Introduction to Internet Business Systems

1
Introduction to Internet Business Systems

• B 2 B is the Word!
• Business 2 Business Models, Values, Future
• Prof.Anna Story
• INBS 510

2
A host of acronyms

• EDI
• Electronic data interchange
• ERP
• Enterprise resource planning
• KM
• Knowledge management
• CRM
• Customer relationship management
• EIP
• Enterprise information portal

• SCM
• Supply chain management
• EAI
• Enterprise application intergration
• MRO- most common
• Maintenance repair operations
• RFQ
• Request for quote

3
Rules of E- Business

• Relationships
• Size
• Velocity
• Integration
• Technology
• Partners
• uptime

• Security
• Flexibility
• Bottom line

PC Magazine June 21, 2000
4
More Rules?

• Technology is cause and driver
• Ability to streamline information is the cost
  effective value
• You have to throw out the old business design
• Create flexible outsourcing for cost and customer
  satisfaction

• Listen to customers and become the cheapest, most
  familiar or best
• Use technology for every aspect
• Create E-B Community
• Develop Strong leadership strategy

Kalakota and Robinson 2000
5
Integrate Integrate Integrate

• FedEx-proactive transformation
• Merged with Caliber Logistics
• Obtain the IT system
• The warehouse, fullfillment and shipping for any
  company
• Partner with National Semiconductor
• Dedicated line to FedEx for orders
• fedEx houses inventory, ships, cycle time

6
Future Shock The Innovators Dilemna

• Alvin Toffler in Future Shock stated
• we do nothing at all, do not respond
  quickly or effectively enough in the face of
  demanding change
• Clayton Christensen in The Innovators Dilemna
• disruptive technologies are initially
  rejected by mainstream firms

7
Major Trends Driving E-Business

• Consumer trends
• Services /processes
• Organizational trends
• Enterprise technology trends

8
B2B Broad Spectrum Applications

• Product- specifications, prices and sales history
• Customer- sales history and forecast
• Supplier- product line, lead time, sales terms
  and conditions
• Product process- capacities, commitments and
  plans
• Transportation- carriers, lead times, costs

9
B2B appscont.

• Inventory- levels, carrying costs, locations
• Supply chain partners- key contacts, partners
  roles and responsibilites and schedules
• Competitor- benchmarking, competitive product
  offerings, market share
• Sales and marketing- point of sale, promotions
• Supply chain process and performance- process
  descriptions, performance measures, quality,
  delivery time, and customer satisfaction

10
Supply Chain Management
the coordination of order generation, order
taking, and order fulfillment and distribution of
products, services or information
Kalakota and Whinston, 1997
B2B E-business contributes to lower purchase
cost, reduced inventory, efficiencies, and
decreased sales and marketing costs.
11
eSupply Chain Trends

• Link manufacturers, retailers, customers and
  suppliers
• Streamline the flow
• Manage demand and sourcing globalization
• Customer service, growth and revenue
• Knowledge management

• More responsive to to consumers and the need to
  reduce costs to maintain competitive edge

Integrate
12
Predominent Industry Sectors

• Computing electronics
• Motor vehicles
• Petrochemicals
• Utilities
• Paper/office supplies
• Shipping/warehouse
• Food/agriculture
• See http//www.gs.com ( Feb 15 2001 report)

13
Supply Chain Components

• Upstream
• suppliers
• Internal
• Processing
• Packaging
• Downstream
• Distributors
• customers

14
Procurement
Approval cycle
Create requisition
PO-Approved
Select Product
Submit order
Supplier Fulfillment
To recipient
receiving
Ship

Accounts payable
15
SCM- Distributors, Vendors and Shipment Providers

• Fulfillment JIT inventory
• How does www.dell.com do it?
• Some Solution providers
• www.evolve.com
• www.i2.com
• Check the above out and understand their value

16
E-Procurement Evaluate

• Management control
• Level of empowerment
• Online product selection
• Electronic ordering
• Application integration
• Information and reporting

• www.ariba.com
• ORMS operating resource mgmt
• Eliminates eternal paper chase
• First to market with integrated suite of
  applications
• Production related goods
• Non-production related goods

