1. Part I Company-Centric B2B

2. Concepts and Characteristics of B2B EC (cont.)
How is B2B conducted?
Directly between buyer and seller
Via an online intermediary
Along the supply chain
With or without intermediaries
Types of transactions
Spot buying —determined by dynamic supply and demand
Strategic sourcing —long term contracts

3. Figure 6-1 B2B Supply Chain

4. Concepts and Characteristics of B2B EC (cont.)
Supply chain relationships (sharing materials, process information and knowledge worker assets)
Interrelated subprocesses and roles
Acquisition of materials
Processing products and services
Moving to distributors
Purchase by consumer

5. Concepts and Characteristics of B2B EC (cont.)
Entities of B2B EC
Selling company —marketing management perspective
Buying company —procurement management perspective
Electronic intermediaries —optional third party directory service provider (scope of service may be extended to order fulfillment)
Trading platforms —pricing and negotiation protocol (auctions, reverse auctions)

6. Concepts and Characteristics of B2B EC (cont.)
Entities of B2B EC (What are they sharing?)
Payment services —mechanism for transferring money to sellers
Logistics providers —logistics to complete transaction (packaging, storage, delivery)
Network platforms —Internet, VAN, intranet, extranet (and protocols)
Back-end integration —connecting to ERP systems, databases, functional applications

7. Concepts and Characteristics of B2B EC (cont.)
Information processed in B2B
Product
Customer
Supplier
Product process
Transportation
Inventory
Supply chain
Competitor
Sales and marketing
Supply chain process and performance

8. Benefits Electronic intermediaries in B2B Benefits of B2B models
Consumers and business may share intermediaries
Businesses may use different intermediaries with different suppliers
Benefits of B2B models
Eliminate paper-based systems
Expedite cycle time
Reduce errors
Increase employee productivity
Reduce costs
Increase customer service and partnership management

9. B2B Models Company-centric models
Sell-side marketplace (one-to-many)
Buy-side marketplace (many-to-one)
Many-to-many marketplaces—the exchange
Buyers and sellers meet to trade
Trading communities
Trading exchanges
Exchanges

10. B2B Models (cont.) Other B2B models and services
For the purpose of selling
For the purpose of buying
Value chain integrators
Value chain service providers
Information brokers
Vertical vs. horizontal marketplaces
Vertical—one industry or industry section
Horizontal—service or product used in several types of industries

11. B2B Models (cont.) Virtual service industries in B2B
Travel and tourism services
Real estate
Electronic payments
Online stock trading
Online financing
Other online services

12. Sell-Side Marketplace Architecture

13. Sell-Side Marketplaces:One-to-Many
Virtual sellers—Bigboxx.com.hk of Hong Kong
B2B office supply retailer services (corporate clients)
Goal—sell products in various SE Asian countries (many products 10,000 items, many suppliers -300)
Company portal
Browse online catalogs
Use search engines
Payments (many types available)
Delivery
Owns trucks and warehouses
Delivery scheduled online
Same day (within an hour)
Specifically scheduled time
Ordering system integrated with SAP-based back-office system

14. Sell-Side Marketplaces: One-to-Many (cont.)
Virtual sellers—Bigboxx.com.hk of Hong Kong (cont.)
Value-added services
Track status of order
Check stock availability
Promotions
Customized prices
Group accounts and central approval—for businesses with multiple branches
Standing orders automatically activated
Large number of reports and data available

15. Sell-Side Marketplaces: One-to-Many (cont.)
Customer service
General Electric
20 million calls/year about appliances
Reduced cost of each call from $5 to $0.20
Milacron, Inc.
Site contains 55,000 products
Easy to use
Securely handles selection, purchase, application
Technical service—expanded to provide a higher level of service than previously available at the site

16. Sell-Side Marketplaces: One-to-Many (cont.)
Direct sales from catalogs
Configuration and customization
Efficient customization for direct sales
Business customers
Customize products
Receive price quote
Submit order
Successful cases
Dell
Intel
IBM
Cisco

17. Sell-Side Marketplaces: One-to-Many (cont.)
Direct sales from catalogs
Benefits
Reduces costs (to buyers and sellers) and errors during the process
Speeds up order cycle
Ability to customize products
Offer different prices to different customers
Limitations
Channel conflicts with distribution systems
High cost when traditional EDI used
Large number of business partners is needed to justify system

