E & ( - 2002)

EDI B2B Electronic Marketplaces( )

BUSINESS MODELS -- Current State

Most EC Business today areAn online version of traditional modelsAn extension of physical businesses that are able to reduce cost and improve customer satisfactionfollow a vertical and rigid supply chain

BUSINESS MODELS -- EmergingVirtual Companies and marketsa consortium of companies build on each others businesses to exploit opportunitiesOpen buyer centric marketscomparison shoppingCoalition and outsourcinge.g. in REAL ESTATE: brokers, banks, escrow () , lawyers (for title inspection)Supply chain ---- SUPPLY WEB

Supply-Chain Management

VIRTUAL STOREFRONT: sells goods, services on-line (Amazon, Virtual Vineyards, etc.)

MARKETPLACE CONCENTRATOR: concentrates information from several providers InsureMarket, DealerNet, etc.)

INFORMATION BROKER: provides product, pricing, availability information Auto-by-Tel, PartNet, etc)INTERNET BUSINESS MODELS

TRANSACTION BROKER: buyers view rates, terms from various sources (E*Trade, Ameritrade)

ELECTRONIC CLEARINGHOUSE: auction-like setting, products, prices, change in response to demand (Bid.com, OnSale, etc.)

REVERSE AUCTION: buyer sets price, submits to multiple sellers (Priceline.com)INTERNET BUSINESS MODELS

DIGITAL PRODUCT DELIVERY: sell, download software, other digital products (SonicNet, Build-a-Card, etc.)

CONTENT PROVIDER: creates revenue through providing client for a fee, and advertising Tripod, Wall Street Journal, etc.)

ON-LINE SERVICE PROVIDER: provides service, support for hardware, software products CyberMedia, Tune Up, etc.)

INTERNET BUSINESS MODELS

Company-CentricB2B

Typical ClassificationBusiness-to-Business (B2B)Business-to-Public Body (e.g., Government)Business-to-Individual / Consumer (B2C)Individual-to-Public Body

Concepts and Characteristics of B2B ECB2B EC definedTransaction conducted electronically between business over the networksInternetExtranetsIntranetsPrivate networks (e.g., EDI)Automated trading improves the process

: -to-B vs. B-to-C

Concepts and Characteristicsof B2B EC (cont.)Market size and contentExpected to grow from $1.1 trillion in 2003 to $10 trillion by 2005Percentage of Internet-based B2B from 2.1% in 2000 to 10% in 2005Private and public e-marketplacePrivateone-to-many modePublicmany-to-many mode

Concepts and Characteristicsof B2B EC (cont.)How is B2B conducted?Directly between buyer and sellerVia an online intermediaryAlong the supply chainWith or without intermediariesTypes of transactionsSpot buyingdetermined by dynamic supply and demandStrategic sourcinglong term contracts

B2B Supply Chain

Concepts and Characteristicsof B2B EC (cont.)Supply chain relationshipsInterrelated subprocesses and rolesAcquisition of materialsProcessing products and servicesMoving to distributorsPurchase by consumerTraditional process managed through paper transactionsB2B applications offer competitive advantages for supply chain management (SCM)

Concepts and Characteristicsof B2B EC (cont.)Entities of B2B ECSelling companymarketing management perspectiveBuying companyprocurement management perspectiveElectronic intermediariesoptional third party directory service provider (scope of service may be extended to order fulfillment) Trading platformspricing and negotiation protocol (auctions, reverse auctions)

Concepts and Characteristicsof B2B EC (cont.)Entities of B2B EC (cont.)Payment servicesmechanism for transferring money to sellersLogistics providerslogistics to complete transaction (packaging, storage, delivery)Network platformsInternet, VAN, intranet, extranetProtocols of communicationEDI or XMLBack-end integrationconnecting to ERP systems, databases, functional applications

Concepts and Characteristicsof B2B EC (cont.)ProductCustomerSupplierProduct processTransportation InventorySupply chainCompetitorSales and marketingSupply chain process and performanceInformation processed in B2B

Concepts and Characteristicsof B2B EC (cont.)Electronic intermediaries in B2BConsumers and business may share intermediariesBusinesses may use different intermediaries with different suppliers Benefits of B2B modelsEliminate paper-based systemsExpedite cycle timeReduce errorsIncrease employee productivityReduce costsIncrease customer service and partnership management

B2B ModelsCompany-centric modelsSell-side marketplace (one-to-many)Buy-side marketplace (many-to-one)Many-to-many marketplacesthe exchangeBuyers and sellers meet to tradeTrading communitiesTrading exchangesExchanges

B2B Models (cont.)Other B2B models and servicesFor the purpose of sellingFor the purpose of buyingValue chain integratorsValue chain service providersInformation brokersVertical vs. horizontal marketplacesVerticalone industry or industry sectionHorizontalservice or product used in several types of industries

