Part I Company-Centric B2B. Concepts and Characteristics of B2B EC (cont.) –How is B2B conducted? Directly between buyer and seller Via an online intermediary.

Part I

Company-Centric B2B

Concepts and Characteristicsof B2B EC (cont.)

– How is B2B conducted?• 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 6-1B2B Supply Chain


• 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


• 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)


• 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


• Product• Customer• Supplier• Product process• Transportation

• Inventory• Supply chain• Competitor• Sales and marketing• Supply chain process

and performance

Information processed in B2B

Benefits• Electronic intermediaries in B2B

– Consumers and business may share intermediaries– Businesses may use different intermediaries with

different suppliers

• Benefits of B2B models– 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-to-Many

• 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

• 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


• 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


• Dell• Intel

• IBM• Cisco

Direct sales from catalogsConfiguration and customization

Efficient customization for direct salesBusiness customers

Customize productsReceive price quoteSubmit order

Successful cases


• 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:– 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

• 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


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 6-3A 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:

• Electronic tendering• Volume purchasing• Aggregating supplier catalogs at buyer’s site• Group purchasing• Others


• 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


• 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 6-4Buy-Side B2BMarketplace

Architecture


• 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 (C-Commerce)

• 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


• Suppliers• Distributors• Overseas

• Factories

• Customers

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


• 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

• 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:

• 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 8-4Participants 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

• DPC• HotSamba• Sales tax clearinghouse• Taxware international

– Implementing tax collection in the U.S.

Financial B2B Services (cont.)

• Payments (cont.)– Other financial services

• 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– 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.)• 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– 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– Classified ads– Job vacancies– Announcements– Industry news

• E-communities connect:– Personnel– Partners– Customers– Any combination of

these three

• Service providers– Design of exchange

portals– E-community service

Partner RelationshipManagement (PRM)

• In B2B environment the partners include:– Suppliers– Partners in joint

ventures– Service providers

• PRM—relies on: – Trust– Commitment– Quality of services– Continuity

Strategy for e-serviceHow 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 8-8The 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:

• All Internet business services

• Merchant services

• Exchange infrastructure

• Buying and selling

• Member enterprises

• Other B2X exchanges

Part I Company-Centric B2B. Concepts and Characteristics of B2B EC (cont.) –How is B2B conducted? Directly between buyer and seller Via an online intermediary.

Documents

b2b supply chain slide

characteristics of b2b

b2b travel

b2b consumers

companycentric b2b slide

entities of b2b ec

consumer slide

online services