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Transcript of Much of the content of these slides comes from co-authored papers and my own standards group work...
• Much of the content of these slides comes from co-authored papers and my own standards group work with ebXML, the UN-CEFACT BP group, and the ISO Open-edi group, so the ideas are due to many people besides myself. These include Guido Geerts, Julie David, Bob Haugen, John Yunker, Jim Clark, Brian Hayes, Paul Levine, Jamie Clark, Dave Welsh, Karsten Riemer, Nita Sharma, Colin Clark, Nenad Ivezic, Katsuhiro Morita, Jake Knoppers, David Clemis, Hannu Pelkonen, Steve Mathews, and many others too numerous to mention.
• These slides may be reproduced, but please do not change the contents or attributions.
The REA Accounting and Economic Ontology and Its Use in E-commerce Standards
William E. McCarthy – Michigan State University
PHONE: 517-432-2913 EMAIL: [email protected]
EconomicEvent
EconomicAgent
EconomicResource
duality
• See Accounting Review article (July 1982)
• See Issues in Accounting Education article (NOV 2003)
INITIATING
RESPONDING
Economic Event
Economic Agent
Economic Agent
Economic Resource
Economic Event
Economic Agent
Economic Agent
Economic Resource
Pattern: A prototypical constellation of objects
• REA is an business process pattern
• Can we standardize the world of ERP business objects and business object connections with a library of BP patterns ?
• Can we standardize collaboration space with collaboration patterns ?
Evolutionary Tree – Enterprise Information Systems
EnterpriseSystems
No OrganizingRationale Outwardly
Organized
Single Entry
Transactions& Obligations
A = L + OEEnterprise
Value Chain
BookkeepingModular
Integration: ABC, MRP
ERP SupplyChain
Multi-dimensionalAccounting
Hybrid
Inwardly Oranized
Best ofBreed ERP
Integrator-Enabled
Standards-Enabled
SingleSourceERP
CustomerFocused
MS MoneyQuicken
PeachtreeQuickbooks
PlatinumSolomon
PeopleSoftSAP
OMGOAG Siebel
Goldmine
i2Ariba
Constellar HubVitria
BPCSGreat Plains Dynamics
TradingPartner Independent
ebXMLISO Open -EDI
A business process is a set of activities that takes one or more kinds of input and creates an output that is of
greater value to the customer (Hammer)
A value chain is a purposeful network of business processes aimed at assembling the individual components of a final product (i.e., its portfolio of attributes) of value
to the customer (Porter)
Definitions of Business Process and Value Chain
cookiesConversion Cycle
labor
cookie ingredient
s
Acquisition Cycle
Revenue Cycle
cash cash
business process
business process
business process
value chain
delivered raw materials
delivered manufactured goods
$$$$
$$
$$manufactured goods
payment
sale
Cash payment
Cash payment
logistical operation
shipment
labor
payment
labor acquire
labor
labor
facilities, services & technology
payment
service acquire
manufacture job
material issue
manufacture operation
$$
$$
service contract
service operation product services
labor
raw materialspurchase
payment
$$
Example Value Chain (source, make,
deliver) ______ ______ _______
Buyer Seller
Third Party
Collaboration Space
Value Exchange
Concept of a Business Collaboration
Source: ISO Open-edi
event stream
fail to pay
pay
pay
pay
pay
deliver
deliver
deliver
deliver
deliver return
fail to deliver
pay
pay
SELLER
BUYER
Type & Commitment Extensions
Harry
Jane
Named Set of Objects
Tom
Dick
Ashley
Typification
Salespeople
Tom
Dick
Ashley
Abstraction
Harry
Jane
Named Set of Objects with Labeled Clusters
Group & Name Clusters Cashiers
Named Set of Groups
Cashiers
Salespeople
Economic Agent Type
Economic Agents
Operational Level
Knowledge Level
Source: Geerts and McCarthy, type paper
delivery paymentduality
commitment to deliver
Economic Contract
commitment to pay
reciprocal
fulfillsfulfills
Contract as a Bundle of CommitmentsSource: Geerts and McCarthy, ontology paper
Business Role
Economic Commitme
nt
Resource Type
Event Type
specifies
specifies
specifies
Source: Geerts and McCarthy, ontology paper
Exchange with Commitments and Types
Economic Event
Economic Resource
Economic Agent
stockflow from
to
fulfills
duality
Economic Resource
Type
typifies
specifies
Economic Event Type
Role
typifies
Economic Commitment
reciprocal
specifies specifies
typifies
Source: Geerts and McCarthy, ontology paper
ISO Open-edi Ontology Collaboration Model
Bilateral Collaboration
governs
Economic Event
Economic Resource
Economic Agent
stockflow from
to
Economic Contract
Economic Commitment
reciprocal
fulfills
establish
duality
Economic Resource
Type
typifies
specifies
Economic Event Type
Business Role
specifies
specifies
typifies
qualifies
reserves
involves
Partner Third Party
Mediated Collaboration
Business Transaction
participates
requires
Agreement
Regulator
constrains
Business Object
State Machine
Example
Business State Alignment• Means both trading partners must agree on the
state of each Business Object at the end of each Business Event.
