Main

ECR
Contents
Summary
Introduction
Category management
Product replenishment
Enabling technologies
Conclusion
Bibliography

Enabling Technologies

Introduction

Information Technology is focused on acquiring, processing and transmitting of data. After World War II this technology developed explosively. Prospective people pointed out the implications of this technology, when computers were introduced. While the industrial revolution brought mechanization, this technology would bring automation. Until that time, people were needed to process data in order to control processes. Information Technology would change that in future.

We speak of computer networks, when different computers or computer-based systems are connected to each other. Although there are quite a lot networks today, most of the possibilities and implications are not realized yet. In most cases one is still busy with the technology itself, others just use several simple applications. Apart from that, still a lot of possibilities have to be discovered. Networks have created a lot of new techniques to provide information.

These Enabling Technologies can be used to overcome the barriers between retailers and manufacturers, as pointed out in the chapter 1. Efficient Category Management and Efficient Product Replenishment are very dependent on accurate information. It is clear that Enabling Technologies are very important, therefore this chapter will discuss this topic more extensively than other topics.

In this chapter the following technologies will be discussed:

• Electronic Data Interchange (EDI),
• Electronic Funds Transfer (EFT), and
• Database Management.

Electronic Data Interchange (EDI)

American businesses have been using EDI for several decades, beginning as parallel efforts in different industries, such as transportation, shipping, and health care. For example, pharmaceutical companies began research in about 1971 on using computers to improve their profits by reducing paper work and human errors, and to develop electronic links between manufacturers, warehouses and retailers. By 1974, they had an operational system.

At that time, 90% of the participating companies had IBM mainframes. To assist smaller members that could not afford to interface with their larger trading partners, the industry hired ORDERNET (a division of Sterling Software) to develop an order entry clearinghouse. ORDERNET linked 100 warehouses with the top 40 to 50 manufacturers within 2 and a half years.

The strategy paid off. Participants found that EDI allowed them to reduce their inventory by decreasing order-processing time. Since 50% of a drug warehouse's assets were tied up in inventory, reducing their inventory saved a considerable amount of money [Plumb, 1993].

What is EDI?

Electronic Data Interchange (EDI) in literal sense is nothing special. Someone who types a text on a computer, saves it on a floppy and reads the same text on a different computer, would in this sense also be doing electronic data interchange. Therefore, in practice a different meaning has been given to EDI. In [Dankbaar, 1991] we can find the following definition:

EDI is the interchange of standardized messages between computers about trade transactions between the involved parties.

Taking a closer a look at this definition reveals three interesting key points. Firstly, the messages are standardized, which means that the messages are specified according to fixed rules, such that the meaning is clear and unambiguous. Communication between two parties is roughly done as follows: the sending party fills in a form, which is then standardized by a message processor. This translated message will be sent to the other party and is translated back by their message processor.

Secondly, the definition speaks about interchange between computers. I think it is better to speak about interchange between computer applications instead of interchange between computers. Interchange between computer applications does not only cover pure communication, but also automatically sent messages, which are generated by an application. This feature makes EDI a value adding technology for most companies. If EDI were considered as pure communication only, then it would be just an expensive alternative for a fax machine. Moreover if companies do not integrate EDI into their internal applications, they lose 70% of the potential benefits [Thierauf, 1990].

Finally, EDI involves data interchange of trade transactions of the involved parties. This means that standardized interchange of information between establishments of the same company is not considered as EDI. Note that this type of interchange is already implemented and used on large scale. The parties, implied by the definition, have to be juridical independent companies, such as manufacturers, consumers, banks and transporters.

All three key points can be summarized by the following figure. In this figure two parties with (not necessarily the same) business functions, which are supported by an application system, are drawn. When the application generates a message, a message processor based on a specified message syntax, which both parties have agreed on, standardizes this message. This message is put in a mailbox and is transmitted by an interchange protocol to the other party. The actual transport of the message is done by a computer network and requires a great deal of protocols, hardware, software and data-communication lines. When the message is put in the mailbox of the other party, the message processor translates the message back to a form, which the application system can view. The technical part in the process has been colored gray.

Source: B. Dankbaar, 1991.

