Group 2 B2B Exchanges

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Group 2B2B Exchanges

• Timothy Brasher
• Tamira D. Meier
• Stephen P. Nicholas

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B2B Exchange

• Worldwide B2B market for services projected to
  grow from 403 billion (2000) to between 2.4 to
  7.29 trillion (2004)
• B2B e-commerce represents 7 of forecasted 105
  trillion of total global sales transactions
• All businesses will eventually buy on, sell on,
  host on or be marginalized by an exchange

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B2B Exchange
Forecasted B2B Revenues Worldwide
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What is a B2B Exchange?

• An e-marketplace where buyers and sellers
  exchange goods and services
• Purchase mechanisms one of the following
• Auction Reverse Auction
• Aggregate Auction Catalogs
• RFQ/RFP Matching buyers Sellers
• Value-Added Services
• Examples of services
• Portal Workflow Management
• Application Rental
• B2B exchanges produce revenue via membership and
  subscription fees, transaction fees or some
  combination

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B2B Exchange
CONTRIBUTION COMMODITY DIFFERENTIATOR
CRITICAL Critical Commodities Critical Differentiators
USEFUL Useful Commodities Eliminate/Migrate

• A B2B exchange is a cooperative among businesses
  where each corporation shares resources of
  critical commodities Critical commodities
  provide incentive to
• collaborate
• reduce costs
• share gains

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B2B Exchange

• Potential competitors reduce costs through shared
  industry ventures (critical commodities)
• Supply Chain Management
• Web based trade exchange for procurement
• Component suppliers bid via exchange
• Preferred supplier vs. open bidding?
• Just in Time (JIT) inventory
• Fixed networks vs. virtual networks

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B2B Exchange

• Value-Added Benefits
• Economies of scale - cut IT development and
  operating costs
• Scalable common industry interface
• Cut deployment costs
• View real-time data
• Increased visibility across supply chain
• Security/data integrity (128 bit encryption)

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Three Categories Defined

• Consortium
• One or more business organizations pool leading
  vendors or buyers in a particular industry
• Public Exchanges
• Run by third party, open to all companies that
  meet standards
• Private Marketplaces
• Run by a single company and its key suppliers

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Three Categories of B2B

• Consortium
• Global Food Exchange
• Covisint
• Public Exchanges
• Commerce One
• Private Exchanges
• Wal-Mart and Dell
• FuelQuest, Inc.

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Horizontal Exchange

• Horizontal Portal Exchanges
• Provides specializes services across several
  industries.
• Example SteelNet.com
• Salesinfo
• Markets
• Supplies
• Supplied to customers across multiple domains

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Vertical Exchange

• Vertical Portal Exchanges
• Provides a set of services across a single
  industry
• Example VerticalNet.com
• Technology
• Communication
• Environmental
• Healthcare/Science
• Biosearch.com biotechnology/life science
• Drugdiscoveryonline.com pharmaceutical
  industry

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Case Studies

• Covisint
• Automotive Industry
• FuelQuest, Inc.
• Petroleum Industry
• FreeMarkets.com
• Industrial Goods Services

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Covisint Case Study

• Who Are They?
• Background Information
• What Do They Do?/Services
• Benefits of Their Services
• Case Study Conclusions

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Covisint

• The Global independent e-business environment for
  the automotive industry.
• Mission Provide services that connect trading
  partners and improve their interactions within
  their supply chain.

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Who is Covisint?

• Covisint is the technology services company whose
  business-to-business applications and
  communication services connect the global
  automotive industry.
• They provide their customers with a common
  connection to suppliers, manufacturers and
  dealers in the automotive industry.

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Background

• Founders
• Covisint was formed by DaimlerChrysler, Ford,
  General Motors and Renault-Nissan.
• PSA Peugeot Citroen has also joined the
  initiative.