17
E-procurement

• www.grainger.com
• A distributor
• www.stapleslink.com
• Corporations open accounts and receive discounts
  on orders

18
Benefits of E-Procurement

• Reduced procurement labor
• Reduced materials cost
• Redeployment of staff involved in procurement
• Reducing manual works
• Reduced cycle time
• Automatic reconciliation of invoices with
  purchase orders
• Discovering new suppliers

19
Entities of SCM

• Selling company
• Buying company
• Electronic intermediary
• Deliverer
• Network platform
• Protocols and communication
• Back end information system

20
Characteristics of B2B ec

• Company centric EC
• Selling to customers via electronic auctions
• Purchasing or procurement via electronic bidding
• An attempt to automate the transaction process of
  buying and selling
• Private and public e-marketplaces
• Private- one to Many
• Public- many to many

21
B2B Models

• Company Centric Model either
• Sell side
• Buy side
• Exchange- Marketplace
• Buyers and sellers meet electronically
• Vertical
• Horizontal
• E-Service

22
Buy Side One-from-Many,E-Procurement

• Purchasing agents (buyers)
• Direct purchasing
• Use of material is scheduled
• Not a shelf item
• Indirect purchasing
• MROs
• Nonproduction materials
• Inefficiencies in procurement management of
  indirect materials

23
A Traditional Purchasing Process Flow
Source ariba.com, February 2001.
24
Buy Side One-from-Many,E-Procurement (cont.)

• Innovative procurement management
• Innovative purchasing as strategic approach to
  increase profit margins
• Web facilitation includes
• Electronic tendering
• Volume purchasing
• Aggregating supplier catalogs at buyers site
• Group purchasing
• Others

25
Buy Side One-from-Many,E-Procurement (cont.)

• Goals of procurement reengineering
• Increase purchasing agent productivity
• Lower purchasing prices of items
• Improve information flow and management
• Minimize maverick (unplanned) buying
• Improve payment process
• Streamline purchasing process to make it
• Simple
• Fast

26
Buy Side One-from-Many,E-Procurement (cont.)

• Goals of procurement reengineering (cont.)
• Reduce administrative processing cost per order
• Find new suppliers and vendors to provide
  faster/cheaper goods and services
• Integrate procurement process with budgetary
  control in an efficient and effective way
• Minimize human errors in buying or shipping
  process

27
Buy-Side B2BMarketplace Architecture
28
Buy Side Reverse Auctions

• Pre-Internet Reverse auction process
• Prepare description of product to be produced
• Announce project via ads, mail, telephone
• Send detailed information to interested vendors
• Vendors prepare proposals
• Bidders submit document proposals
• Proposals evaluated
• Problems
• Laws
• Expensive
• Errors

29
Buy Side Reverse Auctions (cont.)

• Web-based reverse auction process
• Buyers prepare bidding project information
• Buyers post project on portal
• Identify potential suppliers
• Invite suppliers to bid
• Suppliers download project information
• Suppliers submit electronic bid
• Reverse auction in real-time, or it can take a
  few days
• Buyers evaluate and award contract

30
Buy Side Reverse Auctions (cont.)

• Web-based reverse auction process
• Benefits
• Electronic process is faster
• Administratively much less expensive
• Enables location of cheapest possible products

31
Procurement Revolution at GE

• TPN at GE Lighting Division
• Purchasing was inefficienttoo many
  administrative transactions
• Process for each requisition took 7 days
• Complex and time-consuming
• Could only send out bids for 2 or 3 suppliers
• Trading Process Network (TPN)electronic bids
• Entire process takes 7 days (for suppliers to
  bid)
• 2 hours to send information to suppliers
• Evaluate and award bids same day

32
Procurement Revolution at GE (cont.)

• Benefits to GE
• Involvement in procurement process
• Labor declined 30
• Material costs declined 5-20--wider base of
  suppliers online
• Redeployment
• 60 of the staff
• Sourcing department concentrates on strategic
  activities instead of paperwork, etc.

