Professional Documents
Culture Documents
Steel Screen - B2B Exchanges
Steel Screen - B2B Exchanges
Exchanges
Jenny Arnold
Supree Mongrolcheep
Matthew Sheets
Melissa Sherer
1
B2B Exchanges
Overview
Case Studies
Conclusion
2
What are B2B exchanges?
B2B exchanges offer digital transaction
services that heighten eBusiness
performance making it safer and more
secure.
The B2B market is composed of websites
were buyers and sellers come together
vertically and horizontally to communicate,
bid, advertise, transact, and procure.
Source:, www.techechange.com/thelibrary /b2bterminology.html, Viewed February 24, 2004.
Source: An outlook on B2B Commerce, www.weforum.org, Viewed March 11, 2004
3
B2B Definition
Suppliers Manufacturers
Wholesalers
Selling to intermediaries rather than
directly to the end customer
Fewer customers
Smaller product ranges
Source: Friesen, G. Bruce, From B2B to ? Consulting to Management,Vol. 14, 4, 2003,
pp.27-33.
Source: Angel, Robert, A new dawn for CRM: This time its B2B Ivey Business Journal Online,
Jul/Aug 2003, pp. 1. 4
B2Bs are the LARGEST
markets known to business!
5
B2B e-Commerce Spending
$8,000
$7,000
$6,000
E-exchange
$5,000
All other
Value Total e-commerce
$4,000
(billions)
$3,000
$2,000
$1,000
20
20
04
20
$0
03
20
02
Year
20
e
01
erc er
00
19
m
om oth e
99
c l
19
e- Al ng
tal cha
98
o x
T E-e
GartnerGroup
Source: www.cba.hawaii.edu/aspy/aspymkfa.htm, viewed March 11, 2004
6
US Annual B2B Sales Projections by Medium,
2000 vs. 2005
$600
$500
$400 2000
Value
$300
(billions) 2005
$200
$100
$0
t l
rne dio i ne i o n
per ai ne
t e a z i s a M o
In R
ag
a
l ev sp ect
eph
r l
M Te ew D
i
Te
N
Medium
DRI-WEFA
Source: www.cba.hawaii.edu/aspy/aspymkfa.htm, viewed March 11, 2004
7
Why is B2B bigger?
The value of B2B transactions are bigger
since the goods and services in the making
pass through a lot of hands before they reach
an end consumer.
Big transaction value however does not
always make a difference in the bottom line.
B2B derived efficiencies will be competed
away by companies whose products and
services are uninspired and undifferentiated.
Source: Rodriquez, Edel, Special Report: Is This All You Can Build with the Net? Think Bigger Enough of this
B2B talk. Use the Net to construct a unique company. How? Ask your customers. Fortune Magazine,
April 17, 2001 8
B2B versus B2C
B2B a bonanza B2C a bust
B2B startup goals included taking slack
out of the supply chain rather than
stealing customers . Of money poured
into e-business efforts 80% goes to
B2B.
B2C startups lacked good business
models, and often do not receive the
money that B2B exchanges received.
Source: Rodriquez, Edel, Special Report: Is This All You Can Build with the Net? Think Bigger Enough of this
B2B talk. Use the Net to construct a unique company. How? Ask your customers. Fortune Magazine,
April 17, 2001 9
Basic B2B information
B2B exchanges may act as a virtual marketplace that
are free of geographic limits.
Certain exchanges allow businesses to find particular
products or suppliers and agree on terms of
transactions online.
Many others allow complete transactions to take
place online. Either way it is easier for buyers or
sellers worldwide to come together on the web.
B2B exchanges make money through charging a
transaction fee (approximately 4%) to buyers and
suppliers.
11
B2B Benefits
When done correctly.
Cuts transaction costs
Large opportunity for transformation because of
scale and scope
Buyers are able to reduce purchasing costs due to
automation of paperwork.
Online exchanges also introduce buyers to
suppliers that they wouldnt have traditionally met
from traditional channels.
Source: Friesen, G. Bruce, From B2B to ? Consulting to Management,Vol. 14, 4, 2003, pp.27-33.
