How does the development of e-collaboration provide e-businesses with a competitive advantage?
E-Collaboration, a relatively new concept that is shaping the way we do business. The development of this model has seen recent advances in inter-enterprise software and communication technologies which are shaping the way for digitalisation, mass communication, and globalisation. This emerging business tool has the ability to change the traditional foundations of business relationships. This report explores the concept of developing e-collaboration for e-businesses and the competitive advantage it provides to B2B (Business to Business), through the means of secondary qualitative research, books, journals, the internet and shared company information.
Goonatilake et al. (2009) state that ‘e-collaboration is the use of internet and related technologies to assist distant clients in exchanging information for interactions between suppliers and customers, and everyone in between to move trade forward’. Kock (2002) supports the aforementioned definition by identifying e-collaboration at an operational level as being a collaboration utilising electronic technologies amongst different individuals to achieve a common goal.
E-Collaboration is a tool that breaks the boundaries of activities involving buying and selling. As cited in Samtani (2002, p.8) The Gartner Group believed that by 2005 nearly half of all Web-based commerce would be collaborative. Not only has collaboration become firmly established within many businesses it has changed many business models to incorporate B2B (Business to Business) integrations.
The reasons for companies utilising e-commerce are mainly driven by the need to share resources and information. Wanga, Y. (Unknown, p.3) states that in collaborating the participating companies are sharing ‘the supply chain… the cost reduction, JIT … process automation, increased potential opportunities on partnership, and the flexibility and adaptability.’ Samtani (2002, p.9) concurs with the above reasons for collaborating believing that it leads to ‘shared databases, open tracking systems, enhanced inter-enterprise visibility and cooperation, streamlined business processes, new cost efficiencies and an expanded customer base for every collaborative partner.’
IPC E-Business & Supply chain committee (2000) state ‘The business-to-business (B2B) model is much more complex compared to the business-to commerce (B2C) model, which is more prevalent today. B2B spans the full spectrum of business processes, from raw material to the consumer.’
IPC E-Business & Supply chain committee (2000)
The diagram visualises the key elements of an e-collaborated e-business and its ability to manage end-to-end business transactions. As the trend towards outsourcing in the electronics industry continues to develop it is essential that all the main components are interlined: OEM’s, EMS Providers, PCB Fabricators, Raw Material Suppliers and Component Suppliers to allow for automated processes.
Extranet is the term used for a private network within an organisation and other clients/suppliers who have access rights. Extranets have the ability to automate processes improving the business relationships. Businesses are currently more pressured into online ordering and inventory management because of their attractive benefits.
Information is freely available 24/7 making communication easier between suppliers. Any changes needed to be made are simple in comparison to the traditional slow paper form saving time. Inventory and order processing can be easily changed without the delay of the post. Another added benefit of utilising an extranet is a much more effective collaboration and synchronization between clients. (Benefits of intranets and extranets, 2009) Business becomes more flexible with negotiable working hours because of their ordering system being connected 24/7.
EDI is a tool that can be used by business to communicate with other businesses or suppliers. It reduces the need for paper documentation and reduces cycle time dramatically. PCMag.com, (Accessed November 2009) define it as being the ‘electronic communication of business transactions, such as orders, confirmations and invoices, between organizations.’
API is the application that enables EDI. It is a platform that connects the companies together and standardises the layout of the data being transmitted so that it becomes meaningful to both parties involved.
Outsourcing is defined as ‘the process of shifting/delegating/transferring a service/process/function to a third-parties/external service provider which would otherwise be an in-house function/service/process.'(CyberVillage.com, Accessed November 2009). Utilising outsourcing can be a crucial advantage to companies such as Dell, Nissan and Cummins. If the companies can source another company to make a component needed for the end product at a price that allows them to still have a viable profit margin, then this prevents the need to buy in the equipment and the expertise to do so.
Web 2.0 can be used as a means of selling products to customers and suppliers. This can be split into two categories of selling B2B or B2C. Websites such as eBay and Amazon.com can be used by businesses to sell directly to customers using a B2C model. Other websites such as nationalrail.co.uk can be used by 3rd party companies to sell train tickets on behalf of many train providers such as VirginTrains and the Eurostar.
