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VENDOR RELATIONSHIP MANAGEMENT:

Re-engineering the Business Process Through B2B

Infrastructure to Accelerate the Growth of Small

Businesses in Geographically Isolated Areas

William McDaniel AlbrittonCollaborative Software Development Lab

University of Hawaii

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ParticipationCo-authored by

•Joy M. Agustin

Funding by•City Bank•UH New Economy Research Grant Program

Participants•Dr. Philip Johnson•City Bank•FedEx•Hilo Hattie•United States Postal Service (USPS)•University of Hawai’i•10 Local Businesses

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Geographically Isolated Businesses

Issue•Small businesses limited to local market

Solution•Global marketplace of the Internet

Example: Village near Chincheros, Peru•1995 – village’s income = $300 US per month

•1996 – Internet connection •Online partnership with export company•Sell produce in New York

•1998 – village’s income = $1500 US per month

“Wiring the Pueblo”, Business 2.0David Batstone, 1998

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Expanding Local Hawai’i Businesses

Virtual Merchant•(+) Ideal in early 90’s•(+) Direct control of inventory and information

•(-) Overhead of sales, marketing, and web site•(-) Problem of being noticed on the Internet

Metamediary/Virtual Mall•(+) Larger well-established company•(+) Has brand name recognition•(+) Takes care of sales, marketing, and web site

•(-) Maintaining inventory and information

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Vendor Relationship Management (VRM)

PartnersMetamediary (Host)

•Sales, marketing, and website

Virtual Merchant (Vendor)•Maintain inventory and information

Financial Institution•Transaction processing and loans

Shipping Provider•Order tracking

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Partner Services

Metamediary

VirtualMerchant

FinancialInstitutionShippin

g Provider

ProductShipping

OrderTracking

ProductInformation

OrderInformation

TransactionProcessing

TransactionProcessing

andLoans

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Virtual Merchant/Metamediary

Metamediary

VirtualMerchant

FinancialInstitutionShippin

g Provider

ProductInformation

OrderInformation

VRM System

OrderInformation

ProductInformation

(8)

Shipping Provider

Metamediary

VirtualMerchant

FinancialInstitutionShippin

g Provider

ProductShipping

OrderTracking

VRM System

OrderTracking

OrderTracking

(9)

Financial Institution

Metamediary

VirtualMerchant

FinancialInstitutionShippin

g Provider

TransactionProcessing

TransactionProcessing

andLoans

VRM System

MerchantSales

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VRM PrototypeWeb-based application

Designed with Microsoft Components•Microsoft Windows 2000•Active Server Pages (ASP)•Internet Information Server (IIS)•Open Database Connectivity (ODBC)•Microsoft Access

4 main interfaces•Metamediary (Host)•Virtual Merchant (Vendor)•Financial Institution•Shipping Provider

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VRM PrototypeMetamediary Interface•Maintaincontactinfo.

•Createvendor

accounts•Sendorderstovendors

•View statusoforders

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VRM PrototypeVendor Interface•Maintain contactinfo.

•Maintainproductinfo.

•View customerinfo.

•Receive orders

•View status oforders

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VRM PrototypeFinancial Institution Interface•Maintain contactinfo.

•View vendorand hostcontactinfo.

•View vendorsales

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VRM PrototypeShipping Provider Interface - pending

•Provide .gif shipping labels

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Ordering a Product

VirtualMerchant

Customer

Metamediary

Shipping Provider

VRM System

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Ordering a Product

VirtualMerchant

Customer

Metamediary

Shipping Provider

VRM System

Order

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Ordering a Product

VirtualMerchant

Customer

Metamediary

Shipping Provider

VRM System

Order

Order

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Ordering a Product

VirtualMerchant

Customer

Metamediary

Shipping Provider

VRM System

Order

Order

Notification and Shipping Label

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Ordering a Product

VirtualMerchant

Customer

Metamediary

Shipping Provider

VRM System

Order

Order

Notification and Shipping LabelProduct

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Ordering a Product

VirtualMerchant

Customer

Metamediary

Shipping Provider

VRM System

Order

Order

Notification and Shipping LabelProduct

Product

Shipping Information

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Ordering a Product

VirtualMerchant

Customer

Metamediary

Shipping Provider

VRM System

Order

Order

Notification and Shipping LabelProduct

Product

Shipping Information

Confirmation Number

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Ordering a Product

VirtualMerchant

Customer

Metamediary

Shipping Provider

VRM System

Order

Order

Notification and Shipping LabelProduct

Product

Shipping Information

Confirmation Number

Confirmation Number

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Ordering a ProductBenefits of VRM BPM

