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Tuesday, 11 August 2009

Are b2b supply chain issues as significant in the service industry?

The internet has developed immensely sine it began in 1957 with the formation of the Advanced Research Projects Agency (ARPA) by the US, which was no more than a connection of two computers, up until 1992 when the World Wide Web was released by CERN, (Hobbes Internet Timeline, 2003), up until today, where we see internet as the best technological advancement since, well since time began. The Internet has ‘enabled’ many businesses in many different ways; one of the key contributions it has made to all types of firms is in restructuring and developing the supply chain. The Internet has changed the ways in which businesses operate and work with suppliers and distributors; this has occurred and affected the B2B market considerably. E-commerce has become an essential tool for any kind of business, it is regarded by many as the way forward in survival and gaining sustainable competitive advantage, whether that be offline or online, or both. The largest segment of e-commerce is the buying and selling of goods and services by the businesses to the other businesses, (Forrester Research, 2004).

‘E-commerce is the use of the Internet and the Web to transact business. More formally, digitally enabled commercial transactions between and among organizations and individuals’, Laudon and Traver, (2003).

Essentially e-commerce is the more than just the buying and selling of products electronically, involving all pre-sale and post-sale activities, panning across the whole supply chain of a firm. E-commerce has impacted firms in many different ways, it’s affected the ways in which firms trade, purchase, sell, build relationships, interact with customers and suppliers, and how they transfer goods and money.

On a broad level e-commerce can be split in to two sub-sections, business to business, and business to consumer, these two different approaches stimulate different methods and requirements from firms, (Madlberger and Kotzab, 2001). In undertaking e-commerce in the different groups different concepts and requirements are exercised, in this report e-commerce will be looked at in relation to B2B organizations, and the role it plays in them.

E-commerce has enabled firms through seven unique features it possess:

Ubiquity – available everywhere, work, home, school, at anytime

Global reach

Universal standards

Richness – Video, audio, and text is possible


Information density – technology reduces information costs and increase quality


Source: Laudon and Traver (2003)

However e-commerce is not a process whereby all these factors must be utilized or used in some way in order for it to be successful. They are he benefits of e-commerce, and some of those benefits will out way others to certain firms.

‘B2B: Business transactions conducted over public or private networks, including public and private transactions that se the Internet as a delivery vehicle. These transactions include financial transfers, online exchanges, auctions, delivery of products and services, supply-chain activities and integrated business networks.’ (Cunningham, 2001)

The subject of B2B e-commerce can be very detailed, and stretch far and wide to all the links a business may have with other businesses, and external sources. Where e-commerce has become its own, and been utilized successfully, and where it is most valuable is in the changing process of activity and supply chain management.

Supply chain issues have existed in all types of businesses for many years, and it’s pretty certain that they will continue to exist in the future. However, the level of significance these issues may have on certain types of businesses may be debatable or varying accordingly to the type of business. What the Internet as enabled is the development and adaptation of the Procurement process, essentially changing ‘the way firms purchase the goods they need to produce goods for consumers’, (Laudon and Traver, 2003; pp.709).

Business to business activity is seen to be more complex and multifaceted than that of business to consumer, the B2B supply issues are therefore directly related to the activity between suppliers and the organization, primarily on the Buy-side. The Buy-side(Upstream supply chain), (Chaffey, 2004), relates to and involves all the interaction between the firm and is supplier(s), it is the full process of engaging with suppliers in obtaining the end product or service, which can then be moved along to the Sell-side and to your customers.

Upstream supply chain – B2B

The B2B supply chain issues that have emerged are that:

B2B activities are conducted with companies and partners through supply chains or distribution networks

It is primarily a Buy-side issue

The chains have increased in their complexity and now the Internet extends the reach, and potentially the rate of exchange

These three issues can relate to any form of organization, whether it is service based or product, the implications and resulting factors are the same. However the importance of B2B e-commerce between service-orientated and profit centered organizations is something that may have different orientations.

