ELC 200 Day 11 2017 Cengage Learning

ELC 200 Day 11 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 1

Agenda • Questions? • Assignment 3 is not corrected yet. I will have corrected by the end of this week • Assignment 4 is posted – Due Oct 13 @ 9: 30 AM(one week ) – assignment#4. pdf • Today, Finish Discussion on Marketing on the Web and Begin Discussion on Business to Business Activities: Improving Efficiency and Reducing Costs © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2

Creating and Maintaining Brands on the Web / Elements of Branding • Branded products easier to advertise and promote – Each product carries reputation of the brand name – Value far exceeds cost of creating them • Rolls Royce, Gucci • Three key brand elements – Product differentiation clearly distinguishes product – Relevance is degree to which product offers utility to a potential customer – Perceived value (key element) occurs when customer perceives a value in buying product • Environmental changes cause brands to lose value © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 3

© Cengage Learning 2017 FIGURE 4 -13 Elements of a brand © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 4

Affiliate Marketing Strategies • One firm’s Web site (affiliate site) includes descriptions, reviews, ratings, other information about a product linked to another firm’s site that offers the item for sale – Affiliate site receives a commission for every visitor who follows a link to the seller’s site • Affiliate saves expense of handling inventory, advertising and promoting product, transaction processing • Amazon. com was one of the first to create a successful affiliate marketing program on the Web © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 5

Affiliate Commissions / Cause Marketing • Pay-per-click pays commission each time a visitor clicks the link and loads the seller’s page • Pay-per-conversion pays when visitor becomes a qualified prospect or customer • Affiliate program broker serves as a clearinghouse for sites interested in affiliate programs • Cause marketing benefits a charitable organization – Affiliate site created to benefit charity • Amazon Smile – Sponsoring company makes a donation when a visitor clinks a link • Higher click-through rates than typical ads © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 6

Amazon Affiliate Fees © Cengage Learning 2015 7

© Cengage Learning 2015 8

Viral Marketing Strategies and Social Media • Viral marketing relies on existing customers to tell prospective customers about products or service – Blue. Mountain Arts electronic greeting cards include a link to the greeting card site • Social media marketing is best done using an indirect approach – Encourage community to discuss the desirability of a product or service – Web site followers on a company’s discussion activity are called fans © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 9

© Cengage Learning 2017 FIGURE 4 -14 Viral marketing through social media © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 10

Search Engine Positioning and Domain Names • Ways that potential customers find Web sites – – – Referral by a friend A link on a referring Web site Referral by an affiliate marketing partner Site’s URL in print advertisement, television Unintentional visit after mistyping similar URL Use of a search engine or directory Web site © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 11

© Cengage Learning 2015 12

Search Engines and Web Directories • Web site that helps people find things on the Web – Spider (crawler, robot, bot) program automatically searches Web for potentially interesting Web pages – Index (database) is the storage element – Search utility takes search terms entered by visitors and finds matching Web page entries • Search engine ranking uses factors to decide which URLs appear first on searches for a search term – Search engine positioning (optimization, placement) is the art and science of having a particular URL listed near the top of a search engine – Often called organic search © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 13

Google Patents © Cengage Learning 2015 14

Paid Search Engine Inclusion and Placement • Paid placement (sponsorship, search term sponsorship) offers the option of purchasing a top listing on results page for a particular search term • Another option is to buy display ad space at the top of search results pages that include certain terms • Search engine positioning is a complex subject – Some sites use search engine placement brokers to sell ads and Google uses their Ad. Words program – Contextual advertising is ads placed in proximity to related content and localized advertising is ads related to location on search results © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 15

FIGURE 4 -15 U. S. online advertising expenditures, actual and projected Source: Adapted from reports by Click. Z, e. Marketer, Forrester Research, Nielsen, and Internet Retailer © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 16

FIGURE 4 -16 Global advertising expenditures by medium, 2016 estimates Source: Adapted from reports by e. Marketer, Nielsen, and Zenith. Optimedia © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 17

Web Site Naming Issues • URLs should reflect company name or reputation – Important part of establishing Web presence • Troublesome domain names can lead to purchasing more suitable domain names – www. iflyswa. com changed to www. southwest. com – www. delta-air. com changed to www. delta. com • Companies often buy more than one domain name to ensure users find the intended site – Prevents problems due to misspelled words – Many companies have different names or forms of names associated with them © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 18