18. Selling Side: Auctions
Forward auctions—quick disposal of items
Revenue generation
Member acquisition and retention—bidding transactions result in additional registered members
Selling from own site when:
Large companies that conduct auctions frequently don’t benefit from using intermediaries
E-marketplace already in use, cost of adding auction not too high
Using intermediaries when:
No resources required, control auction information
Service: researching, searching and reporting on auction activities

19. Selling Side Billing and collection
Automatic calculation of shipping weights and charges
Payment—encrypted credit card data
Billing information—easily downloaded into existing systems
Successful if:
Sufficient number of loyal customers
Products well known
Price not major purchasing criteria

20. Sell-Side Case: CISCO Connection Online (CCO)
Benefits—saves the company $363 million per year in:
Technical support
Human resources
Software distribution
Marketing material
Customer service—Cisco Connection online
Online ordering—Internet Product Center builds virtually all products to order
Order status—customer tools for finding answers to order status inquiries

21. Cisco Connection Online (CCO)
Benefits to Cisco
Reduced operating costs for order taking
Enhanced technical support and customer service
Reduced technical support staff cost
Reduced software distribution costs
Lead times reduced fro 4-10 days to 2-3 days
Benefits to customers
Quick order configuration
Immediate cost determination
Collaboration with Cisco staff

22. Sell-Side Intermediaries
Marshall Industries - multinational distributor of electronic components
Products and services
MarshallNet, portal, PartnerNet, NetSeminar, etc
Strategy
Continuous improvement, Team-based organization, flat hierarchy, decentralized decision making, Profit sharing w/employees.
CRM highly promoted, Web-based services
EC initiatives supported by:
Changing internal organization
Changing internal procedures

23. Sell-Side Intermediaries (cont.)
Boeing’s PART
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 for online parts and maintenance information and ordering capability

24. Sell-Side Intermediaries (cont.)
Boeing’s PART
Spare parts business using traditional EDI
Mechanic tells purchasing department parts are needed, purchase is approved, purchase is made
Large airlines connect to Boeing's VAN
Boeing finds part and delivers
Debut of PART on the Internet
Encourages customers to order parts electronically—cheap, easy, fast
50% of customers using Internet within first year

25. Sell-Side Intermediaries (cont.)
Benefits of Boeing PART online
New sales opportunities
Benefits to Boeing’s customers
Increased productivity—less time searching for information
Reduced costs—delays at gate reduced because all information is available
Increased revenues—faster service provides time savings
Customer service online reduces (calls on orders, data entry)
Portable access to technical drawings/support
Boeing On Line Data (BOLD) provides availability to:
Engineering drawings
Manuals
Catalogs
Other technical information
Portable Maintenance Aid (PMA)—solves maintenance problems

26. Buy Side: One-from-Many, E-Procurement
Purchasing agents (buyers)
Direct (materials) purchasing
Use of material is scheduled
Not a shelf item
Indirect (materials) purchasing
MROs (Maintenance,Repair,Operations)
Nonproduction materials
Inefficiencies in procurement management of indirect materials

27. Figure 6-3 A Traditional Purchasing Process Flow
Source: ariba.com, February 2001.

28. Buy Side: One-from-Many, E-Procurement (cont.)
Innovative procurement management
Innovative purchasing as strategic approach to increase profit margins
Web facilitation includes:
Electronic tendering
Volume purchasing
Aggregating supplier catalogs at buyer’s site
Group purchasing
Others

29. Buy Side: One-from-Many, E-Procurement (cont.)
Goals of procurement reengineering
Increase purchasing agent productivity
Lower purchasing prices of items (through standardization, and consolidation of buys)
Improve information flow and management
Minimize maverick (unplanned) buying from non-contract vendors
Improve payment process
Streamline purchasing process to make it:
Simple
Fast

30. Buy Side: One-from-Many, E-Procurement (cont.)
Goals of procurement reengineering (cont.)
Reduce administrative processing cost per order
Find new suppliers and vendors to provide faster/cheaper goods and services
Integrate procurement process with budgetary control, efficiently and effectively
Minimize human errors in buying or shipping process

31. Figure 6-4 Buy-Side B2BMarketplace Architecture

32. Buy Side: One-from-Many, E-Procurement (cont.)
Direct vs. indirect sourcing
Tools to automate purchasing goods
Direct or mission critical
80% of manufacturer’s expenditure
Long-term relationship with vendor of known quality goods
Tight integration with suppliers along supply chain
Indirect—use of public exchanges for indirect sourcing

33. Buy Side: Reverse Auctions
Pre-Internet Reverse auction process
Prepare description of product to be produced
Announce project via ads, mail, telephone
Send detailed information to interested vendors
Vendors prepare proposals
Bidders submit document proposals
Proposals evaluated
Problems:
Laws
Expensive
Errors

