Part I
Company-Centric B2B
Concepts and Characteristics
of B2B EC (cont.)
– How is B2B conducted?
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•
•
•
Directly between buyer and seller
Via an online intermediary
Along the supply chain
With or without intermediaries
– Types of transactions
• Spot buying —determined by dynamic supply and
demand
• Strategic sourcing —long term contracts
Figure 6-1
B2B Supply Chain
Concepts and Characteristics
of B2B EC (cont.)
• Supply chain relationships (sharing
materials, process information and
knowledge worker assets)
– Interrelated subprocesses and roles
•
•
•
•
Acquisition of materials
Processing products and services
Moving to distributors
Purchase by consumer
Concepts and Characteristics
of B2B EC (cont.)
• Entities of B2B EC
– Selling company —marketing management
perspective
– Buying company —procurement
management perspective
– Electronic intermediaries —optional third
party directory service provider (scope of
service may be extended to order
fulfillment)
– Trading platforms —pricing and
negotiation protocol (auctions, reverse
auctions)
Concepts and Characteristics
of B2B EC (cont.)
• Entities of B2B EC (What are they
sharing?)
– Payment services —mechanism for
transferring money to sellers
– Logistics providers —logistics to complete
transaction (packaging, storage, delivery)
– Network platforms —Internet, VAN, intranet,
extranet (and protocols)
– Back-end integration —connecting to ERP
systems, databases, functional applications
Concepts and Characteristics
of B2B EC (cont.)
Information processed in B2B
•
•
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•
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Product
Customer
Supplier
Product process
Transportation
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Inventory
Supply chain
Competitor
Sales and marketing
Supply chain process
and performance
Benefits
• Electronic intermediaries in B2B
– Consumers and business may share intermediaries
– Businesses may use different intermediaries with
different suppliers
• Benefits of B2B models
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Eliminate paper-based systems
Expedite cycle time
Reduce errors
Increase employee productivity
Reduce costs
Increase customer service and partnership
management
B2B Models
• Company-centric models
– Sell-side marketplace (one-to-many)
– Buy-side marketplace (many-to-one)
• Many-to-many marketplaces—the
exchange
– Buyers and sellers meet to trade
• Trading communities
• Trading exchanges
• Exchanges
B2B Models (cont.)
• Other B2B models and services
– For the purpose of selling
– For the purpose of buying
– Value chain integrators
– Value chain service providers
– Information brokers
• Vertical vs. horizontal marketplaces
– Vertical—one industry or industry section
– Horizontal—service or product used in
several types of industries
B2B Models (cont.)
• Virtual service industries in B2B
– Travel and tourism services
– Real estate
– Electronic payments
– Online stock trading
– Online financing
– Other online services
Sell-Side Marketplace Architecture
Sell-Side Marketplaces:One-toMany
• Virtual sellers—Bigboxx.com.hk of Hong Kong
– B2B office supply retailer services (corporate clients)
– Goal—sell products in various SE Asian countries
(many products 10,000 items, many suppliers -300)
– Company portal
• Browse online catalogs
• Use search engines
• Payments (many types available)
– Delivery
• Owns trucks and warehouses
• Delivery scheduled online
– Same day (within an hour)
– Specifically scheduled time
• Ordering system integrated with SAP-based back-office
system
Sell-Side Marketplaces:
One-to-Many (cont.)
• Virtual sellers—Bigboxx.com.hk of Hong
Kong (cont.)
– Value-added services
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•
•
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Track status of order
Check stock availability
Promotions
Customized prices
Group accounts and central approval—for
businesses with multiple branches
• Standing orders automatically activated
• Large number of reports and data available
Sell-Side Marketplaces:
One-to-Many (cont.)
• Customer service
– General Electric
• 20 million calls/year about appliances
• Reduced cost of each call from $5 to $0.20
– Milacron, Inc.
• Site contains 55,000 products
– Easy to use
– Securely handles selection, purchase, application
• Technical service—expanded to provide a higher level
of service than previously available at the site
Sell-Side Marketplaces:
One-to-Many (cont.)
Direct sales from catalogs
Configuration and customization
Efficient customization for direct sales
Business customers
Customize products
Receive price quote
Submit order
Successful cases
• Dell
• Intel
• IBM
• Cisco
Sell-Side Marketplaces:
One-to-Many (cont.)