B2B Models (cont.)Virtual service industries in B2BTravel and tourism servicesReal estateElectronic paymentsOnline stock tradingOnline financingOther online services

Sell-Side Marketplace Architecture

Sell-Side Marketplaces:One-to-ManyVirtual sellersBigboxx.com.hk of Hong KongB2B office supply retailer servicesLarge corporate clientsMedium corporate clientsSmall officesGoalsell products in various SE Asian countriesOffers more than 10,000 itemsUses more than 300 suppliers

Sell-Side Marketplaces:One-to-Many (cont.)Virtual sellersBigboxx.com.hk of Hong Kong (cont.)Company portal attractive, easy to useBrowse online catalogsUse search enginesPaymentsCash or check upon deliveryAutomatic paymentsCredit cardPurchasing card

Sell-Side Marketplaces:One-to-Many (cont.)Virtual sellersBigboxx.com.hk of Hong Kong (cont.)Delivery Owns trucks and warehousesDelivery scheduled onlineSame day (within an hour)Specifically scheduled timeOrdering system integrated with SAP-based back-office system

Sell-Side Marketplaces:One-to-Many (cont.)Virtual sellersBigboxx.com.hk of Hong Kong (cont.)Value-added servicesTrack status of orderCheck stock availabilityPromotionsCustomized pricesGroup accounts and central approvalfor businesses with multiple branchesStanding orders automatically activatedLarge number of reports and data available

Sell-Side Marketplaces:One-to-Many (cont.)Customer serviceGeneral Electric20 million calls/year about appliancesReduced cost of each call from $5 to $0.20Milacron, Inc.Site contains 55,000 productsEasy to useSecurely handles selection, purchase, applicationTechnical serviceexpanded to provide a higher level of service than previously available at the site

Sell-Side Marketplaces:One-to-Many (cont.)DellIntelIBMCiscoDirect sales from catalogsConfiguration and customizationEfficient customization for direct salesBusiness customersCustomize productsReceive price quoteSubmit orderSuccessful cases

Sell-Side Marketplaces:One-to-Many (cont.)Direct sales from catalogsBenefitsReduces costs (to buyers and sellers) and errors during the processSpeeds up order cycleAbility to customize productsOffer different prices to different customers

Sell-Side Marketplaces:One-to-Many (cont.)Direct sales from catalogs (cont.)LimitationsChannel conflicts with distribution systemsHigh cost when traditional EDI usedLarge number of business partners is needed to justify system

Selling Side: Auctions and Other ModelsForward auctionsquick disposal of itemsRevenue generationIncreased page viewsMember acquisition and retentionbidding transactions result in additional registered membersSelling from own site when:Large companies that conduct auctions frequently dont benefit from using intermediariesE-marketplace already in use, cost of adding auction not too high

Selling Side:Auctions and Other Models (cont.)Using intermediaries when:No resources requiredOwn and control auction informationFast time to marketSearching and reportingSearch and report all auction activitiesStandard reports availableAdditional analysis of complex information

Selling Side:Auctions and Other Models (cont.)Billing and collectionAutomatic calculation of shipping weights and chargesPaymentencrypted credit card dataBilling informationeasily downloaded into existing systemsSuccessful if:Sufficient number of loyal customersProducts well knownPrice not major purchasing criteria

Sell-Side Case:CISCO Connection Online (CCO)Benefitssaves the company $363 million per year in:Technical supportHuman resourcesSoftware distributionMarketing material

Cisco Connection Online (CCO) (cont.)Customer serviceCisco Connection onlineOnline orderingInternet Product Center builds virtually all products to orderOrder statuscustomer tools for finding answers to order status inquiries

Cisco Connection Online (CCO) (cont.)Benefits to CiscoReduced operating costs for order takingEnhanced technical support and customer serviceReduced technical support staff costReduced software distribution costsLead times reduced from 4-10 days to 2-3 days

Cisco Connection Online (CCO) (cont.)Benefits to customersQuick order configurationImmediate cost determinationCollaboration with Cisco staff

Sell-Side IntermediariesMarshall Industries(a subsidiary of AvnetMarshall) multinational distributor of electronic components known for its innovative uses of IT and the WebProducts and servicesMarshallNetMarshall on the Internet (portal)Strategic European InternetElectronic Design CenterPartnerNetNetSeminarEducation and News Portal

Sell-Side Intermediaries (cont.)Marshall Industriesa subsidiary or AvnetMarshall (cont.)Survival strategyContinuous improvement programs and innovationsTeam-based organization, flat hierarchy, decentralized decision makingProfit sharing compensation for salespeople

Sell-Side Intermediaries (cont.) Marshall Industriesa subsidiary of AvnetMarshall (cont.)Survival strategyCRM highly promotedWeb-based services create value between suppliers and customersEC initiatives supported by:Changing internal organizationChanging internal procedures

