Company Centric B2 B And Collaborative Commerce


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Company Centric B2 B And Collaborative Commerce

  1. 1. Chapter 5 Company-Centric B2B and Collaborative Commerce
  2. 2. Learning Objectives <ul><li>Describe the B2B field </li></ul><ul><li>Describe the major types of B2B models </li></ul><ul><li>Describe the characteristics of the sell-side marketplace </li></ul><ul><li>Describe the sell-side intermediary models </li></ul><ul><li>Describe the characteristics of the buy-side marketplace and e-procurement </li></ul>
  3. 3. <ul><li>Explain how forward and backward auctions work in B2B </li></ul><ul><li>Describe B2B aggregation and group purchasing models </li></ul><ul><li>Describe collaborative e-commerce and interorganizational systems </li></ul><ul><li>Describe infrastructure and standards requirements for B2B </li></ul>Learning Objectives (cont.)
  4. 4. General Motors’ B2B Initiatives <ul><li>The Problem </li></ul><ul><ul><li>EC initiatives—build-to-order project to be in place by 2005 reducing inventory of finished cars </li></ul></ul><ul><ul><li>What to do with manufacturing machines that are no longer sufficiently productive (assets problem) </li></ul></ul><ul><ul><li>Resource problem relating to procurement of commodity products </li></ul></ul>
  5. 5. General Motors’ (cont.) <ul><li>The Solution </li></ul><ul><ul><li>TradeXchange (now part of Covisint) online auctions of items like used machines for manufacturing </li></ul></ul><ul><ul><ul><li>Significantly decreases time for sales </li></ul></ul></ul><ul><ul><ul><li>Increases dollar amount of the sales </li></ul></ul></ul><ul><ul><li>EC initiatives at TradeXchange </li></ul></ul><ul><ul><ul><li>Capital assets problem—implemented its own electronic market to conduct forward auctions </li></ul></ul></ul><ul><ul><ul><li>Procurement problem—automated the bidding, creating online reverse auctions on its e-procurement site </li></ul></ul></ul>
  6. 6. General Motors’ (cont.) <ul><li>The Results </li></ul><ul><ul><li>Within just 89 minutes after the first forward auction opened, eight presses were sold for $1.8 million </li></ul></ul><ul><ul><li>In the first online reverse auction, GM purchased a large volume of rubber sealing packages for vehicle production at a significantly lower than the price GM had been paying through negotiated by manual tendering </li></ul></ul>
  7. 7. Concepts, Characteristics, and Models of B2 EC <ul><li>Basic B2B Concepts </li></ul><ul><ul><li>Business-to-business e-commerce (B2B EC)—transactions between businesses conducted electronically over the Internet, extranets, intranets, or private networks; also known as eB2B ( electronic B2B ) or just B2B </li></ul></ul><ul><li>Market Size and Content </li></ul><ul><ul><li>Expected to grow from $1.1 trillion in 2003 to $10 trillion by 2005, the percentage of Internet-based B2B from 2.1% in 2000 to 10% in 2005 </li></ul></ul>
  8. 8. Concepts, Characteristics, and Models of B2 EC (cont.) <ul><li>B2B EC Characteristics </li></ul><ul><ul><li>Parties to the transaction </li></ul></ul><ul><ul><ul><li>Online intermediary—an online third-party that brokers a transaction between a buyer and a seller; can be virtual or click-and-mortar; buyers; sellers </li></ul></ul></ul><ul><ul><li>Types of transactions </li></ul></ul><ul><ul><ul><li>Spot buying—the purchase of goods and services as they are needed, usually at prevailing market prices </li></ul></ul></ul><ul><ul><ul><li>Strategic sourcing—purchases involving long-term contracts that are usually based on private negotiations between sellers and buyers </li></ul></ul></ul>
  9. 9. Concepts, Characteristics, and Models of B2 EC (cont.) <ul><ul><li>Types of materials </li></ul></ul><ul><ul><ul><li>Direct materials—materials used in the production of a product (e.g., steel in a car or paper in a book) </li></ul></ul></ul><ul><ul><ul><li>Indirect materials—materials used to support production (e.g., office supplies or light bulbs) </li></ul></ul></ul><ul><ul><ul><li>MROs (maintenance, repairs, and operations)—indirect materials used in activities that support production </li></ul></ul></ul>
  10. 10. Concepts, Characteristics, and Models of B2 EC (cont.) <ul><ul><li>Direction of trade </li></ul></ul><ul><ul><ul><li>Vertical marketplaces—markets that deal with one industry or industry segment (e.g., steel, chemicals). </li></ul></ul></ul><ul><ul><ul><li>Horizontal marketplaces—markets that concentrate on a service or a product that is used in all types of industries (e.g., office supplies, PCs) </li></ul></ul></ul>
  11. 11. Concepts, Characteristics, and Models of B2 EC (cont.) <ul><li>The Basic B2B Transaction Types </li></ul><ul><ul><li>Sell side—one seller to many buyers </li></ul></ul><ul><ul><li>Buy side—one buyer from many sellers </li></ul></ul><ul><ul><li>Exchanges—many sellers to many buyers </li></ul></ul><ul><ul><li>Collaborative commerce—communication and sharing of information, design, and planning among business partners </li></ul></ul>
  12. 12. Exhibit 5.1 Types of B2B E-Commerce
  13. 13. One-to-Many and Many-to-One: Company-Centric Transactions <ul><li>Company-centric EC—e-commerce that focuses on a single company’s buying needs (many-to-one, or buy-side) or selling needs (one-to-many, or sell-side) </li></ul><ul><li>Private e-marketplaces—markets in which the individual sell-side or buy-side company has complete control over participation in the selling or buying transaction </li></ul>
