Designing an International Trade E-commerce System

11.4 Designing an International Trade E-commerce System

In knowledge-based economy era, e-commerce system is the core of the international trade and will directly affect the business performance or even the survival and successful running of an enterprise. A good e-commerce system for international trade should be able to automatically handle all the structural and most of the semi-structured problems. For unstructured problems (those requiring creative work) and a small part of half-structured problems, the e-commerce system can provide the necessary information to help international trade clerks handle business problems and make decisions. In what follows, we start studying the problem of how to design a good international trade e-commerce system according to above principle.

11.4.1 The International Trade Business Analysis

As mentioned above, a good e-commerce system should automatically solve all the structural problems and most semi-structured problems. As for unstructured

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and the minority of semi-structured problems, e-commerce system can provide the necessary information to the businessmen to help them make decisions. This tells us the first step of designing an international trade e-commerce system is business analysis. That is to analyze, in the whole business process, which parts are structured processes, which parts are semi-structured processes, and which parts are unstructured processes. And we also need to conduct an in-depth analysis into these treatment processes and consider whether the process is reasonable, whether it can be handled through the information technology to make it more rational and more efficient. So that we can make clear which parts of the business process can be handled by the e-commerce system, which parts should be handled by clerks with the help of e-commerce system and which parts should be completely handled by man.

Figure 11.2 offers a typical flow chart for a business transaction in the international trade. Details follow.

Figure 11.2 Typical business flow chart of international trade In the flow chart above, businessmen need to, with their business experience,

query, analyze, and judge relevant information, or mine relevant knowledge with related algorithms. And then synthesize relevant information so that eliminate the false and retain the true, eliminate the useless and remain the distillate. This is a half-structured process for problem processing.

Trade negotiating is a very complex process which requires the businessmen’s ability to control the situation. This ability involves the depth and range of their knowledge, psychological quality, business experience and ability, cultural quality

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and the art of negotiation. This is completely an unstructured problem processing process and it is the field where the businessmen may freely play.

Signing contract is the outcome of successful trade negotiations. It involves only putting the details such as name and descriptions of goods, quantity, quality, unit price, shipment, payment of goods etc. and general terms and conditions into written form to be signed. Since it involves completely formalities, there is no problem to handle.

Preparing goods is a complex process. Under the present conditions of China, this workload amount 50% of the total workload in an international transaction. This process involves a number of structural problems and unstructured problems which need the cooperation of both the e-commerce system and businessmen. But most of them are structural problems.

The remain processes involve the banks, customs, tax (export tax rebates), commodity inspection and quarantine institute, foreign trade administrative authorities, the import and export chamber of commerce, the international trade transport enterprises and insurance companies etc. It is necessary to produce a large number of documents, which have strict requirements. The general requirement is that the export documents should be correct, complete, timely, concise, and clean.

(1) Correct: Export paperwork must follow the principle of strict consistency. Two things must be agreed, i.e. documents must be consistent with letters of credit, and documents must be consistent with documents. Even one misspelling would not be permissible.

(2) Complete: The types and the number of copies of the documents should be in accordance with documents stipulated in the letter of credit and the trade common practice. Lacking of one copy would result in that the importer refuses to pay the money.

(3) Timely: The required documents must be supplied timely. (4) Concise: The content of the document should be concise. Get rid of the

things that are unnecessary.

(5) Clean: The appearance of the documents must be clean and tidy, with least amendment.

The documentation process in the international trade in China is featured by complex procedure, complicated links, low speed and common quality. This directly affects the performing of the contract and timely receiving foreign exchange. Sometimes 46 types and a total of 360 copies of documents are required for one transaction. An experienced business paperwork staffs must spend 36.5 hours on average on producing these documents, and the average cost of paperwork amounts for 7.5% of the product price. Paperwork is really the most troublesome thing for an inexperienced person. It may take him over 100 hours to deal with the documents, together with the time he spends on contacting the commodity inspection bureau, Customs, insurance company and transportation company, this part of the workload amounts to about 30% of the total workload

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of a international trade transaction. But the work is structural, and can be programmed. It is for this reason that the information processing technology first demonstrated an incomparable superiority in the international trade paperwork.

