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Chapter 5 B 2 B E-Commerce: Selling and Buying in Private EMarkets Jason C. Chapter 5 B 2 B E-Commerce: Selling and Buying in Private EMarkets Jason C. H. Chen, Ph. D. Professor of MIS Graduate School of Business Gonzaga University Spokane, WA 99223 USA [email protected] gonzaga. edu ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Learning Objectives 1. Describe the B 2 B field. 2. Describe the major types Learning Objectives 1. Describe the B 2 B field. 2. Describe the major types of B 2 B models. 3. Discuss the characteristics of the sell-side marketplace, including auctions. 4. Describe the sell-side intermediary models. 5. Describe the characteristics of the buy-side marketplace and e-procurement. 6. Explain how reverse auctions work in B 2 B. ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Learning Objectives 7. Describe B 2 B aggregation and group purchasing models. 8. Describe Learning Objectives 7. Describe B 2 B aggregation and group purchasing models. 8. Describe other procurement methods. 9. Explain how B 2 B administrative tasks can be automated. 10. Describe infrastructure and standards requirements for B 2 B. 11. Describe Web EDI, XML, and Web Services. ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

5. 1 Concepts, Characteristics, and Models of B 2 B EC • business-to-business e-commerce 5. 1 Concepts, Characteristics, and Models of B 2 B EC • business-to-business e-commerce (B 2 B EC) Transactions between businesses conducted electronically over the Internet, extranets, intranets, or private networks; also known as e. B 2 B (electronic B 2 B) or just B 2 B ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Focus on e-Business Applications Knowledge Management/Business Intelligence E-Commerce Procurement Network M: 1 Trading Network Focus on e-Business Applications Knowledge Management/Business Intelligence E-Commerce Procurement Network M: 1 Trading Network M: N E-Channel Management 1: N E-Portal Management E-Business, E-Services SCM/ERP/Legacy Appls ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr. Businesses & Consumers (CRM) Businesses (SRM) E-Customer Relationship

Exhibit 5. 1 Generations of B 2 B E-Commerce (Key Drivers for B 2 Exhibit 5. 1 Generations of B 2 B E-Commerce (Key Drivers for B 2 B E-Commerce) Non-IT Application Management Collaboration With Suppliers And Buyer Integration e-Government Collaborative Commerce Personalize And Customize Mobile Commerce e-CRM e-Marketplaces Exchange Publish And Promote Online Ordering B 2 C, B 2 B Actions e-Learning Business values Multichannel 1 st Generation 1998 2 nd Generation 1999 3 rd Generation 2000 4 th Generation 2001 ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr. Internal/External Business Process Management Web Services Intelligent Systems Expert Sales System 5 th (current) Generation 2002 and Beyond

