Chapter 4 B2B Business Processes PDF

CHAPTER 4 B2B BUSINESS  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 applicat...

CHAPTER 4 B2B BUSINESS  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. 2 4.1. THE PROCESS MODEL AND ITS VARIANTS 4.1.1 DEFINITION OF B2B B2B stands for “Business to Business”. In general: Business interaction between different organizations is considered. B2B E-Commerce is simply defined as E-Commerce between companies (Xu 2014, pp. 119–130). Business processes cross the boundaries of the participating organizations. B2B also includes business interactions between sub-organizations of (big) organizations. Big enterprises are often organized as a group of different autonomous legal entities. There is no clear limit between “inner world” and “outer world”. BUSINESS RULES COVER: Decision rules for process management, Rules for exception handling, A comprehensive data model including input requirements and output descriptions, Rules for the operation of interfaces, Policies for the usage of information systems, Areas of responsibilities and accountabilities, Reporting lines. 5 HOW CAN ICT SUPPORT B2B BUSINESS? THIS IS DONE BY THE SUBSEQUENTLY DESCRIBED TECHNOLOGIES: 6 HOW CAN ICT SUPPORT B2B BUSINESS? THIS IS DONE BY THE SUBSEQUENTLY DESCRIBED TECHNOLOGIES: EAI (Enterprise Application ASP (Application Service Providing) Integration) is a sub-area of the B2B provides software for users, who are not integration. It considers the coupling mandatorily members of the same of databases and/or ERP systems and organization is mainly focused on technical issues. Hubs are central points where output from Portals are the user interface for an various senders is collected and then access to different application distributed to the receivers. A hub takes systems. So the suite of different messages/documents/data files. It application systems behind the portal converts and transforms formats and looks like one integrated application forwards messages/documents/data files system to the user. In this area the to receivers. management of access rights is a Cloud Computing is the synonym for challenging task. 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 7  4.1.2. 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) 8 4.1.2. DIFFERENCES BETWEEN B2B AND B2C The primary aspects of B2B business are: The fundamental pattern is the on-going cooperation. Business partners have agreed to cooperate for some time. Business partners have concluded a (written) contract. Different partners with specific objectives have to be coordinated. All members work together to reach common objectives. Price allocation is in most cases completely done in the initiation phase of the B2B cooperation; it is normally not done in each single transaction. Payment is in most cases done beside the B2B cooperation via traditional payment channels; often payments are not done for each single transaction but for a set of transactions, e.g. on a monthly basis. 9 4.1.2. DIFFERENCES BETWEEN B2B AND B2C The primary aspects of B2B business are: The fundamental pattern is the on-going cooperation. Business partners have agreed to cooperate for some time. Business partners have concluded a (written) contract. Different partners with specific objectives have to be coordinated. All members work together to reach common objectives. Price allocation is in most cases completely done in the initiation phase of the B2B cooperation; it is normally not done in each single transaction. Payment is in most cases done beside the B2B cooperation via traditional payment channels; often payments are not done for each single transaction but for a set of transactions, e.g. on a monthly basis. 10  STRONG B2B RELATIONSHIP The example is the cooperation of a supplier and a merchant. They have to work like a single and homogeneous organization. What are their fields of cooperation? Common strategic planning: Matching of the merchant’s sales plan and the supplier’s production plan. Supplier gets sales data from merchant: Monitoring of sales data at POS (point of sale; at rack in shop). Optionally daily sales data: tomorrow real-time (see the big data issue); objective is just-in-time delivery and just-in-time production to avoid warehousing and capital lockup. Common forecasts: update of cooperative planning; planning departments of business partners have to collaborate closely. 11  STRONG B2B RELATIONSHIP There are a lot of advantages for the supplier: Supplier gets precise sales data: Development/change in time; due to geographic distribution, Improved production management, Improved marketing and advertisement: reduction or even avoidance of return shipments. 12  STRONG B2B RELATIONSHIP On the other side there are also a lot of advantages for the merchant: Reduction of warehousing costs, Saving of personnel costs: rack management done by supplier or specific service firms (paid by the supplier), Transfer of logistics risks to supplier, Reduction or even avoidance of out-of-stock situations, Renting of storage space to the suppliers: Business model of merchant changes; merchant earns money with letting of rack space not longer with sales activities; sales risk is transferred to the supplier. 