EC(Lec 5)

School Work #4

Visit the following sites and1) The purpose of the site? Who makes?2) Target customers and products?3) How to make profits?

www.samsungmobileb2b.comwww.tradekorea.comwww.freelancer.comwww.alibaba.comshop.oracle.com

Lecture 5B2B E-Commerce:

3Definition

Basic B2B Conceptsbusiness-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

4Concepts, Characteristics,and Models of B2B EC

Key business drivers for B2B: The availability of a secure broadband Internet

platform and private and public B2B e-marketplaces; The need for collaborations between suppliers and

buyers; To save money, reduce delays, and improve

collaboration; and The emergence of effective technologies for intra- and

inter-organizational integration.

5http://www.toyota-global.com/company/vision_philosophy/toyota_production_system/just-in-time.html

6B2BB2C

Who

Object

Market Penetration

Start-up with

Competition

New & old players

Create new market& Get the new customers

Respectively easy

Idea

Never ending Quick ending

Process Innovation

Respectively tough

Customer Retention

Almost established

B2BB2C

Size Small Large

Participants Consumers direct tomerchantsMultiple companies& employees

Pricing Mainly catalog,fixed priceNegotiated, contract,auctions, and catalog

Decision Maker Single consumer Approval needed

Selection ofe-market or portal

Brand driven, word of mouth, price, or ad.

Value, partnership, orequity driven

7 U.S. B2B trade in 2012 is $16 trillion, B2B e-commerce

in 2012 is $4.1 trillion

Procurement requires significant overhead costs, which

Internet and networking helps automate

Variety of Internet-enabled technologies used in B2B

Types of B2B EC by Purpose

Electronic data interchange (EDI)

Private industrial networks (private exchanges)

E-marketplaces

B2B e-commerce

8 Computer-to-computer exchange of standard transactions such as invoices, purchase orders.

Major industries have EDI standards that define structure and information fields of electronic documents.

More companies are increasingly moving toward private networks that allow them to link to a wider variety of firms than EDI allows and share a wider range of information in a single system.

Electronic data interchange (EDI)

9Companies use EDI to automate transactions for B2B e-commerce and continuous inventory replenishment. Suppliers can automatically send data about shipments to purchasing firms. The purchasing firms can use EDI to provide production and inventory requirements and payment data to suppliers.

Example of EDI document

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Large firm using extranet to link to its suppliers, distributors, and other key business partners

Permits sharing of: Product design and development Marketing Production scheduling and inventory management Unstructured communication (graphics and e-mail)

Private industrial network (private exchange)

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A private industrial network, also known as a private exchange, links a firm to its suppliers, distributors, and other key business partners for efficient supply chain management and other collaborative commerce activities.

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Design Partners

B2B Site

Manufacturers

Distributors & Resellers

ComponentSuppliers

e-Collaborative Company

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Single market for many buyers and sellers Industry-owned or owned by independent

intermediary Generate revenue from transaction fees,

other services Use prices established through negotiation,

auction, RFQs, or fixed prices May focus on direct or indirect goods May be vertical or horizontal marketplaces

E-marketplaces (e-hubs)

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E Marketplace

E-marketplaces are online marketplaces where multiple buyers can purchase from multiple sellers.

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Types of B2B by Players(Agents)

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One-to-Many E-Marketplacescompany-centric ECE-commerce that focuses on a single companys buying needs (many-to-one, or buy-side) or selling needs (one-to-many, or sell-side)private e-marketplacesMarkets in which the individual sell-side or buy-side company has complete control over participation in the selling or buying transaction

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One-to-Many: Sell-Side E-Marketplaces

Sell-Side Models and Activitiessell-side e-marketplaceA Web-based marketplace in which one company sells to many business buyers from e-catalogs or auctions, frequently over an extranet

Three major pricing methods: 1. Selling from electronic catalogs; 2. Selling via auctions; and3. One-to-one selling, usually under a negotiated long-

term contract.

