B2B E-Procurement Beyond MRO?

Conference Paper (PDF Available) · October 2003with 70 Reads
Conference: 6th International Conference on Electronic Commerce Research (ICECR-6), At Dallas, TX, USA
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Abstract
Electronic product catalogs are the prime instrument in the information phase of procurement transactions. Likewise it is a vital interest of suppliers, thus the companies that create electronic catalogs, to be able to describe products in full detail, according to requirements of customers and in a manner that supports and influences procurement decisions. However, the main object of catalog-based transaction systems are standardized products of a limited specification and complexity. A common term is MRO goods (maintenance, repair and operations). Catalog data is exchanged between companies with the help of XML-based catalog standards. Each standard contains a more or less powerful product model that represents products through data structures and elements. Which types of products can be described depends on the range, complexity and restrictions of the respective product model. This paper aims at analyzing how these XML-based catalog standards model complex products and therefore answers the question if B2B e-procurement beyond MRO is possible.
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B2B E-Procurement Beyond MRO?
Joerg Leukel, Volker Schmitz, Frank-Dieter Dorloff
Institute for Computer Science and Business Information Systems (ICB)
University of Duisburg-Essen at Essen
45117 Essen, Germany
{joerg.leukel | volker.schmitz | dorloff}@uni-essen.de
Abstract
Electronic product catalogs are the prime instrument in the information phase of
procurement transactions. Likewise it is a vital interest of suppliers, thus the
companies that create electronic catalogs, to be able to describe products in full
detail, according to requirements of customers and in a manner that supports
and influences procurement decisions. However, the main object of catalog-
based transaction systems are standardized products of a limited specification
and complexity. A common term is MRO goods (maintenance, repair and
operations). Catalog data is exchanged between companies with the help of
XML-based catalog standards. Each standard contains a more or less powerful
product model that represents products through data structures and elements.
Which types of products can be described depends on the range, complexity and
restrictions of the respective product model. This paper aims at analyzing how
these XML-based catalog standards model complex products and therefore
answers the question if B2B e-procurement beyond MRO is possible.
1. Introduction
Electronic product catalogs are the prime instrument in the information phase of
procurement transactions. Buying companies make high demand on the
semantics and syntax of catalog data, in order to support buyers and other
employees by their business functions and needs. Likewise it is a vital interest
of suppliers, thus the companies that create electronic catalogs, to be able to
describe their products in full detail, according to requirements of customers
and in a manner that supports and influences procurement decisions [3]. The
product description plays a major role in sales and procurement systems.
The main object of catalog-based transaction systems are standardized
products of a limited specification and complexity. Among these products are
primarily indirect goods that are not an immediate input factor for production
processes and can not be attributed to manufactured final goods. A common
term is MRO goods (maintenance, repair and operations). Indirect goods are
characterized by a limited specification, low single values and high order
frequencies as well as at the same time a low share in the procurement budget.
The described restrictions cause a limited area of application for e-procurement
systems so far. By extending the capabilities of catalog applications concerning
product complexity, product models and product data exchange, e-procurement
system could re-shape their role as tools for buying direct, complex or strategic
goods as well.
Catalog data is the foundation for product descriptions. In contrast to
B2C, catalog usage in B2B is characterized by the fact that data of the catalog-
creating enterprise is imported into an information system (target system) of the
catalog-receiving enterprise. In addition, catalog data exchange is not limited to
the relationship supplier-buyer. In many branches of industry catalog data is
exchanged along the entire supply-chain, e.g. manufacturer – whole-sale –
industry. On the other hand sell-side systems, typical e-shops that represent the
products of only one supplier, lose their former importance [7]. Here we look at
catalog data exchange as the transfer of catalog data into target systems.
Meanwhile XML-based catalog formats and standards became generally
accepted. Each of these standards contains a more or less powerful product
model that represents products through data structures and elements. Which
types of products can be described depends on the range, complexity and
restrictions of the respective product model. The models vary from simple text-
based descriptions to larger data models coming from enterprise resource
planning (ERP) and product data management (PDM) systems.
2. Paper Organization and Related Work
This paper aims at analyzing how XML-based catalog standards model complex
products. The empirical analysis can help answering the question to what extent
B2B data exchange standards fulfill requirements from B2B e-procurement. To
do so, our paper is structured as follows: First we will describe the attribute-
oriented modeling of less complex products (Section 3.1). Then we will look at
more complex products by distinguishing parameterizable from configurable
products (Sections 3.2 & 3.3). Eventually we will draw the attention to a
specific B2B e-procurement concept that deals with high complex products and
the need for a close integration of e-procurement systems with sell-side systems.
