ELC 200

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ELC 200

• Day 12

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Agenda

• Questions from last Class?
• Assignment 3Corrected
• 4 As, 8 Bs and 2 Cs
• I am not looking for generic textbooks answer but
  answers that are specific to your business.
• 5 Days till Daytona Beach Bike Week
• http//www.daytonachamber.com/bwhome.html
• Today we will finish discussing Company-Centric
  B2B and Collaborative Commerce
• Thursday we will be talking about how to write an
  eBiz Plan
• The completed eBiz plan is worth 22 of your
  grade

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Buy Side E-MarketplacesReverse Auctions

• Buy-side e-marketplacea Web-based marketplace
  in which a buyer opens an electronic market on
  its own server and invites potential suppliers to
  bid on the items the buyer needs also called the
  reverse auction, tendering, or bidding model
• Request for quote (RFQ)the invitation to a
  buy-side marketplace (reverse auction)

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Exhibit 5.6Buy-Side B2B Market Architecture
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Conducting Reverse Auctions

• Reverse auctions administered from a companys
  Web site
• Bidding process lasts a day or more
• Bidders may bid only once or view the lowest bid
  and rebid several times
• Increasing number of reverse auction sites makes
  it impossible for suppliers to monitor all of
  them
• Online directories list open RFQs
• Use software search-and-match agents to reduce
  the human burden in the bidding process

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Bidding Through a Third-Party Auctioneer
Freemarkets.com

• United Technologies Corp. needs suppliers to make
  24 million worth of circuit boards
• 2,500 suppliers are identified as possible
  contractors
• List is submitted to FreeMarkets
  (freemarkets.com)
• http//www.ariba.com/

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Freemarkets.com (cont.)

• FreeMarkets reduced the list to 50, based on
  considerations including
• Plant location
• Size of supplier
• Plant capacity
• Customer feedback
• Detailed evaluation of the candidates

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Freemarkets.com (cont.)

• 3-hour auction conducted of online competitive
  bidding
• First bid was seen by all bidders
• Using reverse auction approach, the bidders
  reduced their bids
• Comprehensive analysis of several of the lowest
  bidders
• Then recommended the winners and collected its
  commission fees
• Results
• Original specification of 24 million was reduced
  to 18 million

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Procurement Revolution at GE

• TPN (now part of gxs.com)
• Purchasing was inefficienttoo many
  administrative transactions
• Process for each requisition took 7 days to send
  to bidders
• Complex and time-consuming
• Could only send out bids for 2 or 3 suppliers
• Trading Process Network (TPN)electronic bids
• Entire process takes 7 days (for suppliers to
  bid)
• 2 hours to send information to suppliers (7 days
  before)
• Evaluate and award bids same day

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Procurement Revolution at GE (cont.)

• Benefits to GE
• Labor declined 30 and material costs declined
  5-50--wider base of suppliers online
• Redeployment of 50 of the staff
• Takes half the time to identify suppliers,
  prepare a request for bid, negotiate a price, and
  award the contract
• Invoices automatically reconciled reflecting
  modifications

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Procurement Revolution at GE (cont.)

• Benefits to buyers
• Worldwide supplier partnerships
• Current business partners
• Strengthen relationships
• Streamline sourcing process
• Rapid distribution of information
• Transmit electronic drawings to multiple
  suppliers
• Decrease sourcing cycle time
• Quick receipt and comparison of pricing bids

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Procurement Revolution at GE (cont.)

• Benefits to suppliers
• Increased sales volume
• Expanded market reach, finding new buyers
• Lowered administration costs for sales and
  marketing activities
• Shortened requisition cycle time
• Improved sales staff productivity
• Streamlined bidding process

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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

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Buying from MasterCardInternationals Internal
Catalog

• Online buying program at MasterCard
• Allows corporate buyers to select goods and
  services from companys electronic catalog
• Goal is to consolidate buying activities from
  multiple corporate sites, improve processing
  costs, reduce the supplier base
• Procurement department defines
• Scope of products or projects to buy
• Invites vendors to bid or negotiate prices

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MasterCard International (cont.)