  14. 14. Many-to-Many: Exchanges <ul><li>Exchanges—many-to-many e-marketplaces, usually owned and run by a third party or a consortium, in which many buyers and many sellers meet electronically to trade with each other; also called trading communities, or trading exchanges </li></ul><ul><li>Public e-marketplaces—third-party markets that are open to all interested parties (sellers and buyers) </li></ul>
  15. 15. Concepts, Characteristics, and Models of B2 EC (cont.) <ul><li>Supply chain relationships in B2B </li></ul><ul><ul><li>Interrelated subprocesses and roles </li></ul></ul><ul><ul><li>B2B applications offer competitive advantages for supply chain management (SCM) </li></ul></ul><ul><li>Virtual service industries in B2B </li></ul><ul><ul><li>Travel and tourism services </li></ul></ul><ul><ul><li>Real estate Online stock trading </li></ul></ul><ul><ul><li>Electronic payments Online financing </li></ul></ul>
  16. 16. Concepts, Characteristics, and Models of B2 EC (cont.) <ul><li>Benefits of B2B </li></ul><ul><ul><li>Eliminates paper and reduces administrative costs </li></ul></ul><ul><ul><li>Expedites cycle time </li></ul></ul><ul><ul><li>Lowers search costs and time for buyers </li></ul></ul><ul><ul><li>Increases productivity of employees dealing with buying and/or selling </li></ul></ul><ul><ul><li>Reduces errors and/or improves quality of services </li></ul></ul><ul><ul><li>Reduces inventory levels and costs </li></ul></ul><ul><ul><li>Increases production flexibility, permitting just-in-time delivery </li></ul></ul><ul><ul><li>Facilitates mass customization </li></ul></ul><ul><ul><li>Increases opportunities for collaboration </li></ul></ul>
  17. 17. Sell-Side Marketplaces:One-to-Many <ul><li>Sell-side e-marketplace—a Web-based marketplace in which one company sells to many business buyers, frequently over an extranet </li></ul><ul><li>3 major methods for direct sale in the one-to-many model: </li></ul><ul><ul><li>Selling from electronic catalogs </li></ul></ul><ul><ul><li>Selling via forward auctions </li></ul></ul><ul><ul><li>One-to-one selling under a negotiated, long-term contract </li></ul></ul>
  18. 18. Sell-Side Marketplaces (cont.) <ul><li>Virtual sellers—sellers in the sell-side marketplace can be click-and-mortar manufacturers or intermediaries, usually distributors or wholesalers </li></ul><ul><li>Customer service </li></ul><ul><ul><li>Milacron, Inc . </li></ul></ul><ul><ul><ul><li>Site contains 55,000 products, easy to use, securely handles selection, purchase, application </li></ul></ul></ul><ul><ul><ul><li>Technical service—expanded to provide a higher level of service </li></ul></ul></ul>
  19. 19. Buying from Virtual Seller <ul><li> of Hong Kong </li></ul><ul><ul><li>B2B office supply retailer services </li></ul></ul><ul><ul><li>Goal—sell products in various SE Asian countries </li></ul></ul><ul><ul><ul><li>Offers more than 10,000 items </li></ul></ul></ul><ul><ul><ul><li>Uses more than 300 suppliers </li></ul></ul></ul><ul><ul><li>Company portal attractive, easy to use </li></ul></ul><ul><ul><ul><li>Browse online catalogs </li></ul></ul></ul><ul><ul><ul><li>Use search engines </li></ul></ul></ul><ul><ul><ul><li>Payments—cash or check upon delivery, automatic payments, credit card, purchasing card </li></ul></ul></ul>
  20. 20. (cont.) <ul><ul><li>Delivery </li></ul></ul><ul><ul><ul><li>Owns trucks and warehouses </li></ul></ul></ul><ul><ul><ul><li>Delivery scheduled online </li></ul></ul></ul><ul><ul><ul><li>Ordering system integrated with SAP-based back-office system </li></ul></ul></ul><ul><ul><li>Value-added services </li></ul></ul><ul><ul><ul><li>Track status of order </li></ul></ul></ul><ul><ul><ul><li>Check stock availability </li></ul></ul></ul><ul><ul><ul><li>Promotions </li></ul></ul></ul><ul><ul><ul><li>Customized prices </li></ul></ul></ul><ul><ul><ul><li>Group accounts and central approval </li></ul></ul></ul><ul><ul><ul><li>Standing orders automatically activated </li></ul></ul></ul><ul><ul><ul><li>Large number of reports and data available </li></ul></ul></ul>
  21. 21. Exhibit 5.2 Sell-Side B2B Marketplace Architecture
  22. 22. Direct Sales from Catalogs <ul><li>Companies may: </li></ul><ul><ul><li>Offer one catalog for all customers </li></ul></ul><ul><ul><li>Customized catalog for each customer </li></ul></ul><ul><ul><li>Facilitate the B2B direct sale by providing the buyer with a buyer customized shopping cart </li></ul></ul><ul><li>Configuration and customization </li></ul><ul><ul><li>Efficient customization for direct sales </li></ul></ul><ul><ul><li>Business customers customize products, receive price quote, submit order </li></ul></ul>
  23. 23. Direct Sales from Catalogs (cont.) <ul><li>Benefits </li></ul><ul><ul><li>Lower order-processing costs </li></ul></ul><ul><ul><li>Faster ordering cycle </li></ul></ul><ul><ul><li>Fewer errors in ordering and product configuration </li></ul></ul><ul><ul><li>Lower search costs for buyers </li></ul></ul><ul><ul><li>Lower search costs for sellers </li></ul></ul><ul><ul><li>Lower logistics costs </li></ul></ul>
  24. 24. Direct Sales from Catalogs (cont.) <ul><li>Benefits (cont.) </li></ul><ul><ul><li>Ability to offer different catalogs and prices to different customers and to customize products and services efficiently </li></ul></ul><ul><li>Limitations </li></ul><ul><ul><li>Channel conflicts with distribution systems </li></ul></ul><ul><ul><li>High cost when traditional EDI used </li></ul></ul><ul><ul><li>Large number of business partners is needed to justify system </li></ul></ul>
