B2B E-COMMERCE E-COMMERCE CONCEPTS

B2B - Business to Business E-Commerce

E-commerce has been in use for quit a few years and is more commonly known as EDI (electronic data interchange). In the past EDI was conducted on a direct link of some form between the two businesses where as today the most popular connection is the internet. The two businesses pass information electronically to each other. B2B e-commerce currently makes up about 94% of all e-commerce transactions. Typically in the B2B environment, E-Commerce can be used in the following processes:

• Procurement;
• order fulfilment;
• Managing trading-partner relationships.

For many Welsh SMEs, B2B E-Commerce is synonymous with the vision of integrated supply chains. This might be the ultimate objective, but, in the short term, B2B E-Commerce could be used as a significant enabler in their move towards greater trading partner collaboration.

E-Commerce technologies have allowed even the smallest businesses to improve the processes for interfacing with customers. They are now able to develop services for individual clients rather than provide a standard service. Pentwyn Splicers based in Pontypool manufacture pneumatic splicers for the UK and world textile market. They evaluated all aspects of their business process to determine where the greatest return could be obtained. Using the Web to sell more products was an initial consideration, but it was in the provision of customer service and support to their overseas distributors that the greatest benefits have been achieved.

An alternative way of thinking of B2B eCommerce is to think of it as being used to:

• Attract, develop, retain, and cultivate relationships with customers;
• Streamline the supply chain, manufacturing, and procurement processes, and automate corporate processes to deliver the right products and services to customers quickly and cost-effectively;
• Capture, analyze, and share, information about customers and company operations, in order to make better decisions.

In business-to-business electronic commerce businesses use the Internet to integrate the value- added chain, which can extend from the supplier of raw materials to the final consumer. Business for business dominates the total value of e-commerce activity, accounting for about 80 per cent at present. Because the-economic factors affecting the adoption of e-commerce between businesses are such different from those affecting business-to consumer ecommerce, business-to- business e-commerce is likely to maintain for enlarge is advantage for the foreseeable future:

Electronic links between businesses are not new. They have existed for decades, in the form of electronic data interchange (EDI) supplied by value-added networks (VAN) operated over leased telephone lines. Large manufacturing firms are the main users of EDI. General Electric (GE), one of the largest EDI service suppliers, estimates that 80 per cent of suppliers are not connected to an EDI system but rely on from, telephone or mail. Drivers and inhibitors of business-to-business electronic commerce in businessto- business e-commerce, three factors are likely to lead to e-commerce a reduction in transaction costs and improvement of product quality/customer service a. a defensive reaction A competitors engaging in commerce; and b. Insistence by large businesses that all of their suppliers link into their e-commerce system as a condition of-doing business.

The first factor, reduced transaction costs, drives the second and third and will be explored in greater detail in the next chapter. However, electronic commerce clearly reduces these costs and thus drives its adoption.

It is expected that by 2001-02, many barriers, such as questions of security and reliability, which now limit the extension of Internet EDI to unknown firms, will have been overcome. As a result, there will be a significant increase in business-to-business e-commerce as it draws in smaller second- and third-tier suppliers. For example, the US Automotive Network exchange (ANX), developed by the Automotive Industry Action Group (AIAG), makes use of the Transport Control Protocol/Internet Protocol (TCP/IP) to link automotive suppliers to each other and to original equipment manufacturers (OEM) (e.g. GM, Ford and Chrysler). Dispensing with the multiple networks and protocols that now link first-tier suppliers to OEMs, the new system will provide a single common system that can be extended to include all suppliers.

The largest impact of business –to – business e-commerce is likely to be on small and medium sized enterprises (SMEs), because many large business already have EDT’ systems in place. The accessibility of the Internet makes electronic commerce realistic possibility for SMEs and is likely to lead to its widespread diffusion. In addition to migrating existing activity to e-commerce, new business—to-business products are being created which did not, or could not, exist before electronic commerce over the Internet made them economically viable. For example, spot markets that match buyers and sellers for a wide variety of goods ranging from electronic components to agricultural commodities to transportation futures have sprung up; they represent only the beginning of what is expected to be a wide number of new business-to-business opportunities.

Another example is the extension of EDI-type links via the Internet. Parcel delivery, logistics and order fulfillment services, frequently by the same firm, are also experiencing growth as ecommerce increases. As businesses move to “build-to-order” processing and just-in time inventories, a premium is placed on timely, accurate inbound and outbound logistics. In addition, there is greater demand by final consumers for fast order fulfillment and the ability to track an order as it is being processed and delivered.

