APPROACHES TO MANAGEMENT

1) Empirical Approach
2) Human Behaviour Approach
3) Social System Approach
4) Decision Theory Approach
5) Mathematical Approach
6) Socio-Technical Systems Approach
7) Systems Approach
8) Contingency Approach
9) Operational Approach

EMPIRICAL APPROACH

•Study of managerial experiences and cases(mgt)

•Contributors: Earnest Dale, Mooney & Reiley, urwick.

•Features

–Study of Managerial Experiences

–Managerial experience passed from participationerto students for continuity in knowledge management.

–Study of Successful & failure cases help practicisingmanagers.

–Theoretical research combined with practical experiences.

•Uses

–Learning through experience of others

•Limitations

–No Contribution for the development of management as a discipline

–Situations of past not the same as present.

HUMAN BEHAVIOUR APPROACH

•Organisationas people

–a) Interpersonal Behaviour Approach -Individual Psychology

–b) Group Behaviour Approach -Organisation Behaviour

•Features
–Draws heavily from psychology & sociology.

–Understand human relations.

–Emphasis on greater productivity through motivation & good human relations

–Motivation, leadership, participative management & group dynamics are core of this approach.

•Uses
–Demonstrates how management can be effective by applying knowledge of organisation
behaviour.
•Contributors
–Maslow, Herzberg, Vroom, Mc Cleland, Argyris, Likert, Lewin, Mc Gregor, etc.
•Limitations
–Treating management as equivalent to human behaviour.
–Talks about organisation & organisation behaviourin vague terms.

SOCIAL SYSTEM APPROACH

•Understanding the behaviourof groups & individuals.
•Features
1.Social System, a system of cultural relationship
2.Relationship exist between external and internal environment of the organisation.
3.Formal Organisation-Cultural relationships of social groups
working within the organisation.
4.Co-operation necessary
5.Efforts directed -harmony between goals of organisation& goals of groups.

•Contributors
–Pareto, Chester Barnard
•Uses
–Organisationaldecisions should not be based on desires of one group alone but should reflect
the interests of all the parties.
•Limitations
–Broader than management & its practice
–Overlooks many management concepts principles & techniques that are important to
practisingmanagers.

DECISION THEORY APPROACH

•Manager –Decision maker

•Organisation–Decision making unit.
•Features
–Management is decision making.
–Members of Organisation -decision makers and problem solvers.
–Decision making -control point in management
–Increasing efficiency -the quality of decision
–MIS, process & techniques of decision making are the subject matter of study.
•Contributors
–Simon, Cyert, Forrester, etc.
•Uses
–Tools for making suitable decisions in organisations.
•Limitation
–Does not take the total view of management
–Decision making -one aspect of management

MATHEMATICAL APPROACH

•Management-logical entity
•Actions-Mathematical symbols, Relationships and measurable data.
•Features
1.Problem Solving mechanism with the help of mathematical tools and techniques.
2.Problems Expressed in mathematical symbols.
3.Variables in management –quantified.
4.Scope -Decision making, system analysis & some aspect of human behaviour.
5.Tools -Operations research ,simulation etc.

•Contributors
–Newman, Russell Ackoff, Charles Hitch, etc.
•Uses
–Provided Exactness in management discipline.
•Limitations
–Not a separate school
–Technique in decision making.

SOCIO -TECHNICAL SYSTEMS APPROACH

•Features

–Social & technicalssystems interact. This interaction is important for organisationaleffectiveness.

–Organisation–governed by social laws as well as psychological forces.

–Technical aspects of organisationmodified by the social aspects.

•Contributors

–Trist, Bamforth, Emery etc.

•Uses

–Organisationaleffectiveness depends on looking at people and their interactions and also at the technical
environment in which they operate.

–Change in technology
–Change in social interactions at work place

•Limitations

–Lack of total managerial view

–Concentrate on factory or other production system

–No new contribution

–People aware about the role of technology of the social system of the work place

SYSTEMS APPROACH

•An enterprise

•Man-Made system

•Internal parts

•Achieve established goals

•External parts

•Achieve interplay with its environment

•Manager integrates his available facilities with goal achievement.