33
Procurement Revolution at GE (cont.)

• Benefits to GE
• Time to identify suppliers, prepare a request for
  bid, negotiate a price, and award the contract
• Was 18-23 days
• Now 9-11 days
• Invoices automatically reconciled reflecting
  modifications
• GE procurement departments share information
  about their best suppliers across the world

34
Procurement Revolution at GE (cont.)

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

35
Procurement Revolution at GE (cont.)

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

36
Procurement Revolution at GE (cont.)

• Deployment strategies
• Start EC in one division and slowly go to all
  divisions
• Use the site as public bidding marketplace to
  generate commission income to GE

37
Benefits for Centralized Buy-Side Procurement
Professional

• Spending analysis
• Catalog management
• Contract management
• Approval controls

38
Benefits of Sell Side Procurement

• Delivers a Web Based private trading sales
  channel
• for distributors and manufacturers
• Web storefronts and transaction systems

39
Sell-Side MarketplacesOne-to-Many

• Virtual sellersBigboxx.com.hk of Hong Kong
• B2B office supply retailer services
• Large corporate clients
• Medium corporate clients
• Small offices
• Goalsell products in various SE Asian countries
• Offers more than 10,000 items
• Uses more than 300 suppliers

40
Sell-Side MarketplacesOne-to-Many (cont.)

• Virtual sellersBigboxx.com.hk of Hong Kong
  (cont.)
• Company portal attractive, easy to use
• Browse online catalogs
• Use search engines
• Payments
• Cash or check upon delivery
• Automatic payments
• Credit card
• Purchasing card

41
Sell-Side MarketplacesOne-to-Many (cont.)

• Virtual sellersBigboxx.com.hk of Hong Kong
  (cont.)
• Delivery
• Owns trucks and warehouses
• Delivery scheduled online
• Same day (within an hour)
• Specifically scheduled time
• Ordering system integrated with SAP-based
  back-office system

42
Sell-Side MarketplacesOne-to-Many (cont.)

• Virtual sellersBigboxx.com.hk of Hong Kong
  (cont.)
• Value-added services
• Track status of order
• Check stock availability
• Promotions
• Customized prices
• Group accounts and central approvalfor
  businesses with multiple branches
• Standing orders automatically activated
• Large number of reports and data available

43
Sell-Side MarketplacesOne-to-Many (cont.)

• Direct sales from catalogs
• Configuration and customization
• Efficient customization for direct sales
• Business customers
• Customize products
• Receive price quote
• Submit order
• Successful cases

• Dell
• Intel

• IBM
• Cisco

44
Sell-Side MarketplacesOne-to-Many (cont.)

• Direct sales from catalogs
• Benefits
• Reduces costs (to buyers and sellers) and errors
  during the process
• Speeds up order cycle
• Ability to customize products
• Offer different prices to different customers

45
Sell-Side MarketplacesOne-to-Many (cont.)

• Direct sales from catalogs (cont.)
• Limitations
• Channel conflicts with distribution systems
• High cost when traditional EDI used
• Large number of business partners is needed to
  justify system

46
Selling SideAuctions and Other Models (cont.)

• Billing and collection
• Automatic calculation of shipping weights and
  charges
• Paymentencrypted credit card data
• Billing informationeasily downloaded into
  existing systems
• Successful if
• Sufficient number of loyal customers
• Products well known
• Price not major purchasing criteria

47
Sell-Side CaseCISCO Connection Online (CCO)

• Benefitssaves the company 363 million per year
  in
• Technical support
• Human resources
• Software distribution
• Marketing material

48
Cisco Connection Online (CCO) (cont.)

• Customer serviceCisco Connection online
• Online orderingInternet Product Center builds
  virtually all products to order
• Order statuscustomer tools for finding answers
  to order status inquiries

49
Cisco Connection Online (CCO) (cont.)

• Benefits to Cisco
• Reduced operating costs for order taking
• Enhanced technical support and customer service
• Reduced technical support staff cost
• Reduced software distribution costs
• Lead times reduced fro 4-10 days to 2-3 days

50
Cisco Connection Online (CCO) (cont.)

• Benefits to customers
• Quick order configuration
• Immediate cost determination
• Collaboration with Cisco staff

