Jul 11, 2019 in Economics
IntroductionToday all food companies using B2B and B2C platform are exploring new means for increasing efficiency, costs reduction techniques, and expansion of existing business. At the same time, they want to ensure that their investments can increase customer satisfaction and derive more sales with new information technology. Many enterprises increasingly consider e-commerce as the engine of growth for profitable business operations. They acknowledge that success depends on introduction of modern e-commerce technologies, for example, personalized content, rich and interactive displays, effective online trading, and guided direction of them. These capabilities have been achieved over the last few years with the application of electronic transactions and implementation of EDI in the supply chain systems of B2C and B2B organizations. Besides, the adoption of advanced information technology has reduced costs and increased the business of many organizations. Current paper describes how organizations can use B2B and B2C e-commerce to reduce costs, grow the business, retain customers and decrease complexity for customers. It also identifies effective supply chain systems for smooth flow of information, materials, and finances, as well as explores the roles of all essential technological processes used by e-commerce companies for competing in marketplace.
Task 1: Purchasing Process used in B2B and B2C Companies
Purchasing Process used in B2B CompaniesThe two different distinct types of e-commerce activities such as B2B e-commerce and B2C markets continue to gain popularity worldwide, thereby attracting more and more companies and consumers to derive benefits from the existing digital technologies. The first is B2B e-commerce in which both buyers and sellers belong to companies. The most common products sold in B2B platform are usually raw materials or products, which are consumed by industries in the production of finished goods such as iron and steel, chemicals, paper, office supplies, food, products of automobile industry, agriculture and shipping (Botha, Bothma & Geldenhuys 2008).
Buyers’ Impact on Buying Process in B2B CompaniesProfessional buyers buying products and services from B2B companies render a significant impact on the whole buying process in the following way: buyers demand reduction of transaction costs. Three costs areas are extremely significant for buyers in B2B platform. First, buyers search for costs reduction techniques because they do not want to involve multiple intermediaries to search information regarding suppliers, prices, and products in a traditional way. Second, buyers demand reduced costs of processing transactions such as mode of payments, invoices, and purchase orders as B2B e-commerce enables automation of transactions. Third, buyers demand those online processing systems that improve inventory management and logistics as well as provide security and transparency in business dealings (Druehl & Porteus 2010).
Purchasing Process used in B2C CompaniesBusiness-to-consumer is a platform in which companies sell finished goods or services to potential customers on the Internet. The process begins with buyers collecting information about desired products that satisfy their needs from various B2C stores. The consumer recognizes a need for specific products or services during the course of online shopping, and then explores several B2C sites for searching desired information. If the search does not yield any useful information, then the customer evaluates other alternatives to find out the best available products or services and finally purchases appropriate products from a B2C e-market that offers competitive price, quality, security and trust. The products and services usually bought from B2C markets include books, consumer products, financial products, electronic materials and digital content.
Buyers’ Impact on Buying Process in B2C CompaniesThe B2C online shopping is influenced by customers during the purchasing process because online shopping uses non-store shopping formats. Although B2C markets offer several functional advantages, some social, cultural, personal, and psychological issues affect the buying process. Besides, online security, trust, trustworthiness and privacy also affect buyers while shopping in B2C companies. Security and Privacy: The Internet includes some peculiar characteristics; hence, information across the web can be lost or stolen easily, especially buyer’s monetary details and personal information. Although many websites offer secured certification of professional organizations, buyers continue losing their money while shopping from B2C markets. Thus, buyers are discouraged to buy goods and services from B2C markets and prefer to buy from traditional stores.
Trust and TrustworthinessBuyers purchasing tendency most likely depends upon the level of trust that they have in B2C shops. A current study shows that buyers’ level of online trust is lower than trust in face-to-face interactions in traditional stores. Many customers use the Internet for searching information and buy products from traditional stores (Jeffers & Nault 2011).
Cultural, Social, Personal and Psychological VariablesConsumer buying process is affected strongly by social, cultural, personal, and psychological variables. Culture influences buyers’ wants, needs and behaviour to a great extent. For instance, individuals learn different types of wants and needs from the family environment and prefer to buy same products recommended by their family members. Subculture such as religion or nationality also influences buyers’ buying behaviour, which encourages firms to design their products according to different groups’ demands and needs. Social aspects such as societies and groups also change buying behaviour because a buyer is most likely to be impacted by the opinions of other members of the society. Besides, family members, friends, and relatives influence buying behaviour, and social networking sites are extremely popular in changing consumer buying tendencies. Personal factors, such as lifestyle, occupation and age also define the behaviour of an individual. Desires and wants of buyers change with their age. This category usually buys those products that are useful, economical and fulfil their needs. Buyers’ psychological characteristics influence buying decisions. For instance, business executives have a tendency to buy more expensive suits than others. In this situation, buyers’ psychology impacts decisions as highly paid people tend to buy more expensive products (Lim 2014).