Automated Ecommerce Transactions

It is a term also used in electronic commerce and to describe automated processes between trading partners. The volume of B2B transactions is much higher than the volume of B2C transactions. One reason for this is that businesses have adopted electronic commerce technologies in greater numbers than consumers. Also, in a typical supply chain there will be many B2B transactions but only one B2C transaction, as the completed product is retailed to the end customer.

An example of a B2B transaction is a chicken feed company selling its product to a chicken farm, which is another company. An example of a B2C transaction is a grocery store selling grain-fed chickens to a consumer. B2B can also describe marketing activities between businesses, not just the final transactions that result from marketing, though the term can be used to identify sales transactions between businesses (also referred to as “institutional sales”). For example, a company selling photocopiers would more likely be a B2B sales organization than a B2C sales organization.

“Business-to-business” can also refer to all transactions made in an industry value chain before the finished product is sold to the end consumer.

Characteristics of B2B EC

Business – to – business electronic commerce implies that both the sellers and buyers are Business Corporation, while business – to – consumer electronic commerce implies that the buyers are individual consumers. Business-to – business EC is expected to grow to $1,330.9 billion by 2003 and continue to be the major share of the EC market (Free-man 1998, Retter and Calyniuk 1998). The percentage of Internet – based B2B EC compared to total B2B commerce will expand from.2 percent in 1997 to 2.1 percent in 2000 and 9.4 percent in2003. Computing electronics, utilities, shipping and warehousing, motor vehicles, petrochemicals, paper and office products, food, and agriculture are the leading items in B2B EC.

Business-to-business EC covers a broad spectrum of applications that enable an enterprise or business to form electronic relationships with their distributors, resellers, suppliers, and other partners. As Handfield and Nichols (1999) suggest, B2B applications will offer enterprises access to the following sorts of information:

• Product – specifications, prices, sales history
• Customer – sales history and forecasts
• Supplier – product line and lead times, sales terms and conditions
• Product process – capacities, commitments, product plans
• Transportation – carriers, lead times, costs
• Inventory – inventory levels, carrying costs, locations
• Supply chain alliance – key contacts, partner roles and responsibilities,schedules
• Competitor – benchmarking, competitive product offerings, market share
• Sales and marketing – point of seal (POS) , promotions
• Supply chain process and performance – process descriptions,

performance measures, quality, delivery time, customer satisfaction

What is B2B Marketing Communications?

B2B marketing communications is how businesses promote their products and services to other businesses using tactics other than direct sales. The purpose of B2B marketing communications is to support the marketer’s sales effort and improve company profitability. B2B marketing is generally considered to be more complex than B2C marketing, often complicated by a longer sales cycle and multiple decision makers on the buyer’s side.

B2B marketing communications tactics generally include advertising, public relations, direct mail, trade show support, sales collateral, branding, and interactive services such as website design and search engine optimization. The Business Marketing Association is the trade organization that serves B2B marketing professionals. It was founded in 1922 and offers certification programs, research services, conferences, industry awards and training programs.

B2B Marketing Methodologies

Positioning Statement

An important first step in business to business marketing is the development of your positioning statement. This is a statement of what you do and how you do it differently and better than your competitors.

Developing your messages

The next step is to develop your messages. There is usually a primary message that conveys more strongly to your customers what you do and the benefit it offers to them, supported by a number of secondary messages, each of which may have a number of supporting arguments, facts and figures.

Building a campaign plan

Whatever form your B2B marketing campaign will take, build a comprehensive plan up front to target resources where you believe they will deliver the best return on investment, and make sure you have all the infrastructure in place to support each stage of the marketing process - and that doesn’t just include developing the lead - make sure the entire organization is geared up to handle the inquiries appropriately.

Briefing an agency

A standard briefing document is usually a good idea for briefing an agency. As well as focusing the agency on what’s important to you and your campaign, it serves as a checklist of all the important things to consider as part of your brief. Typical elements to an agency brief are: Your objectives, target market, target audience, product, campaign description, your product positioning, graphical considerations, corporate guidelines, and any other supporting material and distribution.

Measuring results

The real value in results measurement is in tying the marketing campaign back to business results. After all, you’re not in the business of developing marketing campaigns for marketing sake. So always put metrics in place to measure your campaigns, and if at all possible, measure your impact upon your desired objectives, be it Cost Per Acquisition, Cost per Lead or tangible changes in customer perception.

B2B standards

UN/EDIFACT is one of the most well-known and established B2B standards. ANSI ASC X12 is a popular standard in North America. RosettaNet is an XML-based, emerging B2B standard in the high tech industry. An approach like UN/CEFACT’s Modeling Methodology (UMM) might be used to capture the collaborative space of B2B business processes.

