CIS Exam 3
Trends in B2B E-commerce
Flexibility: growing emphasis on rapid-response and optimal supply chains Supply chain visibility—real time Social/mobile commerce and customer intimacy Large firms splinter global B2B systems into productand region-centered systems Big data and growing use of business analytics Influence of mobile, social, and cloud platforms Sustainable supply chains
Potential Benefits (cont.)
Improved quality of products by increasing cooperation among buyers and sellers Decreased product cycle time Increased opportunities for collaboration Greater price transparency Increased visibility, real-time information sharing Some risk is posed by Increased: Globalization and Consolidation
E-procurement Net Marketplaces
Independently owned intermediaries Connect hundreds of suppliers of indirect goods Firms pay fees to join market Long-term contractual purchasing of indirect goods Revenues from transaction fees, licensing consultation services and software, network fees Offer value chain management services Many-to-many market e.g., Ariba (Spend Mgmt)
Exchanges
Independently owned online marketplaces Connect hundreds to thousands of suppliers and buyers in dynamic, real-time environment Vertical markets, spot purchasing in single industry Charge commission fees on transaction Variety of pricing models Tend to be buyer-biased Suppliers disadvantaged by competition Many have failed due to low liquidity
Online Publishing Industry
$102 billion based originally in print, moving rapidly to Internet Three segments: 1. Online newspapers 2. E-books 3. Online magazines
The retail industry
7 segments (clothing, durable goods, etc.) For each, uses of Internet may differ Information vs. direct purchasing General merchandisers vs. specialty retailers Mail order/telephone order (MOTO) sector most similar to online retail sector Sophisticated order entry, delivery, inventory control systems ALREDY in Place
Defining B2B Commerce
B2B commerce: All types of computer-enabled inter-firm trade Before Internet, B2B transactions called trade or procurement process B2B e-commerce: The portion of B2B commerce enabled by the Internet Supply chains Organizations, people, business processes, technology, information required to produce products efficiently Often global
Challenges of E-book Platform
Cannibalization Fewer physical sales More e-book sales, more purchases of readers Finding the right business model Wholesale model Retailers pay wholesale price and establish retail price Agency model Distributor as agent must charge publisher's retail price Pricing Control: Amazon .vs. Hachette Evolution: Amazon Kindle
B2B In the Cloud
Cloud-based B2B systems Shift much of the expense of B2B systems from firm to B2B network provider (data hub or B2B platform) Cloud platform owner provides Computing/telecommunications capabilities Software Connectivity Data cleansing and quality File storage Network effects: Costs spread out over all members Cloud-based solutions can be implemented rapidly
Multi-tier Supply Chain
Complex series of transactions between firm and thousands of suppliers, supplying thousands of goods Challenges: Supply chain visibility Demand forecasting Production scheduling Order management Logistics management
Implementation Barriers
Concerns about sharing of proprietary, sensitive data Integration of private industrial networks into existing ERP systems and EDI networks difficult, expensive Requires change in mindset and behavior of employees and suppliers All participants lose some independence
Social Networking Sites
Conduit of Cyber Bullying Impact: Crowd Behavior Depression Isolation Suicide
Online Communities: Trust
Do we Trust the Content, the Poster? What do others want from US and our contacts? Friends-n-Followers?
