b2b Session

B2B E-Commerce

Concepts, Characteristics, and Models of B2B E-Commercebusiness-to-business e-commerce (B2B

EC)Transactions between businesses conducted electronically over the Internet, extranets, intranets, or private networks; also known as eB2B (electronic B2B) or just B2B

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Concepts, Characteristics, and Models of B2B E-CommerceTHE BASIC TYPES OF B2B

TRANSACTIONS AND ACTIVITIESSell-sideBuy-sideExchangesSupply chain improvements and

collaborative commerce

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Concepts, Characteristics, and Models of B2B E-CommerceTHE BASIC TYPES OF B2B E-

MARKETPLACES AND SERVICESOne-to-Many and Many-to-One: Private E-

Marketplaces company-centric EC

E-commerce that focuses on a single company’s buying needs (many-to- one, or buy-side) or selling needs (one-to- many, or sell-side)

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Concepts, Characteristics, and Models of B2B E-Commerce

Many-to-Many: Public Exchanges exchanges (trading communities or trading

exchanges)Many-to-many e-marketplaces, usually owned and run by a third party or a consortium, in which many buyers and many sellers meet electronically to trade with each other

public e-marketplacesThird-party exchanges open to all interested parties (sellers and buyers)

Supply Chain Improvers and Collaborative Commerce

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Concepts, Characteristics, and Models of B2B E-CommerceB2B CHARACTERISTICS

Parties to the Transaction: Sellers, Buyers, and Intermediaries online intermediary

An online third party that brokers a transaction online between a buyer and a seller; may be virtual or click-and-mortar

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Types of B2B Transactions: How Do Firms Buy? spot buying

The purchase of goods and services as they are needed, usually at prevailing market prices

strategic (systematic) sourcingPurchases involving long-term contracts that usually are based on private negotiations between sellers and buyers

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Types of Materials Traded: What Do Firms Buy? direct materials

Materials used in the production of a product (e.g., steel in a car or paper in a book)

indirect materialsMaterials used to support production (e.g., office supplies or light bulbs)

MRO (maintenance, repair, and operation)Indirect materials used in activities that support production

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The Direction of the Trades vertical marketplaces

Markets that deal with one industry or industry segment (e.g., steel, chemicals)

horizontal marketplacesMarkets that concentrate on a service, material, or a product that is used in all types of industries (e.g., office supplies, PCs)

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One-to-Many: Sell-Side E-Marketplacessell-side e-marketplace

A Web-based marketplace in which one company sells to many business buyers from e-catalogs or auctions, frequently over an extranetB2B SellersCustomer Service

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One-to-Many: Sell-Side E-MarketplacesSALES FROM CATALOGS: STOREFRONT

Customization and Self-ConfigurationBenefits and Limitations of Online Sales

from CatalogsCase: Brady CorporationCOMPREHENSIVE SELL-SIDE SYSTEMS

Best Buy – supplier to SMEs

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Selling Via Distributors and Other IntermediariesManufacturers can sell directly to businesses, and

they do so if the customers are large buyers. Frequently they use intermediaries to distribute

their products to a large number of smaller buyers.

The intermediaries buy products from many manufacturers and aggregate them into one catalog from which they sell to customers or to retailers.

Case: W.W.Grainger

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Selling Via E-AuctionsUSING AUCTIONS ON THE SELL SIDE

Revenue generationCost savingsIncreased “stickiness”Member acquisition and retention

AUCTIONING FROM THE COMPANY’S OWN SITE

USING INTERMEDIARIES IN AUCTIONS

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EXAMPLES OF B2B FORWARD AUCTIONS

Whirlpool Corp. sold $20 million in scrap metal in a single auction via asses-auctions.com, increasing the price received by 15%.

Sam’s Club auctions thousands of items at auctions.samsclub.com. Featured auctions include the current bid, the number of bids, and the end date.

Resort Quest, a large vacation company, uses auctionanything.com to auction rental space.

At governmentauctions.org, businesses can bid on seized items, abandoned property etc.

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One-from-Many: E-Procurement at Buy-Side E-Marketplacesbuy-side e-marketplace

A corporate-based acquisition site that uses reverse auctions, negotiations, group purchasing, or any other e-procurement method

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One-from-Many: E-Procurement at Buy-Side E-MarketplacesINEFFICIENCIES IN TRADITIONAL

PROCUREMENT MANAGEMENTprocurement management

The planning, organizing, and coordinating of all the activities relating to purchasing goods and services needed to accomplish the organization’s mission

maverick buyingUnplanned purchases of items needed quickly, often at non-prenegotiated higher prices

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Multiple DepartmentsMultiple Departments•EngineeringEngineering•MarketingMarketing•SalesSales•SupportSupport

Approval HierarchyApproval Hierarchy•ManagersManagers•ApproversApprovers•Etc.Etc. Purchasing DepartmentPurchasing Department

•H/W PurchaserH/W Purchaser•Facilities PurchaserFacilities Purchaser•Etc.Etc.