Based on the analysis of the international trade business process, we can conclude that the e-commerce system should be employed to finish most parts of the goods preparation, commodity inspection, customs declaration, paperwork, insurance, transportation, foreign exchange settlement and export tax rebate. And it can also help businessmen gather information and make them focus on information processing and trade negotiations, which are more creative and challenging.

11.4.2 Frame of international Trade E-commerce System

From the analysis above, we can see that an international trade e-commerce system requires the following modules to accomplish the above tasks:

(1) Communication Module. (2) Document generation module. (3) Database module (DB). (4) Data Mining module (DM). (5) Supply Chain Management (SCM) module. (6) Customer Relationship Management (CRM) modules. (7) Related department relationship management module (RDM). (8) Intelligent problem processing module. In China’s international trade industry, an international trade enterprise usually

does not have its own production enterprise. Even if they have, the production capacity is very small compared with the volume of trade they can have. They usually purchase the exported goods from relative manufacturers or just act as agents for manufacturers. In contrast to many large multinational companies engaged in both production and trade such as IBM, HP or General Motors, the very important enterprise resource planning (ERP) modules seems dispensable to these enterprises in the international trade. However, in view of the future development of the international trade, in the design of e-commerce systems, an ERP module interface should be kept.

E-commerce rises from meeting the need of improving quality of paperwork and strengthening information exchange. Information sharing and data exchange is the most basic functions of e-commerce. Therefore, the communication module is the most basic e-commerce module.

Document generation module is necessary because of the uniqueness of e-commerce system for the international trade, and there is great need to produce

a large number of documents with strict requirements. Therefore, it is also the basic module of e-commerce system for the international trade.

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Database module is also the most basic component of all e-commerce systems. E-commerce system database for the international trade should include law database, business database, customer database, contract database, management database and human resources database.

Data Mining module can help businessmen find out, from the database in the e-commerce system or the Internet, the implied information and knowledge that customer relationship management, supply chain management, department relationship management and intellectual processing modules need to handled, and that is needed by relative business departments.

Supply Chain Management module integrates upstream and downstream enterprises by means of Internet. It takes export enterprises as the core and combines upstream suppliers of raw materials and spare parts and downstream dealers, logistics, transportation companies, product service businesses and correspondent banks to create a complete e-commerce supply chain linked to the end-users. The aim is to reduce the procurement and logistics costs, increase the enterprises responsiveness to the end-users’ needs and ultimately enhance the competitiveness of domestic enterprises. It includes the management for supply, demand, and purchase of raw materials, markets, production, inventory, orders and distribution.

CRM module automatically responds to customers’ demands, timely sends feedbacks of customers to the businessmen, and provides customers with high-quality after-sales service. It keeps track of relevant information about the production and delivery of the commodities, such as production speed and delivery date (arising from the ERP system) and transportation of the commodities. Such information will be publicized on the website for customers’ inquiries. This is a key technology to improve customers’ satisfaction and keep old customers.

Related departments relationship management module (RDM) is a special component of the system, which depends on the feature of management of the international trade. Unlike most production enterprises and domestic trading enterprises, the international trade involves, apart from the upper and lower enterprises and consumers, customs, commodity inspection and quarantine bureau, chambers of commerce, tax, insurance companies, and government departments in charge of the international trade and so on. The relationship between these departments and the international trade enterprises is different from that between business and consumers and that between enterprises and suppliers. It is relationship of managing and being managed, supervising and being supervised and it calls for a special processing by special modules.

Intelligent problem processing module is the core and key part of the e-commerce system and can intelligently deals with all structural problems the e-commerce system encounters. For those that cannot be dealt with independently, it submits them to the businessman and coordinates all aspects of the e-commerce system by providing required data and information and helping the businessmen to cope with the problem.

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11.4.3 International Trade E-commerce System Design

The structure of the e-commerce system for the international trade is showed above. In the following, we discuss how to design the various components of e-commerce system.