E-Marketplace

“E-” or “electronic” marketplace in a business-to-business context is primarily a large online platform (B2B portal) or website that facilitates interaction and/or transactions between buyers and suppliers at organizational or institutional rather than individual levels. Since the builders of such marketplaces primarily aim at facilitating buyer-seller interaction (in most cases without being a buyer or seller themselves), these are also referred to as “third-party” B2B marketplaces.

These marketplaces can do one or more of the following:

1. Help buyers find new suppliers and vice versa
2. Help reduce the time and cost of interaction for B2B transactions
3. Help increase trade between distant geographies
4. Help manage payments and track orders for B2B transactions
5. Help reduce the number of profits after tax
6. Help increase the greenhouse gas emissions in the country
7. Help the environment by using appropriate technology that is environmentally friendly

Vertical e-Marketplace

A vertical e-marketplace spans up and down every segment of one specific industry. Each level of the industry has access to every other level, which greatly increases collaboration. Buyers and sellers in the industry are connected to increase operating efficiency and decrease supply chain costs, inventories and cycle times. This is possible because buying/selling items in a single industry standardizes needs, thereby reducing the need for outsourcing many products. E-commerce has a variety of different opinions going out towards different people in different organization that are committed to such technology. Therefore e-commerce is not well no where near the advanced technology that us in organizations use now a days.

Horizontal e-Marketplace

A horizontal e-marketplace connects buyers and sellers across many industries. The most common type of materials traded horizontally are MRO (maintenance, repair and operations) materials. Mainly business and consumer articles, these items are in demand because they are crucial to the daily running of a business, regardless of industry and level within that industry. Many corporations have MRO materials bought directly on-line by the maintenance team in order to relieve the purchasing department.

No-frills e-Marketplace

Developed in response to customers wanting to purchase products without service (or with very limited service), the no-frills e-marketplace parallels the B2C offering of no-frills budget airlines. The subject of several Harvard and IMD articles/case-studies, no-frills B2B e-marketplaces enable the effective de-bundling of service from product via clear “business rules.” This provides the basis of differentiation from conventional B2B sales/purchasing channels.

Etymology

The term “business-to-business” was originally coined to describe the electronic communication relations between businesses or enterprises in order to distinguish it from the communications between businesses and consumers (B2C). It eventually came to be used in marketing as well, initially describing only industrial or capital goods marketing. However, today it is widely used to describe all products and services used by enterprises.

EDI Standards

EDI stands for Electronic Data Interchange. This is one of the applications of E Commerce which makes Business to Business transactions possible over a network.

Electronic data interchange (EDI) is a technology poised for explosive growth in use as the Internet provides an affordable way for businesses to connect and exchange documents with customers and suppliers of any size. EDI is the electronic exchange of business documents, data, and other information in a public-standard format. It cuts the cost of managing business-to-business transactions by eliminating the need for labor-intensive manual generation and processing of documents. In this lecture we will discuss the EDI standards, the EDI networks and the EDI software that interfaces these two elements and the business applications. These elements together with the EDI Agreement are covered in detail in this lecture.

Let’s start with EDI Standards.

EDI Standards

At the heart of any EDI application is the EDI standard. The essence of EDI is the coding and structuring of the data into a common and generally accepted format –anything less is nothing more than a system of file-transfers. Coding and structuring the documents for business transactions is no easy matter. There have been a number of EDI standards developed in various industry sectors or within a specific country and there are complex committee structures and procedures to support them.

Following on from the various sectorial and national EDI standards is the United Nations (UN) EDI Standard: EDIFACT. This is the standard that should be adopted for any new EDI application.

EDI provides an electronic linkage between two trading partners. Business transactions are output from the sending computer system, transmitted or transported in electronic format and input into the second, receiving computer system. The computer systems that exchange data need a common format; without a common format the data is meaningless. Two organizations that exchange data can, with relative ease, agree a format that meets their mutual needs.

Automotive Network Exchange in E Commerce

As the network of exchanges develops then the number of organizations needing to be party to the agreement grows. To illustrate this, assume a network of three customers (say supermarkets) ordering goods from four suppliers (food manufacturers), see

The network in is 12 separate interchanges. It is unlikely that each of these exchanges would have its own format but it is perfectly possible that each customer would have developed its own standards (giving each supplier three separate standards to cope with).