Source: Campanelli, Melissa, Trading Places. (business to business exchages) Entrepreneur. November 2000
12
Benefits of B2B exchanges
Benefits to Buyers Benefits to Sellers
If a customer wants rock Gives sellers an
bottom prices he is likely to opportunity to retain some
prefer a B2B market place, control over their sales
if he wants a close channels while minimizing
relationship with a supplier service costs
because his orders are They can take over part of
large and critical to his core the value added
operations he may prefer processing e.g.
bilateral e-trade customizing products
Source: Practical guide to selling efficiently on any B2B exchange: www.gcis.ca/B2B _sellers_guide.html
13
Analyzing the B2B Market
3 Elements
Mechanism (info-structure) to support data
exchange
Set of Marketing Processes
Set of institutions to perform these market
processes
14
Analyzing the B2B Market
Info-structure
Without information and the systems to
gather, store, and redistribute, markets
can not operate
MORE efficient the structure the MORE
efficient the market
Broken down into physical infrastructure
and intangible data
Source: Friesen, G. Bruce, From B2B to ? Consulting to Management,Vol. 14, 4, 2003, pp.27-33.
15
Analyzing the B2B Market
Market Processes
Trade versus Context
Trade: activities that buyers and sellers must
undertake to exchange a good or service
Includes: search, authentication, pricing, payment, and
logistics
Context: activities that support the trade process or
make them run more efficiently
Includes: representation, regulation, influence, dispute
resolution, and risk management
Source: Friesen, G. Bruce, From B2B to ? Consulting to Management,Vol. 14, 4, 2003, pp.27-33.
16
Analyzing the B2B Market
Institutions:
ecosystem
3 Groups
1. Principals (buyers or sellers) Goods and Services to
exchange
2. Agents (brokers or traders) Represent principals in
one or more of the market processes
3. Supporting Cast Members (Bankers, Insurers,
Shippers, etc) Provide highly specialized context
processes to the market
Source: Friesen, G. Bruce, From B2B to ? Consulting to Management,Vol. 14, 4, 2003, pp.27-33.
17
Analyzing the B2B Market
Final Thoughts
More than a basic technology platform or
well organized economic process
Web of personal and institutional
relationships
An inefficient market is not uniformly
inefficient.a combination of elements
could be inefficient
Source: Friesen, G. Bruce, From B2B to ? Consulting to Management,Vol. 14, 4, 2003, pp.27-33.
18
The Future of B2B exchanges
In 2000, it was estimated that more than half
of B2B trade would take place through
eBusiness networks or eMarketplaces in 2003
In 2000, B2B exchanges were thought to be
growing markets, however there were some
doubts about the future. It was estimated
that market size would be $1.5 trillion in
2004. (five to ten times larger than
estimated B2C markets)
Source: B2B terminology: www.techexchage.com/the library/b2bterminologry.html
Outlook on B2B commerce: www.weforum.org
19
B2B Numbers decrease
2001-1,520 B2B 2003-180 will be
exchanges active (markets)
(markets)
20
Why are B2B exchanges
struggling?
People are creatures of habit
Money does not ensure success
Prioritizing new features is not easy
Launching at the right time is tricky
Security is critical
Tools for viewing and collaboration are
essential
Movement is toward private exchanges
Source: Wohlers, Terry, E-Commerce: The Challenges of Creating a B2B exchange Rapid
Prototyping Journal, Vol. 7,2, 2001, pp. 122.
21
Evaluating B2B Best Practices
Products exchanged specific or general?
Structure of Exchange public or private?
Proposed Benefit - Buyer or Seller?
Value-added services - what are current
offerings and future roll-out plans?
How does the exchange derive a profit
annual fees or transaction commissions?
What role do the members play in the
management of the exchange?
22
Case Studies
23
World Wide Retail Exchange
24
History of the WWRE
The company was founded in March
2000 by 17 international retailers.
The goal was to enable retailers and
manufacturers to eliminate the
inefficiencies of the supply chain by
simplifying, rationalizing, and
automating supply chain processes.
Source: www.wwre.com, viewed March 28, 2004
25
Founding Partners
The founding partners included Albertson's (US), Auchan (France),
Casino (France), CVS (US), Kingfisher (UK), K-Mart (US), Marks
Spencer (UK), Royal Ahold (The Netherlands), Target (US), Tesco
(UK) and Safeway Inc. (US).
At the time, the group operated over 30,000 stores with combined
sales of over $300 Billion.
