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ECT455/HCI513 E-Commerce Web Site Engineering Lecture 7 B2B E-Commerce Agenda Market News B2B e-commerce Supply Chain Management Business Models EDI, XML, Internet Solutions B2B E-Commerce

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Ect455 hci513 e commerce web site engineering l.jpg

ECT455/HCI513E-Commerce Web Site Engineering

Lecture 7

B2B E-Commerce

ECT455/HCI 513 Susy Chan Ph.D.

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  • Market News

  • B2B e-commerce

    • Supply Chain Management

    • Business Models

    • EDI, XML, Internet Solutions

ECT455/HCI 513 Susy Chan Ph.D.

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B2B E-Commerce

  • Global B2B revenues to grow from $282 billion in 2000, to $4.3 trillion by 2005, the bulk of B2B transactions will be made in the US.

  • Compound annual growth rate (CAGR) of 73% in US, 91% in Europe, and 109% in Asia

  • lower costs, shorter cycle time, quicker response, and global markets

ECT455/HCI 513 Susy Chan Ph.D.

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B2B Value Proposition

  • Reduced cost of selling

  • Reduced order processing costs

  • Improved service levels for low-volume customers

  • Higher quality information for customers

  • Accurate information

ECT455/HCI 513 Susy Chan Ph.D.

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Porter’s Framework

  • Generic Strategies

    • Competitive Strategy, The Free Press, 1980

    • Forces that shape business strategy

      • Value Chain analysis

      • Industry and Competitive Analysis

ECT455/HCI 513 Susy Chan Ph.D.

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The Value Chain:

Firm’s Perspective

ECT455/HCI 513 Susy Chan Ph.D.

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The Value Chain:

Industry Perspective













ECT455/HCI 513 Susy Chan Ph.D.

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Porter’s Industry and Competitive Analysis (ICA)

Barriers to Entry


Power of


End Users





Competitive Intensity

Threat of Substitute

Products or Services

ECT455/HCI 513 Susy Chan Ph.D.

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What is a Supply Chain?

  • A business process that links a company with its manufacturers, assemblers, distributors, shipping companies, retailers and consumers

  • To develop and deliver products as one "virtual" organization of pooled skills and resources.

  • To obtain benefits by streamlining the movement of manufactured goods from the production line into the customers

  • Improve efficiency or effectiveness by redesign, disintermediation, and reintermediation

ECT455/HCI 513 Susy Chan Ph.D.

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Two Views of Supply Chain

  • Push-based Model : "build-to-stock"

    • A tradition approach

    • The merchandise is pushed into the customer's hands

  • Pull-based Model: "build-to-order"

    • A demand-driven model -- the customer initiates the supply chain

    • More compelling and more suitable for Internet Commerce

ECT455/HCI 513 Susy Chan Ph.D.

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Push-based Supply Chain

  • Manufacturer --> Retail Distribution Center --> Retail Store --> Consumers

  • Manufacturer

    • Financial and marketing-driven forecast

    • Master scheduling

    • Replenishment based on distribution center inventory

    • Manual purse order and invoicing

  • Retail Distribution Center

    • Order point based on warehouse inventory and historical forecasts

    • Deals, promotions, and forward buying

  • Retail Stores

    • Order point based on shelf inventory and forecasts

    • Promotions and Manual entry of items to be reordered

ECT455/HCI 513 Susy Chan Ph.D.

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Pull-based Supply Chain

  • Consumers --> Retail Stores --> Retail Distribution Center --> Manufacturer

  • Retail Stores

    • POS data collection

    • Perpetual inventory checks

    • Automatic replenishment using EDI services

  • Retail Distribution Center

    • Automatic replenishment

    • Shipping container marking

    • Cross-dock receiving

    • EDI services

ECT455/HCI 513 Susy Chan Ph.D.

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B2B Models

  • Firm-based Models

    • Sell-side (1-to-many), Cisco

    • Buy-side (many-to-1) , GE

  • Many-to-Many Marketplaces – Exchange and catalog models

  • Vertical vs. Horizontal Marketplaces

ECT455/HCI 513 Susy Chan Ph.D.

