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Group 11: Christian, Mads, Hanne, Pia24-10-2012

Questions• What are the roles of the various trade

communities of CrimsonLogic?• What is the motivation for suppliers and buyers to

use CrimsonLogic’s communities?• What are the challenges for CrimsonLogic?• What value-added services can CrimsonLogic

offer to a supplier-centric community?

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Agenda• Background• B2B E-Commerce hub• Products: TradePalette / TradeNet• Trading community formation • Competitors• Motivation to buy communities• Challenges• Value-added services to offer a supplier-centric

community• Recommendation

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Background• 1988 - Formed by 4 government-linked companies in Singapore• 2002 - Name changed from SNS (Singapore Network Services) to

CrimsonLogic in line with its internationalisation and service area expansion aims

• Ownershipo International Enterprise Singapore Board (55%)o Singapore Telecomo Civil Aviation Authority of Singapore (CAAS) o Port of Singapore Authority (PSA)

• Originally VAN (value-added network) service provider, later ASP (Application Service Provider)o In addition, CrimsonLogic offers systems integration, consulting and licensing

services

• Worldwide 500 employees (2004)• Headquarter in Singapore

o Advanced nationwide information infrastructureo Singapore government is trying to develop it into an international e-commerce

hubo Location for many multi-national companies

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B2B E-Commerce hub• Electronic marketplace• Requires 2 or more business entities interacting with each other

directly or through an intermediary • 3 types

o Supplier-centrico Marketplace typically set up by a dominant supplier

o Buyer-centrico Marketplace for purchase and acquisition set up by buyers

o Intermediary-centrico Marketplace set up by a third party, such as CrimsomLogic, to attract both the

buyer and seller businesses to interacto Essential that intermediary company represents large numbers of members

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TradeNetWhat Description

TradeNet • Electronic data interchange (EDI) trade clearance system

Purpose • To facilitate trade in Singapore

Procedure • About 2,400 companies submit trade permit applications electronically to the government controlling authorities for processing and approval

• Online platform for most documentation tasks, e.g. processing import and export permits and certificates of origin

• Approx. 9 million online transactions• Upon approval, the permit will be transmitted to the sender’s electronic

mailbox, usually within 10 seconds

Users • Majority of users access system through modem dial-up

Advantages • Previously, shipping agents / freight forwarders had to prepare multiple trade documents and personally submit them to the various regulatory authorities

• Urgent processing = 4 hours*• Regular processing = 2 days *• *provided all necessary documents were submitted and properly filled out• Slow, complex, error-prone and costly trading process

Extensions • To facilitate cross-border trade, CrimsonLogic is currently working for system interoperability with other countries, e.g.

• Tradelink (Hong Kong)• Trade-Van (Taiwan)

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TradePaletteWhat Description

Access • Online application which community members use remotely for data exchange with their trading partners via the Web (Member ID and password required)

TradePalette Traders(Users = manufacturers and their suppliers)

• Modules (often customised to meet customer’s needs)• Procurement (electronic purchase orders / purchase order acknowledgements• Inventory visibility (monitor inventory levels, support VMI (vendor-managed

inventory)• Certificate of origin (retrieve, amend and submit applications online)• Finance (electronic payment via banks, letters of credit)

• Exchange of data as part of SCM activities, e.g.• Purchase orders• Purchase order acknowledgements• Delivery orders (notices) • Invoices

• Exchange of vital information, e.g. • Sales data• Inventory levels• Demand forecasts• Production plans

TradePalette Forwarders(Users = freight forwarders)

• Modules• Freight• Insurance• Permits and licenses

Costs • Basic• Fixed subscription fee• Fee based on the volume of electronic data transactions

• Extra• Customisation of modules• Licensing of software

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Products: TradePalette and TradeNet

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TradePalette

Supplier/Forwarders

Buyer/Regulatory Authorities

= EDI VANs

= Internet EDIs/XML

TradeNet

TradeNet

Trading community formation

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TradePalette Traders

TradePalette Traders

TradePalette Traders

Suppliers Suppliers Suppliers

Step 1Few-to-One-to-One

Buyer-Driven Formation

Step 2Many-to-One-to-Few

Buyer-Driven Formation

Step 3Many-to-One-to-Many

Buyer-Driven Formation & Supplier-Driven Formation

Buyers BuyersBuyers

Current position

• Normally created on the initiative of a large buyer

• Buyer proposes adoption of the application for data communication with each supplier

• Particularly, large buyers have the bargaining power to require adoption of the community

• A small community is formed between buyer and some of its suppliers

• No. of suppliers gradually increases over time, as buyer’s request for the system to be adopted is taken up