SuppliersSuppliers•ContractContract•Non-ContractNon-Contract•SpecializedSpecialized•Etc.Etc. LogisticsLogistics

•ReceivingReceiving•InventoryInventory•PaymentPayment•Etc.Etc.

Procurement Process: Why automate?

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e-ProcurementAn e-Procurement application is the software that is required to access suppliers electronically, enabling an organization to conduct procurement transactions over the Internet.

Supplier

Supplier

Supplier

Supplier

Portal

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e-Procurement Business Issues (Purchasing Department)

How can I streamline myprocurement process?

How well are my suppliers performing?

Supplier Performance Operational Efficiency

Procurement Efficiency

How can I align with my strategic suppliers?

Supplier Efficiency

How can I drive my procurement costs

down?

Cost Savings

How can I identify and eliminate rogue buying?

Buying Behavior

How can I maximize my purchasing power?

e-Procuremente-Procuremente-Procuremente-Procurement

One-from-Many: E-Procurement at Buy-Side E-MarketplacesTHE GOALS AND PROCESS OF E-

PROCUREMENTTypes of E-Procurement

E-sourcing E-tendering E-reverse auctioning E-informing Web-based ERP E-market sites E-MRO

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Benefits of eProcurementhttp://www.mysap.com/solutions/e-procurement/businessbenefits.htm

Reduced purchase costsEnhanced efficiency at every stageEstablish adaptive, efficient, collaborative supplier

relationsMonitor and regulate buying behaviorsImprove sourcing by discovering more suppliersEnsure deliveries on time, every timeFree up skilled employeesReduce training requirementPermit flexible access time, anywhereManage contractsPerform content management functionsReduce maverick purchase

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Perceived Benefits • Improvement in supplier relationships• Greater purchasing efficiencies• Process efficiency• Cost reduction (processing)• Compliance • Improving accountability• User friendliness• Transparency• Management information• Fast (cycle time) • Improved inventory management• User satisfaction• Promotion of competition• System availability/Flexibility• Reductionin error/ Ease of use/System reliability

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eProcurement Infrastructure

Enabling Infrastructure

Catalogue

Corporate Systems

Workflow

Buyer Admin

Buyer Engine

Connectivity

S1

S2

Content Management

Buyer Side

Catalogue Information Repository

Supplier Side

S3

Firewall Firewall

One-from-Many: E-Procurement at Buy-Side E-Marketplaces

The Limitations and Challenges of E-Procurement The cost may be too high

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Reverse Auctions at Buy-Side E-Marketplacesrequest for quote (RFQ)

The “invitation” to participate in a tendering (bidding) system

CONDUCTING REVERSE AUCTIONSE-Tendering by Governments

GROUP REVERSE AUCTIONS

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Other E-Procurement Methodsinternal procurement marketplace

The aggregated catalogs of all approved suppliers combined into a single internal electronic catalogBenefits of Internal Aggregated Catalogsdesktop purchasing

Direct purchasing from internal marketplaces without the approval of supervisors and without the intervention of a procurement department

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Other E-Procurement Methodsgroup purchasing

The aggregation of orders from several buyers into volume purchases so that better prices can be negotiatedInternal Aggregation of Purchasing OrdersExternal Aggregation for Group

Purchasing

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Other E-Procurement MethodsBUYING AT SELLERS’ SITES

Purchasing Direct GoodsACQUISITION VIA ELECTRONIC BARTERING

bartering exchangeAn intermediary that links parties in a barter; a company submits its surplus to the exchange and receives points of credit, which can be used to buy the items that the company needs from other exchange participants

SELECTING AN APPROPRIATE E-PROCUREMENT SOLUTION

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B2B Exchanges: Definitions and Concepts

Functions of Exchanges1. Matching buyers and sellers2. Facilitating transactions3. Maintaining exchange policies and infrastructure

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B2B Exchanges: Definitions and ConceptsOWNERSHIP OF B2B EXCHANGES

Third-Party Independent Marketplacesconsortium trading exchange (CTE)

An exchange formed and operated by a group of major companies in an industry to provide industry-wide transaction services

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B2B Exchanges: Definitions and ConceptsDYNAMIC PRICING IN B2B EXCHANGES

dynamic pricingA rapid movement of prices over time and possibly across customers, as a result of supply and demand matching

ADVANTAGES, LIMITATIONS, AND THE REVENUE MODEL OF EXCHANGESRevenue Models

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B2B Portals and DirectoriesB2B portals

Information portals for businessesvortals

B2B portals that focus on a single industry or industry segment; “vertical portals”

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B2B Portals and Directoriescorporate (enterprise) portal

A major gateway through which employees, business partners, and the public can enter a corporate websiteExamplesTypes of Corporate Portals

Portals for Suppliers and Other Partners Customer Portals Employee Portals Executive and Supervisor Portals mobile portals

