Ecommerce Chap 06


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Ecommerce Chap 06

  1. 1. Chapter 6Business-to-BusinessElectronic Commerce © Prentice Hall, 2000 1
  2. 2. Learning ObjectivesDistinguish between B2B and B2CIdentify the relationship between B2B andsupply chain managementClassify the categories of B2B models andarchitectures according to the nature of theelectronic stores and mallsDescribe typical cases of Supplier, Buyers,and Intermediary-Oriented Market PlacesOutline the current and next-generationcharacteristics of B2B Electronic Commerce © Prentice Hall, 2000 2
  3. 3. Learning Objectives (cont.)Distinguish between VAN-based an Internet-base EDIDescribe the role of Just-In-Time in B2BElectronic CommerceDescribe how software agents can facilitatecommunication between sellers and buyersDescribe how marketing is done in B2B © Prentice Hall, 2000 3
  4. 4. Trading Process Network (TPN) Post in General Electric General Electric (GE) Its purchasing was inefficient, involved too many administrative transactions For each requisition, theFactories at GE This process took at accompanying blueprintsLighting division least 7 days and was had to be requested fromused to send so complex and time- storage, retrieved fromhundreds of consuming that the the vault, transported toRequisitions For sourcing department the processing site,Quotations (RFQs) normally sent out bid photocopied, folded,to the corporate packages only to two attached to papersourcing department or three suppliers at requisition forms witheach day for low- a time. quote sheets, stuffed intovalue machine parts. envelopes and mailed out. GE is conducting electronic bids, no paperwork © Prentice Hall, 2000 4
  5. 5. Trading Process Network (TPN) Post in General Electric (cont.) Benefits of using TPN60%of the staff involved in It used to take 18-23 days to identifyprocurement have been suppliers, prepare a request for bid,redeployed. The sourcing negotiate a price and award thedepartment has at least 6-8 free contract to a supplier. It now takesdays a month to concentrate on 9-11 days.strategic activities rather than With the transaction handledon paperwork, photocopying electronically from beginning toand envelope stuffing it had to end, invoices are automaticallydo when the process was reconciled with purchase orders,manual. reflecting any modifications thatLabor involved in procurement happen along the way.declined by 30%. At the same GE Procurement departmentstime, materials costs declined across the world now share5%-20% due to the ability to information about their bestreach a wider base of suppliers © Prentice Hall, 2000 5
  6. 6. Supply Chain Definition All activities associated with the flow and transformation of goods from raw materials to end users Upstream Internal Downstream2nd Tier Distribution CustomersSupplier 1st Tier Centers2nd Tier Supplier Assembly/Supplier Manufacturing and 1st Tier Packaging2nd Tier Supplier Packaged RetailersSupplier Cereal Grain Grain Processing Cereal Packaging Distributor Customers Producer Facility Paperboard Corrugate Manufacturer Labels Store Word Lumber Label Company Manufacturer © Prentice Hall, 2000 6
  7. 7. Characteristics of B2B ECKey Entities of B2B EC Buying company with procurement management perspective Selling company with marketing management perspective Electronic Intermediary, an optional third party directory service provider (the scope of service may be extended to order fulfillment) Deliverer who can fulfill a just-in-time delivery Network platform such as the Internet, VAN, intranet and extranet Protocol of communication such as EDI and comparison shopping possibly using software agents Back-end information system possibly implemented using the intranet and Enterprise Resource Planning (ERP) systems © Prentice Hall, 2000 7
  8. 8. Characteristics of B2B EC (cont.)Relationship with Electronic Marketing Supplier-oriented marketing Used to sell the company’s products and services to business customers on the Internet Electronic catalogs are basically the same as that for B2C EC, but they may be customized Using electronic auctions to liquidate surplusesRelationship with Procurement Management Purchasing company’s point of view : a medium of achieving the goals of procurement management Procurement management’s point of view : the buyer-oriented market can be effective Using a RFQ-bidding mechanism © Prentice Hall, 2000 8
  9. 9. Characteristics of B2B EC (cont.)Relationship with Electronic Intermediaries Similar to the B2B electronic intermediaries, but the customers are businesses Also, special intermediaries for matching buyers and sellers, bartering etc.Relationship with intranet are very importantRelationship with extranets A dedicated network between business partners or a secured public network like the Internet Implementing a virtually private network (VPN) to improve internet security © Prentice Hall, 2000 9