•Uses

–Quick Perception

–Better Planning

•Limitations

–Complicated

–Expensive

CONTIGENCY SCHOOL

•In developing management concepts the environment within which the concepts are to be
applied has to be considered.
•Internal environment
–Structure, Processess, Technology.
•External Environment
–Social, Economic, Political etc.
•Features
–Appropriateness of a management technique depends on situation.
–If -Then approach.

OPERATIONAL APPROACH

•Management is a process.

•Universalist/ Classist/ Traditional Approach.

•This school concentrates on the role and functions of managers and distills the principles to be followed by
them.

•Features

–Functions of managers remain same

–Functions of management

–core of good management

–Framework of management

–Principles of management

•Contributors

–Fayol, LyndallUrwick,Harold Koontz, Newman, Mc Farland, Taylor.

•Uses

–Flexible & practical but not universal.

MIS as a support to management

What are Management Information Systems?

Definition: Management Information Systems (MIS) is the term given to the discipline focused on the
integration of computer systems with the aims and objectives on an organisation.

The development and management of information technology tools assists executives and the general workforce
in performing any tasks related to the processing of information. MIS and business systems are especially useful
in the collation of business data and the production of reports to be used as tools for decision making.
Applications of MIS With computers being as ubiquitous as they are today, there's hardly any large business
that does not rely extensively on their IT systems.

However, there are several specific fields in which MIS has become invaluable.

• Strategy Support
While computers cannot create business strategies by themselves they can assist management in understanding
the effects of their strategies, and help enable effective decision-making.

MIS systems can be used to transform data into information useful for decision making. Computers can provide
financial statements and performance reports to assist in the planning, monitoring and implementation of
strategy.

MIS systems provide a valuable function in that they can collate into coherent reports unmanageable volumes of
data that would otherwise be broadly useless to decision makers. By studying these reports decision-makers can
identify patterns and trends that would have remained unseen if the raw data were consulted manually.

MIS systems can also use these raw data to run simulations – hypothetical scenarios that answer a range of
‘what if’ questions regarding alterations in strategy. For instance, MIS systems can provide predictions about
the effect on sales that an alteration in price would have on a product. These Decision Support Systems (DSS)
enable more informed decision making within an enterprise than would be possible without MIS systems.

• Data Processing

Not only do MIS systems allow for the collation of vast amounts of business data, but they also provide a
valuable time saving benefit to the workforce. Where in the past business information had to be manually
processed for filing and analysis it can now be entered quickly and easily onto a computer by a data processor,
allowing for faster decision making and quicker reflexes for the enterprise as a whole.

Management by Objectives

While MIS systems are extremely useful in generating statistical reports and data analysis they can also be of
use as a Management by Objectives (MBO) tool.

MBO is a management process by which managers and subordinates agree upon a series of objectives for the
subordinate to attempt to achieve within a set time frame. Objectives are set using the SMART ratio: that is,
objectives should be Specific, Measurable, Agreed, Realistic and Time-Specific.

The aim of these objectives is to provide a set of key performance indicators by which an enterprise can judge
the performance of an employee or project. The success of any MBO objective depends upon the continuous
tracking of progress.

In tracking this performance it can be extremely useful to make use of an MIS system. Since all SMART
objectives are by definition measurable they can be tracked through the generation of management reports to be
analysed by decision-makers.

Benefits of MIS

The field of MIS can deliver a great many benefits to enterprises in every industry. Expert organisations such as
the Institute of MIS along with peer reviewed journals such as MIS Quarterly continue to find and report new
ways to use MIS to achieve business objectives.

Core Competencies

Every market leading enterprise will have at least one core competency – that is, a function they perform better
than their competition. By building an exceptional management information system into the enterprise it is
possible to push out ahead of the competition. MIS systems provide the tools necessary to gain a better
understanding of the market as well as a better understanding of the enterprise itself.

Enhance Supply Chain Management

Improved reporting of business processes leads inevitably to a more streamlined production process. With better
information on the production process comes the ability to improve the management of the supply chain,
including everything from the sourcing of materials to the manufacturing and distribution of the finished
product.

Change management
Change management is a structured approach to transitioning individuals, teams, and organizations from a
current state to a desired future state. Change management (or change control) is the process during which the
changes of a system are implemented in a controlled manner by following a pre-defined framework/model with,
to some extent, reasonable modifications [1].

