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Discuss the following: spot buying versus strategic sourcing, direct materials
versus indirect materials, and vertical markets versus horizontal markets.
Spot buying is the purchase of goods and services as they are needed, usually at
prevailing market prices. In contrast, strategic sourcing is the purchase of goods and
services involving long-term contracts that are usually based on private negotiations.
Direct materials are the materials that are used in the creation of a product whereas
indirect materials are used to support that production. Vertical markets are concentrated
in a specific industry whereas horizontal markets concentrate on a product or service that
is used across several industries.
3.
What are company-centric marketplaces? Are they public or private?
Company-centric marketplaces focus on a single companys purchasing needs or selling
needs and are generally private entities owned by that company.
4.
Define B2B exchanges.
A B2B exchange is a many-to-many e-marketplace, usually owned and run by a third
party, in which many buyers and sellers meet electronically to trade with each other.
5.
Relate the supply chain to B2B transactions.
The use of business-to-business electronic commerce is generally a part of existing
supply chains that are used to make them more efficient.
6.
List the B2B online services.
The virtual service industries in B2B include: travel services, real estate, electronic
payments, online stock trading, online financing and other online services.
7.
Summarize the benefits of B2B.
These benefits are listed on page 180.
4.
Describe customer service in B2B systems.
Customer service in B2B systems is very similar to the customer service provided in B2C
systems. It is important to provide the customer with a way to interact with the merchant
and have technical questions solved. In this market, personalization/customization of the
service becomes even more important because of the large sales volume involved.
5.
Describe direct B2B sales from catalogs.
B2B can use catalogs in much the same way that B2C merchants can. Merchants are able
to list a variety of their products online for customers to select and purchase from.
Personalization/customization becomes more important in B2B sell-side transactions
when firms are working with larger customers.
6.
Discuss the benefits and limitations of direct B2B sales from catalogs.
There are several benefits to direct sales including: lower order processing costs, a faster
ordering cycle, fewer errors, lower search costs for buyers/sellers, lower logistics costs
and customization options. The limitations to direct sales include attracting buyers,
channel conflicts, the method of electronic indication and the required scale to operate
efficiently.
Describe Ciscos B2B activities and list their benefits to Cisco and to its
customers.
Ciscos System provides a central portal for service, ordering and order information. The
benefits of the system include decreased costs, increased quality, better and faster
technical support and reduced distribution costs.
7.
1.
Define procurement and list the major procurement methods.
Procurement is the acquisition of goods and services for a business. The major methods
are listed on page 191.
2.
Describe the inefficiencies of traditional procurement.
The traditional procurement system is inefficient because it involves large amounts of
time spent analyzing small repetitive purchases that could be made more efficiently
through a more developed system. Additionally, the lack of this developed system
creates maverick buying.
3.
Define e-procurement and its goals.
E-procurement is the electronic acquisition of goods and services for a business. Eprocurement attempts to achieve the following goals: increased productivity, lower
purchase prices, improved information flow, minimized maverick purchasing, improved
payment processes, faster purchasing, reduced processing costs, and finding new
suppliers/vendors.
4.
How do direct materials from MROs differ? Why are MROs good candidates
for e-procurement?
Direct materials are those materials that are used in the production process and are part of
the finished item. Indirect materials (MROs) are materials used to support the
manufacturing process but are not used as a part of the finished good. Office supplies are
an excellent example of MROs. MROs are an excellent candidate for e-procurement
because they are generally small dollar items that are purchased repetitively.
5.
Describe the implementation of e-procurement.
To implement e-procurement a firm must first decide how it fits in its overall strategy.
After this is determined, the firm must evaluate its existing processes and changes that
this system will make in both processes and personnel. Next, the firm must begin to set
up the software that will allow them to continue. This process will involve establishing
what goods should be purchased and from whom. Additionally, back-end systems must
be configured.
6.
Describe e-sourcing and its benefits.
E-sourcing includes the processes and tools that enable the sourcing process
electronically. This decreases process time and leads to decreased costs for customers
and suppliers.
Enter grainger.com and review all services offered to buyers. Prepare a list of
these services.
They can shop at one location for a variety of products. The shopping online is quick.
3.
There is a decrease in paperwork due to the use of online purchasing and purchasing
cards.
4.
The system has decreased the time spent by purchasing agents and has allowed
purchasing to be completed by employees through purchasing cards.
EC Application Case 5.4: How the State of Pennsylvania Sells Surplus Equipment
1.
It is high value, with potential buyers that are physically distant or unable to attend a
specific time auction.
2.