Sell-Side Intermediaries (cont.) Boeings PARTActs as an intermediary between the airlines and parts suppliersProvides a single point of online access through which airlines and parts providers can access the data neededGoal: provide its customers with one-stop shopping for online parts and maintenance information and ordering capability

Sell-Side Intermediaries (cont.)Boeings PARTSpare parts business using traditional EDI Mechanic tells purchasing department parts are needed, purchase is approved, purchase is madeLarge airlines connect to Boeing's VANBoeing finds part and deliversDebut of PART on the InternetEncourages customers to order parts electronicallycheap, easy, fast50% of customers using Internet within first year

Sell-Side Intermediaries (cont.)Boeings PARTBenefits of PART onlineImproved customer serviceSignificant operating savingsNew sales opportunitiesCustomer service online reducedPhone calls (purchasing, order status etc.)Data entry

Sell-Side Intermediaries (cont.) Boeings PARTPortable access to technical drawings/supportBoeing On Line Data (BOLD) provides availability to:Engineering drawings ManualsCatalogsOther technical informationPortable Maintenance Aid (PMA)solves maintenance problems

Sell-Side Intermediaries (cont.)Boeings PARTBenefits to Boeings customersIncreased productivityless time searching for informationReduced costsdelays at gate reduced because all information is availableIncreased revenuesfaster service provides time savings

Buy Side: One-from-Many,E-ProcurementPurchasing agents (buyers)Direct purchasingUse of material is scheduledNot a shelf itemIndirect purchasingMROsNonproduction materialsInefficiencies in procurement management of indirect materials

A Traditional Purchasing Process Flow

Buy Side: One-from-Many,E-Procurement (cont.)Innovative procurement managementInnovative purchasing as strategic approach to increase profit marginsWeb facilitation includes:Electronic tenderingVolume purchasingAggregating supplier catalogs at buyers siteGroup purchasingOthers

Buy Side: One-from-Many,E-Procurement (cont.)Goals of procurement reengineeringIncrease purchasing agent productivityLower purchasing prices of itemsImprove information flow and managementMinimize maverick (unplanned) buyingImprove payment processStreamline purchasing process to make it:SimpleFast

Buy Side: One-from-Many,E-Procurement (cont.)Goals of procurement reengineering (cont.)Reduce administrative processing cost per orderFind new suppliers and vendors to provide faster/cheaper goods and servicesIntegrate procurement process with budgetary control in an efficient and effective wayMinimize human errors in buying or shipping process

Buy-Side B2BMarketplace Architecture

Buy Side: One-from-Many,E-Procurement (cont.)Direct vs. indirect sourcingTools to automate purchasing goodsDirect or mission critical80% of manufacturers expenditureLong-term relationship with vendor of known quality goodsTight integration with suppliers along supply chainIndirectuse of public exchanges for indirect sourcing

Buy Side: Reverse AuctionsPre-Internet Reverse auction processPrepare description of product to be producedAnnounce project via ads, mail, telephoneSend detailed information to interested vendorsVendors prepare proposalsBidders submit document proposalsProposals evaluatedProblems:LawsExpensiveErrors

Buy Side: Reverse Auctions (cont.)Web-based reverse auction processBuyers prepare bidding project informationBuyers post project on portalIdentify potential suppliersInvite suppliers to bidSuppliers download project informationSuppliers submit electronic bidReverse auction in real-time, or it can take a few daysBuyers evaluate and award contract

Buy Side: Reverse Auctions (cont.)Web-based reverse auction processBenefits:Electronic process is fasterAdministratively much less expensiveEnables location of cheapest possible products

Procurement Revolution at GETPN at GE Lighting DivisionPurchasing was inefficienttoo many administrative transactionsProcess for each requisition took 7 daysComplex and time-consumingCould only send out bids for 2 or 3 suppliersTrading Process Network (TPN)electronic bidsEntire process takes 7 days (for suppliers to bid)2 hours to send information to suppliersEvaluate and award bids same day

Procurement Revolution at GE (cont.)Benefits to GEInvolvement in procurement processLabor declined 30%Material costs declined 5%-20%--wider base of suppliers onlineRedeployment60% of the staffSourcing department concentrates on strategic activities instead of paperwork, etc.