13 4.1.4 SUPPLY CHAIN MANAGEMENT SUPPLY CHAIN MANAGEMENT (SCM) Supply Chain Management (SCM) is considered as the strong interlinking and coordination of all activities, which are related to procurement, manufacturing and transportation of products. The supply chain connects suppliers, manufacturing shops, distribution centres, shipping companies, merchants and customers through processes like procurement, warehouse management, distribution and delivery, to provide goods and services to the customer. It is characteristic for supply chains that they coordinate several value chain stages. 15 FINAL TIPS & TAKEAWAYS Consistent rehearsal 1. Seek feedback Practice makes perfect, so strengthen your familiarity 2. Reflect on performance with the presentation 3. Explore new techniques Refine delivery style 4. Set personal goals Pacing, tone, and emphasis 5. Iterate and adapt Timing and transitions Aim for seamless, professional delivery Practice audience Enlist colleagues to listen & provide feedback 16 FINAL TIPS & TAKEAWAYS Consistent rehearsal 1. Seek feedback Practice makes perfect, so strengthen your familiarity 2. Reflect on performance with the presentation 3. Explore new techniques Refine delivery style 4. Set personal goals Pacing, tone, and emphasis 5. Iterate and adapt Timing and transitions Aim for seamless, professional delivery Practice audience Enlist colleagues to listen & provide feedback 17 Consistent rehearsal 1. Seek feedback Practice makes perfect, so strengthen your familiarity 2. Reflect on performance with the presentation 3. Explore new techniques Refine delivery style 4. Set personal goals Pacing, tone, and emphasis 5. Iterate and adapt Timing and transitions Aim for seamless, professional delivery Practice audience Enlist colleagues to listen & provide feedback 18 Consistent rehearsal 1. Seek feedback Practice makes perfect, so strengthen your familiarity 2. Reflect on performance with the presentation 3. Explore new techniques Refine delivery style 4. Set personal goals Pacing, tone, and emphasis 5. Iterate and adapt Timing and transitions Aim for seamless, professional delivery Practice audience Enlist colleagues to listen & provide feedback 19 Consistent rehearsal 1. Seek feedback Practice makes perfect, so strengthen your familiarity 2. Reflect on performance with the presentation 3. Explore new techniques Refine delivery style 4. Set personal goals Pacing, tone, and emphasis 5. Iterate and adapt Timing and transitions Aim for seamless, professional delivery Practice audience Enlist colleagues to listen & provide feedback 20 Consistent rehearsal 1. Seek feedback Practice makes perfect, so strengthen your familiarity 2. Reflect on performance with the presentation 3. Explore new techniques Refine delivery style 4. Set personal goals Pacing, tone, and emphasis 5. Iterate and adapt Timing and transitions Aim for seamless, professional delivery Practice audience Enlist colleagues to listen & provide feedback 21 Consistent rehearsal 1. Seek feedback Practice makes perfect, so strengthen your familiarity 2. Reflect on performance with the presentation 3. Explore new techniques Refine delivery style 4. Set personal goals Pacing, tone, and emphasis 5. Iterate and adapt Timing and transitions Aim for seamless, professional delivery Practice audience Enlist colleagues to listen & provide feedback 22 Consistent rehearsal 1. Seek feedback Practice makes perfect, so strengthen your familiarity 2. Reflect on performance with the presentation 3. Explore new techniques Refine delivery style 4. Set personal goals Pacing, tone, and emphasis 5. Iterate and adapt Timing and transitions Aim for seamless, professional delivery Practice audience Enlist colleagues to listen & provide feedback 23 Consistent rehearsal 1. Seek feedback Practice makes perfect, so strengthen your familiarity 2. Reflect on performance with the presentation 3. Explore new techniques Refine delivery style 4. Set personal goals Pacing, tone, and emphasis 5. Iterate and adapt Timing and transitions Aim for seamless, professional delivery Practice audience Enlist colleagues to listen & provide feedback 24  THE SCOR HAS DEVELOPED A SPECIFIC BUSINESS PROCESS MODEL (ELEMENT OF THE SUPPLY CHAIN), WHICH CONSISTS OF 5 STAGES AND FOCUSES ON THE SUPPLY CHAIN ISSUES: Plan: market forecast, procurement forecast, procurement alternatives, manufacturing alternatives, delivery alternatives, supply-chain alternatives, Source: materials staging request, delivery of parts, materials order, materials delivery, Make: manufacturing order, product delivery, Deliver: customer order, delivery of customer order, Return: return/receive products from customer. 