Electronic Commerce

1. Electronic Commerce BBA (Hons) (B2B Business to Business EC) By: Farhan Mir

2. For each requisition, the accompanying blueprints had to be requested from storage, retrieved from the vault, transported to the processing site, photocopied, folded, attached to paper requisition forms with quote sheets, stuffed into envelopes and mailed out. This process took at least 7 days and was so complex and time-consuming that the sourcing department normally sent out bid packages only to two or three suppliers at a time. Trading Process Network (TPN) Post in General Electric • General Electric (GE) • Its purchasing was inefficient, involved too many administrative transactions Factories at GE Lighting division used to send hundreds of Requisitions For Quotations (RFQs) to the corporate sourcing department each day for low-value machine parts. • Using TPN GE is conducting electronic bids, no paperwork

3. Trading Process Network (TPN)Post in General Electric (cont.) • Benefits of using TPN • 60%of the staff involved in procurement have been redeployed. The sourcing department has at least 6-8 free days a month to concentrate on strategic activities rather than on paperwork, photocopying and envelope stuffing it had to do when the process was manual. • Labor involved in procurement declined by 30%. At the same time, materials costs declined 5%-20% due to the ability to reach a wider base of suppliers online. • It used to take 18-23 days to identify suppliers, prepare a request for bid, negotiate a price and award the contract to a supplier. It now takes 9-11 days. • With the transaction handled electronically from beginning to end, invoices are automatically reconciled with purchase orders, reflecting any modifications that happen along the way. • GE Procurement departments across the world now share information about their best suppliers.

4. Concepts, Characteristics, and Models of B2B EC • The Basic Types of B2B Transactions and Activities • Sell-side • Buy-side • Exchanges • Supply chain improvements and collaborative commerce

5. Concepts, Characteristics, and Models of B2B EC

6. Characteristics of B2B EC • Key Entities of B2B EC • Buying company with procurement management perspective • Selling company with marketing management perspective • Electronic Intermediary, an optional third party directory service provider (the scope of service may be extended to order fulfillment) • Deliverer who can fulfill a just-in-time delivery • Network platform such as the Internet, VAN, intranet and extranet • Protocol of communication such as EDI and comparison shopping possibly using software agents • Back-end information system possibly implemented using the intranet and Enterprise Resource Planning (ERP) systems

7. Characteristics of B2B EC • Majorly Supplier-oriented marketing • Used to sell the company’s products and services to business customers on the Internet • Electronic catalogs are basically the same as that for B2C EC, but they may be customized

8. Concepts, Characteristics, and Models of B2B EC • Types of transactions • spot buying The purchase of goods and services as they are needed, usually at prevailing market prices • strategic (systematic) sourcing Purchases involving long-term contracts that usually are based on private negotiations between sellers and buyers

9. Concepts, Characteristics, and Models of B2B EC • Types of materials traded • direct materials Materials used in the production of a product (e.g., steel in a car or paper in a book) • indirect materials Materials used to support production (e.g., office supplies or light bulbs) • MRO (maintenance, repair, and operation) Indirect materials used in activities that support production

10. Concepts, Characteristics, and Models of B2B EC • Virtual Service Industries in B2B • Travel and hospitality services • Real estate • Financial services • Online stock trading • Online financing • Other online services

11. Supply Chain • Definition • All activities associated with the flow and transformation of goods from raw materials to end users Upstream Internal Downstream 2nd Tier Supplier Distribution Centers Customers 1st Tier Supplier Assembly/ Manufacturing and Packaging 2nd Tier Supplier 1st Tier Supplier 2nd Tier Supplier Retailers Packaged Cereal Cereal Grain Grain Producer Processing Facility Packaging Distributor Customers Paperboard Store Labels Label Manufacturer

12. One-to-Many: Sell-Side E-Marketplaces • Supplier-Oriented Market Place – one to many • Individual consumers and business buyers use the same supplier-provided market place (May pay different prices due to quantity discount)

13. Case Study of Supplier-Oriented Market Place:CISCO Connection Online • Customer Service— Cisco Connection online • Online Ordering— Internet Product Center builds virtually all its products to order • Finding Order Status— gives the customers tools to find answers to order status inquiries by themselves • Benefits— save the company $363 million per year from technical support, human resources, software distribution and marketing material

16. Selling via Auctions • Auctioning from the Company’s Own Site • Why should a company pay a commission to an intermediary if the intermediary cannot provide the company with added value • If a company decides to auction from its own site, it will have to pay for infrastructure and operate and maintain the auction site

