Electronic marketplaces like eBay and Trade Me are enjoying a dominant position in internet-based consumer trading, but the special requirements of online business to business transactions have led to the evolution of a variety of other business models.

A recent report by Quocirca titled ‘B2B Reality Check’ observed that many of the early B2B electronic marketplaces have either gone out of business or are shifting towards other models. While automating transactions is a recognised enabler of efficiency in the B2B supply and demand chains, Quocirca found that the technical and other barriers involved in hooking up multiple organisations electronically can be daunting.

‘Going it alone’ in B2B ecommerce is rarely a viable option. Quocirca found that a complete in-house solution is beyond the reach of most companies, even in Europe and the US. “The more broadly organisations attempt to apply [B2B] automation the more they fall foul of the complexity and expense of dealing with the myriad of technologies and standards across their customer and supplier bases,” the report stated.

However Quocirca found that those companies which had outsourced the problem were more likely to achieve their desired benefits of B2B automation (see ‘Business priorities in the B2B value chain’ below) which show a marked correlation between the buying and selling side.

January 2007

BUSINESS PRIORITIES IN THE B2B VALUE CHAIN

Procurement

Sales

Reducing cost and overheads associated with procurement

81%

Improving overall sales profitability

66%

Increasing the overall quality of goods and services bought

78%

Reducing sales costs and overheads

60%

Reducing goods in inventory

74%

Increasing ability to respond to customer demand

54%

Increasing consistency of goods and services received

71%

Helping to turn ad hoc customers into regular customers

43%

Reducing costs beyond routine ongoing optimisation

66%

Adding new customers to customer base

38%

Improving the procurement process to cope with changing demands

53%

Improving sales forecasting and demand planning

36%

Increasing management visibility of procurement

49%

Improving inventory turns and stock levels

34%

Gaining greater predictability of procurement costs

47%

Improving the bid/win ratio

33%

Source: www.quocirca.com

Increasing management visibility of sales

32%

Bridging the gap
Fortunately in New Zealand there are plenty of wellestablished B2B specialist companies which are experienced in overcoming the technical barriers to electronic commerce.

Intergen, for example is a business process management (BPM) specialist which recently helped to set up an electronic trading platform between local retail giants Foodstuffs and Progressive Enterprises and some of their largest suppliers including NZ Dairy Foods, Chelsea Sugar, and Tegel Foods.

Intergen general manager Shaun Donaghey says that prior to implementing the e-procurement solution the purchasing process between these firms was clumsy, time consuming and error-prone.

“Typically the rep would be going to the store, hunting down the right department manager, who would then begin keying numbers into a green screen.”

Donaghey says that in this environment a single printed invoice could run to a 150 pages or more. The paper and printing costs of producing these documents were considerable, and because the invoices could not be checked accurately by manual means, errors were common and led to costly reconciliation processes.

Much of the raw information needed to complete transactions electronically - stock records, prices, account details – was already residing in the respective ERP and database systems of each company, but not necessarily in a format that was compatible with the others.

To bridge this gap Intergen used Microsoft’s BizTalk Server 2004 which provided an electronic data interchange between each company’s accounting and ordering systems and databases. The result was flexibility and interoperability between Foodstuffs, Progressive and its major suppliers, regardless of their choice of application, platform, or transport. Microsoft BizTalk 2004 binds all the systems together controlling the entire process from purchase order receipt to shipping notices, invoicing, through to financial updates and inventory control.

“Obviously, when we cut out the human interaction it led to a dramatic decrease in errors, and we were also knocking out the cost of printing hundreds and thousands of invoices and statements, and postage,” says Donaghey.

New Zealand Dairy Foods previously paid up to $30,000 a month in printing invoices alone. Now working electronically, errors are reduced, and invoices are processed more accurately and efficiently, requiring fewer resources.

International roll out
Brent Baldwin, CEO of Conexa Markets (formerly known as SupplyNet) can point to similar success stories both in New Zealand and overseas. Baldwin says Conexa is unique in New Zealand in that it provides B2B applications as well as managed transaction services and the range of the company’s solutions is still broadening.

For example Conexa is to about launch a subset of its principal B2B application (derived from the Commerce One package) which is aimed at small to medium-sized businesses. Baldwin says the package will allow “large scale accounts payable reform from requisition to payment independently of the size of the supplier.”

According to Baldwin Conexa’s e-procurement solutions deliver benefits through being “process savvy” as well as time and cost savings. “A procurement solution should help you buy the right product, for example when you are buying a fleet vehicle it is important to consider fuel efficiency, financing costs, maintenance and resale value in addition to the purchase price. Too often the purchase price is the only thing that managers consider.”

In another development, Conexa has used its expertise in electronic transactions to produce an online factoring system on behalf of a major Australian financial institution. Factoring has been around for years of course but Baldwin says the Conexa system brings it into the 21st century. Businesses will be able to go online and choose those invoices for which they wish to receive early payment on a selective basis. Baldwin says this will be an invaluable tool for small businesses which will be able to fine tune their cash flow without resorting to bank overdrafts.

“Currently, factoring tends to be an all or nothing kind of deal. The online factoring system will help firms cope with sudden demands on their cash, such as when the GST falls due on the day the payroll is about to be paid.”

Conexa is also enjoying considerable international success with its B2B Internet sales solution (Conexa Enabler). Since 2005 BP has been progressively using it to streamline the customer re-ordering process for fuel and lubricants.

