with in 60 days. For debit card fraud, your liability is $50 if you notify the bank within two days of

noticing the fraudulent charges. After two days, your liability increases to $500 andup to your entire account balance after 60 days.

So if you notice that your card is missing within two days and report it, you can onlybe made to pay up to $50.However if you report the theft after two days, you can beheld responsible for paying for purchases or charges or charges that you didnt make.


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Q: what is e-payment system? Describe the special features required in paymentsystems for e-commerce.

ORWhat do you mean by electronic payment systems? Discuss the features of goodelectronic payments system?Ans: Electronic payment systems have been in operation since 1960s and have been

expanding rapidly as well as growing in complexity. However, in most of the majorindustrialized countries, an inverse relationship exists between the volume andnumber of transaction handled electronically.

Typically, of business payments around 85-90% or more of monetary value will beprocessed electronically while less than 5-10% of the total number of paymenttransactions will be handled in this way. this can be due to the following four relatedfactors(i) Proprietary closed networks were developed by banks to handle large and

increasingly internationally base payment systems.(ii) Large value payments are increasingly associated with foreign exchange and

global securities transactions, thereby becoming divorced from underlyingworld trade.

(iii) Large value p[payment systems were not designed nor are they cost effectivefor small value payments.

(iv) Paper based non automated payment systems remain an established part of accepted business practice for varying institutional reasons, thereby remainingingrained in the economic system.

The internet is experiencing rapid growth which is being largely driven by newcommercial users of the network. Other commercial online services provided bycompanies such as CompuServe, America on-lne and prodigy are also expandingrapidly.

The creation of an internet electronic payment system will provide opportunities forthe creation of completely new sets of global and national trading relationships.

The internet offers the possibility of an open systems payment and settlementsystem which operates in parallel to existing, more traditional bank based network,

and which is particularly suited to meet the currently unsatisfied requirements forprocessing low value payments electronically. It is estimated that an increasing amount of commerce will take place via the internet

In both business-to-business and business to-consumer markets in the coming yearshowever, the electronic commerce to take place, a method of payment must bedeveloped for the use of internet-an electronic payment systems.

Currently there are several proposed electronic payment systems swaying fordominance as a preferred system, and they can be classified under one of two


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categories. The first category is the cash-like or debit payment system , where thecustomer prepays money to receive tokens with intrinsic value that can be used forpurchases at a later time. Examples of the first category include DigiCash, Millicentand Mondex.

The second category is the check-like or credit payment system, where the customer

receives an identifying designation that allows them to make purchases-the identifierhas no built-in value on its own. It is only at the time of the transaction, or shortlyafter, that money is taken from the customers possession (control). Examples of thiscategory include First Virtual Holdings, CyberCash and Electronic Check.

The electronic payment systems examined may be evaluated under the followingcriteria:-

(i) Convenience: The payment system should require the least amount of effort,special equipment and time for both the customer and merchant to process the

transaction, such as an on-line authorization process. In contrast a lessconvenient system would require the customer and/or the merchant to go off-line in order to process the transaction with a significant time delay.

(ii) Security: the greatest restriction for customers embracing internet commerce isthe possibility of fraud-the MasterCard, Visa and Verifone study found that thegreatest concern for internet commerce transactions was the possibility of creditcard fraud. The payment system should be secure, covering some aspects of transaction:

1. DigiCash2. Millicent3. Mondex

4. NetCash

1. CyberCash2. First Virtual Holding3. Secure Electronic Transactions(SET)4. FSTC Electronic check Project

Electronic Payment System

Check Like Payment SystemOR Credit Payment system

Cash Like Payment SystemOR Debit Payment System


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1. The customer must be positively identified such that all financial transactions arecarried out with the correct customer.

2. Information related to the customer such as credit card numbers, bank accountnumbers or passwords must be protected from unauthorized access. The data shouldbe protected from alteration or manipulation as it is transmitted via the internet.

That means the customer can receive authentication from the merchant to ensurethat the merchant has been authorized to process the payment.3. Both the merchant and the customer should be protected in the event of loss, either

from the result of system failure of fraud. Some electronic payment systemproviders have guaranteed payment to merchants for processed transactions andoffered coverage for consumers who lose their electronic currency.

(iii) Anonymity: Another concern of on-line consumers is the confidentiality of transactions-keeping payment activities private preventing thired parties fromobserving and tracking spending habits.

(iv) Universality: The payment system should have a few constraints on its use toallow adoption by any customer or merchant regardless of what browser

software they use or what country they are in.(v) Support of Micro Payments: Micro payments are the series of smalldenomination payments that are made in rapid sucession, that would be used ina pay-per-play kind of environment, such as on-line gaming or fort he paymentof per page service fees.

