B2B Business and E-Commerce: Understanding the Differences and Commonalities, Slides of Fundamentals of E-Commerce

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B2B BUSINESS

Prepared by Nick Gachui, Multimedia University of Kenya

Learning objectives In this chapter you will learn,

• (^) how we define B2B business,
• (^) what are the commonalities of B2C and B2B business,
• what are the differences between B2C and B2B business,
• how electronic business can be supported by application software packages.

How can ICT support B2B business? This is done by the subsequently described technologies:

• EAI ( Enterprise Application Integration ) is a sub-area of the B2B integration. It considers the coupling of databases and/or ERP systems and is mainly focused on technical issues.
• Portals are the user interface for an access to different application systems. So the suite of different application systems behind the portal looks like one integrated application system to the user. In this area the management of access rights is a challenging task.
• ASP ( Application Service Providing ) provides software for users, who are not mandatorily members of the same organization. With the emerging cloud technologies ASP is more or less absorbed by SAAS = Software as a service, where application services are technically based on cloud technology. The application may be provided by one of the participants of the B2B structure, but a third party may also provide it. ASP is a specific variant of outsourcing.
• (^) Hubs are central points where output from various senders is collected and then distributed to the receivers. A hub takes messages/documents/data files. It converts and transforms formats and forwards messages/documents/data files to receivers. Hubs may be operated by one of the participants (normally the most powerful participant), but also by a third party.
• Cloud Computing is the synonym for up-to-date technologies to use IT systems without possessing them or having them installed in the own facilities (Marks & Lozano 2010). The philosophy is: You actually do not have your own power plant. Why should you tomorrow still have your own IT infrastructure? The access to these systems is possible via the Internet. The systems are virtual and you can use them but you do not know where the server or database is physically installed.

• There are three categories of cloud services available:

• SaaS = Software as a Service,
• Paas = Platform as a Service,
• IaaS = Infrastructure as a Service.

DIFFERENCES BETWEEN B2B AND B2C

• (^) The primary aspects of B2C business are:
  • (^) The fundamental pattern is the one-time cooperation with a focus on the single transaction.
  • (^) Each transaction has to be executed as if business partners have never cooperated in the past and will never come together again in the future.
  • (^) Both business partners have to find out whether they want to conduct this transaction (negotiation). Both business partners have to see that they will benefit from this transaction (win-win situation).
  • (^) Prices have to be allocated for each transaction specifically (See chapter 3 of this book: pricing challenge).
  • (^) The appropriate payment method has to be selected (See chapter 7 of this book: Electronic payment)

B2B SOFTWARE SYSTEMS

1. ENTERPRISE RESOURCE PLANNING (ERP)

• (^) ERP (Ganesh et al 2014) is a category of business-management software – typically a suite of integrated applications – that an organization can use to collect, store, manage and interpret data from many business activities, including:
• (^) Product planning,
• Manufacturing or service delivery,
• (^) Marketing and sales,
• (^) Inventory management,
• (^) Shipping and payment.

ERP systems provide the following functionality:

• Financial accounting : general ledger, fixed asset, accounts payables (vouchering, matching, payment), accounts receivables (cash application, collections), cash management, financial consolidation,
• Management accounting : budgeting, costing, cost management, activity based costing,
• (^) Human resources : recruiting, training, rostering, payroll, benefits, diversity management, retirement, separation,
• (^) Manufacturing : engineering, bill of materials, work orders, scheduling, capacity, workflow management, quality control, manufacturing process, manufacturing projects, manufacturing flow, product life cycle management,
• (^) Order processing : order to cash, order entry, credit checking, pricing, available to promise, inventory, shipping, sales analysis and reporting, sales commissioning,
• (^) Supply chain management : supply chain planning, supplier scheduling, product configurator, order to cash, purchasing, inventory, claim processing, warehousing (receiving, put-away, picking, packing),
• Project management : project planning, resource planning, project costing, work breakdown structure, billing, time and expense, performance units, activity management,
• Customer relationship management : sales and marketing, commissions, service, customer contact, call centre support,
• (^) Data services : Various “self-service” interfaces for customers, suppliers and/or employees, product lifecycle management (PLM),
• (^) Systems engineering (SE) : product and portfolio management (PPM), product design (CAx), manufacturing process management (MPM), product data management (PDM).

