Key technologies : Following are the key technologies used in B2B e-commerce: Electronic Data Interchange (EDI) - EDI is an inter organizational exchange of business documents in a structured and machine processable format. Internet - Internet represents world wide web or network of networks connecting computers across the world. Intranet- Intranet represents a dedicated network of computers within a single organization Extranet - Extranet represents a network where outside business partners, supplier or customers can have limited access to a portion of enterprise intranet/network. Back-End Information System Integration - Back End information systems are database management systems used to manage the business data. Three models of B2B EC : In this section, the three models of B2B EC are described. They are classified depending on who controls the marketplace: the buyer, the supplier or the intermediary. In a Buyer-Oriented Marketplace few buyers face many suppliers. In a Supplier-Oriented Marketplace many buyers face few suppliers. In an Intermediary-Oriented Marketplace many buyers face many suppliers. Other important B2B models are virtual corporation, networking between the headquarters and subsidiaries and online services to business.
a) Supplier-oriented Marketplace A Web-based marketplace in which one company sells to many business buyers from e-catalogs or auctions, frequently over an extranet B2B Sellers Customer Service
Examples of this model are Dell , Intel and Cisco and IBM.
Limitations : How to find a buyer Channel conflicts with their existing distribution Systems The cost to the customers can be high
Example : Cisco Connection Online Case Cisco uses the Supplier-Oriented Marketplace successfully. The market is operated by Cisco Connection Online. In 1997 Cisco sold more than US$ 1 billion online (total: US$ 6.4 billion) of routers, switches and other network interconnect devices. Ciscos business model also includes customer service and finding order status. In 1991, Cisco began providing electronic support using the Internet. The first applications were software downloads, defect tracking and technical advice. Three years later, in 1994, Cisco put its system on the Web naming it Cisco Connection Online. By 1998, customers were using Ciscos Web site about one million times a month to receive technical assistance, check orders or download software. Nearly 70 percent of the technical support and customer service calls are handled online. As a result, Cisco increased its technical support productivity by about 200 to 300 percent per year. Furthermore, the online technical support reduced technical support staff costs by about US$ 125 million. Since 1996, Ciscos Internet Product Center allows customers to buy any products via the Web, saving time for both Cisco and its customers. Before the development of the Web site, ordering a product was lengthy and complicated. Cisco also provides tools on its Web site where customers can find answers to questions like e.g. When will the order be ready?. Cisco estimates that putting its applications online in 1998 saved the company US $363 million per year. Additionally, Cisco saves US$ 180 million per year in distribution, packaging and duplication, because customers download new software releases directly from Ciscos site. By providing product and pricing information on the Web site and on Web-based CD-ROMs, Cisco also saves US$ 50 million per year in printing and distributing catalogues.
b) Buyer-Oriented Marketplace
A buyer opens an electronic market on its own server and invites potential suppliers to bid on the announced RFQs(Request for Quote- invitation to participate in a tendering system). Offers a greater opportunity to committed suppliers. It does not exist in B2C EC. The Electronic bidding reduce the purchasing cost and cycle time.
Limitations: Sellers have to search for the sites with relevant tenders. Business suppliers Buyers electronic store
Buyers requesting products catalog Suppliers Bid information
Example: GEs lightning TPN (Trading process network)
The buyers bidding site is the most popular type of Buyer-Oriented Marketplace. This example shows GEs electronic bidding site (GE TPN Post) which enhances the companys procurement process. GE also opened its site to other buyers which also can profit from the benefits. GE charges fees for using its site and therefore generates additional profits. For using GEs bidding site, buyers prepare bidding project information and post it on the Internet. After the identification of potential suppliers, these suppliers are invited to bid on the project. Suppliers can download the project information from the Internet and submit bids for the project. Buyers then evaluate the suppliers bids and may negotiate electronically. Buyers accept the bids that best meet their requirements. By doing so, buyers can identify and build partnerships with new suppliers worldwide. The information and specifications can be rapidly (simultaneously) distributed to business partners (suppliers). As a result, bids can rapidly be received and compared from a large number of suppliers to negotiate better prices.
GEs bidding site also offers benefits to suppliers. Sellers can gain instant access to a large-scale buyer with over US$ 1 billion in purchasing power. Therefore the sellers can expand their market reach and can lower costs for sales and marketing activities.
c) Intermediary- oriented market place
3 rd party sets up marketplace: matches buyers and sellers. Bring buyers and suppliers to one place. The corporate info systems need tight coupling with intermediary electronic mall. Examples: Boeings PART, ProcureNet. Boeings PART links airlines with 300 key suppliers of Boeings maintenance parts. Intermediary marketplace are frequently delievered on an extranet such as in the case of ANX(Automative Network Exchange- a large private extranet that connects automotive suppliers to automotive manufacturers).
