Signifies material that will be on the next MIS204 test
Penn State Erie – Frank DeWolf
Electronic Commerce
Definitions
E-Commerce – The process of buying and selling goods and
services electronically involving transactions using the internet,
networks, and other digital technologies.
E-Business – The use of the internet and other digital technology
for organizational communication and coodination and the
management of the firm.
B2B – Business to business electronic commerce.
B2C – Business to consumer electronic commerce.
C2C – Consumer to consumer electronic commerce.
Intranet – An internal network based on internet and WWW
technology and standards. Available only to employees.
Extranet – Private (secure) internet connection which allows an
enterprise to communicate electronically to outside trading
partners (customers and suppliers).
Penn State Erie – Frank DeWolf
Internet Commerce
Forrester Research
% of total
Sales in 2004
2000
2001
2002
2003
2004
Total
(Billions
US$)
$657.0
$1,233.6
$2,231.2
$3,979.7
$6,789.8
8.6%
North
America
$509.3
$908.6
$1,495.2
$2,339.0
$3,456.4
12.8%
Asia
Pacific
$53.7
$117.2
$286.6
$724.2
$1,649.8
8.0%
Western
Europe
$87.4
$194.8
$422.1
$853.3
$1,533.2
6.0%
Rest of
World
$6.8
$13.0
$27.2
$63.3
$150.5
%2.4
Worldwide Net commerce -- both B2B and B2C -- will hit $6.8
trillion in 2004.
Penn State Erie – Frank DeWolf
NAM/Ernst & Young E-Commerce Trends
Manufacturers’ Objectives for E-Commerce Initiatives
•New business opportunities and broader customer reach: 62.2 percent
•Cost savings reasons: 45 percent
•To reach a wider group of suppliers: 26.1 percent
E-Commerce: Barriers to Entry
•Companies with no e-commerce initiatives: 17 percent
•Lack of human resource capabilities: 51.9 percent
•Lack of technical knowledge inside the company: 43.6 percent
•One third identify concern over security issues on the Internet. The index shows
that 24 percent of respondents have no security efforts in place, with five percent
reporting security breaches within the past six months.
Penn State Erie – Frank DeWolf
NAM/Ernst & Young E-Commerce Trends
Employees and the Internet
•Companies where most office employees have Web access: 72.7 percent
•Manufacturers that have an intranet: 39 percent
•Companies where most office employees have e-mail: 83.2 percent
•Respondents that feel e-mail is a vital management tool: 65.3 percent
•Nearly 18 percent of companies are already using the Internet to provide online education and training for employees.
Interacting with Suppliers
•Respondents connecting electronically with a majority of their suppliers: 8.6
percent
•Manufacturers who use a Web-based marketplace to locate suppliers: 26
percent
•Companies that share product designs and specifications with suppliers
through the Web: 22.9 percent
•Less that 3 percent of sales and goods are transacted over the Internet
Penn State Erie – Frank DeWolf
Role of Electronic Commerce
• Reaching new customers or suppliers
• Creating new ways of selling /
supporting existing products
• Reducing costs
• Improving product quality
Increase Sales & Reduce Costs!!
Penn State Erie – Frank DeWolf
B2B E-COMMERCE
• Automation of purchase, sale
transactions from business to business
• Electronic Data Interchange (EDI)
• Exchanges: Commercial on-line market,
many buyers, sellers
• Forward auctions – disposition of
excess inventory
• Reverse auctions - purchases
Penn State Erie – Frank DeWolf
Value Chains in Electronic Commerce
Defined as the way of organizing the
activities undertaken to design,
produce, promote, market, deliver, and
support the products or services a
business sells.
Penn State Erie – Frank DeWolf
Value Chain Primary Activities
• Identify customers
– Market research, customer satisfaction surveys
• Design
– Concept research, engineering, test marketing
• Purchase materials and supplies
– Vendor selection, quality and timeliness of delivery
• Manufacture
– Fabrication, assembly, testing, packaging
Where are YOUR biggest e-commerce opportunities?