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Sell Side: 1:M

eg. Cisco

Buy Side: M:1

e.g., GE




Public or Private Marketplaces M:M

Catalogs (Newark in One)

Exchanges, Houstonstreet

ECT455/HCI 513 Susy Chan Ph.D.

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Firm-based modelSell side B2B: One to Many

  • Delivers a Web-based, private-trading sales channel over an extranet to business customers

  • The seller can be a manufacturer, or a distributor

  • Architecture similar to B2C

  • Similar technology

  • Sell by electronic catalogues, auction, or by contract

  • Differences in commerce value chain

ECT455/HCI 513 Susy Chan Ph.D.

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Reduced order processing costs

Speeds the ordering cycle

Reduce errors in ordering and product configuration

Reduced buyers’ search costs

Customize products

Different prices to different customers (personalization, customization)

Improve service levels for low-volume customers

Provide higher-quality information for customers


Channel conflicts with existing distribution systems

EDI (if used) is costly and could limit the participation

Firm-based Model: Direct sale form Catalogue

ECT455/HCI 513 Susy Chan Ph.D.

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Cisco Connection Online

Services offered?

E-Commerce value chain application?

Benefits to Cisco?

Benefits to customers?

ECT455/HCI 513 Susy Chan Ph.D.

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Attract: Advertising & Marketing

merchandising and branding

become a p referred vendor

Interact: Catalogs

Searching capability for large electronic catalog

Customized catalogs -- special part number and pricing

Security Requirements

Act: Order Processing

Approval & Workflow


Act: Payment

Purchase Order, Procurement Cards, EFT

Act: Fulfillment

Predefined ship-to address and order aggregation

React: Customer Service

Training, Software maintenance, techsupport

B2B Commerce Value Chain--different from B2C

ECT455/HCI 513 Susy Chan Ph.D.

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Firm-Based Model: Buy-Side: Many to one, E-Procurement

  • Two types of purchases (what are purchased)

    • Direct materials: production materials go directly to the manufacture or assembly of a product or the creation of a service. Their use is scheduled, purchased in volume at pre-negotiated price

    • Indirect materials: used in maintenance, repairs, and operations (MRO), nonproduction materials

ECT455/HCI 513 Susy Chan Ph.D.

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  • Procurement management: the coordination of all the activities pertaining to purchasing goods and services for an organization

  • Inefficiencies in procurement management of indirect materials – MRO – aggregation of catalogues

  • Reverse Auction for procurement of direct materials, e.g.. GE, GM, RFP process

ECT455/HCI 513 Susy Chan Ph.D.

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E-Procurement: Basic Features of MRO Systems (Catalog Based)

  • Administration -- for non-technical persons

  • Catalogue Support -- multiple catalogues from different suppliers

  • Enterprise Integration-- tight integration into existing enterprise processes

  • Localization-- multi lingual purchaser catalogues with local prices and products

  • Reporting tools

  • Automated workflow

ECT455/HCI 513 Susy Chan Ph.D.

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B2B Procurement: Reverse Auction

  • Bidding and RFQ, RFP process

    • Buyers prepare bidding project information; Post the project for bid on the secured portal; Identify potential suppliers; Invite supplier to bid on projects

    • Suppliers submit electronic bids for projects

    • Buyers evaluate the bides and may negotiate (electronically) to achieve the best deal

    • Buyers award a contract to the bidders that best meet the requirements

      Value Proposition

    • Reduced costs, time, and staff involved in the procurement process

    • Invoices reconcile with Purchase orders

    • Lower the bid.

ECT455/HCI 513 Susy Chan Ph.D.

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Exchange, e-Hub, e-Marketplace

  • Many to many

  • Four forms of B2B

ECT455/HCI 513 Susy Chan Ph.D.

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Classifying B2B Hubs

What business buy

operating input manufacturing inputs

How business buy

systematic sourcing

spot sourcing

Catalog Hubs


MRO Hubs


Yield Managers





Source: E-Hubs 2000

ECT455/HCI 513 Susy Chan Ph.D.