(vi) Cost: The cost of payment system, to both the customer and the merchant,should be inexpensive, especially if micro payments are supported.

Q: Describe the various types of e-payment systems.OR

Discuss the major electronic payment systems.Ans: E-payment systems are mainly two types. They are as follows:-

Cash -like Payment systems OR Debit Payment System

(1) DigiCash: Digicash originating from the Netherlands and having undergone trails since

1994.Digicash is a pure electronic currency, not requiring any hardware other than aninternet capable PC.

The consumers buy Digicash coins of various denominations from an issuing bank and are then stored on the consumers hard drive.

Each one of these coins is an encrypted number with an encoded signature of theissuing bank to serve as a check against unauthorized duplication. When a sale is made, the customer encrypts a sum of the Digicash and transmits it to

the merchant, either by e-mail or via the merchants web site. Digicash is so flexible that, if needed the currency can be printed on paper or saved

onto a disk to be sent to the merchant. Not having any special hardware requirements, any merchant can accept Digicash

without having to undergo a lengthy qualification process.


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Both the merchant and the customer must have world-currency access accounts at theMark Twain Bank of Missouri. However, because of the denominations of the coins,consumers may have to deal with the accumulation of the spare change.

Digicash uses 64-bit encryption to make each coin unique and in the fraud, each coincan be split into its component parts to determine the issuing source of the coin.

While the merchant is paid immediately with little risk upon acceptance of Digicash,there is only one bank in North America that buys and sells Digicash, the Mark twainBank in St.Louis-if the bank goes out of business, and then Digicash could beworthless without a bank to redeem them.

All Digicash transaction are untraceable by both the merchant and the issuingbank.Digicash is recognized internationally and it is currently accepted at over onehundred internet vendors.however,only two banks in the world issue Digicash,theMark Twain Bank in the United States and the Merit Bank of Finland which will limitits international adoption.

(2) Millicent Millicent was created by Digital Equipment Corporation and was intended to bean industry standard for micro payments. Under the Millicent payment system, merchants generate their own currency,

called Scrips, which are good for purchases at their own websites. This scripsare then sold in bulk to brokers, from where the customer can purchase themwith credit cards. Once purchased, the scrips reside in the customers browserand are automatically downloaded from the browser to the merchant wheneverthe customer uses a web site that charges by the scrip.

Though the customer doesnt have to set up an account with the merchant totransact business, they still have to find a broker that will sell the relevant scrip.

Scrips have many security features built-in tamper resistance, difficult to

counterfelt, spendable only by its owner, vendor specific serial numbers,expiration dates, and the use of unique digital signature.

Since the owner identity is coded into the scrip, anonymity is not possible.However the creators of Millicent feel that it is an inconsequential/minorfeature, since it will be used by customers for use on web sites that charge by-the-byte.

(3) Mondex The mondex payment system started out as a smart card for use in cafeterias and

evolved into a universal smart card based payment system. The Mondex smart cards hold a preprogrammed amount of value, and

consumers can pay for items in the real world by swiping the cards throughspecially designed kiosks at retailers. Online consumers can also use theirMondex cards for Internet purchases if their PC is outfitted with a smart cardsreader.

Though mondex requires the customer to have a smart card reader, reloading aspent card can be done quickly and easily. There are several channels indevelopment for reloading the Mondex card; via the internet with thecustomers bank, over the phone, from card-to-card, or from automated bankingmachines (ABMs).


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The security and encryption on the smart cards and the readers is of paramountimportance to the creators of the Mondex system, since it is designed to allowvalue exchange between merchant and customers without intervention of anauthorizing authority (such as bank).

Electronic money stored on the Mondex cards can be exchanged for the

government currency any time at a bank or an ABM, an advantage over theDigiCash and Millicent systems. Because all transactions are carried out in an off-line basis, they are untraceable. The greatest advantage of the Mondex system is the ability to use it in real

world, giving it the most versatility and liquidity of any electronic paymentsystem.

(4) Net Cash Net cash is the electronic payment system being offered by the Netbank, and is

designed to support low value exchanges on the internet. A customer must first set up US checking account in order to buy Net-Cash

coupons of exact denominations-each coupon is a serial number with an exactvalue.

When a purchase is made, the customer must pay the merchant in exact changeby e-mailing the serial numbers and values of the coupons being used.

Like the digicash system, Netcash can become Messy (confuse) if customerhave lots of spare change, though there is a change; function where thecustomer or the merchant can have their loose bills and change consolidatedinto higher denominations.

