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Global B2B eCommerce Adoption: The Business Perspective

Global B2B eCommerce Adoption: The Business Perspective. Presentation to The Information Technologies Group at the Center for International Development Harvard University by Jeff Conklin Founder and CEO May 2, 2001. Introduction. Context for global B2B eCommerce

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Global B2B eCommerce Adoption: The Business Perspective

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  1. Global B2B eCommerce Adoption: The Business Perspective Presentation to The Information Technologies Group at the Center for International Development Harvard University by Jeff Conklin Founder and CEO May 2, 2001

  2. Introduction • Context for global B2B eCommerce • What is driving adoption of global B2B eCommerce? • What companies are looking for in B2B eCommerce solutions, and why? • Issues and forecasts for global adoption

  3. Context • B2B eCommerce is complex and contract based • B2B supply and distribution chains are international • Buy-side, or procurement focus in this presentation

  4. Buy-side Requirements Inter-enterprise Requirements Sell-side Requirements Service Level Agreements Management Management Contract negotiations and transactions Services Procurement Sales Services Financing Escrow Factoring Contract Document Banking Contract Document Legal Finance Finance Info Info Legal Credit, Payment Terms Ts & Cs Engineering Logistics Logistics Engineering Schedule, Delivery Terms, Returns Manufacturing Manufacturing Warranties, Schedule, Quality Form, Fit, Function, Quality Business Rules Trade Practices and System Requirements Inter-enterprise Data Valid Commerce and Non-Repudiation International Complexity of Contract eCommerce

  5. Complexity of Procurement Cycle Operations Planning Sourcing (RFx) Negotiation Fulfillment Vendor Evaluation and Feedback Key Activities Forecasting Operations/ productionplanning New product design Supplier identification RFI, RFP, RFQ Vendor short list Vendor selection Terms negotiation (e.g., BOM, payment, delivery, T&Cs) Vendor selection Agreement renewal Respond to changes Journaling / archiving Purchasing / ordering Order management Physical delivery / Materials management Payment processing Financial settlement Reconciliation

  6. Market Magnitude Contract-based goods commerce represents approximately $13 trillion of business in the US, and $52 trillion globally - US Goods Commerce ($ Trillions) - B2B Spot Market Indirect Goods ($2) ($3) B2B Under Consumer Contract Direct Goods ($11) ($13) Total - $20 Trillion Contract-Based B2B - $13 Trillion Sources: CAPS Procurement Survey Ratios, U.S. Department of Commerce data and Morgan Stanley analysis

  7. Company Spend Analysis Communications & Hi Tech Industry Spending Benchmarks 100% 85% 18% Spot Buying 67% 75% 8% Indirect Percent of Company Revenues 50% 67% Contract- Based 59% Direct 25% 0% Procurement Spend Contract-Based Procurement Sources: CAPS Procurement Survey Ratios, Accenture and Ozro Analysis

  8. What Companies Want Supply Chain Best Practices Strategic Solution Tactical Solution Obtain Competitive Purchase Price Reduce Total Cost of Ownership Improve Supplier Performance Motivate Early Supplier Involvement (1 time, per event ) 1 2 3 4 1st Generation, Reverse Auction 2nd Generation, Effective Negotiation VS.

  9. Continuous Improvement eCommerce Virtuous Circle • Inform Multiple Business Processes of Key Terms • Coordinate Internal Groups • Manage External Partners Inform • Negotiate Lowest Total Cost Terms • Respond to Changes • Re-negotiate or Renew Agreements Continuous Improvement Negotiate • Monitor/Report on: • Vendor Activity • Organizational Activity • Vendor/Customer Performance & Feedback • Compliance Reporting Monitor

  10. Why • Companies spend 5% of revenues managing contracts • eCommerce software can cut this to 1% - 2.5% • eCommerce software can also reduce total purchase costs as much as 30%, and sourcing cycle times 50% • Direct materials savings flow through COGS; even small savings create significant impact on profitability Sources: Goldman Sachs estimates and Ozro Analysis

  11. Significant Savings

  12. Issues in Global Adoption • Internet access and infrastructure • IT infrastructure • Payment processing • Security concerns • Competitiveness • ‘Red Herrings’

  13. International Timing, by Region

  14. Worldwide eCommerce Growth $ Billions Sources: Forrester Research, Inc.

  15. Summary • Countries that have invested in competitiveness will lead global adoption • 86% of Singapore’s exports sold to computing and electronics industry/US supply chains • eCommerce hyper growth in 2002 • .3% of Turkey’s exports tied to US supply chains • eCommerce ramps in 2006 • ‘Red Herrings’ stall supporting policies • Tax collection • Customs • Security • Financial controls • Money talks in B2B…

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