Procurement Revolution at GE (cont.) Benefits to GETime to identify suppliers, prepare a request for bid, negotiate a price, and award the contractWas 18-23 days Now 9-11 daysInvoices automatically reconciled reflecting modificationsGE procurement departments share information about their best suppliers across the world

Procurement Revolution at GE (cont.)Benefits to buyersWorldwide supplier partnershipsCurrent business partnersStrengthen relationshipsStreamline sourcing processRapid distribution of informationTransmit electronic drawings to multiple suppliersDecrease sourcing cycle timeQuick receipt and comparison of pricing bids

Procurement Revolution at GE (cont.)Benefits to suppliersIncreased sales volumeExpanded market reach, finding new buyersLowered administration costs for sales and marketing activitiesShortened requisition cycle timeImproved sales staff productivityStreamlined bidding process

Procurement Revolution at GE (cont.) Deployment strategiesStart EC in one division and slowly go to all divisionsUse the site as public bidding marketplace to generate commission income to GE

Aggregating CatalogsAggregating suppliers catalogs: an internal marketplaceMaverick buying to save time leads to high pricesAggregating all approved suppliers catalogs in one placeReduced number of suppliersBuyers at multiple corporate locationsFewer and remote suppliersLarger quantity/lower costs

Group PurchasingGroup purchasingorders from several buyers are aggregatedInternal aggregationEconomy of scaleReduced transaction processing costExternal aggregationAggregating demand onlinePutting together orders from multiple buyers to make large volumes/lower costs

Electronic BarteringElectronic barteringExchange of goods or services without the use of moneyExchange a surplus for other needBartering exchangeSubmit surplus to exchange for pointsPoints used to buy what company needsBenefits:Faster than manuallyEasier to match

Collaborative Commerce (C-Commerce)Web-based systems used between and among suppliers for:CommunicationDesignPlanning Information sharingInformation discovery

Collaborative Commerce(C-Commerce) (cont.)Webcore construction goes online with its partners

Suppliers Extranet: Hudson Dayton Case

Collaborative Commerce(C-Commerce) (cont.)Reduce design cycle time by connecting suppliers: Adaptec, Inc.Microchip manufacturer supplying electronic equipment makersOutsources manufacturing tasksDelivery times exceeded their competitorsSolution to the problemExtranet and enterprise-level supply chain integrated softwareSignificantly reduced order-to-product delivery time

Collaborative Commerce(C-Commerce) (cont.)SuppliersDistributorsOverseasFactories CustomersReduce product development time by connecting suppliers: Caterpillar, Inc.Heavy machinery manufacturer uses extranetRequest for customized component directly to designers and suppliers ship to buyersConnect engineering and manufacturing division with worldwide

Collaborative Commerce(C-Commerce) (cont.)Other examples of c-commerceTricon Restaurant Internationalglobal brand marketing managementRE/MAXreal estate franchiser improved communication and collaboration between independent ownersMarriott Internationallinks corporations, franchising partners, suppliers, customersNygard of Canadainterorganizational collaboration

B2B InfrastructureServer to host database and applicationsSoftware for executing sell-side (catalogs)Software for conducting auctions and reverse auctionsSoftware for e-procurement (buy-side)

B2B Infrastructure (cont.)Software for CRMSecurity hardware and softwareSoftware for building a storefrontTelecommunications networks and protocols

Extranet and EDISecure interorganizational networksTraditional EDI limits accessibility of small companiesInternet-based EDI offers wide accessibility to companies around the world

Extranet

IntegrationERP softwareCustomer, supplier, and other databasesLegacy systemsCatalog (product) informationInventory systemsSales statisticsDecision support systems (DSS) and SCM applications

Integration (cont.)Integration with existing information systemsIssues in integrating with back-end information systems:Intranet-based work flowDatabase management systems (DMBS)Application packagesERPBack-end sell-side integration works for sellers but not buyers and vice versa

Integration (cont.)Integration with business partnersEasy integration with one company-centric sideNot easy to integrate for many buyers or sellersNeed buyer owned shopping cart that can interface with back-end information systems

Intelligent Agent-Based CommerceB2B Agents

Implementation IssuesJustification and prioritizationMust conduct cost benefit analysis of proposed projectsInclude organizational impactsPossible channel conflictsDealing with resistance to change due to processes reengineering Cost-benefit analysis related to:Finding B2B opportunitiesPrioritizing potential initiatives

Implementation Issues (cont.)Vendor selectionPrimary vendor uses its software and procedures, adds partners as neededIntegrator mixes and matches existing products and vendors to create best of the breedAffiliate programsReferral programUseful for B2B intermediaries

Implementation Issues (cont.)Implementing e-procurementFit e-procurement into EC strategyReview and change procurement process itselfIf ERP or SCM is in placeintegrate e-procurement, If not in placeBPR before implementationCoordinate buyers information system with sellers

Managerial IssuesB2B marketingsell-side marketplaces require advertisement and incentivesWhich models to use and whenneed for implementation strategies and prioritizationPurchase process reengineering (BPR)Establish buy-side marketplace on its server if volume is big enough to attract major vendorsJoin third-party intermediary-oriented marketplace if volume is small

Managerial Issues (cont.)Integrationtrading in e-marketplaces is interrelated with logisticsParticularly true in many-to-many exchangesCompany-centric marketplaces must integrate:Logistics Other support services