  10. 10. Models of B2B EC Supplier-Oriented Market Place Individual consumers and business buyers use the same supplier-provided market place (May pay different prices due to quantity discount)Consumers Business Customers Supplier’s Electronic Mall Supplier’s Customer’s Products Catalog Order InformationB2C E-commerce B2B E-Commerce © Prentice Hall, 2000 10
  11. 11. Models of B2B EC (cont.) Buyer-Oriented Market PlaceBuyer opens a market on its own server and invitespotential suppliers to bid on RFQsOffer opportunity to committed suppliersBUT as the number of such sites increase, only verybig buyers can afford to fully utilize this approachOVERCOME with the aid of software agents Business Suppliers Buyer’s Electronic Mall Buyer’s Suppliers’ Products Bids, Information Catalog, RFQ © Prentice Hall, 2000 11
  12. 12. Models of B2B EC (cont.)Intermediary-Oriented Market Place Establish an electronic intermediary company Similar to an intermediary-based B2C mall; bring buyers and suppliers (bidders) to one place The corporate information systems need tight coupling with the intermediary electronic mallBusiness BusinessCustomers Suppliers Intermediary’s Electronic Mall Customer’s Shared Supplier’s Order Information Products Catalogs Product Information © Prentice Hall, 2000 12
  13. 13. Procurement Management Using B2B EC PlatformPurchasing is now a strategic function, to increase profitmarginsBy automating and streamlining the laborious routine of thepurchasing function, purchasing professionals can focus onmore strategic purchases, achieving the following goals: Reducing purchasing cycle time and cost Enhancing budgetary control Eliminating administrative errors Increasing buyers’ productivity Lowering prices through product standardization and consolidation of purchases Better information management; e.g. supplier’s information and pricing information Improving the payment process © Prentice Hall, 2000 13
  14. 14. Case Study of Supplier-Oriented Market Place: CISCO Connection Online Customer Service— Cisco Connection online Online Ordering— Internet Product Center builds virtually all its products to order Finding Order Status— gives the customers tools to find answers to order status inquiries by themselves Benefits— save the company $363 million per year from technical support, human resources, software distribution and marketing material The Future— expect online sales to grow more than 60% of total volume in 1999 © Prentice Hall, 2000 14
  15. 15. Case Study of Customer-Oriented Market Place: GE’s TPN Post Provides a chance for sellers to participate in the bidding process of GE using the following procedure: Buyers prepare bidding project information Buyers post the bidding projects on the Internet 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 © Prentice Hall, 2000 15
  16. 16. Case Study of Customer-Oriented Market Place: GE’s TPN Post (cont.) The benefits of joining GE TPN PostAs buyers As Sellers Identify and build partnerships with new Boost Sales suppliers worldwide Expand market reach Strengthen relationships and streamline Cut costs for sales and sourcing processes with current marketing activities business partners Shorten the selling cycle Rapidly distribute information and specifications to business partners Improve sales productivity Transmit electronic drawings to multiple suppliers simultaneously Streamline the bidding Cut sourcing cycle times and reduce process costs for sourced goods Quickly receive and compare bids from large number of suppliers to negotiate better prices © Prentice Hall, 2000 16
  17. 17. Case Study of Intermediary-Oriented Market Place: Boeing’s PART Boeing’s 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 © Prentice Hall, 2000 17
  18. 18. Case Study of Intermediary-Oriented Market Place: Boeing’s PART (cont.) 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 © Prentice Hall, 2000 18
  19. 19. Case Study of Intermediary-Oriented Market Place: Boeing’s PART (cont.) Benefits to Boeing’s Customers Increased productivity spending less time searching for information; frees up engineers and maintenance technicians to focus on more productive activities 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 Increased revenue opportunity through BOLD and PMA, a European airline estimates it will save 1-2 days/year of down time for each aircraft Should Boeing keep the inventory of parts in stock, or relay on the manufacturers? © Prentice Hall, 2000 19
  20. 20. Just-In-Time Delivery: Fed Express InterNetShipFedEx Internet and private networks improve efficiency and customer satisfaction FedEx PowerShip and FedEx Ship were the two software rolled out in the mid- 1980s and 1995 respectively Now moving to the Internet : InterNetShip © Prentice Hall, 2000 20
  21. 21. Just-In-Time Delivery: Fed Express InterNetShip (cont.)FedEx InterNetShip Extends online 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 © Prentice Hall, 2000 21