Portals accessible via mobile devices, especially cell phones and PDAs

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B2B Portals and DirectoriesThe Functionalities of Portals

information portalsPortals that store data and enable users to navigate and query these data

collaborative portalsPortals that allow collaboration

Corporate Portal Applications and IssuesDirectory Services and Search EnginesAlibaba.com

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B2B In Web 2.0 and Social NetworkingE-COMMUNITIES IN B2BTHE OPPORTUNITIES OF SOCIAL

COMMERCE IN B2BTHE USE OF WEB 2.0 TOOLS IN B2B

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B2B In Web 2.0 and Social NetworkingSOCIAL NETWORKING IN B2BEXAMPLES OF OTHER ACTIVITIES OF B2B

SOCIAL NETWORKSSuccess Stories – Cisco systems, HP, Deloitte

STRATEGY FOR B2B SOCIAL NETWORKINGParticipateMonitor

THE FUTURE OF B2B SOCIAL NETWORKING

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e-Procurement RoadmapProduct Characteristic

-Complexity

-Volume uncertainty

-Technology uncertainty

Supplier Market Characteristic

-Trust

-Age of relationship

-Competitive intent

-Market variability

-Bargaining power

e-Procurement Model

Ownership Patterns

Value Generated

Value Apportion

Adoption and Implementation

Risks

Analyze Product and Supply Market

Decide upon right e-Procurement Model

Risk Management

Enjoy the benefits

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Product CharacteristicsComplexity of description

Extent to which detailed drawings or specifications are required to describe the product

Higher the complexity, more information flow needed. Hence a tightly coupled e-Procurement model is better

Volume uncertainty Assessment of fluctuations in the demand and the

confidence placed in estimates of the demand. Higher the uncertainty, more flexible your e-

Procurement model should be. Hence e-Markets are preferred

Technological uncertainty Rate of changes in specifications and the probability

of future technological improvements in the product If Suppliers are Pro – Innovation than a tightly

coupled e-Procurement solution can be used as a buffer against uncertainty

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Supply Market CharacteristicsTrust

Existing when one party has confidence in the exchange partner’s reliability and integrity

If trust is higher than a tightly coupled e-Procurement system will further enhance trust

Age of relationship Measured as the year of association e-Markets do not help in creating and sustaining longer age of

relationship

Competitive intent Extent to which there are potential suppliers to ensure

adequate competition e-Markets do not help if competitive intend is lower. Suppliers

can always collude to drive prices up.

Market variability Extent of market fragmentation and rate at which price and

player in the industry changes over time If market variability is high than e-Markets give better benefits

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Adoption and Implementation Risks

Inherently carries more risk than ordinary information technology projects Adoption risk: whether business partners will join

the system or not Implementation risk: whether business partners

will be able to implement the system optimally

Subsidies such as training, software etc can be used to overcome these risks

Key Issues: How to provide subsidy To Whom it should be provided

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Strategic Focus of eProcurement

Small Number of Items with Large VolumeTight Integration with back-end systemTight integration with partners along supply chain:

Direct connection, private exchangesPartnership based sourcing

Large Number of Items with Small VolumeOpen Sourcing in the public exchangesLoose integration with legacy systemsDiscover new suppliers

Which policy more urgent?Portfolio of strategies: Contingency,

combination, and architectural integration

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eProcurement Deployment Strategies

Evolutionary Deployment of eProcurementEvolutionary: start small; with single set of

commodities; a particular regionStrategic Sourcing: systematic e-Procurement process reengineering

Only most advanced organization adopts 2/3 of purchasing communities in experimental

stage

Managerial Issues1. Which B2B model(s) should we use for e-

procurement?1. Type of material purchase2. Organizational operational efficiency3. Minimum price4. Minimum inventory and stock-outs5. Low purchase administrative cost

2. Which B2B model(s) should we use for online B2B sales?

1. Multiple buyers – EDI & ERP systems2. EAI

3. Which exchange should we join?4. Which solutions and vendor(s) should we select?

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1. What is the organizational impact of B2B?2. What are some ethical issues in B2B?3. How shall we manage the suppliers?4. Which type of social network should we use

—private (proprietary) or public?5. Can we use B2C marketing methods and

research in B2B?

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Critical Success Factors

Selection of right strategy, architecture and solutions

Management commitmentContent managementUser friendly Seamless integration with back-end ERPRedesign workflowManage changeFast implementation

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eProcurement Integration Policy

Tight Internal IntegrationTight integration with ERP or legacyInternal e-catalog

Inter-Enterprise IntegrationDirect integration with partner’s ERP systemCompliant ERP interface standard necessary

Integration with ExchangesERP-compliant eMarketplacesMarketSet: Commerce One and SAPPrivate ExchangeApplication Server

Communication Platform Standard: XML

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Conclusion

eProcurement as Procurement Process Reengineering

Selection and combination of eProcurement models critical

Conformance of integration policy and solution selection crucial for the successful deployment

b2b Session

Documents

Transcript of b2b Session