Business Customers Business Suppliers
Customers Order info. Shared Product Catalogs Suppliers Product info. Other Business models:
a) Virtual Corporation An organization composed of several business partners sharing costs and resources for the purpose of producing a product or service. Goals that VCs pursue are: Excellence - each partner brings its core competence. utilization - resources of the business partners are frequently underutilized. A VC can utilize them more profitably. Opportunism an VC can find and meet market opportunity better than an individual company. Example: Safari Notebook Computer To produce its Safari notebook computer, American Telephone & Telegraph Co. formed a virtual corporation with two Japanese companies. The company used Marubeni Trading Co., which partnered with Matsushita Electrical Industrial Co. to produce the computer. IBM and Apple Although they are usually competitors, IBM and Apple formed a virtual corporation for mutual benefit. IBM and Apple teamed up with Motorola to develop an operating system and microprocessor for a new generation of computers. b) Networking Between headquarters and Subsidiaries B2B EC platform can help the communication and collaboration between headquarters and subsidiaries or franchiser and franchisee by providing email, message boards and chat rooms and online corporate data access. Helps the franchiser create the global brand marketing and management for franchisees. On demand training program can also be shared by franchisees.
Procurement Management using the Buyers Marketplace
Procurement Methods Conduct bidding or tendering (a reverse auction) in a system in which suppliers compete against each other. Buy directly from manufacturers, wholesalers, or retailers from their catalogs and possibly by negotiation. Buy from the catalog of an intermediary(e-distributor) that aggregates sellers catalogs. Buy from an internal buyers catalog, in which company-approved vendors catalogs, including agreed-upon prices, are aggregated. Buy at private or public auction sites in which the organization participates as one of the buyers. Join a group-purchasing system that aggregates participants demand, creating a large volume. Buy at an exchange or industrial mall. Collaborate with suppliers to share information about sales and inventory, so as to reduce inventory and stock-outs and enhance just- in-time delivery.
Inefficiencies in Procurement Management A high percentage of this time is spent on value added activities such as performing data entry, correcting errors in paperwork, expediting delivery or solving quality problems.Do not have sufficient time to pay full attention to upstream activities. Goals of E-Procurement: Increasing the productivity of purchasing agents Lowering purchase prices through product standardization, reverse auctions, volume discounts, and consolidation of purchases Improving information flow and management Minimizing the purchases made from noncontract vendors Improving the payment process and saving due to expedited payments (for sellers) Establishing efficient, collaborative supplier relations Ensuring delivery on time, every time Slashing order-fulfillment and processing times by leveraging automation Reducing the skill requirements and training needs of purchasing agents Reducing the number of suppliers Streamlining the purchasing process, making it simple and fast. Reducing the administrative processing cost per order by as much as 90% Finding new suppliers and vendors that can provide goods and services faster and/or cheaper (improved sourcing) Integrating budgetary controls into the procurement process Minimizing human errors in the buying or shipping process Monitoring and regulating buying behavior
Other Procurement Methods: internal procurement marketplace The aggregated catalogs of all approved suppliers combined into a single internal electronic catalog. desktop purchasing Direct purchasing from internal marketplaces without the approval of supervisors and without the intervention of a procurement department. group purchasing The aggregation of orders from several buyers into volume purchases so that better prices can be negotiated.
Case Study of Supplier-Oriented Market Place: CISCO Connection Online
Customer Service Cisco began providing electronic support in 1991 using the internet. Software downloads, defect tracking and technical advice. Online Ordering Internet Product Center builds virtually all its products to order . It allowed users to purchase any Cisco product over the Web. A program that was launched in November 1997 interactively links the customers and Ciscos computer systems over the internet and private networks, so that the configuration and price can be validated at the customers own PC even before the order is placed. This approach can be possible if the customer commits to Cisco. Finding Order Status gives the customers tools on its website to find answers to order status inquiries by themselves. Cisco records a shipping date, a method of shipment and the current location of each product. Benefits save the company $363 million per year from operating cost, technical support productivity increased by 200 percent to 300 percent per year, online technical support reduced technical support staff, software distribution cost and marketing material. The Future expect online sales to grow more than 60% of total volume in 1999.
