Sticking with the tried and true

The first returns are in, and the news is good: B2B e-commerce pays. Find out how companies have used their B2B experience to gain competitive advantage.
Written by Stan Gibson, Contributor

The first returns are in, and the news is good: Business-to-business e-commerce pays, and the longer you stick with it, the bigger the ROI. While most companies on the eWeek FastTrack 500 list - 69 percent, to be exact - say they're already engaged in B2B e-commerce, those that got started several years ago are sporting the biggest smiles.

For one thing, companies with a couple of years or more of B2B experience under their belts are seeing more of their customers and suppliers joining them online. For another, companies are steadily upgrading what they can do online, augmenting simple static product catalogs, for example, with more advanced B2B features such as online payment, inventory checking and order tracking. As they upgrade, FastTrack companies report that they're not only cutting transaction costs, they're also increasing revenue and customer satisfaction. And that spells competitive advantage.

A survey of FastTrack 500 companies found that, while satisfaction with B2B overall was relatively evenly split, of the companies that said they've been engaged in e-commerce for at least two years, 33 percent said they are satisfied or strongly satisfied with B2B return on investment. Only 22 percent said they are dissatisfied or strongly dissatisfied.

Ciba Specialty Chemicals Inc. is a typical example of how FastTrack companies have been continuing to enhance B2B value. Three years ago, the Basel, Switzerland supplier of chemical products had only a Web site that published information about its products. However, two years ago, the company - No. 136 on the FastTrack - began pilot deployments of online ordering systems. Now, the company has been providing its customers with full-blown ordering for more than a year.

"We want to exploit the Internet in a very big way," said Terry Gorman, head of supply chain and information management at CSC.

The Internet was a natural for CSC because customers need plenty of information about chemical products to select what is right for them. After putting product information online, however, the company rapidly moved to increase what customers could do online. Besides rolling out online ordering, CSC moved to personalize the customer experience, giving each customer a catalog tailored to their needs with features such as prenegotiated pricing. CSC also put in a system with which customers can track orders regardless of how they have been placed, Gorman said.

Such B2B enhancements are increasingly popular with FastTrack companies. In addition to online product catalogs, the most widespread B2B features that are already in place, according to the survey of FastTrack companies, are (in order) online customer support, ordering, order tracking, payment and inventory checking. The B2B feature that most FastTrack companies are targeting next is online supply chain planning.

But as FastTrack companies such as CSC move to offer enhanced B2B features online, they face several obstacles. One is the need to integrate B2B systems with complex corporate data. At CSC, it wasn't easy. But now, Gorman said, "orders go immediately to the ERP [enterprise resource planning] system and from there, information flows back to the customer's private space on the Web."

Integrating B2B and legacy systems has proved more difficult than expected for another FastTrack company, Tektronix Inc., a $1 billion maker of test and measurement equipment in Beaverton, Ore., and No. 10 on the FastTrack list. "A lot of existing transaction systems are not Net-ready. I want to enable my customer to look at their open order queue. That takes a lot more work than we at first realized," said Larry Bunyard, director of IT at Tektronix.

Like CSC, Tektronix started building its B2B system two years ago. The goal was to improve service to small customers by enabling them to get information over the Web. Bunyard said this has made Tektronix salespeople much more efficient - bringing in $10 to $15 in sales for every dollar spent on the system.

But Tektronix isn't satisfied to serve only the small fry. It's opening its systems to its largest customers through a deployment of the Comergent Distributed E-Business System from Comergent Technologies Inc., of Redwood City, Calif. The sell-side B2B system will allow large customers to order and collaborate with Tektronix online from their Ariba or CommerceOne procurement applications. Tektronix has also implemented an executive information system that lets the company's executive team check online activity by product line, customer and geographic area.

All in all, Tektronix is doing 10 percent to 15 percent of its business electronically, and that percentage will soon double, he said.

Like Tektronix, many FastTrack companies see B2B not just as a way to cut costs but also as a vehicle for driving revenue increases and improving customer satisfaction. In fact, 40.4 percent said improving customer satisfaction was their top B2B goal, followed by increasing revenue (36.5 percent). While most FastTrack companies say B2B e-commerce accounts for less than 10 percent of their companies' revenue today, 21.1 percent said they expect it will account for at least 16 percent by the end of next year.

Not all FastTrack companies have cashed in yet on B2B in a big way. Tyson Foods Inc., No. 452 on the FastTrack list, for example, has seen only a small gain so far from moving EDI (electronic data interchange) transactions to the Web. Tyson's larger customers had been participating in EDI transactions for years when Tyson moved that EDI system to the Web, thereby extending the benefits of EDI to smaller customers, said Gary Cooper, vice president of IS at Tyson, in Springdale, Ark.

The big bang for the buck at Tyson will come when the company moves most of its B2B transactions to online marketplaces. That should come over the next several years, thanks to the company's participation in two online exchanges. One of these exchanges, the EFS (Electronic Food Service) network, focuses on transactions between food producers and restaurants. The other exchange, which does not yet have a name, is oriented toward meat sales through supermarkets. Even with many transactions going through these exchanges, Cooper said that Tyson will still deal with large customers primarily through extranet B2B applications.

With one-third of the company's $7.4 billion annual business now being done either through conventional or Web-based EDI, the company aims, one way or another, to eventually handle 80 percent of its business online, Cooper said.

Tyson probably isn't far from the majority of FastTrackers. Close to half, 44.2 percent, said they are working directly with individual customers, suppliers and partners, while 9.6 percent said they are actively participating in e-marketplaces. Over half said they are engaged in some combination. Those working with e-marketplaces have high expectations, however. 44.8 percent said they expect to profit from e-marketplaces this year.

Besides augmenting B2B extranets with e-marketplaces, FastTrack companies such as CSC also plan to take their B2B efforts global. Reaching more smaller customers online and doing business online with customers in developing countries - where establishing a sales office would be too costly - will help CSC grow the percentage of its business done online from 5 percent currently to 70 percent in two years, Gorman said.

In light of the expected return, the investment is not that high, Gorman said. "We're going to get a very significant return," he said. "But that investment is changing the way the company thinks and does business."

And it's changing the way customers think about CSC, Gorman said. As more customers get higher levels of service online, their expectations will be higher.

More customers, lower prices, better service. That's the list of B2B benefits FastTrack companies are seeing already. And the best is yet to come.

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