Buying, Selling, and Leasing Domain Names • Artuframe purchased the URL art. com and had a 30% increase in site traffic the next day – When company failed, the domain name was bought by another art company who had a 100% increase in site visitors the first month • Market for domain names continues to be active – Names that include general topic terms often bring high prices – Many invested in highly desirable domain names – Leasing the rights to domain names is an option that is usually done through URL brokers © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 19

https: //sedo. com/us/ © Cengage Learning 2017 FIGURE 4 -17 Domain names that sold for more than $5 million © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 20

URL Brokers and Registrars • Broker sell, lease, auction valuable domain names • Unissued or unused domain names can be purchased from a domain registrar – Internet Corporation for Assigned Names and Numbers (ICANN) maintains accredited registrars list • Registrars offer domain name search tools • Domain name parking (domain name hosting) – Service permitting domain name purchaser to maintain simple Web site so the domain name remains in use – Fees much lower than a typical Web site © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 21

© Cengage Learning 2015 22

CHAPTER 5 Business-to-Business Activities: Improving Efficiency and Reducing Costs © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a. publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Learning Objectives In this chapter, you will learn: • How businesses use the Internet to improve purchasing, logistics, and other support activities • How the Internet facilitates implementation of outsourcing and offshoring business strategies • How electronic data interchange works and how it has evolved using Internet technologies © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 24

Learning Objectives (cont’d. ) • What supply chain management is and how businesses are using Internet technologies to improve it • How the various types of online business marketplaces operate to make B 2 B transactions easier and more efficient © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 25

Introduction • After a year of working in Ghana teaching English, Leila Janah started Samasource in 2008 – Links workers in developing countries with companies who need work done – Has lifted more than 6, 500 African, Asian and Haitian workers above the poverty line – Cost-effective for businesses – Builds worker knowledge and skills in less developed countries and gives low-income workers in developed countries similar opportunities – Use of the Internet to do good around the world © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 26

Outsourcing and Offshoring • Outsourcing is using other organizations to perform specific activities – Typically used for manufacturing • Offshoring is outsourcing done by organizations in other countries – Business process offshoring includes purchasing, research and development, record keeping, information management – Impact sourcing (smart sourcing) is offshoring done by or through not-for-profit organizations © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 27

Purchasing Activities • Identify and evaluate vendors, select specific products, place orders, resolve any issues after receipt of goods or services • Supply chain is the part of industry value chain preceding a particular strategic business unit – Includes all activities undertaken by every predecessor in the value chain to design, produce, promote, market, deliver, support each individual component of a product or service • Traditionally purchasing department buys components at lowest price possible via bidding © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 28

Supply Chain vs Value Chain Manufacture Supply Chain Retailer Supply Chain © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 29

Purchasing Activities (cont’d. ) • Procurement includes all purchasing activities, monitoring all purchase transaction elements and managing and developing supplier relationships – Also called supply chain management • Procurement staff have high product knowledge to identify and evaluate appropriate suppliers – Sourcing is identifying suppliers and determining qualifications – e-sourcing is the use of Internet technologies in sourcing activities © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 30

Purchasing Activities (cont’d. ) • Business purchasing process is more complex than most consumer purchasing processes • Spend is the total yearly dollar amount for goods and services purchased – Managing spend is an important function and can be a key component in overall profitability • Institute for Supply Management (ISM) is the main organization for procurement professionals © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 31

© Cengage Learning 2017 FIGURE 5 -1 Steps in a typical business purchasing process © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 32

Direct vs. Indirect Materials Purchasing • Direct materials become part of finished product • Direct materials purchasing – Replenishment purchasing (contract purchasing) • Company negotiates long-term material contracts – Spot purchasing • Purchases made in loosely organized (spot) market at prevailing price • If demand exceeds contract purchasing estimates • Indirect materials are all other materials company purchases – Includes factory supplies and replacement parts for machinery © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 33

Direct vs. Indirect Materials Purchasing (cont’d. ) • Maintenance, repair, and operating (MRO) supplies are indirect materials purchased on a recurring basis – Standard items (commodities) with price as main criterion • Purchasing cards (p-cards) allow managers to make multiple small purchases with cost-tracking information sent to procurement • Leading suppliers – MRO: Mc. Master-Carr, W. W. Grainger, – Office Depot, Staples, Digi-Key, Newark. com © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 34