Why did the state generate 20 percent more in revenues with the online auction?
The intermediary may help increase the potential market pool as well as supplying the
needed technical infrastructure.
4.
Comment on the number of bidders and bids as compared with off-line auctions.
Business needs were put first, with the system tied to other existing systems.
3.
List the major benefits of the new three-procurement system to the company.
The system attempts to reduce costs, time spent and vendor alienation.
2.
Success factors include cost savings, a reduction in time used in the process and an
understanding of the fairness of the system.
EC Application Case 5.7: Reverse E-Procurement
1.
Draw a flow chart of the new procurement process and explain it.
The process involves the use of software that consolidates purchase options, econtracting, e-tendering/e-billing and auctions.
3.
Visit eyedeas.net and Find the Ozro demo. View the demo. Which features are
the most important? Why?
Student responses will vary. Different firms many have greater needs (and perceived
value) in different areas.
3.
Which companies, in your opinion, would benefit the most from this product?
Why?
Sell-side catalog-based marketplaces are very similar to business-to-consumer catalogbased marketplaces. They provide a service that allows buyers to easily select and
purchase products from a catalog of potential goods provided by the seller. Sellers are
able to easily display a large variety of items to their potential buyers. Buyers are able to
make their purchases easily through this online system.
2.
Discuss the advantages of selling through online auctions over selling from
catalogs. What are the disadvantages?
Selling through auctions has several advantages including low overhead and operational
costs if a third-party auction is used, the ability to sell one-of-a-kind items easily, the
ability to sell at the prevailing market price, and the ability to change products and
pricing quickly. Disadvantages might include limited selling times and reduced control
over price.
3.
Discuss the role of intermediaries in B2B. Distinguish between buy-side and sellside intermediaries.
Student answers will vary and will be based on the interplay between organizational
control and ease or purchasing.
6.
How do companies eliminate the potential limitations and risks associated with
Web-based EDI? (See Online File W5.9.)
How can software agents work for multiple sellers and buyers?
These agents can work to select appropriate buyers and sellers in electronic marketplaces
and match appropriate partners. In this way, the agent is acting as a filter of information
for both groups of users.
8. Discuss the role of XML in B2B. Why is it so important?
XML is an open data interchange language that will allow firms to eliminate the need
for EDI. It is possible that XML could provide a single language for data transmission.
Additionally, XML is designed to work with Internet protocols, thus providing businesses
with a huge potential network (the Internet).
Student reports will vary. Web services provide an architecture that is flexible and
assumes integration. This provides a starting place for the integration of several systems.
10. Relate e-procurement to sourcing.
Both applications ease the purchasing process through standardization and other
tools. E-sourcing deals with raw materials whereas e-procurement focuses on finished
goods.
11. Discuss the role of XBRL in financial management.
XBRL provides a common framework for capturing financial data and making it
accessible across systems for review and reporting purposes.
Internet Exercises
(Note: URLs may change over time; please check the Internet Exercises on the
Turban Web site for possible updates: www.prenhall.com/turban.)
1.
Enter gxs.com and review GSX Expresss bidding process. Describe the
preparations your company would make in order to bid on a job. Also, check how
some of the customers are using the company (e.g., Rohn & Haas 2005 case
study).
Student answers will vary. The site provides a variety of parts for different aircraft. The
site is not complex and provides a parts listing for specific types of aircraft. While it is a
clearinghouse, Boeing's PART system appears to be superior due to the greater range of
parts and easier navigation.
4.
Examine the sites, ariba.com, trilogy.com, and icc.net. Match a B2B business
model with each site.
These firms provide software solutions that automate Supplier Resource Management.
The solutions allow tighter integration and lower transaction costs between buyers and
sellers. The concentration is on solutions for the supply-side. While ariba.com provides
similar solutions, they also focus on buy-side and complete supply chain integration.
6.
Enter soho.org and locate EC applications for SOHOs. Also, check the business
services for small businesses provided by officedepot.com.
Visit ebay.com and identify all activities related to its small business auctions.
What services are provided by eBay?
a.
b.
The success factors would include the level of the systems sophistication and allowing
customization; the ability of the system to provide customer service based on need; and
the ability of the system to link customers with relevant product information.
c.
What kinds of inquiries are supported when customers check their order status?
The system can track shipping date, shipping method, and current location. Additionally,
the system provides a variety of FAQs with answers to commonly asked questions.
d.
What are the major benefits of CCO to Cisco and its customers?
Cisco benefits by reducing the cost of order taking, improving service and support,
reducing technical support staff cost, reducing software distribution costs, and providing
faster customer service. Customers receive quicker service and price quotes in addition
to better support and collaboration.
