intro2e_ch11.ppt

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Chapter 11

Electronic Commerce Payments,Order Fulfillment, andOther Support Services

Chapter 11Copyright © 2009 Pearson Education,

Inc. Publishing as Prentice Hall 1

Learning Objectives

1. Understand the shifts that are occurring withregard to noncash and online payments.

2. Discuss the players and processes involvedin using credit cards online.

3. Discuss the different categories and potential

uses of smart cards.4. Discuss various online alternatives to credit

card payments and identify under whatcircumstances they are best used.

5. Describe the processes and parties involvedin e-checking.



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Learning Objectives

6. Describe payment methods in B2B EC,including payments for global trade.

7. Define EC order fulfillment and describe theEC order fulfillment process.

8. Describe the major problems of EC order fulfillment.

9. Describe various solutions to EC order fulfillment problems.10. Discuss support services provided by

general consulting and outsourcing firms.



The Payment Revolution

Crucial factors that determine whether amethod of e-payment achieves critical mass: Independence Interoperability and Portability Security Anonymity Divisibility Ease of Use Transaction Fees Regulations



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Using Payment Cards Online

payment card

Electronic card that contains informationthat can be used for payment purposes. Credit cards

Charge cards

Debit cards




PROCESSING CARDS ONLINE authorization

Determines whether a buyer’s card is active andwhether the customer has sufficient funds.

settlement

Transferring money from the buyer’s to themerchant’s account.

payment service provider (PSP)

A third-party service connecting a merchant’s ECsystems to the appropriate acquirers; PSPs mustbe registered with the various card associationsthey support.



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FRAUDULENT CARD TRANSACTIONS

Address Verification System (AVS)

Detects fraud by comparing the address entered ona Web page with the address information on filewith the cardholder’s issuing bank.

card verification number (CVN)

Detects fraud by comparing the verification number printed on the signature strip on the back of thecard with the information on file with thecardholder’s issuing bank.



Smart Cards

smart card

An electronic card containing anembedded microchip that enablespredefined operations or the addition,deletion, or manipulation of informationon the card.



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Smart Cards



Smart Cards

TYPES OF SMART CARDS contact card

A smart card containing a small gold plate on theface that when inserted in a smart card reader makes contact and passes data to and from the

embedded microchip. contactless (proximity) card

A smart card with an embedded antenna, by meansof which data and applications are passed to andfrom a card reader unit or other device withoutcontact between the card and the card reader.



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Smart Cards

smart card reader

Activates and reads the contents of the chipon a smart card, usually passing theinformation on to a host system.

smart card operating system

Special system that handles file

management, security, input/output (I/O),and command execution and provides anapplication programming interface (API) for a smart card.



Smart Cards

APPLICATIONS OF SMART CARDS

Retail Purchases

Transit Fares

SECURING SMART CARDS



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Stored-Value Cards

stored-value card

A card that has monetary value loadedonto it and that usually is rechargeable.



E-Micropayments

e-micropayments

Small online payments, typically under $5.

Five basic micropayment models: Aggregation Direct payment Stored value Subscriptions Á la carte



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E-Checking

e-check

A legally valid electronic version or representation of a paper check.

Automated Clearing House (ACH) Network

A nationwide batch-oriented electronic funds

transfer system that provides for the interbankclearing of electronic payments for participating financial institutions.



E-Checking



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B2B Electronic Payments

CURRENT B2B PAYMENT

PRACTICES

enterprise invoice presentment and

payment (EIPP)

Presenting and paying B2B invoices

online.




EIPP Models Seller Direct Buyer Direct Consolidator

EIPP Options ACH Network purchasing cards (p-cards)

Special-purpose payment cards issued to acompany’s employees to be used solely for purchasing nonstrategic materials and servicesup to a preset dollar limit.



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Fedwire

letter of credit (L/C)

A written agreement by a bank to pay the seller,on account of the buyer, a sum of money uponpresentation of certain documents.



Order Fulfillment and Logistics—

An Overview

order fulfillment

All the activities needed to provide customerswith their ordered goods and services,including related customer services. back-office operations

The activities that support fulfillment of orders, suchas packing, delivery, accounting, inventorymanagement and shipping

front-office operations

The business processes, such as sales andadvertising, that are visible to customers.



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Order Fulfillment and Logistics—An Overview

logistics

The operations involved in the efficientand effective flow and storage of goods,services, and related information frompoint of origin to point of consumption.




An Overview

THE EC ORDER FULFILLMENT PROCESSStep 1: Making sure the customer will payStep 2: Checking for in-stock availabilityStep 3: Arranging shipmentsStep 4: InsuranceStep 5: ReplenishmentStep 6: In-house productionStep 7:Use contractorsStep 8: Contacts with customersStep 9: Returns



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Order Fulfillment and Logistics—An Overview




An Overview

reverse logistics

The movement of returns from customers tovendors.

Order Fulfillment and the Supply Chain

Traditional versus EC Logistics

e-logistics

The logistics of EC systems, typically involvingsmall parcels sent to many customers’ homes (inB2C).



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Addressing Problemsin Order Fulfillment

TYPICAL SUPPLY CHAIN PROBLEMS

third-party logistics suppliers (3PL)

External, rather than in-house, providers of logistics services.

SOLUTIONS TO ORDER

FULFILLMENT PROBLEMS IMPROVEMENTS IN THE ORDER-

TAKING PROCESS



Addressing Problems

in Order Fulfillment

Warehouse management system

(WMS)

A software system that helps inmanaging warehouses. Other Inventory Management

Improvements

Automated Warehouses



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PARTNERING EFFORTS AND

OUTSOURCING LOGISTICS

Comprehensive Logistics Services

SPEEDING DELIVERIES



Addressing Problems


HANDLING RETURNS (REVERSELOGISTICS) Return the item to the place of purchase Separate the logistics of returns from the

logistics of delivery Completely outsource returns Allow the customer to physically drop the

returned item at a collection station Auction the returned items



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ORDER FULFILLMENT IN B2B

Using BPM to Improve Order Fulfillment



Addressing Problems




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Other EC Support Services

CONSULTING SERVICES

EC OUTSOURCING SERVICES Major reasons why many companies outsource:

A desire to concentrate on the core business The need to have services up and running rapidly Lack of expertise for many of the required support

services

The inability to have the economy of scale enjoyed byoutsourcers Inability to keep up with rapidly fluctuating demands if an

in-house option is used The number of required services, which usually are simply

too many for one company to handle






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IT OUTSOURCING AND APPLICATION

SERVICE PROVIDERS

application service provider (ASP)

An agent or vendor who assembles thefunctions needed by enterprises and

packages them with outsourceddevelopment, operation, maintenance, andother services.



Managerial Issues

1. What B2C payment methods shouldwe use?

2. What B2B payment methods should weuse?

3. Should we use an in-house paymentmechanism or outsource it?

4. How secure are e-payments?



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Managerial Issues

5. Have we planned for order fulfillment?

6. How should we handle returns?

7. Do we want alliances in order fulfillment?

8. Should we employ outside consultingor outsourcing for our EC initiatives?



Summary

1. Payment revolution.

2. Using payment cards online.

3. Smart cards.

4. Stored-value cards.5. E-micropayments.

6. E-checking.



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Summary

7. B2B electronic payments.

8. Order fulfillment and logistics.

9. Addressing problems in order fulfillment.

10. Other EC support services.



All rights reserved. No part of this publication may be reproduced, stored in aretrieval system, or transmitted, in any form or by any means, electronic,

mechanical, photocopying, recording, or otherwise, without the prior writtenpermission of the publisher. Printed in the United States of America.

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