25 4.2. B2B SOFTWARE SYSTEMS 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: 1. Product planning, 2. Manufacturing or service delivery, 3. Marketing and sales, 4. Inventory management, 5. Shipping and payment. HOW CAN ICT SUPPORT B2B BUSINESS? THIS IS DONE BY THE SUBSEQUENTLY DESCRIBED TECHNOLOGIES: Financial accounting: general ledger, fixed asset, accounts payables Order processing: order to cash, order entry, (vouchering, matching, payment), credit checking, pricing, available to promise, accounts receivables (cash application, collections), cash management, financial inventory, shipping, sales analysis and consolidation, Management accounting: budgeting, reporting, sales commissioning, costing, cost management, activity based costing, Supply chain management: supply chain Human resources: recruiting, training, planning, supplier scheduling, product rostering, payroll, benefits, diversity management, retirement, separation, configurator, order to cash, purchasing, Manufacturing: engineering, bill of inventory, claim processing, warehousing materials, work orders, scheduling, capacity, workflow management, quality (receiving, put-away, picking, packing), control, manufacturing process, manufacturing projects, manufacturing flow, product life cycle management, Project management: project planning, resource planning, project costing, work breakdown structure, billing, time and expense, performance units, activity management, Customer relationship management: sales 27 and marketing, commissions, service, 4.2.2 SUPPLY CHAIN MANAGEMENT (SCM) SCM (Chakravarty 2014 and Kurbel 2013) is the management of the flow of goods and services. It includes the movement and storage of raw materials, work-in-process inventory, and finished goods from the point of origin to the point of consumption Supply chain management is a cross-functional approach that includes managing the movement of raw materials into an organization, certain aspects of the internal processing of materials into finished goods, and the movement of finished goods out of the organization and toward the end consumer. 29  The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and the velocity of inventory movement. 30  MARKETPLACE A (digital) marketplace is a piece of software with comprehensive E-Commerce functionality. 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. 31 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). 32 DUE TO THE TYPE OF TRANSACTION WE CONSIDER: Market liquidity: number of transactions per time unit, Stage of transaction: due to process model, Meaning of transaction: due to industry, due to product, Duration of a transaction: with adjustment, without adjustment, 33 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. 34 MAIN FUNCTIONS OF A (DIGITAL) MARKETPLACE ARE: Data management (master data, transaction data, catalogue), Pricing (market, calling for bids, tender offer, auction, negotiations, power shopping: Consumers build a group), Buying (E-Sourcing, E-Procurement, workflow), Sales (ordering, order management), Stock exchange, Transport, Invoicing, Payment, Additionally: All functions which can be offered centrally for various market actors, Interfaces (Provider, customer, forwarding and shipping agency, other service providers, e.g. insurance firms). 35 We see several (digital) marketplaces. However, most of them obviously are not successful. Many of them collapse or shift to some kind of software company. Others shift to online shops or procurement platforms. Why are we not able to find a great variety of genuine (digital) marketplaces? Why do marketplaces fail? Here are several reasons for failure: 36  Technology is much more complex than expected by founders. Costs of IT infrastructure are under-estimated (may change with cloud computing). Project takes longer than expected and increases capital need. Complexity of business processes is under-valued by management. There is no sound background due to missing standards. Personnel efforts are significantly higher than expected. Marketplace is economically not attractive for potential suppliers or customers. Fees are not cost-effective. The business does not need an intermediate organization because partners come together directly using the Internet technology. Specific business does not need a marketplace because of highly complex products or services. 37 1. SPECIFIC SOLUTIONS AND SERVICES The B2B environment has led to many different and creative solutions. Due to the increasing needs for logistics transportation, warehousing and distribution are offered, sometimes by organizations, which originally were not logistics experts, e.g. Procter & Gamble. Application service providers offer deployment, hosting and management of packaged software from a central facility, e.g. Oracle and Linkshare. Outsourcing of functions in the process of E-Commerce such as Web-hosting, security, and customer care solutions are offered by outsourcing providers such as eShare, NetSales, iXL Enterprises and Universal Access. Auction solutions software for the operation and maintenance of real-time auctions in the internet is provided, E.G. By Moai Technologies and Opensite technologies. Content management software for the facilitation of website content management and delivery is delivered, e.G. By interwoven or procurenet. Web-based commerce enablers like commerceone offer a browser-based, XML enabled purchasing automation software.