Concepts, Characteristics, and Models of B 2 B EC (cont. ) • B 2 Concepts, Characteristics, and Models of B 2 B EC (cont. ) • B 2 B characteristics – Parties to the transaction • Online intermediary: An online third party that brokers a transaction online between a buyer and a seller; can be virtual or click-and-mortar – Types of transactions • Spot buying: The purchase of goods and services as they are needed, usually at prevailing market prices • Strategic (systematic) sourcing: Purchases involving long-term contracts that are usually based on private negotiations between sellers and buyers ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Concepts, Characteristics, and Models of B 2 B EC (cont. ) • Basic B Concepts, Characteristics, and Models of B 2 B EC (cont. ) • Basic B 2 B transaction types – Sell -side (1: M) One seller to many buyers – Buy -side (M: 1) One buyer from many sellers – Exchanges (M: M) Many sellers to many buyers – Collaborative commerce(M and Connected) and supply chain improvement Communication and sharing of information, design, and planning among business partners ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Concepts, Characteristics, and Models of B 2 B EC ã Pearson/Prentice Hall & Dr. Concepts, Characteristics, and Models of B 2 B EC ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Concepts, Characteristics, and Models of B 2 B EC (cont. ) • Collaborative commerce Concepts, Characteristics, and Models of B 2 B EC (cont. ) • Collaborative commerce (C-commerce) – Communication, design, planning, and information sharing among business partners – To qualify as C-commerce, the activities that are shared must represent far more than just financial transactions (e. g. , design, manufacture, or management) ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Concepts, Characteristics, and Models of B 2 B EC • The Basic Types of Concepts, Characteristics, and Models of B 2 B EC • The Basic Types of B 2 B E-Marketplaces and Services – One-to-many and many-to-one: private e-marketplaces • company-centric EC E-commerce that focuses on a single company’s buying needs (many-to-one, or buy-side) or selling needs (one-to-many, or sell-side) • private e-marketplaces Markets in which the individual sell-side or buy-side company has complete control over participation in the selling or buying transaction - Intermediaries ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Concepts, Characteristics, and Models of B 2 B EC – Many-to-many: exchanges • exchanges Concepts, Characteristics, and Models of B 2 B EC – Many-to-many: exchanges • exchanges (trading communities or trading exchanges) Many-to-many e-marketplaces, usually owned and run by a third party or a consortium, in which many buyers and many sellers meet electronically to trade with each other • public e-marketplaces Third-party exchanges that are open to all interested parties (sellers and buyers) – Supply chain activities and collaborative commerce – B 2 B 2 C ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Concepts, Characteristics, and Models of B 2 B EC • B 2 B Characteristics Concepts, Characteristics, and Models of B 2 B EC • B 2 B Characteristics – Parties to the transaction: sellers, buyers, and intermediaries • online intermediary An online third party that brokers a transaction online between a buyer and a seller; may be virtual or click-and-mortar ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Concepts, Characteristics, and Models of B 2 B EC – Types of materials traded Concepts, Characteristics, and Models of B 2 B EC – Types of materials traded • direct materials Materials used in the production of a product (e. g. , steel in a car or paper in a book) • indirect materials Materials used to support production (e. g. , office supplies or light bulbs) • MRO (maintenance, repair, and operation) Indirect materials used in activities that support production – nonproduction materials. ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Concepts, Characteristics, and Models of B 2 B EC (cont. ) • Direction of Concepts, Characteristics, and Models of B 2 B EC (cont. ) • Direction of trade – Vertical marketplaces: Markets that deal with one industry or industry segment (e. g. , electronics, cars, steel, chemicals) – Horizontal marketplaces: Markets that concentrate on a service, material, or a product that is used in all types of industries (e. g. , office supplies, PCs) ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Concepts, Characteristics, and Models of B 2 B EC • SUPPLY CHAIN RELATIONSHIPS IN Concepts, Characteristics, and Models of B 2 B EC • SUPPLY CHAIN RELATIONSHIPS IN B 2 B – The supply chain process consists of a number of interrelated subprocesses and roles • • Acquisition of materials from suppliers Processing of a product or service Packaging it and moving it to distributors and retailers The eventual purchase of a product by the end consumer – A B 2 B private e-marketplace provides a company with high supply chain power and high capabilities for online interactions ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Concepts, Characteristics, and Models of B 2 B EC • Virtual Service Industries in Concepts, Characteristics, and Models of B 2 B EC • Virtual Service Industries in B 2 B – Travel and hospitality services – Real estate – Financial services – Online stock trading – Online financing – Other online services ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Concepts, Characteristics, and Models of B 2 B EC • Benefits of B 2 Concepts, Characteristics, and Models of B 2 B EC • Benefits of B 2 B – – Eliminates paper and reduces administrative costs. Expedites cycle time Lowers search costs and time for buyers Increases productivity of employees dealing with buying and/or selling • Reduces errors and improves quality of services. – Reduces inventory levels and costs – Increases production flexibility, permitting just-in-time delivery – Facilitates mass customization – Increases opportunities for collaboration ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Concepts, Characteristics, and Models of B 2 B EC • The Limitations of B Concepts, Characteristics, and Models of B 2 B EC • The Limitations of B 2 B – Channel conflict – Operation of public exchanges ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

5. 2 One-to-Many: Sell-Side E-Marketplaces • sell-side e-marketplace A Web-based marketplace in which one 5. 2 One-to-Many: Sell-Side E-Marketplaces • sell-side e-marketplace A Web-based marketplace in which one company sells to many business buyers from e-catalogs or auctions, frequently over an extranet – B 2 B Sellers – Customer Service • Three major direct sales methods: 1. selling from electronic catalogs 2. selling via forward auctions (GM case) 3. one-to-one selling ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

One-to-Many: Sell-Side E-Marketplaces One seller ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr. One-to-Many: Sell-Side E-Marketplaces One seller ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