34. Buy Side: Reverse Auctions (cont.)
Web-based reverse auction process
Buyers prepare bidding project information
Buyers post project on portal
Identify potential suppliers
Invite suppliers to bid
Suppliers download project information
Suppliers submit electronic bid
Reverse auction in real-time, or it can take a few days
Buyers evaluate and award contract

35. Buy Side: Reverse Auctions (cont.)
Web-based reverse auction process
Benefits:
Electronic process is faster
Administratively much less expensive
Enables location of cheapest possible products

36. Aggregating Catalogs
Aggregating suppliers’ catalogs: an internal marketplace
Maverick buying to save time leads to high prices
Aggregating all approved suppliers’ catalogs in one place
Reduced number of suppliers
Buyers at multiple corporate locations
Fewer and remote suppliers
Larger quantity/lower costs

37. Group Purchasing
Group purchasing—orders from several buyers are aggregated
Internal aggregation
Economy of scale
Reduced transaction processing cost
External aggregation
Aggregating demand online
Putting together orders from multiple buyers to make large volumes/lower costs

38. Electronic Bartering Electronic bartering
Exchange of goods or services without the use of money
Exchange a surplus for other need
Bartering exchange
Submit surplus to exchange for points
Points used to buy what company needs
Benefits:
Faster than manually
Easier to match

39. Collaborative Commerce (C-Commerce)
Web-based systems used between and among suppliers for:
Communication
Design
Planning
Information sharing
Information discovery

40. Suppliers Extranet: Hudson Dayton

41. Collaborative Commerce (C-Commerce) (cont.)
Reduce design cycle time by connecting suppliers: Adaptec, Inc.
Microchip manufacturer supplying electronic equipment makers
Outsources manufacturing tasks
Delivery times exceeded their competitors
Solution to the problem
Extranet and enterprise-level supply chain integrated software
Significantly reduced order-to-product delivery time

42. Collaborative Commerce (C-Commerce) (cont.)
Reduce product development time by connecting suppliers: Caterpillar, Inc.
Heavy machinery manufacturer uses extranet
Request for customized component directly to designers and suppliers ship to buyers
Connect engineering and manufacturing division with worldwide
Suppliers
Distributors
Overseas
Factories
Customers

43. Collaborative Commerce (C-Commerce) (cont.)
Other examples of c-commerce
Tricon Restaurant International—global brand marketing management
RE/MAX—real estate franchiser improved communication and collaboration between independent owners
Marriott International—links corporations, franchising partners, suppliers, customers
Nygard of Canada—interorganizational collaboration

44. Integration ERP software Customer, supplier, and other databases
Legacy systems
Catalog (product) information
Inventory systems
Sales statistics
Decision support systems (DSS) and SCM applications

45. Integration (cont.) Integration with existing information systems
Issues in integrating with back-end information systems:
Intranet-based work flow
Database management systems (DMBS)
Application packages
ERP
Back-end sell-side integration works for sellers but not buyers and vice versa

46. Integration (cont.) Integration with business partners
Easy integration with one company-centric side
Not easy to integrate for many buyers or sellers
Need buyer owned shopping cart that can interface with back-end information systems

47. Implementation Issues
Justification and prioritization
Must conduct cost benefit analysis of proposed projects
Include organizational impacts
Possible channel conflicts
Dealing with resistance to change due to processes reengineering
Cost-benefit analysis related to:
Finding B2B opportunities
Prioritizing potential initiatives

48. Implementation Issues (cont.)
Vendor selection
Primary vendor uses its software and procedures, adds partners as needed
Integrator mixes and matches existing products and vendors to create “best of the breed”
Affiliate programs (referral program or intermediaries)
Implementing e-procurement
Fit e-procurement into EC strategy
Review and change procurement process itself
If ERP or SCM is in place—integrate e-procurement, If not in place—BPR before implementation
Coordinate buyer’s information system with seller’s

49. Managerial Issues
B2B marketing—sell-side marketplaces require advertisement and incentives
Which models to use and when—need for implementation strategies and prioritization
Purchase process reengineering (BPR)
Establish buy-side marketplace on its server if volume is big enough to attract major vendors
Join third-party intermediary-oriented marketplace if volume is small

50. Managerial Issues (cont.)
Integration—trading in e-marketplaces is interrelated with logistics
Particularly true in many-to-many exchanges
Company-centric marketplaces must integrate:
Logistics
Other support services

51. Part I (cont.) B2B Support Services modified by Judith Molka-Danielsen

52. The Evolution of E-Marketplaces

53. Financial B2B Services
Purchasing Cards are an advantage to big government agencies or deparments.
Electronic letters of credit (for big businesses)
Benefits to seller
Credit risk reduced
Payment highly assured
Political/country risk reduced
Benefits to the buyer
Allows negotiation of lower purchase price
Expansion of supply sources
Payment received after document inspected by issuing bank

54. Figure 8-4 Participants and Process of Using a Purchasing Card
Source: napcp.org/napcp.nsf/Cardparticipants!OpenPage. Used with permission of NAPCP.

