Chapter 5

1. Chapter 5 B2B Strategies: From EDI to E-Commerce

2. Purchasing, Logistics, and Support Activities • Electronic commerce possesses the potential for cost reduction and business process improvement in purchasing, logistics, and support activities. • An emerging characteristic of purchasing, logistics, and support activities is that they need to be flexible. • Such as e-Government … do you know any local services offered?

3. Exercise • What are the benefits of e-Government? • What are the disadvantages?

4. Example (1) • e-Government (http://www.gov.mt/egovernment.asp?p=116&l=2) • Usage of eCommerce by Government to improve efficiency of its support operations such as … • Ċertifikati.gov.mt Order certificates online • Servizz.gov.mt e-Customer Care System • MCAST Short Courses Online application/enrolment for these courses • Exams.gov.mt Examinations Applications • VAT online services • eHealth Portal

5. Example (2) • Ird.gov.mt • Corporate Taxes online services • Final Settlement System • FSS-Fringe Benefit Calculator • Social Security Contributions Calculator • Map Server • E-Libraries Service at the National and Public Libraries • Pulizija.gov.mt - Pulizija On-Line • Gpd.gov.mt - Pay Rent On-Line • Les.gov.mt - Local Enforcement System - Pay your local warden tickets online

6. Example (3) • Justice • Sentenzi Online • Civil Cases • Laws of Malta Online • Hall Usage • eServices • Elderly • Persons with Special Needs • - eLicences • Laws of Malta • Order of Fiscal Receipts Books

7. Example (4) • Children's Allowance Calculator • Disabled Child Allowance Calculator • Retirement Planner • Buses Route Finder • Job Vacancies at the Employment & Training Corporation (ETC) • Viewing CVs at the ETC • Renewal of Vehicle Licenses • Social Security contributions submissions for employees • Unique Notification of change in address • Online renewal of Passports • E-procurement for Government departments

8. E-Government • Employment, buying supplies, benefit payment distribution etc • Different levels • National Governments • State or Provincial • Local Governments

9. Purchasing Activities • Purchasing activities include: • Identifying vendors • Evaluating vendors • Selecting specific products • Placing orders • Resolving any issues that arise after receiving the ordered goods and services • late deliveries • incorrect quantities • incorrect or defective items

10. Purchasing Activities • Procurement includes all purchasing activities, plus the monitoring of all elements of purchase transactions. • supply chains • e-sourcing • By using a Web site to process orders, the vendors in this market can save the cost of printing and shipping catalogs, and the cost of handling telephone orders.

11. E-Procurement promises • Reduction of process costs • Less capital costs due to reduced inventory • Increased buying power and better purchase price through aggregation • Increased cost and process transparency • Better management of decentralized purchasing • More capacity for strategic procurement

12. Snapshot of SMEs using E-Procurement • 29 % of SMEs buy online • 2 % interchange data with suppliers • 9% buy more than 50% online • 42 % buy less than 5 % online • Favorite Products: • Books • Office Supplies • Travel Services • Soft- & Hardware

13. E-Procurement benefits • e-Procurement, when properly implemented should provide: • Savings: Easy access to contract pricing • Convenience: Online ordering tool, access from anywhere • Speed: Automated approvals • Help: Guidance through the tool (make process easy to use) • Improving Service • Lowering Total Cost of Ownership

14. TCO • A comprehensive process to help enterprises understand all the costs, benefits and value associated with procuring, owning and using IT components over time. • Example: • How much do you think a networked Window 95 PC would cost an organisation per year?

15. TCO Example • Annual TCO of a networked Window 95 PC has been estimated at • $2,859 by Zona Research, • $2,680 by Forrester Research, Inc., • $9,784 by the Gartner Group • No matter how they calculate the costs the conclusion is that this part of cost is considerably higher than the capital outlay • Why so high?

16. Budgeted TCO • The cost of hardware and software. • The cost of management including network, system and storage administration labor. • The cost of training and support services. • The cost of system development including application and content development, testing and documentation, new development, customizations of system, and maintenance. • The cost of communication fees including lease lines and server access charges.

17. Most Significant Contributing Factors to TCO • Labor and end user operations. • Non-standard PC configurations. • Information and applications uniquely tied to specific workstations. • Deploying and maintaining hardware and software infrastructure. • Manageability is the largest single factor.

