Page 258 - Electronic Commerce

Business-to-Business Activities: Improving Efficiency and Reducing Costs

indirect materials items are often called maintenance, repair, and operating (MRO)
supplies. Procurement professionals generally use the terms “indirect materials” and
“MRO supplies” interchangeably. Most companies have a difficult time controlling MRO
spending from a centralized procurement office because many MRO purchases are
numerous and small in dollar value. One way that Procurement Departments control
MRO spending is by issuing purchasing cards (usually called p-cards). These cards,
which resemble credit cards, give individual managers the ability to make multiple
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small purchases at their discretion while providing cost-tracking information to the
procurement office.
By using a Web site to process orders, the vendors in this market can save the costs of
printing and shipping catalogs and handling telephone orders. They can also keep price and
quantity information continually updated, which would be impossible to do in a printed
catalog. Some industry analysts estimate that the cost to process an MRO order through a
Web site can be less than one-tenth of the cost of handling the same order by telephone.
Two of the largest MRO suppliers in the world are McMaster-Carr and W.W. Grainger.
The Grainger Web site offers more than 900,000 different products for sale.
Office equipment and supplies are items that are used by a wide variety of
organizations. Market leaders Office Depot and Staples each have well-designed Web sites
devoted to helping their business customers buy these routine items easily. Digi-Key and
Newark.com are leading online sellers of electronic parts.
Logistics Activities
The classic objective of logistics is to provide the right goods in the right quantities in the
right place at the right time. Logistics management is an important support activity for
both the sales and the purchasing activities in a company. Businesses need to ensure that
the products they sell to customers are delivered on time and that the raw materials they
buy from vendors and use to create their products arrive when needed. The management
of materials as they go from the raw materials storage area through production processes
to become finished goods is also an important part of logistics.
Logistics activities include managing the inbound movements of materials and
supplies and the outbound movements of finished goods and services. Thus, receiving,
warehousing, controlling inventory, scheduling and controlling vehicles, and distributing
finished goods are all logistics activities. The Web and the Internet are providing an
increasing number of opportunities to manage these activities better as they lower
transaction costs and provide constant connectivity between firms engaged in logistics
management. Web-enabled automated warehousing operations are saving companies
millions of dollars each year. Major transportation companies such as Schneider National,
Ryder Supply Chain, and J.B. Hunt now want to be seen by their customers as information
management firms as well as freight carriers.
For example, the Schneider Track and Trace system delivers real-time shipment
information to Web browsers on its customers’ computers. This system shows the
customer which freight carrier is transporting a shipment, where the shipment is, and
when it should arrive at its destination. J.B. Hunt, with hundreds of thousands of trucks,
trailers, containers, and other mobile operating assets, implemented a Web site that lets
its customers track their shipments themselves. With customers doing their own tracking,

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