Chapter 6 Selling to Business Online Reference Book By: Gary Schneider

Purchasing Activities Include identifying and evaluating vendors, selecting specific products, placing orders, and resolving issues that arise after receiving the ordered goods. These issues are: late deliveries, incorrect quantities, incorrect items and defective items. Purchasing department in a company tries to buy raw materials in a lowest possible price. For this, purchasing staffs identify qualified vendors and ask them to prepare bids that include the description of supplies and the cost. The purchasing staffs select lowest bid that still meets the quality standard. To support purchasing activities, there are other activities called procurement activities. In many organizations, there are procurement departments in place of purchasing departments. The activities are shown on next slide. This slide discusses recent developments in networking technologies. Ask students to give other examples of convergence. How fast is broadband today? Do all of the students have broadband? Note that in 2000, typical Internet access speeds were 56 kbps over a telephone line, costing 25 cents per kilobit, while today broadband speeds are 1-15 mbps, costing less than 1 cent per kilobit. Are students aware of how fast their Internet connections are at home, school, or work? Ask students if they know the speed of their cell phone’s Internet connection. The point here is to try and raise student awareness of telecommunications systems, and their capacities.

Purchasing Activities The entire Procure-To-Pay Cycle can be an involved process with numerous steps: 1.Identification of material requirements 2. Receipt and approval purchase request 3. Identification of suppliers (sourcing) and send RFQ 4. Inquiries receipt of the quotation 5. Negotiation and selection of the vendors 6. Create purchase order and send to those vendors, 7. Goods receipt 8. Payment to supplier Steps 6 to 8 are related to purchasing activities. Procurement can be called e-procurement by using internet and web technologies. This slide discusses recent developments in networking technologies. Ask students to give other examples of convergence. How fast is broadband today? Do all of the students have broadband? Note that in 2000, typical Internet access speeds were 56 kbps over a telephone line, costing 25 cents per kilobit, while today broadband speeds are 1-15 mbps, costing less than 1 cent per kilobit. Are students aware of how fast their Internet connections are at home, school, or work? Ask students if they know the speed of their cell phone’s Internet connection. The point here is to try and raise student awareness of telecommunications systems, and their capacities.

Internet & Web Technologies for E-Procurement EDI Suppliers Buyer Website Open Solution This slide discusses recent developments in networking technologies. Ask students to give other examples of convergence. How fast is broadband today? Do all of the students have broadband? Note that in 2000, typical Internet access speeds were 56 kbps over a telephone line, costing 25 cents per kilobit, while today broadband speeds are 1-15 mbps, costing less than 1 cent per kilobit. Are students aware of how fast their Internet connections are at home, school, or work? Ask students if they know the speed of their cell phone’s Internet connection. The point here is to try and raise student awareness of telecommunications systems, and their capacities.

Direct vs. Indirect Materials Purchasing Direct materials are those materials that become part of the finished product in a manufacturing process. Procurement process for these materials are important since their cost is usually a large part of the cost of the finished product. Two types of purchasing happen to purchase direct materials Replenishment purchasing: Company negotiates long term contracts for most of the materials. Example: An automaker estimates the number of cars it will make during a year and contracts with two or three steel mills to supply most of the steel it will need to produce those cars. By negotiating contracts in advances and guaranteeing the purchase, the auto make obtains low prices and good delivery terms. Spot purchasing: In the above example, the auto maker’s estimation may go wrong. If real demand is high, that it will need to buy additional steel from the suppliers that are not contracted and parts of the loosely organized market. It is called spot market. Example: steel mills, warehouses, speculators, companies with excess stock of steels. This slide discusses recent developments in networking technologies. Ask students to give other examples of convergence. How fast is broadband today? Do all of the students have broadband? Note that in 2000, typical Internet access speeds were 56 kbps over a telephone line, costing 25 cents per kilobit, while today broadband speeds are 1-15 mbps, costing less than 1 cent per kilobit. Are students aware of how fast their Internet connections are at home, school, or work? Ask students if they know the speed of their cell phone’s Internet connection. The point here is to try and raise student awareness of telecommunications systems, and their capacities.