• More buyers start to initiate B2B procurement and community grows

• Suppliers want additional buyers to join the community in order to enhance the operational efficiency from economics of scale (Ability to produce goods and services and services on a larger scale with fewer costs)

CrimsonLogic setup: 1) Sends letter to supplier endorsed by the buyer2) If supplier agrees to join, CrimsonLogic charges a fee based on the number of electronic

data transactions made in addition to a fixed subscription fee

Major competitors• Primarily competition from Singapore-based companies rather than global competitors• Extra services and own communities

– Offer server outsourcing – Out-license solution package on the customers’ terms against a license payment

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Company name

Description Main products

No. of users

CrimsonLogic Established EDI VAN and ASP provider Direct 1000

ECnet Initially supported by Singapore EDB (Economic Development Board)• e-Bizplace• e-Freight Logistics • eProcurement• Enterprise Procurement • Supply Chain Inventory Management

Transportation Collaboration (TC)• Vendor Managed Inventory (VMI)

Direct 1200

TX123 E-procurement• Auctions

Indirect 1300

SESAMi Initially supported by Commerce One• SESAMi E-Procurement (3,000 users)• SESAMi E-Marketplace (ehub) (10,000

users)• SESAMi.NET (dynamic and open B2B E-

Hub)

Direct / Indirect

1700

Motivation to use communitiesSuppliers and buyersSuppliers (Spokes)

(Manufacturers of raw materials / components)

Buyers (Hubs)(Manufacturers of high-tech

products)

Application / IT system

• Internet access to application – no need to install software• Reduced system development and maintenance costs • No need to use a lot of resources to build own IS system (investments in

hardware, IT staff)• No need for in-house expertise to set up the B2B gateway• 24-hour technical support

Communication / Partnerships

• Real-time communication and collaboration • Easier to connect to statuary agencies, shipping lines freight forwarders

and insurance companies• Good connections to governments – avoid bureaucracy / faster process

with public authorities• Better business opportunities through networking facilities

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Motivation to use communitiesSuppliers and buyers

Suppliers (Spokes)(Manufacturers of raw materials

/ components)

Buyers (Hubs)(Manufacturers of high-tech

products)

Data • Easy access to business information 24 hours a day anywhere/anytime• Improved data and transaction security • Easy exchange and sharing of information • Optimisation by integration of data across organisation

Processes • Focus on core business• Economies of scale • Paperless operations• Reduced costs and enhanced operational efficiency

• Single-point-of-entry online processes• Reduced processing time of orders, documents, etc

• Enables implementation of VMI (vendor-managed inventory)• Suppliers monitor manufacturer’s stock level and decide timing and

quantity of replenishment deliveries• E-marketplaces can provide greater transparency in the purchasing

process since availability, prices and stock levels are all accessible in an open environment

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Motivation to use communitiesSuppliers

Suppliers (Spokes)(Manufacturers of raw materials/components)

General • Reduced cost of channel distribution and sale through disintermediation• It provides an additional sales channel to market• E-marketplaces can offer reduced marketing costs when compared

with other sales channels• The use of international e-marketplaces can provide opportunities

for overseas sales that you would not otherwise be aware of• Improved customer service with better ability to meet fluctuating

market needs• Better customer responsiveness (increase of innovation)• Regular requests for quotations from both new and current customers

are possible

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Motivation to use communitiesBuyers

Buyers (Hubs)(Manufacturers of high-tech products)

Order processing

• More efficient order processing• Reduced cost per order• Reduced processing time of orders

• Lower costs through price competition and reduced spending on manufacturing

• Updated information on price and availability makes it easier to secure the best deal• Convenient way to compare prices and products from a single source

rather than spending time contacting each individual supplier

Inventory • Manage inventory more effectively• Improve demand forecasting• Timing and quality of deliveries – reduce bullwhip effect by sharing info

among all partners in the network allowing for economies of scale• Bullwhip

• Trend of larger and larger swings in inventory in response to changes in demand

• Forecasts are based on inaccurate statistics• Many carry an inventory buffer (“safety stock”)

Other • Virtual integration – outsourcing costs of e-SCM to third party• Established e-marketplaces provide a level of trust for the buyer as they are

dealing exclusively with suppliers who are members

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Challenges

Area Challenge

Customers • Growth• Lock-in • Focus

Products • Customisation• IT setup• Standard

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Challenges - Customers

Area Challenge

Growth • Slower growth rate due to economic downturn in Southeast Asia • Existing customers

• Buyers / suppliers stop using TradePalette Traders in order to set up their own systems for the following reasons:• Only used it to test how the electronic data exchange works in its

operations• Inefficient processes if buyer/supplier must use different systems• Log on web application to receive order, log on to another to

acknowledge order• Buyers operate with different systems in each facility• Desire to avoid dependency of its information systems on the ASP• General movement from online public to private trading community