Source: www.wwre.com, viewed March 28, 2004
26
Founding Principles
The following six principles guide the WWRE's
development and growth:
Openness
27
Users of the WWRE
Retailers and manufacturers can substantially reduce
costs across product development, e-Procurement,
and supply chain processes in the following
industries:
Food
General merchandise
Textile/home
Drugstores
30
Additional Members
31
WWRE Alliance Partners
As part of its mission, the WWRE seeks to broaden
the suite of offerings to members, thus enhancing
the value of the Exchange. Through the creation of
alliances and partnerships with best-of-breed
providers, innovative services can be introduced to
WWRE members. These offerings also complement
those solutions hosted by the WWRE.
32
WWRE Technology Partners
WWRE teams with providers of technology solutions that
help enable the Exchange to deliver various software,
hardware, connectivity and services to members.
Collectively, these providers work with the Exchange to
bring our members and their trading partners the
various Sourcing and Procurement and Supply Chain
Collaboration solutions and services that the Exchange
offers. WWRE Technology Providers currently power the
underlying application software, systems integration,
customer service helpdesk, application hosting and
integration components.
33
Major Products and Services
of the Exchange
Surplus Goods Exchange (SGE)
Demand Aggregation
Asset Manager
34
Surplus Goods Exchange (SGE)
35
Visagent Marketplace
36
Visagent Trade Screen
37
Why use the SGE?
Sellers do not pay a fee to use the SGE
Buyers pay a small fee, plus transportation
WWRE Buyers: 2.5% + transportation
Other Buyers: 3.5% + transportation
SGE is up to 70-80% less expensive than
other alternatives (like liquidation)
Trading occurs directly between retailers and
suppliers no intermediaries
Source: www.wwre.com, viewed March 28, 2004
38
Perishable Goods Procurement
39
Problems in Fresh Foods
Grocers spend over 70 cents of every sales
dollar procuring, transporting and
warehousing the products they buy.
40
Agribuys Solution Suite
Order Link allows a retailer to aggregate demand
information, thus enabling a central buyer to perform
buying activities.
41
Demand Aggregation
42
Features of Demand Aggregation
Prior to Auction, demand can be aggregated internally and
externally.
43
WWRE Order Execution Process
44
Asset Manager
45
Benefits of Asset Manager
Allows for the storage of digital assets in one
location
46
World Wide Retail Exchange
World Wide Retail Exchange
Industry Retail, Food, Healthcare
Products Exchanged Mostly General
Private or Public Private
Proposed Benefit Buyer & Seller
Asset Management & Demand
Value-added Services Aggregation
Profit Sources Fees and Commissions
Members Role in
Management of the exchange Equity Stakes and Governing Board
47
Covisint
48
What is Covisint
A technology services company whose business to
business applications and communication services
connect the automotive industry. They provide a
common connection to suppliers and customers
based on common business processes.
Covisint enables customers to reduce costs, increase
efficiency, enhance quality, and improve time to
market.
49
History of Covisint
Covisint was formed in February 2000 when
Daimler Chrysler, Ford Motor Company, and
General Motors combined efforts to form a
single business-to-business supplier
exchange.
Covisint officially began providing services in
the U.S. on January 1, 2001
Source:Butters, Jamie and Jeff Bennett, Covisint Hits rough patch as business falling flat December 9,
2002 www.auto.com, viewed March 28, 2004
Source: www.covisint.com, viewed March 28, 2004
51
About Covisint
Covisint is an internet auction site for
auto parts and other supplies.
Plan included making it quicker and
easier for car companies to explain
exactly what they want to buy, gather
bids from suppliers around the world,
and close the best possible deal
Source: Butters, Jamie and Bennett, Jeff, Covisint hits rough patch as business falling flat,
December 9, 2002 www.auto.com, viewed March 28, 2004
52
Why is Covisint necessary?
Automotive industry supply chain is
disconnected and flow of information is
constricted.
Information gaps exist between the
value chain resulting in expensive
inefficiencies and unsatisfied customers.
53
Covisint Solution
Covisint Communicate: provides supplier
personnel with access to information they
need to work with the host
Covisint Connect: used to exchange data
between current enterprise applications and
its suppliers applications.
Covisint Collaborate: Covisint help desk
assistance.
54
Covisint Communicate
Allows for industry participants to
access buyer and supplier applications
through one common infrastructure.
