Company-Centric B2B

1. Company-Centric B2B

2. General Motors’ B2B Initiatives • EC initiatives—build-to-order project to be in place by 2005 reducing inventory of finished cars • Selling capital assets • TradeXchange online auctions of items like used machines for manufacturing • Significantly decreases time for sales • Increases dollar amount of the sales

3. General Motors’ B2B Initiatives • EC initiatives at TradeXchange • Buying commodity products--$1 billion annual expenditure for direct and indirect products • Traditional process • Length of time measured in weeks • Cost prohibited the number of bids • Reverse auction—automated process • Internet “open bid”—many suppliers take part • Job is awarded quickly • Price to GM significantly lower

4. Concepts and Characteristics of B2B EC • B2B EC defined • Transaction conducted electronically between business over the networks • Internet • Extranets • Intranets • Private networks (e.g., EDI) • Automated trading improves the process

5. Concepts and Characteristicsof B2B EC (cont.) • Market size and content • Expected to grow from $1.1 trillion in 2003 to $10 trillion by 2005 • Percentage of Internet-based B2B from 2.1% in 2000 to 10% in 2005 • Private and public e-marketplace • Private—one-to-many mode • Public—many-to-many mode

6. 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

7. B2B Supply Chain

8. Concepts and Characteristicsof B2B EC (cont.) • Supply chain relationships • Interrelated subprocesses and roles • Acquisition of materials • Processing products and services • Moving to distributors • Purchase by consumer • Traditional process managed through paper transactions • B2B applications offer competitive advantages for supply chain management (SCM)

9. Concepts and Characteristicsof 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)

10. Concepts and Characteristicsof B2B EC (cont.) • Entities of B2B EC (cont.) • Payment services—mechanism for transferring money to sellers • Logistics providers—logistics to complete transaction (packaging, storage, delivery) • Network platforms—Internet, VAN, intranet, extranet • Protocols of communication—EDI or XML • Back-end integration—connecting to ERP systems, databases, functional applications

11. Product Customer Supplier Product process Transportation Inventory Supply chain Competitor Sales and marketing Supply chain process and performance Concepts and Characteristicsof B2B EC (cont.) Information processed in B2B

12. Concepts and Characteristicsof B2B EC (cont.) • 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

13. 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

14. 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

15. B2B Models (cont.) • Virtual service industries in B2B • Travel and tourism services • Real estate • Electronic payments • Online stock trading • Online financing • Other online services

16. Sell-Side Marketplace Architecture

17. Sell-Side Marketplaces:One-to-Many • Virtual sellers—Bigboxx.com.hk of Hong Kong • B2B office supply retailer services • Large corporate clients • Medium corporate clients • Small offices • Goal—sell products in various SE Asian countries • Offers more than 10,000 items • Uses more than 300 suppliers

18. Sell-Side Marketplaces:One-to-Many (cont.) • Virtual sellers—Bigboxx.com.hk of Hong Kong (cont.) • Company portal attractive, easy to use • Browse online catalogs • Use search engines • Payments • Cash or check upon delivery • Automatic payments • Credit card • Purchasing card

19. Sell-Side Marketplaces:One-to-Many (cont.) • Virtual sellers—Bigboxx.com.hk of Hong Kong (cont.) • 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

20. 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

21. 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

22. Dell Intel IBM Cisco 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

23. 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

24. Sell-Side Marketplaces:One-to-Many (cont.) • Direct sales from catalogs (cont.) • Limitations • Channel conflicts with distribution systems • High cost when traditional EDI used • Large number of business partners is needed to justify system

25. Selling Side: Auctions and Other Models • Forward auctions—quick disposal of items • Revenue generation • Increased page views • 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

26. Selling Side:Auctions and Other Models (cont.) • Using intermediaries when: • No resources required • Own and control auction information • Fast time to market • Searching and reporting • Search and report all auction activities • Standard reports available • Additional analysis of complex information

27. Selling Side:Auctions and Other Models (cont.) • 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

28. Sell-Side Case:CISCO Connection Online (CCO) • Benefits—saves the company $363 million per year in: • Technical support • Human resources • Software distribution • Marketing material

29. Cisco Connection Online (CCO) (cont.) • 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

30. Cisco Connection Online (CCO) (cont.) • 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

31. Cisco Connection Online (CCO) (cont.) • Benefits to customers • Quick order configuration • Immediate cost determination • Collaboration with Cisco staff

32. Sell-Side Intermediaries • Marshall Industries—(a subsidiary of AvnetMarshall)multinational distributor of electronic components known for its innovative uses of IT and the Web • Products and services • MarshallNet • Marshall on the Internet (portal) • Strategic European Internet • Electronic Design Center • PartnerNet • NetSeminar • Education and News Portal

33. Sell-Side Intermediaries (cont.) • Marshall Industries—a subsidiary or AvnetMarshall (cont.) • Survival strategy • Continuous improvement programs and innovations • Team-based organization, flat hierarchy, decentralized decision making • Profit sharing compensation for salespeople

34. Sell-Side Intermediaries (cont.) • Marshall Industries—a subsidiary of AvnetMarshall(cont.) • Survival strategy • CRM highly promoted • Web-based services create value between suppliers and customers • EC initiatives supported by: • Changing internal organization • Changing internal procedures

35. Sell-Side Intermediaries (cont.) • Boeing’s PART • Acts as an 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

36. 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 airlinesconnect 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

37. Sell-Side Intermediaries (cont.) • Boeing’s PART • Benefits of PART online • Improved customer service • Significant operating savings • New sales opportunities • Customer service online reduced • Phone calls (purchasing, order status etc.) • Data entry

38. Sell-Side Intermediaries (cont.) • Boeing’s PART • 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

39. Sell-Side Intermediaries (cont.) • Boeing’s PART • 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

40. Buy Side: One-from-Many,E-Procurement • Purchasing agents (buyers) • Direct purchasing • Use of material is scheduled • Not a shelf item • Indirect purchasing • MROs • Nonproduction materials • Inefficiencies in procurement management of indirect materials

41. A Traditional Purchasing Process Flow Source: ariba.com, February 2001.

42. 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

43. Buy Side: One-from-Many,E-Procurement (cont.) • Goals of procurement reengineering • Increase purchasing agent productivity • Lower purchasing prices of items • Improve information flow and management • Minimize maverick (unplanned) buying • Improve payment process • Streamline purchasing process to make it: • Simple • Fast

44. 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 in an efficient and effective way • Minimize human errors in buying or shipping process

45. Buy-Side B2BMarketplace Architecture

46. 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

47. 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

48. 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

49. 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

50. Procurement Revolution at GE • TPN at GE Lighting Division • Purchasing was inefficient—too many administrative transactions • Process for each requisition took 7 days • 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 • Evaluate and award bids same day