• Direct sales from catalogs
– Benefits
• Reduces costs (to buyers and sellers) and errors during the
process
• Speeds up order cycle
• Ability to customize products
• Offer different prices to different customers
– Limitations
• Channel conflicts with distribution systems
• High cost when traditional EDI used
• Large number of business partners is needed to justify system
Selling Side: Auctions
• Forward auctions—quick disposal of items
– Revenue generation
– Member acquisition and retention—bidding
transactions result in additional registered members
• Selling from own site when:
– Large companies that conduct auctions frequently
don’t benefit from using intermediaries
– E-marketplace already in use, cost of adding auction
not too high
• Using intermediaries when:
– No resources required, control auction information
– Service: researching, searching and reporting on
auction activities
Selling Side
• Billing and collection
– Automatic calculation of shipping weights and
charges
– Payment—encrypted credit card data
– Billing information—easily downloaded into
existing systems
– Successful if:
• Sufficient number of loyal customers
• Products well known
• Price not major purchasing criteria
Sell-Side Case:
CISCO Connection Online (CCO)
• Benefits—saves the company $363 million
per year in:
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Technical support
Human resources
Software distribution
Marketing material
• Customer service—Cisco Connection online
• Online ordering—Internet Product Center
builds virtually all products to order
• Order status—customer tools for finding
answers to order status inquiries
Cisco Connection Online (CCO)
• Benefits to Cisco
– Reduced operating costs for order taking
– Enhanced technical support and customer
service
– Reduced technical support staff cost
– Reduced software distribution costs
– Lead times reduced fro 4-10 days to 2-3
days
• Benefits to customers
– Quick order configuration
– Immediate cost determination
– Collaboration with Cisco staff
Sell-Side Intermediaries
• Marshall Industries - multinational distributor
of electronic components
• Products and services
• MarshallNet, portal, PartnerNet, NetSeminar, etc
• Strategy
• Continuous improvement, Team-based organization, flat
hierarchy, decentralized decision making, Profit sharing
w/employees.
• CRM highly promoted, Web-based services
• EC initiatives supported by:
– Changing internal organization
– Changing internal procedures
Sell-Side Intermediaries (cont.)
• Boeing’s PART
– 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 for online parts and maintenance
information and ordering capability
Sell-Side Intermediaries (cont.)
• Boeing’s PART
– Spare parts business using traditional EDI
• Mechanic tells purchasing department parts are needed,
purchase is approved, purchase is made
• Large airlines connect to Boeing's VAN
• Boeing finds part and delivers
– Debut of PART on the Internet
• Encourages customers to order parts electronically—cheap,
easy, fast
• 50% of customers using Internet within first year
Sell-Side Intermediaries (cont.)
Benefits of Boeing PART online
• New sales opportunities
– Benefits to Boeing’s customers
• Increased productivity—less time searching for information
• Reduced costs—delays at gate reduced because all information is
available
• Increased revenues—faster service provides time savings
• Customer service online reduces (calls on orders, data entry)
– Portable access to technical drawings/support
• Boeing On Line Data (BOLD) provides availability to:
– Engineering drawings
– Manuals
– Catalogs
– Other technical information
• Portable Maintenance Aid (PMA)—solves maintenance problems
Buy Side: One-from-Many,
E-Procurement
• Purchasing agents (buyers)
– Direct (materials) purchasing
• Use of material is scheduled
• Not a shelf item
– Indirect (materials) purchasing
• MROs (Maintenance,Repair,Operations)
• Nonproduction materials
• Inefficiencies in procurement
management of indirect materials
Figure 6-3
A Traditional Purchasing Process
Flow
Source: ariba.com, February 2001.
Buy Side: One-from-Many,
E-Procurement (cont.)
• Innovative procurement management
– Innovative purchasing as strategic approach
to increase profit margins
– Web facilitation includes:
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Electronic tendering
Volume purchasing
Aggregating supplier catalogs at buyer’s site
Group purchasing
Others
Buy Side: One-from-Many,
E-Procurement (cont.)
• Goals of procurement reengineering
– Increase purchasing agent productivity
– Lower purchasing prices of items (through
standardization, and consolidation of buys)
– Improve information flow and management
– Minimize maverick (unplanned) buying from
non-contract vendors
– Improve payment process
– Streamline purchasing process to make it:
• Simple
• Fast
Buy Side: One-from-Many,
E-Procurement (cont.)
• Goals of procurement reengineering
(cont.)
– Reduce administrative processing cost per
order
– Find new suppliers and vendors to provide
faster/cheaper goods and services
– Integrate procurement process with
budgetary control, efficiently and effectively
– Minimize human errors in buying or shipping
process
Figure 6-4
Buy-Side B2BMarketplace
Architecture
Buy Side: One-from-Many,
E-Procurement (cont.)
