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Chapter 11
Electronic Commerce Payments, Order Fulfillment, and Other Support Services

Learning Objectives
1. Understand the shifts that are occurring with regard to noncash and online payments. 2. Discuss the players and processes involved in using credit cards online. 3. Discuss the different categories and potential uses of smart cards. 4. Discuss various online alternatives to credit card payments and identify under 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 Interoperability and Portability Security Anonymity Divisibility Ease of Use Transaction Fees Regulations
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Using Payment Cards Online

payment card Electronic card that contains information that can be used for payment purposes.
Credit cards Charge cards Debit cards

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Using Payment Cards Online

PROCESSING CARDS ONLINE
authorization Determines whether a buyers card is active and whether the customer has sufficient funds. settlement Transferring money from the buyers to the merchants account. payment service provider (PSP) A third-party service connecting a merchants EC systems to the appropriate acquirers; PSPs must be registered with the various card associations they support.
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Using Payment Cards Online

FRAUDULENT CARD TRANSACTIONS
Address Verification System (AVS) Detects fraud by comparing the address entered on a Web page with the address information on file with the cardholders 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 cardholders issuing bank.
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Smart Cards
smart card An electronic card containing an embedded microchip that enables predefined operations or the addition, deletion, or manipulation of information on the card.

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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) card A 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 reader Activates and reads the contents of the chip on a smart card, usually passing the information on to a host system. smart card operating system Special system that handles file management, security, input/output (I/O), and command execution and provides an application programming interface (API) for a smart card.
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Smart Cards
APPLICATIONS OF SMART CARDS
Retail Purchases Transit Fares

SECURING SMART CARDS

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Stored-Value Cards
stored-value card A card that has monetary value loaded onto it and that usually is rechargeable.

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E-Micropayments
e-micropayments Small online payments, typically under $5. Five basic micropayment models:
Aggregation Direct payment Stored value Subscriptions 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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B2B Electronic Payments

CURRENT B2B PAYMENT PRACTICES enterprise invoice presentment and payment (EIPP) Presenting and paying B2B invoices online.

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B2B Electronic Payments

EIPP Models
Seller Direct Buyer Direct Consolidator

EIPP Options
ACH Network purchasing cards (p-cards) Special-purpose payment cards issued to a companys employees to be used solely for purchasing nonstrategic materials and services up to a preset dollar limit.
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B2B Electronic Payments

Fedwire letter of credit (L/C) A written agreement by a bank to pay the seller, on account of the buyer, a sum of money upon presentation of certain documents.

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Order Fulfillment and Logistics An Overview

order fulfillment All 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 operations The 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 PROCESS
Step 1: Making sure the customer will pay Step 2: Checking for in-stock availability Step 3: Arranging shipments Step 4: Insurance Step 5: Replenishment Step 6: In-house production Step 7:Use contractors Step 8: Contacts with customers Step 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. Order Fulfillment and the Supply Chain Traditional versus EC Logistics
e-logistics The logistics of EC systems, typically involving small parcels sent to many customers homes (in B2C).
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Addressing Problems in Order Fulfillment

TYPICAL SUPPLY CHAIN PROBLEMS
third-party logistics suppliers (3PL) External, rather than in-house, providers of logistics services.

SOLUTIONS TO ORDER FULFILLMENT PROBLEMS IMPROVEMENTS IN THE ORDERTAKING PROCESS

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Addressing Problems in Order Fulfillment

Warehouse management system (WMS) A software system that helps in managing warehouses.
Other Inventory Management Improvements Automated Warehouses

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Addressing Problems in Order Fulfillment

PARTNERING EFFORTS AND OUTSOURCING LOGISTICS
Comprehensive Logistics Services

SPEEDING DELIVERIES

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Addressing Problems in Order Fulfillment

HANDLING RETURNS (REVERSE LOGISTICS)
Return the item to the place of purchase Separate the logistics of returns from the logistics of delivery Completely outsource returns Allow the customer to physically drop the returned item at a collection station Auction the returned items
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Addressing Problems in Order Fulfillment

ORDER FULFILLMENT IN B2B
Using BPM to Improve Order Fulfillment

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Addressing Problems in Order Fulfillment

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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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Other EC Support Services

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Other EC Support Services

IT OUTSOURCING AND APPLICATION SERVICE PROVIDERS
application service provider (ASP) An agent or vendor who assembles the functions needed by enterprises and packages them with outsourced development, operation, maintenance, and other services.

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Managerial Issues
1. What B2C payment methods should we use? 2. What B2B payment methods should we use? 3. Should we use an in-house payment mechanism or outsource it? 4. How secure are e-payments?
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Managerial Issues
5. Have we planned for order fulfillment? 6. How should we handle returns? 7. Do we want alliances in order fulfillment? 8. Should we employ outside consulting or outsourcing for our EC initiatives?

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Summary
1. 2. 3. 4. 5. 6. Payment revolution. Using payment cards online. Smart cards. Stored-value cards. E-micropayments. E-checking.

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Summary
7. B2B electronic payments. 8. Order fulfillment and logistics. 9. Addressing problems in order fulfillment. 10.Other EC support services.

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All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

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