  25. 25. Selling Via Auctions <ul><li>Using auctions on the sell-side </li></ul><ul><ul><li>Revenue generation </li></ul></ul><ul><ul><li>Increased page views </li></ul></ul><ul><ul><ul><li>Stickiness—characteristic of customer loyalty to a Web site, demonstrated by the number and length of visits to a site </li></ul></ul></ul><ul><ul><li>Member acquisition and retention—bidding transactions result in additional registered members </li></ul></ul>
  26. 26. Selling Via Auctions (cont.) <ul><li>Selling from own site when: </li></ul><ul><ul><li>Large companies that conduct auctions frequently don’t benefit from using intermediaries </li></ul></ul><ul><ul><li>E-marketplace already in use, cost of adding auction not too high </li></ul></ul><ul><li>Intermediary-oriented e-marketplace—an e-marketplace in which intermediaries operate </li></ul>
  27. 27. Selling Via Auctions (cont.) <ul><li>Using intermediaries when: </li></ul><ul><ul><li>No resources required </li></ul></ul><ul><ul><li>Own and control auction information </li></ul></ul><ul><ul><li>Fast time to market </li></ul></ul><ul><ul><li>Searching and reporting </li></ul></ul><ul><ul><ul><li>Search and report all auction activities </li></ul></ul></ul><ul><ul><ul><li>Standard reports available </li></ul></ul></ul><ul><ul><ul><li>Additional analysis of complex information </li></ul></ul></ul>
  28. 28. Selling Via Auctions (cont.) <ul><li>Billing and collection </li></ul><ul><ul><li>Automatic calculation of shipping weights and charges </li></ul></ul><ul><ul><li>Payment— encrypted credit card data </li></ul></ul><ul><ul><li>Billing information— easily downloaded into existing systems </li></ul></ul><ul><ul><li>Successful if: </li></ul></ul><ul><ul><ul><li>Sufficient number of loyal customers </li></ul></ul></ul><ul><ul><ul><li>Products well known </li></ul></ul></ul><ul><ul><ul><li>Price not major purchasing criteria </li></ul></ul></ul>
  29. 29. CISCO Connection Online (CCO) <ul><li>Benefits—saves the company $363 million per year in technical support, human resources, software distribution, marketing material </li></ul><ul><li>Customer service—Cisco Connection online </li></ul><ul><li>Online ordering—Internet Product Center builds virtually all products to order </li></ul><ul><li>Order status—customer tools for finding answers to order status inquiries </li></ul>
  30. 30. Cisco Connection Online (CCO) (cont.) <ul><li>Benefits to Cisco </li></ul><ul><ul><li>Reduced operating costs for order taking </li></ul></ul><ul><ul><li>Enhanced technical support and customer service </li></ul></ul><ul><ul><li>Reduced technical support staff cost </li></ul></ul><ul><ul><li>Reduced software distribution costs </li></ul></ul><ul><ul><li>Lead times reduced fro 4-10 days to 2-3 days </li></ul></ul><ul><li>Benefits to customers </li></ul><ul><ul><li>Quick order configuration </li></ul></ul><ul><ul><li>Immediate cost determination </li></ul></ul><ul><ul><li>Collaboration with Cisco staff </li></ul></ul>
  31. 31. Marshall Industries <ul><li>Marshall Industries —(a subsidiary of AvnetMarshall— multinational distributor of electronic components known for its innovative uses of IT and the Web </li></ul><ul><ul><li>Products and services </li></ul></ul><ul><ul><ul><li>MarshallNet </li></ul></ul></ul><ul><ul><ul><li>Marshall on the Internet (portal) </li></ul></ul></ul><ul><ul><ul><li>Strategic European Internet </li></ul></ul></ul><ul><ul><ul><li>Electronic Design Center </li></ul></ul></ul><ul><ul><ul><li>PartnerNet </li></ul></ul></ul><ul><ul><ul><li>NetSeminar </li></ul></ul></ul><ul><ul><ul><li>Education and News Portal </li></ul></ul></ul>
  32. 32. Marshall Industries (cont.) <ul><ul><li>Survival strategy </li></ul></ul><ul><ul><ul><li>Continuous improvement programs and innovations </li></ul></ul></ul><ul><ul><ul><li>Team-based organization, flat hierarchy, decentralized decision making </li></ul></ul></ul><ul><ul><ul><li>Profit sharing compensation for salespeople </li></ul></ul></ul><ul><ul><ul><li>CRM highly promoted </li></ul></ul></ul><ul><ul><ul><li>Web-based services create value between suppliers and customers </li></ul></ul></ul><ul><ul><ul><li>EC initiatives supported by: </li></ul></ul></ul><ul><ul><ul><ul><li>Changing internal organization </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Changing internal procedures </li></ul></ul></ul></ul>
  33. 33. Boeing’s PART Marketplace <ul><li>Acts as an intermediary between the airlines and parts’ suppliers </li></ul><ul><ul><li>Provides a single point of online access for airlines and parts’ providers to access the data needed </li></ul></ul><ul><li>Goal: provide its customers with one-stop shopping for online parts and maintenance information and ordering capability </li></ul>
  34. 34. <ul><ul><li>Spare parts business using traditional EDI </li></ul></ul><ul><ul><ul><li>Mechanic tells purchasing department parts are needed, purchase is approved, purchase is made </li></ul></ul></ul><ul><ul><ul><li>Large airlines connect to Boeing's VAN </li></ul></ul></ul><ul><ul><ul><li>Boeing finds parts and delivers </li></ul></ul></ul><ul><ul><li>Debut of PART on the Internet </li></ul></ul><ul><ul><ul><li>Encourages customers to order parts electronically—cheap, easy, fast </li></ul></ul></ul><ul><ul><ul><li>50% of customers using Internet within first year </li></ul></ul></ul>Boeing’s PART Marketplace (cont.)
