1 The role of literature Internet and Supply Chain Management Markets Scanmarket Background Scanmarket Customers

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1 Internet and Supply Chain Management E-commerce from an industrial buyer perspective Morten Rask October 2003, Aalborg University The role of literature Backgrounders / Project Doers Andersen, P. H. & Rask, M. (2003). Supply chain management: New organisationalpractices for changing procurement realities. Journal of Purchasing & Supply Management, 2003 (9), New organizational settings Lancioni, R. A., Smith, M. F., & Oliva, T. A. (2000). The Role of the Internet in Supply Chain Management A catalog of Internet-related opportunities for SCM Sheth, J. N. (1996). Organizational buying behavior: past performance and future expectations Future focus: Global sourcing and relationship Tucker, D. & Jones, L. (2000). Leveraging the power of the Internet for optimal supplier sourcing Providers and Partners Approaches Morten Rask 2 Markets Scanmarket Background A market is a network of interactions and relationships where information, products, services, and payments are exchanged. The market handles all the necessary transactions. An electronic market is a place where shoppers and sellers meet electronically. In electronic markets, sellers and buyers negotiate, submit bids, agree on an order, and finish the execution on- or off-line. The first Danish B2B e-marketplace. After 6 months other Danish e-marketplaces opened Application Service Provider 11 employees in Denmark, England and Germany 3 languages 1 URL ( Buyers from Denmark, England and Germany Suppliers from Western European countries and a few from USA and Asia Morten Rask 3 Morten Rask 4 Scanmarket Customers Activity at Scanmarket Turnover 50 million DKK Often 1000 times more employees than Scanmarket. The trendsetters within their industry First suppliers then buyers Easy direct contact in Denmark Strong strong mouth-to-mouth tradition in England Morten Rask buyers including about 20 public municipalities were connected to the system Plan Number of Auctions Turnover within the system 500 million DKK million DKK Morten Rask 6 1

Supply chain management: New organisationalpractices for changing procurement realities. Journal of Purchasing & Supply Management, 2003 (9), 83-95. New organizational settings Lancioni, R. A.

2 Extranet and/or homepages Global B2B E-business Ordering and sales Procurement database and/or Intranet Intranet, Extanet, Internet Source: Scheepers, R. (1999). Intranet Implementation: Influences, Challenges and Role Players. Ph.D. Thesis, Aalborg University, Aalborg, Denmark. Sellers Buyers Homepages E-marketplaces Customer service via e- Morten Rask mail & web 7 Morten Rask 8 Scanmarket A/S E-commerce defined Ordering and sales Pure e-commerce Actors Sellers E-marketplaces Buyers Morten Rask 9 Digital Product (service) Physical Digital Physical Physical Digital Process Traditional commerce Morten Rask 10 Products E-commerce from the buyer s perspective The core of complex products does not change but the important communication and information around the customized product are digitalized. Actors Are digitalized in a certain degree when their homepages are being the digital agents and when operational integration by the Internet are in use Processes Searching of potential partners homepages, evaluation by and integration by buyers/sellers extranet in inventory control and product development Morten Rask 11 SCM defined (one definition among many) A set of practices for ensuring a cost-effective flow and inventory of materials and finished products throughout the value chain from point-of-origin to point-of consumption. Supply Chain Management Supplier Distributor Consumer Morten Rask

pdf Sellers Buyers Homepages E-marketplaces Customer service via e- Morten Rask mail & web 7 Morten Rask 8 Scanmarket A/S E-commerce defined Ordering and sales Pure e-commerce Actors Sellers

