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Business to Business Exchanges

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  1. Business to Business Exchanges Jenny Arnold Supree Mongrolcheep Matthew Sheets Melissa Sherer

  2. B2B Exchanges • Overview • Case Studies • Conclusion

  3. What are B2B exchanges? • B2B exchanges offer digital transaction services that heighten eBusiness performance making it safer and more secure. • The B2B market is composed of websites were buyers and sellers come together vertically and horizontally to communicate, bid, advertise, transact, and procure. Source:, www.techechange.com/thelibrary /b2bterminology.html, Viewed February 24, 2004. Source: “An outlook on B2B Commerce”, www.weforum.org, Viewed March 11, 2004

  4. B2B Definition • Suppliers Manufacturers Wholesalers • Selling to intermediaries rather than directly to the end customer • Fewer customers • Smaller product ranges Source: Friesen, G. Bruce, “From B2B to …?” Consulting to Management,Vol. 14, 4, 2003, pp.27-33. Source: Angel, Robert, “A new dawn for CRM: This time it’s B2B” Ivey Business Journal Online, Jul/Aug 2003, pp. 1.

  5. B2B’s are the LARGEST markets known to business! GDP was $10,480,800,000 in 2002 B2B spending in 2004 estimated to be: $7,297,300,000 Source: www.cba.hawaii.edu/aspy/aspymkfa.htm, viewed March 11, 2004 Source: http://encarta.msn.com, viewed April 4, 2004

  6. GartnerGroup Source: www.cba.hawaii.edu/aspy/aspymkfa.htm, viewed March 11, 2004

  7. DRI-WEFA Source: www.cba.hawaii.edu/aspy/aspymkfa.htm, viewed March 11, 2004

  8. Why is B2B bigger? • The value of B2B transactions are bigger since the goods and services in the making pass through a lot of hands before they reach an end consumer. • Big transaction value however does not always make a difference in the bottom line. • B2B derived efficiencies will be competed away by companies whose products and services are uninspired and undifferentiated. Source: Rodriquez, Edel, “Special Report: Is This All You Can Build with the Net? Think Bigger Enough of this B2B talk. Use the Net to construct a unique company. How? Ask your customers.” Fortune Magazine, April 17, 2001

  9. B2B versus B2CB2B a bonanza B2C a bust • B2B startup goals included taking slack out of the supply chain rather than stealing customers . Of money poured into e-business efforts 80% goes to B2B. • B2C startups lacked good business models, and often do not receive the money that B2B exchanges received. Source: Rodriquez, Edel, “Special Report: Is This All You Can Build with the Net? Think Bigger Enough of this B2B talk. Use the Net to construct a unique company. How? Ask your customers.” Fortune Magazine, April 17, 2001

  10. Basic B2B information • B2B exchanges may act as a virtual marketplace that are free of geographic limits. • Certain exchanges allow businesses to find particular products or suppliers and agree on terms of transactions online. • Many others allow complete transactions to take place online. Either way it is easier for buyers or sellers worldwide to come together on the web. • B2B exchanges make money through charging a transaction fee (approximately 4%) to buyers and suppliers. Source: Campanelli, Melissa, “Trading Places. (business to business exchages)” Entrepreneur. November 2000

  11. Types of B2B exchanges • Horizontal B2B marketplaces are for supplies common to many industries: e.g. computers or work clothes. • Vertical marketplaces are used to trade supplies, such as petroleum or agriculture, that are peculiar to a specific industry. • Source: “B2B for beginners-Definitions and Applications” www.gcis.ca/B2B_beginners.html, Viewed February 29, 2004

  12. B2B Benefits • When done correctly…. • Cuts transaction costs • Large opportunity for transformation because of scale and scope • Buyers are able to reduce purchasing costs due to automation of paperwork. • Online exchanges also introduce buyers to suppliers that they wouldn’t have traditionally met from traditional channels. Source: Friesen, G. Bruce, “From B2B to …?” Consulting to Management,Vol. 14, 4, 2003, pp.27-33. Source: Campanelli, Melissa, “Trading Places. (business to business exchages)” Entrepreneur. November 2000

  13. Benefits to Buyers If a customer wants rock bottom prices he is likely to prefer a B2B market place, if he wants a close relationship with a supplier because his orders are large and critical to his core operations he may prefer bilateral e-trade Benefits to Sellers Gives sellers an opportunity to retain some control over their sales channels while minimizing service costs They can take over part of the value added processing e.g. customizing products Benefits of B2B exchanges Source: Practical guide to selling efficiently on any B2B exchange: www.gcis.ca/B2B _sellers_guide.html

  14. Analyzing the B2B Market • 3 Elements • Mechanism (info-structure) to support data exchange • Set of Marketing Processes • Set of institutions to perform these market processes Source: Friesen, G. Bruce, “From B2B to …?” Consulting to Management,Vol. 14, 4, 2003, pp.27-33.