  35. 35. <ul><li>Benefits of PART online </li></ul><ul><ul><li>Improved customer service </li></ul></ul><ul><ul><li>Significant operating savings </li></ul></ul><ul><ul><li>New sales opportunities </li></ul></ul><ul><ul><li>Customer service online reduced </li></ul></ul><ul><ul><li>Portable access to technical drawings/support </li></ul></ul><ul><ul><li>Portable Maintenance Aid (PMA)—solves maintenance problems </li></ul></ul>Boeing’s PART Marketplace (cont.)
  36. 36. Boeing’s PART Marketplace (cont.) <ul><li>Benefits to Boeing’s customers </li></ul><ul><ul><li>Increased productivity—less time searching for information </li></ul></ul><ul><ul><li>Reduced costs—delays at gate reduced because all information is available </li></ul></ul><ul><ul><li>Increased revenues—faster service provides time savings </li></ul></ul>
  37. 37. Buy Side Marketplaces: One-from-Many <ul><li>Procurement methods </li></ul><ul><ul><li>Buy from manufacturers, wholesalers, or retailers at their storefronts, from catalogs,and by negotiation </li></ul></ul><ul><ul><li>Buy from the catalog of an intermediary </li></ul></ul><ul><ul><li>Buy from an internal-buyer’s catalog </li></ul></ul><ul><ul><li>Conduct a bidding or tendering system </li></ul></ul><ul><ul><li>Buy at private or public auction sites </li></ul></ul><ul><ul><li>Join a group-purchasing system </li></ul></ul>
  38. 38. Buy Side Marketplaces: One-from-Many (cont.) <ul><li>Procurement management—the coordination of all the activities relating to purchasing goods and services needed to accomplish the mission of an organization </li></ul><ul><li>Inefficiencies in procurement management </li></ul><ul><ul><li>Purchasing personnel spend time and effort on procurement activities </li></ul></ul><ul><ul><li>Qualifying suppliers </li></ul></ul><ul><ul><li>Negotiating prices and terms </li></ul></ul><ul><ul><li>Building rapport with strategic suppliers </li></ul></ul><ul><ul><li>Carrying out supplier evaluation and certification </li></ul></ul>
  39. 39. Buy Side Marketplaces: One-from-Many (cont.) <ul><ul><li>Buyers are sometimes too busy with the details of the smaller items </li></ul></ul><ul><ul><li>Organizations address this imbalance by implementing new purchasing models </li></ul></ul><ul><li>Potential inefficiencies: </li></ul><ul><ul><li>Delays </li></ul></ul><ul><ul><li>Paying too much for rush orders </li></ul></ul><ul><ul><li>Maverick buying—unplanned purchases of items needed quickly, often from non-approved vendors or at higher prices </li></ul></ul>
  40. 40. Exhibit 5.4 Traditional Procurement Process
  41. 41. Buy Side Marketplaces: One-from-Many (cont.) <ul><li>Goals of e-procurement </li></ul><ul><ul><li>Increase purchasing agent productivity </li></ul></ul><ul><ul><li>Lower purchasing prices of items </li></ul></ul><ul><ul><li>Improve information flow and management </li></ul></ul><ul><ul><li>Minimize maverick (unplanned) buying </li></ul></ul><ul><ul><li>Improve payment process </li></ul></ul><ul><ul><li>Streamline purchasing process to make it simple and fast </li></ul></ul>
  42. 42. Buy Side Marketplaces: One-from-Many (cont.) <ul><li>Goals of e-procurement (cont.) </li></ul><ul><ul><li>Reduce administrative processing cost per order </li></ul></ul><ul><ul><li>Find new suppliers and vendors to provide faster/cheaper goods and services </li></ul></ul><ul><ul><li>Integrate procurement process with budgetary control in an efficient and effective way </li></ul></ul><ul><ul><li>Minimize human errors in buying or shipping process </li></ul></ul>
  43. 43. Buy Side Marketplaces: One-from-Many (cont.) <ul><li>Implementing e-procurement </li></ul><ul><ul><li>Fit e-procurement into company EC strategy </li></ul></ul><ul><ul><li>Review and change procurement process itself </li></ul></ul><ul><ul><li>Provide interfaces between e-procurement with integrated EIS </li></ul></ul><ul><ul><li>Coordinate buyer’s information system with the sellers </li></ul></ul>
  44. 44. Buy Side E-Marketplaces: Reverse Auctions <ul><li>Buy-side e-marketplace—a Web-based marketplace in which a buyer opens an electronic market on its own server and invites potential suppliers to bid on the items the buyer needs; also called the reverse auction, tendering, or bidding model </li></ul><ul><li>Request for quote (RFQ)—the “invitation” to a buy-side marketplace (reverse auction) </li></ul>
  45. 45. Exhibit 5.6 Buy-Side B2B Market Architecture
  46. 46. Conducting Reverse Auctions <ul><li>Reverse auctions administered from a company’s Web site </li></ul><ul><ul><li>Bidding process lasts a day or more </li></ul></ul><ul><ul><li>Bidders may bid only once or view the lowest bid and rebid several times </li></ul></ul><ul><li>Increasing number of reverse auction sites makes it impossible for suppliers to monitor all of them </li></ul><ul><ul><li>Online directories list open RFQs </li></ul></ul><ul><ul><li>Use software search-and-match agents to reduce the human burden in the bidding process </li></ul></ul>
