BusinesstoBusiness Strategies: From EDI to Electronic Commerce

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Chapter 5

• Business-to-Business Strategies From EDI to
  Electronic Commerce

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Purchasing, Logistics, and Support Activities

• Electronic commerce has the potential to reduce
  cost and improve the business processes of
  purchasing, logistics, and support activities.

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Purchasing Activities

• Purchasing activities include
• Identifying vendors
• Evaluating vendors
• Selecting specific products
• Placing orders
• Resolving any issues that arise after receiving
  the ordered goods and services
• By using a Web site to process orders, the
  vendors in this market can save the cost of
  printing and shipping catalogs and the cost of
  handling telephone orders.

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Purchasing Activities

• Products that companies buy on a recurring basis
  maintenance, repair, and operating (MRO)
  supplies.
• Businesses involves direct and indirect
  materials.
• Direct materials are those materials that become
  part of the finished product.
• Indirect materials are all other materials that
  the company purchases.

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Logistic Activities

• Objective of logistics provide the right goods
  in the right quantities in the right place at the
  right time.

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Support Activities

• Support activities include
• Finance and administration
• Human resources
• Technology development

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Network Model of Economic Organization

• The trend in purchasing, logistics, and support
  activities - move from hierarchical structures
  toward network structures a feature of the Web
• Highly specialized firms can now exist and trade
  services very efficiently on the Web.
• The roots of Web technology for B2B transactions
  lie in electronic data interchange (EDI).

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Electronic Data Interchange

• EDI computer-to-computer transfer of business
  information between two businesses that uses a
  standard format.
• Two businesses that are exchanging information
  trading partners.
• Firms that exchange data in specific standard
  formats EDI-compatible.
• Business information exchanged transaction data
  (paper invoices, purchase orders, requests for
  quotations, bills of lading, and receiving
  reports) can include other information related
  to transactions, such as price quotes and
  order-status.

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Value-Added Networks

• EDI
• reduces paper flow
• streamlines the interchange of information among
  departments within a company and between
  companies.

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Direct Connection Between Trading Partners

• Direct connection EDI - each business in the
  network operates its own on-site EDI translator
  computer.
• These EDI translator computers are then connected
  directly to each other using modems and dial-up
  phone lines or dedicated leased lines.

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Direct Connection Between Trading Partners

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Indirect Connection Between Trading Partners

• Instead of connecting directly to each of its
  trading partners, a company might decide to use
  the services of a value-added network.
• Value-added network (VAN) a company that
  provides the communications equipment, software,
  and skills needed to receive, store, and forward
  electronic messages that contain EDI transaction
  sets.

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Indirect Connection Between Trading Partners

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VAN

• Companies that provide VAN services in US
  General Electric Information Services, GPAS,
  Harbinger Corp., IBM Global Services, etc.
• Cost is an issue to VAN - require an enrollment
  fee, a monthly maintenance fee, and a transaction
  fee.

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Supply Chain Management

• A companys supply chain for a particular product
  or service includes all the activities undertaken
  to design, produce, promote, market, deliver, and
  support each individual component.

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Value Creation in the Supply Chain

• Supply chain management (SCM) process of
  taking an active role in working with suppliers
  to improve products and processes .
• SCM - used to add value in the form of benefits
  to the ultimate consumer at the end of the supply
  chain.
• Can reduce production costs and increase the
  value of product or service to the ultimate
  customer.

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Using Internet Technology in the Supply Chain

• Clear communications and quick responses to those
  communications key elements SCM.
• Technologies of the Internet and the Web can be
  very effective communication enhancers.

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Increasing Efficiency in the Supply Chain

• Many companies are using Internet and Web
  technologies to manage supply chains in ways that
  yield increasing efficiency throughout the
  chain.
• In 1997, production and scheduling errors costing
  Boeing over 1.5 billion - using EDI and Internet
  links, Boeing is working with suppliers so that
  they can provide the right part at the right time.

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Electronic Marketplaces and Portals

• Web - companies can use it to establish
  information hubs for each major industry - offer
  news, research reports, analyses of trends, and
  in-depth reports on companies in the industry AND
  offer marketplaces and auctions.
• Hubs - offer a doorway to the Internet for
  industry members and would be vertically
  integrated, these planned enterprises vertical
  portals or vortals.

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Industry Marketplaces

• Ventro opened its first industry marketplace,
  Chemdex, in 1997 to trade bulk chemicals.
• Ventro also opened Promedix for specialty medical
  supplies, Amphire Solutions for food service,
  MarketMile for general business products and
  services, and a number of others.
• CheMatch.com competed directly with Ventro in the
  bulk chemicals market

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Industry Marketplaces