Net cash relies on the security of the browser or the email program being used,since it has no encryption of its own.

Though NetBank scrutinizes all transactions to ensure that coupons are notbeing used more than once, the responsibility is on merchant to check validityof every coupon received with NetBank for authenticity.

All Net cash transactions are anonymous/unknown.Net cash is currently not forglobal use since customers must have a US checking account to buy or trade in.However this can be avoided by spending ones build up Net cash coupons onother web goods and services.

There is time delay for reimbursement/compensation of the merchant, andpenalties for low value redemptions/recovery encourage merchants to allowtheir Net Cash reserves to accumulate.

Net cash can be used for payments as low as $0.25.there are no transaction feesfor the use of Net Cash, through there is a 2% conversion fee with a $2minimum ($4 minimum for merchants).


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Cheque-like Payment systems OR Credit Payment System

(1) CyberCash CyberCash acts as an intermediary between the internet merchant and the bank

and authorizes the payment directly from the customers bank account or creditcard.

A CyberCash customer must first open an account with Cyber cash, after whichthey are given electronic wallet software that contains an encrypted copy of the customers credit or debit card information.

When a purchase is made, a payment request is sent to CyberCash, which thencontacts the customers bank and transfers the funds to the merchants ownaccount.

Both the merchant and the customer must have CyberCash account setup. Once the payment is approved by Cyber cash, the payment to the merchant is

guaranteed, through the merchant is made legally responsible for any fraudulenttransactions.

To reduce the possibility of diversion, all credit or debit card numbers aretransmitted over closed system dedicated banking networks, as opposed to theinternet, an open system.

In the eyes of merchant the customer is unidentified with only a depositappearing in the merchants account. However, the customers banks receivedetailed into on transactions.

The CyberCash software is universally available, and can be downloaded fromthe companys website for free and is supported by all browsers.

The CyberCash payment system also accepts major credit cards in lieu of banking information, so it is not necessary to have a US bank account to use thissystem.

(2) First Virtual Holdings or (VPIN): First Virtual Holdings has implemented an off-line system for payment that

does not require credit card numbers to be transmitted across the internet.Both merchant and customers have established accounts with first virtualaccounts, the customer provides the merchant with their first Virtual accountnumber (called a Virtual PIN) when a payment is to be made.

The merchant then contacts first virtual holdings with the details of the saleand the customers account number.

An e-mail is then sent to the customer to confirm the charges, and uponconfirmation, a charge is put on the customers credit card. However,according to Visa, this third party authorization of credit cards may be inbreaking of the law.

The setting up of the accounts and the use of e-mail to confirm payments istime consuming and cumbersome.However, First virtual holdings hasautomated the process as much as possible, with all the information collectionbeing done at their web site and one phone call for provision of the credit cardnumber.


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Since credit card numbers are never transmitted over the internet, noencryption is required. Responsibility is on the customer to stop any unwantedtransactions by responding to their e-mails. For the merchant, payment isdelayed as all transactions are passed through an automated clearing house.

While the merchant will only know the customer by their account number,

First virtual holdings keep detailed record of all purchases. Any customeranywhere in the world can setup an account to receive a virtual PIN providedthey have internet access and a major credit card.

The cost of each credit card transaction and the need for e-mail confirmationfrom the customer make this payment system too costly and too slow for usefor micro payment environment.

(3) Secure Electronic Transactions (SET) This payment system, a security protocol for the express purpose of safely

communicating credit card numbers over the internet, was the result of a jointeffort by MasterCard, Visa, IBM, Microsoft, Netscape etc.

The SET system grew from the merging of two competing systems that wereseparated by MasterCard and Visa. Under SET protocol, the merchant presents to the customer a digital certificate

proving that they are an authorized SET merchant. The customer then encrypts a digital payment slip with the dollar amount and

the credit card number, which is then set to the merchant, which is thenauthorized. This payment system is growing in popularity, and plays a role inelectronic payment systems.

Convenience is the strength of this electronic payment system with no need toset up accounts, no prior relationship required between the merchant and thecustomer, and many internet merchants already using it to process payments.

One disadvantage of SET is that the security algorithms used by systemrequires a lot of computing power, making SET very expensive.

Though the possibility of fraud is reduced with this system, it is still theresponsibility of the customer to check their credit card statements forauthorized charges.

Like any regular credit card transactions, detailed records of activity are keptby both the merchant and the credit card issuer.

SET is perhaps the most universal of all electronic payment systems, takingadvantage of the wide production of credit cards, and being designed to work with any software or hardware platform.