It is also possible that new exchanges added to the system will have requirements not envisaged when the data formats were originally agreed; this would require a change to the existing standard or the introduction of an additional standard. The overall picture is one of unnecessary complexity and incompatibility. EDI standards overcome these difficulties. The EDI standard provides, or attempts to provide, a standard for data interchange that is:

• Ready formulated and available for use;
• Comprehensive in its coverage of the data requirements for any given transaction;
• Independent of hardware and software;
• Independent of the special interest of any party in the trading network.

EDI Standards provide a common language for the interchange of standard transactions. Most of the work on EDI standards has been concerned with the interchange of trade documentation and financial transactions but the principle applies to any interchange where the data can be systematized and codified. EDI standards are used for the interchange of information as diverse as weather station readings and school exam results. Now let’s see how the various standards evolve.

National and Sectorial Standards

Evolution of EDI Standards

The first EDI standards evolved from the formats used for file transfer of data between computer applications. The evolution of EDI standards can be seen as having three stages (although in practice it was and is somewhat more complex than that):

1. The first formats that might properly be called EDI were developed by organizations that had to process data from a large number of customer organizations. The data recipients set the standard and the customers conformed to it.
2. The concept of EDI as an application independent interchange standard evolved and several industry sector and / or national standards bodies developed EDI standards to meet the needs of a specific user community.
3. The requirements of international and cross sector trade meant that the sector and national standards were becoming an impediment to the further development of electronic trading. EDIFACT was developed, under the auspices of the United Nations (UN), as a universal standard for commercial EDI.

The International EDI Standard

As already outlined, EDI developed in closed user communities within trade sectors and / or national boundaries. The use of sector and national standards for this type of trade was satisfactory. However, as electronic trade developed to cover wider trading relationships there is a growing problem of trade between organisations using different EDI standards. In addition to the problem of cross sector trade there is a desire to use EDI for international trade. This (sensibly) requires a common format for the exchange of the standard business forms (order, invoice, etc.) between organisations in differing countries.

International trade also requires a great deal of additional documentation for shipping, customs authorities, international credit arrangements, etc. - all of this is potentially electronic and obviously a common format is very desirable. To facilitate this cross sector and international development of EDI the EDIFACT standard has been, and is being, developed. EDIFACT is the United Nations standard of Electronic Data

Business - TO - Business Actions

Business – to-business auctions are growing very rapidly due to the following benefits they provide:

Generating Revenue

• New sales channel that supports existing online sales. For example, Weirton steel Corp. doubled its customer base when it started auctions,
• New venue for disposing of excess, obsolete, and returned products quickly and easily.

Increasing Page Views

• Auctions give “stickiness”. Auction users spend more time on a site and generate more page views than other users

Acquiring and Retaining Members

• All bidding transactions result in additional registered members.

There are three major types of B2B auctions according to Forrester Research:

1. Independent auctions. In this case companies use a third – party auctioneer to create the site and sell the goods.
2. Commodity auctions. In this case many buyers and sellers come together to a third – party Web site. For example, access energy, utilities, and telecommunications are sold at www.band – x.com. The Dutch flower market is another example.
3. Private auctions by invitation only. Several companies by pass the intermediaries and auction their products by themselves. Ingram Micro has its own site, for selling obsolete computer equipment to its regular business customers.

Business – TO – Business Services

Many companies provide services that are intended to facilitate B2B. Some of these services are provided by intermediaries, others by specialists. Here are some examples.

CommerceNet

CommerceNet is a global non-profit membership organization that aims to meet the needs of companies doing EC. It targets promoting and supporting emerging communities of EC.

CommerceNet established a forum for companies doing EC to meet and exchange their experiences, while introducing the latest technology to them to facilitate their business.

It does contain information about members, which can be buyer or supplier companies. However, no specific product information is stored in its database. In fact, CommerceNet mainly acts as a services provider, not dealing with any of the individual transactions. CommerceNet also certifies Internet-enabled EDI products.

Open Buying on the Internet

The Open Buying on the Internet (OBI) Consortium is a non-profit organization dedicated to developing open standards for B2B Internet commerce. Membership in the consortium, an independent collaborative managed by CommerceNet, is open to buying and selling organizations, technology providers, financial institutions, and other interested parties on an annual fee basis.

ConnectUS

ConnectUS is an online service designed for use by companies paying with corporate purchasing cards. It is basically for – fee database, operated by Thomas Publishing Co. and General Electric Information Systems, allowing companies to search for suppliers anywhere in the world. The service may cut up to 90 percent of the transaction cost for the average ($150) purchase. ConnectUS also aids companies in overcoming the shortfalls of purchasing card programs, which are difficult to audit, sometimes resulting in vendor overpayment.

ConnectUS provides all the necessary information that supports card purchasing and facilities trades done EDI. The service is now as part of systems.