ELC 200
Day 12
Prentice Hall, 2003
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Agenda
Questions from last Class?
Assignment 3Corrected
4 A’s, 8 B’s and 2 C’s
I am not looking for generic textbooks answer but answers
that are specific to your business.
5 Days till Daytona Beach Bike Week
http://www.daytonachamber.com/bwhome.html
Today we will finish discussing Company-Centric B2B
and Collaborative Commerce
Thursday we will be talking about how to write an
eBiz Plan
The completed eBiz plan is worth 22% of your grade
Prentice Hall, 2003
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Buy Side E-Marketplaces:
Reverse Auctions
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
Request for quote (RFQ)—the “invitation” to
a buy-side marketplace (reverse auction)
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Exhibit 5.6
Buy-Side B2B Market Architecture
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Conducting Reverse Auctions
Reverse auctions administered from a company’s
Web site
Bidding process lasts a day or more
Bidders may bid only once or view the lowest bid and rebid
several times
Increasing number of reverse auction sites makes it
impossible for suppliers to monitor all of them
Online directories list open RFQs
Use software search-and-match agents to reduce the
human burden in the bidding process
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Bidding Through a Third-Party
Auctioneer: Freemarkets.com
United Technologies Corp. needs suppliers
to make $24 million worth of circuit boards
2,500 suppliers are identified as possible
contractors
List is submitted to FreeMarkets
(freemarkets.com)
http://www.ariba.com/
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Freemarkets.com (cont.)
FreeMarkets reduced the list to 50, based
on considerations including:
Plant location
Size of supplier
Plant capacity
Customer feedback
Detailed evaluation of the candidates
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Freemarkets.com (cont.)
3-hour auction conducted of online competitive
bidding:
First bid was seen by all bidders
Using reverse auction approach, the bidders reduced
their bids
Comprehensive analysis of several of the lowest
bidders
Then recommended the winners and collected its
commission fees
Results
Original specification of $24 million was reduced to $18
million
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Procurement Revolution at GE
TPN (now part of gxs.com)
Purchasing was inefficient—too many administrative
transactions
Process for each requisition took 7 days to send to
bidders
Complex and time-consuming
Could only send out bids for 2 or 3 suppliers
Trading Process Network (TPN)—electronic bids
Entire process takes 7 days (for suppliers to bid)
2 hours to send information to suppliers (7 days before)
Evaluate and award bids same day
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Procurement Revolution at GE (cont.)
Benefits to GE
Labor declined 30% and material costs declined
5%-50%--wider base of suppliers online
Redeployment of 50% of the staff
Takes half the time to identify suppliers, prepare
a request for bid, negotiate a price, and award
the contract
Invoices automatically reconciled reflecting
modifications
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Procurement Revolution at GE (cont.)
Benefits to buyers
Worldwide supplier partnerships
Current business partners
Strengthen relationships
Streamline sourcing process
Rapid distribution of information
Transmit electronic drawings to multiple suppliers
Decrease sourcing cycle time
Quick receipt and comparison of pricing bids
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Procurement Revolution at GE (cont.)
Benefits to suppliers
Increased sales volume
Expanded market reach, finding new buyers
Lowered administration costs for sales and
marketing activities
Shortened requisition cycle time
Improved sales staff productivity
Streamlined bidding process
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Aggregating Catalogs
Aggregating suppliers’ catalogs: an internal
marketplace
Maverick buying to save time leads to high prices
Aggregating all approved suppliers’ catalogs in
one place
Reduced number of suppliers
Buyers at multiple corporate locations
Fewer and remote suppliers
Larger quantity/lower costs
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Buying from MasterCard
International’s Internal Catalog
Online buying program at MasterCard:
Allows corporate buyers to select goods and services
from company’s electronic catalog
Goal is to consolidate buying activities from multiple
corporate sites, improve processing costs, reduce the
supplier base
Procurement department defines:
Scope of products or projects to buy
Invites vendors to bid or negotiate prices
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MasterCard International (cont.)