18. Hidden Costs • Miscellaneous cost • The cost of toner, paper, etc. • License fees/transaction costs • Energy costs needed to run the technology • The cost of lost productivity • The cost of system downtime • The cost occurred when end users are attempting to solve IS problems for themselves or their coworkers.

19. TCO Principles • The TCO $ number is meaningless without discussing service levels. • The more centralized the architecture, the lower the cost. • Standardization at the desktop controls costs. • Local optimization for a particular application is costly. • Attempt to quantify benefits of expenditures or savings when considering acquiring or disposing of technology. • Take a long term perspective and use TCO best practice wherever possible.

20. TCO Best Practices • Maximum consolidation of datacenters, system images, and other resources. • Maximize processor and storage capacity. • Remove unnecessary portions of system. • Use integrated management tools. • Automation of system administration, storage, and operational tasks. • Streamline datacenter work processes. • Limit users ability to get themselves in trouble. • Maintain inventory of all hardware and software. • Train employees. • Replacement of legacy applications. • Keep the infrastructure reliable.

21. Direct Materials Purchasing • Direct Materials • materials that become part of the finished product • E.g. Iron Ore in Steel Manufacturing • Types • Replenishment Purchasing • Yearly contracts with particular suppliers • Spot Purchasing • For additional purchases during the year

22. Indirect Purchasing Activities • Products that companies buy on a recurring basis are called maintenance, repair, and operating (MRO) supplies. • One of the largest MRO suppliers in the world is W.W. Grainger. • McMaster-Carr is another major MRO supplier through WWW. • Office Depot and Staples are also examples in this area.

23. Logistic Activities • The classic objective of logistics is to provide the right goods in the right quantities in the right place at the right time. • Businesses have been increasing their use of information technology to achieve this objective. • FedEx and UPS have freight tracking Web page available to their customers. • Materials Tracking Technologies • Scanners, Bar Codes and RFIDs

24. Exercise • Consider a parcel delivery service. • Draw a flowchart which outlines all the steps which take place from when the client initially accesses the website to the time the parcel is delivered

25. FedEx

26. Support Activities • Includes • Finance and Administration • Human Resources • Technology Development • Online Benefits is a firm that duplicates its clients’ human resource functions on a secure Web site that is accessible to clients’ employees.

27. Knowledge Management • Knowledge management is the intentional collection, classification, and dissemination of information about a company, its products, and its processes. • BroadVision has installed K-Net, or Knowledge Network, that organizes all information sources that its employees use regularly in their jobs.

28. Working Definition Knowledge Management is the explicit and systematic management of vital knowledge - and its associated processes of creation, organisation, diffusion, use and exploitation.

29. Roots of Knowledge Management Business Transformation (BPR, TQM, culture) Learning Organization Innovation Knowledge Management Intellectual Assets/Capital Information Management Knowledge-based Systems

30. Knowledge is Different Intelligence / Wisdom Human, judgemental Contextual, tacit Transfer needs learning Knowledge Codifiable, explicit Easily transferable Information Data

31. Conversion processes Source: The knowledge creating company, I. Nonaka and H. Takeuchi Socialization Externalization Tacit From Internalization Combination Explicit Tacit Explicit To

32. What is ... in Practice • Knowledge Teams - multi-disciplinary, cross-functional • Knowledge (Data)bases - experts, best practice • Knowledge Centres - hubs of knowledge • Learning Organization - personal/team/org development • Communities of Practice - peers in execution of work • Technology Infrastructure - Intranets, Domino, doc mgt • Corporate Initiatives – Chief Knowledge Officers, etc

33. Seven Levers • Customer Knowledge - the most vital knowledge • Knowledge in Products - ‘smarts’ add value • Knowledge in People - but people ‘walk’ • Knowledge in Processes - know-how when needed • Organizational Memory - do we know what we know? • Knowledge in Relationships - richness and depth • Knowledge Assets - intellectual capital

34. KM Cycle Collect Identify Classify Organize/ Store Knowledge Repository Create Share/ Disseminate Use/Exploit Access

35. IT Infrastructure • A key enabler • Access anytime, anywhere, anyhow • Lotus Notes, First Class, Intranets - groupware • Point solutions e.g. data mining, mapping • New generation of Knowledge Based systems • Focus on the I (Information - about Knowledge) • Hybrid, virtual teams

