GXS Insights

B2B Strategies to Grow your Business

By Steve Keifer, VP of Industry Marketing, GXS

When companies talk about the benefits of increasing B2B e-commerce, most people think in terms of reducing their operating costs. Early users of EDI focused on reducing the time required to fax, e-mail and phone in purchase orders to suppliers. From there, e-commerce expanded to electronic invoicing to reduce accounts payable expenses, advanced ship notices for simplifying warehouse receiving, and bank integration to automate payment processes. 

However, industry leading companies are starting to move beyond cost-reduction strategies with their B2B projects towards growth-focused initiatives. These leaders are using e-commerce services to accelerate new product launches, differentiate their service offerings and grow their top line revenues.

Let’s consider five examples from various industries. Each scenario will illustrate how innovative companies are using B2B technologies as a growth strategy:

Retail Distribution─Many of the products destined for the shelves of grocery, department and specialty stores are not shipped directly from the supplier, but instead routed through a third party distributor. Distributors place a small markup on the goods they sell in exchange for services they provide to retailers. Distributor services typically include category management, in-store promotions, new product introductions and reverse logistics. As middlemen, distributors are under constant pressure from retailers to demonstrate their value proposition. One of the areas distributors have been able to use to differentiate themselves is e-business. As B2B technologies have evolved retailers have begun to require an increasingly customized set of e-commerce services.  Variations in the file formats, data fields and delivery mechanisms of electronic documents have begun to challenge even the largest multi-national suppliers’ B2B capabilities to keep pace.

Several leading distributors have made significant investments in e-commerce technologies which enable them to provide custom configured services to their retail customers. These capabilities include labeling shipments with barcodes or RFID tags, introducing new products with data synchronization, and accepting payments via electronic funds transfer. In many cases, distributors are able to provide a better service electronically than large, multi-national suppliers. Distributors are also using B2B to introduce new services such as market opportunity analysis, vendor managed inventory and consolidated multi-distributor billing. As a result, the distributors are offering a competitive advantage that enables them to grow mindshare and shelf-space with large chains as well as to attract new suppliers.

Consumer Products─Retailers collect terabytes of data every day about the consumers who shop in their stores. The data can provide clues as to how to improve the sales of existing products or to identify market opportunities for new offerings.  However, most of the data that is collected is never analyzed by the retailer. And rarely is the data shared with suppliers and brand owners who are designing and marketing most of the SKUs. Shopper data can be segmented into three categories: 1) point-of-sale transactions which identify purchases by SKU, store and date; 2) loyalty card data which identifies the buyer’s demographics, hobbies and interests; and 3) market basket analysis which shows shopper’s product mix, brand preferences and overall spend.   Armed with retailer data, consumer products companies can perform shopper profiling and consumer trend analysis to optimize sales. Once consumer behavior patterns and motivations are better understood, brand owners can execute new marketing programs such as personalized communications and trade promotions to drive increased sales.

 Consumer data sharing can also be used for new product development. Often insights derived from the analysis of market basket, loyalty card and point-of-sale data reveals opportunities for new product offerings. Retailers and brand owners who collaborate to identify new opportunities can be first to market with new concepts. In the consumer products sector, first mover advantage often results in high levels of profitability during the initial rollout period and a long-term leadership position throughout the life of the product. Leading consumer products manufacturers are beginning to collaborate with their retail customers to aggregate and analyze consumer data. To exchange the data between trading partners requires a high-end B2B platform that can transport high volumes of transactions using multiple networking protocols and file formats. As a result, brand owners are investing significantly in e-commerce capabilities to facilitate the exchange, warehousing and analysis of shopper data.

Logistics─Logistics providers are seeking new opportunities for growth by introducing services that extend beyond just transporting shipments. Some firms have introduced outsourcing services in which the logistics provider assumes responsibility for warehouse and yard management on behalf of a corporate customer. Other providers have specialized in international trade facilitating import and export processes with local customs agencies. 3PLs and 4PLs have emerged with expertise at load optimization and supply chain management. An excellent example of innovative new logistics services can be found in the computing industry. Manufacturers of high-end server, storage and networking equipment have a need to provide scheduled maintenance services on equipment operating in customer data centers. Additionally, they have a need to respond to outage situations with diagnostic services and emergency repairs. Success in aftermarket service requires stocking an inventory of spares in parts depots within close proximity of customer data centers. The costs of maintaining a parts inventory in every major metropolitan area is challenging for even the largest computer OEMs.  Logistics providers, with extensive fleet networks and hundreds of distribution centers, are often better positioned to provide the service to customers than the OEMs themselves. However, if computer manufacturers are to outsource service parts management to a third party, the process must be transparent to the end customer. As a result, logistics providers must integrate with the OEM’s trouble ticket and emergency dispatch systems.  They must be able to receive new requests for services, provide status of in-progress repair activities, and close out tickets upon successful resolution. Innovative logistics providers are investing heavily in B2B technology to enable seamless integration with their corporate customers’ business applications. Flexibility to support a wide range of networking, security and document standards can be a strong differentiator when competing for new outsourcing business with corporate accounts.

Banking─Corporate banking is another area in which B2B integration is becoming a key factor in differentiating and winning new business. Service quality is the leading factor that large corporations use to select a financial institution to support their day-to-day money management, payments and collections activities. For large corporations which process thousands of payables and receivables a day, automation is critical. Many corporations are moving away from traditional paper check processes to electronic funds transfers through automated clearinghouses. But digitizing the funds transfer process between banks is only half of the process. Corporations also want to be able to electronically send payment instructions directly from the A/P module in their ERP system to the bank. Similarly, the corporations expect straight-through processing of account statements with updated receivable data into their A/R system. Financial institutions which demonstrate the flexibility to easily integrate with the A/P and A/R modules of popular ERP systems will differentiate themselves in the marketplace. As a result, leading financial institutions are investing heavily in B2B integration capabilities.  Banks are building B2B platforms that can accommodate their clients’ preferred networking protocols and file formats while complying with corporate security policies.  Additionally, the banks are investing in technical talent for B2B competencies such as document mapping, data enrichment, file transfer scripting, and connectivity testing.  Best-in-class providers of B2B integration have been able to demonstrate improved win rates and higher customer satisfaction statistics as a result of their investments.

Insurance─Each year a new wave of insurance products hits the market designed to mitigate more types of personal and corporate risk. Recent years have witnessed the introduction of new products to cover identity theft, wedding cancellations and even veterinary malpractice. One of the most significant challenges with getting new insurance products to market is enabling the sales channel to sell them. Life, property and casualty insurance products are sold by a community of independent agents using third-party software. The software vendors who create agency management systems are in many respects gatekeepers to the sales channel. Unless an insurance product is integrated into the application the agent is running on their desktop, the product only gains minimal sales. The ability to quickly interface with agency management applications can be a competitive advantage for carriers. Leading insurers are beginning to make significant investments in B2B e-commerce technologies to accelerate time to market for new products. Insurers are building robust B2B platforms that offer support for a wide variety of networking protocols, security standards and file formats. The flexibility to integrate using a diverse range of technologies makes integration with insurance carriers easier for software developers. Another critical factor to success is building an integration competency center staffed with experts in B2B skills such as communications, mapping and testing. A strong B2B team can complete agency management software integration projects at a much faster rate. Additionally, a well-staffed team can coordinate multiple product launches concurrently.

As these examples illustrate, B2B technologies offer significant opportunities beyond cost savings. Innovators in a wide variety of industries can gain a competitive advantage by investing in the people, process and technologies associated with B2B integration.