In restructuring the supply chain in relation to e-commerce a B2B firm can gain many opportunities that can benefit them in their market. Disintermediation is a key factor that e-commerce allows firm to adapt and utilize. This is basically the ‘removal of intermediaries such as distributors or brokers that formally linked the company’ to its primary suppliers (Chaffey, 2004; pp.37). This offers firms the opportunity to buy directly from the supplier with reduced costs and shorter cycle times, therefore making the firm more efficient and effective. The other side of this is Re-intermediation (‘the creation of new intermediaries between customers and suppliers providing services such as supplier search and product evolution’, Chaffey, 2004; pp.39). This offers the business the chance to use B2B exchanges to source products or services at lower costs. This can all be utilized to accomplish the changes that e-commerce can bring to the firm, without any restructuring of the supply chain technologies such as email, web-based ordering, EDI and order tracking can be used to reduce costs and cycle times. And both disintermediation and re-intermediation options can be facilitated through email, web-sites EDI and e-commerce.

But the question B2B e-commerce in the service industry needs to address is whether it’s really essential for a not-for-profit organization to be fully integrated in B2B e-commerce activity? Or can they cope without it? Or is it more important for a not-for-profit organization as they have no income directly?

The adoption of e-commerce has occurred predominantly in the manufacturing and product based industries, however more and more service based organizations are adapting their strategies and implementing e-commerce strategies. One of the most successful and domineering companies to implement e-commerce has been Direct line. By adapting their whole organization, and stakeholders’ to a new and revolutionary strategy and way of ‘doing’ things they were able to completely change the market and become a market leader. The insurance industry may not look to be the best suited in adding value to the supply chain or the Buy side of a firm through e-commerce or e-procurement, however this clearly shows it can have monumental effects on any type of organization.

The ways in which Direct line, and many other financial companies have benefited from such implementations are through:

Reduced purchasing cycle time and cost

Enhanced budgetary control (achieved through rules to limit pending and improved reporting facilities)

Elimination of admin errors

Increasing buyer’s productivity

Lowering prices through product/service standardization and consolidation of buys

Improving information management

Improving the payment process

Source: Turban et al. 2000

These factors clearly have immense effects on the companies running costs and roles in their respective markets. By increasing efficiency, lowering costs, and increasing the effectiveness of working with other organizations in providing the service to consumers many firms have seen the benefits of e-commerce. These effects re not only in financial value, but also relate to productivity and organizational structure. Better interaction between companies and suppliers have helped improve products and services for consumers, it has also benefited in achieving substantial growth, not only for you, but key stakeholders.

This can also be looked at in the not-for profit organizations. It is apparent from the outset that profit or sales are not the key issues for such service providers; however, e-commerce can assist such firms in many other areas. Not-for-profit organizations are primarily there to provide a service or project awareness of some kind across to consumers or the public; they do however still have the same supply chains as other firms. These supply chains work and are in place in order to gain or obtain key data or information, in order to provide it to an end user, so fundamentally they are intermediaries for others, or protocol for certain organizations or societies in providing a service to stimulate respective targets, i.e. charities. Obviously the exchange of ‘goods’ is different and the interaction, along with the goals of both the firm and its suppliers or distributors. However, e-commerce can assist and help the firm in its procurement process in providing the systems to make such organizations efficient, and work better with its stakeholders. This can assist the overall service to the consumer, and help implement the ‘pull’ strategy for the firm, but also for the services it provides. An example of this is the ‘portal’ (Chaffey, 2004) site 2wm.co.uk which provides information and support to all aspects within the west midlands. By implementing e-commerce with its strategic partners and stakeholders 2wm.co.uk have been able to provide a service that would be very difficult to duplicate offline. 2wm.co.uk have utilized B2B e-commerce by working directly with its ‘suppliers’ and restructuring the supply chain into an interactive ongoing relationship to whom consumers have access to through the portal. This has been very effective as data and information has been communicated both back and forth, and is continuously updated through the procurement process. This allows ‘suppliers’ of information or data to supply it as and when they feel the need to do so, or when requested.