Message Syntaxes

When computer applications in an organization are responsible for sending and receiving EDI-messages, which have to be interpreted by software without human interaction, then EDI-messages have to be formulated unambiguously. In order to make this task possible message syntaxes have been developed to formulate EDI-messages.

The standardization of the structure and the composition of EDI-messages have been specified in great detail. Several syntaxes are available for different sectors in industry. The most common and most used syntax is the worldwide standardization, which is called EDIFACT. EDIFACT stands for Electronic Data Interchange For Administration, Commerce and Transport.

The EDIFACT-syntaxis describes data elements, which can be compared to words. These elements can be grouped to segments, which can be compared to sentences. Finally, these segments can be grouped to messages. In order to make the interchange process more efficient, different messages to the same recipient can be grouped in one interchange.

In order to make this abstract concept more concrete, consider the following NAD segment. The NAD segment is used for sending name and address information. The segment consists of lines starting with a number. Each number defines a data element, for example: 3035 specifies the PARTY QUALIFIER. After each number, the information of the data element follows. Then the segment specifies the necessity of the information, where M denotes mandatory information and C denotes conditional information. The last column denotes the type of data, where an..3 denotes alphanumerical codes with length 3.

NAD	Name and address
3035	PARTY QUALIFIER	M	an..3
C082	PARTY IDENTIFICATION	C
3039	Party identification, coded	M	an..17
1131	Code list identifier, coded	C	an..2
C058	NAME & ADDRESS	C	an..35
3124	Name and address line	M	an..35
3124	Name and address line	C	an..35
3214	Name and address line	C	an..35
3214	Name and address line	C	an..35
3214	Name and address line	C	an..35
C080	PARTY NAME	C
3036	Party name	M	an..35
3036	Party name	C	an..35
etc.

Standard Messages The EDIFACT-syntaxis, as describe above, is not presented to the user. Instead the user works in a user-friendly environment, where he can work with standard forms to create, process and view messages. For example, when a user wants to order some products, he fills in a standard order form, where he can specify the information needed by the system to process the message. The message processor then generates a standard message, which consists of standard EDIFACT-segments. In this example the following segments would be included:

The UNH segment describes the type of message and the type of syntax, in which the message is coded. The BGM segment notifies the message processor that the message begins after this segment. This segment can also contain additional notes to the message. The NAD segment can be used to specify the delivery address and the DTM segment can be used to determine the delivery time and date. Every LIN segment is an order for a specific item. Finally every message is terminated with the UNT segment.

Interchange Protocols

When a standard message has been derived from the original message, the message is put in the mailbox. Because different types of software and hardware react different, both parties need to agree on the way their computers communicate with each other. Therefore they need to have an interchange protocol, which defines a set of rules for message transmission.

One could for example consider direct communication over telephone lines. This has the advantage that the transmission is very secure, but has the disadvantage that both parties must be online every minute. Furthermore the technical implementation of this type of communication with a lot of companies can be very difficult.

Most companies use indirect communication, because this type of communication has the advantage that services of companies, which are specialized in Information Technology, can be used. The service includes the setup of the rather technical and difficult implementation of the infrastructure and enables interchange of messages at any time; even when one party is off-line. The interchange protocol is then determined by the IT-company and usually the same company provides both parties with suitable software.

Computer Networks

As mentioned earlier, computers can be connected directly to each other. But when a large number of companies must be connected to each other, the complexity and controllability is very difficult. That is why computer networks are a good solution to this problem.

There are many types of networks. Therefore, the International Standards Organization (ISO) developed a model, in order to distinguish all these networks, called Open Systems Interconnection (OSI). This model defines seven layers, which represent functions, which have to be fulfilled by a good communication network. The layers are ordered hierarchically, thus every layer is supported by functions provided by the underlying layer. The idea now is that changes in one layer should be possible, without altering or redefining the whole system. The OSI reference model can be found on the next page.

Based on the OSI model three types of networks can be identified:

• Circuit switching networks,
• Packet switching networks, and
• Message switching and handling networks.