• Contract prices are stored in the internal
  electronic catalog
• Final buyer at MasterCard compares available
  alternatives
• Organizational purchasing decision coupled with
  an internal workflow management system
• Internal electronic catalog is updated manually
  or by software agents
• Payments are made with MasterCards corporate
  procurement card
• By 2002, the system was being used by more than
  2,500 buyers

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Group Purchasing

• Group purchasingaggregation several buyers into
  volume purchases, so that better prices can be
  negotiated
• 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

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Exhibit 5.7Group Purchasing Process
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Electronic Bartering

• Bartering exchangean intermediary that links
  parties in a barter a company submits its
  surplus to the exchange and receives points of
  credit, which can be used to buy the items that
  the company needs from other exchange
  participants
• Exchange of goods or services without the use of
  money
• Exchange a surplus for other need
• Benefits
• Faster than manually
• Easier to match

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Collaborative Commerce (C-Commerce)

• Collaborative commerce (c-commerce)commerce
  consisting of activities between business
  partners in jointly planning, designing,
  developing, managing,and researching products and
  services
• Web-based systems used between and among
  suppliers for
• Communication Design
• Planning Information sharing
• Information discovery

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Collaborative Commerce (cont.)

• Varieties of c-commerce
• Joint design efforts
• Forecasting
• Between and within organizations
• Aids communication and collaboration between
  headquarters and subsidiaries, franchisers and
  franchisees
• C-commerce platform provides e-mail, message
  boards, chat rooms, online corporate data access
  around the globe, no matter what the time zone

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Webcor Construction Goes Online with Its Partners

• Webcor suffered from too much paperwork and poor
  communication with its
• Architects
• Designers
• Building owners
• Subcontractors
• Webcors goal to turn its computer-aided design
  (CAD) drawings, memos, and other information into
  shared digital information

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Webcor (cont.)

• Webcor uses ASP that hosts its projects on a
  secured extranet
• Major problem was getting everyone to accept
  software
• Complex
• User training is necessary
• Webcor was in a strong enough position to choose
  not to partner with anyone who would not use
  ProjectNet

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Webcor (cont.)

• Webcors business partners can post send, or edit
  CAD drawings, digital photos, memos, status
  reports, project histories
• Partners have instant access to new building
  drawings
• Central meeting place where users can both
  download and transmit information to all parties,
  all with a PC

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RetailerSupplier Collaboration Target
Corporation

• Target Corporation is a large retail
  conglomerate
• Conducts EC activities with about 20,000 trading
  partners
• 1998established an extranet-based system for
  those partners that were not connected to its
  VAN-based EDI.

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Target Corporation (cont.)

• The extranet enabled the company to
• Reach many more partners,
• Use many applications not available on the
  traditional EDI
• Streamline its communications and collaboration
  with suppliers
• Business customers to create personalized Web
  pages

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Continuous Replenishment Warner-Lambert

• Warner-Lambert (WL) served as a pilot site for a
  program called Collaborative Planning,
  Forecasting, and Replenishment (CPFR)
• Shared strategic plans, performance data, and
  market insight with Wal-Mart
• Trading partners collaborate on making demand
  forecasts
• WL increased its products shelf-fill rate from
  87 percent to 98 percent
• An empty shelflost present sales and future
  sales if the customer purchases a substitute
  product

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Warner-Lambert (cont.)

• WL is involved in another collaborative retail
  industry projectSupply-Chain Operations
  Reference (SCOR)
• Divides supply chain operations into parts
• Gives a framework with which to evaluate the
  effectiveness of their processes along the same
  supply chains to
• Manufacturers
• Suppliers
• Distributors
• Retailers

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Reduction of Design Cycle Time Adaptec, Inc.

• Microchip manufacturer supplying electronic
  equipment makers
• Outsourced manufacturing tasks to Overseas
  manufactures
• Delivery times exceeded their competitors
• Solution to the problem
• Extranet and enterprise-level supply chain
  integrated software
• Significantly reduced order-to-product delivery
  time

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Reduction of Product Development Time
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 Factories
• Distributors Customers
• Overseas

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Barriers to C-Commerce

• C-commerce is moving ahead fairly slowly because
• Technical reasons involving integration,
  standards, and networks
• Security and privacy concerns over who has access
  control of information stored in a partners
  database
• Internal resistance to new models and approaches
• Lack of internal skills to conduct c-commerce

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Interorganizational Collaboration at Nygard of
Canada

• Nygard has become a leader in adopting IT and
  e-commerce in the apparel industry
• Didnt want to move manufacturing off shore
  (cheaper) due to longer lead and cycle times
• Company stays competitive by using EC to control
  costs of labor and manufacturing
• Developed an ERP and supply chain management
  that controls all internal operations,
  purchasing, product development, accounting,
  production planning, sales
• This enabled the company to develop tight
  integration with its trading partners

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Nygard of Canada (cont.)