  22. 22. Just-In-Time Delivery: Fed Express InterNetShip (cont.)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 FedEx’s 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 © Prentice Hall, 2000 22
  23. 23. Business-to-Business AuctionsBenefits New sales channel New venue for disposing excess, obsolete products Increase page views; viewers like to watch auctions Acquire and retain membersTypes Independent auctions: using 3rd party auction site Community auctions: many sellers and buyers simultaneously (Electricity, Flowers) Private auctions: large distributor (Ingrain Micro) © Prentice Hall, 2000 23
  24. 24. Business-to-Business Auctions (cont.) What Auction Intermediary Provides? All necessary infrastructure Company controls all auction information (software provided) All procedures for auctions Fast deployment time Search engine Trust mechanism (escrow, insurance) Activity report generation Billing and collection © Prentice Hall, 2000 24
  25. 25. EDI - The Infrastructure for B2BA network for transmitting standard transactionsA paperless TPS environmentRoutine documents; purchase order, billings,shipping manifestsDocuments translated into standard businesslanguageIn use since the 1970s on private VANs. Savetime, reduce errors in data entry, save money,consistent information flowProvide strategic advantages © Prentice Hall, 2000 25
  26. 26. EDI - The Infrastructure for B2B (cont.) Typical Flow of EDI Messages one order - seven messages!! Buyer Supplier RFQ Response to RFQ Purchase Order P.O. Acknowledgement Purchase Order Change P.O. Change Acknowledgement Functional Acknowledgement (for each Transaction ) RFQ = Request for Proposal P.O. = Purchasing Order © Prentice Hall, 2000 26
  27. 27. From Traditional to Internet-based EDI 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 © Prentice Hall, 2000 27
  28. 28. From Traditional to Internet-based EDI (cont.)Traditional EDI does not meet followingrequirements: Enable more firms to use EDI Encourage full integration of EDI into trading partner business processes Simplify EDI implementation Expand the capabilities of online information exchange © Prentice Hall, 2000 28
  29. 29. From Traditional to Internet-based EDI (cont.)Reasons for firms to create the ability tochange transactions over the Internet The Internet is a publicly accessible network with few geographical constraints. Its largest attribute, large-scale connectivity (without the need to have special company networking architecture) is a seedbed for growth of a vast range of business applications. The Internet global inter-network connections offers the potential to reach the widest possible number of trading partners of any viable alternative currently available. © Prentice Hall, 2000 29
  30. 30. From Traditional to Internet-based EDI (cont.)Reasons Using the Internet can cut communication cost by over 50%. Using the Internet to exchange EDI transactions is consistent with the growing interest of business in delivering an ever-increasing variety of products and services electronically, particularly through the Web. Internet-based EDI can compliment or replace current EDI systems. Internet tools such as browsers and search engines are very user friendly and most users today know how to use them. © Prentice Hall, 2000 30
  31. 31. The Role of Agents in B2B ECRequirement of Human Buyer Requirement of Human Buyer Buyer Agent B1 Buyer Agent B2Seller Agent S1 Seller Agent S2 Seller Agent S3 Seller Agent S3 Human Human Human Human Seller 1 Seller 2 Seller 3 Seller 4 © Prentice Hall, 2000 31
  32. 32. The Role of Agents in B2B EC (cont.)AGENTProblem Solver Communication Controller Outgoing Msg. Problem Solving Incoming Msg. Message Manager Message Manager Base Directory Consulting Solution Engines Directory Individual Manager Order Message Queue Mgt. Agent Data Knowledge Base Base Message Gate An Architecture of Intelligent Agents for Electronic Commerce: UNIK-AGENT Approach © Prentice Hall, 2000 32
  33. 33. The Role of Agents in B2B EC (cont.) Management of Buyer Information at Buyer Sites to Integrate with Corporate Information SystemsCurrent B-to-C Platform Prospective B-to-B PlatformBuyer’s information stored in Buyer’s information needs tothe seller’s server be stored in the buyer’s server to integrate with back- end systems such as Intranet, Workflow & ERPLimited bookkeeping-supported Complete bookkeeping necessaryWeb technology using a thin Web technology with thickclient is adopted. client is needed. Java and External helper Program at client PC are necessary. © Prentice Hall, 2000 33
