WHEN YOU'RE BIG , YOU CAN BE YOUR OWN B2B E-MARKET PLACE

Business to Business (B2B) e-marketplaces are the growing trend in the B2B e-commerce business model. Businesses from all industries and countries can gather, perform commerce functions, share mission-critical information, and deploy infrastructure applications that allow those organizations to tie their internal systems to each other. But some companies-the largest ones-don't have to play in the generic B2B e-marketplaces.

Instead, they can build their own and literally require that their suppliers participate. One such company is Volkswagen AG. Its B2B e-marketplace is called VWgroupsupply .com ( www.vwgroupsupply.com ). Volkswagen AG offers eight brands of automobiles- Volkswagen (passenger), Volkswagen Commercial Vehicles, Audi, Bentley, Bugatti, Lamborghini, Seat, and Skoda.

In 2003, Volkswagen spent almost 60 billion euros, or approximately $77 billion, on components, automotive parts, and MRO materials for its manufacturing operations. When you spend that much money with your suppliers, you can open and run your own B2B e-marketplace. VWgroupsupply.com handles 90 percent of Volkswagen global purchases.

Almost all requests for quotes, contract negotiations, catalog updating and buying, purchase-order management, vehicle program management, and payments are handled electronically and online through VWgroupsupply.com. Gains in efficiency and productivity coupled with material costs reductions have been tremendous. The cost savings alone generated over the last three years were more than 100 million euros, or approximately $127 million. Volkswagen requires that each of its 5,500 suppliers use VWgroupsupply.com for any interactions. Suppliers place product and pricing catalogs on the system, respond to requests for quotes, and collaborate with Volkswagen engineers on new product designs, all in the safe and secure environment of Volkswagen's proprietary B2B e-marketplace.

By requiring its suppliers to interact with Volkswagen in the e-marketplace, purchasing agents no longer have to spend valuable time searching for information and pricing. Volkswagen has, in essence, created a system that brings the necessary information to the purchasing agents. This new system within VWgroupsupply.com is called iPAD, or Internal Purchasing Agent Desk. Prior to the implementation of iPAD, purchasing agents entering a purchase order for a vehicle front module had to use numerous separate systems to complete the process.

They had to retrieve information from a supplier system and its database, query information in Volkswagen's internal parts information system, obtain information from a request-for-quotes database, enter information into a contract-negotiation transcript system, and interact with several other systems and databases. In all, the purchasing agent had to log into and use seven separate systems. Analysis revealed that Volkswagen purchasing agents were spending 70 percent of their time finding, retrieving, analyzing, validating, and moving information.

This took away valuable time from such tasks as negotiating better prices with suppliers. Using a form of an integrated collaboration environment, or ICE, which we discussed in Chapter 2, purchasing agents now participate in a simple three-step process. First, iPAD captures and sends a business event to the purchasing agent, such as the need to order vehicle front modules. Second, iPAD attaches to that communication other necessary information such as information about potential suppliers, their costs, and other forms of analysis and descriptive information.

Finally, iPAD sends the corresponding business processes and work fl ows to be completed electronically. It works much like a digital dashboard, which we also introduced you to in Chapter 2. When purchasing agents log onto the iPAD portal in the morning, they receive a customized Web page with announcements, business alerts, analyses, and digital workflows to be completed. The purchasing agents can set out immediately to complete the tasks for the day, without having to spend 70 percent of their time finding, retrieving, and analyzing information. iPAD even customizes the Web page according to the purchasing agent's native language, something very necessary for a global manufacturer of automobiles with more than 2,000 purchasing agents worldwide. 19,20

Questions
1. Volkswagen operates its own proprietary B2B e-marketplace in which its suppliers participate. What are the disadvantages to Volkswagen of not using a generic B2B e-marketplace with even more suppliers? What are the advantages to Volkswagen of developing and using its own proprietary B2B e-marketplace?

2. When Volkswagen needs a new part design, it uses VWsupplygroup.com to get its suppliers involved in the design process early. This creates a tremendous amount of interorganizational collaboration. What are the advantages to the suppliers and to Volkswagen in doing so?

3. How is Volkswagen's VWgroupsupply.com B2B e-marketplace an example of a vertical e-marketplace implementation? How is it an example of a horizontal e-marketplace implementation? Why is it necessary that Volkswagen combine both of these e-marketplaces into one e-marketplace? What would be the drawbacks to creating two different e-marketplaces-one for suppliers of direct materials and one for suppliers of MRO materials?

4. To make effective purchasing decisions, Volkswagen's purchasing agents need business intelligence. What kind of business intelligence does iPAD provide to purchasing agents for carrying out their tasks? What additional kinds of business intelligence not discussed in this case could Volkswagen's purchasing agents take advantage of to make more effective decisions?

5. IPAD manages the workflow for purchasing agents. Describe how iPAD manages this process including information provided, steps to be executed, and the presentation of information.