SCM systems usually provide the following functionality:

• (^) Demand & supply planning : demands planning & forecasting, safety stock planning, supply network planning, distribution planning, service parts planning,
• (^) Procurement : strategic sourcing, purchase order processing, invoicing,
• (^) Manufacturing : production planning & detailed scheduling, manufacturing visibility & execution & collaboration, MRP based detailed scheduling,
• (^) Warehousing : inbound processing & receipt confirmation, outbound processing, cross Docking, warehouse & storage, physical inventory,
• (^) Order fulfilment : sales order processing, billing, service parts order fulfilment,
• Transportation : freight management, planning & dispatching, rating & billing & settlement, driver & asset management, network collaboration,
• (^) Real world awareness : supply chain event management, auto ID/RFID and sensor integration,
• Supply chain visibility : strategic supply chain design, supply chain analytics, supply chain risk management, sales & operations planning,
• Supply network collaboration : supplier collaboration, customer collaboration, outsourced manufacturing.

Contd…

3. SUPPLIER RELATIONSHIP MANAGEMENT (SRM)

• (^) SRM is defined as the management of the relations between an organization and its suppliers. The objective is to link all suppliers to the organization, to support the procurement management for the total procurement process. SRM uses methods and approaches of CRM but now from the customer’s point of view. SRM is a sub-area of SCM.
• (^) An SRM system contains information about all sources of supply and all procurement information like deliverable products, possible risks, terms and conditions or quality. SRM can be considered as an advancement of E- Procurement. Added value is generated through bundling of all information about procurement and resources and providing it to the total organization.

Contd…

4. MARKETPLACE

• (^) A (digital) marketplace is a piece of software with comprehensive E-Commerce functionality. It can be characterized by m suppliers and n customers (m>1, n>1). Process and software are under control of the marketplace owner. It uses portal technologies and enables the cooperation of different suppliers and different customers. Providing and demanding organizations act autonomously. It is possible, that members are at the same time providing and demanding organizations.
• (^) Marketplaces can be differentiated due to:
• (^) Type of product or service,
• Type of transactions,
• (^) Functions.

Contd… Due to the type of product or service we consider:

• Tradable quantities : Transaction costs must be low according to tradable quantity.
• (^) Specificity : A specific product with a low application potential has low market liquidity.
• (^) Complexity of products : Complex products are not appropriate for electronic trade.
• (^) Price components : material, service, production, transport, profit margin.
• Consequences for the consumer : contract business, spot business.
• Value creation : A-Products (Goods needed for the production), C-Products (MRO = Maintenance/Repair/Operations).
• (^) Due to the type of transaction we consider:
• Transaction costs : incidental costs (…up to 50% of total costs): searching, signing of a Contract, currency hedging, insurances; external transaction costs: by involved third parties, e.g. credit card company; internal transaction costs (…savings potential supposed to be up to 80%): customer, supplier,
• Profit margin : if profit margins are high, Provider will get around marketplaces; if profit margins are low, Market already has high transparency; do we need a marketplace?
• Market model : number of participants – automation does only make sense, if the number of participants is high,
• (^) Degree of concentration : on the customer side, on the supplier side,
• (^) Degree of globalization : distribution and allocation of power, structure of market volume: value of transaction (high/low), number of transactions (high/low),
• (^) Transparency of market : complementary markets: support functions (Transportation, Insurances), adjacent markets: Extension of value creation chain, similar market structures.

QUESTIONS FOR YOUR SELF-STUDY

• (^) 01: Describe the difference between B2B and B2C business.
• (^) Q2: Consider that you were a book-on-demand company. How could a B2B relationship to a big (electronic) bookshop look like? What is the process? What are the business rules?
• (^) Q3: We have described the advantages of the involved parties for a strong B2B relationship. What are the disadvantages for the involved parties?
• Q4: Find information about marketplaces. What are they offering? How long have they been in the market? Why are they successful?
• (^) Q5: What does the abbreviation EDIFACT mean?
• Q6: Consider a B2B relation between a producer of goods and a merchant. What are the specific advantages for both parties? Give two examples for both parties.
• Q7: Which consequences does a B2B relation have for the involved IT systems?

END

Any Comments and Questions are Welcome