Managerial Issues (cont.)Business ethicsAccessing unauthorized areas in the tracing system should not be allowedPrivacy of partners should be protected technically and legallyAuctionsboth forward and reverseBenefits are substantialImplementation is relatively simpleConsiderable flexibility in implementation

Managerial Issues (cont.)E-procurementcritical success factorsNeed to cut down number of routine tasksReduce overall procurement cycle using appropriate information technologiesWorkflow GroupwareERP softwareB2B models

E-Marketplaces andB2B Exchanges

Opening Case:ChemConnect & CovisintChemConnect uses a B2C business model where customers look for:Lowest priceFast shipmentGood return policyHelpful customer service

ChemConnect & Covisint (cont.)ChemConnectworld chemical exchangeProvides free membership in trading marketplaces and information portalsPublic exchange floor for anonymous bidsCommodities floor for buying and exchangingCorporate trading roomsprivate online auctionsUp-to-the-minute market informationLarge electronic catalogIndependent intermediary

ChemConnect & Covisint (cont.)Covisinte-market of automotive industryB2B integrated buy-side marketplaceGeneral MotorsFordDaimlerChryslerEntire industry gainsLower costsEasier business practicesIncreased efficiency

ChemConnect & Covisint (cont.)Covisint (cont.)Co stands forConnectivityCollaborationCommunicationVis stands for visibility provided by the InternetInt stands for integrated solutions

ChemConnect & Covisint (cont.)Covisint (cont.)Collaborative commerceFacilitate product designEnable procurement processProvide broad marketplace of buyers and suppliersVertical consortia trading exchangeFew large buyersMany sellers (suppliers to the industry)

Trading Communities

B2B E-Marketplacesand Exchanges (cont.)Dynamic pricingOwnership of exchangesGains and risks of B2B exchange participationGovernance Organization of exchanges

MarketplacesYassas 350 Yassas.com. 10,000 Yassas.com Pepsico, SC Johnson, Vileda, Creta Farm, , Lavazza, Misko-Barilla, Hepp, .To Yassas.com o i@Marketplace state-of-the-art, (XML, LDAP, COM, ) 3-tier Microsoft Windows DNA

Marketplaces 2 -Be24 Business Exchanges S.A , , www.be24.gr . Business Exchanges .. , EFG Eurobank Ergasias, Panafon-Vodafone Hellas On Line

Marketplaces 3 -Cosmo-one cosmoONE Hellas MarketSite A.E , (Marketplace) (Business to Business). cosmoONE COSMOTE (www.cosmote.gr), (www.ote.gr), (www.dienekis.gr) - Commerce One (www.commerceone.com) , cosmoONE - Alpha Bank (www.alpha.gr) (www.nbg.gr).

Marketplaces 4 -Onianet , 2001 , , - : , , , , , Agrino, BDF, Bingo, Chipita, Colgate-Palmolive, Georgia Pacific, Sara Lee, SC Johnson & Son, Schwarzkopf & Rilken, Wella, -, .

( MICROSOFT)H GTW (Global Trading Web)

H GTW (Global Trading Web) :British Telecom , BT Marketsite Singapore Telecom, SESAMi.net Nippon Telephone and Telegraph, NT Marketsite Cable and Wireless Optus, Optus Marketsite - Banacci, Banacci Marketsite Tronto Dominion Bank, TD Marketsite o EMediate Consortium, MarketSite CosmoONE,

Information PortalsThomas registerAlibaba.comThe databaseThe portals featuresReverse auctionsServicesLanguagesRevenue modelMore on information portals

B2B Classified Ads

Supplier Aggregation Model

Buyer Aggregation Model

Third-Party (Trading) ExchangesSuitability of third-party exchangesFragmented marketsBuyer-concentrated marketsSeller-concentrated markets

Consortium Trading Exchanges (CTE)CTE is a subset of third-party exchanges, the 4 types are:Vertical, purchasing-orientedHorizontal, purchasing-orientedVertical, selling-orientedHorizontal, selling-oriented

Consortium Trading Exchanges (cont.)E-Procurement Consortia can be:Vertical purchasing-orientedHorizontal purchasing-orientedVertical selling-orientedSelling-oriented consortiaLegal challenges for B2B consortiaSignals that may prompt legal scrutiny

Consortium Trading Exchanges (cont.)Critical success factors of consortiaSize of industryAbility to drive user adoptionElasticitymeasure of incremental spending by buyers as a result of savings generatedStandardization of commodity-like productsManagement of intensive information flowSmoothing inefficiencies in supply chain

Dynamic Trading:Auctions and MatchingAuctionsPrivate trading roomsmembers conduct auctions at the exchangeAuction services may be one of the activitiesExchange may be fully dedicated to auctionsMatchingMarket makers conduct matching supply and demand (e.g., stocks)More complex than auctions because they match:PricesQuantitiesTimesLocations