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How Companies Conduct Purchases

  • Strategic sourcing

    • Long-term contracts based on negotiation between the sellers and buyers

    • Can be supported more effectively and efficiently through a streamlined supply chain

  • Spot buying

    • Purchasing of goods and services at market prices, as determined by supply and demand in a dynamic manner. Buyers and sellers do not know each other. Eg. Stock exchanges, or commodity exchanges (oil, sugar, corn)

    • Can be more economically supported by the 3rd party exchange

ECT455/HCI 513 Susy Chan Ph.D.

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Value Propositions

  • MRO Hubs

    • Consolidated MRO catalog

    • Efficiency, low cost, disintermediate fulfillment

  • Catalog Hubs

    • Automate the sourcing, reducing transaction cost

  • Yield Mangers Hubs

    • a high degree of price and demand volatility

    • High fixed cost asset

  • Exchange Hubs

    • Relationship management

    • Easier trading

ECT455/HCI 513 Susy Chan Ph.D.

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Aggregation & Matching – Value Mechanism

  • Aggregation: Large # of sellers and buyers, reduced transaction, static pricing , one-stop shopping

    • Benefits: purchasing cost is high, specialized products, large SKU, fragmented supplier chain, buyers not sophisticated, pre-negotiated contracts, meta catalog

  • Matching: Dynamic pricing, bid, auction, player’s role is fluid

    • Benefits: products are commodities or near-commodities and can be traded sight unseen; massive trading volumes to transaction costs; buyers and sellers are sophisticated; use spot sourcing to smooth the peaks and valleys of supply and demand, logistics and fulfillment can be conducted by third parties, demand and prices and volatile

ECT455/HCI 513 Susy Chan Ph.D.

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UCCNet: A B2B C-Commerce Solution

ECT455/HCI 513 Susy Chan Ph.D.

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Approaches to SCM

  • Traditional EDI uses a value-added network or VAN

    • A closed network that includes all members of a production process

  • Internet –based EDI, E-Commerce Relying on VAI (Value-Added Internet Service Providers, e.g., AT&T, IBM, AOL)

  • XML (eXtensible Markup Language)

    • Improves the compatibility between disparate systems, creating new

ECT455/HCI 513 Susy Chan Ph.D.

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Traditional EDI vs. InternetEnabled EDI (VAI)

  • Standardized transfer of electronic documentation (Two Standards: ANSI x.12 vs. EDIFACT)

  • Manage supply and distribution relationships; application or transaction based; emphasize efficiency (purchase orders and invoices)

  • Limitations:

    • Costly; Proprietary VANs

    • Participation sometimes through coercion and pressure

    • Compatibility issue

    • limited impact on process change

  • VAI:

    • Common standards; Flat pricing; Security

    • Easy/cheap access; Infrastructure

ECT455/HCI 513 Susy Chan Ph.D.

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Why XML is Successful

  • XML is a text format, can be processed by text-oriented tools

  • Extensible to specific an industry or domain

  • Neutral, an open source tool

  • Easy to implement

  • Interoperable across different platforms

ECT455/HCI 513 Susy Chan Ph.D.

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XML and B2B

  • Improve compatibility between disparate systems

  • Allows parties to exchange structured data over the Internet. XML tags define the meaning of data (catalogue) and business processes

  • XML also supports Unicode that enables the display and exchange of most of the world's written languages.

  • Benefits: Reduce costs, competitive advantage, strengthen relationships with trading partners (processes)

  • Simplifies application architecture—a uniform framework

ECT455/HCI 513 Susy Chan Ph.D.

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  • Industry standards

  • A consortium of more than 400 companies in information technology, electronic components and semiconductor manufacturing

  • Business and technical dictionary

  • RNIF provides XML exchange protocols between trading partners

  • PIP (Partner Interface Process): an XML based dialog between trading partners that implement a business process

ECT455/HCI 513 Susy Chan Ph.D.

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  • Sponsored by UN/CEFACT

  • Provide an open infrastructure to lower the barriers to entry for electronic business

  • Created an architecture

    • Collaboration protocol profile (CPP): about the business process

    • CPA: Collaboration protocol agreement

    • Business Process

  • Goals: cost reduction in data exchange, support collaboration

ECT455/HCI 513 Susy Chan Ph.D.

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ebXML Process

ECT455/HCI 513 Susy Chan Ph.D.

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Extended-enterprise SCM solutions

ECT455/HCI 513 Susy Chan Ph.D.