In project management, change management refers to a project management process where changes to a project
are formally introduced and approved.[2].

The field of change management grew from the recognition that organizations are composed of people. And the
behaviors of people make up the outputs of an organization.

Enterprise resource planning

nterprise resource planning (ERP) is an integrated computer-based system used to manage internal and
external resources including tangible assets, financial resources, materials, and human resources. It is a software
architecture whose purpose is to facilitate the flow of information between all business functions inside the
boundaries of the organization and manage the connections to outside stakeholders. Built on a centralized
database and normally utilizing a common computing platform, ERP systems consolidate all business
operations into a uniform and enterprise wide system environment.[1]

An ERP system can either reside on a centralized server or be distributed across modular hardware and software
units that provide "services" and communicate on a local area network. The distributed design allows a business
to assemble modules from different vendors without the need for the placement of multiple copies of complex,
expensive computer systems in areas which will not use their full capacity

ERP Components

Transactional Backbone

• Financials
• Distribution
• Human Resources
• Product lifecycle management

Advanced Applications

• Customer Relationship Management (CRM)

• Supply chain management
 o Purchasing
o Manufacturing
o Distribution
• Warehouse Management System

Management Portal/Dashboard

• Decision Support System

These modules can exist in a complete system or utilized in an ad-hoc fashion

Implementation

Businesses have a wide scope of applications and processes throughout their functional units; producing ERP
software systems that are typically complex and usually impose significant changes on staff work practices.[13]
Implementing ERP software is typically too complex for "in-house" skill, so it is desirable and highly advised to
hire outside consultants who are professionally trained to implement these systems. This is typically the most
cost effective way. There are three types of services that may be employed for - Consulting, Customization,
Support.[13] The length of time to implement an ERP system depends on the size of the business, the number of
modules, the extent of customization, the scope of the change and the willingness of the customer to take
ownership for the project. ERP systems are modular, so they don't all need be implemented at once. It can be
divided into various stages, or phase-ins. The typical project is about 14 months and requires around 150
consultants.[14] A small project (e.g., a company of less than 100 staff) can be planned and delivered within 3–9
months; however, a large, multi-site or multi-country implementation can take years.[citation needed] The length of
the implementations is closely tied to the amount of customization desired.[14]

To implement ERP systems, companies often seek the help of an ERP vendor or of third-party consulting
companies. These firms typically provide three areas of professional services: consulting; customization; and
support. The client organization can also employ independent program management, business analysis, change
management, and UAT specialists to ensure their business requirements remain a priority during
implementation.[citation needed]

Data migration is one of the most important activities in determining the success of an ERP implementation.
Since many decisions must be made before migration, a significant amount of planning must occur.
Unfortunately, data migration is the last activity before the production phase of an ERP implementation, and
therefore receives minimal attention due to time constraints. The following are steps of a data migration strategy
that can help with the success of an ERP implementation:[15]

1. Identifying the data to be migrated

2. Determining the timing of data migration
3. Generating the data templates
4. Freezing the tools for data migration
5. Deciding on migration related setups
6. Deciding on data archiving

[edit] Process preparation

ERP vendors have designed their systems around standard business processes, based upon best business
practices. Different vendor(s) have different types of processes but they are all of a standard, modular nature.
Firms that want to implement ERP systems are consequently forced to adapt their organizations to standardized
processes as opposed to adapting the ERP package to the existing processes.[16] Neglecting to map current
business processes prior to starting ERP implementation is a main reason for failure of ERP projects.[17] It is
therefore crucial that organizations perform a thorough business process analysis before selecting an ERP
vendor and setting off on the implementation track. This analysis should map out all present operational
processes, enabling selection of an ERP vendor whose standard modules are most closely aligned with the
established organization. Redesign can then be implemented to achieve further process congruence. Research
indicates that the risk of business process mismatch is decreased by:

• linking each current organizational process to the organization's strategy;

• analyzing the effectiveness of each process in light of its current related business
capability;
• understanding the automated solutions currently implemented.[18][19]

