© Farhan Mir 2014 IMS Electronic Commerce BBA (Hons) (B2B Business to Business EC) By: Farhan Mir.

© Farhan Mir© Farhan Mir

20201414 IMSIMS

Electronic CommerceElectronic Commerce

BBA (Hons) BBA (Hons) (B2B Business to Business (B2B Business to Business EC)EC)

By: Farhan MirBy: Farhan Mir


20201414 IMSIMS

Trading Process Network (TPN) Post in Trading Process Network (TPN) Post in General ElectricGeneral Electric

General Electric (GE)

Factories at GE Factories at GE Lighting division used Lighting division used to send hundreds of to send hundreds of Requisitions For Requisitions For Quotations (RFQs) to Quotations (RFQs) to the corporate sourcing the corporate sourcing department each day department each day for low-value machine for low-value machine parts.parts.

For each requisition, the For each requisition, the accompanying blueprints accompanying blueprints had to be requested from had to be requested from storage, retrieved from the storage, retrieved from the vault, transported to the vault, transported to the processing site, photocopied, processing site, photocopied, folded, attached to paper folded, attached to paper requisition forms with quote requisition forms with quote sheets, stuffed into sheets, stuffed into envelopes and mailed out.envelopes and mailed out.

This process took at This process took at least 7 days and was so least 7 days and was so complex and time-complex and time-consuming that the consuming that the sourcing department sourcing department normally sent out bid normally sent out bid packages only to two or packages only to two or three suppliers at a three suppliers at a time.time.

– Its purchasing was inefficient, involved too many Its purchasing was inefficient, involved too many administrative transactionsadministrative transactions

– Using TPN GE is conducting electronic bids, no Using TPN GE is conducting electronic bids, no paperworkpaperwork


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60%of the staff involved in 60%of the staff involved in procurement have been procurement have been redeployed. The sourcing redeployed. The sourcing department has at least 6-8 department has at least 6-8 free days a month to free days a month to concentrate on strategic concentrate on strategic activities rather than on activities rather than on paperwork, photocopying paperwork, photocopying and envelope stuffing it had and envelope stuffing it had to do when the process was to do when the process was manual.manual.

Labor involved in Labor involved in procurement declined by procurement declined by 30%. At the same time, 30%. At the same time, materials costs declined materials costs declined 5%-20% due to the ability 5%-20% due to the ability to reach a wider base of to reach a wider base of suppliers online.suppliers online.

– It used to take 18-23 days to It used to take 18-23 days to identify suppliers, prepare a identify suppliers, prepare a request for bid, negotiate a request for bid, negotiate a price and award the contract price and award the contract to a supplier. It now takes 9-to a supplier. It now takes 9-11 days.11 days.

– With the transaction handled With the transaction handled electronically from beginning electronically from beginning to end, invoices are to end, invoices are automatically reconciled with automatically reconciled with purchase orders, reflecting purchase orders, reflecting any modifications that happen any modifications that happen along the way.along the way.

– GE Procurement departments GE Procurement departments across the world now share across the world now share information about their best information about their best suppliers. suppliers.

• Benefits of using TPNBenefits of using TPN

Trading Process Network (TPN)Trading Process Network (TPN)Post in General Electric Post in General Electric (cont.)(cont.)


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Concepts, Characteristics, Concepts, Characteristics, and Models of B2B ECand Models of B2B EC

The Basic Types of B2B Transactions and Activities

Sell-sideSell-side

Buy-sideBuy-side

ExchangesExchanges

Supply chain improvements and Supply chain improvements and collaborative commercecollaborative commerce


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Characteristics of B2B ECCharacteristics of B2B EC

Key Entities of B2B EC– Buying company Buying company with procurement management with procurement management

perspectiveperspective

– Selling company Selling company with marketing management perspectivewith marketing management perspective

– Electronic Intermediary, Electronic Intermediary, an optional third party directory an optional third party directory service provider (the scope of service may be extended to service provider (the scope of service may be extended to order fulfillment)order fulfillment)

– Deliverer Deliverer who can fulfill a just-in-time deliverywho can fulfill a just-in-time delivery