(4) FSTC Electronic Check Project The electronic check was developed by the Financial Service Technology

Consortium, an organization formed in 1993 which includes banks, financialservices companies, technology suppliers, government labs, etc.

It is essentially an electronic version of a paper check, which contain all theinformation necessary to process payment without requiring the interferenceof an authorizing financial institution to complete the transaction.


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Authentication of the electronic check is done via digital signature from asmart card-based device.

No previous relationship would be required between the merchant and thecustomer to process an electronic check payment, the electronic check areportable, and any bank would honor them, since they are designed to be

compatible with the existing financial services information infrastructure.However, for a customer to write electronic checks, they require a smartcard reader.

The electronic check integrates security elements that can authenticate boththe check and the signer, and detect any tempering that has occurred while thecheck was in transit.

The electronic checks are designed to be able to be cashed by anyone at anyfinancial institution.

Q: Describe risk management options in electronic payment system and itscomponents?

Ans: One essential challenge of e-commerce is risk management.Opertaion of thepayment systems incurs three risks: fraud or mistake, privacy issues, and credit risk.

(A) Risks from Mistake Virtually all electronic payment needs some ability to keep automatic records, for

obvious reasons. From a technical standpoint, this is no problem for electronicsystems. Credit and debit cards and even the paper based check create an automaticrecord. Once information has been captured electronically, it is easy and inexpensiveto keep. For example, in transaction processing systems, old or blocked accounts arenever eliminated and old transaction histories can be kept forever on magnetic tape.

The intangible nature of electronic transactions and dispute resolution relying solely

on records, a general law of payment dynamics and banking technology might be: Nodata need ever be discarded. The features of these automatic records include(1) Permanent storage(2) Accessibility and traceability(3) A payment system database(4) Data transfer to payment maker, bank or monetary authorities.

The need for recode keeping for purposes of risk management conflicts with thetransaction secrecy of cash.


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Q1: Write short notes on ERP, discussing its evolution, characteristics, featurescomponents and needs.Ans: ERP is a business management system that integrates all facets of the business,including planning, manufacturing, sales and marketing.

ERP is the concept that defines how bits and bytes i.e. organizational pieces orcomponents or sub systems should be logically interconnected.

ERP aims at optimum utilization of organizational resources for higherproductivity.

ERP consists of three essential parts i.e. Enterprise (The business organization),resources (Organizational resources like men, machine, material) and planning(the way resources should be planned for optimization in the enterprise).

Enterprise An enterprise is a group of people having some common goal. The assemblage

has some key functions to perform in order to accomplish its goal. In other words, we define the enterprise as any organization that has a physical

presence in more man one geographical region and which require as its ITinfrastructure to be available 24x7 theory.

An enterprises is a group of people having some common goal. The assemblagehas some key functions to perform in order to accomplish its goal.

In other words, we define the enterprise as any organization that has a physicalpresence in more man one geographical region and which require as its ITinfrastructure to be available 24x7 theory.

Resources Resources incorporated are Money, Manpower, Materials and all the

supplementary things that are required to run the enterprise.

e.g. in case of a Airline, machinery is Aircraft, labour are flight crews and pilotsand materials are jet fuel and components.

Planning Planning is done to make certain that nothing goes wrong. Planning is putting

necessary function in place and more importantly, putting them in concert.


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EVOLUTION OF ERPIn the ever growing business environment the following demand are placed on theindustry: Make emphasis on customer rather than other factors like market share, brand image

etc. Aggressive cost control initiatives. Need to analyze cost/revenues on a product or customer basis. Flexibility to respond to changing business requirements. More informed management decision making Changes in ways of doing business.Difficulties in getting accurate data, timely information and improper interface of thecomplex natured business functions have been identified as the hurdles in the growth of any business. Depending upon the velocity of the growing business needs, one or theother applications and planning systems have been introduced into the business world forcrossing these obstacles and for achieving the required growth. They are:

Management Information System (MIS) Integrated Information System(IIS) Executive Information System(EIS) Corporate Information System(CIS) Artificial Intelligence(AI) Knowledge Management(KM) Enterprise Wide System(EWS) Business Intelligence System(BIS) Material Requirement Planning(MRP) Manufacturing Resource Planning(MRP-II) Money Resource Planning(MRP-III)


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The Latest planning tools added to the above list is Enterprise Resource Planning.Successful implementation is the obvious goal of any organization that has chosen togo in for Enterprise Resource Planning. ERP implementation is one of the topgrowing segments in the information technology industry today.ERP implementation is one of the top growing segments in the information

technology today. To take advantage of emerging technologies and business practicesand meet the evolving business requirements of the thriving industry, companies likePeople soft,SAP-AG,Baan,QaD,IFS, Siebel,Oracle,Makess,Ramco etc. have launchedtheir product in this field.

