Ultimately, the reason to use electronic commerce is based on the classic business equation:
Profit = Revenue - Costs
Businesses use electronic commerce to either lower operating costs or increase revenue, or both.
Electronic commerce can reduce operating costs through transaction management by:
Electronic commerce can increase revenue by:
To be more specific, business-to-business computer applications are developed to facilitate the management of the areas outlined in the following table.
|Inventory||Shorten the order-ship-bill cycle. |
Overall levels can be reduced.
Reduce turn-around time.
Reduce out-of-stock occurrences.
|Supplier||Rreduce the number of suppliers. |
Reduce Purchase Order (PO) processing costs and time.
Increase the number of PO's processed in the same amount of time.
Increase PO processing accuracy.
Reduce the number of people required to process POs.
|Distribution and channel||Better tracking of goods from supplier to consumer |
Better tracking of documentation
Better information distribution to trading partners
|Payments and funds transfer||Payments sent and received electronically |
Reduced clerical errors
Lower transaction costs