Building and Integrating Marketplaces and ExchangesStep 1Think aheadStep 2PlanningStep 3System analysis and designStep 4Building the exchangeStep 5Testing, installation, and operationStep 6System evaluation and improvement

Building and Integrating Marketplaces and Exchanges (cont.)IntegrationBetween 3rd-party exchange and back-office systems of participantsAcross multiple, incompatible exchangesExternal communicationsWeb/client accessData exchangeDirect application integrationShare process

Building and Integrating Marketplaces and Exchanges (cont.)Process and information coordinationhow to coordinate external communications with internal information systemsExternal process Internal processData transformationException handlingSystem and information managementinvolves management of:SoftwareHardware Information components

Building and Integrating Marketplaces and Exchanges (cont.)Shopping cartsallow customers to shop at any participating vendorBuyer maintains order information on its own site in order to integrate it with its internal e-procurement systemSell-side cannot support this capabilityB-cart approach: cart resides on buyers PC instead of sellers siteInteroperable interface between heterogeneous e-marketplaces and e-procurement system

The B-Cart

Managing ExchangesRevenue modelsTransaction feesFee for serviceMembership feesAdvertisement feesNetworks of exchangesCentralized managementFinding a CEO and independent management team

Critical Success FactorsEarly liquidityLiquidity refers to volume of business conductedBusinesss chance of survival is best when liquidity is achieved earlyRight ownersPartner with companies that can bring liquidity to the exchangeBest owner may be intermediary that can push both buyers and sellers

Critical Success Factors (cont.)Right governanceGood management and fair /effective operations and rules are criticalGovernance provides:The rules for the exchangeMinimized conflictsDecision making support Good management induces necessary liquidity

Critical Success Factors (cont.)OpennessExchanges must be open to all from:Organizational point of viewTechnical point of viewOpen standards require:Commitment by all involvedUniversal agreement on the standardsUsing the wrong standards can hurt the exchange

Critical Success Factors (cont.)Full range of servicesParticipants are attracted by an exchange that helps cut costsExchanges team up with banks, logistic services and IT companies to helpImportance of domain expertiseMarket makers need an in-depth understanding of: The industryBusiness processes inherent in the industryKnowledge of industry structureGovernment and policy stipulations

Critical Success Factors (cont.)Targeting inefficient industry processesContribute to increased costs and time delaysVertical exchanges can add valueTargeting right industriesLarge base of transactionsMany fragmented buyers and sellersDifficulties bringing together buyers and sellersHigh vendor and product search/comparison costsStrong pressure to cut expenses

Critical Success Factors (cont.)Brand building is criticalIncrease switching costs by adding features and functionalityInvest in:Gaining brand awarenessAttracting businesses to exchangeCustomer retention

Critical Success Factors (cont.)Exploiting economics of scopeValue-added services make exchange compellingIndustry newsExpert adviceDetailed product specification sheetsAdjacent servicesBanks and financial information providersIdentification supported by sophisticated digital certificate architecture

Critical Success Factors (cont.)Garner diverse and multiple revenue streamsSoftware licensingAdvertisingSponsorshipCritical mass of users will garner more value-added servicesAuction servicesFinancial servicesBusiness reportingData mining servicesChoice of business/revenue models

Critical Success Factors (cont.)Blending content, community, and commerceContent and community perspectivestimulate trafficEC transaction perspectivecreates higher level of customer stickinessManaging channel conflictHostile phase as buyers interact directly with sellers (disintermediation of supply chain)Short-term revenues impacted by backlash from existing fulfillment channels result in price erosion affecting medium-term profitability

B2B Networks and ExtranetThe InternetIntranetsintra-business delivery systemsExtranets

An Extranet

Implementation IssuesProblems with exchangesProblems with public exchangesTransaction feesCost savingsRecruiting suppliersToo many exchangesSupply chain improvements

Implementation Issues (cont.)Problems with private exchangesLack of trustLiquidity is questionableSoftware agents in B2B exchangesDisintermediationEvaluating exchanges

Managerial IssuesPlan most secure and economical choice for implementationReview current network and find out if it can be replaced by intranets or extranetsParticipate in which exchange?Determine in which exchange to participate

Managerial Issues (cont.)Joining exchange may require a BPR of internal supply chainChannel conflicts may arise when a company joins an exchangeRisks of joining an exchange must be carefully considered

B2B Support Services

Hewlett Packard Closes thePayment Gap in B2B E-CommerceHP payment solutionseamless electronic B2B paymentTwo components are preintegrated and provide end-to-end automationEmbedded options that establish rules to facilitate direct debit payment optionsBuyer accountsPurchasing limitsCorporate discountingThe system connects all these accounts with their online financial institutions