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Background

• Began Providing Services
• US January 1st 2001
• Europe, Asia Pacific, and Latin American- July,
  2001
• Locations
• HQ Southfield, MI
• Amsterdam
• Tokyo
• Frankfurt
• Paris
• Brazil

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Covisints Background

• Industry Participants (Suppliers)

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Covisints Background

• Technology Partners
• Technology Providers

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Covisints Services

• What do they do?
• Works with manufactures, suppliers and industry
  trade groups worldwide to define and implement
  effective common processes for the industry.
• Goals
• Reduce costs
• Increase efficiency
• Enhance quality
• Improve time to the market

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Covisints Services

• Procurement
• Quality
• Portal

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Procurement

• Covisint Procurement dramatically reduces the
  amount of time needed to complete sourcing
  activities.
• Auctions
• Becoming e-Enabled
• Process Savings
• Price Savings
• Improved Decision Making
• Benefits to both Buyers and Sellers
• Return on Investment

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Procurement

• Covisint Catalogs
• Reduced Purchasing Costs
• Controlled Buying
• Process Savings
• Lower Overhead Costs

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Covisint Quality

• Covisint's Quality Solution Suite
• provides industry standard web based tools to
  drive and accelerate product and process quality
  improvements through enhanced execution of
  quality planning and management across the supply
  chain
• Problem Solver
• To coordinate and manage problem solving between
  customers and suppliers

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Covisint Quality

• Customer Benefits
• Decrease administrative cost and increase
  employee efficiency
• reducing the paperwork expended in communicating
  problems to their suppliers
• Improve product quality and decrease costs from
  faster problem communication and thereby faster
  resulting corrective actions.
• Evaluate supplier performance and identify
  opportunities for continuous improvement.
• Enables the process of implementing a secondary
  inspection process to ensure the delivery of
  quality parts.
• Provides an easy means to record and recover the
  financial consequences of quality problems.

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Covisint Quality

• Supplier Benefits
• Provides an industry standard method for
  responding to customer problems.
• Speeds resolution process through quicker and
  better understanding of the issues.
• Continuous quality improvement due to improved
  knowledge of the patterns of issues.
• Provides a customer accepted solution to a
  quality problem.
• Provides the means to track the cost of bad
  quality.
• Electronic ability to accept or challenge costs.

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Covisint Portal

• The Covisint Portal allows industry participants
  to access OEM applications, Supplier
  applications, and Covisint applications via one
  common framework.
• Reduce IT and development costs
• Leverage Internet and automotive industry
  standards
• Cut Deployment costs
• Increase visibility across supply chain
• Best in-class security
• Integrating applications

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Covisint Portal

• CSM Global Market intelligence and forecasting
  services
• HCI Group LTD International Business Resource
  Journals services and products
• Asia Talk, Euro Talk, Ameri Talk

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Covisint Portal128 bit encryption

• Security Third party security certification by
  Trust Services.
• Audits validity, security, integrity, and
  maintainability

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Portal

• My Workspace customized views of information
  mix and match information from multiple companies
  into comprehensive view.

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GROWTH

• Covisint continues path of acceleration
  membership growth (253)
• 77,000 active users in over 15,000 companies

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Covisint Is it working?

• Daimler Chrysler AG
• e procurement 10 billion euros 2001
• Online bidding (5/2001) 3.5 billion Euros
• e-shop online catalog reduce process costs by
  50
• e- docs shared document
• Fast car automotive development

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COVISINT

• The supplier portal supports our vision for an
  electronically-linked supply chain and will help
  DELPHI to support our customers requirements for
  responsiveness.
• J.T. Bohgbey
• CEO DELPHI

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Covisint

• Since launch we have responded to customer
  demands with flexible solutions that address
  their critical business needs and connect their
  supply chains. IT is the focus that has led to
  reductions in inefficiencies in our customers
  supply chains and enabled us to succeed where
  other exchanges have failed.
• Bruce Swift
• President and CEO of
  Covisint

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FuelQuest Case Study

• Vision
• Background
• Services
• Conclusion

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FuelQuest Vision

• Lead the charge to transform the businesses of
  petroleum suppliers, marketers, and large
  petroleum buyers into service-driven,
  technology-savvy, and Internet-enabled industry
  leaders intent on winning market share and
  growing profits.1

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FuelQuests Background

• Independent
• First transaction October 1998
• Industry leader in on-line petroleum sales
• Provided first web-based business-management
  solution for petroleum marketers

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FuelQuest Services

• Provides and hosts web-based supply chain
  integration and collaboration technologies for
  the downstream petroleum industry.
• Applications support procurement, management and
  sales of fuels and lubricants
• Focus areas price management, strategic
  sourcing, logistics optimization, remote
  inventory monitoring e-Procurement, and automated
  tax compliance