Contract prices are stored in the internal electronic
catalog
Final buyer at MasterCard compares available
alternatives
Organizational purchasing decision coupled with
an internal workflow management system
Internal electronic catalog is updated manually or
by software agents
Payments are made with MasterCard’s corporate
procurement card
By 2002, the system was being used by more
than 2,500 buyers
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Prentice Hall, 2003
Group Purchasing
Group purchasing—aggregation several
buyers into volume purchases, so that better
prices can be negotiated
Internal aggregation
Economy of scale
Reduced transaction processing cost
External aggregation
Aggregating demand online
Putting together orders from multiple
buyers to make large volumes/lower costs
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Exhibit 5.7
Group Purchasing Process
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Electronic Bartering
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
Exchange of goods or services without the use of
money
Exchange a surplus for other need
Benefits:
Faster than manually
Easier to match
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Collaborative Commerce (C-Commerce)
Collaborative commerce (c-commerce)—
commerce consisting of activities between
business partners in jointly planning, designing,
developing, managing,and researching products
and services
Web-based systems used between and among
suppliers for:
Communication
Planning
Information discovery
Design
Information sharing
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Collaborative Commerce (cont.)
Varieties of c-commerce:
Joint design efforts
Forecasting
Between and within organizations
Aids communication and collaboration between
headquarters and subsidiaries, franchisers and
franchisees
C-commerce platform provides e-mail, message
boards, chat rooms, online corporate data
access around the globe, no matter what the
time zone
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Webcor Construction
Goes Online with Its Partners
Webcor suffered from too much paperwork
and poor communication with its:
Architects
Designers
Building owners
Subcontractors
Webcor’s goal: to turn its computer-aided
design (CAD) drawings, memos, and other
information into shared digital information
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Webcor (cont.)
Webcor uses ASP that hosts its projects
on a secured extranet
Major problem was getting everyone to
accept software:
Complex
User training is necessary
Webcor was in a strong enough position to
choose not to partner with anyone who
would not use ProjectNet
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Webcor (cont.)
Webcor’s business partners can post
send, or edit CAD drawings, digital photos,
memos, status reports, project histories
Partners have instant access to new building
drawings
Central meeting place where users can both
download and transmit information to all
parties, all with a PC
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Retailer–Supplier Collaboration:
Target Corporation
Target Corporation is a large retail
conglomerate:
Conducts EC activities with about 20,000
trading partners
1998—established an extranet-based system
for those partners that were not connected to
its VAN-based EDI.
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Target Corporation (cont.)
The extranet enabled the company to:
Reach many more partners,
Use many applications not available on the
traditional EDI
Streamline its communications and
collaboration with suppliers
Business customers to create personalized
Web pages
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Continuous Replenishment:
Warner-Lambert
Warner-Lambert (WL) served as a pilot site for a
program called Collaborative Planning,
Forecasting, and Replenishment (CPFR)
Shared strategic plans, performance data, and
market insight with Wal-Mart
Trading partners collaborate on making
demand forecasts
WL increased its products’ shelf-fill rate from 87
percent to 98 percent
An empty shelf>>>lost present sales and future
sales if the customer purchases a substitute
product
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Warner-Lambert (cont.)
WL is involved in another collaborative retail
industry project—Supply-Chain Operations
Reference (SCOR):
Divides supply chain operations into parts
Gives a framework with which to evaluate the
effectiveness of their processes along the same
supply chains to:
Manufacturers
Suppliers
Distributors
Retailers
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Reduction of Design Cycle Time:
Adaptec, Inc.
Microchip manufacturer supplying electronic
equipment makers
Outsourced manufacturing tasks to Overseas
manufactures
Delivery times exceeded their competitors
Solution to the problem
Extranet and enterprise-level supply chain
integrated software
Significantly reduced order-to-product delivery
time
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Reduction of Product Development
Time: Caterpillar, Inc.
Heavy machinery manufacturer uses
extranet
Request for customized component directly to
designers and suppliers ship to buyers
Connect engineering and manufacturing
division with worldwide
Suppliers
Distributors
Overseas
Factories
Customers
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Barriers to C-Commerce
C-commerce is moving ahead fairly slowly
because:
Technical reasons involving integration,
standards, and networks
Security and privacy concerns over who has
access control of information stored in a
partner’s database
Internal resistance to new models and
approaches
Lack of internal skills to conduct c-commerce
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Interorganizational Collaboration
at Nygard of Canada
Nygard has become a leader in adopting IT and ecommerce in the apparel industry
Didn’t want to move manufacturing off shore (cheaper)
due to longer lead and cycle times
Company stays competitive by using EC to control costs of
labor and manufacturing
Developed an ERP and supply chain management that
controls all internal operations, purchasing, product
development, accounting, production planning, sales
This enabled the company to develop tight integration with
its trading partners
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Nygard of Canada (cont.)
