e-Commerce in passenger air transport
Airline booking systems
Developed in the late 1970s by some large airlines.
Notable examples are: United Apollo American Airways Sabre Initially a competitive weapon for the owning airline.
Latterly developed as ‘unbiased markets’ to sell seats for any airline.
Airline booking systems
Currently three major e-Market airline booking systems: Sabre Galileo Amadeus
Sabre
Sabre (American Airlines): Started in the early 1960s Installed first terminal in a travel agency in 1976 Provides web based access via travelocity.com
At the time of writing Sabre: Is processing over 400 million bookings a year for over 440 airlines (about 40% of the world market); Is linked to more than 210,000 terminals; Uses 30 mainframe computers (US based); Has peak processing exceeding 7,450 messages/second.
Checkout www.sabre.com
Galileo
Galileo (United + European Partners): Started in 1971
At the time of writing Galileo: Is processing over 250 million bookings a year; For over 530 airlines (about 30% of the world market); Is linked to about 160,500 terminals; Uses 21 mainframe computers (US + UK); Has peak processing of about 5,000 messages/second.
Checkout www.galilieo.com
Amadeus
Amadeus (Four European Partners): Founded in 1987, Continental joined in 1995
At the time of writing Amadeus: Is processing for over 469 airlines; Is linked to more than 190,000 terminals;
Is based in Germany.
Checkout www.amadeus.net
Competition and customer loyalty
Airline branding/customer loyalty: Advertisement:
United ‘the friendly skies’ BA ‘the world’s favourite airline’ Hub operations/connections Loyalty/frequent flyer programs Alliances: Star Alliance/Our World
Competition: De-regulation Low cost/no frills carriers
Web booking systems
The web provides: A new sales channel Less opportunity for price comparison Chance to develop brand loyalty
Value-added features can include: Customer’s Frequent Flyers account online, Pre-allocation of seats Online selection of meal options, Additional travel services Travel and airport information, Access to seat sales/auctions, Personalisation of the web site
Web booking systems
Analysis of airline web sites (1999)
With web site (%) With online booking (%)
North America 58 22
South America 33 8
Western Europe 42 12
Eastern Europe 7 1
Pacific 44 9
Asia 23 3
Africa 26 3
Average 33 10
Airline Web sites
Customer Information:
Alternatives: Requirement for prior registration Take details when purchase is made
Prior registration: Can annoy/put-off customers Might tie customer into site
Details at time of purchase: Time-consuming (if done every time) Sales can be mixed mode: Web enquiry / telephone sales
Discuss / Check out some Airline sites
Product (flight) Information:
Alternatives: Show Timetables Take date, time and airport details
Issues: Knowing airport names / codes Several airports for one city Alternative dates and times
Check out some Airline sites for cheap deals: London to New York: Several airports for each city Cheaper tickets may be available on alternative dates
… and discuss issues.
Payment and Delivery: Payment by Credit Card: Security Issues Delivery: By post Collect at airport e-Ticket
Discuss issues ….
Options for booking airline seats
Main options: Telephone airline direct Conventional Travel agent Online Travel Agent Airline web site
Chapter 6:
Inter-organisational transactions
Bhs regularly deal with 400 suppliers and place 6,000 contracts per season. For the merchandising systems this can mean 4.5 million replenishment decisions each working week’.
Credit transaction trade cycle
Pre-Sales: Search – find a supplier Negotiate – agree terms of trade
Execution: Order (purchasing procedures) Delivery (match delivery against order)
Settlement: Invoice (check against delivery) Payment
After Sales (warrantee, maintenance, etc.)
Repeat – many orders repeat on a daily or weekly basis.
Credit transaction trade cycle
Credit transaction trade cycle
A variety of transactions
Discrete transactions of commodity items:
Use an Electronic Market (if one is available)
Repeat transactions for commodity items.
EDI may well be appropriate
Discrete transactions of non commodity items.
Internet e-Commerce can be the answer
Chapter 7: Electronic markets
Markets
Supply and Demand: Supply outstrips demand – prices go down Demand outstrips supply – prices go up
Conditions for an effective market: There are as many buyers as sellers and none of them dominates The goods or services to be transacted are homogeneous or standardised
Buyers and sellers are well informed about the quantity, characteristics and price of the goods
Electronic market
The use of information and communication technologies to provide geographically dispersed traders with the information necessary for the fair operation of the market.
Easy access to information on a range of competing product offerings reduces the search cost of finding the supplier that best meets the purchase requirement.
An electronic market place can be defined as: ‘An inter-organisational information system that allows participating buyers and sellers to exchange information about price and product offerings’.
Electronic markets and the trade cycle
Emphasis is on the Search Phase
Normally includes facilities for Execution and Settlement
Usage of electronic markets
Application has been limited to specific sectors: Airline Booking Systems Financial and Commodity Markets
Use is typically via an intermediary
Advantages and disadvantages
Customer Advantage: Easy access to comparative price/service information
Supplier: Advantage of access to market Disadvantage of easy price comparison
‘The effect of an electronic market in a commodity market is the more efficient distribution of information which decreases the profit possibility for sellers. By the introduction of an electronic market search costs can be lowered. If buyers face lower search costs it will be more difficult for sellers to maintain high price levels.’
(Bean, et al., 1995)
Future developments of electronic markets
e-Procurement Systems: Internet based systems for procurement of ‘non-production goods’ • Checkout ariba.com
Analogous systems: Online Travel Agents Shop bots Online Auctions
Chapter 8: Electronic Data Interchange (EDI)
EDI trade cycle
Regular, repeat transactions between commercial trading partners
Examples: Supermarkets replenishing stocks Vehicle assemblers purchasing components
EDI definition
Summarised as: ‘Paperless Trading’
Defined as:
‘The transfer of structured data,
by agreed message standards,
from one computer system to another,
by electronic means.’
International Data Exchange Association (IDEA)
Structured data
Standardised Document e.g. Order/Invoice
Codes e.g. Product Code/Customer Code (preferably using a common standard e.g. ANA/UPC)
Values e.g. Quantity Ordered
Agreed message standards
Sectorial standards e.g. Odette
National standards e.g. ANSI X12, Tradercoms
International standards i.e. EDIFACT
From one computer system to another
EDI messages are (properly) sent:
From one computer’s application,
e.g. the customer’s Purchasing System.
To a second computer’s application,
e.g. the supplier's Order Processing System.
