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