– Network platform Network platform such as the Internet, VAN, intranet and such as the Internet, VAN, intranet and extranetextranet

– Protocol of communication Protocol of communication such as EDI and comparison such as EDI and comparison shopping possibly using software agentsshopping possibly using software agents

– Back-end information system Back-end information system possibly implemented using possibly implemented using the intranet and Enterprise Resource Planning (ERP) systemsthe intranet and Enterprise Resource Planning (ERP) systems


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Majorly Supplier-oriented marketingMajorly Supplier-oriented marketing

Used to sell the company’s Used to sell the company’s products and services to business products and services to business customers on the Internetcustomers on the Internet

Electronic catalogs are basically the Electronic catalogs are basically the same as that for B2C EC, but they same as that for B2C EC, but they may be customizedmay be customized

Characteristics of B2B EC Characteristics of B2B EC


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Types of transactionsTypes of transactionsspot buyingThe purchase of goods and services as they are needed, usually at prevailing market pricesstrategic (systematic) sourcingPurchases involving long-term contracts that usually are based on private negotiations between sellers and buyers


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Types of materials tradedTypes of materials tradeddirect materialsMaterials used in the production of a product (e.g., steel in a car or paper in a book)indirect materialsMaterials used to support production (e.g., office supplies or light bulbs)MRO (maintenance, repair, and operation)Indirect materials used in activities that support production


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Virtual Service Industries in B2BTravel and hospitality servicesTravel and hospitality services

Real estateReal estate

Financial servicesFinancial services

Online stock tradingOnline stock trading

Online financingOnline financing

Other online servicesOther online services


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Supply ChainSupply ChainDefinition

All activities associated with the flow and All activities associated with the flow and transformation of goods from raw materials to end transformation of goods from raw materials to end usersusers

22ndnd Tier TierSupplierSupplier

UpstreamUpstream InternalInternal DownstreamDownstream



11stst Tier TierSupplierSupplier

11stst Tier TierSupplierSupplier

Assembly/Assembly/Manufacturing andManufacturing and

PackagingPackaging

DistributionDistributionCentersCenters

RetailersRetailers

CustomersCustomers

GrainGrainProducerProducer

ProcessingProcessingFacilityFacility

PackagingPackaging DistributorDistributor

StoreStore

CustomersCustomers

LabelLabelManufacturerManufacturer

GrainGrainCerealCereal

Packaged Packaged CerealCereal

LabelsLabels

PaperboardPaperboard


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One-to-Many: Sell-Side E-One-to-Many: Sell-Side E-MarketplacesMarketplacesSupplier-Oriented Market Place – one to many

Individual consumers and business buyers use the Individual consumers and business buyers use the same supplier-provided market place (May pay same supplier-provided market place (May pay different prices due to quantity discount)different prices due to quantity discount)


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Case Study of Supplier-Oriented Market Case Study of Supplier-Oriented Market Place:Place:CISCO Connection OnlineCISCO Connection Online

Customer Service— Cisco Connection online

Online Ordering— Internet Product Center builds virtually all its products to order

Finding Order Status— gives the customers tools to find answers to order status inquiries by themselves

Benefits— save the company $363 million per year from technical support, human resources, software distribution and marketing material


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Selling via AuctionsSelling via Auctions

Auctioning from the Company’s Own Site

Why should a company pay a commission Why should a company pay a commission to an intermediary if the intermediary to an intermediary if the intermediary cannot provide the company with added cannot provide the company with added valuevalue

If a company decides to auction from its If a company decides to auction from its own site, it will have to pay for own site, it will have to pay for infrastructure and operate and maintain infrastructure and operate and maintain the auction sitethe auction site


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Selling via AuctionsSelling via Auctions

Using Intermediaries in AuctionsBenefitsBenefits

No additional resources are requiredNo hiring costs or opportunity costs associated with the redeployment of corporate resourcesOffer fast time-to-marketBilling and collection efforts, are handled by the intermediary rather than the company


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Buyer-Oriented Market Place – many to one– Buyer opens a market Buyer opens a market

on its own server and on its own server and invites potential invites potential suppliers to bid on suppliers to bid on RFQsRFQs

