Assessing the benefits of B2B trade cycle integration: a model in the home appliances industry

Abstract

PurposeThe paper aims to give a quantitative assessment of the benefits obtainable by using information and communication technologies to integrate the order‐to‐payment process involving manufacturers and specialized retailers in the home appliances industry.Design/methodology/approachStandard business processes were defined and activity base costing was applied to develop the cost model with the support, i.e. validation and data provision of most of the companies operating in the Italian home appliances market.FindingsThe bottom line is €96 per order‐to‐payment cycle in the conventional, paper‐based scenario, compared to €23 in the integrated scenario involving the exchange of structured electronic documents. The potential savings amount to about 80 per cent of the costs, almost equally shared between the retailer and the manufacturer. A significant part of the benefits comes from the reduction in the management costs of non‐conformity issues.Research limitations/implicationsThe assessment considers only tangible benefits and does not include more intangible advantages, such as cycle time reduction, compliance with regulation and easier and faster accessibility to documents.Practical implicationsThe paper measures the benefits of using trade process integration technologies and presents a methodology that can be applied to other industries and to particular supply chains. The difficulties in assessing the benefits have been claimed to be one of the main barriers to adoption.Originality/valueThe paper provides a model to assess the order‐to‐payment cycle costs, considering both the costs of the “perfect cycle” (where no errors occur) and the cost of managing non‐conformities. At present, there is no benchmark available in the literature for the order‐to‐payment cycle costs in conventional and integrated conditions that could help companies to assess the expected benefits of integration.