Module 5

Using B2B E-Commerce to Improve Supply Chain Efficiency

A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and distribution of these finished products to customers.1

Business between Organizations

Doing business with other organizations (B2B) is by far larger than with consumers (B2C). Interorganizational systems (IOS) are the information systems that handle the information flow between trading partners.

B2B Transactions and Business Models

In the one-to-one business model, two companies form a trading relationship with neither company dominating the relationship. In the company-centric business model, a company is either a seller to many companies (one-to-many) or a buyer from many companies (many-to-one). The single company dominates the market and controls the information systems that support the transactions. Electronic data interchange (EDI) or an extranet is often used to link trading partners. E-procurement is often the name for B2B e-commerce in the many-to-one business model.

E-Commerce Competitive Difference

Reducing barriers to entry Preventing any company from "owning" the market Enhanced collaboration/alliances Multiplying market niches Changing marketplace drivers (forces that make things happen in the market, e.g., consumer preferences, number of suppliers a business can choose from, etc.)

Interorganizational Systems (IOS)

An interorganizational system (IOS) is a networked information system used by two or more separate organizations to perform a joint business function.1 The two most common forms of IOS are EDI and extranets.

Benefits and Limitations for Business

Benefits for Business Expansion of marketplace to global proportions Cheaper electronic transaction Greater customer loyalty Expansion of niche marketing opportunities Direct communication with customers via websites Limitations for Business Increased competition Ease of comparison between competing products drives prices down Customers want specific choices and will not accept substitutes Customers control flow of information instead of companies

Benefits and Limitations for Consumers

Benefits for Consumers Lower prices Shopping 24/7 Greater searchability for products Shorter delivery times More sharing of information with other consumers Improved customer service Limitations for Consumers Delay in receiving goods Slow download speeds Security and privacy concerns Inability to touch, feel, smell, try out, or try on products prior to purchasing Unavailability of micropayments

E-Commerce

E-commerce is the use of information systems, technologies and computer networks by individuals and organizations to carry out transactions in order to create or support the creation of business value. E-commerce includes all types of computer networks, transactions and business relationships including: electronic funds transfers EDI over private networks retail sales and wholesale exchanges over public networks like the Internet

Electronic Data Interchange (EDI)

EDI uses private networks to allow the exchange of structured information between two computer applications with a minimum of human involvement. Even though often overshadowed by newer technology, EDI remains the engine behind the majority of e-commerce transactions worldwide. It is too expensive for most small businesses, however.

Extranets

Extranets are collaborative networks that use Internet technology to link businesses with their customers. Security measures keep data secure and XML is used to transfer the data. An extranet can be thought of as two connected intranets.

Two Types of Products

Physical products: anything that requires an actual shipment of a package to the buyer. Digital products: can be received directly over the Internet or other computer network.

Traditional Procurement Process

Purchase order (PO) to vendor Goods to buyer along with bill of lading (BOL) Upon receipt of goods and BOL, signed copy of BOL returned to vendor and receipt of goods is filed Vendor sends invoice to buyer Buyer's accounting department compares PO to receipt of goods and invoice. If there is a match, buyer pays the vendor

E-Commerce Business Model

combines a specific type of website with a successful revenue model that produces profits for the website owner.

Business Model

defines how a company will meet the needs of its customers while making a profit.