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 35

Logistics Activities • Classic objective is to provide the right goods in the right quantities in the right place at the right time • Managing materials, supplies and finished goods – Web and the Internet providing increasing number of opportunities to better manage activities – Third-party logistics (3 PL) provider operates a customer’s materials movement activities • Marriage of GPS and portable computing with the Internet is an example of second-wave e-commerce • Third-wave e-commerce supported by smart phones © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 36

Business Process Support Activities • Finance and administration, human resources (HR), technology development – Human resources, payroll, retirement plan servicing often outsourced by small/midsized companies • Common support activity is training – May be handled by HR or individual departments • Knowledge management is the intentional collection and classification; dissemination of information about a company and its products and processes © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 37

© Cengage Learning 2017 FIGURE 5 -2 Categories of support activities © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 38

E-Government • Use of Internet technologies by governments and government agencies – Enhances functions performed for stakeholders and businesslike activity operations – U. S. government Financial Management Service (FMS) uses Pay. gov to handle activity – Bureau of Public Debt: Treasury. Direct site – Also used in other countries • U. S. states and cities usually have sites – Information about laws and regulations, licenses, jobs, tourism and more © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 39

© 2012 State of California FIGURE 5 -3 State of California portal site © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 40

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 41

Network Model of Economic Organization in Purchasing: Supply Webs • Trend in purchasing, logistics, and support activities is the shift from hierarchical structures toward network structures – Procurement departments being given new tools to negotiate and possibly form strategic alliances • Supply Web is replacing the term “supply chain” – Parallel lines interconnect to form a Web or network configuration • Roots of Web technology for B 2 B transactions lie in a hierarchically structured approach to inter-firm information transfer: electronic data interchange EDI © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 42

Electronic Data Interchange • Computer-to-computer business information transfer using a standard format – Businesses exchanging info are trading partners • EDI compatible firms exchange data in specific standard formats – Often transaction data but can include other information related to transactions • Most B 2 B e-commerce adapted from EDI or based on EDI principles • Dominant technology for electronic B 2 B transactions © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 43

Early Business Information Interchange Efforts • The need to create formal business transaction records began in the late 1800 s and early 1900 s • Companies were using computers for recording internal transactions by the 1950 s – Information flows between companies on paper which was slow, inefficient, redundant and unreliable • In the 1960 s businesses with volume transactions exchanged info on punched cards or magnetic tape – In the 1960 s and 1970 s technologies improved and intercompany information could be transferred over telephone lines (using frame relay technology) © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 44

Early Business Information Interchange Efforts (cont’d. ) • Information transfer agreements between trading partners increased efficiency but not ideal – Incompatible data translation limited participation • Freight and shipping companies joined together in 1968 to create a standardized information set – Used a computer file transmittable to any freight company adopting the standard – Benefits limited to members of industries that created standard-setting groups • Full realization of EDI economies and efficiencies required standards for all companies in all industries © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 45

Emergence of Broader Standards: The Birth of EDI • American National Standards Institute (ANSI) is the coordinating body for standards in the U. S. – Accredited Standards Committee X 12 (ASC X 12) develops and maintains EDI standards – Data Interchange Standards Association (DISA) is the administrative body coordinating ASC X 12 activities – Transaction sets are names of the formats for specific business data interchanges • EDI for Administration, Commerce, and Transport (EDIFACT, or UN/EDIFACT) © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 46

© Cengage Learning 2017 FIGURE 5 -4 Commonly used EDI transaction sets © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 47

How EDI Works • Basic idea: straightforward • Implementation: complicated • Example: – Company replacing metal-cutting machine • Steps to purchase using paper-based system • Steps to purchase using EDI © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 48

Paper-Based Purchasing Process • Buyer and vendor not using integrated software for business processes so each information processing step results in paper document • Must be delivered to department handling next step – Paper-based information transfer • Mail, courier, fax – Information flows shown in Figure 5 -5 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 49

© Cengage Learning 2017 FIGURE 5 -5 Information flows in a paper-based purchasing process © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 50

EDI Purchasing Process • Mail service replaced with EDI network data communications – Paper flows within buyer’s and vendor’s organizations replaced with computers running EDI translation software – Information flows shown in Figure 5 -6 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 51

© Cengage Learning 2017 FIGURE 5 -6 Information flows in an EDI purchasing process © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 52

