Chapter 11 Business-to-Business E-Commerce

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 2 OBJECTIVES What is B2B E-Commerce? B2B Models B2B Building Blocks B2B Integration Challenges B2B Tools –EDI Beyond B2B

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 3 WHAT’S B2B E-COMMERCE? B2B –Both sellers and buyers are business organizations –Involves complex procurement, manufacturing, planning collaboration, payment terms and performance agreements

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 4 B2B ENTITIES Selling Company ERP Buying Company Order Fulfillment Deliverer

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 5 B2B ENTITIES (cont.) Purchasing Company –Focus on procurement in terms of reduced purchase prices and cycle time Selling Company –Focus on marketing and sales Intermediating Service Provider –Focus on ensuring order fulfillment JIT Deliverer –Focus on just-in-time delivery

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 6 B2B ENTITIES (cont.) Web-based Platform –Focus on Internet, intranet, and extranet Tools of B2B –Focus on Electronic Data Interchange and software agents Back-End Technical Support –Focus on Enterprise Resource Planning

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 7 B2B VS. B2C B2CB2B How connection is set up Consumer-to-systemBusiness-to-business Types of relationship Placing orders Executing payments Fulfilling orders Browsing of merchant’s catalog Sending feedback Online procurement Tracking order status Executing payments Managing promotions, returns, and catalog info Fulfilling orders

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 8 B2B VS. B2C (Cont’d) B2CB2B Nature of controlUnidirectionalUnidirectional to peer-to- peer Level of needs-based segmentation Moderate to lowSharper than B2C Sales complexityModerateComplex

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 9 ADVANTAGES Save money on purchases that are negotiated instantly Replacing earlier purchasing bureaucracy with online links improves efficiency Just-in-time environment minimizes inventory sitting in the warehouse

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 10 DRAWBACKS Suppliers have to work with big technology integration issues with the rest of suppliers in the exchange Antitrust violations may result

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 11 SUPPLY CHAIN Process of moving goods from customer order through the raw materials, supply, production, and the distribution of products to the customer Benefits –Reduced inventory, higher sales, improved ability to customize products for different business buyers, and reduced production cost

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 12 B2B MODELS Buyer-oriented B2B –A buyer uses the internet by opening a marketplace on its own server and opening the window for suppliers to do the bidding Supplier-oriented B2B –A supplier invites customers to order product via its electronic market store

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 13 ELECTRONIC AUCTIONS Reduce procurement costs Maximize return on excess merchandise Types –Forward auction –Reverse auction –Internet exchange

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 14 FORWARD AUCTION One seller entertains bids from many buyers Allows the seller to post products or services they want to sell via its auction website Payment and fulfillment is handled through normal electronic channels Ideal where demand and supply are unpredictable, and there is a timing factor to unload the merchandise

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 15 REVERSE AUCTION Used to solicit bids where lowest bidder wins Typical of large corporate buying Tends to drive down prices and expand buyer’s zone of choice among suppliers

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 16 INTERNET EXCHANGE AUCTION Involves many buyers and sellers who trade bids and offers until there is an agreement to exchange product for payment A third party operates the exchange –Responsible for quality assurance and prompt delivery of the goods

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 17 INTERNET EXCHANGE AUCTION (Cont’d) Revolves around an electronic intermediary company that establishes an exchange market where buyers and sellers can make deals

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 18 B2B BUILDING BLOCKS Application Server B2B Integration Server Personalization Software Content Management Facility E-Commerce Package Security Quality of Service

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 19 B2B INTEGRATION CHALLENGE B2B Integration –Deals with spanning independent businesses, each with its own set of applications and users –Interoperates with heterogeneous systems without being tied to one specific system technology

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 20 B2B INTEGRATION Solutions –Via a Web site as a front-end for information sharing among partners –Extract information from one partner’s application convert it into a format amenable for transmission via EDI –For two companies to use common technology to coordinate data exchange

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 21 B2B TOOLS – EDI Allows one computer system to communicate business information with another computer system in a standardized electronic form Computer-to-computer transfer of business information

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 22 COMPONENTS OF EDI Interbusiness –Transmission of data between businesses Computer-to-computer –Data communication from one computer to another Standard transactions –Replace standard business forms Standard format

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 23 ADVANTAGES Cost reduction and time-saving Improved B2B problem resolution Accuracy with integrity

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 24 DRAWBACKS Unpopular Expensive Point-to-point Requires expensive VAN networking Not easy to use, learn, or implement

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 25 EDI JUSTIFICATION Volume of data Frequency of document transmission and reception Content sensitivity Time sensitivity

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 26 FINANCIAL EDI Electronic transmission of payments between a payee and a payer via their respective banks Allows businesses to replace labor-intensive activities of collecting, disbursing and processing payments Improves certainty of payment flows

Awad –Electronic Commerce 2/e © 2004 Pearson Prentice Hall 27 BEYOND B2B A2Z Approach –Connect all the links of value chain via partnership –The link would be turned from physical connections to digital ones –Clear visibility of each stage of business process

Chapter 11 Business-to-Business E-Commerce