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Apart from business-to-consumer highly popular model of conducting business there is another form of commerce unit known as business-to-business. It is considered a different type of trade, as different participants are involved. In case of business-to-consumer scheme there are people who offer services or products and they serve as end products for people who buy them because customers are not likely to do anything else with the purchase other than use it themselves. On the other hand B2B model is set up in such a way that both parties are exchanging some products or services intending to use it somehow in the future, either for creation of their own product/service or aiming to resell for profit generation.
Currently most all big and small businesses and entrepreneurs recognize the importance and overall benefits of using Internet. Both models of business welcome the possibility to cut down production costs, elimination of multiple intermediaries and costs savings as a result of technology usage. In business-to-consumer situation Internet that can be easily accessible by everyone at any time and any place is the best tool for selling goods or services. After all Internet makes the very existence of such phenomenon possible. When we consider business-to-business model a simple Web site available for everyone will not be sufficient and most probably will be a dangerous idea. Security concerns for those who operate big sums of money or have trade secrets are essential and Internet cannot provide it thus businesses have to use different tools to still make e-business possible. In order to reduce or eliminate risk of data theft, companies have started developing sites where it was safe to share information. Mostly big companies with high profits can afford such sites for the reason of expenses involved in setting the systems up and keeping them effectively running. With the help of such Web sites companies are able to communicate with their trading partners and receive information by using passwords that guarantee restricted access to the site. Such sites are called extranets; they establish a secure communication channel between two or more companies, suppliers and vendors. With the help of such network available for all players, supply chain as the most important business component is managed more efficiently causing better returns.
Before extranets were implemented those firms willing to have a secure channel of communication had to send software to their partners. Such programs were expensive and difficult to install, besides it took a lot of time. Current situation does not require a lot of time or effort from neither side, now companies just have to direct their associates to a safe Web site with a specific password. By the year 2000, more than 10% of Fortune 500 companies were employing extranets and about 75% were intending to do so. Statistics show that generally companies with more than thousand employees install extranets because small companies usually do not work with businesses but with end product buyers.
One of the most significant benefits of extranet installment rests in the reduction of workload in the company. There is no need to specially place orders to have the inventory restocked vendors only have to access common extranets that they share with their customers. They can also check supply and order delivery automatically in real time and make sure that it was delivered. Having instant access to corporate data that shows ordering history and buying patterns is another great value that extranets create for the partners. They allow making forecasts about future deals on the basis of ordering patters that are reflected and can be easily found on the extranet. Clearly if the company works with many vendors and buyers, it is important to ensure that all of them have access to their own information and extranets can do it. By providing all business partners with right of entry into inner data warehouse, customer and supplier relationship improves but most importantly it reduces costs related with employing people for call centers that have to respond to inquiries. In such a way companies are cutting down costs and reducing number of steps in supply chain resulting in faster accomplishment of company's objectives.
According to extranet service providers, extranets are able to get suppliers to deliver needed components just in time, as they can check the availability instantly and make a delivery. This practice will keep companies from storing inventories for long periods of time and paying extra for warehousing. It will not only simplify the procedure but make it more transparent for all parties. If the businesses are partners in manufacturing certain products, extranet will be necessary for speeding up and product development. In this stage fast communication and clarity is essential for instance for such companies as aircraft manufacturers, who are frequently working together on the projects. Delivery times will be reduced if partners are aware of what and when components need to be completed, thus facilitating physical and operational efficiency of the project, which are parts of the supply chain.
Cycle times and their costs can also be reduced with implementation of extranets. When performances are controlled by direct customers in real time it serves as a perfect encouragement for the completion of a job in timely manner regarding quality standards. This does not imply pressure over workers but rather a controllable process through which everyone receives satisfaction. Extranets for the most part are used to provide a better customer service and coordination of the business procedures in order to stay informed about current industry tendencies. In order to receive more business proposals and loyal customers, companies also decide to install extranets. As was already mentioned clients with regular access to their own information trust partners more and choose to do business with them over those who have work under old systems.
Overall responsibility of extranets is to show business partners such as vendors, suppliers and buyers their mutual work, if it's effective or not and to make the right decision about future projects. Measuring performance in real time is easier and faster than having to deal with heaps paperwork that takes up loads of time. Thus extranets are efficient as tools for managing supply chain in general and in minimizing its specific steps throughout production and distribution process.
Copyright © 1995 - Photius Coutsoukis (All Rights Reserved).
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