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Capital Partners

• CIBC Capital Partners
• Merchant Banking Group
• Venture Group
• Private Equity Funds Group
• Strategic Investments
• EnerTech Capital
• Lehman Brothers Venture Capital Group
• TechQuest Capital Partners, LLC

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Clients

• Over 900 Clients
• Large Commercial Users Retailers

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Suppliers and Refiners
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Distributors Marketers
Customer base Over 650 small to medium size
businesses
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Alliances
Technology

• AIMS
• Accenture
• DM2 Software, Inc.
• Sun Microsystems

• Microsoft
• Cisco
• IBM
• Oracle

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Alliances
Marketing
Industry

• Meridian Associates, Inc.
• FTA
• Petroleum Marketers Association (PMAA)

• Accenture
• FuelAccess
• b2b Solutions

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FuelQuest Solutions

• Supply Chain Management
• eCommerce and Portals
• Tax Automation
• Consulting Services

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FuelQuest Solutions

• Supply Chain Management
• Links customers, suppliers, terminals,
  warehouses, distributors, carriers, and trading
  partners in one virtual enterprise.
• Replaces manual or linear SCM models
• Circular model offers greater interaction,
  responsiveness, and cost savings.

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FuelQuest Solutions

• eCommerce and Portals
• Effectively sell and service existing customers
  with online access to services and products
• Reduce time to get business critical information
  to dealers and distributors from one to seven
  days
• Decrease overall mail sent to dealers, jobbers,
  and distributors by at least 70
• Draw from existing applications for an inventory
  report, or provide a new capability hosted
  entirely by the Portal

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Supply Chain Process
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FuelQuest Solutions

• Tax Automation
• ZyTax providers Excise Tax compliance
  technologies and consulting services
• Reliable, scalable solutions tailored for any
  size business.
• Automates invoice calculations and compliance
  reporting to local, state, and federal
  authorities.
• Automates motor fuel excise tax calculation and
  reporting.

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FuelQuest Solutions

• Consulting Services
• Professional Services
• Integration Service  
• Application Development 

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Success

• FuelQuest remains successful
• Acts as a hub
• Independent marketers have own site
• Site contains news and information
• Conduct transactions with their own customers
• Handles pricing on a one-to-one basis, not open
  bid market
• Online tools support contract business
• Support contract business
• Automate the RFQ

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FreeMarket Case Study

• Background
• Services
• Case Study Conclusion

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What is FreeMarket

• Empowers organizations with the software,
  services and information to capitalize on the
  global economy.1
• Improve supply management processes
• Expand reach and capabilities of supply mgmt
  organization

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FreeMarkets Background

• Company founded 1995
• IPO December 10, 1999 (NASDAQ FMKT)
• IPO Price per share 48

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FreeMarkets Background

• Customers

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FreeMarkets Mission

• working hand-in-hand with our customers
• drive bottom-line benefits for the entire
  company
• providing a broad and deep mix of products and
  services
• offer practical, configurable set of software
  and services

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FreeMarkets Services

• Integrated Solutions
• Software Solutions
• Global Services

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Integrated Solutions

• FullSource
• Supplier Implementation Solution
• Spend Visibility Solution
• Sourcing Empowerment Package

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Integrated Solutions

• FullSource
• getting faster results
• minimizing supply risks
• building capabilities
• tackling tough spend
• Supplier Implementation Solution
• Spend Visibility Solution
• Sourcing Empowerment Package

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Integrated Solutions

• FullSource
• Supplier Implementation Solution
• Skilled, short term implementation resources
• Project Management
• Document Collaboration
• Repeatable Process Library
• Spend Visibility Solution
• Sourcing Empowerment Package

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Integrated Solutions

• FullSource
• Supplier Implementation Solution
• Spend Visibility Solution
• Spend data collection
• Data cleansing
• Ad-hoc and historical analysis to impact decision
  making
• Sourcing Empowerment Package

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Integrated Solutions

• FullSource
• Supplier Implementation Solution
• Spend Visibility Solution
• Sourcing Empowerment Package
• Assists buyers and suppliers with outsourcing
  decision
• Supplier training
• Help desk

