BBA (Hons) (B2B Business to Business EC) By: Farhan Mir Electronic Commerce BBA (Hons) (B2B Business to Business EC) By: Farhan Mir

Trading Process Network (TPN) Post in General Electric General Electric (GE) Its purchasing was inefficient, involved too many administrative transactions For each requisition, the accompanying blueprints had to be requested from storage, retrieved from the vault, transported to the processing site, photocopied, folded, attached to paper requisition forms with quote sheets, stuffed into envelopes and mailed out. Factories at GE Lighting division used to send hundreds of Requisitions For Quotations (RFQs) to the corporate sourcing department each day for low-value machine parts. This process took at least 7 days and was so complex and time-consuming that the sourcing department normally sent out bid packages only to two or three suppliers at a time. Using TPN GE is conducting electronic bids, no paperwork

Trading Process Network (TPN) Post in General Electric (cont.) Benefits of using TPN 60%of the staff involved in procurement have been redeployed. The sourcing department has at least 6-8 free days a month to concentrate on strategic activities rather than on paperwork, photocopying and envelope stuffing it had to do when the process was manual. Labor involved in procurement declined by 30%. At the same time, materials costs declined 5%-20% due to the ability to reach a wider base of suppliers online. It used to take 18-23 days to identify suppliers, prepare a request for bid, negotiate a price and award the contract to a supplier. It now takes 9-11 days. With the transaction handled electronically from beginning to end, invoices are automatically reconciled with purchase orders, reflecting any modifications that happen along the way. GE Procurement departments across the world now share information about their best suppliers.

Concepts, Characteristics, and Models of B2B EC The Basic Types of B2B Transactions and Activities Sell-side Buy-side Exchanges Supply chain improvements and collaborative commerce

Concepts, Characteristics, and Models of B2B EC

Characteristics of B2B EC Key Entities of B2B EC Buying company with procurement management perspective Selling company with marketing management perspective Electronic Intermediary, an optional third party directory service provider (the scope of service may be extended to order fulfillment) Deliverer who can fulfill a just-in-time delivery Network platform such as the Internet, VAN, intranet and extranet Protocol of communication such as EDI and comparison shopping possibly using software agents Back-end information system possibly implemented using the intranet and Enterprise Resource Planning (ERP) systems

Characteristics of B2B EC Majorly Supplier-oriented marketing Used to sell the company’s products and services to business customers on the Internet Electronic catalogs are basically the same as that for B2C EC, but they may be customized

Concepts, Characteristics, and Models of B2B EC Types of transactions spot buying The purchase of goods and services as they are needed, usually at prevailing market prices strategic (systematic) sourcing Purchases involving long-term contracts that usually are based on private negotiations between sellers and buyers

Concepts, Characteristics, and Models of B2B EC Types of materials traded direct materials Materials used in the production of a product (e.g., steel in a car or paper in a book) indirect materials Materials used to support production (e.g., office supplies or light bulbs) MRO (maintenance, repair, and operation) Indirect materials used in activities that support production

Concepts, Characteristics, and Models of B2B EC Virtual Service Industries in B2B Travel and hospitality services Real estate Financial services Online stock trading Online financing Other online services

Supply Chain Definition Upstream Internal Downstream All activities associated with the flow and transformation of goods from raw materials to end users Upstream Internal Downstream 2nd Tier Supplier Distribution Centers Customers 1st Tier Supplier Assembly/ Manufacturing and Packaging 2nd Tier Supplier 1st Tier Supplier 2nd Tier Supplier Retailers Packaged Cereal Cereal Grain Grain Producer Processing Facility Packaging Distributor Customers Paperboard Store Labels Label Manufacturer

One-to-Many: Sell-Side E-Marketplaces Supplier-Oriented Market Place – one to many Individual consumers and business buyers use the same supplier-provided market place (May pay different prices due to quantity discount)

Case Study of Supplier-Oriented Market Place: CISCO Connection Online Customer Service— Cisco Connection online Online Ordering— Internet Product Center builds virtually all its products to order Finding Order Status— gives the customers tools to find answers to order status inquiries by themselves Benefits— save the company $363 million per year from technical support, human resources, software distribution and marketing material

Selling via Auctions Auctioning from the Company’s Own Site Why should a company pay a commission to an intermediary if the intermediary cannot provide the company with added value If a company decides to auction from its own site, it will have to pay for infrastructure and operate and maintain the auction site

