Transcript ELC 200 Day 15

ELC 200 Day 15
Prentice Hall, 2003
1
Agenda
Questions from last Class?
Assignment 4 due March 27
Assignment 5 will be posted this weekend
Quiz two on March 27
Chaps 4-6
M/C and Short Essays
Same format as before
Today we will be talking about Public B2B
exchanges
Prentice Hall, 2003
2
Consortium Trading Exchanges (CTE)
CTE (consortium)—an exchange formed and
operated by a group of major companies to
provide industry-wide transaction services
Vertical, purchasing-oriented
Horizontal, purchasing-oriented
Vertical, selling-oriented
Horizontal, selling-oriented
Prentice Hall, 2003
3
Purchasing-Oriented
(Procurement) Consortia
E-Procurement Consortia can be:
Vertical purchasing-oriented
All the players are in the same industry
Support buying and selling
Horizontal purchasing-oriented
Owner-operators are large companies from
different industries
Improving the supply chain
Prentice Hall, 2003
4
Covisint
Covisint—e-market of automotive industry
B2B integrated buy-side marketplace
General Motors
Ford
DaimlerChrysler
Entire industry gains
Lower costs
Easier business practices
Increased efficiency
Prentice Hall, 2003
5
Covisint (cont.)
“Co” stands for
Connectivity
Collaboration
Communication
“Vis” stands for visibility provided by the
Internet
“Int” stands for integrated solutions
Prentice Hall, 2003
6
Covisint (cont.)
Collaborative commerce
Facilitate product design
Enable procurement process
Provide broad marketplace of buyers and
suppliers
Vertical consortia trading exchange
Few large buyers
Many sellers (suppliers to the industry)
Prentice Hall, 2003
7
Covisint (cont.)
Marketplace’s connectivity integrates
buyers and sellers into a single network
Flow of information integrates buyers and
sellers into a single network
Visibility provides real-time information for:
Fast decision making
Communication throughout the supply
chain, anywhere in the world
Prentice Hall, 2003
8
Covisint (cont.)
Web use allows changes to be sent
simultaneously and instantly throughout its
entire supply chain
The result:
Less need for costly inventory in the
supply chain
Increased ability to respond quickly to
market changes
Prentice Hall, 2003
9
Covisint (cont.)
One of the major objectives of the exchange is
to facilitate product design:
Offers best-of-breed functionality
Ability to integrate providers across the
supply chain creates (collaborative
commerce)
Enables e-procurement
Provides broad marketplace of buyers and
suppliers
Accesses a wealth of supply chain expertise
and experience
Prentice Hall, 2003
10
Consortium Trade Exchanges
Selling-oriented consortia
Vertical exchanges
Thousands of potential buyers within a
particular industry
Legal challenges for B2B consortia
Exchanges introduce a level of collaboration
among both competitors and business
partners
Antitrust and other competition laws must be
considered
Prentice Hall, 2003
11
Critical Success Factors of Consortia
Size of industry
Ability to drive user adoption
Elasticity—measure of incremental spending
by buyers as a result of savings generated
Standardization of commodity-like products
Management of intensive information flow
Smoothing inefficiencies in supply chain
Prentice Hall, 2003
12
Dynamic Trading
Dynamic trading—exchange trading that
occurs in situations when prices are being
determined by supply and demand
(dynamic pricing)
Prentice Hall, 2003
13
Dynamic Trading:
Auctions and Matching
Matching
Market makers conduct matching supply and demand
(e.g., stocks)
More complex than auctions because they match:
Prices
Quantities
Times
Locations
Most stock exchanges work on matching
Prentice Hall, 2003
14
Dynamic Trading:
Auctions and Matching
Auctions
Private trading rooms—members conduct
auctions at the exchange
Auction services may be one of the activities
Exchange may be fully dedicated to auctions
Can conduct many-to-many public auctions
Prentice Hall, 2003
15
New Entrant to the
Dutch Flower Market: TFA
Dutch auction method
Were semi-automated
Buyers and sellers went to one location to see the
flowers
Auctioneer used a clock with a large hand set at a
high price
Price dropped as the time ticked off on the clock
Until clock was stopped by pushing an order button
Quantity ordered was clarified over an intercom ,
Process continued until all of the flowers were sold
Prentice Hall, 2003
16
TFA (cont.)