• For example, the Order is not accepted until both partners agree explicitly that it is accepted.
• The Business Transaction protocol must insure that both partners transition to the new Business State - or neither does.
• Think “electronic handshake”.
Source: ebXML BCP&MC
• Planning: In the Planning Phase, both the buyer and seller are engaged in activities to decide what action to take for acquiring or selling a good, service, and/or right.
• Identification: The Identification Phase pertains to all those actions or events whereby data is interchanged among potential buyers and sellers in order to establish a one-to-one linkage.
• Negotiation: The Negotiation Phase pertains to all those actions and events involving the exchange of information following the Identification Phase where a potential buyer and seller have (1) identified the nature of good(s) and/or service(s) to be provided; and, (2) identified each other at a level of certainty. The process of negotiation is directed at achieving an explicit, mutually understood, and agreed upon goal of a business collaboration and associated terms and conditions. This may include such things as the detailed specification of the good, service, and/or right, quantity, pricing, after sales servicing, delivery requirements, financing, use of agents and/or third parties, etc.
• Actualization: The Actualization Phase pertains to all activities or events necessary for the execution of the results of the negotiation for an actual business transaction. Normally the seller produces or assembles the goods, starts providing the services, prepares and completes the delivery of good, service, and/or right, etc., to the buyer as agreed according to the terms and conditions agreed upon at the termination of the Negotiation Phase. Likewise, the buyer begins the transfer of acceptable equivalent value, usually in money, to the seller providing the good, service, and/or right.
• Post-Actualization: The Post-Actualization Phase includes all of the activities or events and associated exchanges of information that occur between the buyer and the seller after the agreed upon good, service, and/or right is deemed to have been delivered. These can be activities pertaining to warranty coverage, service after sales, post-sales financing such as monthly payments or other financial arrangements, consumer complaint handling and redress or some general post-actualization relationships between buyer and seller.
SOURCE: ISO FDIS 15944-1 – Operational Aspects of Open-edi for implementation ISO Open-edi Phases of a Business Transaction
Phases of a Business Transaction and Object States for Completion
Business Transaction
Planning Identification Negotiation ActualizationPost
Actualization
Economic Resource
Type Identified
Corresponding Partners Identified
Economic Contract Complete
Requiting Economic
Event Complete
Invoked Warranty
Component Complete
1. Seller sends Catalog to Prospective Buyer2. Buyer sends AvailabilityandPriceRequest to Supplier3. Supplier returns AvailabilityandPriceResult to Buyer4. Supplier sends OrderRequest to Buyer 5. Buyer sends Offer to Supplier6. Supplier sends CounterOffer to Buyer7. Buyer sends an OrderAcceptance to Supplier for parts8. Seller sends an AdvanceShippingNotice when goods are
prepared for shipping9. Buyer sends ReceivingReport to Seller when inspected
goods are accepted10. Seller sends an Invoice to Buyer after parts are shipped11. Buyer sends RemittanceAdvice to Seller with information
about payment of the Invoice12. Buyer sends WarrantyInvocation to Seller
Business Events in an Example Business Transaction
State Model of Business Collaboration:
Economic Event
Economic Resource Partner
resourceflow
site
from
to
Economic Claim
Economic Contract
Economic Commitment
settles
fulfills
establish
Location
duality
AgreementEconomic Resource
Type
Location Type
typifies
typifies
specifies
specifies
Economic Event Type
Partner Type
specifies
specifies
typifies
typifies
Business Transactiongoverns
regulate
reciprocal
Business Event
Seller sends Catalog to Prospective Buyer
Buyer sends AvailabilityandPriceRequest to Supplier
Supplier returns AvailabilityandPriceResult to Buyer
Buyer sends Offer to Supplier with proposed details of resource, location, event, & partner
