Forget the 80/20 rule, and stop wasting money. You need to get the rest of your trading partners online to reap real return from e-commerce.
The next time you're ready to brag about your company's B2B e-commerce strategy, hold your tongue. Chances are, you're leaving millions of dollars on the table in spite of your best efforts to do business electronically with your partners.
Although B2B e-commerce has been the talk of the town for years and has survived more than one antihype backlash, the truth is that few companies today are actually transacting the bulk of their business through electronic connections, be they Web sites, public or private exchanges, one-to-one links with business partners or EDI. Aberdeen Group reports that more than 60 per cent of suppliers in all industries continue to receive orders via fax or e-mail. And a mere 4.5 per cent of all purchasing dollars are transacted through B2B e-commerce, according to a 2002 survey by the Centre for Advanced Purchasing Studies. With so few transactions conducted electronically, companies are missing out on the full value of B2B e-commerce.
Louis Columbus, a senior analyst with AMR Research (US), says procuring direct materials via phone, fax or e-mail costs between $US160 and $US200 per transaction, while the same activity executed electronically rings up as low as $US40 per transaction - a fivefold savings. Aberdeen Group estimates that automating procurement activities will save midsize companies $US2 million per year. And that's not to say anything of the cost savings resulting from better supply chain collaboration. Indeed, the advantages of B2B e-commerce include savings in administrative costs; decreases in acquisition, purchasing and payment cycles; reductions in errors and product returns; better inventory data; and incremental revenue growth.
The key to reaping those benefits lies in recruiting the multitude of business partners that have yet to sign on for your B2B trading.
Of course, there are other obstacles to B2B ROI besides participation: legacy systems ill-equipped to deal with B2B transactions, the volume of legacy processes that need to be mapped and automated, and the lack of standards. Security fears are also a concern for many companies loath to see their data flow over the Web into companies that aren't under their direct control. Nevertheless, recruitment remains a critical challenge.
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