Need of ERPMost organizations across the world have realized that in a speedily changingenvironment, it is impossible to create and maintain a custom designed software package,which will cater to all their requirements, and also be completely up-to-date. Realizing

the requirement of users organizations some of the leading software companies havedesigned Enterprise resource planning software which motivation offer an integratedsoftware solution to all the functions of an organization.

ERP systems are all in relation to the enterprise and not about systems. Theirsuccess greatly depends on the responsibility of the top management and activeparticipation of the HR people. Implementation of an ERP is not an expertise decision. Infact, it is a decision that ideally should be based on business needs and benefits.

The first step for implementing an ERP package is to recognize the reasons forgoing in for ERP solution. Some basic questions such as the following need to beevaluated and answered.

Why should we implement an ERP package?

Will it significantly improve our profitability? Will it lead to reduced delivery times for our products? Will it enhance our customers satisfaction level in terms of cost, delivery

time, service and quality? Will it help to reduce the cost of our product? Will it enable us to reengineer our business processes? Will it enable us to achieve the same business volume with reduced

manpower?Also, the emerging (and historical) needs of the organization require to be considered forinstance.

Need for quick flow of information between business partners. Effective management information system for quick decision making. Elimination of manual documentation work for various statutory

statements. Need for a high level of integration between the various business

functions.


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Characteristics of ERPAn ERP system is not merely the incorporation of various organization processes. Anysystem has to posses some key characteristics top qualify for an accurate ERP solution.These features are:

Elasticity: An ERP system should be flexible to respond to the changing needs of anenterprise. The client server technology enables ERP to run across various databases back ends through open database connectivity (ODBC).

Modular & Unwrap: ERP system has to have open system architecture. This means thatany modules can be interfaced or detached whenever required without affecting the othermodules. It should support multiple hardware platforms for the companies having mixedcollection of systems. It must support some third party add-n also

Wide Ranging: It should be able to support variety of organizational function and must

be stable for a wide range of business organization.

Beyond the company: it should not be confined to be organizational boundaries ratherthan support the on-line connectivity to the other business entities of the organization.Most excellent business live out: it must have the collection of the business processesapplicable world wide.

Reproduction of Reality: It must simulate the reality of business process on thecomputers. In no way it should have the control beyond the business processes and itsmust be able to assign accountabilities the system.

Features of ERPSome of the major features of ERP with what it can do for the business system are asfollows: ERP assist companywide integrated information system, covering all functionalareas like manufacturing ,selling and distribution payables, receivables, inventory,accounts, human resources and purchases etc. ERP perform core business behavior and increases customer service and thereby

augmenting the corporate image. ERP fills sequence break across the organizations. ERP provides for comprehensive integration of system not only transversely the

departments in a company but also across the companies under the same

management. ERP is a single explanation for better project management. ERP permit automatic introduction of latest technologies like Electronic fun transfer

(EFT), Electronic Data Interchange (EDI), internet intranet and Video conferencingE-commerce etc.

ERP eliminates the most of the business problems like material shortages productivityenhancement customer service, Cash management, inventory problem, Qualityproblems, Prompt delivery etc.


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ERP not only addresses the current requirement of the company but also provides theopportunity of persistently improving and cleansing business processes.

ERP provides business intelligence tools like Decision Support System (DSS),Executive information system (EIS), Reporting, Data Mining and Early WarningSystem (Robots) for enabling people to make better decision and accordingly

improve their business processes.

COMPONENTS OF ERPIf the necessities go beyond the capabilities of accounting software and other applicationsoftware, we find the prospect of implementing conventional ERP software. The worldsmost excellent easy to use ERP solution. It fully web enabled integrated, ERP softwarethat can be implemented in weeks. And can computerize your entire operations globally.ERP can help achieve unbelievable efficiency of operations, significant cost savings andmaximize profits. ERP is packed with powerful features, extremely easy to implementand use, comprehensive in its scope, modular and flexible, fully customizable, totallysecure, and incredibly robust.

Imagine your supplier notify you that a delivery will be late, and with the click of abutton, you could graphically demonstrate all of the affected shop orders, as well asrelated sales orders-----enabling your customer service department to immediately notifycustomers and giving instantaneous visibility to your production management to act inresponse to the late shipment

To enable the easy handling of the system ERP has been divided into the following coresubsystem:

A. Planning

With better-quality planning capabilities and user interfaces, ERP make available theinformation required to quickly and easily act in response to scheduling problems as theytake place. This advanced planning functionality allows you to condense and diminishcosts and increase productivity by eliminating stock shortage, improve deliveryperformance and increasing flexibility in building your demand schedule.