Baldwin says the solution was initially provided for BP's retailers and is now being rolled out across Castrol. As a result of customers placing orders over the Internet, BP has reduced customer support costs by 60% while increasing satisfaction.

“It was so successful that the other parts of BP including the aviation sector got a sniff of it and it’s about to be rolled out in 120 countries around the world,” says Baldwin.

Keeping it simple
Another local company which is very active in B2B electronic commerce is The ECN Group.

ECN offers a Supplier Portal which operates in Australia and New Zealand and so provides a trans-Tasman B2B capability.

The Supplier Portal provides a common language for buyers and suppliers, without suppliers having to change their finance systems or invest in new hardware or software.

According to one trans-Tasman customer, A& R Whitcoulls Group, the automated system saves the manual entry of up to 50,000 invoices and purchase orders a month, a process which used to engage 18 full time people in its accounts payable team.

A&R Whitcoulls Group previously had a centralised system which worked with larger suppliers. But smaller suppliers – often just as important as some larger ones – didn’t have the infrastructure to be able to trade electronically. While most purchase orders on both sides of the Tasman are placed with a core group of 20 suppliers, the full supplier list runs to around 1,000.

“We facilitate electronic trading between the buyer and the supplier by making it simple,” says Hayden McCall, group product manager at The ECN Group. Traditionally ECN Group has built integration directly on a customer-by-customer basis. “System to system integration like that is sometimes too complex for smaller suppliers,” says McCall. “Some suppliers don’t necessarily have the capability to do that, so this provides them with an electronic interface that doesn’t have any impact on their own systems.” For more information see the story on NZ Customs Service.

Gaining ground
Rod Hall, a director of e-commerce specialist Tranzsoft says the e-procurement market is growing steadily as organisations discover that processing orders and invoices electronically increases efficiency and accuracy, cuts down paper flow, and reduces the need for re-keying incompatible documents.

Hall says that e-procurement often overlaps with business process management (BPM) – after all procurement is essentially just another process – and Tranzsoft is frequently deploying its BPM application, Flowbiz, in this arena.

“We are finding that the whole thrust of business automation is really starting to have legs,” says Hall. “The market has matured so there’s a lot more understanding of where the value proposition is.”

One of the results of this increased understanding is that Tranzsoft’s customers are increasingly driving new e-procurement applications and Hall cites the Health Exchange as an example of how the reach of e-procurement systems is broadening. Tranzsoft has been running Health Exchange, a central exchange to streamline electronic trading between medical suppliers and hospitals, for several years now, but the exchange has been extended with a new managed service called Locus, which manages loan and consignment stock.

Hall explains that medical suppliers often leave stocks of parts such as artificial hip joints which might be required at short notice with hospitals on a loan arrangement. The Locus system gives hospitals and the suppliers increased visibility of these consignment stocks and, when they are consumed, will automatically create a requisition and a purchase order in the hospital’s ERP system.

“In this case the customers had seen the opportunity to extend the Health Exchange system with this new service. That wouldn’t have happened two or three years ago.”

Digital assets
Denise Donald, general manager of e-commerce company e//volution, says one of her company’s latest development projects, an Advanced Digital Assets Management system for the Norcross printing group, is an example of “B2B with B2C type functionality.”

The system, dubbed ‘ADAM,’ allows Norcross customers to keep all of their digital assets such as logos, images, publications and manuals in a central repository and use them to order print jobs online by using a series of templates.

Using the term ‘digital assets’ to describe these artwork elements is apt, says Donald. “They are just like physical assets because they are expensive and they tend to get lost easily.”

Donald says the ADAM system offers process improvements as well as cost savings to Norcross and its clients. The system helps to manage all aspects of document creation such as version control and editing and signoff processes and is suitable for a range of print jobs from business cards and branch-personalised stationery to catalogues and booklets.

ADAM is also very easy to use. When ordering business cards for example, customers enter details such as names and titles into pre-defined fields which automatically specify which typeface or ink colour should be used. The customer also gets a chance to preview the finished product before confirming the order.

Donald says the PDF created by the ADAM system is ready to print and the time saved will allow Norcross to continue to carry out small jobs for its clients which were previously becoming uneconomic.

Other printers are also on this path of providing clients with e-Procurement tools that make doing business easier and more efficient. Brebner Print for example has recently launched b-Online.

Open for business
Tony Webster, sales manager of e-commerce/supply chain management company Conduit says that one of the most compelling benefits that B2B automation can provide is to provide a differentiating feature in the market.

For example Conduit and Five Star Consumer Finance jointly developed a new internet based consumer credit application system. The system was the first to be fully integrated in to the Baycorp Advantage credit approval network and it is capable of getting an online approval within 30 seconds.

The system can be built in to any website where a consumer finance option is required and it provides total flexibility for around the clock shopping. Webster says much of Conduit’s business involves integration, which delivers the more usual business benefits like reduction in paperwork and increased accuracy in taking orders.

Conduit had early first hand experience of this when it moved customers of its parent company, distribution company Renaissance, to a web-based ordering environment and cut returns caused by inaccurate orders to less than 1 percent.

According to Webster, B2B e-commerce is also increasingly being seen as a means to guaranteeing business continuity. He says that a recent power outage in Auckland brought this home to many customers. “It was just for a few hours but people realised that for a large chunk of the day their ERP systems weren’t available but their web sites kept going and were still open for business.”

For more information visit the B2B eCommerce Research Pavilion for exhibits, case studies, white papers and downloads from a range of New Zealand’s leading B2B eCommerce vendors.