This concept is called PunchOut and was introduced by one of the relevant
XML catalog standards (Section 4). The different degrees of complexity will
serve as the foundation for our analysis of the four most relevant industrial
in: Proceedin
g
s of the 6th International Conference on Electronic Commerce Research
(
ICECR-6
)
, 23.-26.10.2003, Dallas, Texas, USA, S. 493-500.
XML catalog standards. These standards will be examined, which concepts they
implement and to what extent they are able to fulfill the outlined requirements
(Section 4). Finally, we will evaluate the current state of these standards and
formulate some future trends and concerns.
If we limit relevant literature to research and development that
expressly addresses product modeling issues in interorganizational information
systems, then we see three main working areas. The first area deals with new
modeling and configuration concepts that take interorganizational requirements
into account (e.g. [12]). This work mainly tries to improve knowledge-based
algorithms for configuration processes as the core of sell-side application
systems (e.g. [8]). Recently the driving semantic web and ontologies gave a new
impulse [6] [11]. Another important topic is personalization (e.g. [1]). The
second area is built of work in the context of mass customization as a strategy
that integrates construction, production and distribution management [14]. Mass
customization calls for user-friendly order and configuration platforms often
based on electronic product catalogs [18]. Research work on syntactical and
semantic aspects of B2B product data exchange forms the third area. It is
characterized by domain-specific issues, for example exchange protocols for
catalog data (e.g. [10]), reference data models for products, price and
classification information (e.g. [9]), and conversion of XML-based business
data (e.g. [17]).
The main contribution of this paper comes from an in-depth analysis of
product models in XML-based standards for product data exchange. This
analysis is based on a differentiation of product complexity levels from an e-
procurement point of view. It structures products into three categories in
accordance with [16].
3. Complexity of Products
3.1 Fix Products
The first complexity level is limited to the description of fix products which do
not need to be configured. In a simple case the description of a fix product is
realized by a continuous text which contains all relevant information. In practice
these description texts are often used to transfer a lot of information in a
proprietary structure. This is problematic if these texts are not only specifying
different product characteristics but are also important for the order process (if
they contain information about e.g. special prices, limitation of availability or
minimum order quantities). These specifications can not be interpreted by a
catalog application. The following exam-ple shows how product characteristics
are often described:
"10-60 Nm; 12.5=1/2; 392mm L; acc. DIN ISO 6789 (4.3.2 < 1
sec.); ± 4% Tolerance; right/left; Plastic Knob; Safe-Boxes
avail."
This description is meaningful from an expert's point of view but it can not be
assumed that this knowledge is equally distributed among all buying employees.
Furthermore it is difficult to compare the product with another one from the
same product group because texts have to be compared which might be
structured in different ways. Facilitation can be established by individually
accessible attributes. To ensure a comparable product specification among all
products of one product group, standardized sets of attributes are introduced.
These sets of attributes can be specified by a company on its own or can be
provided by a standardization organization within a standardized classification
system like eCl@ss, EGAS or ETIM [5]. A set of attributes defines for one
product class which product attributes must be provided to describe a product
from this class. Beside an unambiguous name and a semantic description often
allowed domains of values or units are specified. The usability of such a domain
of values goes along with its precision in restricting the values. Looking at fix
products all attributes are invariable filled with values from the domain of
values.
According to the classification system eCl@ss 4.1 the above
mentioned torque wrench must be specified as follows (see Table 1). It must be
considered that the set of attributes defined in eCl@ss is not sufficient to
include all important product characteristics. For instance the lower limit of the
adjustment range (here: 10 Nm) and the accuracy (here: 4%) are missing.
Attribute Value Unit
Product class torque wrench -
Product class number 21-04-02-22 -
Torque, max. 120 Nm
Quality features, certificate DIN ISO 6789 -
Length 392 mm
Square wrench size 12.5 mm
Table 1: Specification of a torque wrench according to eCl@ss (Cutout).
3.2 Parameterizable Products
The next level of complexity arises from the fact that single attributes are not
sufficient for describing product variants. Product variants are a set of products
which can be distinguished by a few attribute values especially when these
values are selected from a predefined list (e.g. a folder, which can be ordered in
different colors). If product variants are represented through fix products all
possible combinations of attributes and values must be defined as an individual
product. Because of the non-linear increasing number of possible combinations
a small amount of attributes already leads to a considerable number of products
with an almost identical and therefore redundant description. Furthermore the
connection between the variants is lost for the user of a catalog application. The
solution for this problem is to define additionally to static attributes so called
variable attributes and assign allowed values to them.
