10 - Business-to-business e-commerce and e-SCM

B2B

Business-to-Business. Transactions or relationships where businesses sell products, services, or information to other businesses, not consumers

What are the two sides of B2B e- commerce?

• The Supply (buy) side

• The Sell side

Supply Chain Systems

Integrated networks and processes used to plan, control, and manage the flow of goods, services, and information from suppliers to end customers efficiently.

Supply Chain Competition

Differentiating a firm´s products or prices on the basis of superior supply chain management.

B2B Commerce

All types of inter-firm trade to exchange values across organizational boundaries, involving both the purchase of inputs and the distribution of products and services.

• Customer relationship management, demand management, order fulfillment, manufacturing management, procurement, product development, returns, logistics/transportation, and inventory management.

B2B e-commerce (B2B digital commerce)

That portion of B2B commerce that is enables by the internet and mobile apps.

Supply Chain

The links that connect business firms with one another to coordinate production. It is a complex system of organizations, people, business processes, technology, and information - work together to produce products efficiently.

Automated order entry systems

The first step in the development of B2B e-commerce in mid 70s. It involves the use of telephone modems to send digital orders.

Seller-side solutions

Seller-biased markets that are owned by, and show goods from only, a single seller.

Electronic data interchange (EDI)

A communications protocol that enables firms to more easily share business documents such as invoices, purchase orders, shipping bills, product stocking numbers (SKUs), and settlement information. EDI systems are owned by the buyers.

Buyer-side solutions

Buyer-biased markets that are owned by buyers and that aim to reduce the procurement costs of supplies for buyers.

Vertical Market

A market that provides expertise and products for a specific industry

Horizontal Market

A market that serves many different industries.

B2B e-commerce websites

An online catalog of products made available to the public marketplace by a single supplier.

How are B2B e-commerce websites different from automated order entry systems?

They are a natural descendant, however: 1) the far less expensive and more universal Internet becomes the communication media and displaces private networks, and 2) B2B e-commerce wensites tend to serve horizontal markets - they carry products that serve a wide variety of industries.

B2B e-commerce marketplace (Net marketplaces)

Bring hundreds to thousands of suppliers and buyers into a sell-side, Internet-based environment to conduct trade.

Private B2B networks

Internet-based communication environment that extend far beyond procurement to encompass supply chain efficiency enhancements and truly collaborative commerce where the buyers work with the sellers to develop and design new products.

Benefits to B2B e-commerce

• lower administrative costs

• lower search costs for buyers

• reduce inventory costs by increasing competition among suppliers (increasing price transparency) and reducing inventory to the bare minimum

• lower transaction costs by eliminating paperwork and automating parts of the procurement process

• increase production flexibility by ensuring delivery of parts at just the right time (known as just-in-time production)

• improve the quality of products by increasing cooperation among buyers and sellers and reducing quality issues

• decrease product cycle time by sharing designs and production schedules with suppliers

• increase opportunities for collaborating with suppliers and distributors

• create greater price transparency - the ability to see that the actual buy and sell prices in a market

• increase the visibility and real-time information sharing among all participants in the supply chain network

Risks and challenges to B2B?

• lack of visibility - no real-time data on demand, production, logistics, or supplier finances.

• Supplier failures - lead to unexpected disruption

• Environmental neglect - little focus on environmental and social impacts

• External sensitivities - vulnerable to natural events, fuel/labor costs changes, and “black swan” events

• Systemic fragility - many supply chains are risky and unsustainable.

Procurement process

How firms purchase the goods they need to produce goods for consumers.

“Black Swan” event

Events that no one expected - Covid-19, Russian invasion of Ukraine.

Blockchain-based inventory tracking solution

Offer a centralized and secure way for every link in a supply chain to achieve better visibility into the status of inventory, even end consumers.

The Procurement Process

1. Search

2. Quality

3. Negotiate

4. Purchase order

5. Invoicing

6. Shipping

7. Remittance Payment

Direct Goods

Goods directly involved in the production process. They are directly incorporated into the final product - for instance, when an automobile manufacturer purchases sheet steel for auto body production.

Indirect Goods

All other goods not directly involves in the production process, such as office supplies and maintenance products.

MRO Goods

Products for maintenance, repair, and operations

Contract Purchasing

Involves long-term written agreements to purchase specified products, under agreed-upon terms and quality, for an extended period of time.

Spot Purchasing

Involves the purchase of goods based on immediate needs in larger marketplaces that involve many suppliers. Generally used for indirect goods.

