Chapter 11 Business-to-Business E-Commerce

1. Chapter 11Business-to-Business E-Commerce

2. OBJECTIVES • What is B2B E-Commerce? • B2B Models • B2B Building Blocks • B2B Integration Challenges • B2B Tools –EDI • Beyond B2B

3. WHAT’S B2B E-COMMERCE? • B2B • Both sellers and buyers are business organizations • Involves complex procurement, manufacturing, planning collaboration, payment terms and performance agreements

4. B2B ENTITIES Order Fulfillment Selling Company Buying Company Deliverer ERP

5. B2B ENTITIES (cont.) • Purchasing Company • Focus on procurement in terms of reduced purchase prices and cycle time • Selling Company • Focus on marketing and sales • Intermediating Service Provider • Focus on ensuring order fulfillment • JIT Deliverer • Focus on just-in-time delivery

6. B2B ENTITIES (cont.) • Web-based Platform • Focus on Internet, intranet, and extranet • Tools of B2B • Focus on Electronic Data Interchange and software agents • Back-End Technical Support • Focus on Enterprise Resource Planning

7. B2B VS. B2C

8. B2B VS. B2C (Cont’d)

9. ADVANTAGES • Save money on purchases that are negotiated instantly • Replacing earlier purchasing bureaucracy with online links improves efficiency • Just-in-time environment minimizes inventory sitting in the warehouse

10. DRAWBACKS • Suppliers have to work with big technology integration issues with the rest of suppliers in the exchange • Antitrust violations may result

11. SUPPLY CHAIN • Process of moving goods from customer order through the raw materials, supply, production, and the distribution of products to the customer • Benefits • Reduced inventory, higher sales, improved ability to customize products for different business buyers, and reduced production cost

12. B2B MODELS • Buyer-oriented B2B • A buyer uses the internet by opening a marketplace on its own server and opening the window for suppliers to do the bidding • Supplier-oriented B2B • A supplier invites customers to order product via its electronic market store

13. ELECTRONIC AUCTIONS • Reduce procurement costs • Maximize return on excess merchandise • Types • Forward auction • Reverse auction • Internet exchange

14. FORWARD AUCTION • One seller entertains bids from many buyers • Allows the seller to post products or services they want to sell via its auction website • Payment and fulfillment is handled through normal electronic channels • Ideal where demand and supply are unpredictable, and there is a timing factor to unload the merchandise

15. REVERSE AUCTION • Used to solicit bids where lowest bidder wins • Typical of large corporate buying • Tends to drive down prices and expand buyer’s zone of choice among suppliers

16. INTERNET EXCHANGE AUCTION • Involves many buyers and sellers who trade bids and offers until there is an agreement to exchange product for payment • A third party operates the exchange • Responsible for quality assurance and prompt delivery of the goods

17. INTERNET EXCHANGE AUCTION (Cont’d) • Revolves around an electronic intermediary company that establishes an exchange market where buyers and sellers can make deals

18. B2B BUILDING BLOCKS • Application Server • B2B Integration Server • Personalization Software • Content Management Facility • E-Commerce Package • Security • Quality of Service

19. B2B INTEGRATION CHALLENGE • B2B Integration • Deals with spanning independent businesses, each with its own set of applications and users • Interoperates with heterogeneous systems without being tied to one specific system technology

20. B2B INTEGRATION • Solutions • Via a Web site as a front-end for information sharing among partners • Extract information from one partner’s application convert it into a format amenable for transmission via EDI • For two companies to use common technology to coordinate data exchange

21. B2B TOOLS – EDI • Allows one computer system to communicate business information with another computer system in a standardized electronic form • Computer-to-computer transfer of business information

22. COMPONENTS OF EDI • Interbusiness • Transmission of data between businesses • Computer-to-computer • Data communication from one computer to another • Standard transactions • Replace standard business forms • Standard format

23. ADVANTAGES • Cost reduction and time-saving • Improved B2B problem resolution • Accuracy with integrity

24. DRAWBACKS • Unpopular • Expensive • Point-to-point • Requires expensive VAN networking • Not easy to use, learn, or implement

25. EDI JUSTIFICATION • Volume of data • Frequency of document transmission and reception • Content sensitivity • Time sensitivity

26. FINANCIAL EDI • Electronic transmission of payments between a payee and a payer via their respective banks • Allows businesses to replace labor-intensive activities of collecting, disbursing and processing payments • Improves certainty of payment flows

27. BEYOND B2B • A2Z Approach • Connect all the links of value chain via partnership • The link would be turned from physical connections to digital ones • Clear visibility of each stage of business process

28. Chapter 11Business-to-Business E-Commerce