Online mortgage and lending services
Early entrants: Simply & Expedite Goals Kinds of online mortgage vendor today 1. Established online banks, brokerages, and lending organizations 2. Traditional mortgage vendors 3. Pure online mortgage firms Online mortgage industry has not transformed process (Complex)
Online real estate services
Early vision: Disintermediation of a complex industry However, major impact is influencing of purchases offline Impossible to complete property transaction online Main services are online property listings, loan calculators, research and reference material, with mobile apps increasing
Types of Procurement
Firms purchase two types of goods: 1. Direct goods: Integrally involved in production process 2. Indirect goods: All goods not directly involved in production process Firms use two methods to purchase: 1. Contract purchasing: Long-term written agreements to purchase specified products, with agreed-upon terms and quality 2. Spot purchasing: Purchase of goods based on immediate needs in larger marketplace
Types of Procurement
Firms purchase two types of goods: 1. Direct goods: Integrally involved in production process 2. Indirect goods: All goods not directly involved in production process Firms use two methods to purchase: 1. Contract purchasing: Long-term written agreements to purchase specified products, with agreed-upon terms and quality 2. Spot purchasing: Purchase of goods based on immediate needs in larger marketplaces that involve many suppliers
Industry Consortia
Industry-owned vertical markets Purchase direct inputs from invited participants Emphasize long-term contractual purchasing, stable relationships, creation of data standards Ultimate objective: Unification of supply chains within entire industries through common network and computing platform Revenue: Transaction & Subscription fees Can force suppliers to use the networks
Multi/Omni Channel integration
Integrating Web operations with traditional physical store operations Provide integrated shopping experience Leverage value of physical store Types of integration Online order, in-store pickup Web promotions to drive customers to stores Gift cards usable in any channel Increasing importance of mobile devices, social commerce, and tablets (Ultimate Shopping Machine)
Supply Chain Simplification
Reducing size of supply chain Working with strategic group of suppliers to reduce product and administrative costs and improving quality Essential for just-in-time production models (lower cost/keep high satisfaction) involving: Joint product development and design Integration of computer systems Tight coupling precise delivery of ordered parts at specific times
Impact of the Internet
Spend relatively less time with traditional media Consume more media of all types than non-Internet users often "multitask" with media consumption Physical products have been replaced by digital
Online career servicees
Top sites generate over $1 billion annually Solutions: Traditional recruitment tools: Classified, print ads, career expos, on-campus recruitment, staffing firms, internal referral programs Online recruiting More efficient, cost-effective, reduces total time-to-hire Enables job hunters to more easily distribute resumes while conducting job searches Ideally suited for Web due to information-intense nature of process Social Media: LinkedIn!
Service industries 2 categories
Transaction brokers Hands-on service providers Features: Knowledge- and information-intense Makes them uniquely suited to ecommerce applications Personalization and customization Level differs depending on type of service, e.g., medical vs. financial
E-tailing business models
Virtual merchant Amazon, eBay Omni-Channel (Bricks and clicks) Walmart, J.C. Penney, Sears, Victoria Secret, BestBuy Catalog merchant (old MOTO) Lands' End, L.L. Bean, Lilian Vernon Manufacturer-direct Dell, Apple, Sony with Channel Conflicts Moving from Supply-Push to Demand-Pull
SCM: Supply Chain Management IMMEDIATE IMPACT?
Volcano's: Iceland (2010), Chilie (2015) Nepal Earthquake (Apr 2015) Nov 2014 NE Early Snow Storms Gulf Coast: Rita/Katrina, BP Oil Spill Japan Tsunami and Thailand Flooding Spring 2016: TX Flooding & Hailstorms SA: Toyota SA, HEB SA: TX most costliest: $14bil SA Hail Damage East TX: Constant Flooding
Net Marketplaces
Ways to classify Net marketplaces: Pricing mechanism, nature of market served, ownership By business functionality What businesses buy (direct vs. indirect goods) How businesses buy (spot purchasing vs. longterm sourcing) Four main types E-distributors E-procurement Exchanges Industry consortia
What Is an Online Social Network?
