Today's businesses are operating in a highly dynamic environment. The task environment and specific environments are changing dramatically and in such a short period of time that it is becoming basically impossible to adapt any long term strategic plan and keep a competitive edge. Production and operation efficiency help greatly in cutting costs and permits organizations to compete in terms of product price, however fierce price cutting is not the guarantee of survival. Innovation and technological progress are essential tools that revolutionized and continue to transform deeply the way businesses operate. Information technology (IT) in particular lead to the creation of sophisticated information systems that modified the structure of traditional firms and organizations and resulted in what is known today as B 2 B (business to business), B 2 C (business to consumer), as well as E-commerce, online auctioning, online trading and even an e-marketplace. The focus of this paper is on B 2 B, its early days and how it developed, the different maturation stages it went through as well as the impact it has on organizations.
We will open our discussion with a definition of B 2 B and look at the technology behind it (the hardware, software... ) as well as the role of people in such a system. We will the examine the advantages and potential threats of this systems and how to implement it successfully. We will conclude with a look at B 2 B in Lebanon, the stage it is in and what we think the future holds for this business in Lebanon and in the world. WHAT IS B 2 B? The most basic definition of B 2 B is the following: "Business that sells products or provides services to other businesses." But when we say B 2 B we mean business to business using the information technology therefore we understand by B 2 B today any Business conducting transactions with one another via the World Wide Web. To better understand B 2 B we will illustrate this definition with a real life example and that is the case of American Express that established a new B 2 b system with Tradex.
Following is the event summary: TRADEX Technologies, the provider of a digital marketplace platform, and American Express, the largest corporate card provider, announced that they have partnered to create the "B 2 B Commerce Network", a new component-based e-commerce solution powered by TRADEX's Commerce Center TM platform. The American Express B 2 B Commerce Network is an open digital marketplace for purchasing and catalog management that is designed to connect American Express' corporate customers and suppliers with other horizontal and vertical marketplaces on the Internet. The B 2 B Commerce Network will enable companies to enhance the benefits of their existing procurement applications with online payment tools, supplier services, content management services and advanced sourcing capabilities. American Express selected the TRADEX platform as the foundation of its B 2 B Commerce Network. TRADEX enables the customization of the B 2 B Commerce Network to reflect each buying organization's purchasing policies and negotiated prices, and provides flexible commerce transaction processes from requisition through payment. American Express' B 2 B Commerce Network also will provide customizable catalogs and content aggregation tools through ec-Content, Inc.
a TRADEX partner. In addition to hosting an online corporate travel booking solution, American Express is working with ten electronic purchasing systems vendors to provide full interoperability with the Corporate Purchasing Card to streamline payment, reconciliation and reporting processes. Additionally, American Express has begun testing American Express @ Work, a business-to-business portal that integrates web-based applications and content with full-service support to help companies and their employees streamline activities across the full spectrum of travel and purchasing management. This example illustrates various dimensions of B 2 B, first of all American Express is establishing a partnership with Tradex to launch its B 2 B portal, secondly the website is offering to settle various transactions (payments and booking) as well as conducting the business operations with other companies that may be unknown previously to American Express via the web, an example is the customized catalog and prices to each and every client. Now that we defined B 2 B lets look at its history and the various stages it went through to reach its current aspect: THE HISTORY OF B 2 B It's important to mention that B 2 B is as old as business because it was crucial for businesses in orders to survive to interact with other businesses: suppliers, distributors, as well as strategic alliances. However the focus of the rest of this term paper is on computerized B 2 B.
E-Business dates back to the 1960 s, when many large companies started exchanging standard business documents, such as product specifications, purchase orders, work orders, and invoices, through secure private networks. Connections to these networks were very expensive and beyond the grasp of small and medium-sized companies. The first application of IT in a business was done by the bank of America: Banks were swamped with the growing volume of checks that needed to be processed. By automating the function with ERMA, (the Electronic Recording Machine Accounting) the Bank of America reported that nine employees could do the job that previously took 50 people (United States, 1998). In the 1970 s and 1980 s, businesses extended their computing power beyond the company's walls, sending and receiving information with business partners and suppliers electronically via EDI (Electronic Data Interchange).
This process transmitted standardized data that streamlined the procurement process between businesses, so that paperwork and human intervention were nearly eliminated (E-Commerce Guide's Ask the Experts, 1998). EDI often occurred over private communications networks called value-added networks (VANs). The cost of installation and maintenance of VANs put electronic communication out of the reach of many small and medium-sized businesses. For the most part, these businesses relied on the fax and telephone for their business communications.