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Sell-Side B2B E-Marketplace Architecture

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One-from-Many: Buy-SideE-Marketplaces and E-Procurement

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

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Procurement Methods Conduct bidding or tendering (a reverse auction)

in a system in which suppliers compete against each other

Buy directly from manufacturers, wholesalers, or retailers from their catalogs and possibly by negotiation

Buy from the catalog of an intermediary (e-distributor) that aggregates sellers catalogs

Buy from an internal buyers catalog, in which company-approved vendors catalogs, including agreed-upon prices, are aggregated

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Buy at private or public auction sites in which the organization participates as one of the buyers

Join a group-purchasing system that aggregates participants demand, creating a large volume

Buy at an exchange or industrial mall Collaborate with suppliers to share information

about sales and inventory, so as to reduce inventory and stock-outs and enhance just-in-time delivery

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Goals of E-Procurement Increasing the productivity of purchasing agents Lowering purchase prices through product

standardization, reverse auctions, volume discounts, and consolidation of purchases

Improving information flow and management Minimizing the purchases made from noncontract

vendors Improving the payment process and saving due to

expedited payments (for sellers)

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Establishing efficient, collaborative supplier relations Ensuring delivery on time, every time Slashing order-fulfillment and processing times by

leveraging automation Reducing the skill requirements and training needs of

purchasing agents Reducing the number of suppliers Streamlining the purchasing process, making it

simple and fast Streamlining invoice reconciliation and dispute

resolution

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Reducing the administrative processing cost per order by as much as 90%

Finding new suppliers and vendors that can provide goods and services faster and/or cheaper (improved sourcing)

Integrating budgetary controls into the procurement process

Minimizing human errors in the buying or shipping process

Monitoring and regulating buying behavior

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Implementing E-Procurement Fitting e-procurement into the company EC strategy Reviewing and changing the procurement process

itself Providing interfaces between e-procurement and

integrated enterprise-wide information systems (ERP or SCM)

Coordinating the buyers information system with that of the sellers

Consolidating the number of regular suppliers and integrating with their information systems, and if possible, with their business processes

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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; also called trading communities or trading exchanges

Many-to-Many: Exchanges

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Many-to-Many: Exchangespublic e-marketplacesThird-party exchanges that are open to all interested parties (sellers and buyers)B2B2CA business sells to a business, but delivers small quantities to individuals or business customersonline intermediaryAn 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 Transactionsspot buyingThe 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 Tradeddirect materialsMaterials 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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Vortal (Vertical Portal): Markets that deal with one industry or industry

segment (e.g., steel, chemicals) Ex) plasticsnet.com, e-steel, paperexchange

Hortal (Horizontal Portal) Markets that concentrate on a service,

materials, or a product that is used in all types of industries (e.g., office supplies, PCs)

Ex) mro.com Mega-market

Vortal + Hortal

Types of 2B2 By integration

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Creates new sales (purchase) opportunities Eliminates paper and reduces administrative

costs Lowers search costs and time for buyers to find

products and vendors Increases productivity of employees dealing with

buying and/or selling Reduces errors and improves quality of services Makes product configuration easier

Benefits of B2B

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Benefits of B2B (continued) Reduces marketing and sales costs (for sellers) Reduces inventory levels and costs Enables customized online catalogs with different

prices for different customers Increases production flexibility, permitting just-in-

time delivery Reduces procurement costs (for buyers) Facilitates mass customization Provides for efficient customer service Increases opportunities for collaboration

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Manugistics Ariba Siebel Commerce

One Peoplesoft SAP Oracle

B2B Standard software

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Managerial Issues

1. Can we justify the cost of B2B applications?2. Which vendor(s) should we select?3. Which B2B model(s) should we use?4. Should we restructure our procurement system?5. How can trust and loyalty be cultivated in B2B?

EC(Lec 5)

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