• Direct vs. indirect sourcing
– Tools to automate purchasing goods
• Direct or mission critical
– 80% of manufacturer’s expenditure
– Long-term relationship with vendor of known quality
goods
– Tight integration with suppliers along supply chain
• Indirect—use of public exchanges for indirect
sourcing
Buy Side: Reverse Auctions
• Pre-Internet Reverse auction process
– Prepare description of product to be produced
– Announce project via ads, mail, telephone
– Send detailed information to interested
vendors
– Vendors prepare proposals
– Bidders submit document proposals
– Proposals evaluated
– Problems:
• Laws
• Expensive
• Errors
Buy Side: Reverse Auctions (cont.)
• Web-based reverse auction process
– Buyers prepare bidding project information
– Buyers post project on portal
– Identify potential suppliers
– Invite suppliers to bid
– Suppliers download project information
– Suppliers submit electronic bid
– Reverse auction in real-time, or it can take a
few days
– Buyers evaluate and award contract
Buy Side: Reverse Auctions
(cont.)
• Web-based reverse auction process
– Benefits:
• Electronic process is faster
• Administratively much less expensive
• Enables location of cheapest possible products
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
Group Purchasing
• Group purchasing—orders from several
buyers are aggregated
– 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
Electronic Bartering
• Electronic bartering
– Exchange of goods or services without the
use of money
– Exchange a surplus for other need
– Bartering exchange
• Submit surplus to exchange for points
• Points used to buy what company needs
– Benefits:
• Faster than manually
• Easier to match
Collaborative Commerce (CCommerce)
• Web-based systems used between
and among suppliers for:
– Communication
– Design
– Planning
– Information sharing
– Information discovery
Suppliers Extranet: Hudson Dayton
Collaborative Commerce
(C-Commerce) (cont.)
• Reduce design cycle time by connecting
suppliers: Adaptec, Inc.
– Microchip manufacturer supplying electronic
equipment makers
• Outsources manufacturing tasks
• Delivery times exceeded their competitors
– Solution to the problem
• Extranet and enterprise-level supply chain
integrated software
• Significantly reduced order-to-product delivery
time
Collaborative Commerce
(C-Commerce) (cont.)
Reduce product development time by connecting
suppliers: 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
Collaborative Commerce
(C-Commerce) (cont.)
• Other examples of c-commerce
– Tricon Restaurant International—global brand
marketing management
– RE/MAX—real estate franchiser improved
communication and collaboration between
independent owners
– Marriott International—links corporations,
franchising partners, suppliers, customers
– Nygard of Canada—interorganizational
collaboration
Integration
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ERP software
Customer, supplier, and other databases
Legacy systems
Catalog (product) information
Inventory systems
Sales statistics
Decision support systems (DSS) and SCM
applications
Integration (cont.)
• Integration with existing information
systems
– Issues in integrating with back-end
information systems:
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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
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
Implementation Issues
• Justification and prioritization
– Must conduct cost benefit analysis of
proposed projects
– Include organizational impacts
• Possible channel conflicts
• Dealing with resistance to change due to
processes reengineering
– Cost-benefit analysis related to:
• Finding B2B opportunities
• Prioritizing potential initiatives
Implementation Issues (cont.)
• Vendor selection
– Primary vendor uses its software and procedures,
adds partners as needed
– Integrator mixes and matches existing products and
vendors to create “best of the breed”
• Affiliate programs (referral program or
intermediaries)
• Implementing e-procurement
– Fit e-procurement into EC strategy
– Review and change procurement process itself
– If ERP or SCM is in place—integrate e-procurement,
If not in place—BPR before implementation
– Coordinate buyer’s information system with seller’s
Managerial Issues
• B2B marketing—sell-side marketplaces
require advertisement and incentives
• Which models to use and when—need for
implementation strategies and prioritization
• Purchase process reengineering (BPR)
– Establish buy-side marketplace on its server if
volume is big enough to attract major vendors
– Join third-party intermediary-oriented
marketplace if volume is small
Managerial Issues (cont.)
• Integration—trading in e-marketplaces is
interrelated with logistics
– Particularly true in many-to-many exchanges
– Company-centric marketplaces must integrate:
• Logistics
• Other support services
Part I (cont.)
B2B Support Services
modified by Judith Molka-Danielsen
The Evolution of E-Marketplaces
Financial B2B Services
• Purchasing Cards are an advantage to big
government agencies or deparments.