There is no need read or re-key the data into a computer system.
By electronic means
Transmission by: data communications network or possibly physical transfer of: • magnetic tape or • floppy disc
Benefits of EDI
Shortened ordering time
a posted order …
print Customer
envelope
post room
postal service
supplier
post room
key-into order processing system Supplier
… say 7 days between two large organisations
an EDI order …
Customer EDI transmission Supplier
… one day, one hour, as quick as you like
Cutting costs
Stationery Postage Staff: order entry invoice matching payment checking the principle saving is staff costs – staff savings can be very significant
Elimination of errors
no keying errors
(but no manual check for silly mistakes)
Fast response
immediate acknowledgement and status report
(available but not always implemented)
Accurate invoicing
automatic matching to orders
elimination of queries and delays
EDI payments
rapid settlement automatic matching to invoices
Reduced stock holding
Just-in-time for manufacture Quick response supply for retail Less (or no) cost of stock in hand Less (or no) warehousing costs Elimination of double handling of goods Less damage / deterioration of stock
Cash flow
quicker settlement = improved cash flow
Business opportunities
Access to Customers that require EDI
Customer lock-in
Switching costs – setting-up an EDI system with a new supplier
Chapter 9: EDI – the nuts and bolts
EDI standards
The need for a Common Form
Three customers Four suppliers
Twelve formats or one standard
EDI standards
The need for a common format …
… EDI provides a standard for data interchange that is:
Ready formulated; Comprehensive; Independent of hardware and software; Independent of special interest.
EDI standards provide a common language for the interchange of standard transactions.
Evolution of EDI standards
Three stages: Early applications/common formats Sector and national EDI standards The international EDI standard
Early applications/common formats
Developed by organisations that had to process data from a large number of customer organisations.
Standard set by data recipients and the customers conformed to it.
Examples:
BACS:
System of electronic payments (from user organisations).
LACES:
Freight Clearance System (at LHR).
World Meteorological Office (WMO) System:
System for exchange of weather information and weather reports.
Sector and national EDI standards
Application independent interchange standards, formulated by industry sector and / or national standards bodies.
Examples:
ODETTE: An EDI format developed for, and widely used in, the European motor industry.
TRADACOMS: A UK EDI standard for general trade developed by the ANA (Article Numbering Association).
ANSI X12: Developed as an American national standard by ANSI with the aim of replacing the various sector standards.
The international EDI standard
To meet the requirements of international and cross sector trade..
..EDIFACT was developed, under the auspices of the United Nations (UN), as a universal standard for commercial EDI.
EDIFACT:
Electronic Data Interchange for Administration, Commerce and Transport Started in Europe in mid 1980s Accepted by US (ANSI) to upersede X12 Promoted as the world EDI standard
The EDIFACT standard
EDIFACT interchange structure:
Each document (order, invoice, etc.) is a Message. Several messages are sent as an Interchange. Messages are made up of Data Segments, eg. Order Date or Buyers Name and Address. Data segment consists of a Tag and Data Items: The tag identifies the data segment. Data items are codes, values and qualifiers.
The EDIFACT standard
EDIFACT interchange structure (diagram):
The EDIFACT standard
The Order Decoded:
The order identification is:
Order Number AC6464
Order Date 15.03.2000
From Pens and Things:
Customer Address Code: 6464326
To Packaging Solutions:
Supplier Address Code 1149646
For ‘Executive Elite’ gift cases in red and silver:
Qty Product
Line 1 (Red Cases) 1,600 PT-1073-R
Line 1 (Silver Cases) 1,200 PT-1073-S
Coding standards
Codes: Usable as Keys Facilitate sorting Cut down on transmission Save on storage
For EDI (and data processing), keys are to be used in preference to text data/descriptions
Codes must be recognised and accepted by all parties to a trading exchange.
EAN/UPC codes
Standard codes for grocery and general retail:
Coded as Bar Codes on products Used in order processing / stock control Used in EDI messages.
EAN European Article Number
13 digit – 2 digit country code
UPC Universal Product Code (American)
12 digit – 1 digit country code
Administered by National Article Numbering Associations (ANA)
EDI communications
EDI communications can be:
A magnetic tape or diskette posted or despatched by courier.
A direct data communications link.
A value added data service (VADS),
also known as a value added network (VAN).
The Internet.
The VADS has tended to be the preferred option
(and the Internet, in this context, is another VADS)
EDI VADS
Postboxes and mailboxes: (Post and Forward Network)
The postbox: where outgoing messages are placed.
The mailbox: where incoming messages can be picked up.
EDI VADS - example
Steps 1 and 2
Sava Store establish a link with the VADS
Sava Store send an EDI Interchange
EDI VADS - example
Steps 3
Sava Store establish a link with the VADS
Sava Store send an EDI Interchange
EDI VADS - example
Steps 1 and 2
Best Bread establish a link with the VADS
Best Bread retrieves its orders
EDI VADS - example
The overall VADS network
EDI VADS
Time Independence
Sending and receipt are asynchronous.
Say: Sava Store transmits at the end of its overnight processing run. Best Bread pick up their orders next morning.
Protocol Independence
Each user can use its own protocol
Say: Sava Store might have a fixed link using X400.
Best Bread could use a dial up link.
Further VADS facilities:
Trading Community: Inter-network Connections: International Connections: Privacy, Security and Reliability: Message Storage and Logging: Message Validation: Local Access: Charges: Software and Consultancy:
EDI implementation
EDI software
EDI implementation
EDI software – basic functions:
Coding transactions into the EDI Standard.
Interfacing with the VADS.
EDI software – additional functions:
Trading partner database. Support of multiple EDI Standards. Facilities for formatting application data to and from the EDI Standard. Fax or e-Mail transmission to non EDI users. Interfacing with a variety of EDI VADS. Encryption the EDI Message. Automatic acknowledgement.
Message tracking and an audit trail. Direct input and printed output of EDI transactions.
For full integration of the business application and the EDI Software there needs to be an interface to transfer data from the business application to the EDI software and visa versa.
For example, to send an order:
The supplier record has an EDI indicator. Order for EDI suppliers are not printed; EDI orders are formatted onto a flat file; The flat file is input to the EDI software, formatted into the required EDI standard and posted into the ADS.
The reverse process is used for incoming EDI messages – arguably they need to be validated.