An example for product variants is a set of similar overhead markers
which differ in color. In this case the attributes "line width" and "color type
(permanent/non-permanent)" are identical whereas the attribute "color" is
variable with the values "red", "blue", "green" and "black". In this example only
one product has to be specified instead of four ones. This improves the usability
of the catalog since the products can be found independently from their color
when performing a product search. The size of the search result is reduced and
the user is free to choose the desired color.
Variant products might be built with several variable attributes.
Looking at the example the overall number of products can be reduced when
additionally to the attribute "color" the attributes "line width" with values "super
fine", "fine", "medium" and "strong" and the attribute "color type" with values
"permanent" and "non-permanent" are specified as variable attributes. The
proportion between the use of variable attributes and the use of static attributes
which lead to individual products is determined by the catalog creating
company. In this way it is possible to highlight different aspects from a
marketing point of view and to adapt the catalog to specific industries or
customer requests.
Is a product defined by more than one variable attribute the problem
might occur that there are some theoretical possible combinations of attributes
and values which are not permitted. In this case there has to be a supplemental
mechanism, which either excludes illegal combinations or explicitly defines the
permitted ones. Looking at the already explained example again it is imaginable
that the superfine overhead markers can only be ordered in black.
Overhead Marker
(12345-)
Line Width (01:)
Strong (B;)
Fine (F;)
Super fine (SF;)
Color (02:)
Red (44;)
Blue (5;)
Green (13;)
Type
(03:)
Permanent (perm;)
Non-permanent.
(
non
p
;
)
Product Code: 12345-01:M;02:09;03:nonp;
Medium (M;)
Black (09;)
Figure 1: Example for the creation of variant products
The concept of product variants allows representing certain complex products.
But furthermore there are products which can not be described through discrete,
predefined values so called parameterizable attributes. Examples are measures
like length e.g. for ordering individually tailored cable (e.g. 3 pieces of cable
with a length of 4.5 m each) or product-related textual parameters which have to
be transferred within the order (e.g. engraving on a pen, text on a business card).
Because these values can not be specified in advance but have to be entered at
the time of the product selection, the product model has to be extended. The
input of the attribute values has to comply with a predefined domain of values
and a data format which can vary in detail (field length, pattern, intervals,
precision). These specifications must be transferred as product data within the
product catalog to enable the target system to generate input forms and ensure
that only allowed values are being entered. It is important that the input values
are well-defined not only for order processing but especially because the values
might be used in formulas, for instance for calculating dynamic prices.
To unambiguous identify a product, e.g. for the order process, it is
necessary to select the base product and to fill all variable attributes with values.
Afterwards an order number is built through combining the product
identification number of the base product with the coded values of all variant
attributes. If product variants are described only through a selection of attribute
values the order number can be built by concatenating the base product number
with the attribute value codes.
If parameterizable attributes come to application the generation of a
valid product order number is more difficult. In these cases the following
principle is used. The selection or input of attribute values is determining – in
addition to the derived order number – further attributes. The conclusion is that
dependencies between the specification of non-fix attributes and other elements
of the product description exist. These dependencies have to be considered and
if possible modeled in the product data. But this is sometimes difficult or not
possible at all. For example, if a product is identified by an EAN (European
Article Number) then it is hard to map a single product specification including
non-fix attributes to a set of EAN, because all EANs are assigned in an
independent, freely manner (of course within the supplier’s EAN domain), and
thus follow no formula. Further examples for variant-dependent product data
are figures, description texts, delivery time, availability, and especially the
product price. To model these dependencies it is suitable to combine conditional
rules with formulas that calculate values of attributes. For instance: <IF
Attribute “Color” = Value “red” THEN Attribute “Figure” = “red_pen.jpg”>.
The formula <Attribute “area” = Attribute “Length” * Attribute “Width”>
calculates the values of one attribute by multiplying the values of two other
attributes. Rules and formulas are a powerful instrument to assign values to
attributes, set default values and define constraints for attribute values.
3.3 Configurable Products
So far we have discussed products only that were specified through discrete
attributes; though in practice product configuration is not characterized by a
close relation between a product feature and a single attribute but by the
necessity to select from one or more components (device, assembly). These
components are products in their own that can be described by the same set of
data structures (price and order information, static and variable attributes,
configuration). However it is necessary to determine whether the component
acts like an ordinary product that can be ordered independently from a
configuration process. The role that a product plays in configuration processes
is described by semantic relationships between products (very similar to the
bill-of-material concept).
A first type of relationship expresses that another product can be (but
need not) ordered in addition to the basic product. Those relationships are
required for accessories, spare parts and alternative products. For example: In
addition to a laptop computer you can order a laptop bag, but you can also order
the laptop without a bag.