Direct vs. Indirect Materials Purchasing Indirect materials are those materials that are not the part of the finished product in a manufacturing process. Rather they are available to support manufacturing and other business processes. Example: office supplies, computer hardware and software, spare parts etc. Companies buy indirect materials on a recurring basis. Price is the main criteria in buying these materials. Indirect materials are often called maintenance, repair, and operating (MRO) supplies. Most companies have a difficult time controlling MRO spending from a centralized procurement office because MRO purchases are numerous and small in dollar value. To solve the problem, managers from different departments are issued purchasing cards from the procurement office. These cards enable to buy MRO supplies and provide cost-tracking information to the procurement office This slide discusses recent developments in networking technologies. Ask students to give other examples of convergence. How fast is broadband today? Do all of the students have broadband? Note that in 2000, typical Internet access speeds were 56 kbps over a telephone line, costing 25 cents per kilobit, while today broadband speeds are 1-15 mbps, costing less than 1 cent per kilobit. Are students aware of how fast their Internet connections are at home, school, or work? Ask students if they know the speed of their cell phone’s Internet connection. The point here is to try and raise student awareness of telecommunications systems, and their capacities.

Direct vs. Indirect Materials Purchasing By using an e-commerce Web site to process orders, the vendors in the MRO market can save cost of printing and shipping catalogs and handling telephone orders. They can also keep price and quantity information continually updated which is impossible to do on a printed catalogs. Mcmaster-Carr and W.W. Grainger are two of the largest MRO suppliers. The Grainger Web site offers more than 900,000 different MRO supplies. Office Depot and Staples have well-designed Web sites devoted to helping business Purchasing departments buy office equipments and supplies. This slide discusses recent developments in networking technologies. Ask students to give other examples of convergence. How fast is broadband today? Do all of the students have broadband? Note that in 2000, typical Internet access speeds were 56 kbps over a telephone line, costing 25 cents per kilobit, while today broadband speeds are 1-15 mbps, costing less than 1 cent per kilobit. Are students aware of how fast their Internet connections are at home, school, or work? Ask students if they know the speed of their cell phone’s Internet connection. The point here is to try and raise student awareness of telecommunications systems, and their capacities.

Logistics Activities The objective of logistics is to provide the right goods in the right quantities in the right place at the right time. Logistics management is an important support activity for both sales and purchasing activities. Logistics activities include managing inbound movements of materials and supplies, and the outbound movements of finished goods and services. Thus, receiving, warehousing, controlling inventory, scheduling and controlling vehicles, and distributing finished goods are all logistics activities. The Web and internet technologies are providing opportunities to manage these activities better as they lower transaction costs and provide constant connectivity between firms Example: Schneider National’s Track and Trace system delivers real-time shipment information to Web browsers on its customers’ computers. This system shows the customer which freight carrier is transporting a shipment, where it is, and when it should arrive. This slide discusses recent developments in networking technologies. Ask students to give other examples of convergence. How fast is broadband today? Do all of the students have broadband? Note that in 2000, typical Internet access speeds were 56 kbps over a telephone line, costing 25 cents per kilobit, while today broadband speeds are 1-15 mbps, costing less than 1 cent per kilobit. Are students aware of how fast their Internet connections are at home, school, or work? Ask students if they know the speed of their cell phone’s Internet connection. The point here is to try and raise student awareness of telecommunications systems, and their capacities.

Electronic Data Interchange (EDI) EDI is computer-to-computer transfer of business information between two businesses that uses a standard format. The two businesses that are exchanging information are trading partners. The business information exchanged is often transaction data; however, it can also include other information related to transactions such as quotes and order status inquiries. The data from invoices, purchase orders (PO), requests for quotations, bills of lading, and receiving reports can be standardized under EDI transaction sets. Under EDI transaction sets, each document is standardized and share by the trading partners. This slide discusses recent developments in networking technologies. Ask students to give other examples of convergence. How fast is broadband today? Do all of the students have broadband? Note that in 2000, typical Internet access speeds were 56 kbps over a telephone line, costing 25 cents per kilobit, while today broadband speeds are 1-15 mbps, costing less than 1 cent per kilobit. Are students aware of how fast their Internet connections are at home, school, or work? Ask students if they know the speed of their cell phone’s Internet connection. The point here is to try and raise student awareness of telecommunications systems, and their capacities.

Electronic Data Interchange (EDI) Transaction Sets This slide discusses recent developments in networking technologies. Ask students to give other examples of convergence. How fast is broadband today? Do all of the students have broadband? Note that in 2000, typical Internet access speeds were 56 kbps over a telephone line, costing 25 cents per kilobit, while today broadband speeds are 1-15 mbps, costing less than 1 cent per kilobit. Are students aware of how fast their Internet connections are at home, school, or work? Ask students if they know the speed of their cell phone’s Internet connection. The point here is to try and raise student awareness of telecommunications systems, and their capacities.

