Integration of a B2B Web Portal and an ERP System: the Case of a Trade Company

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1 Integration of a B2B Web Portal and an ERP System: the Case of a Trade Company Tatjana Huber 1, Marko Svetina 1, Jože Zupančič 2 Merkur d.d., C. na Okroglo 7, Naklo, Slovenia tatjana.huber@merkur.si, marko.svetina@merkur.si University of Maribor, Faculty of Organizational Sciences Kidričeva cesta 55a, Kranj, Slovenia joze.zupancic@fov.uni-mb.si Abstract: The web portal Merkur Partner provides the external user with insight into specific business information over the Internet to the external users. This paper a case study discusses the integration between the B2B web portal Merkur Partner and other information systems in the company Merkur, d.d. Data presented in the web portal, is already stored in other companies' information systems, therefore it is useful to integrate these systems to increase business performance. The interchange of data between the systems is performed automatically, without human intervention. The most important data flows between the systems are article data, orders and inquiries, partners and their users data, sub-catalogues and contact persons' information in Merkur. In this paper major problems of integration of web portal Merkur Partner with other information systems in Merkur are presented. The paper gives directions for the further development of the web portal and organizational measures needed for efficient web portal management. Keywords: information system, integration, web portal, B2B, ERP, EDI. 1 Introduction An information presenting Web portal is a site that provides users with on-line information and information-related services, such as search functions, community building features, commercial offers and personal productivity applications. For potential customers, Web portals are a platform that enables them to become acquainted with an organization, to explore goods and services and to make inquiries. For existing customers, Web portals are a place to become more familiar with the organization, to obtain product and/or service related information, to request services, and to exchange information with peer users of the same services or goods (Yang et al., 2005). During the past decade, an increasing number of organizations have established Web portals to complement, substitute for, or extend their existing service to users. Many companies have incorporated a portal structure for its business, or at least, begun to explore the realm of possibilities with portal technology (Rose, 2003). Portals are growing in maturity and scope (Tinham, 2003). Service quality and measures of portal use have been investigated (e.g. Yang et al., 2005, Telang and Mukhopadhyay 2004), to improve the services performance of portals. One of the biggest challenges facing companies when building a Web portal is finding a way to share data across different legacy systems, ERP systems and web based applications (Vijayan 2003). Our paper describes and analyses the integration of the Web portal Merkur Partner with other information systems (in particular the ERP-based KIS commercial information system) in the company Merkur. SYSTEMS INTEGRATION

2 TATJANA HUBER, MARKO SVETINA 1, JOŽE ZUPANČIČ 2 The company Merkur, d.d. and it s B2B business activities The company Merkur, d.d. is a wholesale and retail company trading with technical products. The basic processes in a trade company are: purchasing, warehousing and sales of goods. Merkur s sales programme consists of different items, which are purchased from about suppliers. Business relations with top suppliers are regulated with purchasing contracts. About 97% of total purchase is carried out with these suppliers. With top 200 suppliers, 80% of total purchasing is performed. Merkur produces about purchase documents with items annually. Wholesale sales are processed in Wholesale, Retail and Sales to Foreign Markets departments. Sales to end consumer are carried out only from the Retail department. Wholesale sales represent about 75% of total Merkur revenues. Merkur has business relations with wholesale buyers / businesses. The Wholesale Department takes care of the biggest buyers, The Sales to Foreign Markets Department is in charge of buyers from outside Slovenia, all other smaller Slovenian buyers are served by the Retail Department. The Wholesale Department processes more than sales documents with items each year. Considering this data it is clear that business relations between Merkur and its partners in the B2B segment are very close and the frequency of data interchange is high; therefore, it is necessary to computerize the processes in order to speed them up, cut costs and eliminate errors. 3 Strategic development programme Merkur s E-business with Companies B2B Merkur s business strategy is brought to effect through strategic development programmes which usually last for several years. Strategic development programmes are structured in projects, which makes the resolution of complex problems with partial step-by-step solutions possible. One of Merkur s strategic development programmes is called Electronic business between Merkur and partners B2B. The programme has the following objectives: - Possibility of permanent commercial business between Merkur and its partners on 24x7 basis. - Possibility of electronic business with suppliers and implementation of e-business with supplierscontractors (60% of purchase through e-business solutions). - Possibility of electronic business with buyers and implementation of e-business with all interested buyers. - Implementation of electronic catalogue system with ordering feature for buyers. - Implementation of the system for management of rich data content. - Use of up-to-date information and communication technology, web oriented applications and e-business standards. - Readiness of Merkur for cooperation in global electronic distribution systems. All fields of e-b2b cannot be implemented at one time; therefore the system must be developed stepby-step. Every project is assigned a priority, based on an analysis of available resources and technological possibilities. Higher priorities are assigned to projects which will bring higher business effects. With the implementation of new system, it is essential to integrate it with existing systems Suggested model of e-b2b system An overview of the suggested e-b2b solution and it s installation in Merkur s business system is shown in Picture 1. For e-b2b, two applications were developed: 298 SYSTEMS INTEGRATION 2005