Working definition Group of people Shared social interaction Common ties Sharing an area for period of time Portals and social networks: Moving closer together Oversharing and/or Stalking Community sites adding portal-like services Searching, news, e-commerce services
Characteristics of Net Marketplaces: A B2B Vocabular
-Bias Sell-side vs. buy-side vs. neutral. Whose interests are advantaged: buyers, sellers, or no bias? -Ownership Industry vs. third party. Who owns the marketplace? -Pricing mechanism Fixed-price catalogs, auctions, bid/ask, and RFPs/RFQs. -Scope/Focus Horizontal vs. vertical markets. Value creation What benefits do they offer customers or suppliers? -Access to market In public markets, any firm can enter, but in private markets, entry is by invitation only
Cannibalization vs. Complementarity
Does time on Internet reduce time spent with other media? Books, newspapers, magazines, phone, radio Massive shift of audience to Web/Tables/Smartphones
Bring your own device (BYOD) policy
Employees use their personal smartphone, tablet, or laptop computer on the company's network
Four factors required to charge for online content
Focused market Specialized content Sole source monopoly High perceived net value Portion of perceived customer value that can be attributed to fact that content is available on the Internet
private industrial networks (private trading exchange, PTX)
Internet-based communication environments that extend far beyond procurement to encompass truly collaborative commerce
Service industries
Largest/Rapidly Expanding Tasks in/around households & businesses
The SHARING Economy
Major service industry groups: Business services: consulting, advertising, marketing Professional services—legal, accounting Finance, Insurance, Real estate Travel Health services Educational services
Digital Content Delivery Models
Online content delivery revenue models Subscription A la carte Advertising supported (free/freemium) Free content can drive users to paid content Users increasingly paying for high-quality, unique content
net margin
The percentage of its gross sales revenue the firm is able to retain after all expenses are deducted; calculated by dividing net income by net sales revenue
automated order entry systems
involve the use of the telephone modems to send digital orders
Social network
involves a group of people, shared social interaction, common ties among members, and people who share an area for some period of time
social TV
involves consumers sharing comments via social networks while viewing television
contract purchasing
involves long term written agreements to purchase specified products, under agreed-upon terms and quality, for an extended period of time
supply chain simplification
involves reducing the size of the supply chain and working more closely with a smaller group of strategic supplier firms to reduce both product costs with improving quality
spot purchasing
involves the purchase of goods based on immediate needs in larger marketplaces that involve many suppliers
sustainable supply chain
involves using the most efficient environment-regarding means of production, distribution and logistics
collaborative resource planning, forecasting, and replenishement (CPFR)
involves working with network members to forecast demand, develop production plans, and coordinate shipping, warehousing, and stocking activities to ensure that retail and wholesale shelf space is replenished with just the right amount of goods
long-term debt
liabilities that are not due until the passage of a year or more
horizontal markets
market that serve many different industries
industry convergence
merger of media enterprises into synergistic combinations that create and cross-market content on different platforms
english auction
most common form of auction; the highest bidder wins
UltraViolet
movie industry proof of DVD purchase program that allows playback of DVDs to any digital device
channel conflict
occurs when retailers of products must compete on price and currency of inventory directly against the manufacturers
interest-based social networks
offer members focused discussion groups based on a shared interest in some specific topic
practice networks
offer members focused discussion groups, help, information, and knowledge relating to an area of shared practice
affinity communities
offer members focused discussions and interaction with other people who share the same affinity
general communities
offer members opportunities to interact with a general audience organized into general topics
legacy computer systems
older mainframe systems used to manage key business processes within a firm in a variety of functional areas
vertical market
one that provides expertise and products for a specific industry
accountable supply chian
one where the labor conditions in low-wage, underdeveloped producer countries are visible and morally acceptable to ultimate consumers in more developed industrial societies
B2B e-commerce web site
online catalog of products made available to the public marketplace by a single supplier
sponsored communities
online communities created for the purpose of pursuing organizational (and often commercial) goals
liabilities
outstanding obligations of the firm
paywall
paid subscription service
metered subsription
paid subscription service where some content is offered for free to a freemium revenue model
wholesale model
prices are determined by the retailer
trans-organizational
process that requires at least two independent firms to perform
supply-push model
products are made prior to orders received based on estimated demand
demand -pull model
products are not built until and order is received
MRO goods
products for maintenance, repair, and operations
electronic data interchange (EDI)
a communications standard for sharing business documents and settlement information among a small number of firms
tight coupling
a method for ensuring that suppliers precisely deliver the ordered parts, at a specific time and particular location, to ensure the production process is not interrupted for lack of parts
just-in-time production
a method of inventory cost management that seeks to reduce excess inventory to a bare minimum
link visitor
a person who comes to a news site following a link from another site
lean production
a set of production methods and tools that focuses on the elimination of waste throughout the value chain
magazine aggregator
a web site or app that provides subscriptions and sales of many digital magzines
transaction brokering
acting as an intermediary to facilitate a transaction
indirect goods
all other goods not directly involved in the production process
B2B commerce
all types of inter-firm trade
adaptive supply chain
allows companies to react to disruptions in the supply chain in a particular region by moving production to a different region
online social network
an area online, where people who share common ties can interact with one another
Types of Social Networks and their Business Models
and their Business Models General communities: Offer opportunities to interact with general audience organized into general topics Advertising supported by selling ad space on pages and videos Practice networks: Offer focused discussion groups, help, and knowledge related to area of shared practice May be profit or nonprofit; rely on advertising or user donations
Coporate online booking solutions (COBS)
provide integrated airline, hotel, conference center, and auto rental services at a single site
balance sheet
provides a financial snapshot of a company of a given date and shows its financial assets and liabilities
e-distributor
provides an online catalog that represents the products of thousands of direct manufacturers
Dutch internet auction
public ascending price, multiple unit auction. FInal price is lowest successful bid, which sets price for all higher bidders.
