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Chapter 10
Electronic Commerce Payments, Order Fulfillment, and Other Support Services
Chapter 10 Pearson Education – Prentice Hall 2
Learning Objectives
1. Understand the shifts that are occurring with regard to noncash and online payments.
2. Discuss the Crucial factors that determine whether a method of e-payment achieves critical mass.
3. Discuss the different categories and potential uses of smart cards.
4. Discuss various online alternatives to credit card payments and identify under what circumstances they are best used.
5. Describe the processes and parties involved in 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 the EC 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.
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The Payment Revolution
Crucial factors that determine whether a method of e-payment achieves critical mass: Independence – must not need specialized SW Interoperability and Portability – compatible with
many platforms Security Anonymity Divisibility – min/max ranges – credit cards will not
do for too small costs Ease of Use Transaction Fees – merchant pays 3% + fixed fee Regulations International support
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Using Payment Cards Online
Payment cards —electronic cards that contain information that can be used for payment purposesCredit cards—provides holder with credit to make
purchases up to a limit fixed by the card issuerCharge cards—balance on a charge card is
supposed to be paid in full upon receipt of monthly statement
Debit card—cost of a purchase drawn directly from holder’s checking account (demand-deposit account)
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Using Payment Cards Online
PROCESSING CARDS ONLINEauthorization
Determines whether a buyer’s card is active and whether the customer has sufficient funds.
settlement
Transferring money from the buyer’s to the merchant’s account.
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Using Payment Cards Online
Three basic configurations for processing online payments. Merchants may: Own the payment software Use a point of sale system (POS) operated by an
acquirerpayment service provider (PSP)
A third-party service connecting a merchant’s EC systems to the appropriate acquirers. PSPs must be registered with the various card associations they support
Use a POS operated by a payment service provider
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Using Payment Cards Online
Fraudulent Card Transactions In the online world, merchants are held
liable for fraudulent transactionsMerchants can incur additional fees and
penalties imposed by the card associationsCosts associated with combating fraudulent
transactions are also the merchant’s responsibility
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Using Payment Cards Online FRAUDULENT CARD TRANSACTIONS
Key tools used in combating fraud:Address Verification System (AVS)
Detects fraud by comparing the address entered on a Web page with the address information on file with 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 the card with the information on file with the cardholder’s issuing bank.
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Using Payment Cards Online
Key tools used in combating fraud (cont.):Negative listsFraud screens and automated
decision modelsCard association payer
authentication servicesManual review
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Smart Cards
SMART CARDAn electronic card containing an embedded microchip that enables predefined operations or the addition, deletion, or manipulation of information on the card.
APPLICATIONS OF SMART CARDSRetail PurchasesTransit Fares
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Smart Cards
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Smart Cards
TYPES OF SMART CARDS contact card
A smart card containing a small gold plate on the face that when inserted in a smart card reader makes contact and passes data to and from the embedded microchip.
contactless (proximity) cardA smart card with an embedded antenna, by means of which data and applications are passed to and from a card reader unit or other device without contact between the card and the card reader.
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Smart Cards
smart card readerActivates and reads the contents of the chip on a smart card, usually passing the information on to a host system.
smart card operating systemSpecial system that handles file management, security, input/output (I/O), and command execution and provides an application programming interface (API) for a smart card.
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Stored-Value Cards
stored-value card
A card that has monetary value loaded onto it and that is usually rechargeableAnyone can obtain a stored-value card
without regard to prior financial standing or having an existing bank account as collateral
The stored-value card market is growing rapidly
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E-Micropayments
e-micropayments
Small online payments, typically under $10. Five basic micropayment models that do not
depend solely or directly on credit or debit cards: 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 interbank clearing of electronic payments for participating financial institutions.
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E-Checking
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Order Fulfillment and Logistics—An Overview
order fulfillmentAll the activities needed to provide customers with their ordered goods and services, including related customer services. back-office operations
The activities that support fulfillment of orders, such as packing, delivery, accounting, inventory management and shipping
front-office operationsThe business processes, such as sales and advertising, that are visible to customers.
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Order Fulfillment and Logistics—An Overview
logistics
The operations involved in the efficient and effective flow and storage of goods, services, and related information from point of origin to point of consumption.
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Order Fulfillment and Logistics—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
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Order Fulfillment and Logistics—An Overview
reverse logistics
The movement of returns from customers to vendors.
Traditional versus EC Logisticse-logistics
The logistics of EC systems, typically involving small parcels sent to many customers’ homes (in B2C).
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Traditional versus EC Logistics
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Order Fulfillment and the Supply Chain
Order fulfillment and order taking are integral parts of the supply chain.
Flows of orders, payments, and materials and parts need to be coordinated among Company’s internal participants External partners
The principles of supply chain management must be considered in planning and managing the order fulfillment process
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Problems in Order Fulfillment and the Supply Chain
Typical Supply Chain ProblemsDemand forecasting is difficultMany of the problems along the EC supply
chain stem from the need to coordinate several activities, internal units, and business partners in the face of uncertainties, caused by demand forecast.
third-party logistics suppliers (3PL)
External, rather than in-house, providers of logistics services.
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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 by
outsourcers 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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Solutions to Order Fulfillment Problems
Solutions to Order Fulfillment Problems Improvements in the Order-Taking ProcessWarehouse management system (WMS)
A software system that helps in managing warehouses.
Automated Warehouses
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Solutions to Order Fulfillment Problems
Other inventory management improvementsReducing inventory and decreasing the
incidence of out-of-stocksMaintaining an inventory of repair itemsPicking items out of inventory in the warehouseCommunicatingManaging product inventoryReceiving items at the warehouse automating
the warehouse
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Solutions to Order Fulfillment Problems
Partnering Efforts and Outsourcing LogisticsComprehensive Logistics Services Outsourcing logistics
Speeding Deliveries - same day, even same hour Handling Returns (Reverse Logistics)
Return the item to the place of purchaseSeparate the logistics of returns from the logistics of
deliveryCompletely outsource returnsAllow the customer to physically drop the returned
item at a collection stationAuction the returned items
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Other EC Support Services
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Order Fulfillment in B2BUsing BPM to improve order
fulfillmentUsing e-marketplaces and
exchanges to ease order fulfillmentOrder fulfillment in services
Solutions to Order Fulfillment Problems
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