B2B - the basics
Sponsored by TheSpot4B2B
How do Businesses Benefit?
Let’s first dispel a little myth that has been knocking around for a while.
It is our firm belief that the companies that are best positioned to take
advantage of what B2B has to offer are those who have their internal systems
under control ... which usually means companies who have implemented ERP
systems. It is understandable that the market hype is focussed on the B2B sector
at the moment, but the ERP systems are not going away. Having got that off our
chests, let’s move on …
The majority of market buzz at the moment is around how companies are using
B2B to reduce costs in their supply chain in general, and in their purchasing
activities more specifically. If you look a little closer, the activity is quite
often limited to SG&A (or overhead) purchasing such as office supplies and
the like. The real news here is that there is a lot more to be done with B2B
than the current batch of ideas.
According to the US National Association of Purchasing Managers, the average
manual purchase order costs a company $79. Although this seems high, it actually
seems about right to us. Companies using one of the B2B solutions for purchasing
(the best known are Ariba and Commerce One but there are also others) are
reporting reductions in their SG&A purchasing costs of around 50%. When you
realize that a dollar saved (not spent) in the purchasing process is worth 10
times a dollar gained via a sale (based on a gross margin of 10%), you can see
the attraction is squeezing costs out of the supply chain.
Typical B2B purchasing solutions might feature a dual solution where:
- The purchasing department has access to multiple vendors’ online
catalogs, allowing for effective price comparison and negotiation
- The purchasing department makes available the selected items from the
selected catalogs
- All employees are able to access the catalogs via the web
- Required authorizations – based on employees level and the dollar
value of the purchase – are automatically routed to the right person for
authorization
- Authorized purchase orders are automatically sent to the vendor, and
also automatically update the companies ERP system
- Remaining steps in the purchase process (confirmation of purchase order,
goods receipt, invoice receipt etc) will be more or less automated
depending on the extent of the B2B solution implemented.
Staying within the supply chain, but outside of pure purchasing, B2B
software is also being used to drive efficiencies in the manufacturing
process. The most successful vendor in this space is i2, whose software allows
a company to optimize the manufacturing process including the procurement of
raw materials, manufacturing itself (for example using JIT principles) and
product delivery. Exactly how B2B technologies can be harnessed in this area
can take ten articles to describe … which some day we will get to.
In any event, these two areas – Supply Chain Management in general and
purchasing more specifically - have been the first out the gate. Another area of
great potential is the whole employee/HR area. Since most employees can easily
have access to the web and a browser – no matter where they are located –
many companies have done the obvious and placed most internal policies (etc) on
an intranet which is accessible via the web. The next step we are seeing is ‘self
service’ … where employees can make changes to their retirement plans (etc)
via the web.
We would like to end this article as we started it – with the statement
that we believe that the companies with the best ERP systems are best placed
because they can add the B2B layer on top of their ERP layer (or engine) - so
don’t divert too much spending from the one to the other!
Contributed by
theSpot4B2B
http://www.theSpot4SAP.com
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