  47. 47. Bidding Through a Third-Party Auctioneer: <ul><li>United Technologies Corp. needs suppliers to make $24 million worth of circuit boards </li></ul><ul><ul><li>2,500 suppliers are identified as possible contractors </li></ul></ul><ul><ul><li>List is submitted to FreeMarkets ( </li></ul></ul>
  48. 48. (cont.) <ul><li>FreeMarkets reduced the list to 50, based on considerations including: </li></ul><ul><ul><li>Plant location </li></ul></ul><ul><ul><li>Size of supplier </li></ul></ul><ul><ul><li>Plant capacity </li></ul></ul><ul><ul><li>Customer feedback </li></ul></ul><ul><ul><li>Detailed evaluation of the candidates </li></ul></ul>
  49. 49. (cont.) <ul><li>3-hour auction conducted of online competitive bidding: </li></ul><ul><ul><li>First bid was seen by all bidders </li></ul></ul><ul><ul><li>Using reverse auction approach, the bidders reduced their bids </li></ul></ul><ul><li>Comprehensive analysis of several of the lowest bidders </li></ul><ul><li>Then recommended the winners and collected its commission fees </li></ul>
  50. 50. Procurement Revolution at GE <ul><li>TPN (now part of </li></ul><ul><ul><li>Purchasing was inefficient—too many administrative transactions </li></ul></ul><ul><ul><ul><li>Process for each requisition took 7 days </li></ul></ul></ul><ul><ul><ul><li>Complex and time-consuming </li></ul></ul></ul><ul><ul><ul><li>Could only send out bids for 2 or 3 suppliers </li></ul></ul></ul><ul><ul><li>Trading Process Network (TPN)—electronic bids </li></ul></ul><ul><ul><ul><li>Entire process takes 7 days (for suppliers to bid) </li></ul></ul></ul><ul><ul><ul><li>2 hours to send information to suppliers </li></ul></ul></ul><ul><ul><ul><li>Evaluate and award bids same day </li></ul></ul></ul>
  51. 51. Procurement Revolution at GE (cont.) <ul><li>Benefits to GE </li></ul><ul><ul><li>Labor declined 30% and material costs declined 5%-50%--wider base of suppliers online </li></ul></ul><ul><ul><li>Redeployment of 50% of the staff </li></ul></ul><ul><ul><li>Takes half the time to identify suppliers, prepare a request for bid, negotiate a price, and award the contract </li></ul></ul><ul><ul><li>Invoices automatically reconciled reflecting modifications </li></ul></ul>
  52. 52. Procurement Revolution at GE (cont.) <ul><li>Benefits to buyers </li></ul><ul><ul><li>Worldwide supplier partnerships </li></ul></ul><ul><ul><li>Current business partners </li></ul></ul><ul><ul><ul><li>Strengthen relationships </li></ul></ul></ul><ul><ul><ul><li>Streamline sourcing process </li></ul></ul></ul><ul><ul><li>Rapid distribution of information </li></ul></ul><ul><ul><li>Transmit electronic drawings to multiple suppliers </li></ul></ul><ul><ul><li>Decrease sourcing cycle time </li></ul></ul><ul><ul><li>Quick receipt and comparison of pricing bids </li></ul></ul>
  53. 53. Procurement Revolution at GE (cont.) <ul><li>Benefits to suppliers </li></ul><ul><ul><li>Increased sales volume </li></ul></ul><ul><ul><li>Expanded market reach, finding new buyers </li></ul></ul><ul><ul><li>Lowered administration costs for sales and marketing activities </li></ul></ul><ul><ul><li>Shortened requisition cycle time </li></ul></ul><ul><ul><li>Improved sales staff productivity </li></ul></ul><ul><ul><li>Streamlined bidding process </li></ul></ul>
  54. 54. Aggregating Catalogs <ul><li>Aggregating suppliers’ catalogs: an internal marketplace </li></ul><ul><ul><li>Maverick buying to save time leads to high prices </li></ul></ul><ul><ul><li>Aggregating all approved suppliers’ catalogs in one place </li></ul></ul><ul><li>Reduced number of suppliers </li></ul><ul><ul><li>Buyers at multiple corporate locations </li></ul></ul><ul><ul><ul><li>Fewer and remote suppliers </li></ul></ul></ul><ul><ul><ul><li>Larger quantity/lower costs </li></ul></ul></ul>
  55. 55. Buying from MasterCard International’s Internal Catalog <ul><li>Online buying program at MasterCard: </li></ul><ul><ul><li>Allows corporate buyers to select goods and services from company’s electronic catalog </li></ul></ul><ul><ul><li>Goal is to consolidate buying activities from multiple corporate sites, improve processing costs, reduce the supplier base </li></ul></ul><ul><li>Procurement department defines: </li></ul><ul><ul><li>Scope of products or projects to buy </li></ul></ul><ul><ul><li>Invites vendors to bid or negotiate prices </li></ul></ul>