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Software Solutions

• FreeMarkets ES
• FreeMarkets QS

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Software Solutions

• FreeMarkets ES
• ..provides your organization with the technology
  infrastructure necessary to achieve global supply
  management excellence.
• Requirements Management
• Supplier Relationship Management
• Sourcing Management
• Decision Management
• Contract Management
• FreeMarkets QS

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Software Solutions

• FreeMarkets ES
• FreeMarkets QS
• QS is a comprehensive, full-featured negotiation
  application that allows you to more fully
  automate the process of structuring and executing
  sourcing projects.
• Multi-Language Capabilities
• Multi-Currency Options
• Time Zone, Date, and Number Displays

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Global Solutions

• Application Services
• GSM Services
• Education Services
• Consulting Services

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Global Solutions

• Application Services
• Market Operations Services
• FreeMarkets Supplier Training
• GSM Services
• Education Services
• Consulting Services

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Global Solutions

• Application Services
• GSM Services
• FreeMarkets FullSource
• Sourcing Support Desk
• Education Services
• Consulting Services

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Global Solutions

• Application Services
• GSM Services
• Education Services
• Sourcing with Online Markets
• FreeMarkets QS Training
• Consulting Services

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Global Solutions

• Application Services
• GSM Services
• Education Services
• Consulting Services
• Organizational Transformation
• Outsourcing
• Low-Cost Country Sourcing

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Is it a Success?
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Is it a Success?
2002 2001 2000 1999
Annual Sales ( mil.) 170.4 147.6 91.3 20.9
Annual Net Income ( mil.) (17.6) (295.2) (156.4) (21.8)

• 80 of customers sign long-term contracts
• 54 of customers purchase multiple products
• Profit Margins on renewals and fees are
  increasing
• Reduced cost structure by targeting more specific
  markets, cutting consulting costs, reducing
  headcount from 1100 to 1000.

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Case Study Conclusion

• Freemarkets has landed large, globally-reaching
  clients well positioned to accommodate the
  growing global outsourcing trend
• Good customer service combined with product
  exclusivity generate revenue through contract
  renewals
• Survivability rate is high, but growth is too
  dependent on their niche market

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Conclusion

• Hurdles for B2B Exchanges
• Financial Concerns - Viability
• Pricing
• Transactions fees/subscriber fees
• Industry specific concerns
• ?Anti-Trust/FTC Regulations (Covisint)
• Competitors fears (FuelQuest, Covisint)

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Conclusion

• Hurdles for B2B Exchanges continued
• Maintain Vision
• Role of CIO/Management
• Evolve to meet demands
• Consolidation Dominant players
• Vs.
• Multiple/Small Private Exchanges

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Conclusion

• Future vision
• By streamlining the business process, providing
  hosted applications, and offering value-added
  services such as supply-chain management, some
  exchanges are flourishing in tough times. These
  successful exchanges have found their niche
  within a specific industry and have emerged as
  members of the winners circle.

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B2B Buzz Words

• B2B
• Internet based value chains value driven
• B2B Marketplaces
• Vertical Exchange service specific industry
• e-Analysis
• Interpret the activity and behavior patterns of
  online customers, visitors, or community members.
• e-Communities
• Forum to leverage on-line discussions, industry
  information and resources
• e-Content
• Technologies and tools to create, manage and
  deliver content to their business Web
  environments

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B2B Buzz Words

• e-Hub
• An interactive and instantaneous
  mediumelectronic marketplace or electronic hub
  (e-hub)
• e-Infrastructure
• Enables development of higher levels of
  e-business applications
• e-Markets
• Auction engines, dynamic trading environment and
  ASP-delivered marketplace services
• e-Process
• Tools for defining, deploying, tracking and
  logging process steps and transactions for the
  business Web

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B2B Buzz Words

• e-Procurement
• Technologies and tools that enable B2B purchasing
  via the web environment
• e-Service
• On-line environment for identifying, managing and
  resolving questions and problems of on-line
  visitors.
• Knowledge Management
• Leveraging collective wisdom to increase
  responsiveness and innovation.
• Portals
• Single-point access for Web-connected e-Business
  that mix content, community and commerce as they
  transition to new on-line business models

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lDiagram.pdf