EDI operation:
A big difference between electronic transactions and their paper equivalents is that with electronic transactions there is no paperwork to fall back on should anything go wrong - all incoming transactions need to be secured.
Frequency of operation needs to meet the requirements of the business cycle – it can be daily, hourly or as required.
EDI alternatives:
Large organisation need their own EDI set-up – small companies might:
Make use of a free-standing, PC EDI facility. Making use of an EDI clearing house using: • Post or Fax. • Internet access.
EDI agreements
To achieve a successful, electronically controlled supply chain, businesses need to agree:
The nature of the business that is to be done electronically. The technical details of how it is to be undertaken. The procedures for resolving any disputes that arise.
The appropriate way to document these details is an EDI Interchange Agreement.
Legal Framework:
Most business law relates to paper based trading and how that law should apply to the less tangible form of an electronic message is not always clear.
‘For EDI to be a successful alternative to paper trading, it is essential that messages are accorded a comparable legal value as their paper equivalent when the functions effected in an electronic environment are similar to those effected in a paper environment, and where all appropriate measures have been taken to secure and store the data.’
Legal (and related) aspects:
The point in its transmission and processing at which a message will be deemed to be legally binding
The timescale for processing EDI massages.
The time that message will be retained.
The procedure for settling any disputes.
The legal jurisdiction for settling disputes.
Technical aspects:
The coding systems for identifying entities.
The EDI standard that is to be employed.
The network that is to be used.
Model agreements are available from various organisations.
EDI privacy and security
Reliable procedures (data processing standards).
Controls in the EDI Standards
Controls in the Transmission Protocol.
Protection against Tampering (e.g. digital signature)
Privacy of Message (e.g. encryption).
Non-repudiation (e.g. message acknowledgement or ‘trusted third party’).
EDI privacy and security
Nuts, bolts and the tool kit
Nuts, bolts and the tool kit
EDI – further developments
e-Procurement systems are being developed using XML formatted messages in place of traditional EDI.
Chapter 10: EDI and business
Organisations that use EDI
Bhs UK and European multiple apparel retailer. Bhs deals with about 400 suppliers using EDI.
Lucas Rist Manufacture the wiring loom for car maker. Confirmed EDI orders for delivery to track side within 10 hours.
TeleOrdering The EDI system for the UK book trade System supplied to bookshops on CD-ROM.
EDI trading patterns
Hubs and Spokes
The Hub: the major manufacturer or retailer Spokes: suppliers to the hub.
EDI can be a condition of trade:
‘Therefore, when it [the Hub] says, “thou shall trade electronically”, the suppliers have little option but to reply “anything you say, Sir”.’
EDI or DIE
Arrangement can become problematic for a supplier serving several hubs – each with differing requirements.
EDI trading patterns
Hubs and Spokes
EDI trading patterns
Overlapping user communities
Major retail chains with EDI links to most suppliers;
Suppliers with links to several of the major retail chains.
EDI trading patterns
Extended supply network
EDI trading patterns
Wholesaler network
EDI trading patterns
Open User Community
Networks: Trading partners use differing VADS (possibly in different countries). EDI Standards: Trading partners using differing EDI standards. Hubs defining subsets or dialects of EDI standards. Product Coding: Inconsistent/non-standard use of coding and/or units.
EDI transactions
EDI Trade Exchanges
The main execution and settlement exchanges of the trade cycle are: The Customer sends an Order to the Supplier. The Supplier sends the goods and a Delivery Note. The Supplier follows up the delivery note with an Invoice. The Customer makes payment against the Invoice and sends a Payment Advice.
EDI trade exchanges
Order
The order (purchase order) is a contract for one specific consignment of goods.
It specifies: What is wanted (product code) In what quantity (quantity and unit of issue) Where it is to be delivered (delivery address code) Who will pay (invoice address code) etc.
Also needed – the amendment orders
Another form of order - the ‘call-off order’.
EDI transactions
Delivery Note
Goods arriving at a customer’s door should have documentation to indicate who they are from and why they have been sent.
It normally specifies: The product and quantity
It should specify: The order it fulfils
The delivery note can be sent by EDI. This saves: Typing in the delivery note details Matching it to the corresponding order
The problem with the EDI delivery note is that it does not prove that the package and the goods actually arrived.
EDI transactions
Invoice
When goods or services have been delivered, the supplier issues an invoice.
This says: What has been supplied For which order(s) Total cost (which we would now like paying)
Invoices need checking against the original orders and deliveries – EDI automates this process.
Payment and Payment Advice
With EDI, both payment and payment advice can be electronic:
Payment can be sent to the bank either using an EDI payment message or EFT system (BACS in the UK) The payment advice can be sent to the supplier and is readily matched to the invoice(s) for which it is the payment.
Alternative EDI trade cycles
Order Message:
Delegated Ordering Responsibility of maintaining stocks is given over to the supplier
Self Invoicing (self billing) The customer pays for goods received without an invoice being sent.
Invoice Only Ordering is informal but invoicing is EDI
EDI adoption and EDI maturity
Business System Evolution
EDI Maturity
EDI adoption and EDI maturity
EDI Maturity
Discovery Stage
An organisation choosing to adopt EDI to:
Gain competitive advantage Solve an administrative problem Copy competitors who are adopting EDI
An organisation having to adopt EDI because a significant customer insists.
Introductory Stage
Organisations setting out on the EDI path:
Start with a pilot scheme.
This stage:
requires investment. Does not result in any cost saving or efficiency gain.
Integration Stage
Interface the EDI software with the business application:
Messages can be transferred electronically and automatically between the two systems.
This stage:
Often expensive (writing interface system). System starts to achieve benefits.
Operational Stage:
A significant number of trading partners and/or commonly used trade transactions are converted to EDI – a ‘critical mass’. The volume of electronic trading gives cost savings – the staff dealing with manual transactions can be redeployed.
Strategic Stage:
The opportunity to make changes to established business practice. For example: • Revising the sequence of trade documents. • Just-in-time (JIT) manufacture • Quick response supply.
Innovative Stage:
The possibility of changing the nature of the product or the provision of new services. Example are: • Producing cars to order (as opposed to producing for stock). • Bicycles built to a customer specification. • A factory made-to-measure pair of jeans. • EPOS and EDI in the ‘best seller’ book trade.
IOS and industry sector organisation
(Inter-organisational System)
EDI has, for many sectors, becoming ‘the normal way that business in done’.