Value-Added Networks • Trading partners can implement the EDI network and EDI translation processes in several ways • Each way uses one of two basic approaches • Direct connection EDI requires each business to operate its own on-site EDI translator computer – Connected directly to each other using leased lines – Few companies use direct connection EDI because dedicated leased lines are expensive © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 53

© Cengage Learning 2017 FIGURE 5 -7 Direct connection EDI © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 54

Value-Added Networks (cont’d. ) • Company may use a value-added network (VAN) – Receives, stores, forwards electronic messages containing EDI transaction sets • With indirect connection EDI trading partners use VAN to retrieve EDI-formatted messages – Must install compatible EDI translator software – Trading partners pass messages through the VAN instead of directly connecting computers © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 55

© Cengage Learning 2017 FIGURE 5 -8 Indirect connection EDI through a VAN © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 56

Value-Added Networks (cont’d. ) • Advantages of a VAN – Need to support one communications protocol and the VAN provides translation between different transaction sets – VAN performs automatic compliance checking and records message activity in an audit log • Helps establish nonrepudiation: ability to establish that a particular transaction actually occurred • Cost used to be a disadvantage, now much lower – Internet presents low-cost communications medium used by VAN services © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 57

Value-Added Networks (cont’d. ) • EDI on the Internet called Internet EDI, Web EDI, or open EDI – Internet is open architect network • EDIINT (Electronic Data Interchange-Internet Integration, EDI-INT) is the most common protocol for Internet EDI transaction sets • EDI exchanges encoded using AS 2 (Applicability Statement 2) or AS 3 (Applicability Statement 3) – Secure electronic receipts returned to senders for every transaction which helps establish repudiation © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 58

EDI Payments • EDI transaction sets provide instructions to trading partner’s bank • Negotiable instruments, the electronic equivalent of checks • Electronic funds transfers (EFTs) is the movement of money from one bank account to another – Executed using an Automated clearing house (ACH) system which is used by service banks to manage accounts with each other • Operated by U. S. Federal Reserve Banks, private ACHs © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 59

Supply Chain Management Using Internet Technologies • Supply chain management is the job of managing integration of company supply management and logistics activities – Across multiple participants in a particular product’s supply chain – Ultimate goal is to achieve higher-quality or lower-cost product at the end of the chain © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 60

Value Creation in the Supply Chain • Engaging suppliers in cooperative relationships can lead to better, faster, cheaper service to customers – Company goes beyond its limits and creates a new network form among members of the supply chain • Use of technology to improve operational efficiency is supply chain competition – Can help implement management techniques • Just-in-time reduces inventory and lean production focus on eliminating waste and unnecessary processes • Originally developed as a way to reduce cost – Now adds benefits to the ultimate consumer © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 61

Value Creation in the Supply Chain (cont’d. ) • Requires establishment of long-term relationship with a small number of capable tier-one suppliers – Tier-one suppliers develop relationships with tier-two suppliers who provide components and raw materials – Tier-three suppliers provide components and raw materials to tier-two suppliers • Key element is trust among the supply alliance • Buyers expect annual price reductions, quality improvements from suppliers at each stage • Ideally each level of supplier can share the benefits of reduced cost and more efficient operations © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 62

Value Creation in the Supply Chain (cont’d. ) • Key coordination effort is a consistent production strategy adopted by all supply chain participants – How competitive advantage is achieved, such as efficient processing or market-responsive flexibility • Clear communications and quick response are key elements of successful supply chain management • Adaptive supply chain exists when company uses technology to quick respond to change in market demand supplier conditions – Leads to higher efficiency, lower costs and greater profits © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 63

© Cengage Learning 2017 FIGURE 5 -9 Advantages of using Internet technologies in supply chain management © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 64

Increasing Supply Chain Efficiency and Cooperation • Using Internet and Web technologies to manage supply chains can yield increases in efficiency and cooperation throughout the chain – Increase process speed, reduce costs, coordinate design effort and increase manufacturing flexibility – Allows response to changes in quantity and nature of ultimate consumer demand • Using Internet technologies, as Boeing and other firms do, to integrate the design, development, construction, testing, and refinement of products is called collaborative commerce © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 65

Materials-Tracking Technologies • Challenging task to track materials as they move from one company to another or within a company • Optical scanners and bar codes track movement of materials and integration with EDI is now prevalent – Manages inventory flows and forecasts materials needs across the supply chain – Real-time location systems (RTLS) are bar code tracking system used by fulfillment centers • Second wave of electronic commerce includes new types of tracking integrated with Internet-based materials-tracking systems © © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 66