Circuit switching networks, such as phone lines and ISDN, only cover the first layer. They only have a physical connection, which can send signals. Packet switching networks, such as PTT's Datanet-1, covers the first three layers. These networks send data line by line (as packets). There is still a direct connection between communicating parties. Message switching and handling networks cover all seven layers. Companies only need to have a connection to the network and do not need to agree on interchange protocols. There is no direct connection in this network, which enables receiving messages off-line.

Source: EDI Handboek [Hoffman, 1989].

Value Added Networks (VAN)

When EDI has been implemented according to the OSI-reference model, then all seven layers are determined. Such a network can also play an important role in the actual information interchange, when such a network provides conversion, operations and check routines on the information itself. Such a network is called a Value Added Network (VAN).

Value Added Networks offer added value in a number of ways:

• They sometimes provide additional services, such as E-mail or Bulletin Boards,
• They provide a high level of security and all year round helpdesk support,
• Many also provide software, consultancy and training,
• They have a wide geographical coverage, many with nodes worldwide,
• They can provide audit trails, so that the sender knows when a message has been received and read,
• They support most communication protocols and most standard data formats.

Nowadays, Value Added Networks are faced with competitive pressures. With the low cost and easy accessibly Internet, these networks really have to show what their added value is. The price to pay for using a VAN is the greatest barrier. That is why Value Added Networks are integrating an infrastructure, which makes it possible to access the Internet without losing the secure transmission of messages. Only then a VAN can justify his price.

Value Added Networks, which can access the Internet, are on the TCP/IP network. This greatly expands the number of services they can provide. This type of network is the basis for Electronic Commerce, which covers any form of computerized buying and selling, both by consumers and from company to company. This form of EDI is called Cyber Assisted Business EDI (CAB-EDI) and is still under development [Raman, 1997].

The usage of a Value Added Network, which supports CAB-EDI, has many advantages. The imago of a company can be improved by a homepage on the WWW. This also enables one to show products and services (see also Category Management), with extensive background information, to the market and replaces a paper-based catalogue. Furthermore electronic ordering (see also Efficient Product Replenishment) can be realized. Most of these techniques however are still under development.

Advantages of EDI

The advantages, which can be achieved by EDI, can be summarized in four categories. These are:

• Less errors,
• Higher speed,
• Lower costs, and
• New services.

Less Errors

In a computerized economy without EDI the occurrence of duplicate information entered in a computer is highly possible. Not only does this consider information, which is completely identical, but one must also think of updated information generated by computers. For example, ICI Chemicals UK estimated that 70% of the information, which is manually entered into computers, is created by other computer systems. [Net, 1993].

Using EDI to retrieve and store information sent by other companies can circumvent entering information manually. Literature states that on the average one error is made on 300 key presses. Furthermore 40 to 50 percent of administrative tasks consist of correcting errors, earlier made in the process [Mollema, 1991]. Even if reality is half this worse, EDI can save a lot money and time.

Besides the typing errors, chances are that errors are made by wrong interpretations. Usage of international standards and detailed agreements on information structures also prohibits this kind of error.

Higher Speed

It is evident that EDI is much faster than mail or fax. In particular, when a lot of messages are being sent over between two parties, the time reduction can be great. The time taken for the order-to-invoice cycle can be cut from around 14 days to three days at Dialcom UK [Mollema, 1991].

Even when just one message is being sent, the direct input can lead more accurate coordination of production processes. This makes just-in-time policies realizable and decreases the lead-time of products. Transport companies even claim that EDI enables them to deliver faster, because the receiving company can prepare on the arrival of the goods, which leads to faster processing.

Lower costs

The initial costs of EDI can be very high, but in most cases these costs are earned back by the benefits of EDI. There is a lot of information interchange between companies: papers for customs, buying orders, delivery orders, insurance papers, etc. Research of the Prodis agency pointed out that manufacturers and retailers send 50 million documents with in total 750 million lines per year. Manufacturers and warehouses send 15 million documents with 100 million lines per year. Finally warehouses and retailers send 7 million documents with 1.100 million lines [Vlist, 1994].

One can imagine that, considering these amounts, a few percent reduction in documentation is satisfactory. It must also be noted that the development in management techniques points out that just-in-time policies are rewarding. Adopting such a policy will only increase the amount of documentation, because less inventory, without EDI, almost always means more paper! Besides that, the speed and accuracy of EDI enables one to adopt just-in-time management.