Enables companies to achieve a robust
presence by becoming a Trading
Partner, which allows them to better
communicate with their supply chain
Source: www.covisint.com, viewed March 28, 2004
55
Trading Partners Page
56
Promised Value to Customers
Covisint Connect provides reliable
delivery of any business document to
any point in the supply chain
Covisint Connect is a new way to
conduct traditional store-and-forward
Electronic Document Interchange (EDI)
57
Promised Value to Suppliers
Cost effective solution to engage smaller
trading partners
Improved data integrity
Affordable electronic communication with
trading partners
58
Covisint Collaborate
Enables suppliers to connect effectively and
efficiently through three phases:
Project Goal and Scope of Work: understanding
project goals and business objects of the
customer.
Supplier Rationalization and Prioritization: work
with individual companies to provide timely and
accurate information
Supplier Recruitment and Status Reporting:
Covisint provided applications that are licensed
to each supplier with an individual contract
Source: www.covisint.com, February 26, 2004
59
Troubles for Covisint
In July 2000, the Federal Trade Commission
(FTC) launched an investigation to explore
the possibility of anti-trust implications.
Since the founders represented a large share
of the auto market their online exchange
could raise anti-trust concerns.
The FTC wanted to make sure that the
arrangement would not allow for the big auto
makers to collude in order to force down
prices.
Source: Anti-trust and Competitive Issues in B2B Trading Exchanges: Covisint Inc. Centre for
Asian Business Cases, ECCH, July 12, 2002 60
Covisints Response
They issued the Antitrust Compliance Policy for
Covisint.
This was designed to provide the officers, directors,
and employees with guidelines for compliance with
the antitrust laws.
Any employee who did not comply with this policy
was subject to discipline which could include a
demotion or dismissal.
Management was also responsible for the conduct
of all employees reporting to them.
61
The Outcome
On September 11, 2000 Covisint received clearance
from the FTC, because they would be open to
participation for all potential suppliers and would not
be the exclusive vehicle through which automakers
purchased parts.
Since Covisint did not start providing services until
January 2001, they were considered not to be in
business, therefore in the future they may raise anti-
trust concerns based on how it was going to do
business.
62
The Outcome (cont)
Covisint was the first B2B exchange to be
reviewed by the FTC, and it therefore sparked
debate on how the B2B industry should be
regulated.
The FTC stated that the antitrust analysis of a
B2B exchange will be specific to its mission,
structure, its particular market
circumstances, procedures, and rules for
organization and operation, and actual
operations and market performance.
Source: Anti-trust and Competitive Issues in B2B Trading Exchanges: Covisint Inc. Centre for
Asian Business Cases, ECCH, July 12, 2002
63
More Troubles for Covisint
Bogus auctions made suppliers reluctant to sell their
products through Covisint.
Stiff competition from other internet companies
making it difficult to charge needed prices.
Covisint unable to make expected $240 billion in
transaction value every year.
In 2002, Covisint had about $70 million in annual
revenues when it had hoped to have $150 million.
Source: Butters, Jamie and Jeff Bennett, Covisint hits rough patch as business falling flat December 9, 2002, www.auto.com,
viewed March 28, 2004
Source: Hamm, Steve, B2B Isnt Dead. Its Learning Business Week. December 18, 2002
64
Results of Recent Problems
In December 2003, Covisint signed an
agreement with Freemarkets a global supply
management solutions to acquire the
sourcing and services assets of Covisint
Freemarkets will now be positioned as the
premier provider of sourcing technologies and
services to the automotive industry
Freemarkets will provide the auctioning
services for Covisint
Source: Freemarkets signs agreement to acquire Covisint Auction Services,
www.freemarkets.com, viewed March 28, 2004
65
Covisint
Covisint
Industry Auto
67
Understanding the challenge
Exploiting new technology in an old industry:
Imagine you have been dating someone for years.
The relationship is blossoming, but one day your
sweetheart informs you that instead of calling, you
should communicate by email. And if you want to
get together, you should arrange that through an
online dating service, where you will competing with
other suitors. That, in essence, is the message that
suppliers of everything from paperclips to
maintenance services got a couple of years ago when
manufacturers eager to try business-to-business, or
B2B, exchanges on the Internet, says Laird Harrison,
Time Magazine writer.
Source: Harrison, Laird. B2B Survivors Time Magazine, December 24, 2001.
68
Steelscreens Founding
Fathers
Founded in 1999 by group from the European metals
and telecom industries.
