_06PublicB2BExchanges.ppt

Chapter6PublicB2BExchanges LearningObjectives Listthevarioustypesofe marketplacesDescribeB2BportalsDescribethird partyexchangesDistinguishbetweene procurementande sellingconsortiaDescribethevariousownershipandrevenuemodelsofexchangesDescribethesupportmechanismsofferedbyexchanges includingauctions LearningObjectives cont DescribenetworksofexchangesandexchangemanagementDescribethecriticalsuccessfactorsofexchangesDiscussimplementationanddevelopmentissuesofe marketplacesandexchangesDescribethemajorsupportservicesofB2BDescribetheextranetanditsroleinsupportingmarketplacesandexchanges ChemConnect TheWorldChemicalExchange TheProblemThousandsofcompaniestraderawandpartiallyprocessedchemicalsandplasticsdailyBeforetheInternetthetradingprocesswasslow fragmented ineffective costlyAsaresult BuyerspaidtoomuchSellershadhighexpensesIntermediarieswereneededfortosmooththeprocess ChemConnect cont TheSolutionProvidesfreemembershipintradingmarketplacesandinformationportalsPublicexchangefloorforanonymousbidsCommoditiesfloorforbuyingandexchangingCorporatetradingrooms privateonlineauctionsUp to the minutemarketinformationLargeelectroniccatalogIndependentintermediary ChemConnect cont TheResultsInChemConnecttradingroomscompaniescansaveupto15 injust30minutesofreverseauctionChemConnectisgrowingrapidly addingmembersandincreasingtradingvolumeeachyear B2BExchanges Publice marketplaces publicexchanges tradingvenuesopentoallinterestedparties sellersandbuyers andusuallyrunbythirdpartiesExchange amany to manye marketplace Alsoknownase marketplaces e markets andtradingexchanges B2BExchanges cont Marketmaker thethird partythatoperatesanexchange andinmanycases alsoownstheexchange CompaniesthatuseexchangesarepleasedwiththemandplantoincreasethenumberofexchangestheyparticipateTradersexpecttomorethandoublethevalueoftransactionsthattheydothroughtheexchanges Exhibit6 1TradingCommunities InformationFlowandAccesstoInformation ClassificationsofExchanges Systematicsourcing purchasingdoneinlong termsupplier buyerrelationshipsSpotsourcing unplannedpurchasesmadeastheneedarisesVerticalexchange anexchangeswhosemembersareinoneindustryorindustrysegmentHorizontalexchange anexchangesthathandlesmaterialstradedinseveraldifferentindustries Exhibit6 2ClassificationsofB2BExchanges B2BExchanges DynamicpricingOwnershipofexchangesGovernanceOrganizationofexchangesGainsandrisksofB2Bexchangeparticipation DynamicPricing Dynamicpricing arapidmovementofpricesovertime andpossiblyacrosscustomers asaresultofsupplyanddemandStockexchangessometimeschangeminutebyminuteAuctionpricesvaryallthetime DynamicPricing cont TypicalprocessthatresultsindynamicpricinginmostexchangesAcompanylistsabidtobuyaproductoranoffertoselloneBuyersandsellerscanseethebidsandoffers anonymityisoftenakeyingredientofdynamicpricing DynamicPricing cont Buyersandsellersinteractinrealtimewiththeirownbidsandoffers jointogethertoobtainavolumediscountprice grouppurchasing Adealisstruckwhenthereisanexactmatchbetweenabuyerandaselleronprice volume andothervariablessuchaslocationorqualityThedealisconsummated andpaymentanddeliveryarearranged OwnershipofExchanges Anindustrygiant IBM Aneutralentrepreneur athird partyintermediary ChemC Theconsortia orco op severalindustryplayerssetupanexchange C Governance ExchangesgovernedbyguidelinesandrulesHowtheexchangeoperatesWhattherequirementsaretojointheexchangeWhatfeesareinvolvedWhatrulesneedtobefollowed Governance cont SecurityandprivacyfordocumentsContracttermsbetweenanexchangeandbuyers sellersAssurancesthattheexchangeisfair