E-Business

• Increase of process efficiency, reduction of process costs
• Increase of process quality and trasparency
• Reduction of process through-put time
• Increase of cost/expenditure transparency
• Central controlling and coordination of procurement
• Bundling of needs
• Reduction of purchasing prices
• Integration of suppliers into procurement processes
• Decentralisation of operative tasks

In the past, different organisational units of large corporations bought goods independently from each other.

1.  
   1. Strategic transactions should be done just some times not every time. (once a year/once in two years)
   2. Operative purchasing activities: every time new goods are needed. Depending on the storage place
   3. Controlling activities: less frequently. Depending on good procured (quarterly) depending on categories of good yearly is enogh (C products) 
2. Who is responsible
   1. Responsible for strategic procurement- e-procurement departement
      Supplier:
      Responsible for the operative purchasing- inventory management and purchase requrirements
   2. Responsible for controlling activities: controlling team

1. Information System used in
   1. Strategic procurement: Analytics & the internet
   2. Operative purchasing:
   3. Controlling activities:

Buyer sends arrangements regarding user administration to the seller. Then the business transaction between buyer and seller takes place and then the seller sends the reporting to the buyer.

Distribution of tasks for supplier:

• User administration
• Product data managment
• Catalogue managmenet
• Order process support
• Data exchange functions
• Reporting

Distribution of tasks for buyer:

• Data exchange functions

Buy-side solutions

+ Data own systems

+ Individual assertments

+ One Login, one user interface

+ supports internal workflows

• High upfront invest
• High operating costs
• Update information only several times a week

The procurement process for indirect goods at Schindler

• Orders for indirect goods can be initiated decentralised. (Decentral: in the departments of the purchase requester and not in the central purchasing department)
• Schindler uses a catalogue-based e-purchasing solution (SAP SRM*) which reacts like an online shop.
• Employees can select the needed goods in an electronic multi-supplier catalogue and put them into a shopping basket.
  • Exception: products of certain suppliers with volatile or very extensive product ranges or with configurable products are selected in a system of the supplier and then put into the shopping basket of the e-purchasing solution of Schindler.
• Depending on the value of the goods, the order has to be released by the superior or the cost centre responsible
• Released orders are distributed among the affected suppliers and automatically transmitted to them. The entire structured communication with the suppliers takes place via an automated electronic data exchange. The IT service provider SupplyOn processes the electronic data exchange.

• Employees can select the most part of the needed goods in an electronic multi-supplier catalogue. It reacts like an online shop.
• The operation of the multi-supplier catalogue is outsourced to a specialised IT service provider (jCatalog).
  • The suppliers (sellers) transmit their product data electronically to jCatalog. jCatalog is responsible for the whole catalogue management.
  • The e-purchasing solution SAP SRM has access to jCatalog using the PunchOut method. This enables the filling of the shopping baskets in SAP SRM.
  • Products of certain suppliers with volatile or very extensive product ranges or with configurable products are selected in a system of the supplier and then put into the shopping basket of the e-purchasing solution of Schindler

Business transactions beween buyer and sellers and the seller sends the transfer of proudct data to the buyer.

Distribution of tasks for supplier:

• Product data management
• Data exchange functions

Distribution of tasks for buyer:

• User administration
• Catalogue management
• Order process support
• Data exchange functions
• reporting

Advantages:

+ no maintenance and question

+ (connection to buyer's system is possible)

+ product configuration is possible

Disadvantages:
- different account
- (different contact partners)
- different user interfaces
- limited workflow support

The disadvantages of a buy-side solution can be eliminated to a great extend by a PunchOut access to one or more catalogues of suppliers.

• In a first step, the buyer fills the shopping basket in the seller’s application (sellside application, e.g. online shop) and not in the own multi-supplier catalogue.
• In a second step, the shopping basket is transferred into the order that has to be drawn up in the buy-side solution.
• The following ordering process is carried out in the buy-side solution and also the final order is made by the buy-side solution.

jCatalog operates the complete multi-supplier catalogue of Schindler. Schindler has access to the catalogue via the PunchOut* method.

Roles: Business transactions beween buyer with buy-side solution and seller

And seller who does the transfer of the shopping basket from the seller's to the buyer's application.