The closer co-operation between customer and suppliers of which IOS is a part is also having a subtle effect on the market. It is argued that it is no longer just a manufacturer or a retailer that is competing for the customer but it is these companies in conjunction with their supply chains.
IOS, EDI and Internet e-Commerce
EDI and Internet e-Commerce complement each other:
Internet e-Commerce provides for searching for products and for once-off purchases.
EDI is an application to application interface for repeated and standardised transactions.
Chapter 11: Inter-organisational e-Commerce
Inter-organisational transactions
Organisations can use the Internet/WWW for:
Searching: For goods and services that are not available from their established suppliers. For business opportunities on sites that advertise business requirements
Purchasing: Organisations can purchase goods and services over the Internet – typically ‘secondary supplies’ such as stationary and travel facilities.
After Sales: After-sales support can be provided effectively and economically via the Internet.
Internet, inter-organisational transactions
e-Commerce facilities for business
Purchasing example: Dell
Large manufacturer of PCs
Orders direct from customers (as opposed to using agents or resellers)
Orders are placed by phone or online
Systems are then built to order (using a highly organised just-in-time approach)
www.dell.com.
e-Commerce facilities for business
Purchasing example: CISCO
A world leader in the supply of network equipment
83% of sales online (and increasing – cost saving of $1.3 billion in 3years)
www.cicsco.com.
e-Commerce facilities for business
Purchasing example: Action
UK Supplier of Computer Equipment and Computer Consumables. Catalogue of 12,000 product lines. 1998 – 12% of business online and rising.
Tailor-made web site for large corporates. ‘Virtual Warehouse’ that indicates both Action’s and Supplier’s stock. www.action.com.
e-Commerce facilities for business
Advantages of online purchasing:
Quick and efficient execution of once-off purchase decisions. Replace time consuming and bureaucratic purchase procedures. Can still use preferred supplier agreements. Can still require authorisation for exceptional expenditure. Can provide management with accounts of the expenditure.
e-Commerce facilities for business
After-sales example: Microsoft
Extensive site including after-sales: Add-ons, e.g. Word 7 Reader, PWS. Service Packs – bug fixes. Knowledge Base – fault diagnosis. e-Mail support for Beta-test sites. www.microsoft.com.
e-Commerce facilities for business
After-sales example: Sun
Web site support for technicians and users:
JAVA services. Bug fixes. Free software.
www.sun.com.
e-Commerce facilities for business
Advantages of online after-sales:
Online Documentation – can be kept up-to-date much more easily than hard copy. Online support using ‘frequently asked questions’ or decision trees. e-Mail support.
e-Commerce in desk-top facilities management
Facilities of a system used to support an outsourced desk-top supply and support service: Equipment register Purchasing Call logging Technical database Asset management
Chapter 12: Consumer Trade Transactions
What you want, when you want it
At the heart of most that is good about the Internet lies the simple, seductive offering - what you want, when you want it. You want to buy an obscure book or track down a cheap holiday? Get online. Do it. Now!
(adapted from Waldman, 1999)
Internet e-Commerce
The basic Internet elements used for e-Commerce are:
The client system using a browser; The server holding the e-Commerce application; Links from the Internet application to back office systems.
The e-Shop
An example of a simple e-Shop, set up by Charlie Bucket (and with apologies to Roald Dahl).
The e-Shop
The basics:
An online advert An e-Shop – providing online purchasing
(as provided by Wonka Online)
Additional features may include:
Customer Registration Dynamic Web Pages Personalised Web Pages A Shopping Basket Additional Information Community Multiple Payment Options Encryption Online Delivery Loyalty Schemes Online Help Shopping Mall
Internet Shopping and the Trade Cycle
The Retail Trade Cycle
Internet Shopping and the Trade Cycle
Search options: Select a menu item or a button on a portal. Using a search engine Following a link to another page Selecting a page that has been featured on an advert or that is recommended by a friend. Using the url – a known url or a bookmark.
Order: Helping the customer to find things: • Departments/categories • A site search engine
Displaying the goods: • Picture • Description • VR Images • Sound
Selecting the goods: • Electronic shopping basket.
Payment: Credit Card or e-Cash Debit Card Offline payment Security of payment
Delivery: For conventional shopping, the delivery function is typically performed by the customer. Delivery issues: • Cost • Security • Perishable / large items.
Delivery methods: • Post (through postbox) • Doorstep (may require customer to be present) • Online.
After-Sales: For conventional shopping, goods that don’t fit/won’t work can be taken back. For online shopping, return of goods can be/may seem more problematic. After sales support (instructions/fault diagnosis) can be provided online.
Other e-Commerce Technologies (1)
The Internet is not the first public access telematics system and neither will it be the last word in developments in this field.
Interactive videotext systems (1970s).
The French system was Télétel (1980s)
Free Minitel terminals Over six million subscribers (1993) Used by 14 million people; • Online Telephone Directory • Banking Services • Travel (Information and Reservations) • Catalogue Sales.
Other e-Commerce Technologies (2)
Other networks (mainly US)
CompuServe (1980) Prodigy (1988 – IBM/Sears) Television shopping channels
Projected developments:
Interactive TV
(cable TV/Internet combinations)
(satellite TV/telephone combinations)
Mobile e-Commerce
(mobile phone/laptop combinations)
(mobile phone e-Commerce)
e-Commerce Sales
Dramatic / rapid expansion but still a small proportion of overall retail sales.
KPMG (1999) gives direct sales as 5% of retail sales in the UK and 4% in the US; 16% of US home sales and 1% of UK direct sales were electronic.
Forrester Research (1999) stated online shopping accounted for $1.2 billion of Europe’s $1.9 trillion in retail sales (0.06%) compared to $8 billion of $2.6 trillion (0.3%) in total sales in the US. (US, not UK, definitions of billion and trillion)
Advantages and Disadvantages
Advantages of Consumer e-Commerce:
Home Shopping World-wide, 24-Hours-a-Day Trading The Latest Thing at Bargain Prices Home Delivery Online Sales Support
Disadvantages of Consumer e-Commerce:
Privacy and Security Delivery Inspecting Goods Social Interaction Return of Goods
Advantages for the vendor:
World-wide market High-tech Image Reduced costs
Disadvantages for the vendor:
Privacy and Security Delivery Price transparency
… and for most e-Shops
– an inability to make a profit
Consumer e-Commerce at Pens and Things
Airline booking systems
Developed in the late 1970s by some large airlines.