Task 2: Necessity of Electronic Transactions in E-Commerce
Significance of Electronic TransactionsThe procedure of financial exchange occurring between sellers and buyers on the Internet with the help of digital financial instruments is known as electronic transaction or EPS. Digital financial instruments such as electronic checks, encrypted credit card numbers, digital cash supported by a bank or by legal tender reduce paperwork and eliminate delays in business processes. With the help of the Internet, buyers and sellers can complete electronic transactions rapidly without involving paperwork because transaction details and mode of payments are recorded and stored in the computer systems and can be tracked during the whole buying process. Development of different types of e-commerce buying processes has created a necessity for new means of money exchange systems. For example, online auctions have reduced the time and paperwork in person-to-person payment transactions; thus enabling quick exchange of money between individuals in the online environment (Ray, Ow & Kim 2011).
The Development of EDI in B2B SectorApplications of e-commerce that includes automation of business transactions using communications technologies started in the 1980's with innovations of electronic transfer of money. The introduction of EDI rapidly expanded beyond the boundaries of e-business from the financial sector to B2B companies, manufacturers and others in the service industry. Electronic data interchange is a significant element of B2B e-commerce. EDI transfer documents and information, for instance, invoices, tenders, purchase orders, bills of lading between computer systems of different companies build on a standard format and machine-retrievable system. The application of EDI has increased inter-organizational activities as well as improved the integration that takes place between supply chain participants in B2B platform. However, a research in this field reveals that implementation of EDI in B2B supply chain activities has not been adopted effectively to produce desired results. Internet EDI also enables automation of the B2B supply chain by synchronizing the production, demand and supply, procurement of raw materials from vendors to the final delivery of products to consumers and extends the limits of intranets so that they can be changed into extranets. Intranets are internal networks involving the internal functioning of organizations and its personnel. Extranets extend beyond the intranet limits by involving suppliers, buyers and stakeholders of the organization. So far, the Internet has been the weakest link in the supply chain management because timely communication and sharing of information across internet systems is not practiced efficiently (Turban et al. 2009).
Use of Electronic Payment SystemsThe development of e-commerce has created a necessity of new means of financial requirements, which usually cannot be met by traditional methods of payments. Realizing this, ICT researchers continue to explore different types of EPSs and issues surrounding digital currency. Broadly EPSs are classified as Electronic Cash System, Credit Card Payment System, Electronic Cheques and Smart Cards System. Electronic transactions are important in billing and payments because they are viewed as the final activities in all sales transactions. It is a crucial process in the closure of the e-business cycle. Electronic payment systems facilitate speedy action of delivering goods or services after the buyer decides to pay for a product or service. It delivers payments from buyers to sellers in the most efficient, effective and problem-free procedure (Anandalingam & Raghavan 2005).
Task 3: Supply Chain Management in B2B and B2C Companies
E-Commerce in Supply Chain SystemsSupply chain management in e-business consists of three prime flows such as flow of materials, information and finances. The material flow involves the procurement of goods such as raw material and components from vendors as well as delivery of outputs to a customer. The information flow includes transmission of orders and informing customers regarding the delivery status. Besides, the information also helps in inventory planning, promotional plans and timely execution of sales orders. The financial flow includes payments and credit terms that occur between buyers and sellers when a customer places his or her requirements. Finance, IT and marketing departments support transformation of inputs to final products, and finally, the goods are sold to buyers. Supply chain activities involve the flow of finances, materials and information between various supply chain stages from suppliers to buyers, as shown in Figure 1. When different stages of a supply chain are coordinated without information sharing, the result produced is called the “bullwhip effect” (Anand & Goyal 2009), in which small fluctuations in buyers’ demand lead to large variations in supply of materials. In some cases, orders to suppliers can vary 10 to 15 times more than the requirement of customers. Increased fluctuations lead to large inventories, high transportation, increased warehousing costs, excess capacity and long supply time. Besides, these variations also affect the flow of finances in the supply chain because a large proportion of payments are made for excessive inventory, undesired items, and transportation costs.
Advantages of E-ProcurementTypically, e-procurement websites enable registered and qualified customers to search for sellers and buyers of products and services. Depending on the requirement, sellers and buyers can specify their costs or invite bids. Transactions are trusted and secured and can be completed in time. By integrating e-procurement in a supply chain, bulk purchases qualify buyers for special offers or volume discounts. E-business software allows automation of many selling and buying processes. Firms participating in it can control inventories more effectively, reducing purchase overheads, and improving production cycles (Kotler & Armstrong 2009).