70
E-Commerce Trading Models
First Generation: Many Sellers to One
Buyer
NO GREAT DISADVANTAGES!
Source: Subirana, Brian. STEELSCREEN.com: Challenges in aligning technology and strategy in B2B The European Case Clearing
House, March 2002.
72
Third Generation Model:
Benefits for Buyers
Simplified negotiation process
Needs are satisfied
NO GREAT DISADVANTAGES!
Source: Subirana, Brian. STEELSCREEN.com: Challenges in aligning technology and strategy
in B2B The European Case Clearing House, March 2002.
73
$$$$ Revenue Model $$$
Sales Commissions of 0.5 to 1% of
Transaction Value.
74
Steelscreens Members
Spring 2000,Trading on the web started
75
Types of Members
Selling Member: Information and Selling
Buying Member: Information and Purchasing
Buying and Selling Member (wholesalers):
Information, Purchasing and Selling
Associated Member: Information
76
Why be a member of
Steelscreen?
Cheaper: Fee less than half paid to intermediaries
Faster: Distributed to all potential business partners
Simpler: Inquiries and Offers specified
More Efficient: Reach all members at once
Time Saving: Spend time only with rewarding contacts
Up-to-date: Facts, trends and analyses
Comprehensive: Growing number of services
Independent: Neutral to both sides
European: Standard and languages
Secure: Maximum security
Source: Subirana, Brian. STEELSCREEN.com: Challenges in aligning technology and strategy in B2B The
European Case Clearing House, March 2002.
77
One Members Thoughts..
Trading on Steelscreen gives us several major
advantages. The most important benefit is the ability
to find, evaluate and select the right business partner.
This helps us to avoid risks. In addition, our goal is
to save time and money and make our trading
process more efficient. Steelscreen helps us to
achieve this, says Mario Vergna, Commercial
Director of ILTA INOX.
78
Steelscreen Exchange
Any metal product is tradable, the more standardized
the easier it is to use the system.
79
Suppliers Area:
How to send a Spot Item
80
Suppliers Area:
Replying to an Inquiry
81
The Buyers Area:
Sending an Inquiry
Completing and
sending the Inquiry.
82
Buyers Area:
Replying to a Spot Item
83
Registering Members
Standards
Steelscreen offers the most complete database of
standards and alloy information.
A Member can search the database by designation,
chemical composition and mechanical properties.
A member can add their own standards and alloys
and define specific characteristics.
84
Standards Tailored to Members
Needs
85
Standards Tailored to Members
Needs contd
86
Steelscreen
Steelscreen
Industry Steel
Proposed Benefit Buyer & Seller Buyer & Seller Buyer & Seller
Connect, Financial Asset Mgmt &
Value-added Communicate & Services & Demand
Services Collaborate Logistics Aggregation
Commissions Fees &
Deriving a Profit Commissions on Transactions Commissions
Members Role in Members sit as Equity Stakes
Management of the Board of & Governing
Exchange Directors None Board
Survivors
Covisint-Automotive
Elemica-Chemical
Exostar-Defense
E2Open-Technology
Global Healthcare-Healthcare
Pantellos Group-Utility
Trade-Ranger-Energy
Source: Ulfelder, Steve. B2B Survivors Computerworld, Vol 38,5, 2004, pp. 27-28
89
Changing the Focus
Three years ago, the tech was our raison detre. No
longer. Weve gone from being IT experts to being
purchasing agents, Trade Ranger CEO, John Wilson.
In 2000, we thought wed move faster. We thought
wed bring people right in to the Net and XML. But
soon we realized we were pushing a rock uphill.
Health care (IT) systems arent the most up to
date.People had EDI and didnt want to change
that. We had to back off our aspirations of making
major changes quickly, Kevin Ruffe, Chief Operating
Officer with Healthcare Exchange LLC.
Source: Ulfelder, Steve. B2B Survivors Computerworld, Vol 38,5, 2004, pp. 27-28
90
How did B2B exchanges survive?
Patience with 5 to 7 year plans (Trade-
Ranger)
Downplayed technology from the outset
(Pantellos Group)
From the beginning, we knew that it was
about value-added, not just technology,"
Jim Neikirk, CEO.
Never clear as to whether the survivors
will be truly successful.
Source: Ulfelder, Steve. B2B Survivors Computerworld, Vol 38,5, 2004, pp. 27-28 91
Questions?
92