(1) Communication Module: It has been proposed as a module just to show its important role in the international trade. It does not need to be specially designed, but keep a data communication interface in e-commerce system. The interface for the e-commerce system can be connected to EDI and used to communicate with the customers through the Internet or telephone. This requires that the communication interface can be connected to EDI, the Internet or telephone network. In the communication module, the security of the information must be taken into account and the Intranet and extranet must be separated by a firewall. Access control mechanism must be set up for the visit of the extranet to the intranet. Special encryption mechanism must be taken to protect the confidentiality of important business information.

(2) Documents generation Module: In this part, some application programs must be developed based on the database. All documents can be generated on the basis of defining some views in light of the contracts and letters of credit. Due to the large number of documents used in the international trade, designing views is

a rather arduous task. The content of the views must meet the requirements of the all documents, and the format should be exactly the same.

(3) Database module: It is the infrastructure of the entire e-commerce system, but database technology is so mature that both the large-scale and small-scale database is available in the market. The major part of designing a database is the preparation of a large number of applications programs and the interface between the database and the application programs. It is suggested that large and medium-sized enterprises purchase Oracle, Sybase or SQL and small companies buy the small-scale database such as INFORMIX or MYSQL.

(4) Data Mining Module: There are various types of data mining software, and some are already quite mature. To develop our own data mining program, we must carefully choose the data mining algorithms to ensure its rapidness and accuracy. This requires careful study and detailed analysis of the variety of data mining algorithms.

(5) Supply Chain Management and Customer Relationship Management Module: Software such as Oracle SCM and CRM software, and IBM’s CRM and SCM can be bought in the market. Some domestic enterprises also provide some CRM and SCM software. If the financial strength and technological level of an enterprise are insufficient for the self-development of such software, it has no choice but to buy from others.

(6) Related departments relationship management modules: There is not software available in this field. If we are to set up an e-commerce system, I am afraid that this part has to be developed by technical staffs of the enterprise. It is

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a complicated task because this is not just an internal affair of an enterprise. It often involves the different databases, different information, and different format requirements of the Customs, banks, insurance company, commodity inspection and quarantine bureau, taxation and other departments and so on. Coordination with them is necessary, and documents must be processed online. Serious consideration must be given to these issues.

(7) Intelligent problem processing modules: It is the core of e-commerce and there is no software available for this part possibly due to the difficulty. Intelligent processing module needs to be designed under the cooperation of the businessmen and software developers. During the design both the business knowledge and the computer-related professional knowledge and expertise in artificial intelligence are necessary to come up with an expert system to deal intellectually with the issues in the international trade enterprises.

After all the above parts being designed or bought, we should test each part after completing the designing. If everything is OK, there still exist some problems to be solved, such as application design, the design of the interface between modules, and a more important problem is to integrate these modules. After integration, an important task is data loading. We must understand that software we purchased is often a software system. If we compare the database system we bought with the actual storage system, what we have bought are just a warehouse and a warehouse management system. We also need to build the road links and put our goods to the proper positions in the warehouse.

The integration of e-commerce system is not simply linking various modules together; we also need to consider the hierarchical structure, which can be divided into four levels according to their respective application.

The first is the user interface of the e-commerce system, known as the user interface. The second is intelligent problem processing system which can give command, control and coordinate the respective parts.

The third is the other application modules, including CRM, SCM, communication, knowledge discovery and data mining.

The fourth is the foundation of other applications, including various databases. Then, each module can be linked through the interface between modules and

form a hierarchical structure, and the process is called system integration. After that, there are still testing and data loading for the final evaluation.

11.4.4 EDI-based International Trade E-commerce System

The various technologies of EDI are relatively mature since it was born in 1960 and has been developed for nearly 40 years. EDI service is reliable and secure, and its technology of partner management and dispute arbitration is mature. It has been widely used in the international trade, customs declaration, transportation,

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government tenders and public affairs. It is the main e-commerce form from the 1970s to the early 1990s. At present, most international trade companies have EDI system, so in order to save the investment on EDI, when designing the new e-commerce system we should make full use of the existing system. This will make businessmen fell that the new e-commerce is similar to the old EDI. So we will introduce the designing of a new e-commerce system based on EDI.