3 INTEGRATION OF A B2B WEB PORTAL AND AN ERP SYSTEM: THE CASE OF A TRADE COMPANY The Merkur Partner Web portal: this system was designed for business buyers of Merkur. In the portal they can find accurate information on sales programs, sales conditions (prices), stocks and contact persons in Merkur. Buyers also have the possibility of ordering or inquiring and insight to order history. EDI electronic data interchange: the system was designed for suppliers and major buyers, with whom Merkur interchanges documents (orders, order confirmation, shipping list, invoices) in standardized electronic form directly from the partner s information system to Merkur s information system or vice versa. Picture 1: Merkur eb2b system (integrated with the KIS ERP system) 4 Commercial information system (KIS) Merkur The Commerce Department is the core organizational part of Merkur. It carries out purchase, logistic and sales business processes, which are supported by several interconnected information systems. The most important information system is called Commercial Information System (KIS). KIS plays the role of an ERP system in Merkur and is used by almost users performing operational business transactions. KIS is the core information system, which must be highly capable, reliable and available. KIS is based on Oracle database and application technology and is developed by the Merkur IT Department. Merkur IT Department develops the core information systems; therefore, the business processes can be adapted to the needs of different product groups, business strategies, selling channels and markets very quickly. KIS supports the following key business processes in Merkur: - Codebook management SYSTEMS INTEGRATION

4 TATJANA HUBER, MARKO SVETINA 1, JOŽE ZUPANČIČ - In trade organizations different codebooks are the base for efficient business process performance. In Merkur many codebooks are managed. Among them, the goods register and business partner register are the most important. - The goods register includes an item register and goods classification register. Every item has over 100 attributes. The goods classification register is structured into three levels: on first level there are 70 lines, which are divided into about 600 groups on the second level and into about further classes on the third level. - The business partner register includes business partners, goods receivers and invoice receivers. Each business partner has over 80 attributes. - Purchase - The purchase process in KIS is divided into goods demand identification, inquiring and ordering to supplier, price calculation and supplier invoice identification subprocesses. - Logistics - On the field of logistics, KIS supports inventory reviews, warehouse transactions such as receiving goods and shipping goods. - Sales - KIS enables sales of goods to organizations. Sales of goods to end consumers are supported in a retail information system called MPIS. The sales subsystem of KIS enables offers to buyers, sales order management, shipping of goods and invoicing. Sales processes to foreign markets are supported in KIS as well. 5 Merkur Partner Web portal The Merkur Partner portal enables selection and ordering of more than items, which are divided in five sales programmes: ferrous and non-ferrous products, construction materials and wood, technical goods, consumer goods and chemical products, electrical and other installation materials. At this time, the use of Merkur Partner is limited to contract partners, who have the insight into item data such as descriptions, prices and stock. They can also make orders or inquires and track them. Merkur Partner includes many contents, which are organized in a practical and functional manner: Login to Portal: A username can be acquired only if it is approved by the person in Merkur responsible for the partner. Catalogue of goods: Items are structured into sales programmes and within them into product groups. When a group is selected, the list of group s items is displayed. Each item is presented with its attributes such as Merkur s article number, description, brand name, unit of measure, sales price for a partner, stock, lead time, additional description, buyer s article number, EAN code, picture and others. Search engine: Because of the very broad sales programme, the portal incorporates a search engine which enables an advanced search of items based on different criteria in the whole catalogue or just in a specific part of it. Ordering and inquiring: Orders and inquires can be made by entering the quantities in a table view of items, in a detailed item insight or in a special quick ordering spreadsheet. Because of the strong integration between the KIS and Merkur Partner systems, insight into accurate order status is possible. This insight enables the tracking of goods on their distribution path through the supply chain. Favourite subcatalogues: The users of web portal can create their own subcatalogues and favourite groups of items. With this feature they can make orders and inquires much easier. Business terms: The business terms for web portal users are specified in a sales contract to which an annex defining e-business conditions is added. Help: The Help feature gives user a comprehensive explanation of the solution and assistance in certain business cases. 300 SYSTEMS INTEGRATION 2005