• New customers• They need to get both more buyers and suppliers to join the community and

use their services, as more buyers will attract more suppliers and vice versa and thereby obtaining a positive network effect

• They need to expand their operations globally• Create positive feedback - If you add one more in the network, the total value

of the network increases, and large networks demonstrate increasing return

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Challenges - Customers

Area Challenge

Lock-in • Currently no lock-in effect• It is affordable for the buyers/suppliers to create their own community

• Neutrality• No close relationship between CrimsonLogic and its suppliers/buyers

Focus buyer <-> supplier

• Too buyer-focused• Target large buyers that bring many suppliers to the online community

• Try to turn the buyer-centric community into a supplier-centric community and get from Step 2 to Step 3 in the trading community formation setup

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Challenges - Products

Area Challenge

Customisation of modules

• Both a strength and a weakness• Requires many resources that could have been used elsewhere• Costly to both buyers and suppliers• Upgrading the entire system means upgrading the customised parts• Make it difficult to get to step 3 Many-to-One-to-Many

IT setup • The perceived lack of security with their customers in relation to internet communication

• Integration problems with the back-end system (Communication between front-end client -> back-end server)

• Software out-licensing erodes their business

Standard • Obtain status as preferred standard solution to both buyers and suppliers

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Value-added services to offera supplier-centric community

Service Description

Auctions • Supplier initiated auctions • Enable companies to get competitive prices from suppliers real-time, which

eliminates complicated paper works as the bidding process is conducted automatically online

• Enable buyers to place bids and to compete against other bidders

IT • Integration with existing IT system• Dedicated server outsourcing services

• Dedicate a server physically to the use of a supplier and its buyers only• Locate servers at customers to increase IT security and to make integration

with back-end system easier• Expand information sharing among trading partners from downstream parties

to upstream parties in a supply chain

Standardisation • Optimising information flow potentially leading to enhanced processes and quality of product/service

• Information sharing among trading partners from downstream parties to upstream parties in a supply chain

• Standardised data flow between all parties in the supply chain

Inventory • Implementation of vendor-managed inventory (VMI)• Suppliers monitor manufacturer’s stock level and decide timing and

quantity of replenishment deliveries• Suppliers are better understanding of their specific product lines, so if

you engage the supplier to manage the supply chain, you are going to get much better product availability and reduce inventory

• Change in demand monitored in real-time (decrease of bullwhip effect)

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Value-added services to offera supplier-centric community

Service Description

Open platform • Open up their platform and turn it into a market place structure / operation• In this model, intermediaries, like CrimsomLogic, provide the mechanism to bring

buyers and sellers together in trade• Typically, such market places bring together manufacturers, component

suppliers, and raw material suppliers in a particular industry or marked segment• Traditional supply chains are linear, but the internet does not rely on linear

relationships• Manufactures can interact with consumers, distributors can interact with raw

material suppliers, and consumers can interact with each other

Trading eco system

• Supply the platform for a trading eco system• Strategic planning concept originated by James F. Moore and widely adopted in

the high tech community, starting in the early 1990s• The concept was introduced by Moore “An economic community supported by a

foundation of interacting organisations and individuals - the organisms of the business world. This economic community produces goods and services of value to customers, who are themselves members of the ecosystem.“

• The member organisations also include suppliers, lead producers, competitors and other stakeholders

• Over time, they co-evolve their capabilities and roles and tend to align themselves with the directions set by one or more central companies

• Those companies holding leadership roles may change over time, but the function of ecosystem leader is valued by the community because it enables members to move toward shared visions to align their investments and to find mutually supportive roles

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Recommendation

• Move from buyer-centric to supplier-centric community offering the value-added services

• Move customers from TradeNet til TradePaletteo Increase price for TradeNet to make it more attractive to migrate to TradePalette to ensure a

higher number of users and to make the application a state of the art standard

• Create lock-in effecto Ensure integration with existing systems in order to make it difficult to switch to new system o Introduce upgrades that offer enhanced capabilities in return for the investment of additional

time learning the new featureso Reward customers when they suggest new buyers / suppliers to the communityo Incorporate new proprietary features into your products and services to raise switching costs

• Obtain status as preferred standard solution to both buyers and supplierso Try to get hold of large suppliers / buyers, as they may be influential because they dictate to

others the format in which they insist on receiving information and help establish or promote a product standard

• Standardisation instead of customisationo A standardised solution is more cost effective o Compatibility / standardisation creates benefits for the members, as they can mix and match

their trading across the platform with different stakeholders and intermediaries using the same standard

• Differentiation compared to competitorso Close relation to the Singapore authorities

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