© Cengage Learning 2017 FIGURE 5 -10 Shipping label with bar-coded elements from EDI transaction set 856, Advance Ship Notification © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 67

Materials-Tracking Technologies (cont’d. ) • Radio Frequency Identification Devices (RFIDs) – Small chips using radio transmissions track inventory quicker and more accurately than bar codes – Active RFIDs have their own power supply – Passive RFID tags are inexpensive and small and do not need a power source – Goal is to help reduce lost sales from stockouts • Industry observers believe RFID tagging in retail will become widespread starting in 2017 when many retailers plans to have them in all locations © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 68

© Albert Lozano/Shutterstock. com FIGURE 5 -11 Passive RFID Tag © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 69

© Cengage Learning 2017 FIGURE 5 -12 Key features of bar code, passive RFID, and active RFID technologies © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 70

Creating an Ultimate Consumer Orientation in the Supply Chain • One main goal of supply chain management is to help each company focus on meeting needs of consumer at the end of the supply chain – Ultimate consumer orientation difficult to maintain • Michelin North America pioneered use of Internet technology to go beyond next step in its value chain – 1995: launched online business initiative BIB NET – Allowed dealer access to tire specifications, inventory status, and promotional information • Saved money for Michelin and gave dealers better service making them more likely to recommend tires © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 71

Building and Maintaining Trust in the Supply Chain • Major issue in forming supply chain alliances is developing trust • Key elements are continual communication and information sharing • Internet and the Web provide excellent ways to communicate and share information and offer new avenues for building trust – Provides easy, inexpensive contact with customers – Gives buyers instant access to sales representatives – Provides comprehensive information quickly © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 72

Online Business Marketplaces and Portals • Vertical portals are industry-focused hubs – Offer marketplaces and auctions for contact and business transactions – Doorway (or portal) to the Internet for industry members – Vertically integrated: each hub services just one industry © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 73

Independent Industry Marketplaces • First vertical portals were trading exchanges focused on a particular industry • Independent industry marketplaces – Industry marketplaces: focused on a single industry – Independent exchanges: not controlled by established buyer or seller in the industry – Public marketplaces: open to new buyers and sellers just entering the industry • Ventro opened industry marketplace Chemdex – Trade in bulk chemicals © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 74

Independent Industry Marketplaces (cont’d. ) • By mid-2000 s, more than 2200 independent exchanges – Today fewer than 100 industry marketplaces still operating due to lack of profitability • By 2010, various forms of B 2 B marketplace models gradually replaced independent marketplaces • In 2012 Amazon. com launched Amazon. Supply that is now part of Amazon Business Marketplace • Google followed with Google Shopping for Suppliers, which was later folded into its Google Shopping site © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 75

Private Stores and Customer Portals • Large established sellers feared industry marketplaces would dilute their negotiating power • Many had already invested heavily in Web sites they believed would meet customer needs better – Password protected private stores for major customers with price reductions on some products – Customer portal sites offer private stores along with other services that would be needlessly duplicated in sellers participated in industry marketplaces © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 76

Private Company Marketplaces • Large companies purchasing from relatively small vendors exert power in purchasing negotiations • E-procurement software allows companies to manage purchasing function through Web interface – Automates authorizations, other steps and usually includes marketplace functions • When industry marketplaces opened for business, these large companies were reluctant to abandon their e-procurement software investment – Force suppliers to deal with them on their terms rather than negotiate with industry marketplace © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 77

Private Company Marketplaces (cont’d. ) • Private company marketplace is a marketplace providing auctions, request for quote postings, other features similar to those of e-procurement software – Many have expanded to include functions allowing supply chain participants to manage multiple functions • Manufacturing, tier-one and tier-two suppliers, distribution centers, transportation, orders, invoicing and payment – Expanded arrangements are called private industrial networks or private trading exchanges © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 78

Industry Consortia-Sponsored Marketplaces • Some companies have strong negotiating positions but not enough power to force suppliers to deal with them through a private company marketplace • Industry consortia-sponsored marketplace is a marketplace formed by several large buyers in a particular industry • Characteristics of five general marketplace forms in B 2 B electronic commerce today – Shown in Figure 5 -13 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 79

Adapted from: Raisch, W. 2001. The e. Marketplce, p. 225 FIGURE 5 -13 Characteristics of B 2 B marketplaces © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 80