Notable examples are: United Apollo American Airways Sabre Initially a competitive weapon for the owning airline.
Latterly developed as ‘unbiased markets’ to sell seats for any airline.
Airline booking systems
Currently three major e-Market airline booking systems: Sabre Galileo Amadeus
Sabre
Sabre (American Airlines): Started in the early 1960s Installed first terminal in a travel agency in 1976 Provides web based access via travelocity.com
At the time of writing Sabre: Is processing over 400 million bookings a year for over 440 airlines (about 40% of the world market); Is linked to more than 210,000 terminals; Uses 30 mainframe computers (US based); Has peak processing exceeding 7,450 messages/second.
Checkout www.sabre.com
Galileo
Galileo (United + European Partners): Started in 1971
At the time of writing Galileo: Is processing over 250 million bookings a year; For over 530 airlines (about 30% of the world market); Is linked to about 160,500 terminals; Uses 21 mainframe computers (US + UK); Has peak processing of about 5,000 messages/second.
Checkout www.galilieo.com
Amadeus
Amadeus (Four European Partners): Founded in 1987, Continental joined in 1995
At the time of writing Amadeus: Is processing for over 469 airlines; Is linked to more than 190,000 terminals;
Is based in Germany.
Checkout www.amadeus.net
Competition and customer loyalty
Airline branding/customer loyalty: Advertisement:
United ‘the friendly skies’ BA ‘the world’s favourite airline’ Hub operations/connections Loyalty/frequent flyer programs Alliances: Star Alliance/Our World
Competition: De-regulation Low cost/no frills carriers
Web booking systems
The web provides: A new sales channel Less opportunity for price comparison Chance to develop brand loyalty
Value-added features can include: Customer’s Frequent Flyers account online, Pre-allocation of seats Online selection of meal options, Additional travel services Travel and airport information, Access to seat sales/auctions, Personalisation of the web site
Web booking systems
Analysis of airline web sites (1999)
With web site (%) With online booking (%)
North America 58 22
South America 33 8
Western Europe 42 12
Eastern Europe 7 1
Pacific 44 9
Asia 23 3
Africa 26 3
Average 33 10
Airline Web sites
Customer Information:
Alternatives: Requirement for prior registration Take details when purchase is made
Prior registration: Can annoy/put-off customers Might tie customer into site
Details at time of purchase: Time-consuming (if done every time) Sales can be mixed mode: Web enquiry / telephone sales
Discuss / Check out some Airline sites
Product (flight) Information:
Alternatives: Show Timetables Take date, time and airport details
Issues: Knowing airport names / codes Several airports for one city Alternative dates and times
Check out some Airline sites for cheap deals: London to New York: Several airports for each city Cheaper tickets may be available on alternative dates
… and discuss issues.
Payment and Delivery: Payment by Credit Card: Security Issues Delivery: By post Collect at airport e-Ticket
Discuss issues ….
Options for booking airline seats
Main options: Telephone airline direct Conventional Travel agent Online Travel Agent Airline web site
Chapter 6:
Inter-organisational transactions
Bhs regularly deal with 400 suppliers and place 6,000 contracts per season. For the merchandising systems this can mean 4.5 million replenishment decisions each working week’.
Credit transaction trade cycle
Pre-Sales: Search – find a supplier Negotiate – agree terms of trade
Execution: Order (purchasing procedures) Delivery (match delivery against order)
Settlement: Invoice (check against delivery) Payment
After Sales (warrantee, maintenance, etc.)
Repeat – many orders repeat on a daily or weekly basis.
Credit transaction trade cycle
Credit transaction trade cycle
A variety of transactions
Discrete transactions of commodity items:
Use an Electronic Market (if one is available)
Repeat transactions for commodity items.
EDI may well be appropriate
Discrete transactions of non commodity items.
Internet e-Commerce can be the answer
Chapter 7: Electronic markets
Markets
Supply and Demand: Supply outstrips demand – prices go down Demand outstrips supply – prices go up
Conditions for an effective market: There are as many buyers as sellers and none of them dominates The goods or services to be transacted are homogeneous or standardised
Buyers and sellers are well informed about the quantity, characteristics and price of the goods
Electronic market
The use of information and communication technologies to provide geographically dispersed traders with the information necessary for the fair operation of the market.
Easy access to information on a range of competing product offerings reduces the search cost of finding the supplier that best meets the purchase requirement.
An electronic market place can be defined as: ‘An inter-organisational information system that allows participating buyers and sellers to exchange information about price and product offerings’.
Electronic markets and the trade cycle
Emphasis is on the Search Phase
Normally includes facilities for Execution and Settlement
Usage of electronic markets
Application has been limited to specific sectors: Airline Booking Systems Financial and Commodity Markets
Use is typically via an intermediary
Advantages and disadvantages
Customer Advantage: Easy access to comparative price/service information
Supplier: Advantage of access to market Disadvantage of easy price comparison
‘The effect of an electronic market in a commodity market is the more efficient distribution of information which decreases the profit possibility for sellers. By the introduction of an electronic market search costs can be lowered. If buyers face lower search costs it will be more difficult for sellers to maintain high price levels.’
(Bean, et al., 1995)
Future developments of electronic markets
e-Procurement Systems: Internet based systems for procurement of ‘non-production goods’ • Checkout ariba.com
Analogous systems: Online Travel Agents Shop bots Online Auctions
Chapter 8: Electronic Data Interchange (EDI)
EDI trade cycle
Regular, repeat transactions between commercial trading partners
Examples: Supermarkets replenishing stocks Vehicle assemblers purchasing components
EDI definition
Summarised as: ‘Paperless Trading’
Defined as:
‘The transfer of structured data,
by agreed message standards,
from one computer system to another,
by electronic means.’
International Data Exchange Association (IDEA)
Structured data
Standardised Document e.g. Order/Invoice
Codes e.g. Product Code/Customer Code (preferably using a common standard e.g. ANA/UPC)
Values e.g. Quantity Ordered
Agreed message standards
Sectorial standards e.g. Odette
National standards e.g. ANSI X12, Tradercoms
International standards i.e. EDIFACT
From one computer system to another
EDI messages are (properly) sent:
From one computer’s application,
e.g. the customer’s Purchasing System.
To a second computer’s application,
e.g. the supplier's Order Processing System.