– Offer opportunity to Offer opportunity to committed supplierscommitted suppliers

– BUT as the number of BUT as the number of such sites increase, such sites increase, only very big buyers only very big buyers can afford to fully can afford to fully utilize this approachutilize this approach

Models of B2B ECModels of B2B EC

BusinessBusinessSuppliersSuppliers

Buyer’sBuyer’sProductsProducts

Catalog, RFQCatalog, RFQ

Suppliers’Suppliers’Bids, InformationBids, Information

Buyer’sBuyer’sElectronic MallElectronic Mall


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One-from-Many: Buy-Side E-One-from-Many: Buy-Side E-MarketplacesMarketplacesand E-Procurement – and E-Procurement – Time Time consumption and delaysconsumption and delays


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Case Study of Customer-Oriented Market Case Study of Customer-Oriented Market Place:Place: GE’s TPN PostGE’s TPN Post

Provides a chance for sellers to participate in the bidding process of GE using the following procedure:

Buyers prepare bidding project informationBuyers prepare bidding project information

Buyers post the bidding projects on the InternetBuyers post the bidding projects on the Internet

Buyers identify potential suppliersBuyers identify potential suppliers

Buyers invite suppliers to bid on projectsBuyers invite suppliers to bid on projects

Suppliers download the project information from the Suppliers download the project information from the InternetInternet

Suppliers electronically submit bids for projectsSuppliers electronically submit bids for projects

Buyers evaluate the suppliers’ bids and negotiate Buyers evaluate the suppliers’ bids and negotiate online to achieve the ‘best deal’online to achieve the ‘best deal’

Buyers accept the bid that best meets their Buyers accept the bid that best meets their requirementsrequirements


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One-from-Many: Buy-Side E-One-from-Many: Buy-Side E-MarketplacesMarketplacesand E-Procurementand E-Procurement

Six Main Types of E-Procuremente-sourcinge-sourcing

e-tenderinge-tendering

e-reverse auctioninge-reverse auctioning

e-informinge-informing

Web-based ERP (electronic resource Web-based ERP (electronic resource planning)planning)

e-MRO (maintenance, repair and e-MRO (maintenance, repair and operating)operating)


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Buy-Side E-Marketplaces: Buy-Side E-Marketplaces: Reverse AuctionsReverse Auctions


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Intermediary-Oriented Market PlaceEstablish an electronic intermediary companyEstablish an electronic intermediary company

Similar to an intermediary-based B2C mall; bring Similar to an intermediary-based B2C mall; bring buyers and suppliers (bidders) to one placebuyers and suppliers (bidders) to one place

The corporate information systems need tight The corporate information systems need tight coupling with the intermediary electronic mallcoupling with the intermediary electronic mall

Models of B2B ECModels of B2B EC

BusinessBusinessCustomersCustomers

BusinessBusinessSuppliersSuppliers

SharedSharedProducts CatalogsProducts Catalogs

Supplier’sSupplier’sProduct InformationProduct Information

Intermediary’sIntermediary’sElectronic MallElectronic Mall

Customer’sCustomer’sOrder InformationOrder Information


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Case Study of Intermediary-Oriented Case Study of Intermediary-Oriented Market PlaceMarket Place: : Boeing’s PARTBoeing’s PART

Boeing’s PART CaseActs as an intermediary between the Acts as an intermediary between the airlines and parts’ suppliersairlines and parts’ suppliers

Provides a single point of online access Provides a single point of online access through which airlines and parts through which airlines and parts providers can access the data neededproviders can access the data needed

Goal: provide its customers with one-Goal: provide its customers with one-stop shopping with online parts and stop shopping with online parts and maintenance information and ordering maintenance information and ordering capabilitycapability


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Boeing On Line Data (BOLD) Incorporating not only engineering Incorporating not only engineering drawings but manuals, catalogs and drawings but manuals, catalogs and other technical information that used to other technical information that used to be available only in paper or in be available only in paper or in microfiche formatmicrofiche format

Portable Maintenance Aid (PMA)Solves maintenance problemsSolves maintenance problems

Case Study of Intermediary-Oriented Case Study of Intermediary-Oriented Market PlaceMarket Place: : Boeing’s PART Boeing’s PART (cont.)(cont.)


