1. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Internet Marketing & e-Commerce Ward Hanson Kirthi Kalyanam Requests for permission to copy any part of the material should be addressed to: PERMISSIONS DEPARTMENT THOMSON BUSINESS and ECONOMICS 5109 Natorp Boulevard Mason, OH 45040 Phone: (800) 423-0563

2. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Part Three: Chapter 15 B2B e-Commerce “In the business world, the rearview mirror is always clearer than the windshield.” Warren Buffett

3. © 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

4. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation B2B Basics U.S. e-commerce share of transactional value SOURCE: U.S. Census Bureau

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

6. © 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

7. © 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 SOURCE: Forman, Goldfarb, and Greenstein, “Digital Dispersion: An Industrial and Geographic Census of Commercial Internet Use,” CSIO Working Paper, September 2002

8. © 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

9. © 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

10. © 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

11. © 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

12. © 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

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

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

15. © 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): 107-128.

16. © 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” – Widespread adoption by U.S. businesses

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

18. © 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

19. © 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

20. © 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

21. © 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

22. © 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

23. © 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

24. © 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

25. © 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

26. © 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

27. © 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.