B. Inventory & Material ManagementEffectual management of finished goods, work in process and raw material is critical toyour entire operation. ERP system provides a healthy and structured materialsmanagement system ---- everything you need to accurately control inventory transactions,product costs, and material usage. From material procurement to allocation of finished

products, ERP permit you to administer important inventory information with a multiattribute item card. Instant access to real time data let you to track inventory levels byitem, location, warehouse, product family and historical usage with the click of mouse.

C. Finance & AccountingERP takes care of complete Financial Accounting of the enterprise over the web. Itmaintains all the books and records that are essential for proper book keeping stock analysis and accounting. All transactions effect and update the entire system, and all


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reporting is on the fly, for the most accurate information at all times. ERP helps inmanaging all kinds of taxes, bank reconciliation inventory cashed and everything elsethat is required for efficient and complete financial accounting, modules for book-keeping and making sure the bills are paid on time. Examples: General ledger keepscentralized charts of accounts and corporate financial balances. Accounts receivable

tracks payments due to a company from its customers. Accounts payable Schedules billpayments to suppliers and distributors. Fixed assets manage depreciation and other costsassociated with tangible assets such as building, property and equipment. Treasurymanagement monitors and analyses cash holdings, financial deals and investment risks.Cost control analyses corporate costs related to overheads, products and manufacturingorders.

D. PurchasingManage all purchasing activities from preferred vendor selection to entering bids andfrom purchase order admission to receiving and inspecting the materials as they arereceived.

Empower the purchase function like Sales, Indents, orders, and ERP covers all aspects of production, including issues, quality control, material receipts, purchase invoices andproduction receipts, multiple bills of material, supplier database and comprehensivepurchase analysis, production batches, cost sheets, standard costing, variance reports, andthe valuation of work in progress.

E. Manufacturing & LogisticsERPs fully-featured manufacturing functionality assist you manage your work-in-process activities and increase the productivity of your production staff with labour-saving features that make available more control over production and scheduling.A group of application for planning production, taking orders, and delivering products tothe customer. Examples: Production Planning performs capacity planning and creates adaily production schedule for a companys manufacturing plants. Materials managementcontrols purchasing of raw materials needed to built products. Manages inventory stocks,order entry and processing automates the data entry process of customer order and keepstrack of the status or orders. Warehouse management maintains records of warehousedgoods and processes movement of products through warehouses. Transactionmanagement arranges schedules and monitors delivery of products to customers viatrucks, train and other vehicles. Project management monitors costs and work scheduleson a project by project basis. Plant maintenance seta plans and oversees upkeep of internal facilities. Customer Service management administers installed base serviceagreements and cheeks contracts and warranties when customers call for help.

F. Account Payable/ReceivableComplete management of receivables and payables with bill wise accounting, due datesand overdue bills, interest calculations, ageing analysis.

E. Production Planning & ControlERP enables you to plan for material requirements based on a production planningprocesses. The system reports inventory requirements based on work orders initiated,


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stocks committed and exiting stocks. It helps in determining the optimum mix of inputs atall times.

Q: What is Business Process Re-engineering?

BUSINESS PROCESS RE-ENGINEERINGThe formal definition of BPR ,as given by Hammer And Champhy and acknowledged toa great extent is reproduced hare: BPR is the fundamental; rethinking and radicalredesign of processes to achieve dramatic improvement in critical, contemporarymeasures of performance such as cost,quality,service and speed. Radical redesign means, BPR is re-inventing and not pleasing to the improving. Fundamental rethinking means asking the question why you do? And what you

do?A good example is that of asking for an invoice from the supplier for payment when thecompany has already received and accepted a particular quantity of materials physically

and at an agreed price. Only make the supplier unhappy for delayed payments. Thus,BPR endeavors for major modification of the business processes to achieve dramaticimprovement.

THE BAAN APPROACHThe BAAN approach is to conduct a concurrent Business Process Re-engineering duringthe ERP implementation and aim to shorten the total implementation time frame.

1. Two circumstances can be distinguishedA. Comprehensive Implementation Scenario: Here the focus is more on business

improvement than on technical improvement during the implementation. Thisapproach is suitable when: Improvements in business processes are required. Customizations are necessary. Different alternative strategies need to be evaluated high level of integration with

other systems are required. Multiple sites have to be implemented.