ERP implementation is considerably more difficult (and politically charged) in organizations structured into
nearly independent business units, each responsible for their own profit and loss, because they will each have
different processes, business rules, data semantics, authorization hierarchies and decision centers.[20] Solutions
include requirements coordination negotiated by local change management professionals or, if this is not
possible, federated implementation using loosely integrated instances (e.g. linked via Master Data Management)
specifically configured and/or customized to meet local needs.[citation needed]

A disadvantage usually attributed to ERP is that business process redesign to fit the standardized ERP modules
can lead to a loss of competitive advantage. While documented cases exist where this has indeed materialized,
other cases show that following thorough process preparation ERP systems can actually increase sustainable
competitive advantage

Advantages

In the absence of an ERP system, a large manufacturer may find itself with many software applications that
cannot communicate or interface effectively with one another. Tasks that need to interface with one another
may involve:[citation needed]

• ERP systems connect the necessary software in order for accurate forecasting to be done.
This allows inventory levels to be kept at maximum efficiency and the company to be
more profitable.
• Integration among different functional areas to ensure proper communication, productivity
and efficiency
• Design engineering (how to best make the product)
• Order tracking, from acceptance through fulfillment
• The revenue cycle, from invoice through cash receipt
• Managing inter-dependencies of complex processes bill of materials
• Tracking the three-way match between purchase orders (what was ordered), inventory
receipts (what arrived), and costing (what the vendor invoiced)
• The accounting for all of these tasks: tracking the revenue, cost and profit at a granular
level.

ERP Systems centralize the data in one place. Benefits of this include:

• Eliminates the problem of synchronizing changes between multiple systems -

consolidation of finance, marketing and sales, human resource, and manufacturing
applications
• Permits control of business processes that cross functional boundaries
• Provides top-down view of the enterprise (no "islands of information"), real time
information is available to management anywhere, anytime to make proper decisions.
• Reduces the risk of loss of sensitive data by consolidating multiple permissions and
security models into a single structure.
 • Shorten production leadtime and delivery time
• Facilitating business learning, empowering, and building common visions

Some security features are included within an ERP system to protect against both outsider crime, such as
industrial espionage, and insider crime, such as embezzlement. A data-tampering scenario, for example, might
involve a disgruntled employee intentionally modifying prices to below-the-breakeven point in order to attempt
to interfere with the company's profit or other sabotage. ERP systems typically provide functionality for
implementing internal controls to prevent actions of this kind. ERP vendors are also moving toward better
integration with other kinds of information security tools.[23]

Business process reengineering

Business Process Reengineering (BPR) is a management practice that aims to improve the efficiency of the
business process. The key to BPR is for organizations to look at their business processes from a "clean slate"
perspective and determine how they can best construct these processes to improve how they conduct business.
Reengineering is a fundamental rethinking and radical redesign of business processes to achieve dramatic
improvements in cost, quality, speed, and service. BPR combines a strategy of promoting business innovation
with a strategy of making major improvements to business processes so that a company can become a much
stronger and more successful competitor in the marketplace.

Re-engineering is the basis for many recent developments in management. The cross-functional team, for
example, has become popular because of the desire to re-engineer separate functional tasks into complete cross-
functional processes. Also, many recent management information systems developments aim to integrate a wide
number of business functions. Enterprise resource planning, supply chain management, knowledge management
systems, groupware and collaborative systems, Human Resource Management Systems and customer
relationship management systems all owe a debt to re-engineering theory.

Business Process Reengineering is also known as Business Process Redesign, Business Transformation, or
Business Process Change Management.

Research & Methodology

Although the labels and steps differ slightly, the early methodologies that were rooted in IT-centric BPR
solutions share many of the same basic principles and elements. The following outline is one such model, based
on the PRLC (Process Reengineering Life Cycle) approach developed by Guha.[10].
Simplified schematic outline of using a business process approach, examplified for pharmceutical R&D:
1. Structural organization with functional units
2. Introduction of New Product Development as cross-functional process
3. Re-structuring and streamlining activities, removal of non-value adding tasks

Benefiting from lessons learned from the early adopters, some BPR practitioners advocated a change in
emphasis to a customer-centric, as opposed to an IT-centric, methodology. One such methodology, that also
incorporated a Risk and Impact Assessment to account for the impact that BPR can have on jobs and operations,
was described by Lon Roberts (1994). Roberts also stressed the use of change management tools to proactively
address resistance to change—a factor linked to the demise of many reengineering initiatives that looked good
on the drawing board.