  56. 56. MasterCard International (cont.) <ul><li>Contract prices are stored in the internal electronic catalog </li></ul><ul><li>Final buyer at MasterCard compares available alternatives </li></ul><ul><ul><li>Organizational purchasing decision coupled with an internal workflow management system </li></ul></ul><ul><ul><li>Internal electronic catalog is updated manually or by software agents </li></ul></ul><ul><ul><li>Payments are made with MasterCard’s corporate procurement card </li></ul></ul><ul><ul><li>By 2002, the system was being used by more than 2,500 buyers </li></ul></ul>
  57. 57. Group Purchasing <ul><li>Group purchasing—aggregation several buyers into volume purchases, so that better prices can be negotiated </li></ul><ul><ul><li>Internal aggregation </li></ul></ul><ul><ul><ul><li>Economy of scale </li></ul></ul></ul><ul><ul><ul><li>Reduced transaction processing cost </li></ul></ul></ul><ul><ul><li>External aggregation </li></ul></ul><ul><ul><ul><li>Aggregating demand online </li></ul></ul></ul><ul><ul><ul><li>Putting together orders from multiple buyers to make large volumes/lower costs </li></ul></ul></ul>
  58. 58. Exhibit 5.7 Group Purchasing Process
  59. 59. Electronic Bartering <ul><li>Bartering exchange—an intermediary that links parties in a barter; a company submits its surplus to the exchange and receives points of credit, which can be used to buy the items that the company needs from other exchange participants </li></ul><ul><ul><li>Exchange of goods or services without the use of money </li></ul></ul><ul><ul><li>Exchange a surplus for other need </li></ul></ul><ul><ul><li>Benefits: </li></ul></ul><ul><ul><ul><li>Faster than manually </li></ul></ul></ul><ul><ul><ul><li>Easier to match </li></ul></ul></ul>
  60. 60. Collaborative Commerce (C-Commerce) <ul><li>Collaborative commerce (c-commerce)—commerce consisting of activities between business partners in jointly planning, designing, developing, managing,and researching products and services </li></ul><ul><li>Web-based systems used between and among suppliers for: </li></ul><ul><ul><li>Communication Design </li></ul></ul><ul><ul><li>Planning Information sharing </li></ul></ul><ul><ul><li>Information discovery </li></ul></ul>
  61. 61. Collaborative Commerce (cont.) <ul><li>Varieties of c-commerce: </li></ul><ul><ul><li>Joint design efforts </li></ul></ul><ul><ul><li>Forecasting </li></ul></ul><ul><ul><li>Between and within organizations </li></ul></ul><ul><li>Aids communication and collaboration between h eadquarters and subsidiaries, franchisers and franchisees </li></ul><ul><li>C-commerce platform provides e-mail, message boards, chat rooms, online corporate data access around the globe, no matter what the time zone </li></ul>
  62. 62. Webcor Construction Goes Online with Its Partners <ul><li>Webcor suffered from too much paperwork and poor communication with its: </li></ul><ul><ul><li>Architects </li></ul></ul><ul><ul><li>Designers </li></ul></ul><ul><ul><li>Building owners </li></ul></ul><ul><ul><li>Subcontractors </li></ul></ul><ul><li>Webcor’s goal: to turn its computer-aided design (CAD) drawings, memos, and other information into shared digital information </li></ul>
  63. 63. Webcor (cont.) <ul><li>Webcor uses ASP that hosts its projects on a secured extranet </li></ul><ul><li>Major problem was getting everyone to accept software: </li></ul><ul><ul><li>Complex </li></ul></ul><ul><ul><li>User training is necessary </li></ul></ul><ul><li>Webcor was in a strong enough position to choose not to partner with anyone who would not use ProjectNet </li></ul>
  64. 64. Webcor (cont.) <ul><li>Webcor’s business partners can post send, or edit CAD drawings, digital photos, memos, status reports, project histories </li></ul><ul><ul><li>Partners have instant access to new building drawings </li></ul></ul><ul><ul><li>Central meeting place where users can both download and transmit information to all parties, all with a PC </li></ul></ul>
  65. 65. Retailer–Supplier Collaboration: Target Corporation <ul><li>Target Corporation is a large retail conglomerate: </li></ul><ul><ul><li>Conducts EC activities with about 20,000 trading partners </li></ul></ul><ul><ul><li>1998—established an extranet-based system for those partners that were not connected to its VAN-based EDI. </li></ul></ul>
  66. 66. Target Corporation (cont.) <ul><li>The extranet enabled the company to: </li></ul><ul><ul><li>Reach many more partners, </li></ul></ul><ul><ul><li>Use many applications not available on the traditional EDI </li></ul></ul><ul><ul><li>Streamline its communications and collaboration with suppliers </li></ul></ul><ul><ul><li>Business customers to create personalized Web pages </li></ul></ul>
  67. 67. Continuous Replenishment: Warner-Lambert <ul><li>Warner-Lambert (WL) served as a pilot site for a program called Collaborative Planning, Forecasting, and Replenishment (CPFR) </li></ul><ul><ul><li>Shared strategic plans, performance data, and market insight with Wal-Mart </li></ul></ul><ul><ul><li>Trading partners collaborate on making demand forecasts </li></ul></ul><ul><li>WL increased its products’ shelf-fill rate from 87 percent to 98 percent </li></ul>