5 INTEGRATION OF A B2B WEB PORTAL AND AN ERP SYSTEM: THE CASE OF A TRADE COMPANY Contacts: Any questions and unclear situation considering business relations with Merkur can be addressed to contact personnel assigned to each partner. The feature gives detailed contact personnel data including names, telephone and fax numbers and addresses. The design of Merkur Partner web portal was organized through the B2B E-catalogue project, which lasted one year. The web portal implementation phase lasted six months. The total costs of the project were about EUR. 6 Integration of Merkur Partner with KIS The objective of integration of the Merkur Partner web portal and the KIS Commercial information system was to achieve maximum data interchange automation and therefore enable the consistency of data. Further objectives are to eliminate manual data manipulation, to increase the speed of business operations and to cut operational costs down. These goals must be achieved on both sides: Merkur and the business partner. The both systems, Merkur Partner and KIS, are based on Oracle database and application technology. The integration of the systems is also done with Oracle tools The content of integration Data flows between KIS and Merkur Partner systems are shown on Picture 2. From KIS to Merkur Partner the following data is interchanged: The management of partner data and the data of their employees who will use the Merkur Partner web portal is performed in KIS. This data is then carried over to Merkur Partner and enables the log-in of users to the portal. The following item data are transmitted: Merkur s article number, EAN code, item description, unit of measure, packing quantity, brand name, producer article number, origin of item, lead time, and alternative unit of measure. Merkur also manages the buyer s article numbers and links them to Merkur s items. If the buyer s article numbers exist, then this data is exchanged with Merkur Partner and displayed to the buyer. Certain items have very similar properties; in KIS they are considered as substitutes. This data is very useful for buyers, using Merkur Partner. Item available stock data is interchanged as well. Sales prices are calculated in real time with special function which calculates the right sales price for a partner according to valid price policy. The whole goods classification structure is interchanged. Merkur s own 5 level classification structure is used. In KIS data about persons who are responsible for partners is managed. This data is transmitted to Merkur Partner, where users can see their names, telephone numbers and addresses, so the personal communication can be established very quickly. A part of the Merkur Partner web portal project implementation was also the definition of a file system, where rich format data is deposited. Rich format data includes different multimedia files which describe the products. In the first stage of implementation only item pictures and catalogue descriptions were included. KIS enables the connection between rich format data and KIS item data and gives the users the possibility of viewing rich format data. All this data is transmitted to Merkur Partner, so business partners can see it. Merkur Partner enables ordering and inquiring. Orders and inquires are sent to KIS, where Merkur s salespeople can confirm them. Accurate data about order confirmations and offers is then sent back to the portal for the user s review. In the web portal the user can also see order confirmations, which were sent to Merkur using classical ways: by fax, mail or . SYSTEMS INTEGRATION

6 TATJANA HUBER, MARKO SVETINA 1, JOŽE ZUPANČIČ 6.2. Problems with integration Picture 2: Data flows between KIS and Merkur Partner Merkur still cannot be entirely satisfied with current KIS and Merkur Partner integration level. The problems occur in the following fields: An important business process in Merkur is so called transit. Transit means that goods are shipped to buyers directly from the supplier s or producer s warehouse. The negotiations about conditions are done at every transaction. This means that no relevant prices, lead times and similar data can be published in the portal. Instead of this data the Telephone icon is displayed which means that the user should contact the salespeople of Merkur directly to get or to negotiate the terms of business. Such a solution is quite annoying for many customers. The solution of the problem is in systematic definition of sales conditions for transit business processes. Merkur is already dealing with this problem. Sometimes (depending on sales contract terms) Merkur charges buyers the cost of transportation of goods. For a consistent charge of these costs a transportation price list is needed. The price of transportation depends on the distance between the location of the warehouse and the destination of goods, weight of goods and means of transport. It is obvious that the transport price list can be very complex. Merkur has not yet established a consistent price list for transport; therefore it cannot be used in Merkur Partner. This problem is currently being addressed through the Logistics system strategic programme. The required amount of goods can be located at different locations in Merkur: in central warehouses and in retail centres. Currently, only available inventory in central warehouses is shown in the web portal, because only the users of Merkur Partner can access this stock. In the 302 SYSTEMS INTEGRATION 2005