current assets
assets such as cash, securities, accounts receivable, inventory or other investments that are likely to be able to be converted to cash within one year
general purpose portals
attempt to attract a very large audience and then retain the audience on-site by providing in-depth vertical content
assets
refer to stored value
walled garden
refers to a kind of DRM that uses proprietary file formats, operating systems, and hardware to control the use of content after initial sale
supply chain management (SCM)
refers to a wide variety of activities that firms and industries use to coordinate the key players in their procurement process
economic viability
refers to the ability of firms to survive as profitable business firms during a specified period
Digital rights management (DRM)
refers to the combination of technical and legal means for protecting digital content from unlimited reproduction without permission
Omni channel
retailers that sell products through a variety of channels and integrate their physical stores with their web site and mobile platform
seller-side solutions
seller-biased markets that are owned by, and show only good from, a single seller
vertical market portals
attempt to attract highly focused, loyal audiences with a deep interest in either community or specialized content
Consumer-to-consumer (C2C) auctions
auction house acts as an intermediary market maker, providing a forum where consumers can discover prices and trade
Name your own price auction
auction where users specify what they are willing to pay for goods or services
penny (bidding fee) auction
bidder must pay a non-refundable fee to purchase bids
Net Marketplace
brings hundreds to thousands of suppliers and buyers into a single internet-based environment to conduct trade
business-to-consumer (B2C) auctions
business sells goods it owns, or controls, using various dynamic pricing models
buyer-side solutions
buyer-biased markets that are owned by buyers and that aim to reduce the procurement costs of supplies for buyers
operating margin
calculated by dividing operating income or loss by net sales revenue
cloud-based B2B system
shifts much of the expense from the firm to a B2B network provider sometimes called a data hub or B2B platform
manufacturer-direct
single or multi-channel manufacturers who sell directly online to consumers without the intervention of retailers
virtual merchants
single-channel web firms that generate almost all of their revenue from online sales
financial portals
sites that provide consumers with comparison shopping services independent financial advice, and financial planning
bricks-and-clicks
companies that have a network of physical stores as their primary retail channel, but have also introduced online offerings
seller's lament
concern that one will never know how much the ultimate winner might have paid, or the true value to teh final winner
technological convergence
development of hybrid devices that can combine the functionality of two or more existing media platform into a single device
supply chain competition
differentiating a firm's products or prices on the basis of superior supply chain management
EST (electronic sell-through)
downloading movies to consumers for home or cloud storage
catalog merchants
established companies that have a national offline catalog operation that is their largest retail channel, but who have recently developed online capabilities
working capital
firm's current assets minus current liabilities
direct goods
goods directly involved in the production process
gross margin
gross profit divided by net sales
enterprise portals
help employees navigate to the enterprise's human resource and corporate content
iVOD (Internet video on demand)
streaming video to consumers for a subscription fee
hub-and-spoke system
suppliers connected to a central hub of buyers via private dedicated networks
B2B e-commerce (B2B digital e-commerce)
that portion of B2B is enabled by the internet an mobile apps
net value
that portion of perceived customer value that can be attributed to the fact that content is available on the internet
multi-tier supply chain
the chain of primary, secondary, and tertiary suppliers
loser's lament
the feeling of having been too cheap in bidding and failing to win
supply chain
the links that connect business firms with one another to coordinate production
account aggregation
the process of pulling together of a customers financial (and even nonfinancial) data at a single personalized web site
agency model
the retailer is an agent and prices are set by the manufacturer
herd behavior
the tendency to gravitate toward, and bid for, auction listings with one or more existing bids
collaborative commerce
the use of digital technologies to permit organizations to collaboratively design, develop, build, and manage products through their life cycles
winner's regret
the winner's feeling after an auction that he or she paid too much for an item
liquidity
typically measured by the number of buyers and sellers in a market, the volume of transactions, and the size of transactions
over-the-top (OTT)
use of the internet to deliver entertainment services to the home on cable TV or FiOS networks
Digital leakage
where paid for and downloaded content is redistributed via e-mail or posted for few viewing on a Web site
Types of Social Networks and Their Business Models (cont.)