  68. 68. Warner-Lambert (cont.) <ul><li>WL is involved in another collaborative retail industry project—Supply-Chain Operations Reference (SCOR): </li></ul><ul><ul><li>Divides supply chain operations into parts </li></ul></ul><ul><ul><li>Gives a framework with which to evaluate the effectiveness of their processes along the same supply chains to: </li></ul></ul><ul><ul><ul><li>Manufacturers </li></ul></ul></ul><ul><ul><ul><li>Suppliers </li></ul></ul></ul><ul><ul><ul><li>Distributors </li></ul></ul></ul><ul><ul><ul><li>Retailers </li></ul></ul></ul>
  69. 69. Reduction of Design Cycle Time: Adaptec, Inc. <ul><li>Microchip manufacturer supplying electronic equipment makers </li></ul><ul><ul><li>Outsourced manufacturing tasks </li></ul></ul><ul><ul><li>Delivery times exceeded their competitors </li></ul></ul><ul><li>Solution to the problem </li></ul><ul><ul><li>Extranet and enterprise-level supply chain integrated software </li></ul></ul><ul><ul><li>Significantly reduced order-to-product delivery time </li></ul></ul>
  70. 70. Reduction of Product Development Time: Caterpillar, Inc. <ul><li>Heavy machinery manufacturer uses extranet </li></ul><ul><ul><li>Request for customized component directly to designers and suppliers ship to buyers </li></ul></ul><ul><ul><li>Connect engineering and manufacturing division with worldwide </li></ul></ul><ul><ul><ul><li>Suppliers Factories </li></ul></ul></ul><ul><ul><ul><li>Distributors Customers </li></ul></ul></ul><ul><ul><ul><li>Overseas </li></ul></ul></ul>
  71. 71. Barriers to C-Commerce <ul><li>C-commerce is moving ahead fairly slowly because: </li></ul><ul><ul><li>Technical reasons involving integration, standards, and networks </li></ul></ul><ul><ul><li>Security and privacy concerns over who has access control of information stored in a partner’s database </li></ul></ul><ul><ul><li>Internal resistance to new models and approaches </li></ul></ul><ul><ul><li>Lack of internal skills to conduct c-commerce </li></ul></ul>
  72. 72. Interorganizational Collaboration at Nygard of Canada <ul><li>Nygard has become a leader in adopting IT and e-commerce in the apparel industry </li></ul><ul><ul><li>Company stays competitive by using EC to control costs of labor and manufacturing </li></ul></ul><ul><ul><li>Developed an ERP and supply chain management that controls all internal operations, purchasing, product development, accounting, production planning, sales </li></ul></ul><ul><li>This enabled the company to develop tight integration with its trading partners </li></ul>
  73. 73. Nygard of Canada (cont.) <ul><li>The moment that a customer buys a pair of pants at a partner’s retail store: </li></ul><ul><ul><li>Information moves from the POS terminal </li></ul></ul><ul><ul><li>Automatically generates a reorder at Nygard </li></ul></ul><ul><li>SCM: </li></ul><ul><ul><li>Matches customers’ orders with the right fabrics </li></ul></ul><ul><ul><li>Searches the market pool for the most efficient combinations of other material for use with those fabrics </li></ul></ul>
  74. 74. Nygard of Canada (cont.) <ul><li>Sales trigger orders </li></ul><ul><li>Manufacturing automatically industries, and global manufacturers are willing to operate with razor-thin margins as fabrics, zippers, and buttons </li></ul><ul><li>The moment that raw material is used, an automatic reorder of the material is generated </li></ul><ul><ul><li>Allows just-in-time production </li></ul></ul><ul><ul><li>Quick order delivery (sometimes same day) </li></ul></ul>
  75. 75. Nygard of Canada (cont.) <ul><li>Web-based control system enables the company to: </li></ul><ul><ul><li>Conduct detailed profitability studies </li></ul></ul><ul><ul><li>Decisions are evaluated by impacts on the bottom line </li></ul></ul><ul><ul><li>Decision support systems (DSS) models are used for this purpose </li></ul></ul>
  76. 76. Infrastructure for B2B <ul><li>Server to host database and applications </li></ul><ul><li>Software for executing sell-side (catalogs) </li></ul><ul><li>Software for conducting auctions and reverse auctions </li></ul><ul><li>Software for e-procurement (buy-side) </li></ul><ul><li>Software for CRM </li></ul><ul><li>Security hardware and software </li></ul><ul><li>Software for building a storefront </li></ul><ul><li>Software for building exchanges </li></ul><ul><li>Telecommunications networks and protocols </li></ul>
  77. 77. Extranet and EDI <ul><li>Value-added networks (VANs)—private, third-party-managed networks that add communications services and security to existing common carriers; used to implement traditional EDI systems </li></ul><ul><li>Internet-based EDI—EDI that runs on the Internet and so is widely accessible to most companies, including SMEs </li></ul>