7 INTEGRATION OF A B2B WEB PORTAL AND AN ERP SYSTEM: THE CASE OF A TRADE COMPANY future, the KIS system will be upgraded, so information about the retail inventories will also be accessible and shown to Web portal customers. With the implementation of Merkur Partner, the central and unified rich format data management system was established. The first priority was given to item pictures and item catalogue descriptions. Merkur has just begun collecting this graphical data, therefore,there much of this content. Because users want more graphical and other information on products, there is a need for a rapid increase of this data in the system. The order confirmation data is sent from KIS to Merkur Partner only once a day. It is obvious that the frequency of this interchange of data is to low and that the data in the web portal is not accurate enough. Merkur s IT department will try to increase the frequency of interchange between KIS and Merkur Partner. Additionally, in the future order confirmations and offers will be sent to buyers via Directions for further development of the portal New features of the Merkur Partner Web portal will be added in the future. The users will get more functionality in order to increase their satisfaction in trading with Merkur. Development in the future will include: More efficient use of existing features Use of portal by partners from abroad Use of portal by any (even potential) partner The publications of messages for business partners Advanced presentations from the Sales program Merkur Partner analytical system: This will provide information about users connections and sessions on the web portal (when and how many times) and information on web contents which are visited by users and those which are not. Merkur has already started to plan further development of the web portal content and begun with development of the system which will enable electronic data interchange with business partners. The aim of this development is to speed up the flow of the goods through the supply chain, reduce operating costs, and connect effectively with business partners to achieve positive operating effects. 7 Conclusion The most important benefits of the Merkur Partner Web portal for Merkur partners are: Merkur Partner can be used on a 24x7 basis (higher flexibility, non-stop working hours). Today Merkur partners order goods on afternoons and on Saturdays, when Merkur salespeople are not available. Lower transaction and administrative costs. There is much less paper work needed on the partner s side. Accurate access to relevant information on goods and business conditions. Based on this, business transactions are performed much faster and less expensively. Ordering, inquiring and accurate insight to order confirmation statuses. The possibility of combination of classic and electronic interactions with Merkur. This feature is very helpful, because the electronic business channel can cover the majority of transactions, but there is still the need to perform some complex transactions in a classic way. Users communicate with persons in Merkur whom they already know. There are also some important positive effects for Merkur: Lower transaction and administrative costs. Higher level of automation of business processes. Ordering system is more efficient because of better information on Merkur's and on the partner's side. SYSTEMS INTEGRATION

8 TATJANA HUBER, MARKO SVETINA 1, JOŽE ZUPANČIČ Better productivity of internal human resources. Better use of time resources. Fewer errors and complaints. New market opportunities emerged. Partners can get information about new products, about specialized products which can create new sales. Merkur Partner can be accessed by new potential partners on existing and new markets. Merkur Partner forms a new sales channel. The web portal is potentially problematic if Merkur data (for example: prices, stock) would be inaccurate and therefore problematic for partners. Merkur Partner forces responsible personnel in Merkur to keep data accurate. There is also a risk, if partners would exchange confidential business data about prices with other partners of Merkur. Such behaviour is prevented with additional terms of business contract which penalize unwanted information distribution among partners. The key success factors in implementation of the web portal were good team work in the project group and with other participants, the awareness of the needs of Merkur business partners, a step-by-step approach in connecting partners to the portal, detailed education of partners and salespeople in Merkur, personal communication with partners and maximum integration of web portal with the ERPsystem of Merkur. The Merkur Partner Web portal is an effective information solution as it is strongly integrated with current information systems in Merkur d.d. Therefore, the operating costs of the portal are very low and will bring a return on investment in a short time. It is important to state that the portal has been very efficiently put into practice many business partners use it with pleasure. Partners who are using Merkur Partner send around 60% of their orders via the web portal. References Commercial analytical system KAS (internal documentation), Merkur, 2005 Commercial information system KIS user manual, (internal documentation) Merkur, 2004 Merkur Intranet Pages (internal documentation), Merkur, 2005 Merkur Web Pages, Merkur, 2005 Rose, J.G.: The joys of enterprise portals, Information Management Journal, Vol. 37, No. 5, Sept/Oct 2003, pp Svetina, M., Huber, T.: Povečanje učinkovitosti pri prodaji podjetjem v Merkur d.d. s spletnim portalom Merkur Partner, 6th Annual Quality Conference of Gorenjska 2004, Slovenian Chamber of Commerce, 2004, pp Telang, R., Mukhopadhyay, T.: Drivers of Web portal use, Electronic Commerce research and applications, 2004, accessed through Tinham, B.: Connecting people, information and businesses, Manufacturing Computer Solutions, Vol. 9, No. 10, Oct 2003, pp Vijayan, J.: Best in the class: Application framework allows easy portal access, Computerworld, Vol. 38, No. 3, Feb. 24, 2003, p. 51. Merkur Partner Web portal user manual (internal documentation), Merkur, 2004 Yang, Z., Cai, S., Zhou, Z., Zhou, N.: Development and verification of an instrument to measure user perceived service quality of information presenting portals, Information & Management, Vol. 42, 2005, pp SYSTEMS INTEGRATION 2005