© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Part Three: Chapter 15 B2B e-Commerce

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation B2B Basics Business-to-business e-commerce involves companies buying and selling to each other online Not just purchasing – evolution of B2B e-commerce also emphasized supply chain management B2B e-commerce consumes larger fraction of total commerce than in retail or services

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation B2B Basics Businesses generally adopt technology faster than consumers

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation B2B Basics Businesses generally adopt technology faster than consumers But it still takes time before new capabilities alter business processes

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation B2B Basics Businesses generally adopt technology faster than consumers But it still takes time before new capabilities alter business processes Participation—basic access and usage, having the necessary systems in place to use the Internet Enhancement—the use of the Internet to change business process SOURCE: Forman, Goldfarb, and Greenstein, “Digital Dispersion: An Industrial and Geographic Census of Commercial Internet Use,” CSIO Working Paper, September 2002

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation B2B Basics To compose and operate supply chains, firms follow systematic processes Information technology can improve efficiencies in costs and time –Hiring professional buyers –Cost of placing orders, making payments –Timely information exchange

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation B2B Basics Before the public Internet, companies used electronic data interchanges (EDIs) for point-to-point communication Concept emerged during 1948 Berlin airlift; emphasis on security, reliability SOURCE: Keystone/Getty Images

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation B2B e-Commerce and Customers Internet systems tailor customer acquisition efforts, lower transactional costs through automated ordering

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation B2B e-Commerce and Customers Internet systems tailor customer acquisition efforts, lower transactional costs through automated ordering For new sales targets, multiple decision makers can be targeted with role-specific messages

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation B2B e-Commerce and Customers Internet systems tailor customer acquisition efforts, lower transactional costs through automated ordering For new sales targets, multiple decision makers can be targeted with role-specific messages For repeat purchases, Internet ordering systems lower costs, improve efficiency

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation B2B e-Commerce and Customers

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation B2B e-Commerce and Customers Traditional vs. Internet-based Ordering at Cisco Systems

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation B2B and e-Procurement Direct materials are fundamental to production Indirect materials support the operation SOURCE: Gebauer and Segev, “Emerging Technologies to Support Indirect Procurement,” Information Technology and Management 1 (2000):

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation B2B and e-Procurement Procurement of indirect materials: –Internet procurement systems less costly, more flexible –Eliminating the problem of “maverick buying”-- off contract –Widespread adoption by U.S. businesses

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation B2B and e-Procurement Impact of adding e-procurement SOURCE: Aberdeen Group (2004)

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation B2B and e-Procurement Contracting for services: –Coordinating global work teams through Internet systems –Speeding process for screening, clearances, time sheets –Help tracking spending, contract terms and budgets

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation B2B and e-Procurement Contracting for services – why it matters Increase in temporary workers in the U.S. economy SOURCE: Lloyd and Mueller

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation B2B and e-Procurement Procurement of direct materials and the dynamic bidding process –Transactional exchanges aided by electronic sharing systems; development of XML definitions –Buyer benefits: reduced direct material costs and faster decisions on final price –Supplier concerns, including emphasis on price over other product attributes, eased with specific auction rules

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation B2B and e-Procurement Traditional sourcing versus dynamic bidding flow SOURCE: Adapted from Holloway

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Marketplaces for e-Procurement Speculative boom in1990s doomed by abilities of existing firms and too many entrants in overlapping markets SOURCE: Copyright by the Regents of the University of California

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Marketplaces for e-Procurement Incumbent-backed firms able to capitalize on existing market positions –Suppliers concerns about new pricing pressures meant limited digital catalogs –Buyers, meanwhile, wary of revealing ordering practices to competition Existing intermediary-backed markets and independent marketplaces in fragmented markets able to leverage advantages of the Internet

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Supply Chain Coordination Internet-based information hubs create demand visibility and help expand use of vendor-managed inventory systems

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Supply Chain Coordination Internet-based information hubs create demand visibility and help expand use of vendor-managed inventory systems Accelerate new product development, coordinate design alterations, outsourced production

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Supply Chain Coordination Internet-based information hubs create demand visibility and help expand use of vendor-managed inventory systems Accelerate new product development, coordinate design alterations, outsourced production Simplified data synchronization between business partners

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Supply Chain Coordination Complexities in supply chain for even simple products SOURCE: EAN.UCC Product Classification Brochure, April 2004, Reprinted by permission from GS1 US.

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Study Question 1 Which of the following is an example of indirect materials? A.computer chips B.automobile steel C.paper clips D.lab chemicals

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Study Question 2 “Maverick buying” is a business term that refers to purchases made how? A.off contract B.off schedule C.over budget D.after hours

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Study Question 3 When prices for commodity items are set by auctions, purchase behavior is considered to be what? A.Dynamic B.Relational C.Transactional D.vertical

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Study Question 4 Many buyers were skeptical of online B2B marketplaces because they did not want to reveal their __________ patterns? A.Ordering B.pricing C.Negotiating D.shipping

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Study Question 5 At Cisco Systems, orders processed through an Internet-based system were processed on the same day at what rate? A.60 percent B.80 percent C.95 percent D.100 percent