3 Is SCM just another hype for exploitation of suppliers? SCM concerns the buyers design of supply conditions and simply helps the buyer to more efficient exploitation of suppliers (Semlinger 1993; Heide 1994) Nothing new in SCM is added to good procurement practice (New & Ramsay, 1994) Disregards power as important aspect of buyersupplier relationships (Holland, 1994) Seller Perspectives on the role of information in the buyer/seller relationships Buyer Information patterns replace inventory buffers in maintaining a smooth product flow (Stump & Sriram, 1997) Information replaces relationships Power comes from sorting, presenting and administering abundant information Intermediaries are the new players Morten Rask 13 Morten Rask 14 E-tools for SCM Integration along the Supply Chain Seller Powerplay Buyer Need to streamline operations New business models New organizational relationships (virtual companies) Extranet B2B Marketplaces E-procurement Morten Rask 15 Morten Rask 16 Two-dimensional shift in organizational buying behavior (Sheth,1996) Providers and Partners Approaches (Tucker & Jones, 2000) Global Sourcing Future procurement practices Transaction Past procurement practices Relationship Domestic Sourcing Morten Rask 17 Morten Rask

practice (New & Ramsay, 1994) Disregards power as important aspect of buyersupplier relationships (Holland, 1994) Seller Perspectives on the role of information in the buyer/seller relationships

4 Face2Face and interface - that's the problem The Scanmarket System Internet makes is possible to be close to your customers/suppliers 24/7/365 regardless of the geographical location of the actors. Internet is only an interface, where flesh and blood face2face interaction never will occur. Morten Rask 19 Morten Rask 20 Internet Usage Implications in procurement departments The Key Supply Purchaser is the face behind the interface The Internet changes the understandings of distances The implementation of a KSP practice in procurement New types of management procedure develops with a focus on supplier collaborations Representing the access point of the single or selected group of suppliers to other departments in the buying organisation Competencies in language and cross-cultural understanding develops. Mediating contacts between internal and external groups Maintaining relationships with selected suppliers Procurement solutions are created with a focus on the single individual supplier Internet-search and -evaluation of suppliers Use of information integration and communication technology in relation to operation Providers are found on the basis on quantitative criteria The use of cross-organisational and departmental teams Partners are found on the basis on qualitative criteria Participation in formalised cross-organisational teams on continuous basis Participation in formalised cross-departmental teams on continuous basis Only Internet is used alone when searching for products with a low technical and commercial complexity Involved in product development and/or production decisions Internet is used as a supplement when searching for products with a The changing strategic outlook and skill profile of the high technical and commercial complexity procurement department Internet increases the operational integration of suppliers Broader range of technical skills acquired More holistic oriented specialists employed Partners are the primary focus or skills otherwise acquired Reverting order tracking and similar day-to-day procurement activities to Coordination costs decreases other departments Communication frequency, information sharing and switching costs Morten Rask increases 21 Morten Rask 22 IOR on SCM: Some possible synergies IOR may introduce issues of power for understanding SCM dynamics Networks rather than chains may help SCM research in grasping industrial dynamics surrounding the initiation and maintenance of supply chains SCM on IOR - some possible synergies SCM provides room for understanding relationship regimes of dominant partners SCM may provide understanding of the technical contingencies of supply chain (notably how e-business influences IOR relationships) Morten Rask 23 Morten Rask

Morten Rask 19 Morten Rask 20 Internet Usage Implications in procurement departments The Key Supply Purchaser is the face behind the interface The Internet changes the understandings of distances The

5 SCM in a network perspective Improved importance of sourcing and purchasing Often the purchaser did not have buying (negotiating prices) as his main competence? Scanmarket dealt only with purchasing not sourcing? Price as one of many variables that constituted good business? Scanmarket sell a system that only focused on price? Sourcing features to streamline the sourcing activities? Morten Rask 25 Morten Rask 26 Price or Process? Did the relationship building have any importance? Two different savings for the buyer Less resource demanding process Lower the price Cost savings in non-strategic and in strategic purchases Established relationships with the supplier? Why should the sellers participate? The system was not dealing with the relations The relationship got the supplier into the auction and from there transaction took over. The supplier had to understand that the price was not a parameter that was discussed before the company was in the auction. Relationship Transaction opportunity Transaction Relationship Morten Rask 27 Morten Rask

Sourcing features to streamline the sourcing activities? Morten Rask 25 Morten Rask 26 Price or Process? Did the relationship building have any importance?

Internet and Supply Chain Management

Internet and Supply Chain Management E-commerce from an industrial buyer perspective Morten Rask mr@morten-rask.dk September 2002, Aalborg University www.morten-rask.dk/09-2002.htm Agenda The role of literature