Case Study of Customer-Oriented Market Place: GEs TPN Post
Tpn.geis.com- the electronic bidding site built to enhance GEs procurement process. This site provides a chance for the sellers to participate in the bidding process of GE according to the following procedure: Buyers prepare bidding project information Buyers post the bidding projects on the Internet(RFQs) Buyers identify potential suppliers Buyers invite suppliers to bid on projects Suppliers download the project information from the Internet Suppliers electronically submit bids for projects Buyers evaluate the suppliers bids and negotiate online to achieve the best deal Buyers accept the bid that best meets their requirements
The benefits of joining GE TPN Post As buyers Identify and build partnerships with new suppliers worldwide Strengthen relationships and streamline sourcing processes with current business partners Rapidly distribute information and specifications to business partners Transmit electronic drawings to multiple suppliers simultaneously Cut sourcing cycle times and reduce costs for sourced goods Quickly receive and compare bids from large number of suppliers to negotiate better prices
As Sellers Boosted Sales Expand market reach Cut costs for sales and marketing activities Shorten the selling cycle Improve sales productivity Streamline the bidding process
Case Study of Intermediary-Oriented Market Place: Boeings PART
Boeings PART Case Acts as an intermediary between the airlines and parts suppliers. Provides a single point of online access through which airlines and parts providers can access the data needed. Goal: provide its customers with one-stop shopping with online parts and maintenance information and ordering capability. Boeing On Line Data (BOLD) Incorporating not only engineering drawings but manuals, catalogs and other technical information that used to be available only in paper or in microfiche format. Portable Maintenance Aid (PMA) Solves maintenance problems Benefits to Boeings Customers o Increased productivity spending less time searching for information freed up engineers and maintenance technicians to focus on more productive activities o Reduced costs with information available online at the airports gates, through PMA, rather than back in the office, delays at the gate due to missing information are reduced o Increased revenue opportunity through BOLD and PMA, a European airline estimates it will save 1-2 days/year of down time for each aircraft
Just in Time delivery (JIT) : FedEx InterNetShop Case In such a case (JIT), delivery materials and parts on time is a must. Using E-Commerce, it is highly possible to assure JIT deliveries. Just in time delivery can be realized by the co-coordinated effort of delivery- service company and suppliers inventory policy. For the B2B E-Commerce environment the advance confirmation of the delivery date at the contract stage is very important. Direct marketing requires an internal JIT manufacturing system; the JIT delivery and advanced confirmation of suppliers inventory are essential elements for B2B. FEDEX is a delivery company. It delivers 2.5 million packages daily to 211 countries around the world with an on-time delivery rate of 99 percent. In July 1996, FedEx launched InterNetShip, extending online tracking capabilities to the internet. Customers can request a parcel pickup or find the nearest drop-off point, print packing labels, compute fees, request invoice adjustments and track the status of their deliveries without leaving the Web site. FedEx COSMOS (own proprietary network) handles 54 million transactions a day (1998). Hundreds of thousands of tracking requests per month come from links from over 5,000 Web sites to fedex.com. Benefits to FedEx: Avoided Costs- If not for FedEx PowerShip, FedEx would have had to hire an additional 20,000 employees to answer phone calls at the call centers and key in air bills. Lower operating costs- Without the system, approximately half of the calls would have gone to FedExs toll-free number resulting in high telephone and labor expenses. Better customer service- Customers still have a choice for how they interact with the company, whether by e-mail, phone, fax or other means.
Business to Business Auctions Benefits New sales channel New venue for disposing excess, obsolete products Increase page views; viewers like to watch auctions Acquire and retain members Types Independent auctions: companies use a third-party auctioneer to create the site and sell the goods. Eg: www.fairmarket.com Community auctions: many sellers and buyers come together to a third- party web site.(eg: Electricity) Private auctions: several companies bypass the intermediaries and auction their products by themselves. Ingram Micro has its own site www.auctionblock.com, for selling obsolete computer equipment to its regular business customers.
Business to Business Services Services provided by Intermediaries: CommerceNet- global nonprofit membership organization that aims to meet the needs of companies doing EC. Open Buying on the Internet- OBI Consortium is a nonprofit organization dedicated to developing open standards for B2B Internet commerce. ConnectUs- It is an online service designed for use by companies. It provides all the necessary information that supports card purchasing and facilitates trades done with EDI. Financial Services Technology Consortium (FSTC) and the Smart Card Forum(SCF) - organizations of banks,financial institutions, computer and telecommunications firms and government and private research laboratories that jointly pursue EC research related to electronic banking and payment systems. Traditional EDI EDI and Standards Standardizes the process of trading and tracking purchase orders, invoices, payments and delivery schedules. translates into standard business language and transmits them between trading partners using telecommunications links. Most popular standard is United Nations EDI.
One-order seven messages
P.O.= Purchasing order
Factors limiting businesses to benefit from the traditional EDI Significant initial investment is needed Restructuring business processes is necessary to fit the EDI requirements and standards Long start-up time is needed Use of Private VANs is necessary High EDI operating cost is needed There are several EDI standards The EDI system is complex to use