51
Sell-Side Intermediaries

• Marshall Industries(a subsidiary of
  AvnetMarshall) multinational distributor of
  electronic components known for its innovative
  uses of IT and the Web
• Products and services
• MarshallNet
• Marshall on the Internet (portal)
• Strategic European Internet
• Electronic Design Center
• PartnerNet
• NetSeminar
• Education and News Portal

52
Sell-Side Intermediaries (cont.)

• Marshall Industriesa subsidiary or AvnetMarshall
  (cont.)
• Survival strategy
• Continuous improvement programs and innovations
• Team-based organization, flat hierarchy,
  decentralized decision making
• Profit sharing compensation for salespeople

53
Sell-Side Intermediaries (cont.)

• Marshall Industriesa subsidiary of AvnetMarshall
  (cont.)
• Survival strategy
• CRM highly promoted
• Web-based services create value between suppliers
  and customers
• EC initiatives supported by
• Changing internal organization
• Changing internal procedures

54
Sell-Side Intermediaries (cont.)

• Boeings PART
• Acts as an intermediary between the airlines and
  parts suppliers
• Provides a single point of online access through
  which airlines and parts providers can access
  the data needed
• Goal provide its customers with one-stop
  shopping for online parts and maintenance
  information and ordering capability

55
Sell-Side Intermediaries (cont.)

• Boeings PART
• Spare parts business using traditional EDI
• Mechanic tells purchasing department parts are
  needed, purchase is approved, purchase is made
• Large airlines connect to Boeing's VAN
• Boeing finds part and delivers
• Debut of PART on the Internet
• Encourages customers to order parts
  electronicallycheap, easy, fast
• 50 of customers using Internet within first year

56
Sell-Side Intermediaries (cont.)

• Boeings PART
• Benefits of PART online
• Improved customer service
• Significant operating savings
• New sales opportunities
• Customer service online reduced
• Phone calls (purchasing, order status etc.)
• Data entry

57
Sell-Side Intermediaries (cont.)

• Boeings PART
• Portable access to technical drawings/support
• Boeing On Line Data (BOLD) provides availability
  to
• Engineering drawings
• Manuals
• Catalogs
• Other technical information
• Portable Maintenance Aid (PMA)solves maintenance
  problems

58
Sell-Side Intermediaries (cont.)

• Boeings PART
• Benefits to Boeings customers
• Increased productivityless time searching for
  information
• Reduced costsdelays at gate reduced because all
  information is available
• Increased revenuesfaster service provides time
  savings

59
Business Models

• Auction Model
• Storefront Model
• Portal model
• Horizontal portals
• Vertical portals vortels
• Dynamic pricing model
• B2B E-commerce and EDI
• Click and Mortar

All fall into buyer, seller or intermediary catego
ries.
60
Business Models- Remember

• Supplier oriented marketplace
• I got something to sell!!! Can be successful if
  supplier has sufficient number of loyal business
  customers and frequency of orders is not
  formidable ( from their point of view)
• Intel
• Cisco
• Online customer service- tools for questions
• Online ordering/ tech support
• Order status
• Builds to order

61
Supplier Oriented Market cont.

• Benefits of this market
• Reduced operating costs
• Enhanced service
• Reduced cost of support staff
• Reduced software distribution costs(download)
• Some others
• IBM
• Dell

62
Business Models

• Buyer oriented marketplace
• I got to buy something!
• GE
• TPN-Trading Process Network for procurement of
  contracts- requests start on Intranet and go out
  over Extranet or Internet
• Now a public bidding site. www.tpn.geis.com

63
Buyer Oriented Marketplace

• The process
• Buyers prepare bidding info
• Buyers post RFQ
• Buyers identify potential suppliers
• Invite suppliers
• Suppliers download info
• Submit bids
• Buyers evaluate
• Buyers accept bid
• What are the benefits for sellers and buyers??

64
Business Models

• Intermediary oriented marketplaces
• Im selling and Youre buying- lets meet!
• Buyers and sellers meet
• E-malls
• E-stores
• Vertical portals- Vortals
• www.bio.com
• www.Motorplace.com
• www.partminer.com
• www.verticalnet.com hosts communities for
  industries
• www.freemarket.com