While you are debating and planning how to apply e-commerce in your supply chain, a new breed of online service, business-to-business (B2B) Web portals, is turning the old-economy supply chain on its head. They are hotter than Yahoo!, America Online and Excite. B2B portals don't give stock ticker tape or weather maps, but they provide unprecedented access to a database of buyers, suppliers and products -- all interested in business-to-business e-commerce over the Internet. Watch out. B2B portals can make expensive, proprietary corporate systems redundant and strip your business naked. Although less than two years old, already small offline suppliers and large players are competing for global shelf space at Chemdex. It claims to have more than 130 suppliers and an inventory that is almost five times bigger than the bio-chemical industry paper catalogue. Transaction costs of a typical purchase are down from $100 to $20 or less. According to some predictions, B2B Web portals may handle up to one-third of e-commerce within the next three years.
A lot of corporate effort and cost is associated with procuring items to run the business. Some items are essential (for example, books to a library and raw materials to a manufacturer), but many items are non-essential (for example, office equipment, computer consumables, stationery, catering, travel and entertainment, and so on). In some industries and companies, procurement costs can represent early teens as a percentage of revenue. If you allow "maverick" buying (that is, casual or once-off purchasing from non-approved suppliers), materials can cost you up to 20 per cent more than with approved suppliers. And if you are a supplier, your marketing and distribution costs can represent one-fifth to one-third of revenue. Unfortunately, this classic supply chain problem stays unresolved despite investments in electronic data interchange (EDI) and, more recently, in expensive procurement planning and purchasing systems. End users are still frustrated because they can't get the required items when they are needed, financial controllers are worried that the company is spending nearly 36 cents of every dollar it earns on non-essential and MRO items, and day-to-day management of suppliers continues to prove difficult -- enter B2B Web portals.
Think of a B2B Web portal as a trading hub or a web of traders forming a trading community. The portal is designed primarily to take the load off corporate procurement systems. Instead of implementing proprietary software solutions individually and then spending hundreds of thousands in integration, buyers and suppliers conduct trade via an open, Web-based system. Suppliers can improve time to market, achieve economies of scale, find new customers, and because of the level playing field can compete aggressively with larger suppliers. Buyers reduce requisition cycle time, lower transaction costs, provide self-service capability to employees, and are able to improve control and communication with preferred suppliers. Some B2B portals are industry based and others are dedicated to non-essential and MRO items. They offer a low-cost alternative to automating on your own systems to procure indirect, non-essential and MRO items from approved suppliers. It is important to recognise that supply-chain integration of enterprise-resource planning and other mission-critical applications over the Internet between trading partners is different from procuring goods and services via a B2B portal.
If you are a customer (buyer), and your corporate purchasing is not interacting with online suppliers at a B2B portal, make sure they do. In fact, ask them to start making small purchases to compare margins with existing suppliers, test service levels, and find suppliers (local or overseas) that can reduce costs.
If you are a supplier, ensure that you are a part of your customers' changing expectations mix, that less-than-best processes don't make you uncompetitive online, and that with e-commerce you are getting economies of scale.
Scalability, completeness of automation, integration with back-end systems and flexible business modelling are some of the characteristics to consider in a B2B Web portal.
Aseem Prakash is the CEO of Interactive Knowledge On-Line
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