Official Website of Automotive Component
Manufacturers Association of India

Vol. 8 No.1 May / June / July '2000


2 B or not 2 B – The real issues in B2B Commerce in India

.....More than infrastructural issues, the real obstacle for the rapid proliferation of E-transaction has been a superficial understanding of business processes and organisational objectives and the needless employment of flamboyant solutions.....

Over a trillion dollars of B2B Commerce is expected to fructify through the web shortly. However, as on date, reality has not matched this expectation in India. The perception is that issues surrounding cyber laws, bandwidth, payment gateways and the like are obstacles. While this is partially correct, there are issue of far reaching consequences, which have neither been identified nor focussed upon and these hold the key to success.

The automotive industry is ideal for analysis, as it possesses all the elements in a total transaction cycle. Herein, components and inputs ranging from gearboxes to gum bottles are contracted on the basis of an annual or possibly monthly tender. This is followed up over a shorter timeframe with actual order schedules. The transmission of the contract or purchase order and schedule information from customers to suppliers and the transmission of invoice information from suppliers to customers constitute key data exchanges. In addition, there are other downstream activities related to payments, based on actual receipt of goods. All these occur over a protracted period. Such exchanges are voluminous, repetitive and very basic. Let us analysis the web process from this background.

Sellers would congregate at the buyer’s website, which has all the ingredients to complete the entire transaction cycle. The buyer would list his requirements, inviting bids. Intending suppliers would submit their offers on the web. The contract will be awarded and a purchase order would be generated and sent to the seller. There would be provisions for triggering payment related activities such as authentication and bank clearances.

Welcome to the real world. Orders follow tortuous negotiations, which, screens and menus cannot substitute. Decisions on safety oriented items like brakes are based on multiple criteria such as technology, quality, reliability, price, systems and assorted subjective considerations.

While the buyer has simplified his process by ensuring that all his partners adopt the standardised process stipulated by him, the partners are left to figure out how they would deal with multiple buyers and their assorted systems. It is not easy for any computer department to access multiple sites and operate fundamental processes in customer-wise fashion. Further, he may have to contact one site for orders and perhaps a bank’s site to pay the party. The middle-ware to handle these are not in position.

The economy realised by utilising a free medium, the Internet, is sought to be nullified by a transaction fee, levied to recoup investment in the webmall. Participants will see this as illogical.

Sellers are uncomfortable with the idea of buyers hosting the sites. Intervention of a third party also does not help because business boundaries extended to other communities such as customs and banks. Each of them may be tied up with someone. As on date, there is no guarantee that these individual outfits can interact with each other seamlessly.

Authentication of partner identifies and automatic triggering of payments are essential ingredients in a cusumer type of buying. Their role in repetitive transactions is unclear. Also payment being a part of the internal processes must be integrated internally. The character of buyer seller interaction in the industry is such that all the transaction of the cycle from tenders to payments take place over a period of time and cannot be oversimplified and compressed through clicks.

Thus, there is a mismatch between the expectations and perceptions of the three entities, the buyer, the seller and the vendor. The buyer wishes to standardise and simplify his process and make the seller pay for the webmall. The seller wishes to avail of the economy of the net avoid customisation of the interaction process by buyers. In between, the vendor is pushing a common solution for shoes, ships and spark plugs. Perhaps, due to unfamiliarity with grass root and operational realities, some IT vendors focus on sledgehammer solutions where nutcrackers would do. The Walkman was a hit not because it was a hitech marvel, but because SONY understood and fulfilled a basic need.

Definitely there are areas, which lend themselves admirably to the new approach. The purchase of items which are commodities and hence vendor neutral is one area. One-off transactions such as disposals, is another. It may extend to other areas, but it requires time. In their current form, portals, exchanges, malls and marketplaces are not yet ready to sustain normal mass scale repetitive activity, as in the manufacturing business. Why not look at a simplified model, which can address all these issues and more.

The solution is just a mail agent. It must access the transaction, compress it, encrypt and dial the data out automatically to the final destination in a batch or online mode through the Internet like e-mail. An acknowledgement is essential. On the contra side, it must receive incoming documents through the Internet and perform the reverse actions. Industry must agree for a document standard. If these rudimentary functions are performed flawlessly, the essentials are in place. Participants will be able to operate individually without regimentation and without excessive charges.

If all this looks far fetched, check with Detroit. After attempts at individual forays into e-transactions, the Big Three (GM, Ford and Chrysler) have floated a common buyer marketplace. The modality of operation of this entity has not been made clear. The first experiments to be conducted will be cleaning materials and nuts and bolts, the atoms of auto manufacture. Delphi and Dana Corporation, two of the largest suppliers are stated to be feeling uncomfortable and are exploring ways to have their own supplier market place. Is anything more required?