Supplier sends counter-offer, acccepting resource and location and countering on event and partner
Buyer accepts details of counter-offer on shipment and proposes payment schedule
Seller sends an AdvanceShippingNotice when goods are prepared for shipping
Buyer sends ReceivingReport to Seller when inspected goods are accepted
Seller sends an Invoice to Buyer after parts are shipped
Buyer sends RemittanceAdvice to Seller with information about payment of the Invoice
Buyer sends WarrantyInvocation to SellerSeller accepts payment schedule,
completing contract specification
Business Entity Type Model
<<Stereotype>> BusinessEntityType
#baseClass : string=“Class” +identification : string +name : string +description : text
<<Stereotype>> BusinessEntity
BusinessEntityIdentity +identityConstraint : Expression
<<Stereotype>> BusinessEntityLifecycle
#baseClass : string=“Statemachine” +identification : string +name : string +description : text +lifecycleConstraint : Expression
Organization
Organization
Namespace
Namespace
1 *
1 1
* BusinessEntityContent +contentConstra
BusinessEntitySemantic +semanticConstraint : Expression +useDescription : text
BusinessEntitySemantic +semanticConstraint : Expression +useDescription : text
<<Stereotype>> BusinessEntityState
#baseClass : string=“State” +identification : string +name : string +description : text +entryCondition : Expression +exitCondition : Expression
<<Stereotype>> EconomicElement
<<Stereotype>> EconomicElement
+reaType +reaType
BusinessEntityContent +contentName : string +contentConstraint : Expression +compositionDescription : text
<<Stereotype>> BusinessInformationEntity
+documentElementMapping : Expression
+implementation * +requiredContent +visibleContent
*
*
*
<<Stereotype>> Context
+context
1
+instanceIdentification +versionIdentification *
1
* *
+semanticParent
+semanticContent
SemanticElement +identification : string +semanticName : string +description : text +constraint : Expression
1
1
*
1
* * *
*
+component
+externalDefinition
Source: UN/CEFACT BETL
Issues & Problems• Formalization• Domain specific paper
– Enterprise ontology– Collaboration space
ontology
• Extensions– Mediated collaborations ( =
2 ?)– Workflow & business
events– States of objects– Controls & policies– Aggregate accounting and
economic objects
ACustomer
BProductSupplier
CLogisticsVendor
DBank
PORAAA
FreightOrderAA
AdvanceShipNoticeRA AdvanceShipNotice
AA
ShippingDocumentAdvanceShipNoticeRA
FundTransferAdviceAA
ReceivingAdviceRA
FundTransferAdviceAA
FundsTransferNoticeRA
FundsTransferNoticeRA
Source: David, Geerts and McCarthy
Mediated Collaborations
IS THE ANSWER ALWAYS = 2 ??- economically ?- accounting ?
- legally ?- technically ?
Sample Business Object
Example States for Business Object
Business Transaction • Waiting-Start • In-Service• Completed• Aborted• Suspended
Economic Claim • Materialized• Settled
Economic Resource Type • Planned• Identified• Proposed• Specified• Substituted
Business Transaction Phase • Pending• In-Service• Complete
Sample States for Business Objects
REA use in different
standards
E-Commerce Collaboration Standards
• ebXML– United Nations CEFACT (BP, catalog)• UN CEFACT (UMM), BOTL, BCP&MC, UBAC• ISO Open-edi• European Commission (ECIMF)• OAG ??• Others – OMG, etc. ??
Business Domain View (BDV)
Business Requirements View (BRV)
Business Transaction View (BTV)
Business Service View (BSV)
UMM metamodel
Process Area Business Process
Business Transaction
Business Collaboration(binary or multiparty)
RequestingBusiness Activity
RespondingBusiness Activity
Business Messages Requesting Service Transaction
Responding ServiceTransaction
Agreement
Economic Event
Network Component
Authorizing Roles
Partner Economic Resources
Business Documents
Business Area
Source: ebXML TMWG
COMPANY E
Business Service Interface (BSI)
Business Service Interface (BSI)
COMPANY C
Reporting Taxonomy:
•Purchases – xx AccPay- xx
Reporting Taxonomy:
•AccRec – xx Saies -- xx
•COGS – zz FinGood– zz
Company-neutral (but strictly-typed with REA) view of a business collaboration. For example:
-Order -Fulfillment -Settlement
XBRL ebXML XBRL
Cash – xx AccRec -- xx
AccPay – xx Cash -- xx
REA contract/commitment (no account)REA initiator Economic
EventREA responding Economic Event
External Report
External Report
External Report
Source: J. David, G. Geerts & W. McCarthy
REA State
Machine