Hewlett Packard Closes the Payment Gapin B2B E-Commerce (cont.)HP payment solutionThe integrated system reduces cost of: Order processingContract administrationCustomer serviceCaptures and analyzes information that allows company to offer unique purchasing experienceCustomersbest value online experiencePartnershandle complex transactions quickly and securelyEmployeesreduce cost and time for processing

Electronic Commerce Services and AnalysisInsert Fig 8.1 here

EC Services:Overview & Services (cont.)Why outsource B2B services?Desire to concentrate on core businessNeed to have services up and running quicklyLack of expertise for support servicesEconomy of scale for project not possible from insideIn-house options do not keep up with rapidly changing demandsToo many services for one company to handle

EC Services:Overview & Services (cont.)Steps in the process of developing and managing EC applicationsEC strategy formulationApplication designBuilding (or buying) applicationHosting, operating, and maintaining EC

EC Application Development Process

he Evolution of E-Marketplaces

Consulting ServicesE-strategyConsultants help determine which specific EC applications to implementFirst step in infrastructure developmentTechnologyConsultants advise companies on technology issuesEC architectureSecurity

Consulting Services (cont.)Four types of consulting firmsProvide expertise in area of ECTraditional firms that maintain divisions focused on ECA large firm that consists of many small firms that specialize in ECHardware and software vendors that provide consulting services

Application-Building Services and Required StandardsServices that support B2B applicationsUtilized by in-house design teams putting together system that incorporates best-of-breed EC components (building blocks)Vendors and system integrators may do the jobEC components can be:Special-purpose niche tools (tax-calculation)Broad packages that facilitate all aspects of successful transactions online

Application-Building Services and Required Standards (cont.)Industry standardsXML, XSL, and support organizationsEfficient interaction between B2B companies necessitates connection of:ServersApplicationsDatabasesStandard protocols and data representation schemes are needed

Application-Building Services and Required Standards (cont.)Industry standardsXMLimprove compatibility between disparate system by defining meaning of data in business documentsXSL and XML require international agreements and cooperationSupport organizationsUN body for facilitation of ECW3CXML and other EC standardsRosettaNetsupply chain topics

ELECTRONIC COMMERCE SUPPORT SYSTEMS

WEB HOSTING SERVICES: provides large servers for Web sites of fee-paying customer

ELECTRONIC PAYMENT SYSTEMS: using Web for electronic funds transfers, credit , smart & debit cards

Electronic Commerce ServersICAT: on-line catalog shopping, order placement (Icat)

NET.COMMERCE: merchant server supporting Secure Electronic Transactions protocol (IBM)

MerchantXpert:: search tools, order management, tax, payment, logistics modules (Netscape)

Microsoft - Commerce Server 2000

Electronic Commerce Services

OPEN MARKET TRANSACT: customer authentication, order & payment processing, tax, multi-language customer service (Open Market)

INTERNET COMMERCE SERVER: integrates orders, inventory, customer service, payments (Oracle)

Web Hosting and Other ServicesBusiness hostinghosting is popular for SMEs; large businesses need more advanced servicesDedicated serverassigned for specific purpose or customerCo-location (physical location for the server)Free Web hosting attractive option for small start-upsProvider company inserts a banner ad on their siteStarting point for small companyminimize start-up costs

Web Hosting and Other Services (cont.)Sources of information about Web hostingWeb Host Review (hostreview.com): how to select free Web hosting based on various criteriaHost Search (hostsearch.com): search engine recommends best host based on:Monthly costDisk space requirementsMonthly transfer volumeOther WebHosting Magazine (whmag.com):comprehensive information for members of Web hosting industry and those looking for outsources

Web Hosting and Other Services (cont.)

Management service provider (MSP)Deliver IT infrastructure management servicesMultiple customers over networks on a subscription basisSpecialize in e-business and enterprise solutionsSee imspassociation.org and crosscommerce.com

Web Hosting and Other Services (cont.)End-to-end solutionsBuilds Web sites and EC applications from conceptual design to deploymentAlso supply:Payment systemsDelivery managementSite monitoringOther servicesSee bccentral.com and WebVision.com

Participants and Process of Using a Purchasing Card

Financial B2B Services (cont.)Payments (cont.)Electronic letters of creditBenefits to sellerCredit risk reducedPayment highly assuredPolitical/country risk reducedBenefits to the buyerAllows negotiation of lower purchase priceExpansion of supply sources Payment received after document inspected by issuing bank

Financial B2B Services (cont.) Payments (cont.)Payments in B2B global tradingVenture capital to fund e-commerce initiativesInternet incubatorsTax calculation servicesDPCHotSambaSales tax clearinghouseTaxware internationalImplementing tax collection in the U.S.