55. Financial B2B Services (cont.)
Payments (cont.)
Payments in B2B global trading
Venture capital to fund e-commerce initiatives
Internet incubators (show ad)
Tax calculation services
DPC
HotSamba
Sales tax clearinghouse
Taxware international
Implementing tax collection in the U.S.

56. Financial B2B Services (cont.)
Payments (cont.)
Other financial services
Credit reporting firms
New credit intermediaries broker credit risks
Assurance firms guarantee quality
Exchanges strike insurance deals
E-credit services

57. Order Fulfillment, Logistics, and Supply Chain Services
UPS Logistics Group
Handles outbound logistics and delivery.
This is only one part of order fulfillment.
See the List of Services on page 328.
Solutions for EC initiatives
Tracking systems
Product return systems
Shipping solutions
E-document exchange
Customization
EC software/providers
E-services/partners

58. Marketing and Advertisement
Advertising methods used by offline marketers
Vertical trade show
Ads in industry magazines
Salespeople call on:
Existing customers
Potential buyers
Digital advertisers
Ad server network provider
Electronic wholesalers

59. Affiliate Programs Affiliate programs (B2C services)
Affiliates invited to put a banner of a vendor on their sites
Consumer clicks on the banner and brings up that company’s EC site
Commission paid to affiliate if customer makes a purchase 59
© Prentice Hall, 2002

60. Infomediaries Infomediary services
Collect data about consumer behavior (clickstream)
Analyze it
Repackage it (Data Mining Technology)
Sell the results
As marketing and profiling information
Purpose to increase customer loyalty
Identify likely buyers
Increased sales (Services, Market efforts)
Reduced marketing costs

61. Other Marketing Services
Three examples of other services:
Digitalcement.com provides corporate marketing portals; builds stronger relationships with customers
Vantagenet.com free tools that help increase traffic to a company’s Web site
Businesstown.com has an online directory that enables small businesses to identify and evaluate service companies

62. Content Generation, Syndication, Delivery, and Management (cont.)
Content-delivery networks (CDNs)
Catalog content
Content management options
Do it yourself
Let the suppliers do it
Buy the content from an aggregator
Subscribe to a vertical exchange
Outsource to full-service Internet exchange

63. Content Generation, Syndication, Delivery, and Management (cont.)
Content maximization and streaming services—companies provide media rich content to reach target audience
Video clips
Music
Flash media
Use content delivery solutions that do not cause “traffic jams” with slow download times (e.g., Akamai Corporation)

64. Directory Services & Search Engines
B2Business.net
B2BToday.com
Communityb2b.com
A2zofb2b.com
I-stores.co.uk
Websteronline.com
Thomasregister.com
Bocal.com
B2b.yahoo.com
Search engines and news aggregators
Moreover.com
Google.com
Ientry.com
Newsletters

65. E-Communities E-communities connect: E-communities
Personnel
Partners
Customers
Any combination of these three
Service providers
Design of exchange portals
E-community service
E-communities
Chat rooms
Bulletin boards
Personalized Web pages
B2B are basically communities of transactions
Classified ads
Job vacancies
Announcements
Industry news

66. Partner Relationship Management (PRM)
In B2B environment the partners include:
Suppliers
Partners in joint ventures
Service providers
PRM—relies on:
Trust
Commitment
Quality of services
Continuity
Strategy for e-service
How much to invest in services
What services to provide

67. Other B2B Services Trust services E-business rating sites
Trust Trademark and domain names
Digital photos
Global business communities
Client matching
E-business rating sites
Promotion programs
Encryption sites
Web research services
Coupon-generating sites

68. Figure 8-8 The B2X Hub
Source: Compiled from “B2B Exchanges,” Internet Exchange 2000 at Keenanvision.com, April 24, 2000.

69. Integration Integration in e-marketplaces and exchanges
B2X hubs connect:
All Internet business services
Merchant services
Exchange infrastructure
Buying and selling
Member enterprises
Other B2X exchanges