TeleFlower Auction (TFA)—competing
electronic auction enables its initiators to
penetrate the Dutch flower market
Buyers bid on flowers via their PCs
Designated times
From any location
Auction clock shows on buyer’s PC screen
Clock stopped by pushing space bar
Auctioneer completes sale by telephone
Prentice Hall, 2003
17
TFA (cont.)
Process is much quicker
After-sale delivery is much faster—within
half an hour after the sale
Major issue can be the quality of the flowers
Flowers are not physically visible to the
buyers
Large amount of relevant information is
available
TFA quickly built a competitive advantage
using IT
Prentice Hall, 2003
18
TFA (cont.)
Prentice Hall, 2003
19
Exhibit 6.9
Comparing the Major B2B
Many-to-Many Models
Prentice Hall, 2003
20
Building and Integrating
Marketplaces and Exchanges
Step
Step
Step
Step
Step
Step
1—Think ahead
2—Planning
3—System analysis and design
4—Building the exchange
5—Testing, installation, and operation
6—System evaluation and improvement
Prentice Hall, 2003
21
Building and Integrating
Marketplaces and Exchanges (cont.)
Integration
Between 3rd-party exchange and back-office
systems of participants
Across multiple, incompatible exchanges
External communications
Web/client access
Data exchange
Direct application integration
Shared process
Prentice Hall, 2003
22
Building and Integrating
Marketplaces and Exchanges (cont.)
Process and information coordination—how to
coordinate external communications with
internal information systems
External process
Data transformation
Internal process
Exception handling
System and information management—involves
management of:
Software
Hardware
Information components
Prentice Hall, 2003
23
Managing Exchanges
Revenue models
Networks of exchanges
Transaction fees
Fee for service
Membership fees
Advertisement fees
“First mover” primary
objective is the
acquisition of buyers and
sellers
Integration with other
companies or exchanges
Some exchanges are
beginning to integrate in
order to better serve their
customers
Prentice Hall, 2003
24
Exhibit 6.11
Several Exchange, One Supply Chain
Prentice Hall, 2003
25
Managing Exchanges (cont.)
Centralized management
One market builder builds and operate several
exchanges
Manages all the exchanges ’catalogs, auction places,
discussion forums
Centralizes: accounting, finance, human resources, IT
services
Third-party vendors providing logistic services
and payment systems are more efficient when
supplying services for “families ” of exchanges
VerticalNet (verticalnet.com)
Ventro (nexprise.com)
Prentice Hall, 2003
26
Critical Success Factors
Early liquidity
Business’s chance of survival is best when
liquidity (volume of business conducted) is
achieved early
Right owners
Partner with companies that can bring liquidity to
the exchange
Best owner may be intermediary that can push
both buyers and sellers
Prentice Hall, 2003
27
Critical Success Factors (cont.)
Right governance
Good management and fair /effective operations and
rules are critical
Governance provides rules for the exchange,
minimized conflicts, decision making support
Openness
Exchanges must be open to all from organizational
and technical point of view
Open standards require universal commitment and
agreement on the standards
Prentice Hall, 2003
28
Critical Success Factors (cont.)
Full range of services
Participants are attracted by an exchange that helps
cut costs
Exchanges team up with banks, logistic services and
IT companies to help
Importance of domain expertise
Market makers need an in-depth understanding of:
The industry
Business processes inherent in the industry
Knowledge of industry structure
Government and policy stipulations
Prentice Hall, 2003
29
Critical Success Factors (cont.)
Targeting inefficient industry processes
Contribute to increased costs and time delays
Vertical exchanges can add value
Targeting right industries
Large base of transactions
Many fragmented buyers and sellers
High vendor and product search/comparison
costs
Strong pressure to cut expenses
Prentice Hall, 2003
30
Critical Success Factors (cont.)
Brand building is critical
Increase switching costs by adding features and
functionality
Invest in:
Gaining brand awareness
Attracting businesses to exchange
Customer retention
Prentice Hall, 2003
31
Critical Success Factors (cont.)
Exploiting economics of scope
Value-added services make exchange compelling
Industry news
Expert advice
Detailed product specification sheets
Support services
Banks and financial information providers
Identification supported by sophisticated
digital certificate architecture
Prentice Hall, 2003
32
Critical Success Factors (cont.)
Choice of business/revenue models
Garner diverse and
multiple revenue
streams
Critical mass of users
will garner more valueadded services
Software licensing
Advertising
Sponsorship
Prentice Hall, 2003
Auction services
Financial services
Business reporting
Data mining services
33
Critical Success Factors (cont.)
