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What is this Chapter about? |
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This Chapter describes the opportunities which the e-Business revolution
provides for the MOD and Industry. It explains how new technology
is enabling the development of radically new business processes
and how these can be applied.
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The Detail
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The Change |
Business-to-consumer (B2c) marketplaces are rapidly emerging on
the Internet. Flea markets and print classified ads are being replaced
by online auctions. No one doubts that these new consumer marketplaces
and selling models are having a major impact on how we purchase
goods and services. At the same time, leading Industries are implementing
procurement automation solutions, optimising the corporate purchasing
processes.
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Transforming Business Into
An e-Business |
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A new model for business is taking shape, “e-Business”
and it's built on the largest communications network on the planet,
the Internet. The competitive issues driving Industries around the
world, of all sizes and across all industry sectors, call for nothing
less than complete organisational metamorphosis. e-Business is the
way Industries are fundamentally changing the way they do business
using Internet technologies.
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The internet is changing everything!
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. . . from the way businesses interact with suppliers and serve
their customers, to how they manage back-office functions such as
accounting, payroll, and human resources. e-Business fundamentally
changes the way companies do business using Internet technologies.
e-Business is affecting every organisation around the world. Successful
companies recognise the opportunities e-Business offers and are
transforming themselves into e-Businesses. Companies that are slow
to embrace e-Business are facing competitors who threaten their
very existence.
Leading organisations are transforming procurement into an e-Business
weapon - streamlining processes, empowering employees, analysing
corporate data and forging effective relationships with Industry.
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Optimising Purchasing Through
e-Procurement |
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In order to achieve the results promised by full procurement automation,
a comprehensive procurement solution that addresses the needs of
employees, Industrial partners, and procurement professionals is
required. Employees need easy to use, browser based applications
to easily purchase goods and services. There is a need to extend
internal process efficiencies to Industry, through XML based communication
as well as supplier self-service. Procurement professionals need
the right tools and information to analyse world-wide procurement
spend and supplier performance, as well as to source and select
the right Industrial partners.
Market-leading Internet Procurement solution provides comprehensive
support for all of these needs.
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Self-Guiding Catalogue — Enables
users to find catalogue items quickly with its powerful
text based search engine rather than forcing users through
hierarchy drill downs that typically result in dead ends.
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Global Solution — Support for
multiple languages and currencies for companies of all
sizes, with services including implementation, training,
and support offered around the clock and around the globe.
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All Products and Services — Manage
any type of goods or services, including production, administrative,
MRO, capital, and many more.
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Some Challenges Still Remain |
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Internet procurement solutions work well for long-term relationship
based agreements, contracts, and catalogue purchases, but if you’re
a buyer, how do you find the right supplier in the first place?
If you’re a supplier, how do you find new customers? How do
you initiate the relationship? How do you ensure that the relationship
will change along with your needs? How do you determine the right
price? What about infrequently ordered goods or services?
Interaction with many buyers and suppliers at any given time is
crucial, and yet the cost of point-to-point integration to support
all these relationships is prohibitive. How do you reduce the cost
of doing business and yet remain nimble and responsive?
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| Online Marketplaces—Purchasing
through Community e-Business |
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Online marketplaces provide tremendous efficiencies as well as opportunities
to solve the remaining procurement challenges. Not only will existing
buyer/supplier relationships thrive in these e-Business communities,
but new relationships are much easier to initiate. Buyers with demand
are efficiently matched to partners with supply, and both are assured
that the relationship is initiated at right price, with the right
lead time, with the appropriate level of quality, and so on. The
interaction is easy to the point that relationships can be created
around a single transaction. No longer will companies spend countless
days searching for the right supplier or the best sales opportunity.
When the need arises for a one-time spot purchase, that need can
be quickly and easily fulfilled. When a longer term relationship
is required, the partner can be identified and the relationship
initiated through the same process. This eliminates huge headaches
for both buyers and suppliers.
Consider many of the inefficient markets which exist today. Companies
may carry vast amounts of inventory even when a surplus exists which
is more than adequate. Why? Because the supply and the demand cannot
be matched efficiently. Online marketplaces promise to meet the
challenge with capabilities like auctioning, bid management, and
spot purchasing.