Interest-based social networks: Offer focused discussion groups based on shared interest in some specific subject Usually advertising supported Affinity communities: Offer focused discussion and interaction with other people who share same affinity (self or group identification) Advertising and revenues from sales of products Sponsored communities: Created by government, nonprofit, or for-profit organizations for purpose of pursuing organizational goals
Social Networks and Online Communities
Internet began as communications medium for military/science/research Early communities were bulletin boards & newsgroups Today social networks (we already know): photo/video sharing, blogs have created new era of online socializing one of most common Internet activities "Addictive" Behavior (24x7)
SCM: Just-in-Time
Just-in-Time production Method of inventory cost management Seeks to eliminate excess inventory to bare minimum
Accountable Supply Chains
Labor conditions in low-wage, under -developed producer countries are acceptable to consumers Slave/forced & child labor Routine exposure to toxic substances More than 48 hrs/week Harassment, abuse & sexual exploitation Adequate compensation Efforts to make global SCM more accountable and transparent to reporters & citizens
Service sector:
Largest and most rapidly expanding part of economies of advanced industrial nations Concerned with performing tasks in and around households, business firms, and institutions Includes doctors, lawyers, accountants, business consultants, etc. Employs 4 out of 5 U.S. workers 75% of economic activity
SCM: Lean Production/Manufacturing
Lean production/manufacturing Set of production methods and tools Focuses on elimination of waste throughout customer value chain, not just inventory
The Role of Existing Legacy Computer Systems
Legacy computer systems Generally, older mainframe and minicomputer systems used to manage key business processes within firm MRP: Materials Requirements Planning ERP: Enterprise Resource Planning Enterprise systems Corporate-wide Support/control all aspects of production: Procurement Finance Human resources
Benefits of B2B E-commerce
Lower administrative costs Lower search costs for buyers Reduced inventory costs Increasing competition among suppliers Reducing inventory carried Lower transaction costs: Automation, eliminating paperwork Increased production flexibility by ensuring just-in-time parts delivery
Major trends in online marketing
Mobile commerce exploding Social networks experiment with social commerce Online retail still the fastest growing retail channel Buying online a normal, mainstream experience Selection of goods increases, includes luxury goods Informational shopping for big-ticket items expands Specialty retail sites show rapid growth Integration of multiple retailing channels Big Data used for predictive marketing
Mobile B2B
Mobile devices increasingly important in all aspects of B2B e-commerce Used in all phases of purchase process Over 50% of B2B decision makers use mobile devices to research products Users increasingly expect B2B e-commerce sites to be accessible from mobile devices Bring Your Own Device (BYOD) policies Supply chain software and network providers providing support for mobile platform
E-distributors
Most common type of Net marketplace Electronic catalogs representing products of thousands of direct manufacturers Typically, independently owned intermediaries Offer industrial customers single source to purchase indirect goods on spot basis Typically, horizontal Usually, fixed price—discounts for large customers
The retail sector
Most important theme in online retailing is effort to integrate online and offline operations ESPECIALLY: Buy Online - Pickup In-Store w/i 1hr $17 trillion U.S. Economy 69% is for Personal consumption (Goods/Svcs) "Goods" vs. "services" ambiguity
Characteristics of Private Industrial Networks
Objectives include: Efficient purchasing and selling industry-wide Industry-wide resource planning to supplement enterprisewide resource planning Increasing supply chain visibility Closer buyer-supplier relationships Global scale operations Reducing industry risk by preventing imbalances of supply and demand Focus on continuous business process coordination Typically, focus on single sponsoring company that "owns" the network