Electronic Data Interchange (EDI) PO Document This slide discusses recent developments in networking technologies. Ask students to give other examples of convergence. How fast is broadband today? Do all of the students have broadband? Note that in 2000, typical Internet access speeds were 56 kbps over a telephone line, costing 25 cents per kilobit, while today broadband speeds are 1-15 mbps, costing less than 1 cent per kilobit. Are students aware of how fast their Internet connections are at home, school, or work? Ask students if they know the speed of their cell phone’s Internet connection. The point here is to try and raise student awareness of telecommunications systems, and their capacities.

Paper-Based Purchasing Process (18 Steps) This slide discusses recent developments in networking technologies. Ask students to give other examples of convergence. How fast is broadband today? Do all of the students have broadband? Note that in 2000, typical Internet access speeds were 56 kbps over a telephone line, costing 25 cents per kilobit, while today broadband speeds are 1-15 mbps, costing less than 1 cent per kilobit. Are students aware of how fast their Internet connections are at home, school, or work? Ask students if they know the speed of their cell phone’s Internet connection. The point here is to try and raise student awareness of telecommunications systems, and their capacities.

EDI Purchasing Process (8 Steps) Three key elements of EDI: EDI translator computer EDI network EDI transaction sets This slide discusses recent developments in networking technologies. Ask students to give other examples of convergence. How fast is broadband today? Do all of the students have broadband? Note that in 2000, typical Internet access speeds were 56 kbps over a telephone line, costing 25 cents per kilobit, while today broadband speeds are 1-15 mbps, costing less than 1 cent per kilobit. Are students aware of how fast their Internet connections are at home, school, or work? Ask students if they know the speed of their cell phone’s Internet connection. The point here is to try and raise student awareness of telecommunications systems, and their capacities.

EDI: Value Added Network Trading partners can implement the EDI network and EDI translation process using direct and indirect connection. In direct connection EDI, each business in the EDI network is required to have its own on-site EDI translator computer. These computers are connected between companies using leased telephone lines. But, it is expensive. This slide discusses recent developments in networking technologies. Ask students to give other examples of convergence. How fast is broadband today? Do all of the students have broadband? Note that in 2000, typical Internet access speeds were 56 kbps over a telephone line, costing 25 cents per kilobit, while today broadband speeds are 1-15 mbps, costing less than 1 cent per kilobit. Are students aware of how fast their Internet connections are at home, school, or work? Ask students if they know the speed of their cell phone’s Internet connection. The point here is to try and raise student awareness of telecommunications systems, and their capacities.

EDI: Value Added Network Instead of connecting directly, the trading partners may use services of a value added network (VAN). VAN is a company that provides communications equipment, software, and skills needed to receive, store, and forward electronic messages that contain EDI transaction sets. To use VAN services, the trading partners must install EDI translator software. This slide discusses recent developments in networking technologies. Ask students to give other examples of convergence. How fast is broadband today? Do all of the students have broadband? Note that in 2000, typical Internet access speeds were 56 kbps over a telephone line, costing 25 cents per kilobit, while today broadband speeds are 1-15 mbps, costing less than 1 cent per kilobit. Are students aware of how fast their Internet connections are at home, school, or work? Ask students if they know the speed of their cell phone’s Internet connection. The point here is to try and raise student awareness of telecommunications systems, and their capacities.

Supply Chain Management: Internet Technologies Companies use strategic alliances, long-term contracts to create relationships with other firms in the supply chain for the products that they manufacture or sell. These relationships help companies to save money (reduce cost), increase product quality and identify new ways to provide customers with faster, cheaper and better services. Example: Dell computer has been able to reduce supply chain costs by sharing information with its suppliers. The moment Dell receives an order from a customer, it makes information available to its tier-one suppliers, who can better plan their production based on Dell’s exact demands. A supplier of disk drives can change its production plans immediately when it sees a shift in Dell’s customer orders from computers with one size disk drive to another. This prevents overproduction that reduces the supplier’s costs and costs in supply chain overall. This slide discusses recent developments in networking technologies. Ask students to give other examples of convergence. How fast is broadband today? Do all of the students have broadband? Note that in 2000, typical Internet access speeds were 56 kbps over a telephone line, costing 25 cents per kilobit, while today broadband speeds are 1-15 mbps, costing less than 1 cent per kilobit. Are students aware of how fast their Internet connections are at home, school, or work? Ask students if they know the speed of their cell phone’s Internet connection. The point here is to try and raise student awareness of telecommunications systems, and their capacities.

