ITS 380-001 Global E-Commerce Systems

Xueying Mei

Chapter 12 – B2B E-Commerce: Supply Chain Management and Collaborative Commerce

 

P.834   Case Study Questions:

Q1: If you were a small chemical company, what concerns would you have about joining Elemica?

        Answer:

If I was an owner of a small chemical company, the concerns I would have about joining Elemica is mainly with the complications it would have with big orders. Since, it is a small company there are going to be buyers that are going to place large quantity orders which we don’t know how we are going to respond to it. Working process and raw material would be my main concern. Another big concern would be the Enterprise Resource Planning, as this allows business partners to interact with one another, order confirmations, send invoices, and do purchases. So, it would be a bit difficult to get adjusted with this network. The biggest challenge with small companies is the issue of competition and barriers of entry in an industry dominated by large companies. The first concern is the provision of a fair platform on which all companies are appreciated. I’d be concerned about how Elemica can support small companies to gain the reputation of large companies so that buyers can also get to order from our company. In addition, the prioritization of the different companies supplying inputs and how they are allocated space would be a concern. The ability of the company to meet the bids of large supplies would also be a source of concern. A small company’s scale of production would mean that it cannot meet the needs of large suppliers who might place high bids. The modalities of using the Elemica system and the terms and conditions of use present another concern in choosing to join it.

 

Q2: Elemica provides a community for participants where they can transact, coordinate, and cooperate to produce products for less. Yet these firms also compete with one another when they sell chemicals to end-user firms in the automobile, airline, and manufacturing industries. How is this possible?

        Answer:

By sharing knowledge on production of the inputs, Elemica provides an equal and fair platform for the different players to compete with each other. The role of Elemica is not to completely eradicate competition but to rather limit the areas of competition between the different players. In addition, all the participating traders benefit through reduced costs of serving customers. In so doing, a company’s overhead costs are reduced and this may drive the company to profitability. Moreover, the platform assures the companies of smoother operations and the improvement of the customer experience. This, Elemica does, through the standardization of the buying process thereby improving customer service. The competition between the different traders is maintained through the confidentiality of bids and quotations. For instance, new customers cannot access previous bids or quotations pertaining to previous transactions. This means that companies cannot use the issue of pricing as a competing factor since they are kept confidential. In addition, competition is further ensured through the maintenance of a large community pool and therefore one or even a few companies cannot meet all the industry needs.

 

Q3: How does the purchase of Elemica by Thoma Bravo, a private equity firm, change how Elemica fits into the B2B framework illustrated in Figure 12.10?

        Answer:

Elemica founded in 2000,provides a Digital Supply Network for Process Manufacturers and it is considered as leading company.They went through innovation in B2B integration by adopting cloud-based network which ensures that all the participants (process manufacturers, direct material suppliers, logistics service providers, and customers) are under efficient and secure connection.

Which ever be the industry the main problem which small company faces is domination by large industries through it's cost effectiveness, It helps the small business to avail frictionless business processes which aid in reduced operating costs, revenue growth, free up working capital and supports new business models.
Fair plat form to all participants it can be a small or large company, and here it will get a chance to deal with large number of buyers. Because in open market it's impossible to reach large number of buyers just because they have a perception of being small scale company. Even most of the times their bid is not considered against bid of large scale business.

Yes firms do compete with one another but with the help of Elemica the area of competition get limited between the players and all the companies dealing under this will move towards profitability by way of reduced overhead cost.
It do maintains high amount of confidentiality and standards in its services, at the end it benefits all the participants.

The CEO of Elemica said that “Thoma Bravo’s exceptional track record and proven expertise in our industry will enable Elemica to further capitalize on its growth and leadership”. So Thoma Bravo’s will positively impact the business of Elemica here he may go for expansion of business to different sectors or even attract new customers, thereby he will incorporate for overall growth of company and maintains the leadership position of Elemica.

 

P.838   Projects:

Q1: Choose an industry and a B2B vertical market maker that interests you. Investigate the site and prepare a report that describes the size of the industry served, the type of Net marketplace provided, the benefits promised by the site for both suppliers and purchasers, and the history of the company. You might also investigate the bias (buyer versus seller), ownership (suppliers, buyers, independents), pricing mechanism(s), scope and focus, and access (public versus private) of the Net marketplace.