  78. 78. Extranet and EDI <ul><li>Extranets—secured networks (by VPN), usually Internet-based, that allow business partners to access portions of each other’s intranets; “extended intranets.” </li></ul>
  79. 79. Integration <ul><li>Integration with existing information systems issues </li></ul><ul><ul><li>Intranet-based work flow </li></ul></ul><ul><ul><li>Database management systems (DMBS) </li></ul></ul><ul><ul><li>Application packages </li></ul></ul><ul><ul><li>ERP </li></ul></ul><ul><ul><li>Back-end sell-side integration works for sellers but not buyers and vice versa </li></ul></ul>
  80. 80. Integration (cont.) <ul><li>Integration with business partners </li></ul><ul><ul><li>Easy integration with one company-centric side </li></ul></ul><ul><ul><li>Not easy to integrate for many buyers or sellers </li></ul></ul><ul><ul><li>Need buyer owned shopping cart that can interface with back-end information systems </li></ul></ul>
  81. 81. The Role of XML in B2B Integration <ul><li>Companies interact easily and effectively by connecting to their servers, applications, databases </li></ul><ul><li>Standard protocols and data-representation schemes are needed </li></ul><ul><li>Web is based on the standard communication protocols useful only for displaying static visual Web pages: </li></ul><ul><ul><li>TCP/IP </li></ul></ul><ul><ul><li>HTTP </li></ul></ul><ul><ul><li>HTML </li></ul></ul>
  82. 82. The Role of XML in B2B Integration (cont.) <ul><li>XML (eXtensible Markup Language)—standard (and its variants) used to improve compatibility between the disparate systems of business partners by defining the meaning of data in business documents </li></ul><ul><ul><li>Used to increase: </li></ul></ul><ul><ul><ul><li>Interactivity </li></ul></ul></ul><ul><ul><ul><li>Accessibility with speech recognition systems </li></ul></ul></ul>
  83. 83. XML Unifies Air Cargo Tracking System <ul><li>B2B intermediary, TradeVan Information Services of Taiwan provides information services about the cargo flights of different airlines </li></ul><ul><ul><li>Different information systems have different query results </li></ul></ul><ul><ul><li>XML facilitates data exchange between heterogeneous databases </li></ul></ul><ul><ul><li>Information can be presented on wireless application protocol (WAP)-based cell phones </li></ul></ul>
  84. 84. Air Cargo Tracking System (cont.) <ul><li>System is expected to: </li></ul><ul><ul><li>Reduce delays significantly </li></ul></ul><ul><ul><li>Benefit of all members of the supply chain </li></ul></ul><ul><ul><li>Returns a standardized yet personalized presentation for different airlines </li></ul></ul><ul><ul><li>Enables customs brokers to reduce the cycle time by preparing declarations of imports faster </li></ul></ul>
  85. 85. Air Cargo Tracking System (cont.) <ul><li>Buyers and other supply chain partners can schedule production lines with precision and in advance </li></ul><ul><li>Quality of door-to-door delivery companies is improved through fast communication </li></ul><ul><ul><li>Answers to queries can be derived much faster </li></ul></ul><ul><ul><li>Improves the supply chain by reducing: </li></ul></ul><ul><ul><ul><li>Delivery lead times </li></ul></ul></ul><ul><ul><ul><li>Inventory levels </li></ul></ul></ul>
  86. 86. The Role of Software Agents in B2B EC <ul><li>Agent’s role in the sell-side marketplace </li></ul><ul><ul><li>B2C comparison-shopping </li></ul></ul><ul><ul><li>B2B agents collect information from sellers’ sites for buyers </li></ul></ul><ul><li>Agent’s role in the buy-side marketplace </li></ul><ul><ul><li>Assisting large number of buyers requesting quotes from multiple potential suppliers in buy-side </li></ul></ul>
  87. 87. Managerial Issues <ul><li>Can we justify the cost? </li></ul><ul><li>Which vendor(s) should we select? </li></ul><ul><li>Which model(s) should we use? </li></ul><ul><li>Do we need B2B marketing? </li></ul><ul><li>Should we reengineer our procurement system? </li></ul><ul><li>What restructuring will be required for the shift to e-procurement? </li></ul><ul><li>What integration would be useful? </li></ul><ul><li>What are the ethical issues in B2B? </li></ul>
  88. 88. Summary <ul><li>The B2B field </li></ul><ul><li>The major B2B models </li></ul><ul><li>The characteristics of sell-side marketplaces </li></ul><ul><li>Sell-side intermediaries </li></ul><ul><li>The characteristics of buy-side marketplaces </li></ul><ul><li>Forward and reverse auctions </li></ul><ul><li>B2B aggregation and group purchasing </li></ul><ul><li>Collaborative EC </li></ul><ul><li>Characteristics of Internet-based EDI and the role of XML </li></ul>