Selling via Auctions Using Intermediaries in Auctions Benefits No additional resources are required No hiring costs or opportunity costs associated with the redeployment of corporate resources Offer fast time-to-market Billing and collection efforts, are handled by the intermediary rather than the company

Models of B2B EC Buyer-Oriented Market Place – many to one Business Buyer opens a market on its own server and invites potential suppliers to bid on RFQs Offer opportunity to committed suppliers BUT as the number of such sites increase, only very big buyers can afford to fully utilize this approach Business Suppliers Buyer’s Products Catalog, RFQ Suppliers’ Bids, Information Electronic Mall

One-from-Many: Buy-Side E-Marketplaces and E-Procurement – Time consumption and delays

Case Study of Customer-Oriented Market Place: GE’s TPN Post Provides a chance for sellers to participate in the bidding process of GE using the following procedure: Buyers prepare bidding project information Buyers post the bidding projects on the Internet Buyers identify potential suppliers Buyers invite suppliers to bid on projects Suppliers download the project information from the Internet Suppliers electronically submit bids for projects Buyers evaluate the suppliers’ bids and negotiate online to achieve the ‘best deal’ Buyers accept the bid that best meets their requirements

One-from-Many: Buy-Side E-Marketplaces and E-Procurement Six Main Types of E-Procurement e-sourcing e-tendering e-reverse auctioning e-informing Web-based ERP (electronic resource planning) e-MRO (maintenance, repair and operating)

Buy-Side E-Marketplaces: Reverse Auctions

Models of B2B EC Intermediary-Oriented Market Place Business Customers Establish an electronic intermediary company Similar to an intermediary-based B2C mall; bring buyers and suppliers (bidders) to one place The corporate information systems need tight coupling with the intermediary electronic mall Business Customers Suppliers Shared Products Catalogs Supplier’s Product Information Intermediary’s Electronic Mall Customer’s Order Information

Case Study of Intermediary-Oriented Market Place: Boeing’s PART Boeing’s PART Case Acts as an intermediary between the airlines and parts’ suppliers Provides a single point of online access through which airlines and parts providers can access the data needed Goal: provide its customers with one-stop shopping with online parts and maintenance information and ordering capability

Boeing On Line Data (BOLD) Case Study of Intermediary-Oriented Market Place: Boeing’s PART (cont.) Boeing On Line Data (BOLD) Incorporating not only engineering drawings but manuals, catalogs and other technical information that used to be available only in paper or in microfiche format Portable Maintenance Aid (PMA) Solves maintenance problems

Benefits to Boeing’s Customers Case Study of Intermediary-Oriented Market Place: Boeing’s PART (cont.) Benefits to Boeing’s Customers Increased productivity spending less time searching for information; frees up engineers and maintenance technicians to focus on more productive activities Reduced costs with information available online at the airports’ gates, through PMA, rather than back in the office, delays at the gate due to missing information are reduced Increased revenue opportunity through BOLD and PMA, a European airline estimates it will save 1-2 days/year of down time for each aircraft

B2B: the many-many exchanges Many-to-many: 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-marketplaces Third-party exchanges that are open to all interested parties (sellers and buyers

Procurement Management Using B2B EC Platform Purchasing is now a strategic function, to increase profit margins By automating and streamlining the laborious routine of the purchasing function, purchasing professionals can focus on more strategic purchases, achieving the following goals: Reducing purchasing cycle time and cost Enhancing budgetary control Eliminating administrative errors Lowering prices through product standardization and consolidation of purchases Better information management; e.g. supplier’s information and pricing information Improving the payment process

Infrastructure, Integration, and Software Agents In B2B EC Infrastructure for B2B electronic data interchange (EDI) The electronic transfer of specially formatted standard business documents, such as bills, orders, and confirmations, sent between business partners value-added networks (VANs) Private, third-party managed networks that add communications services and security to existing common carriers; used to implement traditional EDI systems Internet-based (Web) EDI EDI that runs on the Internet and is widely accessible to most companies, including SMEs

B2B in the Web 2.0 Environment Opportunities Brand awareness, generate traffic, create social communities Use of Web 2 tools in B2B Blogs, Wikis and RSS Feeds Social Networks in the B2B Marketplace Examples of Other activities American Express-sponsored Business Social network Corporate Profiles on social networks

Managerial Issues Can we justify the cost of B2B? Which vendor(s) should we select? Which B2B model(s) should we use? Should we restructure our procurement system? What are the ethical issues in B2B? Will there be massive disintermediation? How can trust and loyalty be cultivated in B2B? How is mobile B2B done?