Inventory Costs – Ordering Cost, Carrying Cost and Stock Out Cost
Inventory procurement, storage and management is associated with huge costs associated with each these functions. Inventory costs are basically categorized into three headings: Ordering Cost Carrying Cost Shortage or stock out Cost & Cost of Replenishment Cost of Loss, pilferage, shrinkage and obsolescence etc. Cost of Logistics Sales Discounts, Volume discounts and other related costs. […]
How Emerging Markets Transformed Themselves Over the Last Few Decades
From Backwaters to Powerhouses At the start of the 1970s a widely held belief in the United States and in Europe was about how there were no markets outside of their regions. The implication was that the Third World countries were not worthy of foreign investment as they were steeped in backwardness, immersed in poverty, […]
Italy’s Citizen Income Proposal
The Italian economy is going through a rough financial period. Not too long ago, the budget of this European economy was being approved by the European Union. The EU has been helping Italy on the condition that it will keep public expenditure to a bare minimum. However, Italy has now decided to launch a very […]
How International Mediation and Arbitration Work in the Corporate World
What are Mediation and Arbitration ? Mediation and Arbitration are features of the business landscape that let aggrieved parties resolve their disputes in a structured manner. In the corporate world, breach of contract, non-compliance with the terms of the agreement between companies, failure to pay or complete the work and other disputes are usually resolved […]
History of Database Applications
One of the most important purposes of development of computer systems was the database application which could have been used on them. Data processing drove growth of computer processor speed. In fact, data processing predates the computers; punched cards were used in the US for collecting data for census during beginning of 20th century. Earliest […]
During 1990s’, the popular method of exchanging information between trading partners were Electronic Data Interchange (EDI) and all major ERP vendors added EDI facilities to their products. However, EDI did not achieve its desired outcome as each organization needs its customized EDI (to account for its unique data format), high set up cost (requiring privately run Value Added Network) and little cohesion or standardization. A majority of organizations did not use EDI functionality while implementing their ERP systems.
The advent of the internet and intranet technologies since mid 1990s’ saw the exponential growth of electronic commerce (e-commerce). E-commerce involved buying of goods through the internet (comprising of advertising need, issue invitation to tender, reverse auction, etc.), selling of goods through the internet (comprising electronic auction, publishing electronic catalogues) and handle related processes electronically such as receive invoice, making payment, monitoring performance.
Response of ERP vendors: ERP vendors were not agile to quickly respond to the changing need where customers and suppliers, wanted information, contained in the backend ERP system, for effective collaboration, better information flow and minimizing cost across the supply chain. Customers demanded supply status, billing information, warranty compliance over the web whereas suppliers wanted online information on inventory, supply schedule, and payment status.
ERP products have rigid architecture, and any modification/ development requires complex coding and developing a link between backend ERP with front end web based e-commerce, was a challenging task.
ERP vendors responded to this challenge by their effort to enable their product. They have developed some functionality in-house but also used/ acquired third party products such as storefront. They have developed new workflows encompassing vendors, customers, shippers, distributors, and bankers. They have made these workflows web enabled by adopting open standards such as Java and XML.
Another challenge faced by the ERP vendors for web enabling their product was security issues relating to e-commerce transactions, which are carried out by Virtual Private Network (VPN) over internet backbone. They have to adopt authentication tools such as electronic signatures and digital certificates, Secured Electronic Transactions (SET) and confidentiality through symmetric key encryption/ public key cryptography.
E-commerce transactions can be broadly classified under e-procurement and e-selling particularly under the context of business to business transactions. Some details under these classifications are given below:
E-Procurement - A typical e-procurement requirement of an organization is depicted below:
For meeting the above requirement, ERP vendors carried out integration of web based front end with generation of demand (planning module), preparation of Purchase Order (procurement module), receiving of goods (warehouse module), payment (account payable module), dealt by back-end ERP system.
E-Sales - The biggest change that has been brought by e- commerce in respect of selling and marketing of goods is creating a new sales channel based on the web. This has impacted retail sectors in a big way through increased sales, expanded market reach including overseas market, improved customer loyalty, and reduction of transaction cost.
E-sales enhance value in respect of following business process:
For meeting the above requirements, integration of web system with back-end ERP system was done. Before order acceptance, ATP (Available to Promise) status of the item is verified from planning module. For quoting price, dispatching of good and receiving of payment, sales, warehousing, and accounts receivable modules of ERP system are interrelated.
Your email address will not be published. Required fields are marked *
Configuration Control and Setting Up of Base in ERP System
February 12, 2025