OrganizationofExchanges MembershipGeneraterevenueTransactionandotherfeesRegistrationfeesAnnualmembershipfeesqualificationprocessdepositmayberequiredLimitssetonhowmucheachmembercantrade OrganizationofExchanges cont SiteaccessandsecurityInformationshouldbecarefullyprotected competitorscongregateinthesameexchangePreventillegaloffersandbidsListofindividualswhoareauthorizedtorepresenttheparticipatingcompanies Exhibit6 3ServicesinExchanges Exhibit6 4GainsandRisksofB2BExchanges B2BPortals B2Bportals informationportalsforbusinessesThomasregister facilitatesbusinesstransactionsforMROsADatabaseReverseauctionsFeaturesandServicesRevenuemodelVortals B2Bportalsthatfocusonasingleindustryorindustrysegment verticalportals Third Party Trading Exchanges ElectronicintermediariesDonotfavoreithersellersorbuyers neutralwithoutabuilt inconstituencyofsellersorbuyerstheyhaveaproblemattractingenoughbuyersandsellerstoattainfinancialviabilityLiquidity theresultofhavingasufficientnumberofparticipantsinthemarketplaceaswellasasufficienttransactionvolume Exhibit6 6SupplierAggregationModel Exhibit6 7BuyerAggregationModel SuitabilityofThird PartyExchanges FragmentedmarketsMarketsthathavelargenumbersofbothbuyersandsellersMainlysuitableforMROsBuyer concentratedmarkets severallargecompaniesselltoaverylargenumberofbuyersSeller concentratedmarkets severallargecompaniesdomostofthebuyingfromalargenumberofsuppliers ConsortiumTradingExchanges CTE CTE consortium anexchangeformedandoperatedbyagroupofmajorcompaniestoprovideindustry widetransactionservicesVertical purchasing orientedHorizontal purchasing orientedVertical selling orientedHorizontal selling oriented Purchasing Oriented Procurement Consortia E ProcurementConsortiacanbe Verticalpurchasing orientedAlltheplayersareinthesameindustrySupportbuyingandsellingHorizontalpurchasing orientedOwner operatorsarelargecompaniesfromdifferentindustriesImprovingthesupplychain Covisint Covisint e marketofautomotiveindustryB2Bintegratedbuy sidemarketplaceGeneralMotorsFordDaimlerChryslerEntireindustrygainsLowercostsEasierbusinesspracticesIncreasedefficiency Covisint cont Co standsforConnectivityCollaborationCommunication Vis standsforvisibilityprovidedbytheInternet Int standsforintegratedsolutions Covisint cont CollaborativecommerceFacilitateproductdesignEnableprocurementprocessProvidebroadmarketplaceofbuyersandsuppliersVerticalconsortiatradingexchangeFewlargebuyersManysellers supplierstotheindustry Covisint cont Marketplace sconnectivityintegratesbuyersandsellersintoasinglenetworkFlowofinformationintegratesbuyersandsellersintoasinglenetworkVisibilityprovidesreal timeinformationfor FastdecisionmakingCommunicationthroughoutthesupplychain anywhereintheworld Covisint cont WebuseallowschangestobesentsimultaneouslyandinstantlythroughoutitsentiresupplychainTheresult LessneedforcostlyinventoryinthesupplychainIncreasedabilitytorespondquicklytomarketchanges Covisint cont Oneofthemajorobjectivesoftheexchangeistofacilitateproductdesign Offersbest of breedfunctionalityAbilitytointegrateprovidersacrossthesupplychaincreates collaborativecommerce Enablese procurementProvidesbroadmarketplaceofbuyersandsuppliersAccessesawealthofsupplychainexpertiseandexperience ConsortiumTradeExchanges Selling orientedconsortiaVerticalexchangesThousandsofpotentialbuyerswithinaparticularindustryLegalchallengesforB2BconsortiaExchangesintroducealevelofcollaborationamongbothcompetitorsandbusinesspartnersAntitrustandothercompetitionlawsmustbeconsidered CriticalSuccessFactorsofConsortia