• Electronic letters of credit (for big businesses)
• Benefits to seller
– Credit risk reduced
– Payment highly assured
– Political/country risk reduced
• Benefits to the buyer
– Allows negotiation of lower purchase price
– Expansion of supply sources
– Payment received after document inspected by issuing bank
Figure 8-4
Participants and Process of Using a Purchasing
Card
Source: napcp.org/napcp.nsf/Cardparticipants!OpenPage. Used with permission of
NAPCP.
Financial B2B Services (cont.)
• Payments (cont.)
– Payments in B2B global trading
– Venture capital to fund e-commerce
initiatives
– Internet incubators (show ad)
– Tax calculation services
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DPC
HotSamba
Sales tax clearinghouse
Taxware international
– Implementing tax collection in the U.S.
Financial B2B Services (cont.)
• Payments (cont.)
– Other financial services
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Credit reporting firms
New credit intermediaries broker credit risks
Assurance firms guarantee quality
Exchanges strike insurance deals
E-credit services
Order Fulfillment, Logistics,
and Supply Chain Services
• UPS Logistics Group •
Handles outbound
logistics and delivery.
This is only one part of
order fulfillment.
See the List of Services
on page 328.
Solutions for EC
initiatives
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Tracking systems
Product return systems
Shipping solutions
E-document exchange
Customization
• EC software/providers
• E-services/partners
Marketing and Advertisement
• Advertising methods used by
offline marketers
– Vertical trade show
– Ads in industry magazines
– Salespeople call on:
• Existing customers
• Potential buyers
• Digital advertisers
– Ad server network provider
– Electronic wholesalers
Affiliate Programs
• Affiliate programs (B2C services)
– Affiliates invited to put a banner of a vendor
on their sites
– Consumer clicks on the banner and brings up
that company’s EC site
– Commission paid to affiliate if customer
makes a purchase
59
© Prentice Hall, 2002
Infomediaries
• Infomediary services
– Collect data about consumer behavior
(clickstream)
– Analyze it
– Repackage it (Data Mining Technology)
– Sell the results
• As marketing and profiling information
• Purpose to increase customer loyalty
– Identify likely buyers
• Increased sales (Services, Market efforts)
• Reduced marketing costs
Other Marketing Services
• Three examples of other services:
– Digitalcement.com provides corporate
marketing portals; builds stronger
relationships with customers
– Vantagenet.com free tools that help
increase traffic to a company’s Web site
– Businesstown.com has an online directory
that enables small businesses to identify
and evaluate service companies
Content Generation,
Syndication, Delivery, and
Management (cont.)
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Syndication
Content-delivery networks (CDNs)
Catalog content
Content management options
– Do it yourself
– Let the suppliers do it
– Buy the content from an aggregator
– Subscribe to a vertical exchange
– Outsource to full-service Internet exchange
Content Generation,
Syndication, Delivery, and
Management (cont.)
• Content maximization and streaming
services—companies provide media rich
content to reach target audience
– Video clips
– Music
– Flash media
• Use content delivery solutions that do not
cause “traffic jams” with slow download times
(e.g., Akamai Corporation)
Directory Services &
Search Engines
• Directory services
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B2Business.net
B2BToday.com
Communityb2b.com
A2zofb2b.com
I-stores.co.uk
Websteronline.com
Thomasregister.com
Bocal.com
B2b.yahoo.com
• Search engines and
news aggregators
– Moreover.com
– Google.com
– Ientry.com
• Newsletters
E-Communities
• E-communities
– Chat rooms
– Bulletin boards
– Personalized Web
pages
• B2B are basically
communities of
transactions
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Classified ads
Job vacancies
Announcements
Industry news
• E-communities
connect:
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Personnel
Partners
Customers
Any combination of
these three
• Service providers
– Design of exchange
portals
– E-community service
Partner Relationship
Management (PRM)
• In B2B environment
the partners include:
– Suppliers
– Partners in joint
ventures
– Service providers
• PRM—relies on:
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Trust
Commitment
Quality of services
Continuity
Strategy for e-service
How much to invest in services
What services to provide
Other B2B Services
• Trust services
• Trust Trademark and
domain names
• Digital photos
• Global business
communities
• Client matching
• E-business rating
sites
• Promotion programs
• Encryption sites
• Web research
services
• Coupon-generating
sites
Figure 8-8
The B2X Hub
Source: Compiled from “B2B Exchanges,” Internet Exchange 2000 at Keenanvision.com,
April 24, 2000.
Integration
• Integration in e-marketplaces and
exchanges
– B2X hubs connect:
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All Internet business services
Merchant services
Exchange infrastructure
Buying and selling
Member enterprises
Other B2X exchanges