Financial B2B Services (cont.) Payments (cont.)Other financial servicesCredit reporting firmsNew credit intermediaries broker credit risksAssurance firms guarantee qualityExchanges strike insurance dealsE-credit services

Transaction-Based Financing

Order Fulfillment, Logistics,and Supply Chain ServicesSupply chain managementReengineering & managing complex supply chainsSupplierManufacturerDistributorCustomer Transportation servicesManages complexTransportation networksDedicated fleetsCarriersMultimodel shipmentsUPS Logistics Group

Order Fulfillment, Logistics,and Supply Chain Services (cont.)Parts distributionComprehensive return-and-repairParts distributions operationsLogistics technologiesIntegration of logistics information systemsServices to provide supply chain visibilityEC solutionsLogistics servicesWeb-based businesses worldwideGlobal servicesLogistics facilitiesStaffingExpertise about global commerce

Order Fulfillment, Logistics,and Supply Chain Services (cont.)Call center servicesCustomer careCommunications (call center services to EC capabilities)Financial servicesfull range of financial services that complement:LogisticsTransportingAdditional business needsSolutions for EC initiativesTracking systemsProduct return systemsShipping solutionsE-document exchangeCustomizationEC software/providersE-services/partners

Marketing and AdvertisementAdvertising methods used by offline marketersVertical trade showAds in industry magazinesSalespeople call on: Existing customersPotential buyersDigital advertisersAd server network providerElectronic wholesalers

The Architecture of Ad Server Networks

Affiliate ProgramsAffiliate programs (B2C services)Affiliates invited to put a banner of a vendor on their sitesConsumer clicks on the banner and brings up that companys EC siteCommission paid to affiliate if customer makes a purchase*

InfomediariesInfomediary servicesCollect data about consumer behaviorAnalyze itRepackage itSell the resultsAs marketing and profiling informationPurpose to increase customer loyaltyIdentify likely buyersIncreased salesReduced marketing costs

Online Data Mining ServicesClickstream datadata collected by monitoring what people do onlineAnalyzed and mined to produce useful knowledge used to improve:ServicesMarketing effortsFirms use these services to extend their ability to execute EC a successful strategyNetTrackerWebTrends

Other Marketing ServicesThree examples of other services:Digitalcement.com provides corporate marketing portals; builds stronger relationships with customersVantagenet.com free tools that help ease traffic to a companys Web siteBusinesstown.com has an online directory that enables small businesses to identify and evaluate service companies

Digital Delivery Content Life Cycle

Content Generation, Syndication, Delivery, and Management (cont.)Syndication Content-delivery networks (CDNs)Catalog contentContent management optionsDo it yourselfLet the suppliers do itBuy the content from an aggregatorSubscribe to a vertical exchangeOutsource to full-service Internet exchange

Content Generation, Syndication, Delivery, and Management (cont.)Content maximization and streaming servicescompanies provide media rich content to reach target audienceVideo clipsMusicFlash mediaUse content delivery solutions that do not cause traffic jams with slow download times (e.g., Akamai Corporation)

Directory Services &Search EnginesDirectory servicesB2Business.netB2BToday.comCommunityb2b.comA2zofb2b.comI-stores.co.ukWebsteronline.comThomasregister.comBocal.comB2b.yahoo.comSearch engines and news aggregatorsMoreover.comGoogle.comIentry.comNewsletters

E-CommunitiesE-communitiesChat roomsBulletin boardsPersonalized Web pagesB2B are basically communities of transactionsClassified adsJob vacanciesAnnouncementsIndustry newsE-communities connect:PersonnelPartnersCustomersAny combination of these threeService providersDesign of exchange portalsE-community service

Partner RelationshipManagement (PRM)In B2B environment the partners include:SuppliersPartners in joint venturesService providersPRMrelies on: TrustCommitmentQuality of servicesContinuityStrategy for e-serviceHow much to invest in servicesWhat services to provide

Other B2B ServicesTrust servicesTrust Trademark and domain namesDigital photosGlobal business communitiesClient matching

E-business rating sitesPromotion programsEncryption sitesWeb research servicesCoupon-generating sites

IntegrationIntegration in e-marketplaces and exchangesB2X hubs connect:All Internet business servicesMerchant servicesExchange infrastructureBuying and sellingMember enterprisesOther B2X exchanges

HypermediationHypermediators are:Content providersAffiliate sitesSearch enginesPortalsISPsSoftware makersOther entities

Managerial IssuesWhich services and to what level?Complex decision situation for managers; use:Check out the competitionVendors can provide useful directionRead white papers etc.Hire a reputable EC consultantSelecting service providersPublic ratings and rankings of service providersTalk to others in the industryExamine growth rate of providers businessTry vendor with small projects first

Managerial Issues (cont.)E-infrastructurelarge part of outsourcing funds go to e-infrastructureJoin ventureslook for potential partnerships with service providersEnd-to-end outsourcing vs. best-of-breedComplete end-to-end serviceDifferent vendors for best-of-breed approach