Some items to use on a process analysis checklist are: Reduce handoffs, Centralize data, Reduce delays, Free
resources faster, Combine similar activities. Also within the management consulting industry, a significant
number of methodological approaches have been developed.[11]

MIS AND BPR

nformation technology (IT) has historically played an important role in the reengineering concept. It is
considered by some as a major enabler for new forms of working and collaborating within an organization and
across organizational borders.

Early BPR literature [9] identified several so called disruptive technologies that were supposed to challenge
traditional wisdom about how work should be performed.
 • Shared databases, making information available at many places
• Expert systems, allowing generalists to perform specialist tasks
• Telecommunication networks, allowing organizations to be centralized and decentralized at the same
time
• Decision-support tools, allowing decision-making to be a part of everybody's job
• Wireless data communication and portable computers, allowing field personnel to work office
independent
• Interactive videodisk, to get in immediate contact with potential buyers
• Automatic identification and tracking, allowing things to tell where they are, instead of requiring to be
found
• High performance computing, allowing on-the-fly planning and revisioning

In the mid 1990s, especially workflow management systems were considered as a significant contributor to
improved process efficiency. Also ERP (Enterprise Resource Planning) vendors, such as SAP, JD Edwards,
Oracle, PeopleSoft, positioned their solutions as vehicles for business process redesign and improvement.

CRM BENEFITS AND CHALLENGES

Benefits

These tools have been shown to help companies attain these objectives:[2]

• Streamlined sales and marketing processes

• Higher sales productivity
• Added cross-selling and up-selling opportunities
• Improved service, loyalty, and retention
• Increased call center efficiency
• Higher close rates
• Better profiling and targeting
• Reduced expenses
• Increased market share
• Higher overall profitability
• Marginal costing
• Creates communication

[edit] Challenges

Tools and workflows can be complex to implement, especially for large enterprises. Previously these tools were
generally limited to contact management: monitoring and recording interactions and communications. Software
solutions then expanded to embrace deal tracking, territories, opportunities, and at the sales pipeline itself. Next
came the advent of tools for other client-facing business functions, as described below. These technologies have
been, and still are, offered as on-premises software that companies purchase and run on their own IT
infrastructure. Perhaps the most notable trend has been the growth of tools delivered via the Web, also known as
cloud computing and software as a service (SaaS). In contrast with traditional on-premises software, cloud-
computing applications are sold by subscription, accessed via a secure Internet connection, and displayed on a
Web browser. Companies don’t incur the initial capital expense of purchasing software; neither must they buy
and maintain IT hardware to run it on.

Despite all this, many companies are still not fully leveraging these tools and services to align marketing, sales,
and service to best serve the enterprise.[3] Often, implementations are fragmented; isolated initiatives by
individual departments to address their own needs. Systems that start disunited usually stay that way: Siloed
thinking and decision processes frequently lead to separate and incompatible systems, and dysfunctional
processes.

Supply chain management problems

Supply chain management must address the following problems:

• Distribution Network Configuration: number, location and network missions of

suppliers, production facilities, distribution centers, warehouses, cross-docks and
customers.
• Distribution Strategy: questions of operating control (centralized, decentralized or
shared); delivery scheme, e.g., direct shipment, pool point shipping, cross docking, DSD
(direct store delivery), closed loop shipping; mode of transportation, e.g., motor carrier,
including truckload, LTL, parcel; railroad; intermodal transport, including TOFC (trailer on
flatcar) and COFC (container on flatcar); ocean freight; airfreight; replenishment strategy
(e.g., pull, push or hybrid); and transportation control (e.g., owner-operated, private
carrier, common carrier, contract carrier, or 3PL).
• Trade-Offs in Logistical Activities: The above activities must be well coordinated in
order to achieve the lowest total logistics cost. Trade-offs may increase the total cost if
only one of the activities is optimized. For example, full truckload (FTL) rates are more
economical on a cost per pallet basis than less than truckload (LTL) shipments. If,
however, a full truckload of a product is ordered to reduce transportation costs, there will
be an increase in inventory holding costs which may increase total logistics costs. It is
therefore imperative to take a systems approach when planning logistical activities. These
trade-offs are key to developing the most efficient and effective Logistics and SCM
strategy.
• Information: Integration of processes through the supply chain to share valuable
information, including demand signals, forecasts, inventory, transportation, potential
collaboration, etc.
• Inventory Management: Quantity and location of inventory, including raw materials,
work-in-progress (WIP) and finished goods.
• Cash-Flow: Arranging the payment terms and methodologies for exchanging funds across
entities within the supply chain.