Multi-tier supply chain

The chain of primary, secondary, and tertiary suppliers

Supply Chain Visibility

The ability of a firm to monitor the output and pricing of its first- and second-tier suppliers, track and manage supplier orders, and manage transportation and logistics providers who are moving the products.

Visibility

Having the ability to monitor suppliers, orders, logistics, and pricing.

Demand forecasting

Informing your suppliers of future demand

Production scheduling

Informing your suppliers of the production schedule

Order management

Keeping track of orders to your suppliers

Logistics management

Managing your logistics partners based on your production schedule.

Legacy Computer Systems

Older enterprise systems used to manage key business processes within a firm in a variety of functional areas from manufacturing, logistics, finance, and human resources.

Enterprise systems

Corporate-wide systems that relate to all aspects of production, including finance, human resources, and procurement. Generally have an inward focus on the firm´s internal production processes, and only tangentially are concerned with suppliers.

Supply chain management (SCM)

A wide variety of activities that firms and industries use to coordinate the key players in their procurement process.

Supply chain simplification

Involves reducing the size of the supply chain and working more closely with a smaller group of strategic supplier firms to reduce both product costs and administrative costs, while improving quality.

Tight Coupling

A method for ensuring that suppliers precisely deliver the ordered parts, at a specific time and particular location, to ensure the production process is not interrupted for lack of parts.

Just-in-time production

A method of inventory cost management that seeks to reduce excess inventory to a bare minimum. For instance, for an automobile, the parts needed arrive at the assembly factory a few hours or even minutes before they are attached to the car. Payment for parts does not occur until the parts are attached to the vehicle on the production line.

Lean Production

A set of production methods and tools that focuses on the elimination of waste throughout the customer value chain. Extension of just-in-time-

Adaptive supply chain

Allows companies to react to disruptions in the supply chain in a particular region by moving production to a different region. Firms can decide to locate some production in several countries rather than having all their production or suppliers in a single country.

Accountable supply chains

One where the labor conditions in low-wage, less developed producer countries are visible and morally acceptable to the ultimate consumers in more developed, industrial societies.

Sustainable supply chains

Involves using the most efficient environment-regarding means of production, distribution, and logistics.

Circular Economy

Based on three primary principles:

1. The elimination of waste and pollution in the production process;

2. The circular (recycling) of products and materials;

3. The regeneration of nature;

Bring Your Own Device (BYOD) Policy

Employees use their personal smartphone, tablet, or laptop computer on the company´s network.

Cloud-based B2B systems

Shifts much of the expense of B2B systems from the firm to a B2B network provider, sometimes called a data hub or B2B platform

Supply Chain Management (SCM) Systems

Continuously link the activities of buying, making, and moving products from suppliers to purchasing firms, as well as integrating the demand side of the business equation by including the order entry system in the process.

Digital Twin

Involves creating a digital simulation of a complex real-world system such as supply chain. It allows companies to “stress-test” their supply chains with various scenarios and develop alternate strategies.

Blockchain

A transaction database that operates on a distributed P2P network that connects all the participant members in a single database that is highly secure, reliable, resilient, and inexpensive.

Blockchain Ledger

Enables all parties to a transaction to add blocks of information to the shared ledger after a validation algorithm approves the transaction.

Collaborative Commerce

The use of digital technologies to permit organizations to collaboratively design, develop, build, and manage products throughout their life cycle. It involves a definitive move from a transaction focus to a relationship focus among the supply chain participants.

Content Marketing

Using informative media to promote sales rather than advertising the availability and price typical of display and search advertising in B2C markets.

Sales enablement systems

Keep track of leads developed from websites, e-mail, and mobile apps, and help the salesforce track these prospective customers through the point of purchase.

Predictive Analytics

Help B2B marketers to estimate the lifetime value of leads based on past marketing data.

e-distributor

Provides an online catalog that represents the products of thousands of direct manufacturers. E-distributors are independently owned intermediaries that offer industrial customers a single source from which to order indirect goods (often referred to as MRO goods) on a spot, as-needed basis. Operate in horizontal markets.

