INTRANETS AND EXTRANETS TO ENABLE E-BUSINESS (STUDY OBJECTIVE 8)
In many cases, interaction between entities within the supply chain occurs between entities that are part of the same company. As an example, in the eGM vignette, GM was using e-business to enhance the engineering and manufacturing of vehicles. Therefore, engineers and plant personnel have interaction electronically. This interaction within the same company would use an intranet. Exhibit 14-7 depicts the three levels of network platforms—intranets, extranets, and the Internet—that are used in e-business.
An intranet is a private network accessible only to the employees of a company. The intranet uses the same common standards and protocols of the Internet. An intranet uses TCP/IP protocol and the same type of HTML Web pages as the Internet. However, the computer servers of the intranet are accessible only from internal computers within the company. The purposes of an intranet are to distribute data or information to employees, to make shared data or files available, and to manage projects within the company. For example, GM engineers located in several different offices across the United States may collaborate on the design of a new car. Those engineers can share project files and information by the use of the internal network, the intranet.
To engage in B2C e-commerce, a company must access the Internet, since it is the network platform that gives a wide range of customers access to B2C sales. For example, Amazon.com could not exist as it currently does if it were not able to reach customers anywhere and any time over the Internet. However, when an organization engages in B2B e-business and e-business throughout the supply chain, it is not interested in reaching the general public. Instead, e-business activities require network access to entities such as suppliers, distributors, logistics providers, and wholesalers. When communicating with these entities, the company in fact needs to exclude access by the general public. For example, if Dell, Inc., is buying computer hard drives from a supplier, Western Digital Corporation, it would be more appropriate for these two businesses to use a network that does not allow the general public to have access. Rather than using the Internet, this type of exchange may use an extranet.
Exhibit 14-7 Internet, Extranet, and Intranet
An extranet is similar to an intranet except that it offers access to selected outsiders—buyers, suppliers, distributors, or wholesalers in the supply chain. Extranets are the networks that allow business partners to exchange information through limited access to company servers and data. The external parties have access only to the data necessary to conduct supply chain exchanges with the company. For example, suppliers would need access to raw material inventory levels of the company they sell to, but they would not need access to finished product inventory levels. Conversely, a wholesaler within the value chain may need access to the manufacturer's finished product inventory, but would not need access to raw material inventory levels.
THE REAL WORLD
An Extranet Example of B2B
Staples, Inc., the office supply company, provides a good example of an organization using an extranet to link to large companies to facilitate purchases of office supplies. StaplesAdvantage (www.staplesadvantage.com) is the extranet available only to established customers of Staples who have 50 or more employees. With a proper company ID, user ID, and password, an employee of a company can log into StaplesAdvantage to purchase office supplies. This e-business arrangement offers advantages to both the company buying supplies and to Staples. The company will have negotiated prices, acceptable products that employees can order, and payment terms. These agreements give company employees convenience and control over their office supply purchases, yet at the same time allow the company to restrict the type and amount of office supplies purchased. Employees of a company using StaplesAdvantage can order supplies online at any time and at a pricing structure that is advantageous to the StaplesAdvantage customer. The StaplesAdvantage customer can also block its employees from purchasing certain items. For example, a company may block the purchase of furniture, printers, or fax machines.
Through such an agreement, Staples has assured itself of an ongoing customer as long as it continues to satisfy the agreement terms. Therefore, Staples increases its volume of sales but accepting a slightly smaller profit margin on each sale. The extranet provides benefits to both Staples and the companies that use StaplesAdvantage.