One-to-Many: Sell-Side E-Marketplaces • Direct Sales from Catalogs – Configuration and customization – Benefits One-to-Many: Sell-Side E-Marketplaces • Direct Sales from Catalogs – Configuration and customization – Benefits and limitations of direct sales from catalogs • The benefits of direct sales are similar to that of B 2 C • Limitations – How to find a buyer – Channel conflicts with their existing distribution systems – The cost to the customers can be high ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

One-to-Many: Sell-Side E-Marketplaces • Direct Sales: The Example of Cisco Systems – Customer service One-to-Many: Sell-Side E-Marketplaces • Direct Sales: The Example of Cisco Systems – Customer service – Online ordering by customers – Tracking order status • Benefits – Reduced operating costs for order taking – Improved quality – Reduced technical support staff cost – Reduced software distribution costs – Faster service ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

One-to-Many: Sell-Side Marketplaces (cont. ) • Major benefits of direct sales are: – – One-to-Many: Sell-Side Marketplaces (cont. ) • Major benefits of direct sales are: – – – – Lower order-processing costs and less paperwork A faster ordering cycle Fewer errors in ordering and product configuration Lower search costs of products for buyers Lower search costs of finding buyers for sellers Sellers can advertise and communicate online Lower logistics costs Ability to offer different catalogs and prices to different customers ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

5. 3 Selling via Intermediaries and Distributors • Manufacturers frequently use intermediaries to distribute 5. 3 Selling via Intermediaries and Distributors • Manufacturers frequently use intermediaries to distribute their products to a large number of buyers, known as distributors • The intermediaries usually buy products from many vendors and aggregate them into one catalog from which they sell • Now, many of these distributors also are selling online ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

5. 4 Selling via Auctions • Using Auctions on the Sell Side – – 5. 4 Selling via Auctions • Using Auctions on the Sell Side – – Revenue generation Cost savings Increased “stickiness” Member acquisition and retention ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Selling via Auctions • Auctioning from the Company’s Own Site – Why should a Selling via Auctions • Auctioning from the Company’s Own Site – Why should a company pay a commission to an intermediary if the intermediary cannot provide the company with added value – If a company decides to auction from its own site, it will have to pay for infrastructure and operate and maintain the auction site ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Selling via Auctions • Using Intermediaries in Auctions – An intermediary may conduct private Selling via Auctions • Using Intermediaries in Auctions – An intermediary may conduct private auctions for a seller, either from the intermediary’s or the seller’s site – A company may choose to conduct auctions in a public marketplace, using a third-party hosting company – Benefits • No additional resources are required • No hiring costs or opportunity costs associated with the redeployment of corporate resources • Offer fast time-to-market • Billing and collection efforts, are handled by the intermediary rather than the company ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Sell-Side Cases I (Cisco) • Direct sales: Cisco Systems – World’s leading producer of Sell-Side Cases I (Cisco) • Direct sales: Cisco Systems – World’s leading producer of routers, switches, and network interconnection services – Cisco’s portal began with technical support for customers and developed into one of the world’s largest direct sales EC sites ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Sell-Side Cases (cont. ) • Customer service – Applications offered: • software downloads • Sell-Side Cases (cont. ) • Customer service – Applications offered: • software downloads • defect tracking • technical advice – 85% of customer service inquiries and 95% of software updates are delivered online • Online ordering by customers – Provides online pricing and configuration tools to customers – 98% are now placed through Cisco Connection Online (CCO) • Order status ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Sell-Side Cases I (Cisco) Summary • Direct Sales: The Example of Cisco Systems – Sell-Side Cases I (Cisco) Summary • Direct Sales: The Example of Cisco Systems – Customer service – Online ordering by customers – Tracking order status • Benefits – Reduced operating costs for order taking – Improved quality – Reduced technical support staff cost – Reduced software distribution costs – Faster service ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Sell-Side Case II - Boeing • B 2 B intermediary: Boeing’s parts marketplace – Sell-Side Case II - Boeing • B 2 B intermediary: Boeing’s parts marketplace – World’s largest maker of airplanes for commercial and military customers – Major goal of Boeing’s intermediary parts market, called PART is supporting customers’ maintenance needs as a customer service – Online strategy is to provide a single point of online access through which airlines (buyers) and the maintenance and parts providers (suppliers) can access data about the parts they need – Began using traditional EDI ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Sell-Side Cases (cont. ) – 1996, Boeing introduced its PART page on the Internet Sell-Side Cases (cont. ) – 1996, Boeing introduced its PART page on the Internet – Customers around the world could • check parts availability and pricing • order parts • track order status – Less than a year later, about 50 percent of Boeing’s customers used PART for parts orders and customer service inquiries ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Sell-Side Cases (cont. ) – Boeing On. Line Data (BOLD) enables mechanics and technicians Sell-Side Cases (cont. ) – Boeing On. Line Data (BOLD) enables mechanics and technicians at the airport to access the technical manuals they need for repairs – These manuals are now available in digital form, and mechanics and technicians can access them via wireline or wireless devices ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Examples of Different B 2 B E-Commerce Sites Used by Organizational Buyers (and Sellers) Examples of Different B 2 B E-Commerce Sites Used by Organizational Buyers (and Sellers) All sellers and buyers at all levels Collaboration Hub Best search tool sites Exchanges “Vertical” depth across firms at different levels of production & distribution process Communities Procurement Hub Catalog site Best search tool sites One of two levels (a seller to a buyer) One business One specific industry “Horizontal” breadth of goods and services ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr. Many industries