Distribution of tasks for the seller:

• Product data management
• Catalouge management
• Data exchange functions

Distribution of tasks for the buyer with buy-side solution

• User administration
• Order process support
• Data exchange functions
• Reporting

1. The shown extreme with exclusive access to the shops of selelrs is not realised in practice. Typically, the punchOut method extends buy-side catalogues (multi-supplier catalogues) - as with Schindler.
2.  

Advantages.

• Single login
• Single UI
• Rights of users meet the rules of the procuriing organisation
• Supports approval workflows
• Management of product range
• Spend transparency
• One interace for ERP integration

Disadvantages

• Installation and maintenance of additional IT components
• No product-specific presentation of the goods
• No product configuration
• Update frequency of prices, terms & conditions cannot be optimal for all supliers.

In italig: disadvantages solved with a punchOut solution

• Timeliness and completeness of the multi-supplier catalogue are the crucial aspects of
• Catalogue management can be outsourced to specialised service providers, e.g. jCatalog (Schindler) or Simeno.

• Direct goods: material for production as well as trading goods
• Procurement is often controlled by an inventory management system or an ERP system and can achieve a high productivity (see the electronic purchase-to-pay process at Schindler).
  • The master data of direct goods have to be held and maintained in the ERP system. This causes a considerable effort.
  • The ERP system calculates the demand: planning of demands, assigning goods on stock, initiating external orders or production orders, registration of goods received, inventory management
• Direct goods are subject-matter of supply chain management.
• The order processing can be supported by an automated electronic data exchange (EDI) but not the initiation of the procurement process

• EDI (Electronic Data Interchange) is a form of e-business which has its origins in the 1970s.
• Definition: EDI is the asynchronous electronic exchange of structured data – free of media breaks and human intervention – between the application systems of business partners.
• Conventional EDI is done by network operators (so-called Value Added Network (VAN) providers) via proprietary networks, incompatible among themselves. This is associated with high costs.
• Conventional EDI has been extended in recent years with vendor-independent technologies (among others XML) and increasingly uses the Internet for transfer purposes.
• For business messages, there are a number of standards, the most important is UN/EDIFACT (approx. 200 message types). There are many industry-specific derivations from this standard.

Edi = Electronic data interchange

Electronic data interchange is the concept of businesses electronically communicating information that was traditionally communicated on paper, such as purchase orders and invoices. Technical standards for EDI exist to facilitate parties transacting such instruments without having to make special arrangements.

Internet applications in the World Wide Web:

• Computer with human being
• Dialog oriented
• Single transactions
• Order initiation and processing

Conventional EDI:

• Computer with computer
• Automated
• Mass transactions
• Order processing

• Different IT systems. E.g. SAP/Navision/Abacus..
• Different data labels. E.g. invoice_nbr -> rg_nr (for invoice number)
• Different data formats: number with points/commas, quanitiy units in ISO
• Different data needs from the process. E.g. ID of a consumer in the ordering process
• Different transport channels. E.g. internet, proprietary nets/VAN
• Different document formats. E.g. invoice in EDIFACT or in cXML

1. Industry-neutral standards
   1. UN/EDIFACT
   2. UBL
   3. openTrans
2. Provider-driven standards
   1. cXML
   2. xCBL
   3. Idoc
   4. …Individual standards of software suppliers and service providers
3. Industry standards
   1. Consumer Goods/Trade (EANCOM)
   2. Automotive (Odette)
   3. Chemical Industry (Chem eStandard)
   4. Paper Inustry (Papinet)
   5. Petrochemical Industry (PIDX XML)
   6. ICT (RosettaNet, Ediffice)
   7. Healthcare (Medidata)
   8. Steel Industry (ESIDEL (XML)
   9. Further Industries

• UN/EDIFACT: United Nations / Electronic Data Interchange for Administration Commerce and Transport (approx. 200 message types)
• EANCOM: European Article Number Communication is an industry-specific sub set of UN/EDIFACT for the consumer goods industry (57 message types).
• Ideal Message Switzerland is a national sub set of EANCOM, which was defined in Switzerland within the association GS1 (8 message types).
• The aim of the reduction of the message variety is the reduction of complexity