Currently, there are mainly four methods to build e-commerce based on EDI: (1) Internet Mail can achieve the electronic exchange of business data and

information through the Internet ISP (Internet Service Provider) instead of VAN. The ordinary information can be sent and shared instantly through e-mail but for important information, the security of the e-mail has become a major problem. We may use the encryption technology to send e-mail so that the confidentiality of the e-mail content can be preserved. This technology can solve part of the security problem. It is much cheaper to use the Internet compared with the VAN, which will greatly facilitate the small and medium sized enterprises to do business through e-commerce. As e-mail is easily forged and the sender can also denied that he has sent an e-mail, electronic authentication is needed to ensure the authenticity of e-mails when designing an EDI-based e-commerce system. Again, in order to reduce the loss of e-mail and keep the sender informed of its loss, a confirmation of sending an e-mail is needed in the application level of the Internet Mail.

EDINT group in Internet Engineering Task Force (IETF) has published the security standards of doing EDI using e-mail and HTTP on Internet. The standards offer two main approaches, using PEM (Privacy Enhancement Mail) to enhance private communication, and using PGP (Pretty good privacy) to guarantee the security of the e-mails. PEM keeps the e-mails confidential by using encryption and the mechanism of authenticating sender, ensures the completeness of the contents of e-mail by using the algorithm for integrity checking and achieves the confirmation of authenticity of the e-mails. If a public key system is employed, PGP can provide encryption and certification for e-mails.

(2) Standard IC (Standard Implementation Conventions). In the process of using EDI, different industries or enterprises must make different choices on the basis of their needs of the standards and eliminate the unnecessary parts. IC refers to selected versions, and hence there are a number of IC versions. Developing IC need sophisticated analysis, so the development cost is very high.

A message system that uses some special version cannot process message of different versions. The standard implementation agreement focuses on solving this problem. It is a special cross-industry international standard aimed at special application and is the middleware of the various IC versions. This standard differs from the previous industrial and national standards, and even from the previous international standards. It is very simple to handle without too many options for the items and it takes into account the previous IC which enables EDI to be employed conveniently on the Internet.

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(3) Web-EDI is the most popular method of integrating EDI with the Internet. It is a perfect idea to combine EDI, which offers a secure exchange of business data, and the Web where information is shared. HTML provides a tool for the processing of business matters on the World Wide Web by allowing users to create forms and to provide a method of transmitting the information in the forms to business application.

One of the participants in the e-commerce develops or purchases the corresponding Web forms according to every EDI message, make them adapt to his/her own IC, and then put them on a Web site. In this way the forms become the interface to EDI system. Another participant of the e-commerce activities logs onto the Web site, choose to fill the forms that he is interested in, submits the results to the Web. The server makes legitimacy inspection, and translates the filled forms into normal EDI messages. Since then, the news is dealt with exactly the same as the traditional EDI message. To ensure the messages are returned to the participants, the messages can be converted into e-mails or Web forms. The conversion fee is charged only once for all transactions. The costs of EDI software and mapping are paid at the side of the server. This scheme needs only a browser and Internet connection. The companies which have set EDI interface can enjoy the full benefits of EDI, e.g. the low rate of making mistakes in the transactions and low cost of each transaction. We only need to do some minor alterations to the existing applications in an enterprise, which can facilitate the rapid expansion of applications so as to protect the existing investment without re-development of the database.

(4) XML/EDI method XML/EDI focuses on solving the mapping problem in EDI. XML/EDI

introduces the concept of templates and the templates do not describe the data information but the structure of information and the way explain the message in order to map information without programming. In the users’ computer, the software agent uses the best way to explain the templates and process the message. Through templates supported by the software agent, users can get the best system integration of their environment. Templates are stored in different places and dynamically combined into the local application process. If a user’s application programs have achieved XML/EDI, the software agents can automatically map and produce the correct message. At the same time the agents can generate a Web form. Automatic mapping can be completed automatically and is very cheap.