Answer:

Industry: In India pumps and valves industry are valued at Rs.5000 crores and Rs.4500 crores respectively. These industries are not only big on their own but they facilitate the productivity and growth of other industrial sectors as well. The exports of pumps and valves amounted to about US $ 1.55 billion, serving over 100 countries for different engineering services. The exports in these industries are growing at a rate of 10-12 percent per annum. This growth potential combined with the boost from the government is attracting many international players.

Company: Sulzer Pumps India Ltd. is one of the leading companies in manufacturing of pumps, mixers, compressors, agitators and aeration equipment for industrial application. The parent company Sulzer Ltd., originated in Switzerland is a well-established global market player in the B2B sector. The industrial application is basically of three types— Power generation segment, Oil and Gas segment, Water segment. Since their major chunk of business depends on export, so they have to maintain international standards. Their competitors include KSG Pumps Ltd, ITT India, SlowServe, Andritz etc.

POD: In such a highly priced product where customers seek for customization according to their needs at lowest price, Sulzer has managed to differentiate itself through Direct selling by removing resellers in between them and the customer, by providing only pumps and not processes and thus reducing the cost of engineering know-how from total price, by giving utmost importance to design stage for delivering high quality, and by being globally present at 22 factories and 100 types of products and ensuring close proximity to the customers.

Direct Selling and Customers: They have an augmented product, follow a skimming pricing strategy and initially sell through bidding on tenders. Gradually, they look for loyal customers and tries to transform the Transactional selling into Enterprise selling or Strategic selling. By mapping on the Loyalty Ladder, they have three kinds of customer— Switchers (60%), Undesirable customers (30%) and Most Valuable Customer (10%).

Value Proposition: For showing value proposition a product example called SNS Pumps is taken. SNS4-50 process pump was developed to replace normal slurry pumps used in mining sites. It was priced at EUR 16,000 and has an average life of 10 years. The NBA is BrownBros priced at EUR 9,875 with an average life of 8 years. SNS4-50 requires less oil lubrication and hence saves cost for oil and labor totaling around Euro 105 annually, and also due to high efficiency and low power consumption, it saves on energy cost of EUR 24,000 annually.

Value = Oil Savings + Labor savings + Energy savings= EUR 105 + EUR 24,000 = EUR 24,105. By using value in use equation, we get Optimum Price of Sulzer Pump = EUR 36,449.

Hence the price of EUR 16,000 is much lower than the value they are delivering to customer. Also SNS4-50 lead to lower TCO due to low initial cost, low installation cost, low operation cost, low maintenance cost, and low downtime costs.

In every consumer offerings there are a lot of players involved to make that offering possible. The markets involved in all these transactions apart from the final one are called business-to-business markets. To understand these B2B markets better and to apply the theoretical concepts learned in B2B course, we have studied in detail about the businesses of Sulzer Pumps India Ltd.

 

Q4: You are involved in logistics management for your company, a national retailer of office furniture. In the last year the company has experienced a number of disruptions in its supply chain as vendors failed to deliver products on time, and the business has lost customers as a result. Your firm only has a limited IT department, and you would like to propose a cloud-based solution. Go to the website of GT Nexus. Explore the Why GT Nexus tab, and the Solutions By Industry/Retail tab. Read several case studies on the site. Write a report to senior management why you believe that a cloud-based B2B solution is best for your firm.

Answer:

With the growing technology, businesses are more keen to move their infrastructure from on premises to cloud based platform. It doesn't even matter whether the business runs an e-commerce application or a logistic application. Cloud is being enhanced day by day and the services they provide can not be achievable under such low cost. Because of the advantage provided by the cloud based service providers, it is really a profit for the business to migrate to the cloud based infrastructure.

Since our business deals with customer data and we need an infrastructure that should have zero downtime, so only that kind of infrastructure is being provided by the cloud based platform. Scalability is one such feature that is being provided by the cloud service provider which actually attracting business to move their infrastructure in cloud. Scalability is the feature where business can scale up their infrastructure whenever required and even scale down when not needed. This actually ensures high availability infrastructure and our application will certainly face zero downtime. We can easily handle the number of traffic entering or trying to access our infrastructure.

Since we deal with loads of data in our application, hence the data availability provided by the cloud service provider is unimaginable. They ensure that there should be like 99.99% data availability and data durability. That actually means that 0.01% chance that our data will be lost which is nearly equals to 0%. Hence the application will always remain up and running. These all feature actually making businesses to move to cloud and that services provided by the cloud service provider are very much beneficial in terms of our business perspective.