Online mortgage and lending services
Online term life insurance: One of few online insurance with lowered search costs, increased price comparison, lower prices Commodity Most insurance not purchased online Online industry geared more toward Product information, search Price discovery Online quotes Influencing the offline purchasing decision
Private Industrial Networks
Private trading exchanges (PTXs) Web-enabled networks for coordination of trans-organizational business processes (collaborative commerce) Direct descendant of EDI; closely tied to ERP systems Manufacturing and support industries Single, large manufacturing firm sponsors network Ranges from single firm to entire industry e.g., Procter & Gamble
The Procurement Process and the Supply Chain
Procurement process: The way firms purchase materials they need to make products Supply chain: Firms that purchase goods, their suppliers, and their suppliers' suppliers, relationships and processes involved Steps in procurement process Deciding who to buy from and what to pay Completing transaction
Social Network Features and Technologies
Profiles Friends network Network discovery Favorites Games Widgets Apps E-mail Storage Slide 11-16 Instant messaging Message boards Online polling Chat Discussion groups Experts online Membership management tools
Adaptive Supply Chains
Reducing centralization Reduce risks caused by relying on single suppliers who are subject to local instability e.g., European financial crisis, Japanese earthquake Creating regional or product -basedsupply chains Allowing production to be moved to temporary safe harbors in case of local manufacturing disruptions Focus on "optimal-cost", distributed manufacturing, and flexible supply chains that can shift to low-risk area
When GOOGLE initially acquired YouTube - they were LOSING up to $1.65M a Day on:
1. Bandwidth (in and out) $1million / day 2. Content Acquisition 3. Revenue Sharing 4. Data Center (Storage, power, HW & SW....) 5. Overhead to run it as a business
The strategic factors that pertain specifically to the firm and its related businesses include:
-Firm value chain - Core competencies - Synergies -Technology -Social and legal challenges
Financial analysis
-Revenues - Cost of sales - Gross Margin - Operating expenses -Operating margin - net margin
The key industry strategic factors are
-barriers to entry -power of suppliers - power of customers - existence of substitute products - Industry value chain - nature of intra-industry competition
Ecommerce retail: the vision
1. Reduced search and transaction costs; customers able to find lowest prices 2. Lowered market entry costs, lower operating costs, higher efficiency 3. Traditional physical store merchants forced out of business 4. Some industries would be disintermediated (sell direct) Few of these assumptions were correct—structure of retail marketplace has not been revolutionized Internet has created new venues for multi-channel firms and supported a few pure-play merchants
current liabilities
debts of the firm that will be due within one year
supply chain management (SCM) systems
continuously link the activities of buying, making, and moving products from suppliers to purchasing firms, as well as integrating the demand side of the business equation by including the order entry system in the process
content convergence
convergence in the design, production and distribution of content
enterprise systems
corporate-wide systems that relate to all aspects of production, including finance, human resources, and procurement
value chain management services
include automation of a firm's entire procurement process on the buyer side and automation of the selling business processes on the seller side
e-procurement net marketplace
independently owned intermediary that connects hundreds of online suppliers offering millions of maintenance and repair parts to business firms who pay fees to join the market
exchange
independently owned online marketplace that connects hundreds to potentially thousands of suppliers and buyers in a real time, dynamic environment
industry consortium
industry-owned vertical market that enables buyers to purchase direct inputs (both goods and services) from a limited set of invited participants