Blending content, community, and commerce
Content and community perspective—
stimulate traffic
EC transaction perspective—creates higher
level of customer “stickiness”
Managing channel conflict
Hostile phase as buyers interact directly with
sellers (disintermediation of supply chain)
Short-term revenues impacted by backlash
from existing fulfillment channels result in
price erosion affecting medium-term
profitability
Prentice Hall, 2003
34
Communication Networks and
Extranets for B2B
The Internet—a public, global
communications network that provides
direct connectivity to anyone over a
local area network (LAN) via an
Internet service provider (ISP) or
directly via an ISP
Prentice Hall, 2003
35
Communication Networks and
Extranets for B2B (cont.)
Intranets—a corporate LAN or wide area
network (WAN) that uses Internet
technology and is secured behind a
company’s firewalls
Links various servers,clients,databases,and
application programs within a company
Limited to information pertinent to the
company
Prentice Hall, 2003
36
Communication Networks and
Extranets for B2B (cont.)
Extranets—a network that uses a virtual
private network (VPN) to link intranets in
different locations over the Internet; an
“extended intranet”
Provide secured connectivity between a
corporation’s intranets and the intranets of its
business partners
protected environment of an extranet allows
Allows partners to securely collaborate and
share information
Prentice Hall, 2003
37
Communication Networks and
Extranets for B2B (cont.)
Virtual private network (VPN)—a network
that creates tunnels of secured data flows,
using cryptography and authorization
algorithms, to provide secure transport of
private communications over the public
Internet
Prentice Hall, 2003
38
Exhibit 6.12
An Extranet
Prentice Hall, 2003
39
A Network Loaded with Extras: ANX
Automotive Network Exchange (ANX)—an
infrastructure for B2B applications
Backed by General Motors, Ford, and Chrysler
Allows companies in the automotive
market to:
Swap supply and manufacturing data
Buy
Sell
Collaborate
Prentice Hall, 2003
40
ANX (cont.)
Benefits of ANX
One-to-one and one-to-many connections
Procurement
CAD/CAM file transfers
EDI
E-mail
Group-ware
“Big Three” expect to save millions of dollars
Consolidating communications links
Reduce order turn-around time
Prentice Hall, 2003
41
ANX (cont.)
A VPN for ANX
Most visible B2B implementation of VPNs that
run over the Internet
Security—all participants must have tools
compliant with (IP) security standards
covering
Authentication
Encryption
Encryption key management.
Prentice Hall, 2003
42
Categories of Extranet Benefits
1.
2.
3.
4.
5.
Enhanced communications
Productivity enhancements
Business enhancements
Cost reduction
Information delivery
Prentice Hall, 2003
43
Implementation Issues
Problems with exchanges
High transaction fees
Sharing information
Unclear cost savings
Recruiting suppliers
Too many exchanges
Difficult to coordinate supply chain process
Private exchanges—e-marketplaces that are owned
and operated by an industry giant or a consortium
Problems with private exchanges
Lack of trust
Liquidity is questionable
Prentice Hall, 2003
44
Implementation Issues (cont.)
Software agents in B2B exchanges
Disintermediation
Evaluating exchanges
How much will company really save and/or gain?
Determine viability of the exchange
Contracts and technology that lock into a longterm relationship
Membership—who sits on the board.
Who provides payment, logistics, other services?
Prentice Hall, 2003
45
Support Services for B2B Exchanges
Directory services and search engines
Partner relationship management
Other services:
Trust services
Trademark and domain names
Global business communities
E-business rating sites
Web-research services
Prentice Hall, 2003
Digital photos
Client matching
Encryption sites
Promotion programs
46
Managerial Issues
Have we “done our homework?”
Can we use the Internet?
Which exchange?
Will joining an exchange force restructuring?
Will we face channel conflicts?
What are the benefits and risks of joining an
exchange?
Prentice Hall, 2003
47
Summary
E-marketplaces and exchanges defined
The major types of e-marketplaces
B2B portals
Third-party exchanges
Consortium trading exchanges
Dynamic pricing and trading
Prentice Hall, 2003
48
Summary (cont.)
Ownership and revenue models
Exchange networks and management of
exchanges
Critical success factors for exchanges
Extranets
E-marketplaces and exchange
implementation and development issues
Support services
Prentice Hall, 2003
49