B. Compact Implementation Scenario: Here the focus is on technical migrationduring the implementation with enhanced business improvements coming at a

later stage. This approach is suitable when: Improvements in business processes are not required immediately. Change minded organization with firm decision making process. Company operating according to common business practices. Single site has to be implemented.


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Three Approaches for ERP implementationA. Pure BPR: In this approach business processes are re-engineered into ideal form.

Each and every process is revisited and the best possible method is found. Pure BPRis complete transformation in the business processes before going for ERPimplementation.The business model re-engineered after analyzing its AS-IS status along with theenterprise need and vision. A To-Be positioning of the business model isevolved.Re-enginnering is used to reconfigure the enterprise so as o make it a best fit

model for the ERP package.B. Channeled BPR: channeled BPR, in distinction, begins with a strategic choice of software package based on high-level requirement and a selection exercise. Businessprocesses are designed around the known capabilities of the package. After a throughstudy of the system, a package is chosen; ERP is implemented and redesigned,keeping in view the distinctiveness of the package.

C. Pure ERP: In this approach the effort is on mapping the current business processeson the ERP package. There is not much effort on deciding the To-Be position of the

Two Circumstances Three Approach

Pure BPRCompactImplementationScenario

ChanneledBPR

Concurrent Business Process Re-Engineering

ComprehensiveImplementationScenario

Pure ERP


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enterprise since, the effort is quite high in developing the package, his strategy callsfor high expertise in software development. The business processes of the enterprisemust be standardized and well established. This strategy is onlr recommended whenthe processes are difficult to change and it is world class standard.

Use in I.T. in BPRI.T. helps in BPR in the following ways:1. Old Rule: Managers make all the decisionsI.T.: Provides Decision Tools.New Rule: Decision making is part of everyones job.

2. Old Rule: Only expert can perform complex work I.T.: Provides Expert SystemsNew Rule: Now a general can do the work of an expert.

3. Old Rule: Information can appear in only one place at one time.

I.T.: Provides shared databases via. Internet, intranet, & Extranets.New Rule: Now information can appear simultaneously in as many places as needed.

BPR and ERPBusiness processes Re-engineering is a pre-requisite for going ahead with an influentialplanning tool, ERP. An in depth BPR study has to be prepared prior to ERP. Businessprocess re-engineering fetches deficiencies out of the existing system and attempts tomake best use of the efficiency from side to side restructuring and recognizing the humanresources as well as partitions and departments in the organization.Business process Re-engineering evolves the following steps:Step-1: Study the existing system design and build the new system.Step-2: Describe process, organization structure and formula.Step-3: Describe tailor-made and modify the software.Step-4: Instruct communityStep-5: Execute new system.

The principle followed for BPR may be defined as USA principle.USA PRINCIPLE

UNDERSTAND Understanding the existing practiceSIMPLIFY Simplifying the processesAUTOMATE Automate the processes.

Various tools used for this principle are charted below: Comprehend simplify Automate Diagramming eradicate EDI Storyboard unite ERP Brain storming reshuffling.


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How BPR connected to ERPBPR suggest radical changes to improve the competitiveness of company & users. IT isone of its most important tools.ERP Packages integrates business processes enable the seamless flow of informationacross departmental barriers and help in automating business processes and procedures.So ERP is an ideal solution for the reengineering process.

Q: What is Supply Chain Management?

SUPPLY CHAIN MANAGEMENT

SCM is process of planning, implementing and controlling cost effective flow of rawmaterial and associated to conform to customer needs.

SCM is a complete process of interconnecting various entities like suppliers,manufacturers distribution channel in a predetermined direction.

The demands are made to a manufacturer by a client are dependent upon demands

made by clients customers. This dependence is a natural progression. All suppliers,manufacturers, distributors, etc. are dependent upon the same end customer. All of them will be more successful if they cooperate in satisfying that demand. If they donot fulfill demand, another supply chain will. Now there is a competition not betweenorganizations but between supply chains.

Supply Chain management is the management of resources to design, procure,fabricate, produce, assemble, store, distribute, use, maintain, recycle and dispose of goods and services.

U S A

Understand

ExistingProcess

Simplify

Process byeliminatingwaste

Automate the

Process

METHODS METHODS METHODS

Diagramming Storyboarding

walking theprocess

Rearranging Eliminating

Combining Increasing

EDI ERP

ManufacturingExecutionsystem


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COMPONANTS OF SCM1. Plan: This is the strategic portion of supply chain management, strategy for

managing all the resources that go toward meeting customer demand of the

product. A big piece of planning id developing a set of matrices to monitor thesupply chain so that it is efficient, cost effective and delivers quality a nd value tocustomers.