Striving for Competitive Advantage • Firm level: Industry & Competitive Analysis – Competitive Forces Striving for Competitive Advantage • Firm level: Industry & Competitive Analysis – Competitive Forces Model – Competitive Strategy • Business level – Value-Chain Analysis ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

PORTER’S FIVE COMPETITIVE FORCES MODEL NEW MARKET ENTRANTS • Switching cost • Access to PORTER’S FIVE COMPETITIVE FORCES MODEL NEW MARKET ENTRANTS • Switching cost • Access to distribution channels • Economies of scale THE FIRM INDUSTRY COMPETITORS • Cost-effectiveness • Market access • Differentiation of product or service • Selection of suppler • Threat of backward integration SUPPLIERS SUBSTITUTE PRODUCTS & SERVICES Threats Bargaining power ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr. Chen, The Trends of the Information Systems Technology • Redefine products and services • Improve price/performance • Buyer selection • Switching costs • Differentiation CUSTOMERS N TM -37

The Five Forces Model and IS • The Five Forces Model provides a way The Five Forces Model and IS • The Five Forces Model provides a way to think about how information resources can create competitive advantage. • Using Porter’s Model, General Managers can: – Identify key sources of competition they face. – Recognize uses of information resources to enhance their competitive position against competitive threats – Consider likely changes in competitive threats over time N ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Porter’s Five Forces Model and Value Chain • The value chain model highlights specific Porter’s Five Forces Model and Value Chain • The value chain model highlights specific activities in the business where competitive strategies can be best applied and where information systems are most likely to have a strategic impact. • Therefore, the value chain model can be employed to identify specific, critical leverage points where a firm can use IT most effectively to enhance its competitive position. ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Figure 1. 6 (2. 4) Process View of the Firm: The Value Chain e Figure 1. 6 (2. 4) Process View of the Firm: The Value Chain e tiv eti mp Co Ad va nta ge (Value) ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr. N

Using Information Resources to Alter the Value Chain • The Value Chain model suggest Using Information Resources to Alter the Value Chain • The Value Chain model suggest that competition can come from two sources: – Lowering the cost to perform an activity and – Adding value to a product or service so buyers will be willing to pay more. • Lowering costs only achieves competitive advantage if the firm possesses information on the competitors’ cost structure • Adding value is a strategic advantage if a firm possesses accurate information regarding its customer such as: which products are valued? Where can improvements be made? When to … ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr. N

The Value System: Interconnecting relationships between organizations Upstream value Firm value ã Pearson/Prentice Hall The Value System: Interconnecting relationships between organizations Upstream value Firm value ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr. Downstream value N

Business Strategies and its Competitive Advantage Differentiation Cost Focus Differentiation Focus Industrial economy Growth Business Strategies and its Competitive Advantage Differentiation Cost Focus Differentiation Focus Industrial economy Growth Particular Segment only (Narrow Target) Cost Leadership Alliance Industry wide (Broad Target) Uniqueness Perceived by Customer Innovation Competitive Scope Lower Cost Position Knowledge-based economy Competitive Mechanism ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr. Chen, The Trends of the Information Systems Technology N TM -43