Benefits of Integrating Electronic Processes with the E-Business Supply ChainThere are considerable benefits of integrating electronic processes with the e-business supply chain. Some of the key benefits are as follows: Revenue enhancement: Electronic processes permit companies to increase revenues by selling goods and services directly to buyers. Manufacturers and other participants of the supply chain do not possess direct contact with customers. Firms can use electronic systems to downsize the supply chain by eliminating retailers and selling directly to users. Inventory costs: E-businesses can centralize inventories in their supply chain systems because they do not have to maintain inventory close to customers. This electronic process reduces inventory levels because of enhanced scale economies in the supply and decreased fluctuation in demand. Transportation costs: A company spends on inbound transportation to execute an order in a form of a vendor while it incurs outbound costs to deliver the finished product to a buyer. Electronic processes help e-businesses in locating competitive transporters, which can supply and deliver goods at reduced costs (Huang, Zhang & Lo 2005).
Analytical Presentation of Information Flow in Logistics OperationsFor efficient management of supply chain, all logistics operations must be fully integrated. This integration can be possible by using communication networks, which will increase involvement and coordination between various members and operations of the supply chain. This communications network is called the heart of e-business. The following figure shows how e-business can integrate the flow of information in logistics operations and distribute information between the members and business activities of the supply chain (see figure 2).
Task 4: Communication in E-Commerce Activities
Effective Use of the Internet in Communication with Employees and StakeholdersThe Internet has improved the level of communication in e-commerce companies. The Internet connects various departments, workforce and personnel internally and other stakeholders of the supply chain externally. Communication via the Internet has gained momentum to keep workers well-informed regarding organization’s vision, mission, goals, and objectives. The Internet unites all employees to work together for a common purpose. The Internet maintains the flow of communication among an enterprise, its employees, and business stakeholders. Besides, communication has increased participation and productivity of employees because through the Internet, employees receive instructions, job responsibilities and can act swiftly, thus saving their time and improving efficiency. It also establishes the relationship between the organization and business personnel having a common interest. The Internet has gradually accelerated e-commerce activities between the organization and its supply chain systems. All members participating in organization’s supply chain can improve their efficiency and productivity because the Internet provides speedy information, facilitating them to act quickly (Smith, Watson & Baker 2008).
Security and Trust in Supply Chain ManagementBolhari (2009) has defined security issues in supply chain systems as “The application of technology and procedures to safeguard supply chain assets from damage, terrorism, or theft and to prevent mass destruction of the supply chain.
Issues Related to Security and Trust in Supply ChainsDifferent aspects that relate to information security and trust in supply chains have been explained in the literature. Some of these are highlighted below:
- Data security;
- Technology aspects;
- Management aspects.
Data Security AspectsFaisal, Banwet, and Shankar (2006) explained that each information system of the company must support both shared and proprietary data. Proprietary data should be available only to those workers who are trustworthy and possess legitimate business needs for internal functioning of the organization. Shared data can be available to all supply chain participants through relevant information interfaces. Thus, there is a necessity to explore issues of trust and data security in the information flow between participants of a supply chain.
Technology AspectsIn B2B e-commerce, many organizations have not adopted the latest ICT processes, which reduce security risks and allow effective information sharing in supply chain management. Bolhari (2009) argued that IT-facilitated coordination has improved customer satisfaction and service by allowing information sharing for joint decision-making and brought about maximum benefits for all supply chain participants. However, this aspect has increased the company’s vulnerability to a large number of IT-specific risks such as malware, unauthorized access, and hacking. Thus, there is a necessity of a Decision Information Trust Model that will construct a network of security management system with features of trust and confidentiality for all participants in the supply chain system.
Management AspectsFaisal, Banwet, and Shankar (2006) explain that for achieving customer satisfaction and competency, the entire supply chain demands smooth flow of materials, funds, and information between the supply chain members. Quite often man-made and natural disasters affect approaches of the management in the supply chain systems as businesses now depend on their global partners spanning across several continents and nations. Thus, global supply chains need greater involvement of all participants in addressing issues of security and trust (Faisal, Banwet & Shankar 2006).
Quality in E- Business and Development of Internet TechnologiesIn B2B and B2C e-commerce, organizations formulate an effective management strategy for improving the quality of business operations. E-business improves the quality of operations in two ways. First, by improving visibility in supply chain processes, an e-business can mitigate the bullwhip impact. The resulting reduction in variability will enable a supply chain to enhance customer service while reducing costs as well as maintaining a smooth flow of finance, material and information. Second, e-business can improve the quality of coordination between the company and its stakeholders. Coordination is the capability of supply chain stages to utilize common information received from different sources in making decisions in product designing, production, pricing, marketing, and final delivery of a product, which benefits all stakeholders (Botha, Bothma & Geldenhuys 2008). Some of the widely practiced information technologies are as follows:
- EDI is meant for exchanging information between computer systems by using and sharing agreed messages with electronic means and without human interference. Its application is widely used for transfer of trade transaction data and automated processes of procuring goods and services.
- Open source software is the computer software operated as an open source license. This software carries a copyright license in which the owner of the copyright offers the rights to modify, distribute and use the software without having paid to the original author. The OSS is widely used with the Linux operating system and as an alternative to Windows.
- Secure server technology implies that the exchange of data between computer systems requires certain protocols or technical standards, for instance, Secure Sockets Layer.