Supply Chain Management: Internet Technologies To enable benefits from a supply chain, clear communications and quick responses to those are key elements. Web and internet technologies help in this regard. Software that uses internet can help all members of the supply chain review past performance, monitor current performance, and predict when and how much of certain products need to be produced. Advantages of using internet technologies: Share information about customer demands Receive rapid notification of product design changes and adjustments Provide specifications and drawings Increase the speed transaction processing Reduce cost of transaction Reduce error in entering transaction data Share information about defect rates and types This slide discusses recent developments in networking technologies. Ask students to give other examples of convergence. How fast is broadband today? Do all of the students have broadband? Note that in 2000, typical Internet access speeds were 56 kbps over a telephone line, costing 25 cents per kilobit, while today broadband speeds are 1-15 mbps, costing less than 1 cent per kilobit. Are students aware of how fast their Internet connections are at home, school, or work? Ask students if they know the speed of their cell phone’s Internet connection. The point here is to try and raise student awareness of telecommunications systems, and their capacities.

Increasing Supply Chain Efficiency Many companies are using internet and Web technologies to manage supply chains in ways that yield increases in efficiency throughout the chain. Using EDI and internet links, Boeing works with suppliers so that they can provide exactly the right part at the exactly right time. Even before an airplane enters into production, Boeing makes the engineering specifications and drawing available to its suppliers through secure internet connections. As work on the airplane progresses, Boeing keeps every member of the supply chain continually informed of completion milestones achieved and necessary schedule changes. This way, customers get products in a shorter time than before. This slide discusses recent developments in networking technologies. Ask students to give other examples of convergence. How fast is broadband today? Do all of the students have broadband? Note that in 2000, typical Internet access speeds were 56 kbps over a telephone line, costing 25 cents per kilobit, while today broadband speeds are 1-15 mbps, costing less than 1 cent per kilobit. Are students aware of how fast their Internet connections are at home, school, or work? Ask students if they know the speed of their cell phone’s Internet connection. The point here is to try and raise student awareness of telecommunications systems, and their capacities.

Materials-Tracking Technologies Using EDI, a company can track materials/finished inventory flows with in the supply chain. To do this, EDI is integrated with bar-code or radio frequency identification device (RFID) technologies. Both technologies store information using EDI transaction/data sets from ASC X12 or EDIFACT. Whenever a bar-code or RFID is scanned, the information are shared via EDI technologies, so that the partners in a supply-chain know about the current position of a material with in the supply-chain network. RFIDs are used to increase efficiency in material tracking. This enable scanning RFID tags from six feet away. Also, in this technology, materials can be scanned even if they are covered with dirt or plastic bands. This slide discusses recent developments in networking technologies. Ask students to give other examples of convergence. How fast is broadband today? Do all of the students have broadband? Note that in 2000, typical Internet access speeds were 56 kbps over a telephone line, costing 25 cents per kilobit, while today broadband speeds are 1-15 mbps, costing less than 1 cent per kilobit. Are students aware of how fast their Internet connections are at home, school, or work? Ask students if they know the speed of their cell phone’s Internet connection. The point here is to try and raise student awareness of telecommunications systems, and their capacities.

Electronic Marketplaces and Portals Internet-based industry-focused hubs (marketplaces and auctions) in which companies in the industry can contact each others and transact business. Most of these hubs are vertically integrated, thus called vertical portals. Private stores: A private store has a password-protected entrance and offers at negotiated price reductions on a limited selection of products- usually those that the customer has agreed to purchase in certain minimum quantities. It may provide additional services such as product usage guidelines, safety information etc. Private company marketplaces: A private company marketplace is a marketplace that provides auctions, request for quote postings etc. to companies that want to operate their own marketplaces. This slide discusses recent developments in networking technologies. Ask students to give other examples of convergence. How fast is broadband today? Do all of the students have broadband? Note that in 2000, typical Internet access speeds were 56 kbps over a telephone line, costing 25 cents per kilobit, while today broadband speeds are 1-15 mbps, costing less than 1 cent per kilobit. Are students aware of how fast their Internet connections are at home, school, or work? Ask students if they know the speed of their cell phone’s Internet connection. The point here is to try and raise student awareness of telecommunications systems, and their capacities.