The moment that a customer buys a pair of pants
at a partner’s retail store:
Information moves from the POS terminal
Automatically generates a reorder at Nygard
SCM:
Matches customers’ orders with the right fabrics
Searches the market pool for the most efficient
combinations of other material for use with those
fabrics
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Nygard of Canada (cont.)
Sales trigger orders
Manufacturing automatically industries, and
global manufacturers are willing to operate with
razor-thin margins as fabrics, zippers, and
buttons
The moment that raw material is used, an
automatic reorder of the material is generated
Allows just-in-time production
Quick order delivery (sometimes same day)
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Nygard of Canada (cont.)
Web-based control system enables the
company to:
Conduct detailed profitability studies
Decisions are evaluated by impacts on the
bottom line
Decision support systems (DSS) models are
used for this purpose
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Infrastructure for B2B
Server to host database and applications
Software for executing sell-side (catalogs)
Software for conducting auctions and reverse
auctions
Software for e-procurement (buy-side)
Software for CRM
Security hardware and software
Software for building a storefront
Software for building exchanges
Telecommunications networks and protocols
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Extranet and EDI
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
Internet-based EDI—EDI that runs on the
Internet and so is widely accessible to
most companies, including SMEs
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Extranet and EDI
Extranets—secured networks (by VPN),
usually Internet-based, that allow business
partners to access portions of each other’s
intranets; “extended intranets.”
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Integration
Integration with existing information systems
issues
Intranet-based work flow
Database management systems (DMBS)
Application packages
ERP
Back-end sell-side integration works for sellers
but not buyers and vice versa
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Integration (cont.)
Integration with business partners
Easy integration with one company-centric side
Not easy to integrate for many buyers or sellers
Need buyer owned shopping cart that can
interface with back-end information systems
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The Role of XML in
B2B Integration
Companies interact easily and effectively by connecting
to their servers, applications, databases
Standard protocols and data-representation schemes are
needed
FIXML
Web is based on the standard communication protocols
useful only for displaying static visual Web pages:
TCP/IP
HTTP
HTML
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The Role of XML in
B2B Integration (cont.)
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
Used to increase:
Interactivity
Accessibility with speech recognition
systems
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How XML works
DTD
Document Type
Definations
XML
Schemas
XML
Document
XSLT
Style Sheets
CSS
Browser
Display
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XML Unifies
Air Cargo Tracking System
B2B intermediary, TradeVan Information Services
of Taiwan provides information services about the
cargo flights of different airlines
Different information systems have different
query results
XML facilitates data exchange between
heterogeneous databases
Information can be presented on wireless
application protocol (WAP)-based cell phones
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Air Cargo Tracking System (cont.)
System is expected to:
Reduce delays significantly
Benefit of all members of the supply chain
Returns a standardized yet personalized
presentation for different airlines
Enables customs brokers to reduce the cycle
time by preparing declarations of imports
faster
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Air Cargo Tracking System (cont.)
Buyers and other supply chain partners can
schedule production lines with precision and in
advance
Quality of door-to-door delivery companies is
improved through fast communication
Answers to queries can be derived much faster
Improves the supply chain by reducing:
Delivery lead times
Inventory levels
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The Role of Software Agents
in B2B EC
Agent’s role in the sell-side marketplace
B2C comparison-shopping
B2B agents collect information from sellers’ sites
for buyers
Agent’s role in the buy-side marketplace
Assisting large number of buyers requesting
quotes from multiple potential suppliers in buyside
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Managerial Issues
Can we justify the cost?
Which vendor(s) should we select?
Which model(s) should we use?
Do we need B2B marketing?
Should we reengineer our procurement system?
What restructuring will be required for the shift to
e-procurement?
What integration would be useful?
What are the ethical issues in B2B?
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Summary
The B2B field
The major B2B models
The characteristics of sell-side marketplaces
Sell-side intermediaries
The characteristics of buy-side marketplaces
Forward and reverse auctions
B2B aggregation and group purchasing
Collaborative EC
Characteristics of Internet-based EDI and the
role of XML
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