New Services

The advantages mentioned above offer possibilities for new activities and potential products or services. Internal statistics, lists of debts and credits can automatically be updated, which leads to better control of processes. This can be used for Cyber Assisted Business EDI and to support electronic ordering, such as James (see Efficient Product Replenishment).

The advantages of EDI can be summarized as follows:

Electronic Funds Transfer (EFT)

Electronic Funds Transfer (EFT) is a very young technology, which has been successfully introduced in 1996. This technique enables one to pay with and withdraw electronic money, which is thus not physically available. Dr. David Chaum, managing director of DigiCash invented the first safe and usable system to pay with electronic money, called E-cash.

E-cash makes it possible to pay any amount of money, while other media, like credit cards are meant for large amounts. Because E-cash is transferred electronically, one can pay for a single CD-track or just an article in a newspaper. Therefore, new services and new consumer driven products are possible.

The system is technically very difficult, but easy in usage for the consumer. Like banknotes, E-cash can be withdrawn from and deposited to transaction demand deposit accounts. And like banknotes, one person can transfer possession of a given amount of E-cash to another person. But unlike cash, when a customer pays another customer an electronic bank will play an unobtrusive but essential role.

The next figure shows the two participants in the withdrawal transaction: the bank and a customer. The digital coins that have been withdrawn from the customer's account at the bank are on their way to his PC. When they arrive, they will be stored along with some coins he already had on his hard disk.

Source: DigiCash, 1996.

No physical coins are involved in the actual system of course, but the messages include strings of digits, and each string corresponds to a different digital coin. Each coin has a denomination, or value, so that a purse of digital coins is managed automatically by the E-cash software. It decides which denominations to withdraw and which to spend in particular payments. The E-cash software keeps plenty of 'small change', but will prompt the user to contact the bank in the rare event that more change is needed before the next payment, to restructure its purse of coin denominations.

Now that the customer has some E-cash on his hard drive, he can buy things from a particular shop. After having received a payment request from the shop, the customer can confirm the payment. His E-cash software chooses coins with the desired total value from the purse on his hard disk. Then it removes these coins and sends them over the network to the shop. When the shop receives the coins, the software automatically sends them on to the bank and waits for acceptance before sending the goods to the customer along with a receipt.

To ensure that each coin is used only once, the bank records the serial number of each coin in its spent coin database. If the coin serial number is already recorded, the bank has detected someone trying to spend the coin more than once and informs the shop that it is a worthless copy. If, as will be the usual case, no such serial number has been recorded, the bank stores it at that position and informs the shop that the coin is valid and the deposit is accepted.

In the withdrawal transaction described above, the bank created unique blank digital coins, validated them with its special digital stamp, and supplied them to the customer. This would normally allow the bank, at least in principle, to recognize the particular coins when they are later accepted in a payment. And this would tell the bank exactly which payments were made by the customer.

By using 'blind signatures', the bank can be prevented from recognizing the coins as having come from a particular account. The idea is shown in the next figure. Instead of the bank creating a blank coin, the customer's computer creates the coin itself at random. Then it hides the coin in a special digital envelope and sends it off to the bank. The bank withdraws one dollar from the customer's account and makes its special 'worth-one-dollar' digital validation like an embossed stamp on the envelope before returning it to the customer's computer.

Source: DigiCash, 1996.

Like an emboss, the blind signature mechanism lets the validating signature be applied through the envelope. When the customer's computer removes the envelope, it has obtained a coin of its own choice, validated by the bank's stamp. When he spends the coin, the bank must honor it and accept it as a valid payment because of the stamp. But because the bank is unable to recognize the coin, since it was hidden in the envelope when it was stamped, the bank cannot tell who made the payment. The bank, which signed, can verify that it made the signature, but it cannot link it back to a particular object or owner.

Note that this technology can be integrated with CAB-EDI. This feature makes it possible to only communicate by computer and eliminate any paperwork involved in the process. Other forms of Electronic Funds Transfer, which are widely used, are Credits Cards, PIN cards and Chippers. These cards have proven the advantage of EFT.