•Customer -only sees metamediary

•Metamediary-no product inventory-no shipping

•Virtual Merchants-no advertising-no web maintenance

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Returning a product

VirtualMerchant

Customer

Metamediary

Shipping Provider

VRM System

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Returning a product

VirtualMerchant

Customer

Metamediary

Shipping Provider

VRM System

ReturnReques

t

ReturnRequest

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Returning a product

VirtualMerchant

Customer

Metamediary

Shipping Provider

VRM System

ReturnReques

t

ReturnRequest

ShippingLabel

ShippingLabel

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Returning a product

VirtualMerchant

Customer

Metamediary

Shipping Provider

VRM System

ReturnReques

t

ReturnRequest

ShippingLabel

ShippingLabel

Product

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Returning a product

VirtualMerchant

Customer

Metamediary

Shipping Provider

VRM System

ReturnReques

t

ReturnRequest

ShippingLabel

ShippingLabel

Product

Product

ShippingInformation

ReturnNotification

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Returning a product

VirtualMerchant

Customer

Metamediary

Shipping Provider

VRM System

ReturnReques

t

ReturnRequest

ShippingLabel

ShippingLabel

Product

Product

ShippingInformation

ReturnNotification Received

Notification

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Returning a product

VirtualMerchant

Customer

Metamediary

Shipping Provider

VRM System

ReturnReques

t

ReturnRequest

ShippingLabel

ShippingLabel

Product

Product

ShippingInformation

ReturnNotification Received

Notification ReceivedNotification

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Returning a product

VirtualMerchant

Customer

Metamediary

Shipping Provider

VRM System

ReturnReques

t

ReturnRequest

ShippingLabel

ShippingLabel

Product

Product

ShippingInformation

ReturnNotification Received

Notification ReceivedNotification

Refund

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Returning a productBenefits of VRM BPM

•Customer -only sees metamediary

•Metamediary-no product inventory-no shipping

•Virtual Merchants-no advertising-no web maintenance

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VRM PrototypePortability

•Windows NT/2000Reliability

•Microsoft products seem to attract viruses•Access database

-Typically 10 to 20 users-One megabyte of data

Scalability•Need to change to SQL Server

Security •Secure Socket Layer (SSL)•Cannot load pages unless go through Login page

•Other general security concerns

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Survey of 10 Local Businesses

Vendor interviews•E-commerce issues and solutions•30-45 minutes interview

Topics•Degree of technological sophistication•Use of Internet for sales and marketing•Desires for and barriers to growth•Present and future financial services

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Survey ResultsBusiness Size•Staff of 1-2 (7 businesses)•Staff of 5-25 (3 businesses)

E-commerce•9 businesses on the Internet•8 individual websites

-Trouble getting site noticed (4)-Product not easily sold online (2)-No problems (2)

•Percent of business from Internet-95%+ (3)-30-95% (0)-10-30% (2)-<10%(3)

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Survey ResultsFuture Business Direction

•Keep growing (3)•Eventually sell business (3)•Have brick & mortar store (1)•Outsource web site (1)•Survive/continue at same pace (2)

Advantages of Using a Metamediary/Virtual Mall•9 companies gave positive comments

-High visibility-Wider customer base-Increase traffic -Less hassles-No maintenance of websites

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Survey ResultsDisadvantages of Using a Metamediary/Virtual Mall •7 companies gave negative comments

-Concerns over setup with metamediary-Insufficient time to keep up with production-Possible competition with other products-Loss of control over advertising-Slower payment process-Increase number of small orders

•3 companies currently use a metamediary

Metamediary/Virtual Mall Product Preferences•Wholesale (6)•Drop-ship (2)•Commission (1)

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Survey ResultsFinancial Services

•Present-Credit card transactions (8)-Merchant account (3)

•Future-Loans (2)-Other banking services (2)-No loans (2)-Not interested in additional services (4)

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Expert CritiquesParticipants

•Business Owners (2) •Bank Employees (3)

Topics•Advantages•Disadvantages•Suggested Improvements

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Expert CritiquesAdvantages

•Easy for inexperienced small vendors-Banking-Advertising-Ordering-Shipping details

•Eliminate paper traveling between partners•Vendors can get paid immediately by metamediary

•Metamediary does not need to store inventory

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Expert CritiquesDisadvantages

•Vendor packs orders themselves•Not geared toward vendors that do not “produce” their own product

•Metamediary immediately pays vendors •Competition between metamediary and vendor

•Competition between vendors on web site

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Expert CritiquesSuggested Improvements

•Include contract negotiations in business process-Metamediary and shipping company-Metamediary and vendors-Financial institution and other 3 partners

•Add information on individual product sales•Add user log•Investigate third party shipping software•Add fulfillment center as a fifth partner

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What’s Next?

1. Is this a viable approach?

2. Under what conditions?

3. When should we think about proceeding?