Business-to-Business Electronic Commerce (B2B EC):
An Imperative for Supply Chain Management

S. Balasubramanian
Teaching Research Associate
School of Management
Anna University, Chennai - 600025
E-mail:balasubu007@hotmail.com
Phone: 2351445 Dr. R. Radhakrishnan
Assistant Professor
Department of Mechanical Engineering
Anna University, Chennai - 600 025
E-mail: rrk38@hotmail.com
Fax: 91-44-2350397
Dr. D S Roosevelt
Scientist - EII
Central Leather Research institute
Adyar, Chennai - 600 020
India

Abstract

Business-to-business EC covers a broad spectrum of applications that enable an enterprise or business to form electronic relationships with their distributors, resellers, suppliers, and other partners. With the convergence of industry and product, supply chains are no longer constrained by geography and technology. In today’s electronic landscape there is a growing demand for companies to share data more efficiently across their extended supply chains. B2B Electronic Commerce implies that both the sellers and buyers are business corporations. B2B applications offer enterprises access to the following sorts of information.

Product - specifications, prices and sales history
Customer – sales history and forecasts
Supplier – product line and lead times, sales terms and conditions
Product process – capacities, commitments, product plans
Inventory – inventory levels, carrying costs, locations
Supply chain alliance – key contacts, partners role and responsibilities, schedules
Competitor – benchmarking, competitive product offerings, market share
Sales and marketing – point of sale and promotions

By using B2B EC, businesses can reengineer their supply chain and partnership. More than 90 percent of respondents in Nasscom’s e-commerce survey perceived efficiency in supply chain management as a rational for B2B e-commerce. The Internet can provide the most economical B2B EC platform for linking companies without additional network implementation. B2B EC can contribute to lower purchase costs, reduced inventory, enhanced efficiency of logistics, increased sales and lowered sales and marketing costs. Many companies in India gave gone for e-SCM, including Sony, MRF, Telco and Maruti. SAP, i2 and Oracle are the vendors in this space. The challenge is to “ work as a virtual corporation by using e-business solutions to bridge gap between a company and its supplies and dealers”. The B2B EC platform can be used to sell the company’s products and services to business customers on the Internet.
From the purchasing company’s point of view, B2B EC is a medium of facilitating procurement management such as reduced purchase price and reduced cycle time. Businesses around the world are getting serious about electronic purchasing, better know as Internet based Procurement or e-procurement. There are two types of B2B EC models are supplier-oriented marketplace architecture and buyer-oriented marketplace architecture. E–warehousing and distribution technology also improve the company performance in terms of money and information flow.

Introduction

Logistics and supply chain management have been influenced by developments in information technology and systems. E-commerce is an emerging concept that describes the process of buying and selling or exchanging of products, services, and information via computer networks including internet, intranet and extranet. In online perspective, e-commerce provides the capability of buying and selling products and information on the Internet and other online services. E-business refers to the execution of business transactions between customers and businesses through Internet. According to Lou Gerstner, IBM’s CEO “ E-commerce is all bout cycle time, speed, globalisation, enhanced productivity, reaching new customers and sharing knowledge across institutions for competitive advantage.” E-commerce provides an environment where time differences and location do not matter. The Internet is the basic driving force for the conduct of e-commerce. Basically the e-commerce is classified based on nature of transaction, as given below

B2B (Business-to-Business): In which, the electronic market transactions takes place between Organisation
B2C (Business-to-consumers): Retailing transactions with individual shoppers.
C2C (Consumer-to-Consumer): In this category consumers sells directly to consumers. Examples are individuals selling in classified ads. Several auction web sites allow individuals to put items for auctions.
Organisational e-commerce: All internal organisational activities are performed on Intranets. Activities can range from selling corporate products to employees to online training.

1. Electronic Marketing Process
Figure 1 shows the model of electronic marketing process. The process sequence starts with buyer logs on to the marketplace, search the product, select the product, order the product, purchase order send to seller, seller confirms order, buyer pays for product, payment information send to bank, credit checked, credit approved and Product shipped.

Figure 1. Model of electronic marketing process

2. Web – directed supply chain network management

The ability of the company to develop a globally wired business network, implementation, and components will determine its competitiveness. This requires fully integrating the customer, storefront, suppliers and business Organisation with supply chain operations (figure 2). As described by this framework, the web provides an additional channel for making sales and delivering services. The supply chain encompasses all the activities associated with the flow and transformation of goods from raw material s stage all the way to the end user. Supply chain management encompasses management of all the elements and activities of the supply chain. This includes material suppliers, production facility, distribution, services and customers; linked together via the feed- forward flow of information and the feed-back of materials [Evans, 1995].

Basically supply chain activities are broken into three parts.
Upstream activities involving material and service inputs from suppliers
Internal activities involving the manufacturing and packaging of goods
Downstream activities involving the distribution and sale of products to distributors and customers

Web-based supply chain model provides opportunities for several companies to work together and form a virtual enterprise

Figure 2. Typical web- directed supply chain network management

3. Entities of B2B Electronic Commerce

The key entities in B2B e- commerce are given below

Selling company
Buying company
Electronic intermediary –third party service provider
Deliverer
Network platform- Internet, Intranet and extranet
Protocols and communication- EDI and software agents
Back end information system – ERP in Intranet environment

4. Models of B2B Electronic Commerce

There are three models employed depending upon who controls the market place: supplier, customer and intermediary. The most common model is the supplier –oriented marketplace. In this model, both individuals and business buyers use the same supplier –provided market place as shown in figure 3.

Figure 3. Suppler – Oriented B2B marketplace architecture

In buyer oriented marketplace, a buyer opens an electronic market on its own server and invites potential suppliers to bid on the announced RFQ’s. A third business model is establishing an electronic intermediary company, which runs a marketplace where business buyers and sellers can meet and transact the business.
5. Just-in-time Delivery
Using e-commerce, it is highly possible to assure JIT Deliveries. In such case, delivering parts and materials on time is a must. In JIT, materials arrive just as they are needed. The aim of the JIT is to achieve the production targets using minimum amount of material, with minimum amount of Equipmets and least number of operators.

6. Benefits of Electronic Commerce (B2B)

Lowering purchase costs
Reduced inventory & cycle time
Efficient customer service
Lower sales & marketing costs
Reduced document processing costs

7. Challenges of E-Commerce

Security concerns
Developments concerns

Conclusion

Business-to-Business e-commerce provides a wonderful opportunities to manufacturing industries to enhance the operation in global view. Web-enabled technology integrating all the activities from raw material purchase to customer supply. Web-based supply chain model provides opportunities for several companies to work together and form a virtual enterprise. Finally B2B EC reduces the total product cost as well as improve the image of the company in global environment.

References

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Balasubramanian, S, Radhakrishnan, R, D S Roosevelt, 2002, “ Globalization of manufacturing industry through web-based supply chain management”, Spark on-line referred journal ( www.indiabschools.com/ operations_001.htm)
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www.research.ibm.com - 17 Aug 2002