36. Soft Infrastructure • A culture of sharing - vs. information fiefdoms • Directors of Knowledge (Intellectual Capital) • Facilitating knowledge processes • change teams, development workshops etc. • Developing personal skills • info management, ‘dialogue’, online techniques • New measures of human capital, capabilities

37. Critical Factors • Strong link to business imperative • Compelling vision and architecture • Knowledge leadership • Knowledge creating and sharing culture • Continuous Learning • Well developed ICT infrastructure • Systematic knowledge processes

38. Action Planning 1. Find out where you are! • do an assessment; look for existing practice 2. Identify the knowledge champions • and top level sponsors 3. Start the learning process • attend seminars, site visits, assemble resources 4. Understand the seven knowledge levers • find how knowledge adds value to your business

39. Action Planning (cont.) 5. Identify Related Initiatives • an opportunity for collaboration? 6. Initiate a Pilot Project • look for quick wins, within long-term framework 7. Assess Organizational Readiness • assessment plus enablers, levers, foundations 8. Develop a road map for knowledge • vision, goals, strategies, resources, networks.”

40. KM Case Studies … • Glaxo Wellcome • Price Waterhouse KnowledgeView • Buckman Laboratories • Skandia Life

41. Glaxo Wellcome • A strategy led initiative - learning org. focus • Workshops to convert rhetoric to action plans • Using Intranets to share R&D, help approvals • Library, document management support • Reoreinted Technical Architecture • Challenge is creating ‘sharing culture’ Bottom Line - better RoIC

42. Glaxo Wellcome - Knowledge Net Learning History Team Skills Process Improvements - Quality etc. Knowledge Network Architecture New science competencies Communications Marketing products - customer dialogue People - manager skills - ‘Yellow pages’ - expertise Strategy

43. Price Waterhouse KnowledgeView • Knowledge is their business • Systematic processes - sharing ‘best practice’ • Knowledge centres - editors and advisers • Taxonomy - International Business Language • Common formats on information • Lotus Notes for multiple ‘views’ • Adding contextual/contact information Bottom Line: Better solutions in less time

44. Buckman Laboratories • “Solutions lie in minds, not databases” • Corporate network (V1 - CIS) - up in 30 days • Knowledge Transfer department • CEO monitors and uses the network • FAQs, virtual conferences, forums • K’Netix (sm) - knowledge sharing Intranet • Metrics - direct customer engagement Bottom line - open, unrestricted communication

45. Skandia Life • First to publish ‘intellectual’ balance sheet • Visible assets vs. invisible assets • Intellectual Capital = customer + human + structural • IT + IC + values = Intelligent organisation • Not just sums - will drive operating units • “visualise”, success factors, indicators, development Bottom line - ongoing growth and value

46. Network Model of Economic Organization • The trend in purchasing, logistics, and support activities is a shift away from hierarchical structures toward network structures. • The Web is enabling this shift from hierarchical forms of economic organization to network forms. • The roots of Web technology for B2B transactions lie in electronic data interchange (EDI).

47. Economic Forces of E-Commerce Transaction costs were the main motivation for moving economic activity from markets to hierarchically structured firms Transaction costs are the total of all costs that a buyer and a seller incur for business Types of economic organization: Market form Hierarchically-structured form

48. Electronic Data Interchange (EDI) • EDI is a computer-to-computer transfer of business information between two businesses that uses a standard format. • Transaction data in B2B transactions includes the information on paper invoices, purchase orders, requests for quotations, bills of lading, and receiving reports.

49. Early Business Information Interchange Efforts • In the 1950s, information flows between businesses continued to be printed on paper. • By the 1960s, businesses had begun exchanging transaction information on punched cards or magnetic tape. • Benefits were outweighed by required computing infrastructure bearable only by large, high-volume companies • In 1968, a number of freight and shipping companies formed the Transportation Data Coordinating Committee (TDCC) to create the TDCC standard format.

50. Emergence of Broader Standards • The American National Standards Institute (ANSI) has been the coordinating body for standards in the U.S. since 1918. • In 1979, ANSI chartered a new committee to develop uniform EDI standards. This committee is called the Accredited Standards Committee X12 (ASC X12). • In 1987, the United Nations published its first standards under the title “EDI for Administration, Commerce, and Transport (EDIFACT, or UN/EDIFACT).