B2B - How Do Businesses Benefit?
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.
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.
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) .
TOP
Article courtsey:The spot4B2b