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Benefits to Boeing’s CustomersIncreased productivityIncreased productivity

spending less time searching for information; frees up engineers and maintenance technicians to focus on more productive activities

Reduced costsReduced costswith information available online at the airports’ gates, through PMA, rather than back in the office, delays at the gate due to missing information are reduced

Increased revenue opportunityIncreased revenue opportunitythrough BOLD and PMA, a European airline estimates it will save 1-2 days/year of down time for each aircraft

Case Study of Intermediary-Oriented Market PlaceCase Study of Intermediary-Oriented Market Place: : Boeing’s PART Boeing’s PART (cont.)(cont.)


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B2B: the many-many B2B: the many-many exchangesexchanges Many-to-many: exchangesMany-to-many: exchanges

exchanges (trading exchanges (trading communities or trading communities or trading exchanges)exchanges)

Many-to-many e-Many-to-many e-marketplaces, usually owned and marketplaces, usually owned and run by a third party or a run by a third party or a consortium, in which many buyers consortium, in which many buyers and many sellers meet and many sellers meet electronically to trade with each electronically to trade with each otherotherpublic e-marketplacespublic e-marketplaces

Third-party exchanges Third-party exchanges that are open to all interested that are open to all interested parties (sellers and buyersparties (sellers and buyers


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Procurement Management Using Procurement Management Using B2B EC PlatformB2B EC Platform

Purchasing is now a strategic function, to increase profit margins

By automating and streamlining the laborious routine of the purchasing function, purchasing professionals can focus on more strategic purchases, achieving the following goals:

Reducing purchasing cycle time and costReducing purchasing cycle time and cost

Enhancing budgetary controlEnhancing budgetary control

Eliminating administrative errorsEliminating administrative errors

Lowering prices through product standardization andLowering prices through product standardization and

consolidation of purchasesconsolidation of purchases

Better information management;Better information management;

e.g. supplier’s information and pricing informatione.g. supplier’s information and pricing information

Improving the payment processImproving the payment process


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Infrastructure, Integration, and Infrastructure, Integration, and SoftwareSoftwareAgents In B2B ECAgents In B2B EC

Infrastructure for B2Belectronic data interchange (EDI)electronic data interchange (EDI)The electronic transfer of specially formatted The electronic transfer of specially formatted standard business documents, such as bills, standard business documents, such as bills, orders, and confirmations, sent between orders, and confirmations, sent between business partnersbusiness partnersvalue-added networks (VANs)value-added networks (VANs)Private, third-party managed networks that add Private, third-party managed networks that add communications services and security to communications services and security to existing common carriers; used to implement existing common carriers; used to implement traditional EDI systemstraditional EDI systemsInternet-based (Web) EDIInternet-based (Web) EDIEDI that runs on the Internet and is widely EDI that runs on the Internet and is widely accessible to most companies, including SMEsaccessible to most companies, including SMEs


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B2B in the Web 2.0 B2B in the Web 2.0 EnvironmentEnvironmentOpportunities

Brand awareness, generate traffic, create Brand awareness, generate traffic, create social communitiessocial communities

Use of Web 2 tools in B2BBlogs, Wikis and RSS FeedsBlogs, Wikis and RSS Feeds

Social Networks in the B2B Marketplace

Examples of Other activitiesAmerican Express-sponsored Business American Express-sponsored Business Social networkSocial network

Corporate Profiles on social networksCorporate Profiles on social networks


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Managerial IssuesManagerial Issues

1. Can we justify the cost of B2B?2. Which vendor(s) should we select?3. Which B2B model(s) should we use?4. Should we restructure our procurement

system?5. What are the ethical issues in B2B?6. Will there be massive disintermediation?7. How can trust and loyalty be cultivated in

B2B?8. How is mobile B2B done?

© Farhan Mir 2014 IMS Electronic Commerce BBA (Hons) (B2B Business to Business EC) By: Farhan Mir.

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Transcript of © Farhan Mir 2014 IMS Electronic Commerce BBA (Hons) (B2B Business to Business EC) By: Farhan Mir.