SizeofindustryAbilitytodriveuseradoptionElasticity measureofincrementalspendingbybuyersasaresultofsavingsgeneratedStandardizationofcommodity likeproductsManagementofintensiveinformationflowSmoothinginefficienciesinsupplychain DynamicTrading Dynamictrading exchangetradingthatoccursinsituationswhenpricesarebeingdeterminedbysupplyanddemand dynamicpricing Supply Demand DynamicTrading AuctionsandMatching MatchingMarketmakersconductmatchingsupplyanddemand e g stocks Morecomplexthanauctionsbecausetheymatch PricesQuantitiesTimesLocations DynamicTrading AuctionsandMatching AuctionsPrivatetradingrooms membersconductauctionsattheexchangeAuctionservicesmaybeoneoftheactivitiesExchangemaybefullydedicatedtoauctionsCanconductmany to manypublicauctions NewEntranttotheDutchFlowerMarket TFA DutchauctionmethodWeresemi automatedBuyersandsellerswenttoonelocationtoseetheflowersAuctioneerusedaclockwithalargehandsetatahighpricePricedroppedasthetimetickedoffontheclockUntilclockwasstoppedbypushinganorderbuttonQuantityorderedwasclarifiedoveranintercom Processcontinueduntilalloftheflowersweresold TFA cont TeleFlowerAuction TFA competingelectronicauctionenablesitsinitiatorstopenetratetheDutchflowermarketBuyersbidonflowersviatheirPCsDesignatedtimesFromanylocationAuctionclockshowsonbuyer sPCscreenClockstoppedbypushingspacebarAuctioneercompletessalebytelephone TFA cont ProcessismuchquickerAfter saledeliveryismuchfaster withinhalfanhourafterthesaleMajorissuecanbethequalityoftheflowersFlowersarenotphysicallyvisibletothebuyersLargeamountofrelevantinformationisavailableTFAquicklybuiltacompetitiveadvantageusingIT TFA cont Exhibit6 9ComparingtheMajorB2BMany to ManyModels BuildingandIntegratingMarketplacesandExchanges Step1 ThinkaheadStep2 PlanningStep3 SystemanalysisanddesignStep4 BuildingtheexchangeStep5 Testing installation andoperationStep6 Systemevaluationandimprovement BuildingandIntegratingMarketplacesandExchanges cont IntegrationBetween3rd partyexchangeandback officesystemsofparticipantsAcrossmultiple incompatibleexchangesExternalcommunicationsWeb clientaccessDataexchangeDirectapplicationintegrationSharedprocess BuildingandIntegratingMarketplacesandExchanges cont Processandinformationcoordination howtocoordinateexternalcommunicationswithinternalinformationsystemsExternalprocessInternalprocessDatatransformationExceptionhandlingSystemandinformationmanagement involvesmanagementof SoftwareHardwareInformationcomponents ManagingExchanges RevenuemodelsTransactionfeesFeeforserviceMembershipfeesAdvertisementfees Networksofexchanges Firstmover primaryobjectiveistheacquisitionofbuyersandsellersIntegrationwithothercompaniesorexchangesSomeexchangesarebeginningtointegrateinordertobetterservetheircustomers Exhibit6 11SeveralExchange OneSupplyChain ManagingExchanges cont CentralizedmanagementOnemarketbuilderbuildsandoperateseveralexchangesManagesalltheexchanges catalogs auctionplaces discussionforumsCentralizes accounting finance humanresources ITservicesThird partyvendorsprovidinglogisticservicesandpaymentsystemsaremoreefficientwhensupplyingservicesfor families ofexchangesVerticalNet Ventro CriticalSuccessFactors EarlyliquidityBusiness schanceofsurvivalisbestwhenliquidity volumeofbusinessconducted isachievedearlyRightownersPartnerwithcompaniesthatcanbringliquiditytotheexchangeBestownermaybeintermediarythatcanpushbothbuyersandsellers CriticalSuccessFactors cont RightgovernanceGoodmanagementandfair effectiveoperationsandrulesarecriticalGovernanceprovidesrulesfortheexchange minimizedconflicts