There is no need read or re-key the data into a computer system.
By electronic means
Transmission by: data communications network or possibly physical transfer of: • magnetic tape or • floppy disc
Benefits of EDI
Shortened ordering time
a posted order …
print Customer
envelope
post room
postal service
supplier
post room
key-into order processing system Supplier
… say 7 days between two large organisations
an EDI order …
Customer EDI transmission Supplier
… one day, one hour, as quick as you like
Cutting costs
Stationery Postage Staff: order entry invoice matching payment checking the principle saving is staff costs – staff savings can be very significant
Elimination of errors
no keying errors
(but no manual check for silly mistakes)
Fast response
immediate acknowledgement and status report
(available but not always implemented)
Accurate invoicing
automatic matching to orders
elimination of queries and delays
EDI payments
rapid settlement automatic matching to invoices
Reduced stock holding
Just-in-time for manufacture Quick response supply for retail Less (or no) cost of stock in hand Less (or no) warehousing costs Elimination of double handling of goods Less damage / deterioration of stock
Cash flow
quicker settlement = improved cash flow
Business opportunities
Access to Customers that require EDI
Customer lock-in
Switching costs – setting-up an EDI system with a new supplier
Chapter 9: EDI – the nuts and bolts
EDI standards
The need for a Common Form
Three customers Four suppliers
Twelve formats or one standard
EDI standards
The need for a common format …
… EDI provides a standard for data interchange that is:
Ready formulated; Comprehensive; Independent of hardware and software; Independent of special interest.
EDI standards provide a common language for the interchange of standard transactions.
Evolution of EDI standards
Three stages: Early applications/common formats Sector and national EDI standards The international EDI standard
Early applications/common formats
Developed by organisations that had to process data from a large number of customer organisations.
Standard set by data recipients and the customers conformed to it.
Examples:
BACS:
System of electronic payments (from user organisations).
LACES:
Freight Clearance System (at LHR).
World Meteorological Office (WMO) System:
System for exchange of weather information and weather reports.
Sector and national EDI standards
Application independent interchange standards, formulated by industry sector and / or national standards bodies.
Examples:
ODETTE: An EDI format developed for, and widely used in, the European motor industry.
TRADACOMS: A UK EDI standard for general trade developed by the ANA (Article Numbering Association).
ANSI X12: Developed as an American national standard by ANSI with the aim of replacing the various sector standards.
The international EDI standard
To meet the requirements of international and cross sector trade..
..EDIFACT was developed, under the auspices of the United Nations (UN), as a universal standard for commercial EDI.
EDIFACT:
Electronic Data Interchange for Administration, Commerce and Transport Started in Europe in mid 1980s Accepted by US (ANSI) to upersede X12 Promoted as the world EDI standard
The EDIFACT standard
EDIFACT interchange structure:
Each document (order, invoice, etc.) is a Message. Several messages are sent as an Interchange. Messages are made up of Data Segments, eg. Order Date or Buyers Name and Address. Data segment consists of a Tag and Data Items: The tag identifies the data segment. Data items are codes, values and qualifiers.
The EDIFACT standard
EDIFACT interchange structure (diagram):
The EDIFACT standard
The Order Decoded:
The order identification is:
Order Number AC6464
Order Date 15.03.2000
From Pens and Things:
Customer Address Code: 6464326
To Packaging Solutions:
Supplier Address Code 1149646
For ‘Executive Elite’ gift cases in red and silver:
Qty Product
Line 1 (Red Cases) 1,600 PT-1073-R
Line 1 (Silver Cases) 1,200 PT-1073-S
Coding standards
Codes: Usable as Keys Facilitate sorting Cut down on transmission Save on storage
For EDI (and data processing), keys are to be used in preference to text data/descriptions
Codes must be recognised and accepted by all parties to a trading exchange.
EAN/UPC codes
Standard codes for grocery and general retail:
Coded as Bar Codes on products Used in order processing / stock control Used in EDI messages.
EAN European Article Number
13 digit – 2 digit country code
UPC Universal Product Code (American)
12 digit – 1 digit country code
Administered by National Article Numbering Associations (ANA)
EDI communications
EDI communications can be:
A magnetic tape or diskette posted or despatched by courier.
A direct data communications link.
A value added data service (VADS),
also known as a value added network (VAN).
The Internet.
The VADS has tended to be the preferred option
(and the Internet, in this context, is another VADS)
EDI VADS
Postboxes and mailboxes: (Post and Forward Network)
The postbox: where outgoing messages are placed.
The mailbox: where incoming messages can be picked up.
EDI VADS - example
Steps 1 and 2
Sava Store establish a link with the VADS
Sava Store send an EDI Interchange
EDI VADS - example
Steps 3
Sava Store establish a link with the VADS
Sava Store send an EDI Interchange
EDI VADS - example
Steps 1 and 2
Best Bread establish a link with the VADS
Best Bread retrieves its orders
EDI VADS - example
The overall VADS network
EDI VADS
Time Independence
Sending and receipt are asynchronous.
Say: Sava Store transmits at the end of its overnight processing run. Best Bread pick up their orders next morning.
Protocol Independence
Each user can use its own protocol
Say: Sava Store might have a fixed link using X400.
Best Bread could use a dial up link.
Further VADS facilities:
Trading Community: Inter-network Connections: International Connections: Privacy, Security and Reliability: Message Storage and Logging: Message Validation: Local Access: Charges: Software and Consultancy:
EDI implementation
EDI software
EDI implementation
EDI software – basic functions:
Coding transactions into the EDI Standard.
Interfacing with the VADS.
EDI software – additional functions:
Trading partner database. Support of multiple EDI Standards. Facilities for formatting application data to and from the EDI Standard. Fax or e-Mail transmission to non EDI users. Interfacing with a variety of EDI VADS. Encryption the EDI Message. Automatic acknowledgement.
Message tracking and an audit trail. Direct input and printed output of EDI transactions.
For full integration of the business application and the EDI Software there needs to be an interface to transfer data from the business application to the EDI software and visa versa.
For example, to send an order:
The supplier record has an EDI indicator. Order for EDI suppliers are not printed; EDI orders are formatted onto a flat file; The flat file is input to the EDI software, formatted into the required EDI standard and posted into the ADS.
The reverse process is used for incoming EDI messages – arguably they need to be validated.