Even larger companies that used EDI often did not realize the full potential savings because many of their business partners did not use it. Today, electronic commerce increasingly refers to business conducted over the Internet. EDI, for example, is being brought to the Internet and allowing companies to save money by eliminating the old system's expensive private networks and by expanding reach to include more businesses on the supply chain. Other business-to-business transactions are simply moving to the Web without using the standardized forms required by EDI (E-Commerce Guide's Ask the Experts, 1998). Companies of all sizes can now communicate with each other electronically, through the public Internet, networks for company-use only (intranets) or for use by a company and its business partners (extranets), and private value-added networks. Another aspect of B 2 B that is growing today is what is known by the: B 2 B Transaction management: A B 2 B transaction management platform enables trading partners in enterprises and e-marketplaces to manage the fulfillment, payment, and settlement of transactions online.
When these activities are integrated with an enterprise e-supply chain and e-procurement efforts, they deliver powerful economic benefits to B 2 B trading partners. By allowing participants of online business to coordinate and manage logistical, financial, and other transaction-related services, this automated system tracks all terms and conditions related to the B 2 B transaction, and provides added flexibility to include multiple parties if necessary. The most obvious reason for the expansion of electronic B 2 B is the progress of technology and the sharp drop in prices that allowed the widespread of this business practice. The history of B 2 B was shaped by the science of information systems; therefore we will look now at the technology behind B 2 B. B 2 B: THE TECHNOLOGY: EDI The technology used for B 2 B is very similar to the regular information technology used to link any two parties on the World Wide Web.
Each company must create an Integrator interface that is a website (or a powerful sophisticated portal) and makes it accessible online for the public to use. Such companies have internal systems that are connected by local areas networks (LANs) and that are here to assist workers in the company to complete the B 2 B operations at various level in the hierarchy of the organization. The tools used for B 2 B as mentioned earlier are quite similar to those in any information system. The hardware being a computer a keyboard, a phone etc...
and the software being custom made information systems depending on every organization need. The determining dimension of a B 2 B is what is called the EDI. A computerized system that allows linked computers to conduct business transactions, such as invoicing and ordering, over a telecommunication network. EDI covers two basic areas in business: 1/ Trade data exchange which includes all the data exchange such as purchase orders, bills and receipts, 2/Electronic fund transfer which includes all the money that is being transferred on the wire, How does EDI work? By definition, EDI involves one computer communicating to another.
This may be a problem due to the incompatibility of two different computer systems. To combat the incompatibility, standards were developed to facilitate this inter-computer data exchange. The EDI process involves several steps as the transactions are sent back and forth between the systems. The sending computer translates its business transactions into a universally accepted EDI data format. The EDI formatted data is then transferred to an interceding computer that holds the transactions which will be polled, or retrieved, by the company for whom the transactions are intended.
The receiving computer translates the retrieved EDI formatted data into the receiving system's format. Finally, the data is processed by the receiving system. The multi-step process is automated with the use of bridging software, eliminating any human interaction. Many types of interceding computer systems can be utilized to process the EDI transactions. Structured interceding computer systems are called VAN's (value added networks). The VAN has the benefit of added security because the data is accepted on behalf of one company from another company based on a pre-established relationship.
The VAN often verifies the transactions that appear to be valid EDI transactions. Trading partners can also use an Internet e-mail address. This is less costly, but more risky due to the lack of transaction security. Benefits of EDI: Businesses using EDI can achieve significant cost savings, including improvements in cash management and reduced administrative costs.
In addition, customer relations improve due to faster response time and reduced errors in processing orders. Using EDI allows cash management to be more precise than relying on traditional check transactions since the timing of banking transactions is easier to predict. Operating costs decrease because paper is reduced. This affects administrative costs associated with clerical duties: managing the documents, postage, preprinted forms, duplicating and document retention. Higher customer satisfaction can be achieved when lower inventory levels are maintained. This is the result of the vendor's faster response time and higher accuracy on filled orders.
The faster response time and improvements in accuracy are a result of the orders being processed directly from the customer's computer, versus the traditional methods of taking orders by voice, fax and printed communications. Before we look at B 2 B in Lebanon lets review the basic advantages and disadvantages of such a way to conduct organizations: B 2 B: Pro and drawbacks. A successful E-B 2 B can have the following advantages: Lower Purchasing Costs o Materials procurement efficiency o Reduced labor costs o Reduced office supplies inventory Reduced Inventory (Proper Inventory) o Just in time inventory o Increased turnover of inventory o Efficient use of manufacturing capacity Networks to improve communication and analyze supply and demand and track production schedules Lower Cycle Times (time to build product) o Reduction of fixed cost per item o Sharing of information o Coordinate production and scheduling requirements o Improved material flow through the supply chain More Efficient and Effective Customer Service o Website with product / technical support info / software downloads o Customized database o Delivery tracking Lower Sales and Marketing Costs o Automated ordering o Electronic catalogues o Build to order o Open 24 x 7 o New Sales Opportunities And here are some of the B 2 B threats, (the threats themselves are no different, no matter what type of Internet-based transaction): o Message & data integrity o Authentication o Impersonation & non-repudiation o Confidentiality o No originator clearance (access controls) o Hacking o If the system collapses so does the entire organizations. o Other o Mis-routing o Denial of service The difference for B 2 B is the level of protection organizations must apply to each potential threat..