  34. 34. The Role of Agents in B2B EC (cont.) Comparison Shopping with Buyer’s Own Electronic BagCurrent B-to-C Platform Prospective B-to-B PlatformCustomers need to visit many malls Meta-Mall architecture is need for the customers to reduce the effort of visiting many sitesEvery mall requires a proprietary Standard shopping bag and digitalshopping bag and digital wallet wallet that can work independently of malls are necessarySoftware agents merely help the Comparison-shopping needs to besearch process treated as multiple criteria decision supportCustomer membership registration is Shared customer membership isrequested for each mall necessary to allow the comparison of multiple malls with a single registration © Prentice Hall, 2000 34
  35. 35. The Role of Agents in B2B EC (cont.) Just-in-Time DeliveryCurrent B-to-C Platform Prospective B-to-B PlatformInventory availability is not Dynamic inventory availabilitydisplayed should be displayed to customersPrecise delivery date is less Precise delivery date should becritical dynamically confirmed at ordering timeOrdering system is fragmented Integration of orders withfrom inventory system inventory, production scheduling, and delivery scheduling systems essential © Prentice Hall, 2000 35
  36. 36. The Role of Agents in B2B EC (cont.) Buyer Oriented DirectoryCurrent B-to-C Platform Prospective B-to-B PlatformSeller Oriented Directory To big buyers, Buyerpopular Oriented Directory should be offeredMajor motivation of EC is sales Additional motivation is the re-promotion engineering acquisition processEither buyer or seller oriented Intermediary directory isdirectory is developed necessary to coordinate between seller and buyer oriented directories © Prentice Hall, 2000 36
  37. 37. The Role of Agents in B2B EC (cont.) Formal Contract with Bidding ProcessCurrent B-to-C Platform Prospective B-to-B PlatformOrdering without formal Formal contract with electroniccontract is enough for order documents that include specific terms and conditions is necessaryfulfillmentFree contract protocol Legitimate contract protocol needs to be conformedElectronic version of More creative contract protocoltraditional bidding and can be innovatedauction are implemented © Prentice Hall, 2000 37
  38. 38. The Role of Agents in B2B EC (cont.) Organizational Purchasing DecisionCurrent B-to-C Platform Prospective B-to-B PlatformPurchasing is an individual Purchasing is an organizationalbuyer’s decision buyer’s decisionBuying decision process does Buying decision is made as anot need coordination combination of synchronous group decision (using web conference and Internet phone) and asynchronous group decision (using workflow tools) © Prentice Hall, 2000 38
  39. 39. The Role of Agents in B2B EC (cont.) Agent Based CommerceCurrent B-to-C Platform Prospective B-to-B PlatformHuman interactively involved in the Buyer’s and seller’s software agentsbuying decision assist communication to minimize human’s involvementSoftware agent in one site cannot Mutually agreed contract typeunderstand the norm of the conformation is necessary tocounterpart agents effectuate the communication between agentsBuyers have to search around the Seller agents assist theseller’s products catalog configuring configuration process based on themanually buyer’s requirement specificationSeller’s data mining is popular Buyer’s data mining is additionally necessary © Prentice Hall, 2000 39
  40. 40. The Role of Agents in B2B EC (cont.) Secure Large Amount PaymentCurrent B-to-C Platform Prospective B-to-B PlatformCredit card is popular, and Electronic check and electronicrelatively high fee is charged fund transfer will becometo sellers popular, whose fees are traditionally paid by payer Security, certification and non- repudiation will become more critical. So registered delivery, which keeps the important transaction record at the third party will become popular © Prentice Hall, 2000 40
  41. 41. Issues in B2B Advertisement and Marketing Finding and retaining business customers Making them buy Reaching organizational buyers (functional, corporate) Building relationship marketing in B2B Advertisement, mailing lists, strategies Mailing lists: house, response, compiled The role of the CD-ROM Marketing databases and e-mail lists © Prentice Hall, 2000 41
  42. 42. Internet Marketing StrategiesGenerating and qualifying leads with theInternetUsing Internet events to promote productsand servicesExecuting instant fulfillment on the InternetGenerating orders through the InternetEnhancing customer relationships with theInternet © Prentice Hall, 2000 42
  43. 43. Managerial IssuesIf sales promotion is a major concern, adopt theSupplier-Oriented Marketing approach possiblyjoining popular Intermediary-Oriented MarketPlaces as wellIf purchase process re-engineering is a majorconcern, consider establishing Customer-OrientedMarket Place (if sales volume is big enough) toattract the attention of major vendorsOtherwise, join a third party Intermediary-OrientedMarket Place to implement the plan from either orboth aspects, because every company needseffective and efficient sales and purchases © Prentice Hall, 2000 43