E-business collaboration allows businesses to have an active role in all aspects of its customer sales and marketing experience, from shopping and product configuration to fulfilment and feedback. ‘Internet-enabled collaboration is creating a fundamental divide in the practice of global business and the management structures that guides it.’ http://www.industryweek.com/articles/e-business_–_e-collaboration_674.aspx
Collaborated e-businesses pose the risk factor for many managers of organisations who have not adopted the collaboration phenomenon as old strategies do not constitute a sustainable competitive advantage. The managers of e-collaborated businesses are achieving industry advantages by adhering to two main characteristics (1) lowering interaction cost with the use of the internet and (2) they are primarily focused on the part of the value chain where they have a prominent advantage.
With the business focused on the prominent advantage of creating an effective demand-driven (or customer driven) supply chain, e-collaboration has aided in providing the necessary tools and processes needed to manage the large of amount of information being shared throughout the cycle.
Joint product development
Another strategic imperative for collaboration is emerging from a basic transformation in discrete manufacturing. As the build-to-demand model replaces yesterday’s build-to-stock paradigm, the ability to collaborate with customers and suppliers at a product engineering level becomes a primary competitive tool. It is a need that has been transforming the product strategies of companies that were once known only for their ability to deliver CAD/CAM solutions.
This online collaboration will allow your active participation in all aspects of your customer’s sales and marketing experience, from shopping and product configuration to fulfillment and feedback. Short-term rewards include reduced costs through process automation and efficiencies. Long-term rewards include increased revenue, greater customer and partner loyalty, and the ability to create strong sell-side partnerships that help differentiate products
E-business offers the opportunity for businesses to establish new competitive standards by expanding distribution channels, integrating external and internal processes, and offering a cost-effective method of providing products and services. The Internet provides online businesses with the ability to reach a global audience and to operate with a minimal infrastructure, reducing overhead, and providing greater economies of scale, while providing customers and businesses with a broad selection, increased pricing power, and unparalleled convenience.
These changing economic assumptions within the context of the electronic economy have direct impact on economic value-add for manufacturers. Three primary value levers are exercised through the adoption of e-business. The associated value propositions can be quite compelling and span many of the key dimensions of business performance and success. In this context, e-business is clearly much more than just an electronic sales channel or an MRO procurement alternative, as many have defined it to be. Those who have been willing to adopt an e-business perspective are seeing tangible economic results.
‘All of the new tools of collaboration promote a model for manufacturing in which an enterprise is no longer inhibited by size or lack of it. And the collapsing of time and distance means that many of the old rules for corporate structure and strategy are being rewritten’. Teresko, J. (2000)
To investigate the available tools to develop e-collaboration for an e-business, in order to achieve a competitive advantage.
In order to achieve this aim the following objectives will be met:
Amazon.com case study?
Alliance between companies. For example Microsoft and Google. Are they going to buy out Google or collaborate to provide a better service to their customers?
Effect on travel and transport? Retailers being able to provide train times from national rail through ADI.
Nissan and Renault are one of the most formidable e-collaborations. Beginning in 1999 when Nissan UK was facing financial difficulties, Renault bought out 44.3% of the shares in Nissan. Nissan bought 15% of Renault shares but hold no voting rights. They also created the Renault-Nissan Alliance team, with both parties owning a 50% share. The two companies share their purchasing and information services as shown below.
This partnership is successful due to many factors. Nissan are one of the leading petrol car manufacturers and Renault specialise in diesel. The Alliance have together co-developed common engines and gearboxes. These include a six-speed manual gearbox and a new V6 diesel engine. The Alliance also interchanges existing engines or gearboxes. For example, the Nissan 3.5-litre engine is used in the Renault Laguna and Renault 1.5 litre diesel engine is used in the Nissan Qashqai. In total, the Alliance share eight engines that are commonly used throughout the range of Nissan and Renault cars.
Renault originally had no plant in South America, however from day one of the merger Renault have been able to utilise Nissan’s plant in Aguascalientes Mexico. Renault now produces the Clio for Mexico and Latin America. The Clio can be produced along side Nissan’s Platina as they share a similar architecture which drives down production and inventory costs. Nissan and Renault still however remain distinct recognisable brands which appeals to the customers.
Nissan and Renault share their purchasing and information services. Within the RNIS (Renault-Nissan Information Services) the companies share a WAN, service providers and hardware. They also share systems e.g. Packaging Visibility System (PVS) that standardises the return of returnable packaging between shared suppliers, thus saving money.
