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ELC 200

DAY 19

2WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

Agenda

• Assignment #6 Due

• Quiz 3 will be on April 6– Chap 8-12 – 15 M/C (60 Points), 4 Short Essay (40 Points)– Extra credit --- What is the derivation of the

name “cookie” used by Internet Browsers?

• Start discussion on B2B eCommerce

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Chapter 11

Business-to-Business E-Commerce

4WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

OBJECTIVES

• What is B2B E-Commerce?

• B2B Models

• B2B Building Blocks

• B2B Integration Challenges

• B2B Tools –EDI

• Beyond B2B

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WHAT’S B2B E-COMMERCE?

• B2B– Both sellers and buyers are business

organizations– Involves complex procurement, manufacturing,

planning collaboration, payment terms and performance agreements

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B2B ENTITIES

Selling Company

ERP

Buying Company

Order Fulfillment

Deliverer

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B2B ENTITIES (cont.)

• Purchasing Company– Focus on procurement in terms of reduced purchase

prices and cycle time

• Selling Company– Focus on marketing and sales

• Intermediating Service Provider– Focus on ensuring order fulfillment

• JIT Deliverer– Focus on just-in-time delivery

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B2B ENTITIES (cont.)

• Web-based Platform– Focus on Internet, intranet, and extranet

• Tools of B2B– Focus on Electronic Data Interchange and

software agents

• Back-End Technical Support– Focus on Enterprise Resource Planning

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B2B VS. B2C

B2C B2B

How connection is set up

Consumer-to-system Business-to-business

Types of relationship

•Placing orders

•Executing payments

•Fulfilling orders

•Browsing of merchant’s catalog

•Sending feedback

•Online procurement

•Tracking order status

•Executing payments

•Managing promotions, returns, and catalog info

•Fulfilling orders

10WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

B2B VS. B2C (Cont’d)

B2C B2B

Nature of control Unidirectional Unidirectional to peer-to-peer

Level of needs-based segmentation

Moderate to low Sharper than B2C

Sales complexity Moderate Complex

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ADVANTAGES

• Save money on purchases that are negotiated instantly

• Replacing earlier purchasing bureaucracy with online links improves efficiency

• Just-in-time environment minimizes inventory sitting in the warehouse

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DRAWBACKS

• Suppliers have to work with big technology integration issues with the rest of suppliers in the exchange

• Antitrust violations may result

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SUPPLY CHAIN

• Process of moving goods from customer order through the raw materials, supply, production, and the distribution of products to the customer

• Benefits– Reduced inventory, higher sales, improved

ability to customize products for different business buyers, and reduced production cost

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B2B MODELS

• Buyer-oriented B2B– A buyer uses the internet by opening a

marketplace on its own server and opening the window for suppliers to do the bidding

• Supplier-oriented B2B– A supplier invites customers to order product

via its electronic market store

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ELECTRONIC AUCTIONS

• Reduce procurement costs

• Maximize return on excess merchandise

• Types– Forward auction– Reverse auction– Internet exchange

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FORWARD AUCTION

• One seller entertains bids from many buyers• Allows the seller to post products or services they

want to sell via its auction website• Payment and fulfillment is handled through

normal electronic channels• Ideal where demand and supply are unpredictable,

and there is a timing factor to unload the merchandise

17WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

REVERSE AUCTION

• Used to solicit bids where lowest bidder wins

• Typical of large corporate buying

• Tends to drive down prices and expand buyer’s zone of choice among suppliers

18WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

INTERNET EXCHANGE AUCTION

• Involves many buyers and sellers who trade bids and offers until there is an agreement to exchange product for payment

• A third party operates the exchange– Responsible for quality assurance and prompt

delivery of the goods

19WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

INTERNET EXCHANGE AUCTION (Cont’d)

• Revolves around an electronic intermediary company that establishes an exchange market where buyers and sellers can make deals

20WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

B2B BUILDING BLOCKS

• Application Server

• B2B Integration Server

• Personalization Software

• Content Management Facility

• E-Commerce Package

• Security

• Quality of Service

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B2B INTEGRATION CHALLENGE

• B2B Integration– Deals with spanning independent businesses, each

with its own set of applications and users– Interoperates with heterogeneous systems without

being tied to one specific system technology

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B2B INTEGRATION

• Solutions– Via a Web site as a front-end for information

sharing among partners– Extract information from one partner’s

application convert it into a format amenable for transmission via EDI

– For two companies to use common technology to coordinate data exchange

23WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

Agenda

• Assignment #6 Corrected– 3 A’s, 3 B’s & 3 C’s

• Quiz 3 will be on April 6– Chap 8-12– 15 M/C (60 Points), 4 Short Essay (40 Points)

• Extra credit --- What is the derivation of the name “cookie” used by Internet Browsers?

• Finish Discussion on EDI

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B2B TOOLS – EDI

• Allows one computer system to communicate business information with another computer system in a standardized electronic form

• Computer-to-computer transfer of business information

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COMPONENTS OF EDI

• Interbusiness– Transmission of data between businesses

• Computer-to-computer– Data communication from one computer to

another

• Standard transactions– Replace standard business forms

• Standard format

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ADVANTAGES

• Cost reduction and time-saving

• Improved B2B problem resolution

• Accuracy with integrity

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DRAWBACKS

• Unpopular

• Expensive

• Point-to-point

• Requires expensive VAN networking

• Not easy to use, learn, or implement

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EDI JUSTIFICATION

• Volume of data

• Frequency of document transmission and reception

• Content sensitivity

• Time sensitivity

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FINANCIAL EDI

• Electronic transmission of payments between a payee and a payer via their respective banks

• Allows businesses to replace labor-intensive activities of collecting, disbursing and processing payments

• Improves certainty of payment flows• Examples

– EFT• Electronic Funds Transfer

– ACH • Automated Clearing House

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BEYOND B2B

• A2Z Approach– Connect all the links of value chain via

partnership– The link would be turned from physical

connections to digital ones– Clear visibility of each stage of business

process

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Chapter 11

Business-to-Business E-Commerce