9.
Student responses will vary. Different firms many have greater needs (and perceived
value) in different areas.
10.
Enter bitpipe.com and find recent B2B vendor reports related to e-procurement.
Identify topics not covered in this chapter.
Visit iasta.com and examine the tools they sell for conducting various types of eprocurement. List and analyze each tool.
Enter terrecom.com. Summarize the B2B technologies it provides. Relate the sell
side, buy side and auctions.
14.
Predictions about the future magnitude of B2B and statistics on its actual volume
in various countries keep changing. In this activity, each team will locate current
B2B predictions and statistics for different world regions (e.g. Asia, Europe,
North America). Using at least five sources, each team will find the predicted B2B
volume (in dollars) for the next 5 years in their assigned region. Possible sources
of data are listed in Exhibit 3.1 (page 94).
Student answers will vary based on which statistics are used and when statistics are
procured.
2.
Your goal in this assignment is to investigate the major B2B vendors. Each team
should investigate a major vendor (e.g., Ariba, Microsoft, HP, Commerce One,
Oracle, or IBM) or an application type (buy-side, sell-side, or auction). Find the
major products and services offered, and examine customer success stories. Write
a report of your findings. Convince the class that your vendor is the best.
Each team should explore a different e-procurement method and prepare a paper
for class presentation. The paper should include the following about the eprocurement method:
a.
The mechanisms and technologies used
b.
The benefits to buyers, suppliers, and others (if appropriate)
c.
The limitations
d.
The situations for which each method is recommended
Each team will research vendors that produce software for reverse auctions and
vendors that conduct reverse auctions for businesses. Some companies to
consider are hedgehog.com, purchasing.com, oltiby.com, sorcity.com,
epiqtech.com and bizauctions.com. Each team will compile information about the
reverse auction process, security and so on. Prepare and make a presentation of
your findings.
1.
Why did Eastman Chemical start first with e-procurement rather than with the
sell-side? You may want to visit eastman.com to learn more about the company.
The company was focused on reducing the cost of MRO purchases to make operations
more efficient.
3.
Which of the problems cited in this case can be solved by other EC applications?
Relate your answer to Ariba products (ariba.com).
Chapter Test
1. B2C and B2B orders have similar order-fulfillment processes and pricing
models.
A. True
B. False
2. B2B EC can increase the efficiency and effectiveness of supply chains or
dramatically change the supply chain by eliminating one or more
intermediaries.
A. True
B. False
3. Strategic sourcing refers to purchases involving long-term contracts that
usually are based on private negotiations between sellers and buyers.
A. True
B. False
4. Each of the following is a major type of B2B structural model except:
A. collaborative union.
B. exchanges.
C. buy-side.
D. sell-side.
5. The purchase of goods and services as they are needed, usually at prevailing
market prices is referred to as:
A. direct materials.
B. strategic sourcing.
C. spot buying.
D. consolidation.
6. Benefits of e-procurement over traditional procurement methods include
each of the following except:
A. increasing the productivity of purchasing agents.
B. streamlining invoice reconciliation and dispute resolution.
14. Markets that deal with one industry or industry segment are:
A. horizontal marketplaces.
B. production chain marketplaces.
C. supply chain markets.
D. vertical marketplaces.
15. Purchases of goods and services based on long-term contracts is referred to
as:
A. spot buying.
B. consolidation.
C. strategic sourcing.
D. direct materials acquisition.
16. B2B only includes electronic transactions between businesses conducted over
the public Internet.
A. True
B. False
17. In company-centric marketplaces, the individual company has very little
control over who participates in selling or buying transactions.
A. True
B. False
18. Materials used in the production of a product best defines:
A. indirect materials.
B. direct materials.
C. MRO materials.
D. production materials.
19. E-procurement limitations and challenges include each of the following
except:
A. the technology needs to be updated frequently.
B. the system may be too complex.
C. the cost may be too high.
D. the ease of getting suppliers to cooperate electronically.
20. High-quality bicycle manufacturer Gregg's Cycles does not sell its products
online, nor do they allow their bicycles to be sold online by others. By not
selling online, Gregg's Cycles avoids ________ with its dealers and the
independent bike shops that sell its bikes.
A. pricing conflict
B. channel conflict
C. multichannel distribution
D. disintermediation
21. The aggregated catalogs of all approved suppliers combined into a single
internal electronic catalog defines:
A. bartering exchange.
B. buy-side e-marketplace.
C. sell-side e-marketplace.
D. internal procurement marketplace.