17. Selling via Auctions • Using Intermediaries in Auctions • Benefits • No additional resources are required • No hiring costs or opportunity costs associated with the redeployment of corporate resources • Offer fast time-to-market • Billing and collection efforts, are handled by the intermediary rather than the company

18. Business Suppliers Buyer’s Electronic Mall Buyer’s Products Catalog, RFQ Suppliers’ Bids, Information Models of B2B EC • Buyer-Oriented Market Place – many to one • Buyer opens a market on its own server and invites potential suppliers to bid on RFQs • Offer opportunity to committed suppliers • BUT as the number of such sites increase, only very big buyers can afford to fully utilize this approach

19. One-from-Many: Buy-Side E-Marketplacesand E-Procurement – Time consumption and delays

20. Case Study of Customer-Oriented Market Place:GE’s TPN Post • Provides a chance for sellers to participate in the bidding process of GE using the following procedure: • Buyers prepare bidding project information • Buyers post the bidding projects on the Internet • Buyers identify potential suppliers • Buyers invite suppliers to bid on projects • Suppliers download the project information from the Internet • Suppliers electronically submit bids for projects • Buyers evaluate the suppliers’ bids and negotiate online to achieve the ‘best deal’ • Buyers accept the bid that best meets their requirements

21. One-from-Many: Buy-Side E-Marketplacesand E-Procurement • Six Main Types of E-Procurement • e-sourcing • e-tendering • e-reverse auctioning • e-informing • Web-based ERP (electronic resource planning) • e-MRO (maintenance, repair and operating)

22. Buy-Side E-Marketplaces: Reverse Auctions

23. Business Suppliers Business Customers Intermediary’s Electronic Mall Customer’s Order Information Shared Products Catalogs Supplier’s Product Information Models of B2B EC • Intermediary-Oriented Market Place • Establish an electronic intermediary company • Similar to an intermediary-based B2C mall; bring buyers and suppliers (bidders) to one place • The corporate information systems need tight coupling with the intermediary electronic mall

24. Case Study of Intermediary-Oriented Market Place: Boeing’s PART • Boeing’s PART Case • 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 with online parts and maintenance information and ordering capability

26. Case Study of Intermediary-Oriented Market Place: Boeing’s PART (cont.) • Boeing On Line Data (BOLD) • Incorporating not only engineering drawings but manuals, catalogs and other technical information that used to be available only in paper or in microfiche format • Portable Maintenance Aid (PMA) • Solves maintenance problems

27. Case Study of Intermediary-Oriented Market Place: Boeing’s PART (cont.) • Benefits to Boeing’s Customers • Increased productivity • spending less time searching for information; frees up engineers and maintenance technicians to focus on more productive activities • Reduced costs • with information available online at the airports’ gates, through PMA, rather than back in the office, delays at the gate due to missing information are reduced • Increased revenue opportunity • through BOLD and PMA, a European airline estimates it will save 1-2 days/year of down time for each aircraft

28. B2B: the many-many exchanges • Many-to-many: exchanges • exchanges (trading communities or trading exchanges) Many-to-many e-marketplaces, usually owned and run by a third party or a consortium, in which many buyers and many sellers meet electronically to trade with each other • public e-marketplaces Third-party exchanges that are open to all interested parties (sellers and buyers

29. Procurement Management Using B2B EC Platform • Purchasing is now a strategic function, to increase profit margins • By automating and streamlining the laborious routine of the purchasing function, purchasing professionals can focus on more strategic purchases, achieving the following goals: • Reducing purchasing cycle time and cost • Enhancing budgetary control • Eliminating administrative errors • Lowering prices through product standardization and consolidation of purchases • Better information management; e.g. supplier’s information and pricing information • Improving the payment process

30. Infrastructure, Integration, and SoftwareAgents In B2B EC • Infrastructure for B2B • electronic data interchange (EDI) The electronic transfer of specially formatted standard business documents, such as bills, orders, and confirmations, sent between business partners • 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 (Web) EDI EDI that runs on the Internet and is widely accessible to most companies, including SMEs

31. B2B in the Web 2.0 Environment • Opportunities • Brand awareness, generate traffic, create social communities • Use of Web 2 tools in B2B • Blogs, Wikis and RSS Feeds • Social Networks in the B2B Marketplace • Examples of Other activities • American Express-sponsored Business Social network • Corporate Profiles on social networks

32. Managerial Issues • Can we justify the cost of B2B? • Which vendor(s) should we select? • Which B2B model(s) should we use? • Should we restructure our procurement system? • What are the ethical issues in B2B? • Will there be massive disintermediation? • How can trust and loyalty be cultivated in B2B? • How is mobile B2B done?