Chapter 6 Company-Centric B2B

1. Chapter 6Company-Centric B2B

2. A,B計畫 • 1999年行政院 IAeB 推動方案 • Industrial Automation and E-Business • 運用資訊科技提升產業競爭力 • 第一優先： 資訊業 • 補助 B2B 專案，以提升台灣資訊產業之競爭力

3. A Plan • Major foreign computer buyers, with annual acquisition over US$3B • B2B EC to link up with local suppliers, expediting ordering cycles and • Target: Compaq (7.5B), IBM (3.5B), HP (3.5B), Dell (4.5B) • 3 projects awarded: Compaq (TaiWeb), IBM, HP (eMercury)

4. B Plan • Local computer companies with revenue over NT$20B • To help at least 200 suppliers on-board a B2B application • 25 projects awarded • Mostly around e-Procurement • Other industries, projects funded by IDB,DOC and SMEA

5. What’s Next • CDE plans • Cash (eFinancing) • Delivery (Logistics, track and trace, VMI) • Engineering (Design, early involvement, engineering change)

6. 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

7. Scale of EC 1600 1400 1200 1000 800 600 400 200 0 B2B EC Billion US$ CAGR=99% B2C EC CAGR=68% 1998 1999 2000 2001 2002 2003 *source：Forrester

8. 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 • Tightly coupled supply chain vs. Loosely coupled marketplace • Production parts vs. MRO (maintenance, repair and operations) • Private and public e-marketplace • Private—one-to-many mode • Public—many-to-many mode

9. 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

10. 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)

11. Supply chain activities • Product design • Time to market • Procurement • Order fulfilling cycles • 955  983  982 (for computer manufacturing) • Logistics • Delivery cycle time • Payment • Payment process cycles, financing, error rate • Service

12. B2B modes of operations • Traditional EDI • Electronic Data Interchange • ISO/EDIFACT • Web-based Solutions • Turn-key solutions • An system between in-house ERP and exchange services • B2Bi • Business to business integration • Application to application communications • XML-based • Process integration, eg. RosettaNet

13. Problems • Supply NET instead of supply-chain • 1-to-many vs. many-to-many connections • Differences in processed • Power and trust • Web-based • Many different interfaces • B2Bi • Process integrations • Solutions • Standard, and standard mechanism • RosettaNet like, or eB-XML

14. 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)

15. 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) • LSP: Logistics service suppliers • 3PL: 3rd party logistics • Network platforms—Internet, VAN, intranet, extranet • ASP: Application service providers • Protocols of communication—EDI or XML • RosettaNet- XML based process standard for electronics • Back-end integration—connecting to ERP systems, databases, functional applications

16. Product (PDM) 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

17. 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

18. 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

19. 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

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

21. 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

22. 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

23. 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

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

25. 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

26. 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

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

28. 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

29. 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

30. Sell-Sid 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

31. 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

32. 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

33. 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

34. 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

35. 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

36. 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

37. 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

38. 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

39. 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

40. 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

41. 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

42. 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

43. 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

44. Procurement Revolution at GE • Refer to Book

45. 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

46. 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 • Or, order from sites scattered world-wide are aggregated

47. 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

48. Collaborative Commerce (C-Commerce) • Web-based systems used between and among suppliers for: • Communication • Design: design for manufacurability, design for maintenability • Planning: CPFR- Collaborative forecast, planning and replenishment • Information sharing • Information discovery

49. 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

50. Suppliers Distributors Overseas Factories Customers 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