Another example of where B2B e-commerce has worked very well is through auction sites. Auction sites at the bare minimum are places to trade or market, they aim to bring two sets of individuals together to a place where they can trade. Various auction site offer one-to-many markets, providing the seller with buyers and the buyers with products; this can be seen in the business orientated DoveBid.com site. The site provides the service; there is no cost at all to post your products on the site, although it is only done through an invitation process and items are not common ‘consumer’ use products. The site has developed its supply chain by implementing supply chain management from the seller, through themselves and down to the consumer, at no stage does the site see or hold the product, however, it holds all the key links in the supply chain and manages them.

This shows the importance e-commerce can have within an organization and how it can help improve the quality of the service being provided. E-commerce is not specifically one item or one element of the process; it enables and aids firms in many different ways and in many different areas.

Yes e-commerce is new way of doing business, yes e-commerce is beneficial to any type of firm, yes e-commerce is something all firms are looking to utilize in the future if they’ve not already done so. However it must also be noted that e-commerce is the next stage in a log running process. Firms and organizations have for many years now been using various systems or structures in order to communicate effectively with trade partners and stakeholders. E-commerce did not originate with the Internet, it merely took a step further and was taken to new level or stage.

Since the early 1980’s firms have been implementing communication systems, the most effective being EDI (Electronic Data Exchange). Over the years EDI has developed from simply a system for document automation, to document elimination and finally continuous replenishment. EDI is a specialized system and used for interaction, and supports direct commercial transactions among strategically related firms. However, unlike e-commerce, EDI has the weakness of being unable to support vast amounts of suppliers and distributors meeting in one virtual network. In essence this has helped e-commerce in taking the role of an electronic system to the next level, and becoming the most successful tool to implement, which has been enabled through web technologies.

E-commerce has a very broad and drawn out definition, however implementing all such functions is not always necessary. E-commerce to one firm may involve all aspects of e-commerce from buying to selling, and eCRM to post sale servicing. An example of this s Dell, there entire network has been enabled by e-commerce and this has changed there whole supply chain systems and management, from supplier interaction to customer contact, to delver and post sale services. On the other side of the argument, many firms have only utilized certain areas of e-commerce, in relation to their business and the products or services they offer. An example of this is various shopping mall sites, one of which is the Bullring site. It has utilized e-commerce in providing the service of information, knowledge, and data by working with suppliers of this information, the council, retailers, consumers, in order to provide a service with improved quality and better access abilities to all aspects of the Bullring through one, portal to an extent.

As it’s evident from the various sites discussed, and from personal experience e-commerce has completely changed the market and the organizational structures of firms and its stakeholders.

The key implications that B2B e-commerce has had is that it has created the virtual organization, giving firms the ability to exist virtually with virtual links to one or many suppliers, distributors and customers. It has also helped in creating new distribution channels from both suppliers to firms, and from firms to customers. This impact has overall improved the distribution channel support by allowing stakeholders to work together, and compliment each others abilities and strategies in providing the product or service from one end, the beginning, through the supply chain, to the end user.

This has allowed firms to implement supply chain management, increasing efficiency and effectiveness of their firm, but also improvement of the overall process for customers. Another factor that e-commerce has impacted strongly is customer relationship management. It has enabled and developed a firms’ ability to acquire customers, retain existing customers through supply chain management, improve the quality of service, and employ strategies to extend and selectively target certain customer segments. In doing so, eCRM has been able to be implemented within any type of business, whether it’s a product or service based company, for-profit or not.

E-commerce is a process, and it is unique to each and every business or situation. The end result of the process is dependant upon the type of firm or organization in question; however the importance of e-commerce is as valid for any type of firm.

One of the most important aspects that need to be identified and related to e-commerce in recognizing the potential for e-commerce is the objectives of the firm or organization. Varying objectives will cause different uses of e-commerce, however the importance of reaching ones objectives are as equally as important to any type of firm, from profit based, to not-for-profit. Therefore it is essential to note that e-commerce is applied in many different forms, and for many different motives, however the importance of it will be directly related to ones objectives, which are they key priority to every firm.

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