  15. Analyzing the B2B Market • Info-structure • Without information and the systems to gather, store, and redistribute, markets can not operate • MORE efficient the structure the MORE efficient the market • Broken down into physical infrastructure and intangible data Source: Friesen, G. Bruce, “From B2B to …?” Consulting to Management,Vol. 14, 4, 2003, pp.27-33.

  16. Analyzing the B2B Market • Market Processes • Trade versus Context Trade: activities that buyers and sellers must undertake to exchange a good or service • Includes: search, authentication, pricing, payment, and logistics Context: activities that support the trade process or make them run more efficiently • Includes: representation, regulation, influence, dispute resolution, and risk management Source: Friesen, G. Bruce, “From B2B to …?” Consulting to Management,Vol. 14, 4, 2003, pp.27-33.

  17. Analyzing the B2B Market • Institutions: • “ecosystem” • 3 Groups • Principals (buyers or sellers) Goods and Services to exchange • Agents (brokers or traders) Represent principals in one or more of the market processes • Supporting Cast Members (Bankers, Insurers, Shippers, etc) Provide highly specialized context processes to the market Source: Friesen, G. Bruce, “From B2B to …?” Consulting to Management,Vol. 14, 4, 2003, pp.27-33.

  18. Analyzing the B2B Market • Final Thoughts • More than a basic technology platform or well organized economic process • Web of personal and institutional relationships • An inefficient market is not uniformly inefficient….a combination of elements could be inefficient Source: Friesen, G. Bruce, “From B2B to …?” Consulting to Management,Vol. 14, 4, 2003, pp.27-33.

  19. The Future of B2B exchanges • In 2000, it was estimated that more than half of B2B trade would take place through eBusiness networks or eMarketplaces in 2003 • In 2000, B2B exchanges were thought to be growing markets, however there were some doubts about the future. It was estimated that market size would be $1.5 trillion in 2004. (five to ten times larger than estimated B2C markets) Source: B2B terminology: www.techexchage.com/the library/b2bterminologry.html Outlook on B2B commerce: www.weforum.org

  20. 2001-1,520 B2B exchanges (markets) 2003-180 will be active (markets) B2B Numbers decrease 8.5% survival rate Source: Friesen, G. Bruce, “From B2B to …?” Consulting to Management,Vol. 14, 4, 2003, pp.27-33.

  21. Why are B2B exchanges struggling? • People are creatures of habit • Money does not ensure success • Prioritizing new features is not easy • Launching at the right time is tricky • Security is critical • Tools for viewing and collaboration are essential • Movement is toward private exchanges Source: Wohlers, Terry, “E-Commerce: The Challenges of Creating a B2B exchange” Rapid Prototyping Journal, Vol. 7,2, 2001, pp. 122.

  22. Evaluating B2B Best Practices • Products exchanged – specific or general? • Structure of Exchange – public or private? • Proposed Benefit - Buyer or Seller? • Value-added services - what are current offerings and future roll-out plans? • How does the exchange derive a profit – annual fees or transaction commissions? • What role do the members play in the management of the exchange?

  23. Case Studies World Wide Retail Exchange Covisint Steelscreen.com

  24. World Wide Retail Exchange Premier Internet-based B2B exchange in the retail e-marketplace

  25. History of the WWRE • The company was founded in March 2000 by 17 international retailers. • The goal was to enable retailers and manufacturers to eliminate the inefficiencies of the supply chain by simplifying, rationalizing, and automating supply chain processes. Source: www.wwre.com, viewed March 28, 2004

  26. Founding Partners • The founding partners included Albertson's (US), Auchan (France), Casino (France), CVS (US), Kingfisher (UK), K-Mart (US), Marks Spencer (UK), Royal Ahold (The Netherlands), Target (US), Tesco (UK) and Safeway Inc. (US). • At the time, the group operated over 30,000 stores with combined sales of over $300 Billion. Source: www.wwre.com, viewed March 28, 2004

  27. Founding Principles The following six principles guide the WWRE's development and growth: • Openness • Commitment to utilizing the best available technology • Focus on improving efficiency and lowering costs for the retail industry • Operation as a neutral company • Equivalent fee structures for all participants • Confidentiality of transaction information Source: www.wwre.com, viewed March 28, 2004

