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4.9 Collaborative Commerce 127

Improving Collaborative Commerce Thus, administrative costs are reduced, inventories are kept
low, and stock-outs become rare. A VMI also can be con-
C-commerce can be divided into two major categories: ducted between a supplier and its subsuppliers. For more
internal and external. Internal collaboration refers to inter- information, see en.wikipedia.org/wiki/Vendor- managed_
departmental collaboration such as collaboration among inventory, vendormanagedinventory.com, and SAP (2016).
organizational employees and collaboration of departments Representative VMI software solutions are provided by
with their mobile employees. It also refers to collaboration Vecco International (veccointl.com) and JDA Software
among teams and individual employees who are off premises. Group, Inc. (jda.com).
External collaboration refers to any collaboration between an
organization and others in the external environment. Example: VMI and Information Sharing Between
A large number of electronic tools are available to improve a Retailer (Walmart) and a Supplier (P&G)
collaboration, starting with e-mail and wikis and ending Walmart provides P&G access to sales information on every
with collaborative spaces and comprehensive tools such as item P&G sells to Walmart. The sales information is col-
Microsoft SharePoint (office.microsoft.com/en-us/share- lected electronically by P&G on a daily basis from every
point), Salesforce Chatter (salesforce.com/ap/chatter/over- Walmart store. By monitoring the inventory level of its items,
view), and Jive Software (jivesoftware.com). For example, P&G knows when the inventories fall below the threshold
SAP Inc. provides a social-based layer of software products that triggers an automatic order fulfillment and a shipment.
that optimizes collaboration. Everything is done electronically. The benefit for P&G is
A large number of publications are available on how to accurate demand information; the benefit for Walmart is ade-
improve c-collaboration. For a 2016 list of collaboration quate inventory, and both enjoy reduced administrative costs
software products, see captera.com/collaboration- software. (minimum paper orders and manual work). P&G has similar
For a comprehensive coverage, see Beard (2014). agreements with other major retailers; Walmart has similar
agreements with other major suppliers.

Representative Examples of Collaborative Retailer–Supplier Collaboration
Commerce
In addition to VMI, retailers and the suppliers can collabo-
Leading technology companies such as Dell, Cisco, and HP use rate in other areas as illustrated in the following example.
collaborative commerce mostly for supply chain improve-
ment such as e-procurement. Other collaboration EC initia- Example: Target Corporation
tives are used to increase efficiency and effectiveness of Target Corporation (corporate.target.com) is a large retail
operation as can be seen in the following examples. conglomerate. It conducts EC activities with tens of thou-
sands of trading partners. The company has an extranet-based
Vendor-Managed Inventory Systems system for those partners who are not connected to its value-
added network (VAN)-based EDI (see Online Tutorial T2).
Vendor-managed inventory (VMI) refers to a process in The extranet enables the company not only to reach many
which retailers make their suppliers responsible for monitor- more partners but also to use many applications not available
ing the inventory of each item they supply, and determining on the traditional EDI. The system enables the company to
when to order each item, and how much to order each time. streamline its communication and collaboration with suppli-
Then the orders are generated electronically and fulfilled by ers. It also allows the company’s business customers to create
the vendors. (A third-party logistics provider (3PL) can also personalized Web pages, as shown in Figure 4.11. Target now
be involved in VMI by organizing the shipments as needed.) has a business website called Partners Online (partnerson-
The retailer provides the supplier with real-time usage line.com), which it uses to communicate with business part-
(depletion) information (e.g., point-of-sale data), inventory ners, providing them with valuable information.
levels, and the threshold below which orders need to be
replenished. With this approach, the retailer is no longer Reducing Transportation and Inventory Costs
involved with inventory management, and the demand fore-
casting becomes the responsibility of the supplier who can Cost reduction in shipping and inventory can be achieved
calculate the need for an item before the item is depleted. In through collaboration. An example is the collaboration
addition, instead of sending purchase orders, customers elec- between Amazon.com (amazon.com) and shippers such as
tronically send daily information to the supplier, who gener- UPS (ups.com). Amazon.com delivers millions of items
ates the replenishment orders for the customer based on this every week from its distribution centers. Rapid delivery is
demand information (see datalliance.com/whatisvmi.html). critical and collaboration with the shippers is essential.