EDI operation:
A big difference between electronic transactions and their paper equivalents is that with electronic transactions there is no paperwork to fall back on should anything go wrong - all incoming transactions need to be secured.
Frequency of operation needs to meet the requirements of the business cycle – it can be daily, hourly or as required.
EDI alternatives:
Large organisation need their own EDI set-up – small companies might:
Make use of a free-standing, PC EDI facility. Making use of an EDI clearing house using: • Post or Fax. • Internet access.
EDI agreements
To achieve a successful, electronically controlled supply chain, businesses need to agree:
The nature of the business that is to be done electronically. The technical details of how it is to be undertaken. The procedures for resolving any disputes that arise.
The appropriate way to document these details is an EDI Interchange Agreement.
Legal Framework:
Most business law relates to paper based trading and how that law should apply to the less tangible form of an electronic message is not always clear.
‘For EDI to be a successful alternative to paper trading, it is essential that messages are accorded a comparable legal value as their paper equivalent when the functions effected in an electronic environment are similar to those effected in a paper environment, and where all appropriate measures have been taken to secure and store the data.’
Legal (and related) aspects:
The point in its transmission and processing at which a message will be deemed to be legally binding
The timescale for processing EDI massages.
The time that message will be retained.
The procedure for settling any disputes.
The legal jurisdiction for settling disputes.
Technical aspects:
The coding systems for identifying entities.
The EDI standard that is to be employed.
The network that is to be used.
Model agreements are available from various organisations.
EDI privacy and security
Reliable procedures (data processing standards).
Controls in the EDI Standards
Controls in the Transmission Protocol.
Protection against Tampering (e.g. digital signature)
Privacy of Message (e.g. encryption).
Non-repudiation (e.g. message acknowledgement or ‘trusted third party’).
EDI privacy and security
Nuts, bolts and the tool kit
Nuts, bolts and the tool kit
EDI – further developments
e-Procurement systems are being developed using XML formatted messages in place of traditional EDI.
Chapter 10: EDI and business
Organisations that use EDI
Bhs UK and European multiple apparel retailer. Bhs deals with about 400 suppliers using EDI.
Lucas Rist Manufacture the wiring loom for car maker. Confirmed EDI orders for delivery to track side within 10 hours.
TeleOrdering The EDI system for the UK book trade System supplied to bookshops on CD-ROM.
EDI trading patterns
Hubs and Spokes
The Hub: the major manufacturer or retailer Spokes: suppliers to the hub.
EDI can be a condition of trade:
‘Therefore, when it [the Hub] says, “thou shall trade electronically”, the suppliers have little option but to reply “anything you say, Sir”.’
EDI or DIE
Arrangement can become problematic for a supplier serving several hubs – each with differing requirements.
EDI trading patterns
Hubs and Spokes
EDI trading patterns
Overlapping user communities
Major retail chains with EDI links to most suppliers;
Suppliers with links to several of the major retail chains.
EDI trading patterns
Extended supply network
EDI trading patterns
Wholesaler network
EDI trading patterns
Open User Community
Networks: Trading partners use differing VADS (possibly in different countries). EDI Standards: Trading partners using differing EDI standards. Hubs defining subsets or dialects of EDI standards. Product Coding: Inconsistent/non-standard use of coding and/or units.
EDI transactions
EDI Trade Exchanges
The main execution and settlement exchanges of the trade cycle are: The Customer sends an Order to the Supplier. The Supplier sends the goods and a Delivery Note. The Supplier follows up the delivery note with an Invoice. The Customer makes payment against the Invoice and sends a Payment Advice.
EDI trade exchanges
Order
The order (purchase order) is a contract for one specific consignment of goods.
It specifies: What is wanted (product code) In what quantity (quantity and unit of issue) Where it is to be delivered (delivery address code) Who will pay (invoice address code) etc.
Also needed – the amendment orders
Another form of order - the ‘call-off order’.
EDI transactions
Delivery Note
Goods arriving at a customer’s door should have documentation to indicate who they are from and why they have been sent.
It normally specifies: The product and quantity
It should specify: The order it fulfils
The delivery note can be sent by EDI. This saves: Typing in the delivery note details Matching it to the corresponding order
The problem with the EDI delivery note is that it does not prove that the package and the goods actually arrived.
EDI transactions
Invoice
When goods or services have been delivered, the supplier issues an invoice.
This says: What has been supplied For which order(s) Total cost (which we would now like paying)
Invoices need checking against the original orders and deliveries – EDI automates this process.
Payment and Payment Advice
With EDI, both payment and payment advice can be electronic:
Payment can be sent to the bank either using an EDI payment message or EFT system (BACS in the UK) The payment advice can be sent to the supplier and is readily matched to the invoice(s) for which it is the payment.
Alternative EDI trade cycles
Order Message:
Delegated Ordering Responsibility of maintaining stocks is given over to the supplier
Self Invoicing (self billing) The customer pays for goods received without an invoice being sent.
Invoice Only Ordering is informal but invoicing is EDI
EDI adoption and EDI maturity
Business System Evolution
EDI Maturity
EDI adoption and EDI maturity
EDI Maturity
Discovery Stage
An organisation choosing to adopt EDI to:
Gain competitive advantage Solve an administrative problem Copy competitors who are adopting EDI
An organisation having to adopt EDI because a significant customer insists.
Introductory Stage
Organisations setting out on the EDI path:
Start with a pilot scheme.
This stage:
requires investment. Does not result in any cost saving or efficiency gain.
Integration Stage
Interface the EDI software with the business application:
Messages can be transferred electronically and automatically between the two systems.
This stage:
Often expensive (writing interface system). System starts to achieve benefits.
Operational Stage:
A significant number of trading partners and/or commonly used trade transactions are converted to EDI – a ‘critical mass’. The volume of electronic trading gives cost savings – the staff dealing with manual transactions can be redeployed.
Strategic Stage:
The opportunity to make changes to established business practice. For example: • Revising the sequence of trade documents. • Just-in-time (JIT) manufacture • Quick response supply.
Innovative Stage:
The possibility of changing the nature of the product or the provision of new services. Example are: • Producing cars to order (as opposed to producing for stock). • Bicycles built to a customer specification. • A factory made-to-measure pair of jeans. • EPOS and EDI in the ‘best seller’ book trade.
IOS and industry sector organisation
(Inter-organisational System)
EDI has, for many sectors, becoming ‘the normal way that business in done’.