  28. Users of the WWRE • Retailers and manufacturers can substantially reduce costs across product development, e-Procurement, and supply chain processes in the following industries: • Food • General merchandise • Textile/home • Drugstores Source: www.wwre.com, viewed March 28, 2004

  29. Value to Customers/Suppliers • Low-cost product offerings that are robust, scaleable, integrated, and fully supported • Shared technology investments and outsourced assets • Ability to access a global membership community and network with other retailers/manufacturers • Value-added services from a trusted source, at competitive costs • Participation in collaborative activities • Complex transactions and interactions made easy through automation • Standard setting benefits for all B2B activities

  30. Strength of Membership • Today there are 62 members. • Members have stores in over 130 countries. • $900 Billion in annual sales. • 5,000,000 employees. WWRE has saved over $1 Billion so far!

  31. Additional Members

  32. WWRE Alliance Partners • As part of its mission, the WWRE seeks to broaden the suite of offerings to members, thus enhancing the value of the Exchange. Through the creation of alliances and partnerships with best-of-breed providers, innovative services can be introduced to WWRE members. These offerings also complement those solutions hosted by the WWRE.

  33. WWRE Technology Partners • WWRE teams with providers of technology solutions that help enable the Exchange to deliver various software, hardware, connectivity and services to members. • Collectively, these providers work with the Exchange to bring our members and their trading partners the various Sourcing and Procurement and Supply Chain Collaboration solutions and services that the Exchange offers. WWRE Technology Providers currently power the underlying application software, systems integration, customer service helpdesk, application hosting and integration components.

  34. Major Products and Services of the Exchange • Surplus Goods Exchange (SGE) • Perishable Goods Exchange • Demand Aggregation • Asset Manager

  35. Surplus Goods Exchange (SGE)

  36. Visagent Marketplace

  37. Visagent Trade Screen

  38. Why use the SGE? • Sellers do not pay a fee to use the SGE • Buyers pay a small fee, plus transportation • WWRE Buyers: 2.5% + transportation • Other Buyers: 3.5% + transportation • SGE is up to 70-80% less expensive than other alternatives (like liquidation) • Trading occurs directly between retailers and suppliers – no intermediaries Source: www.wwre.com, viewed March 28, 2004

  39. Perishable Goods Procurement

  40. Problems in Fresh Foods • Grocers spend over 70 cents of every sales dollar procuring, transporting and warehousing the products they buy. • Grocers continue to rely on paper, fax, and phone to manage key business processes. • Studies show a huge percentage of the data in retail catalogues is wrong and invoices contain errors. Source: www.wwre.com, viewed March 28, 2004

  41. Agribuys Solution Suite • Order Link – allows a retailer to aggregate demand information, thus enabling a central buyer to perform buying activities. • Delivery Link – allows a user to track the product from the supplier to the receiving warehouse or store. • Logistics Link – allows a user to take the purchase order information and build a truckload of compatible product. Source: www.wwre.com, viewed March 28, 2004

  42. Demand Aggregation

  43. Features of Demand Aggregation • Prior to Auction, demand can be aggregated internally and externally. • Templates can be set up to manage information across divisions for budgeting. • Suppliers can post production schedules to allow buyers to group their orders around predefined shipping dates. • Capture and analyze spending patterns. Price Curves are controlled by the Supplier! Source: www.wwre.com, viewed March 28, 2004

  44. WWRE Order Execution Process

  45. Asset Manager

  46. Benefits of Asset Manager • Allows for the storage of digital assets in one location • Efficiently share products, photo images, text, multimedia, audio and video with business partners. • Improve communications and response time for new products with suppliers. Source: www.wwre.com, viewed March 28, 2004

  47. World Wide Retail Exchange

  48. Covisint The world’s largest B2B exchange

  49. What is Covisint • A technology services company whose business to business applications and communication services connect the automotive industry. They provide a common connection to suppliers and customers based on common business processes. • Covisint enables customers to reduce costs, increase efficiency, enhance quality, and improve time to market. Source: www.covisint.com, Viewed February 26, 2004

  50. History of Covisint • Covisint was formed in February 2000 when Daimler Chrysler, Ford Motor Company, and General Motors combined efforts to form a single business-to-business supplier exchange. • Covisint officially began providing services in the U.S. on January 1, 2001 Source: www.covisint.com, Viewed February 26, 2004