By virtue of the fact that everyone is connected to the same service,
the need for point-to-point integration with each trading partner
is eliminated. Buyers and suppliers have only one place to go to
get transaction details and other vital information. And the more
participants, the more efficient the communication.
Keys to a successful online marketplace include:
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| Ability To Match The Right
Buyers To The Right Sellers |
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In order to match the right buyers to the right sellers, traditional
purchasing models based on catalogues and contracts are being supplemented
with new, Internet enabled models. While catalogue and contract
based purchasing work well in relatively stable pricing environments,
these models don't work well for commodities with volatile pricing
or for situations where a relationship doesn’t already exist.
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| Buyer Auctions and Internet
Bids |
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A buyer auction or Reverse Auction (see Chapter 10) allows buyers
to solicit and manage bids from multiple Industry partners online.
Different from a conventional auction where terms favour the seller,
terms in a Reverse Auction are determined by the buyer. Terms could
be centred around price, delivery, quality, service, or some combination
of them all.
In addition to defining which elements are most critical, buyers
can also determine what information will be visible to the Industry
partners who choose to respond. The buyer may choose to let Industry
partners see information like the current lead time or best price,
and let them bid multiple times right up to the closing moments
of the bid process. Buyers may choose to have a public bid where
any supplier can respond, or they may limit the bidders to those
who meet some defined criteria. A bidders list may be automatically
generated from the supplier registry based on that criteria. Either
way, the appropriate Industry partners are notified automatically
and they can choose to respond and submit their bids.
Buyers then review supplier responses online and award a contract
or allow additional rounds of bidding. Awarding a contract could
be the first step of several in a long term business relationship.
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| Spot Purchasing |
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Spot buying allows companies to purchase quickly from suppliers
with whom they have no previous formal relationship. And even if
there is an existing relationship, there may not always be a contract
or detailed pricing arrangements. A great example is maintenance
and repair. You may have a parts supplier that you use regularly,
but you simply cannot anticipate what parts you will need and when.
In fact, many of the purchases may only occur once. In this case
a contract doesn’t even make sense—you just need to
get the goods or have some service performed quickly.
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Catalogue Purchases |
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Buyers have traditionally negotiated contracts for high volume,
repetitive purchases. Contracts are also used to lock in pricing
as well as negotiate volume discounts from suppliers. Typically,
buyers have catalogues or contracts in place for suppliers with
long and established relationships. While spot purchases and buyer
auctions are valuable purchasing models, a full service marketplace
needs to support traditional catalogue and contract purchases as
well.
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Content and support for all
goods and services
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An important element for the success of any online marketplace is
the quality and accessibility of its content. Users naturally congregate
to sites which offer rich content and intuitive search tools to
easily access the content.
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| Self Guiding Search |
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Most search engines pursue one of two search strategies to locate
an item or commodity—aggregation or indexing. Leading search
engines on consumer oriented sites like Yahoo! and Excite! return
an indexed list of web sites where the content may be found. While
this approach decentralises ownership of the content to the supplier,
the user is faced with a multi-step search and different search
engines and user interfaces at each supplier's website. The content
aggregation approach, on the other hand, centralises content from
suppliers into a central repository offering a uniform interface
and search technology.
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Summary |
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Today’s single-buyer, multi-supplier Internet Procurement
solutions offer great opportunities for improving traditional purchasing
by automating transaction processing and enabling supplier collaboration.
However, significant additional purchasing efficiencies can be achieved
by streamlining procurement in an online community of multiple buyers
and suppliers.
A viable electronic marketplace solution requires a fundamental
understanding of the impact of Internet applications on buyers and
suppliers' business processes.
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Who should I contact to find
out more? |
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UK Online for business:
www.ukonlineforbusiness.gov.uk/cms/template/homepage.jsp?id=61297
The British Chambers of Commerce e-Business Clubs;
www.ebusinessclubs.co.uk
The Society of British Aerospace Companies e-Business Working
Group;
www.sbac.co.uk
Office of Government Commerce – e-Commerce Team;
www.ogc.gov.uk/index.asp?id=95
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