E-procurement company

independently owned intermediary that helps businesses automate their procurement processes and in some instances provides a marketplace that connects suppliers to buyers who pay a fee to join the market

Value Chain Management (VCM) services

Include automation of a firm’s entire procurement process on the buyer side and automation of the selling business processes on the seller side

Exchange

Independently owned B2B e-commerce marketplace that connects hundreds to potentially thousands of suppliers and buyers in a dynamic, real-time environment. Exchanges generally create vertical markets that focus on the spot-purchasing requirements of large firms in a single industry

Liquidity

typically measured by the number of buyers and sellers in a market, the volume of transactions, and the size of transactions

Industry Consortium

Industry-owned vertical market that enables buyers to purchase direct inputs (both goods and services) from a limited set of invited participants

Private B2B Network

A secure, exclusive digital platform designed for specific businesses, such as suppliers, manufacturers, and distributors, to collaborate, communicate, and conduct transactions. Access is restricted to authorized participants, ensuring confidentiality and security. These networks often include features like real-time data sharing, inventory management, and order processing, tailored to the needs of the connected businesses.

Objectives of private B2B networks?

• Developing efficient purchasing and selling business processes industry-wide

• Developing industry-wide resource planning to supplement enterprise-wide resource planning 

• Increasing supply chain visibility—knowing the inventory levels of buyers and suppliers 

• Achieving closer buyer-supplier relationships, including demand forecasting, communications, and conflict resolution 

• Operating on a global scale—globalization 

• Reducing risk by preventing imbalances of supply and demand, including developing financial derivatives, insurance, and futures markets 

Difference between B2B e-commerce marketplaces and B2B networks?

B2B e-commerce marketplaces are primarily transaction-oriented, whereas private B2B networks focus on continuous business process coordination among companies. B2B e-commerce marketplaces have a strong focus on indirect goods and services, private B2B networks focus on strategic, direct goods and services.

Collaborative resource planning, forecasting, and replenishment (CPFR)

Involves working with network members to forecast demand, develop production plans, and coordinate shipping, warehousing, and stocking activities to ensure that retail and wholesale shelf space is replenished with just the right amount of goods

Implementation barriers for private B2B Networks

Data Sharing Concerns:

• Firms must share sensitive, previously proprietary information, risking unintended sharing with competitors.

Integration Challenges:

• Incorporating private B2B networks into existing enterprise systems and EDI networks requires significant time and financial investment.

• While expensive for large firms, smaller firms may benefit from cheaper cloud-based SaaS solutions.

Behavioral and Organizational Changes:

• Employees need to adopt a trans-organizational mindset, prioritizing the broader network over individual firm interests.

• Suppliers must adjust resource management to align closely with partner demands, sacrificing some independence.

Cultural Shift:

• Broad behavioral change is required across the supply chain to effectively collaborate within the network.

Upstream Supply Chain

The part of the supply chain where all organizations and suppliers are involved in producing value and delivering raw materials, components, or resources needed by the main organization for production or assembly.

Downstream Supply chain

The part of the supply chain that involves all organizations and processes responsible for delivering products and creating value between the main organization and the end customer. This includes distribution, marketing, sales, and customer service.

Sell-side e-commerce

The online activities and systems used by an organization to market, sell, and distribute products or services to customers. It focuses on managing relationships with buyers, ensuring efficient order fulfillment, and enhancing the customer experience.

Buy side e-commerce

E-commerce relationships and activities that focus on the links between the supplier and the main organization, emphasizing procurement, supplier management, and the acquisition of goods and services needed by the organization.

Inbound Logistics

The activities involved in receiving, storing, and managing raw materials, components, or finished goods from suppliers to the main organization. It focuses on ensuring that inputs required for production or operations are delivered efficiently and cost-effectively.

Outbound Logistics

The processes involved in storing, transporting, and distributing finished goods from the organization to customers, retailers, or distribution centers. It ensures that products reach the end users efficiently, reliably, and cost-effectively.

Difference between inbound and outbound logistics?

inbound focuses on the movement of raw materials and supplies into the organization (from suppliers), while outbound focuses on the movement of finished goods out of the organization (to customers or distribution centers).

Bullwhip effect

A supply chain phenomenon where small fluctuations in customer demand lead to increasingly larger fluctuations in orders and inventory levels as they move up the supply chain. This can result in inefficiencies, such as overproduction, stockouts, or excessive inventory holding costs

Push Based Model

 A supply chain strategy where production and distribution decisions are based on forecast demand rather than actual demand. Products are "pushed" through the supply chain from manufacturers to retailers in anticipation of future sales.

Pull Based Model

A supply chain strategy where production and distribution are driven by actual customer demand rather than forecasts. Products are "puller" through the supply chain in response to real-time orders.