BREAK-1 • EC Application Case 5. 4: How the State of Pennsylvania Sells Surplus BREAK-1 • EC Application Case 5. 4: How the State of Pennsylvania Sells Surplus Equipment (p. 233) ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

5. 5 One-from-Many: Buy-Side Marketplaces and E-Procurement • Buy-side e-marketplace: A corporate-based acquisition site 5. 5 One-from-Many: Buy-Side Marketplaces and E-Procurement • Buy-side e-marketplace: A corporate-based acquisition site that uses reverse auctions, negotiations, group purchasing, or any other e-procurement method ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

One-from-Many: Buy-Side Marketplaces and E-Procurement (cont. ) • Inefficiencies in traditional procurement management – One-from-Many: Buy-Side Marketplaces and E-Procurement (cont. ) • Inefficiencies in traditional procurement management – Procurement management: The coordination of all the activities relating to purchasing goods and services needed to accomplish the mission of an organization – Maverick buying: Unplanned purchases of items needed quickly, often at non-pre-negotiated, higher prices • e-procurement: The electronic acquisition of goods and services for organizations ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

One-from-Many: Buy-Side E-Marketplaces and E-Procurement • Six Main Types of E-Procurement (see p. 234) One-from-Many: Buy-Side E-Marketplaces and E-Procurement • Six Main Types of E-Procurement (see p. 234) – e-sourcing • Identifying new suppliers for a specific category of purchasing requirements using Internet tech. – e-tendering • Sending requests for information and prices to suppliers and receiving the suppliers’ responses from Internet tech. – e-reverse auctioning – e-informing – Web-based ERP (electronic resource planning) – e-MRO (maintenance, repair and operating) ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

One-from-Many: Buy-Side E-Marketplaces and E-Procurement ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr. One-from-Many: Buy-Side E-Marketplaces and E-Procurement ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Exhibit 5. 5 The E-Procurement Process: A Buyer’s View Search for Vendors and Products Exhibit 5. 5 The E-Procurement Process: A Buyer’s View Search for Vendors and Products E-catalogs, brochures, Conventions, exhibits, Telephone calls, visits. Quality Vendors Which vendors we can do business with? Research firms, financial stability, credit history. Select a Market Mechanism Private, public, auctions, exchange. Initiate a Purchase Order (PO) Electronic form or rigger ready order. One-from-Many: Buy-Side Marketplaces and EProcurement Arrange a pick-up or Receive shipment Check shipping document Tendering system has a special process. Compare and Negotiate Price, financing , delivery, Quality, etc. Make a Purchase (Individual or committee) Have a contract. Arrange payment. Pre-Purchase Activities ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr. Make Payment Approve payment Arrange money transfer. After-Purchase Activities

B 2 B e-Procurement Processes Seller/Supplier e-Marketplaces Supplier Trading Platform Supplier Buyer/Wholesale Buye/r Wholesale B 2 B e-Procurement Processes Seller/Supplier e-Marketplaces Supplier Trading Platform Supplier Buyer/Wholesale Buye/r Wholesale Buyer/Wholesale Trading Platform B 2 B e-Procurement Process System • Order mgt. • Finance mgt. • Shipping mgt. • Customer mgt. 供應鏈 Supply Chain • e-catalogue • inquiry/ negotiation • quick ordering • account mgt. e-procurement process system Material Flow Information Flow Money Flow ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr. 需求鏈 Demand Chain

Benefits of E-Procurement • The Goals and Benefits of E-Procurement – – – Increasing Benefits of E-Procurement • The Goals and Benefits of E-Procurement – – – Increasing the productivity of purchasing agents Lowering purchase prices Improving information flow and management Minimizing the purchases made from non-contract vendors Improving the payment process and savings due to expedited payments – Establishing efficient, collaborative supplier relations – Ensuring delivery on time, every time – Slashing order-fulfillment and processing times by leveraging automation ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Implementing E-Procurement • Implementing e-procurement—major eprocurement implementation issues – Fitting e-procurement into the company Implementing E-Procurement • Implementing e-procurement—major eprocurement implementation issues – Fitting e-procurement into the company EC strategy – Reviewing and changing the procurement process itself – Providing interfaces between e-procurement with integrated enterprisewide information systems such as ERP or supply chain management (SCM) – Coordinating the buyer’s information system with that of the sellers; sellers have many potential buyers – Consolidating the number of regular suppliers to a minimum and assuring integration with their information systems, and if possible with their business processes ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