2. Source: Choose the suppliers that will deliver the goods required for the products,besides develop a set of pricing, delivery and payment processes with suppliersand create matrices of monitoring the timely delivery and improving therelationships.

3. Make: This is manufacturing and scheduling the activities necessary of theproduction, testing, packaging and preparation of delivery.

4. Deliver : This refers to as Logistics i.e. to coordinate the receipt of orders fromcustomers, develop a network of warehouses, pick carriers to get products to

customers and set up an invoicing system to receive payments.5. Return: The problem part is to create a network for receiving defective andexcess products who have problems with delivered products, along with after saleservice support.

Meaning The meaning of SCM is that the SCM (Supply Chain Management) we can get

the right goods and services to where they are needed at the right time, in the rightquantity and at an acceptable cost.

To do this, you manage relationship with suppliers and customers, controlinventory, forecast demand and get constant feedback on events at every link in

the chain. It is the fundamental business system that integrates companys internal resourcesto manage and work with the external supply chain .The objective is to enhancethe companys performance through improved manufacturing or servicecapability, market responsiveness, and customer supplier relationship.

SCM can be defined as a loop: It starts with the customer and ends with the customer. A supply chain in the link that means product between suppliers manufacturers

wholesalers, distributors and retailers to finally customers. All materials, finished

products, information and even all transaction flow through the loop.


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Fig: Supply Chain Loop

CHARATERSTICS, ELEMENTS AND NATURE OF SCM An ability of source raw material or finished goods from anywhere in world. A centralized, global business and management strategy. On line, real time distributed information processing of the desktop, providing total

supply chain management information visibility. The ability to manage information not only within a company but across industries

and enterprise.

Elements1. Logistics and distribution: logistics deals with integration of material

management and physical distribution.2. Integrated market and distribution: Most managers often do not realize that

order processing and fulfillment processes may exceed 15% of the cost of thesale. Traditionally, the customer order process is initiated by sales personal thathave in depth understanding of customer product.

3. Agile Manufacturing: Consumers and manufacturing are stressing quality andspeed. One of the most influential visions of the production goes by the name of agile manufacturing.

Nature of SCM(a) Business Supply Chain, consisting of a company, immediate supplier, immediate

customer directly linked by upstream and on-stream flow of products, servicesinformation etc.

(b) Extended supply chain, consisting of suppliers of the immediate supplier andcustomers of the immediate customer, all linked by one or more of upstream anddownstream flow of products services information etc.

(c) Ultimate supply chain, consisting of all the companies involved in all theupstream and downstream flows of the products services information etc. frominitial supplier to the ultimate customer.

Customer

Sales Purchasing Producing Delivery

Suppliers


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Q: Differentiate between ERP and SCM

ERP SCM1. For enterprise 1. For Supply Chain2. Transaction Processing 2. Analysis and Planning

3. Sequential Planning 3. Concurrent Planning4. Inflexible 4. Flexible5. Time consuming implementation 5. Fast implementation6. Body of the Enterprise 6. Brain of the enterprise7. excels in the transaction management 7. Forecasting & the Decision support8. ERP system are linear and interactive 8. SCM is constraint based and optimized

Advantage of Supply Chain ManagementThe quality of the supply chain is a major key area that is its core-surrounding, which isemerging and flourishing key man enrolled in the supply chain operations to look after.

1. Demand uncertainty in supply chains can be addressed by lesser response time.2. A bsic product supply chain should have shorter lead times and batch

manufacturing of large lot sizes to meet the demand.3. Supply chain needs to be improved upon its performance and once stable it can

move towards maturity.4. Supply chain is an integration of so many aspects of the business that this type of

analysis as such becomes all the more important and thus the core advantage of SCM means the smooth performance, better response time, more number of orderfulfillment etc.

Q: What is Customer Relationship Management?

CUSTOMER RELATIOSHIP MANAGEMENT Preserving existing customer and providing better services to gain the loyalty is

termed as CRM. Under stand customer needs and going customer loyalty is part of the CRMs

objective. CRM software organization administers its customers in a better way. Different business entities like salesperson, customers, representative come together

with the help of CRM.

Definition:Berry defines CRM as an attractive maintaining and enhancing relationship with holdersin multi service organization. He proposes that CRM concerns attracting, developing andretaining relationship with customer. Berry stressed that the attraction of new customersshould be viewed only as intermediate step in the marketing process. Solidifying therelationship, transforming indifferent customers into loyal ones and serving customers as


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clients should also be considered as marketing. He outlined five strategy elements forpracticing CRM. Developing a core service

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