Supply chain execution means managing and coordinating the movement of materials, information and funds
across the supply chain. The flow is bi-directional.

BENEFITS

a) Customer service management process

Customer Relationship Management concerns the relationship between the organization and its customers.
Customer service is the source of customer information. It also provides the customer with real-time
information on scheduling and product availability through interfaces with the company's production and
distribution operations. Successful organizations use the following steps to build customer relationships:

• determine mutually satisfying goals for organization and customers

• establish and maintain customer rapport
• produce positive feelings in the organization and the customers

b) Procurement process
Strategic plans are drawn up with suppliers to support the manufacturing flow management process and the
development of new products. In firms where operations extend globally, sourcing should be managed on a
global basis. The desired outcome is a win-win relationship where both parties benefit, and a reduction in time
required for the design cycle and product development. Also, the purchasing function develops rapid
communication systems, such as electronic data interchange (EDI) and Internet linkage to convey possible
requirements more rapidly. Activities related to obtaining products and materials from outside suppliers involve
resource planning, supply sourcing, negotiation, order placement, inbound transportation, storage, handling and
quality assurance, many of which include the responsibility to coordinate with suppliers on matters of
scheduling, supply continuity, hedging, and research into new sources or programs.

c) Product development and commercialization

Here, customers and suppliers must be integrated into the product development process in order to reduce time
to market. As product life cycles shorten, the appropriate products must be developed and successfully launched
with ever shorter time-schedules to remain competitive. According to Lambert and Cooper (2000), managers of
the product development and commercialization process must:

1. coordinate with customer relationship management to identify customer-articulated needs;

2. select materials and suppliers in conjunction with procurement, and
3. develop production technology in manufacturing flow to manufacture and integrate into the best supply
chain flow for the product/market combination.

d) Manufacturing flow management process

The manufacturing process produces and supplies products to the distribution channels based on past forecasts.
Manufacturing processes must be flexible to respond to market changes and must accommodate mass
customization. Orders are processes operating on a just-in-time (JIT) basis in minimum lot sizes. Also, changes
in the manufacturing flow process lead to shorter cycle times, meaning improved responsiveness and efficiency
in meeting customer demand. Activities related to planning, scheduling and supporting manufacturing
operations, such as work-in-process storage, handling, transportation, and time phasing of components,
inventory at manufacturing sites and maximum flexibility in the coordination of geographic and final
assemblies postponement of physical distribution operations.

e) Physical distribution

This concerns movement of a finished product/service to customers. In physical distribution, the customer is the
final destination of a marketing channel, and the availability of the product/service is a vital part of each
channel participant's marketing effort. It is also through the physical distribution process that the time and space
of customer service become an integral part of marketing, thus it links a marketing channel with its customers
(e.g., links manufacturers, wholesalers, retailers).

f) Outsourcing/partnerships

This is not just outsourcing the procurement of materials and components, but also outsourcing of services that
traditionally have been provided in-house. The logic of this trend is that the company will increasingly focus on
those activities in the value chain where it has a distinctive advantage, and outsource everything else. This
movement has been particularly evident in logistics where the provision of transport, warehousing and
inventory control is increasingly subcontracted to specialists or logistics partners. Also, managing and
controlling this network of partners and suppliers requires a blend of both central and local involvement. Hence,
strategic decisions need to be taken centrally, with the monitoring and control of supplier performance and day-
to-day liaison with logistics partners being best managed at a local level.
g) Performance measurement

Experts found a strong relationship from the largest arcs of supplier and customer integration to market share
and profitability. Taking advantage of supplier capabilities and emphasizing a long-term supply chain
perspective in customer relationships can both be correlated with firm performance. As logistics competency
becomes a more critical factor in creating and maintaining competitive advantage, logistics measurement
becomes increasingly important because the difference between profitable and unprofitable operations becomes
more narrow. A.T. Kearney Consultants (1985) noted that firms engaging in comprehensive performance
measurement realized improvements in overall productivity. According to experts, internal measures are
generally collected and analyzed by the firm including

1. Cost
2. Customer Service
3. Productivity measures
4. Asset measurement, and
5. Quality.

External performance measurement is examined through customer perception measures and "best practice"
benchmarking, and includes 1) customer perception measurement, and 2) best practice benchmarking.