• The moment that a customer buys a pair of pants
  at a partners retail store
• Information moves from the POS terminal
• Automatically generates a reorder at Nygard
• SCM
• Matches customers orders with the right fabrics
• Searches the market pool for the most efficient
  combinations of other material for use with those
  fabrics

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Nygard of Canada (cont.)

• Sales trigger orders
• Manufacturing automatically industries, and
  global manufacturers are willing to operate with
  razor-thin margins as fabrics, zippers, and
  buttons
• The moment that raw material is used, an
  automatic reorder of the material is generated
• Allows just-in-time production
• Quick order delivery (sometimes same day)

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Nygard of Canada (cont.)

• Web-based control system enables the company to
• Conduct detailed profitability studies
• Decisions are evaluated by impacts on the bottom
  line
• Decision support systems (DSS) models are used
  for this purpose

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Infrastructure for B2B

• Server to host database and applications
• Software for executing sell-side (catalogs)
• Software for conducting auctions and reverse
  auctions
• Software for e-procurement (buy-side)
• Software for CRM
• Security hardware and software
• Software for building a storefront
• Software for building exchanges
• Telecommunications networks and protocols

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Extranet and EDI

• 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 EDIEDI that runs on the Internet
  and so is widely accessible to most companies,
  including SMEs

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Extranet and EDI

• Extranetssecured networks (by VPN), usually
  Internet-based, that allow business partners to
  access portions of each others intranets
  extended intranets.

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Integration

• Integration with existing information systems
  issues
• 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

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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

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The Role of XML in B2B Integration

• Companies interact easily and effectively by
  connecting to their servers, applications,
  databases
• Standard protocols and data-representation
  schemes are needed
• FIXML
• Web is based on the standard communication
  protocols useful only for displaying static
  visual Web pages
• TCP/IP
• HTTP
• HTML

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The Role of XML in B2B Integration (cont.)

• XML (eXtensible Markup Language)standard (and
  its variants) used to improve compatibility
  between the disparate systems of business
  partners by defining the meaning of data in
  business documents
• Used to increase
• Interactivity
• Accessibility with speech recognition systems

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How XML works
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XML Unifies Air Cargo Tracking System

• B2B intermediary, TradeVan Information Services
  of Taiwan provides information services about the
  cargo flights of different airlines
• Different information systems have different
  query results
• XML facilitates data exchange between
  heterogeneous databases
• Information can be presented on wireless
  application protocol (WAP)-based cell phones

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Air Cargo Tracking System (cont.)

• System is expected to
• Reduce delays significantly
• Benefit of all members of the supply chain
• Returns a standardized yet personalized
  presentation for different airlines
• Enables customs brokers to reduce the cycle time
  by preparing declarations of imports faster

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Air Cargo Tracking System (cont.)

• Buyers and other supply chain partners can
  schedule production lines with precision and in
  advance
• Quality of door-to-door delivery companies is
  improved through fast communication
• Answers to queries can be derived much faster
• Improves the supply chain by reducing
• Delivery lead times
• Inventory levels

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The Role of Software Agentsin B2B EC

• Agents role in the sell-side marketplace
• B2C comparison-shopping
• B2B agents collect information from sellers
  sites for buyers
• Agents role in the buy-side marketplace
• Assisting large number of buyers requesting
  quotes from multiple potential suppliers in
  buy-side

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Managerial Issues

• Can we justify the cost?
• Which vendor(s) should we select?
• Which model(s) should we use?
• Do we need B2B marketing?
• Should we reengineer our procurement system?
• What restructuring will be required for the shift
  to e-procurement?
• What integration would be useful?
• What are the ethical issues in B2B?

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Summary

• The B2B field
• The major B2B models
• The characteristics of sell-side marketplaces
• Sell-side intermediaries
• The characteristics of buy-side marketplaces
• Forward and reverse auctions
• B2B aggregation and group purchasing
• Collaborative EC
• Characteristics of Internet-based EDI and the
  role of XML