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Chapter 6 Company-Centric B2B

Chapter 6 Company-Centric B2B. Learning Objectives. Describe the B2B field Describe the major types of B2B models Describe the characteristics of the sell-side marketplace Describe the sell-side intermediaries models Describe the characteristics of the buy-side marketplace and e-procurement.

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Chapter 6 Company-Centric B2B

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  1. Chapter 6Company-Centric B2B Prentice Hall, 2002

  2. Learning Objectives • Describe the B2B field • Describe the major types of B2B models • Describe the characteristics of the sell-side marketplace • Describe the sell-side intermediaries models • Describe the characteristics of the buy-side marketplace and e-procurement Prentice Hall, 2002

  3. Learning Objectives (cont.) • Explain how forward and backward auctions work in B2B • Describe B2B aggregation and group purchasing models • Describe collaborative e-commerce • Understand issues concerning the implementation of company-centric B2B • Distinguish Internet-based EDI from traditional EDI Prentice Hall, 2002

  4. 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 Prentice Hall, 2002

  5. 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 Prentice Hall, 2002

  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 Prentice Hall, 2002

  7. 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 Prentice Hall, 2002

  8. 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 Prentice Hall, 2002

  9. Figure 6-1B2B Supply Chain Prentice Hall, 2002

  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) Prentice Hall, 2002

  11. 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) Prentice Hall, 2002

  12. 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 Prentice Hall, 2002

  13. 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 Prentice Hall, 2002

  14. 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 Prentice Hall, 2002

  15. 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 Prentice Hall, 2002

  16. 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 Prentice Hall, 2002

  17. B2B Models (cont.) • Virtual service industries in B2B • Travel and tourism services • Real estate • Electronic payments • Online stock trading • Online financing • Other online services Prentice Hall, 2002

  18. Figure 6-2Sell-Side Marketplace Architecture Prentice Hall, 2002

  19. 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 Prentice Hall, 2002

  20. 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 Prentice Hall, 2002

  21. 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 Prentice Hall, 2002

  22. 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 Prentice Hall, 2002

  23. 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 Prentice Hall, 2002

  24. 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 Prentice Hall, 2002

  25. 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 Prentice Hall, 2002

  26. 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 Prentice Hall, 2002

  27. 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 Prentice Hall, 2002

  28. 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 Prentice Hall, 2002

  29. 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 Prentice Hall, 2002

  30. Sell-Side Case:CISCO Connection Online (CCO) • Benefits—saves the company $363 million per year in: • Technical support • Human resources • Software distribution • Marketing material Prentice Hall, 2002

  31. 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 Prentice Hall, 2002

  32. 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 Prentice Hall, 2002

  33. Cisco Connection Online (CCO) (cont.) • Benefits to customers • Quick order configuration • Immediate cost determination • Collaboration with Cisco staff Prentice Hall, 2002

  34. 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 Prentice Hall, 2002

  35. 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 Prentice Hall, 2002

  36. 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 Prentice Hall, 2002

  37. 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 Prentice Hall, 2002

  38. 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 Prentice Hall, 2002

  39. 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 Prentice Hall, 2002

  40. 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 Prentice Hall, 2002

  41. 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 Prentice Hall, 2002

  42. 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 Prentice Hall, 2002

  43. Figure 6-3A Traditional Purchasing Process Flow Source: ariba.com, February 2001. Prentice Hall, 2002

  44. 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 Prentice Hall, 2002

  45. 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 Prentice Hall, 2002

  46. 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 Prentice Hall, 2002

  47. Figure 6-4Buy-Side B2BMarketplace Architecture Prentice Hall, 2002

  48. 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 Prentice Hall, 2002

  49. 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 Prentice Hall, 2002

  50. 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 Prentice Hall, 2002

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