Electronic commerce

Re-engineering of business and public sector

From EDI to Extranet

Experiences from Sweden

 

Karl-Erik Andersson

E-mail Keandersson@Svekom.se

 

Background

Sweden started a project in 1995 with the aim to implement electronic commerce for all public purchasing and procurement processes in the public sector and its suppliers. Under the initiative of Senior Management Forum ( an advisory group to the Swedish government concerning ICT-use in public sector) a project was started as a co-operation between Finance department of Sweden, the Swedish Association of Local Authorities and the Federation of County Councils . The first area to start with was to automate the processes of calls off and invoicing under framework agreements between suppliers and public procurers. This is traditionally the EDI-technology. Electronic procurement according to the EU rules for public procurement and different forms of open internet-trade will also now be developed by fast speed.

Co-operation within EU according to the EU:s SIMAP project will be very important in the near future. The aim for SIMAP is to stimulate the implementation of electronic procurement/tendering all over Europe.

In 1998 80 % of all Swedish local authorities are under planning or implementation of electronic commerce. The corresponding figures for Swedish counties is 100 per cent and 50 % for state authorities. The process of implementation is under way even if it has taken a bit longer time than calculated. We have won a lot of experiences which can be useful for other states to study. There are four aspects on electronic commerce which will be discussed in this paper.

1. Technology behind electronic commerce

2. Process change by the aid of electronic commerce

3. Electronic markets

4. Economics of electronic commerce

Technology behind electronic commerce

The technology for electronic commerce has gone from EDI to Extranet. It started during the 80:ies with simple EDI solutions in the automotive industry. The thing was to integrate the information-flows between suppliers and sub-suppliers etc. In the midst of 1990:ies the internet revolution occurred and open simple ways to the global market In the end of the 90:.ies the combination and integration between EDI and Internet-technology starts . Internet has also made it possible to create simple ways for SME:s and smaller user to start electronic commerce.

The Web-EDI is good example of a hybrid between traditional EDI and Internet. The internet-browsers are interfaces to Value-added internetwork services. Simple forms can be used for messages like orders, invoices etc. but at the serviceproviders site these forms will be transformed to EDIFACT messages. Also more on-line oriented EDI will be used eg in dealing with WWW to order good/services and to payment systems. Behind the Web there is often a complicated network o applications which have to be integrated. E.g. an order to a web-site have to be transformed to other places and organisations (ware-houses, factories, transportation- companies etc.)

Process change by the aid of electronic commerce

Electronic commerce creates the options of changing working process within and between organisations. The impacts of the reengineering of process can mean cost-reductions from 40 to 60 percent of certain functions in an organisation. In some cases it will be possible to abolish the invoice and it will save approx. 50% of the process-cost for ordering and the invoice-process.

Therefore it is important to note that Business Process reengineering and Process Network Re-engineering have to follow the implementation of Electronic Commerce, The most interesting changes may be seen in the value-chain (first producer via distributors to the final consumer)

 

Electronic markets

The Web-technology has created a new market-channel. There is an option for enterprises to exposure its products and services on internet. The creation of the electronic marketplace is one driving forces for electronic commerce. The emergence between different technologies i.e. web-technology and ordering, invoice and payment processes) DE is now essential. To get the electronic market to function it is essential that smaller and bigger actors in the market can participate. Special actions may be necessary in order to stimulate the processes. In Sweden there are initiatives taken by regional governments in order to stimulate and speed up dissemination of EC. It is also necessary that intermediary enterprises will be developed as trading partners in order to facilitate SME and others to participate in electronic commerce. These intermediaries may play an important role not only as technical services (like data-communication, electronic messages, integration between applications, encryption and security services) but also as an agent for finding customers and suppliers in the electronic global marketplace.

 

The economics and benefits of electronic commerce

Electronic commerce can create many benefits for both private enterprises and public organisations. Among the benefits are

· lower capital costs by less inventories, faster speed of capital, decreased costs for interests etc.

· reduced administrative costs by simplifying/rationalisation of routines which may save man-power

· exposure to the market of products and services which may help the enterprise to get new customers and markets

· reduced costs for logistics and transportation

· increased competition for procurers and purchaser may decrease prices and improve quality

The mentioned benefits implies that management will be involved in the change process for electronic commerce, It demands a capability to change processes and organisation and it implies a new strategic thinking.

Conclusions

Electronic commerce is a tool for making companies and regions more competitive and it will stimulate economic growth. Therefore it is important that Europe will take the lead in EC. Dismantling legal and other barriers for Electronic Commerce is essential at the Global , European and National level. The EU programmes such as The TenTelcom, the 5 th Framework programme etc. are important and necessary elements in disseminating EC to smaller and mediumsized enterprises in Europe.

The public procurement may be used as a trigger for Electronic Commerce. If public authorities proclaim that the public tendering will be done electronically it will start a rapid process for implementation and which very soon will lower costs for public administration and increase competitiveness of the business sector. A combination of national initiatives in Europe and a more focused work in EU SIMAP project will in a few year create a competitive and leading Europe in Electronic Commerce.