Dell spend a minimal 1.1% of their annual revenue on research and development, preferring to outsource various components to suppliers they collaborate with. They collaborate rather than compete with companies to provide customers with innovative ideas. This is vastly different to the methodology adopted by HP who invest 4.6%.of their annual revenue in research and developing components. This has previously given Dell the competitive advantage and enabled Dell to dominate the computer market.
Outsourcing can be beneficial to companies who focus on other areas of production rather than research and development of specific components. Companies who outsource may pay a premium for buying in ‘ready made’ components for their end product; however they compensate for that area of expenditure by ensuring they produce a very high quality end result that will attract customers.
Outsourcing saves production time. If the business and their suppliers can successfully implement JIT (Just in Time) and components are delivered as per demand for the manufacturing line this will drive down product time. The increased number of products being manufactured within the same company in the same plant also increases the possibility of delays in such cases as a mainframe failures and machinery malfunctions. Out of house outsourcing can eliminate such problems. Nissan outsources to both in-house and out of house suppliers. They have improved their logistics by relocating many of their suppliers in-house, saving the time taken to get the components to the line and reduced the cost of transportation.
To successfully outsource companies need to have confidence and trust in the suppliers. Nissan for example has implemented SAIS (Supplier Appraisal and Improvement System). This awards the suppliers ‘demerits’ for mistakes such as parts mislabelled and accuracy percentages for delivery times. This allows Nissan remain in control over its suppliers and with the control reoccurring mistakes can be highlighted so that action can be taken.
Nokia have recently published a press release in November 2009 to recall its mobile phone chargers that are produced by a third party supplier. The charger has a fault which can result in an electric shock. This can severely affect the client base of Nokia due to the inefficiencies of their supplier, customers may lose faith in Nokia and question how much of their outsourced components are quality assured by Nokia. Therefore ultimately meaning Nokia lose their competitive advantage in the mobile phone market.
Utilising EDI for communication between collaborated companies can provide numerous advantages. Sending an electronic message cross-country or globally requires only seconds or minutes instead of days. It can be agreed between the companies for the data to be sent in a certain format that can be instantaneously uploaded on the receiving company’s system. Data files can be frequently communicated throughout a day between a company and a supplier via EDI; this is advantageous to a company dealing with a rapid stock turnover like manufacturing companies.
The sending and receiving of information electronically can be of great benefit to a supplier too. The suppliers of NMUK (Nissan Manufacturing UK) will receive much earlier notification of NMUK’s delivery requirements. This can be used by the supplier to enable them to minimise their inventory holding, improve their production scheduling and prepare in advance for logistics collections if necessary.
NMUK also use EDI transmissions for the Self-Invoicing System. The objective is to have all suppliers who receive orders from Nissan by EDI to also be active for self-invoicing. This is saving Nissan money as they are not physically sending out the invoices. It is also reducing the possible errors caused by manual intervention may have when data needs to be input from one system onto another.
The effectiveness of using e-collaboration tools in the supply chain:
an assessment study with system dynamics
Oscar Rubiano Ovallea, Adolfo Crespo Marquezb,*
a Escuela de Ing. Industrial y Estad!Ä±stica, Universidad del Valle, Cali, Colombia
b Industrial Management, School of Engineering, University of Seville, Seville, Spain
Received 1 February 2002; received in revised form 21 October 2002; accepted 18 January 2003
Goonatilake, R. Herath, S., Hearth, A., Tyska C.K. (2009) ‘E-collaboration issues in global trade, transactions and pratices’, European Journal of Scientific Research, 34 (3), p.326 [Online]. Available at: http://www.eurojournals.com/ejsr_34_3_04.pdf (Accessed: 02 December 2009).
Samtani, G. (2002) B2B Integration – A practical guide to collaborative E-commerce. London. Imperial College Press.
IPC E-Business & Supply chain committee(2000) ‘The myths of E-commerce’. An IPC White Paper Report p.5. Open Access [online] Available at: http://www.ipc.org/4.0_Knowledge/4.1_Standards/E-CommerceWhitePaper.pdf (see page 5) (Accessed : 29 November 2009).
Teresko, J. (2000) ‘Internet tools allow manufactures to join forces to enhance individual strenghts’, Industry Weekly, 12 June [Online] Available at: http://www.industryweek.com/articles/e-business_–_e-collaboration_674.aspx (Accessed: 29 November 2009).
Wanga, Y. (Unknown) ‘A literature review’. p.3, Open Access [online] Available at: http://conference.iproms.org/sites/conference.iproms.org/files/PID172674.pdf (Accessed: 27 November 2009).