The closer co-operation between customer and suppliers of which IOS is a part is also having a subtle effect on the market. It is argued that it is no longer just a manufacturer or a retailer that is competing for the customer but it is these companies in conjunction with their supply chains.
IOS, EDI and Internet e-Commerce
EDI and Internet e-Commerce complement each other:
Internet e-Commerce provides for searching for products and for once-off purchases.
EDI is an application to application interface for repeated and standardised transactions.
Chapter 11: Inter-organisational e-Commerce
Inter-organisational transactions
Organisations can use the Internet/WWW for:
Searching: For goods and services that are not available from their established suppliers. For business opportunities on sites that advertise business requirements
Purchasing: Organisations can purchase goods and services over the Internet – typically ‘secondary supplies’ such as stationary and travel facilities.
After Sales: After-sales support can be provided effectively and economically via the Internet.
Internet, inter-organisational transactions
e-Commerce facilities for business
Purchasing example: Dell
Large manufacturer of PCs
Orders direct from customers (as opposed to using agents or resellers)
Orders are placed by phone or online
Systems are then built to order (using a highly organised just-in-time approach)
www.dell.com.
e-Commerce facilities for business
Purchasing example: CISCO
A world leader in the supply of network equipment
83% of sales online (and increasing – cost saving of $1.3 billion in 3years)
www.cicsco.com.
e-Commerce facilities for business
Purchasing example: Action
UK Supplier of Computer Equipment and Computer Consumables. Catalogue of 12,000 product lines. 1998 – 12% of business online and rising.
Tailor-made web site for large corporates. ‘Virtual Warehouse’ that indicates both Action’s and Supplier’s stock. www.action.com.
e-Commerce facilities for business
Advantages of online purchasing:
Quick and efficient execution of once-off purchase decisions. Replace time consuming and bureaucratic purchase procedures. Can still use preferred supplier agreements. Can still require authorisation for exceptional expenditure. Can provide management with accounts of the expenditure.
e-Commerce facilities for business
After-sales example: Microsoft
Extensive site including after-sales: Add-ons, e.g. Word 7 Reader, PWS. Service Packs – bug fixes. Knowledge Base – fault diagnosis. e-Mail support for Beta-test sites. www.microsoft.com.
e-Commerce facilities for business
After-sales example: Sun
Web site support for technicians and users:
JAVA services. Bug fixes. Free software.
www.sun.com.
e-Commerce facilities for business
Advantages of online after-sales:
Online Documentation – can be kept up-to-date much more easily than hard copy. Online support using ‘frequently asked questions’ or decision trees. e-Mail support.
e-Commerce in desk-top facilities management
Facilities of a system used to support an outsourced desk-top supply and support service: Equipment register Purchasing Call logging Technical database Asset management
Chapter 12: Consumer Trade Transactions
What you want, when you want it
At the heart of most that is good about the Internet lies the simple, seductive offering - what you want, when you want it. You want to buy an obscure book or track down a cheap holiday? Get online. Do it. Now!
(adapted from Waldman, 1999)
Internet e-Commerce
The basic Internet elements used for e-Commerce are:
The client system using a browser; The server holding the e-Commerce application; Links from the Internet application to back office systems.
The e-Shop
An example of a simple e-Shop, set up by Charlie Bucket (and with apologies to Roald Dahl).
The e-Shop
The basics:
An online advert An e-Shop – providing online purchasing
(as provided by Wonka Online)
Additional features may include:
Customer Registration Dynamic Web Pages Personalised Web Pages A Shopping Basket Additional Information Community Multiple Payment Options Encryption Online Delivery Loyalty Schemes Online Help Shopping Mall
Internet Shopping and the Trade Cycle
The Retail Trade Cycle
Internet Shopping and the Trade Cycle
Search options: Select a menu item or a button on a portal. Using a search engine Following a link to another page Selecting a page that has been featured on an advert or that is recommended by a friend. Using the url – a known url or a bookmark.
Order: Helping the customer to find things: • Departments/categories • A site search engine
Displaying the goods: • Picture • Description • VR Images • Sound
Selecting the goods: • Electronic shopping basket.
Payment: Credit Card or e-Cash Debit Card Offline payment Security of payment
Delivery: For conventional shopping, the delivery function is typically performed by the customer. Delivery issues: • Cost • Security • Perishable / large items.
Delivery methods: • Post (through postbox) • Doorstep (may require customer to be present) • Online.
After-Sales: For conventional shopping, goods that don’t fit/won’t work can be taken back. For online shopping, return of goods can be/may seem more problematic. After sales support (instructions/fault diagnosis) can be provided online.
Other e-Commerce Technologies (1)
The Internet is not the first public access telematics system and neither will it be the last word in developments in this field.
Interactive videotext systems (1970s).
The French system was Télétel (1980s)
Free Minitel terminals Over six million subscribers (1993) Used by 14 million people; • Online Telephone Directory • Banking Services • Travel (Information and Reservations) • Catalogue Sales.
Other e-Commerce Technologies (2)
Other networks (mainly US)
CompuServe (1980) Prodigy (1988 – IBM/Sears) Television shopping channels
Projected developments:
Interactive TV
(cable TV/Internet combinations)
(satellite TV/telephone combinations)
Mobile e-Commerce
(mobile phone/laptop combinations)
(mobile phone e-Commerce)
e-Commerce Sales
Dramatic / rapid expansion but still a small proportion of overall retail sales.
KPMG (1999) gives direct sales as 5% of retail sales in the UK and 4% in the US; 16% of US home sales and 1% of UK direct sales were electronic.
Forrester Research (1999) stated online shopping accounted for $1.2 billion of Europe’s $1.9 trillion in retail sales (0.06%) compared to $8 billion of $2.6 trillion (0.3%) in total sales in the US. (US, not UK, definitions of billion and trillion)
Advantages and Disadvantages
Advantages of Consumer e-Commerce:
Home Shopping World-wide, 24-Hours-a-Day Trading The Latest Thing at Bargain Prices Home Delivery Online Sales Support
Disadvantages of Consumer e-Commerce:
Privacy and Security Delivery Inspecting Goods Social Interaction Return of Goods
Advantages for the vendor:
World-wide market High-tech Image Reduced costs
Disadvantages for the vendor:
Privacy and Security Delivery Price transparency
… and for most e-Shops
– an inability to make a profit
Consumer e-Commerce at Pens and Things