decisionmakingsupportOpennessExchangesmustbeopentoallfromorganizationalandtechnicalpointofviewOpenstandardsrequireuniversalcommitmentandagreementonthestandards CriticalSuccessFactors cont FullrangeofservicesParticipantsareattractedbyanexchangethathelpscutcostsExchangesteamupwithbanks logisticservicesandITcompaniestohelpImportanceofdomainexpertiseMarketmakersneedanin depthunderstandingof TheindustryBusinessprocessesinherentintheindustryKnowledgeofindustrystructureGovernmentandpolicystipulations CriticalSuccessFactors cont TargetinginefficientindustryprocessesContributetoincreasedcostsandtimedelaysVerticalexchangescanaddvalueTargetingrightindustriesLargebaseoftransactionsManyfragmentedbuyersandsellersHighvendorandproductsearch comparisoncostsStrongpressuretocutexpenses CriticalSuccessFactors cont BrandbuildingiscriticalIncreaseswitchingcostsbyaddingfeaturesandfunctionalityInvestin GainingbrandawarenessAttractingbusinessestoexchangeCustomerretention CriticalSuccessFactors cont ExploitingeconomicsofscopeValue addedservicesmakeexchangecompellingIndustrynewsExpertadviceDetailedproductspecificationsheetsSupportservicesBanksandfinancialinformationprovidersIdentificationsupportedbysophisticateddigitalcertificatearchitecture CriticalSuccessFactors cont GarnerdiverseandmultiplerevenuestreamsSoftwarelicensingAdvertisingSponsorship Criticalmassofuserswillgarnermorevalue addedservicesAuctionservicesFinancialservicesBusinessreportingDataminingservices Choiceofbusiness revenuemodels CriticalSuccessFactors cont Blendingcontent community andcommerceContentandcommunityperspective stimulatetrafficECtransactionperspective createshigherlevelofcustomer stickiness ManagingchannelconflictHostilephaseasbuyersinteractdirectlywithsellers disintermediationofsupplychain Short termrevenuesimpactedbybacklashfromexistingfulfillmentchannelsresultinpriceerosionaffectingmedium termprofitability CommunicationNetworksandExtranetsforB2B TheInternet apublic globalcommunicationsnetworkthatprovidesdirectconnectivitytoanyoneoveralocalareanetwork LAN viaanInternetserviceprovider ISP ordirectlyviaanISP CommunicationNetworksandExtranetsforB2B cont Intranets acorporateLANorwideareanetwork WAN thatusesInternettechnologyandissecuredbehindacompany sfirewallsLinksvariousservers clients databases andapplicationprogramswithinacompanyLimitedtoinformationpertinenttothecompany CommunicationNetworksandExtranetsforB2B cont Extranets anetworkthatusesavirtualprivatenetwork VPN tolinkintranetsindifferentlocationsovertheInternet an extendedintranet Providesecuredconnectivitybetweenacorporation sintranetsandtheintranetsofitsbusinesspartnersprotectedenvironmentofanextranetallowsAllowspartnerstosecurelycollaborateandshareinformation CommunicationNetworksandExtranetsforB2B cont Virtualprivatenetwork VPN anetworkthatcreatestunnelsofsecureddataflows usingcryptographyandauthorizationalgorithms toprovidesecuretransportofprivatecommunicationsoverthepublicInternet Exhibit6 12AnExtranet ANetworkLoadedwithExtras ANX AutomotiveNetworkExchange ANX aninfrastructureforB2BapplicationsBackedbyGeneralMotors Ford andChryslerAllowscompaniesintheautomotivemarketto SwapsupplyandmanufacturingdataBuySellCollaborate ANX cont BenefitsofANXOne to oneandone to manyconnectionsProcurementCAD CAMfiletransfersEDIE mailGroup ware BigThree expecttosavemillionsofdollarsConsolidatingcommunicationslinksReduceorderturn aroundtime ANX cont AVPNforANXMostvisibleB2BimplementationofVPNsthatrunovertheInternetSecurity allparticipantsmusthavetoolscompliantwith IP securitystandardscoveringAuthenticationEncry