Penn State Erie – Frank DeWolf
Value Chain Primary Activities
• Market and sell
– Advertising, promotion, pricing, monitoring sales
and distribution channels
• Deliver
– Warehousing, materials handling, monitoring
timeliness of delivery
• Provide after-sale service and support
– Installation, testing, maintenance, repair, warranty
replacement, replacement parts
• Internal Support Activities
Where are YOUR biggest e-commerce opportunities?
Penn State Erie – Frank DeWolf
B2B E-Commerce Strategy
Suppliers
• e-Sourcing
• Indirect
Procurement
• Reverse Auctions
•
•
•
•
Intranet
Paper elimination
Data Warehouse
Productivity apps
Customers
e-Business
•
•
•
•
•
Customer service
Product catalogs
Electronic orders
E-Order status
Customer collaboration
Employees
Strategy Must Cover All Fronts
Penn State Erie – Frank DeWolf
GE - e-Procurement
Vendor Selection
Web Enabled Applications
Receive
Req.
& Identify
Suppliers
Business Example
Order
Management
Prepare Supplier
& Dist. Quality Auction
RFQ's
•RFQ’s
•Drawings
•Specifications
•Qty & Schedules
•Document Management
•Quality process
•CTQ Identification
& Tracking
P.O.
Placement
&
Admin
• Supplier auctions
• Purchase Orders
• Schedules / Reschedules - Demand
Forecasting
• T&C’s
• Drawing Distribution
• Scorecards
Settlement
Ship
&
Receive
Production /
Inventory
Quality /
Productivity
Status
&
Tracking
Collaboration
&
Admin
Payment
•Electronic Invoicing
•A/P Access*
•Evaluated Reciepts (ERS)
• Shipment Authorization
• Carrier Selection
• Customs Information
• Bar Code Labels
• Supplier Shipment Notification
• Carrier Tracking
•Kanbans
•LOB Tracking
•Bailment
•E&ZD
•Report Cards
•Deviation Requests
•Productivity Ideas
•CTQ Capture
•Discrepant material info
•Field Failure
•Remote Diagnostics
Sametime Meeting*, E-mail, FAQ’s, Newsletters, Manuals, Contacts, T&C’s, Holiday Schedules, Profiles, Etc.
Penn State Erie – Frank DeWolf
E-Commerce
Auction Basics
Forward Auctions
•Used to sell something that you own
•One seller, many potential buyers
•Bidders bid UP; high bidder(s) win
•Consumer: eBay, Yahoo!, Amazon
•B2B: Many surplus asset selling sites
Reverse Auctions
•Used to buy something you will need
•One buyer, many potential sellers
•Bidders bid DOWN; low bidder(s) win
•Replaces traditional “Price Negotation” process
•B2B: FreeMarkets, CommerceOne, GE Sourcebid,
GXS Selection
Reverse Auctions Obtain the Lowest Market Price
Penn State Erie – Frank DeWolf
GE Reverse Auctions
Supplier Review
Review Stage: Accept the Invitation
Penn State Erie – Frank DeWolf
GE Reverse Auctions
View Parts
Penn State Erie – Frank DeWolf
Bidding
GE Reverse Auctions
Auction
Updates
Place Bids
Over 10,000 SourceBid Events To Date
Penn State Erie – Frank DeWolf
GE Reverse Auctions
Monitor Auction
Penn State Erie – Frank DeWolf
Reverse Auctions
Lessons Learned
•“Rack and Stack”: categorize and prioritize the buy
•Run some Pilot events, and adapt your plans
•Develop a strong planning process
•Supplier relationships are still important!
•Build a good quotation package
•Some events will go nowhere…others will amaze you
•The goal is NOT to drive your suppliers out of business
•Consistent, timely feedback after the event is crucial
•Deliver the results…measure implementation speed
•Implement an auction results tracking system
This Changes the Sourcing Game
Penn State Erie – Frank DeWolf
Reverse Auctions
Selling via Auction
•Get a good PC and Internet Connection
•Gain some bidding experience
•Seek out online selling opportunities
•Know your true costs
•Know your competition
•Act on opportunities: Excess capacity, inventory
•Develop a “rapid response” selling team
•Do your homework before the bidding begins
•Differentiate your product – features, services, IP, etc.
Get Ready for Real Time Selling
Penn State Erie – Frank DeWolf