• Many companies outsource the technical integration to specialized service providers so they do not have to master the complexity of ecommerce themselves.
• The specialists operate transaction platforms which realise the various integrations of the involved partners with universal integration tools.
• At the centre of the services is the exchange of electronic business documents, supplemented by additional services like
  • Service and format conversions
  • Data mutations, classifications, etc.
  • Tracking and tracing functions
  • Online auctions
  • Digital signature (e.g. for electronic invoices)
  • Transaction protection (reaction in case of malfunction)
• Most service providers focus on specific application fields, e.g. transactions in the supply chain. They often have an internal reference standard with which the requirements of the involved parties are matched.
• Schindler works together with the service provider SupplyOn

A supply chain is a logistics network or a supply chain combines the logistics of several co-manufacturers to a comprehensive logistics.

Supply Chain Management (SCM): SCM is the coordination of a strategic and long-term cooperation of co-manufacturers in the entire logistics network for the development, manufacturing and distribution of porudcts. This includes production and procurement as well as product and process innovations.

The supply-Chain operation reference model

• There is a value creation architecture for the involved partners which is dominated by one partner (Schindler) or developed as partners (Verein IFIS).
  • It states in which division of labour the overall performance should be created.
  • The value creation architecture can be depicted in the business scenario.
• The understanding of the labour division, payment and responsibility has to be coordinated among the involved parties.
• Processes have to be precisely defined including all variants and error handling.
• The procedures used at the process interfaces have to be coordinated (message types, identification procedures (labels, barcodes), quality assurance, means of communication).
• Material master data have to be matched in detail (numbers, labels, units of quantity, etc.)
• Corporate master data have to be matched in detail (address and contact information, locations, currencies, etc.)

• The supply chain management approach has already been pursued for several decades.
  • Great progress has been made in the development of appropriate product concepts (e.g. Schindler: component concept) and various logistics concepts (e.g. Music Store: virtual warehouse; Rotronic Secomp: drop-shipping; LeShop: cross-docking).
  • An extensive automation across multiple steps of the value chain remains only a vision so far.
• In a value creation network which is dominated by one partner it is easier to achieve a high degree of automation. Examples:
  • Vertically integrated companies, e.g. Music Store Group, Migros with its operations
  • Networks with a dominant leading company, to which the partners largely adapt, e.g. Schindler
    • However, the “power” of the system dominator is restricted (e.g. Schindler: only one of three carriers was immediately cooperative).
    • In the long term, only balanced value creation architectures are promising ( see our definition “... support of the relationships and processes ...”).

The purchase requestor (human)s time. Process efficiency is key.

The approval processes need to take place and need time and also the invoice control is more complex than an ordering process. For those reasons a lot of employee time is necessary. It is a huge effort and cost time.

costs can be reduced by automating as much as possible, set up purchasing systems (buy-side-solutions)

To assess the effort we need to measure time and cost

1. Business view: involved business partners and their roles, business model type, contracts, strategic and operative targets
2. Process view: detailed business processes, process links among the involved parties, assessment of process quality
3. Application view: overview of business information systems, distribution of functions, place of data storage, integration layers
4. Technical view: involved system components, networks, data transfer

Layers:

1. Business model
2. Business processes
3. Business pplications (IS)
4. Information technology (IT))

In the history of organisation theory, information systems and computer science, numerous systematics for graphical depictions were developed. Such systematics are called “notations”. They allow the clear description of business matters with the help of defined symbols and rules for their use. The figures used for the description of the four views of the case studies dealt within this module are based on uniform notations. Other notations could have been applied as well.

The business view contains the information which is important to understand the context of the project. These are:

(content can be depicted graphically)

• The involved business partners and their roles
• The distribution of tasks among the involved parties

(content cannot be depicted graphically)

• The business model type of the operating organisation. (The operating organisation (or company) is the company that invested in the solutions and from which’s perspective the solution is described. The technical operation of the IT platform can be the business of another organisation.)
• The strategic and operative goals or benefit expectations of the involved partners.

• The Figure „Business Scenario“ supports the description of the business view. The figure contains
  • The involved business partners and their roles
  • The processes that are relevant in the context of the project and the distribution of the processes among the involved partners (distribution of tasks)
  • The exchange relationships between the involved partners that are relevant in the context of the project
• The depicted elements help to identify the affected partners and processes and to demarcate the project.