Components of Supply Chain Management are 1. Standardization 2. Postponement 3. Customization

APPLICATION OF E_ COMMERCE

Business applications

Some common applications related to electronic commerce are the following:

• Email
• Enterprise content management
• Instant messaging
• Newsgroups
• Online shopping and order tracking
• Online banking
• Online office suites
• Domestic and international payment systems
• Shopping cart software
• Teleconferencing
• Electronic tickets

ELECTRONIC PAYMENT

When it comes to payment options, nothing is more convenient than electronic payment. You don't have to
write a check, swipe a credit card or handle any paper money; all you have to do is enter some information into
your Web browser and click your mouse. It's no wonder that more and more people are turning to electronic
payment -- or e-payment -- as an alternative to sending checks through the mail.

In this article, we'll look at the types of electronic payment, discuss its benefits and limitations and explain how
to add e-payment capability to your Web site.

Methods and Types of Electronic Payment

An electronic payment is any kind of non-cash payment that doesn't involve a paper check. Methods of
electronic payments include credit cards, debit cards and the ACH (Automated Clearing House) network. The
ACH system comprises direct deposit, direct debit and electronic checks (e-checks).

For all these methods of electronic payment, there are three main types of transactions:

1. A one-time customer-to-vendor payment is commonly used when you shop online at an e-

commmerce site, such as Amazon. You click on the shopping cart icon, type in your credit card
information and click on the checkout button. The site processes your credit card information and sends
you an e-mail notifiying you that your payment was received. On some Web sites, you can use an e-
check instead of a credit card. To pay by e-check, you type in your account number and your bank's
routing number. The vendor authorizes payment through the customer's bank, which then either initiates
an electronic funds transfer (EFT) or prints a check and mails it to the vendor.
2. You make a recurring customer-to-vendor payment when you pay a bill through a regularly
scheduled direct debit from your checking account or an automatic charge to your credit card. This type
of payment plan is commonly offered by car insurance companies, phone companies and loan
management companies. Some long-term contracts (like those at gyms or fitness centers) require this
type of automated payment schedule.
3. To use automatic bank-to-vendor payment, your bank must offer a service called online bill pay. You
log on to your bank's Web site, enter the vendor's information and authorize your bank to electronically
transfer money from your account to pay your bill. In most cases, you can choose whether to do this
manually for each billing cycle or have your bills automatically paid on the same day each month.

Benefits of Electronic Payment

Electronic payment is very convenient for the consumer. In most cases, you only need to enter your account
information -- such as your credit card number and shipping address -- once. The information is then stored in a
database on the retailer's Web server. When you come back to the Web site, you just log in with your username
and password. Completing a transaction is as simple as clicking your mouse: All you have to do is confirm your
purchase and you're done.

Electronic payment lowers costs for businesses. The more payments they can process electronically, the less
they spend on paper and postage. Offering electronic payment can also help businesses improve customer
retention. A customer is more likely to return to the same e-commerce site where his or her information has
already been entered and stored

With all the benefits of electronic payment, it's no wonder that its use is on the rise. More than 12 billion ACH
payments were made in 2004, a 20 percent increase from 2003 [ref]. The 2004 Federal Reserve Payments Study
noted that from 2000 to 2003, electronic payments grew as payment by check declined, which suggests that
electronic payments are replacing checks.

In order to better serve their customers, banks are swiftly moving to offer online bill pay services. Grant
Thornton's 2005 survey of bank executives found that 65 percent of community banks and 94 percent of large
banks offer 24/7 online bill payment [ref]. Most of these services are free to members and coordinate easily
with personal software programs such as Quicken or MS Money. Alternatively, consumers can subscribe to
online bill pay services such as Paytrust or Yahoo! Bill Pay. These services charge a monthly fee in exchange
for the convenience of paperless bill paying.