One-from-Many: Buy-Side E-Marketplaces and E-Procurement • e-sourcing • The process and tools that electronically One-from-Many: Buy-Side E-Marketplaces and E-Procurement • e-sourcing • The process and tools that electronically enable any activity in the sourcing process, such as quotation/tender submission and response, e-auctions, online negotiations, and spending analyses ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

5. 6 Buy-Side E-Marketplaces: Reverse Auctions • One of the major methods of e-procurement 5. 6 Buy-Side E-Marketplaces: Reverse Auctions • One of the major methods of e-procurement is through reverse auctions (tendering or bidding model) request for quote (RFQ): The “invitation” to participate in a tendering (bidding) system • The reverse auction method is the most common model for large MRO purchases as it provides considerable savings ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Exhibit 5. 6 The Reverse Auction Process (Sellers Bid) Posting Bids Invitation (Buyers) Contract Exhibit 5. 6 The Reverse Auction Process (Sellers Bid) Posting Bids Invitation (Buyers) Contract & Purchasing Department Requirement (Bidders/ Sellers) E-mail Bid Invitation Enterprise Web Restricted Evaluation of Bids Bid E-mail Bid (Evaluators) (Sellers) Bid Contract & Purchasing Department Rejection Supplier 1 Bid Evaluation Rejection Supplier 2 Acceptance Supplier 3 Bid ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Reverse Auctions A Pioneer: General Electric’s TPN • Procurement revolution at GE—Trading Process Network Reverse Auctions A Pioneer: General Electric’s TPN • Procurement revolution at GE—Trading Process Network (TPN) Post – With this online system, the sourcing department received the requisitions electronically from its internal customers (i. e. , in the different departments) and sent off a bid package to suppliers around the world via the Internet – The system automatically pulled the correct drawings and attached them to the electronic requisition forms ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Reverse Auctions A Pioneer: General Electric’s TPN (cont. ) • Benefits of TPN – Reverse Auctions A Pioneer: General Electric’s TPN (cont. ) • Benefits of TPN – labor involved in the procurement process declined by 30% – cut by 50% staff involved in the procurement process and redeployed those workers into other jobs – reduced the number of days to complete a contract by half – invoices were automatically reconciled with purchase orders – procurement departments around the world were able to share information about their best suppliers ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Reverse Auctions A Pioneer: General Electric’s TPN (cont. ) • GXS Express Marketplaces is Reverse Auctions A Pioneer: General Electric’s TPN (cont. ) • GXS Express Marketplaces is an expanded system that makes it a public posting place for other buyers – Suppliers gain instant access to global buyers – Dramatically improve the productivity of their bidding and sales activities – Increased sales volume – Expanded market reach and ability to find new buyers – Lower administration costs – Shorter requisition cycle time – Improved sales staff productivity – Streamlined bidding process ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

5. 7 Other E-Procurement Methods • Internal procurement marketplace - The aggregated catalogs of 5. 7 Other E-Procurement Methods • Internal procurement marketplace - The aggregated catalogs of all approved suppliers combined into a single internal electronic catalog - Benefits of internal marketplaces Ø corporate buyers quickly find what they want, check availability and delivery times, and complete an electronic requisition form Ø reduce number of regular suppliers Ø easy financial controls • Desktop purchasing – Direct purchasing from internal marketplaces without the approval of supervisors and without the intervention of a procurement department ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Other E-Procurement Methods (cont. ) • Group purchasing: The aggregation of orders from several Other E-Procurement Methods (cont. ) • Group purchasing: The aggregation of orders from several buyers into volume purchases so that better prices can be negotiated – Internal aggregation—companywide orders are aggregated using the Web and replenished automatically • This system only works for very large firms – External aggregation—provide SMEs with better prices, selection, and services by aggregating demand online and then either negotiating with suppliers or conducting reverse auctions ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Group Purchasing Organization Process [Stage 1 -b] G Confirm (Price OK) . . . Group Purchasing Organization Process [Stage 1 -b] G Confirm (Price OK) . . . [Stage 3] Returns Forecast Demand RFQ Response P u [Stage 2] Shipping / Receiving Orders y … Refund Process O Shipping / Receiving Orders Invoice Payment Returns [Stage 4] Refund Process VPTM : Vender Performance Tracking & Management ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr. B RFQ … S u p p l i e r / S e l l e r RFQ Bid Negotiate Contract Place Orders Process Orders Shipping Orders Receiving Orders Invoicing Payment VPTM [Stage 1 -a] e r