The E-cash technology however, offers significant advantages over other forms of electronic payment. Most other existing systems use credit cards, where small value transactions are not cost-effective and the interception of a single message can sometimes lead to substantial losses. In contrast, each E-cash coin is secured by high-level encryption, which includes the name of the payee, making it impossible for any other party to deposit the payment and obtain cash value.

Unlike other systems, E-cash also protects users from losses when their PC crashes. The E-cash recovery procedure will ensure that, even if the coins and other files on the local hard disk are corrupted or destroyed, the user will still be able to retrieve the full value of his E-cash coins.

Database Management

After World War II, Information Technology developed explosively. People began to store a lot of information into computers. But after several months or several years the space occupied by information was nearly exceeding storage capacity. Research showed that a lot of information was not needed in daily business processes and furthermore there were a lot of errors and redundancy in the data. This development led to a new scientific approach of information storage and usage, called Database Management.

Database Management focuses on the creation, maintenance and usage of databases. This concept is very important, because most of the methods discussed in this paper are dependent on accurate information. For example a database with product information, such as prices, inventory levels etc., is very important for Efficient Product Replenishment and Order Support Systems. A database with customer information is crucial for Efficient Product Promotion. Just-in-time management can lead to great losses when wrong or erroneous information is used.

The goal of Database Management is to

• Reduce redundancy in data, such as storage of duplicate records. This leads to less input and storage costs and less probability on erroneous data,
• Create logical data independence, which means that programs can use and alter data, without conflicting with other programs, which use the same data,
• Create physical data independence, which means that programs do not have to be altered, when a different storage technology will be implemented. This enables one to change to a better, cheaper or bigger storage medium,
• Better security against data loss, damages, electrical disturbances and data abuse.

These goals lead to faster response times and search capabilities, correctness and consistency of data, faster development times for new applications. There are three levels of Database Management in order to achieve this [Bots, 1992]. These are:

• Database Administration,
• Data Administration, and
• Information Resource Management.

Database Administration

Database Administration was developed from a technical point of view. In order to create a database some descriptions have to be agreed on, such as description of tables, the number and width of columns, type of data, user accessibility, etc. Moreover, different databases have different restrictions on data and hardware. The organization, in order to create a technical basis for databases to solve these problems, resulted in Database Administration. In order to assist the database administrator in his task, database management systems (DBMS) are used.

The database administrator has the following tasks to accomplish:

• Monitoring the performance. When a lot of users and programs want to access the same information, users have to wait on each other. The administrator determines acceptable priorities for users.
• Securing the system. The administrator has to develop recovery procedures and determine authorization for every user.
• Maintenance of DBMS software and upgrades.
• Maintenance of hardware and technical infrastructure.

It is the database administrator, who can create a link between databases and the use of EDI and Internet.

Data Administration

When a database administrator has laid a technical foundation, a conceptual foundation has to be made. Users are not permitted to access a database directly and most users only use certain parts of the database and information. Therefore graphical forms have to be created in order to decrease the scope of accessibility of users. Examining problems on conceptual levels and providing solutions are tasks of Data Administration.

While the database administrator is fairly independent, the data administrator is not. The data administrator forms the link between users and programmers. Databases can only be value adding when the information can be used efficiently by applications. Some tasks of the data administrator are:

• Development of graphical forms and views.
• Intermediary between users and automation personnel.
• Improving accessibility of information.

It is the data administrator, who plays an important part in Efficient Product Promotion on the Internet and in Order Support Systems.

Information Resource Management

When the data administrator has created views and forms, users can use the database. When users want to have specific information, which is not stored in the database itself, but can be derived from the data, then Information Resource Management comes in the picture. The slogan of Information Resource Management (IRM) is "Information is a production factor for the company". IRM points out that personnel, materials and capital are not the only production factors. Information has become very important in business processes.

Information Resource Management is very important for maintenance and consistency of the database. Some tasks of IRM are:

• Preserve consistency of databases,
• Data-mining. Data mining focuses on deriving information and relationships out of the data, which has been stored in the database.
• Determine quality of information. IRM determines which historical data can be deleted and which data is accurate and acceptable in order to be kept in the database.

If you have any suggestions, comments, or links related to any of my subjects, please send E-mail to: S.Bhulai@few.vu.nl.