The situation is different when you have to choose from a list of
components. In this case the laptop is ready for order if a device for the empty
CD drive cartridge is selected. Self-evident is that some products have to be
specified through more than one components; a bill of material describes the
structure and the relationship between products and components. Multi-level
bills of material are built if a component is from the type configurable product,
too.
Similar to relationships between attributes (values of attributes
respectively) interdependencies exist between selected components or even
between attributes and components. These dependencies can be very complex;
they require a flexible rule-based modeling concept (constraints). For example:
Selecting the rechargeable battery (component) for a cell phone (base product)
determines the speech/stand-by time as well as the weight of the device
(attributes).
Assigning values to variable attributes and selecting components have
in nearly all cases an effect on the price of a product. Beside a totally
independent price specification (defined price for each variant or configuration)
often a flexible system of allowances and charges in addition to the basic price
is applied in practice. This information extends the bill of material.
3.4 External Products
In the so called PunchOut model only a part of all the describing product data is
transferred via a catalog document from the supplier to the target system. This
data forms the basis so that the products are findable through search and
navigation mechanisms, and posses a meaningful description consisting of
product name, static attributes, keywords and so on. Additionally, the respective
product, product group or product class comes with an URL (unique resource
locator) pointing to the sell-side system of the supplier. If the buyer selects such
a product, group or class in his e-procurement system, he can start a PunchOut
process: The procurement process is carried forward to the remote sell-side
system. In this system, the buyer can select products, specify variants or
configurable products; in other word he fills a shopping cart in the remote
systems. When he ends the remote session the shopping cart containing the
necessary order information (product identification, unit, price, quantity,
delivery time, additional specification) is returned to the e-procurement system.
There the content of this shopping cart is merged with an existent or converted
into a new shopping cart. The buy-side procurement process can be continued.
Figure 2 shows the message transfer between a buy-side and a sell-side
system as it is implemented in the e-business software of Ariba: Prerequisite is
the initial transfer of a catalog containing PunchOut information (message 0:
Catalog). A PunchOut session begins with the buyer who requests to setup a
remote procurement process (message 1: PO SetupRequest). The supplier
answers this request with a confirmation notice (or refusal; message 2: PO
SetupResponse). One reason for this setup interaction is to allow the supplier to
modify the URL that was sent in his product catalog. Eventually the sell-side
system is called via the current URL (message 3: PO Redirect), there the buyer
can select or configure products. The PunchOut session ends by a buyer action;
the complete shopping cart will be transferred in an XML message to the e-
procurement system (message 4: PO OrderMessage).
0. cXML Catalog
1. PO SetupRequest
Supplier
Sell-Side-
System
Buyer
Buy-Side-
System
2. PO SetupResponse
4. PO OrderMessage
3. PO Redirect
Figure 2: Ariba PunchOut Model
One advantage of the PunchOut concept is that even complex configurations on
the basis of expert systems and with direct connection to the supplier’s ERP
system can be realized without the need of transferring all the product know-
how within the catalog. A powerful product model is not needed. With this
approach a catalog-creating company can bypass the creation and update of
extensive catalog data and prevent that valuable product knowledge in
electronic form is transferred to customers or even competitors. Additionally the
connection to ERP systems enables a calculation of real-time availability and
price information.
The application area of the PunchOut model is not limited to complex
products and connecting supplier-side systems. Especially wide or constantly
changing assortments of standardized goods are suitable. For example it is not
reasonable that a purchasing company builds up and maintains a catalog for
books and magazines. In this case it would be advantageous to establish a
PunchOut process with the sell-side system of a service provider who is a
specialist for the whole assortment of books and magazines. Another scenario is
to establish a PunchOut process to a marketplace (instead of to a sell-side
system) which offers a larger number of supplier catalogs.
There are some disadvantages and limitations in using the PunchOut
model. When jumping to an external application the user acts in a new
environment which differs from the original catalog application in form,
handling and functionality. The integration of the accessed sell-side application
or marketplace system and the in-house purchasing organization is difficult and
sumptuous. On the one hand, established workflows, authorization and budget
constraints are bypassed, and on the other hand it can not be guaranteed that the
product prices coming from the PunchOut application are compliant to the
bilateral agreements between buyer and seller. Additionally, there is a danger
that buyers order products which are not approved because the buying company
has no control over the assortment of goods in the external application system.
4. Product Models in XML-based Catalog Standards
On the basis of the developed requirements on product models for electronic
catalogs we can now examine selected XML-based catalog standards, ask what
requirements they already fulfill and determine, which areas and concepts have
the smallest support so far. The selection is limited to the most important,
horizontal standards. The selection covers the following four standards:
- BMEcat is a genuine catalog standard [15].
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