Other E-procurement Methods (cont. ) ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr. Other E-procurement Methods (cont. ) ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Other E-Procurement Methods • Buying from E-Distributors • Purchasing Direct Goods • Electronic Bartering Other E-Procurement Methods • Buying from E-Distributors • Purchasing Direct Goods • Electronic Bartering – bartering exchange – An intermediary that links parties in a barter; a company submits 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 • Buying in Exchanges and Industrial Malls ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

5. 8 Automating B 2 B Tasks • Contract Management – Contract-management software can: 5. 8 Automating B 2 B Tasks • Contract Management – Contract-management software can: • Reduce contract negotiation time and efforts • Facilitate inter- and intracompany contract analysis and development • Provide for proactive contract compliance management • Enable enterprisewide standardization of contracts • Improve understanding of contract-related risks • Provide a more efficient approval process ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Automating B 2 B Tasks • Spend Management – Tools and features may be Automating B 2 B Tasks • Spend Management – Tools and features may be found in spend-management software include: • A data warehouse repository designed to manage data from multiple data sources • Data management of contracts, supplier catalogs, and product content • Data management of pricing • Detailed standard and ad-hoc purchasing activity analysis and report tools • Updates, notifications, and alerts regarding purchasing ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Automating B 2 B Tasks • Sourcing Management and Negotiation – Tools and features Automating B 2 B Tasks • Sourcing Management and Negotiation – Tools and features may be found in sourcing management software include: • Bid comparison, including exports of detailed bid data • User management functions that eliminate data redundancy, simplify data management, and reduce risk to data integrity • Weighted scoring of parameters to calculate the total value offered by suppliers • Total merchandise purchased cost model with bids winners selection and ranking • Reverse auctions and sealed bids, with a full set of features such as proxy bids and bid-time extensions • Negotiation support tools ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

5. 9 Infrastructure, Integration, and Software Agents In B 2 B EC • Infrastructure 5. 9 Infrastructure, Integration, and Software Agents In B 2 B EC • Infrastructure for B 2 B – electronic data interchange (EDI) The electronic transfer of specially formatted standard business documents, such as bills, orders, and confirmations, sent between business partners – 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 (Web) EDI that runs on the Internet and is widely accessible to most companies, including SMEs ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Infrastructure, Integration, and Software Agents In B 2 B EC • Integration – Integration Infrastructure, Integration, and Software Agents In B 2 B EC • Integration – Integration with the existing internal infrastructure and applications – Integration with business partners ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Infrastructure, Integration, and Software Agents In B 2 B EC • The Role of Infrastructure, Integration, and Software Agents In B 2 B EC • The Role of Standards, Especially XML, in B 2 B Integration – XML (e. Xtensible 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 ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Infrastructure, Integration, and Software Agents In B 2 B EC – XBRL A version Infrastructure, Integration, and Software Agents In B 2 B EC – XBRL A version of XML for capturing financial information throughout a business’s information processes. XBRL makes it possible to format reports that need to be distributed to shareholders, SOX regulators, banks, and other parties. The goal of XBRL is to make the analysis and exchange of corporate information more reliable (trustworthy) and easier to facilitate – Web Services An architecture enabling assembly of distributed applications from software services and tying them together ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

Managerial Issues 1. 2. 3. 4. 5. 6. 7. 8. Can we justify the Managerial Issues 1. 2. 3. 4. 5. 6. 7. 8. Can we justify the cost of B 2 B? Which vendor(s) should we select? Which B 2 B model(s) should we use? Should we restructure our procurement system? What are the ethical issues in B 2 B? Will there be massive disintermediation? How can trust and loyalty be cultivated in B 2 B? How is mobile B 2 B done? ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.

BREAK-2 • EC Application Case 5. 6: Reverse Auctions Become a Diplomatic Tool (p. BREAK-2 • EC Application Case 5. 6: Reverse Auctions Become a Diplomatic Tool (p. 241) ã Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Dr.