B2B E-COMMERCECHAPTER 2

LEARNING OBJECTIVES 1. Describe the B2B field.2. Describe the major types of B2B models.3. Discuss the characteristics of the sell-side

marketplace, including auctions.4. Describe the sell-side models.5. Describe the characteristics of the buy-side

marketplace and e-procurement.6. Explain how reverse auctions work in B2B.7. Describe B2B aggregation and group purchasing

models.8. Describe other procurement methods.

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CONCEPTS, CHARACTERISTICS, AND MODELS OF B2B E-COMMERCE

•Business-to-Business E-commerce (B2B EC)Transactions between businesses conducted electronically over the Internet, extranets, intranets, or private networks; also known as eB2B (electronic B2B) or just B2B.

• BASIC TYPES OF B2B TRANSACTIONS AND ACTIVITIES– Sell-side: one seller to many buyers.– Buy-side: one buyer from many sellers.– Exchanges: Many sellers to many buyers.– Supply chain improvements and collaborative commerce:

including additional activities such as ,communicating, sharing information for joint design.

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CONCEPTS, CHARACTERISTICS, AND MODELS OF B2B E-COMMERCE

THE BASIC TYPES OF B2B1-Private E-Marketplaces2- Many-to-Many: Exchanges3- Supply Chain Improvers and Collaborative Commerce

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THE PARTIES OF B2B1-Seller 2-Buyer3-Intermediary

THE TRANSACTIONS OF B2B1-Spot2-Strategic

THE MATERIALS TRADED OF B2B1-Direct 2-Indirect3-MRO

THE DIRECTION OF TRAD OF B2B1-Vertical2-Horezontal

CONCEPTS, CHARACTERISTICS, AND MODELS OF B2B E-COMMERCETHE BASIC TYPES OF B2B1- One-to-Many and Many-to-One: Private E-Marketplaces

• company-centric ECE-commerce that focuses on a single company’s buying needs (many-to-one, or buy-side) or selling needs (one-to-many, or sell-side)

Example 1-A pharmacy buys a medications from different online drug

companies .2-Heinz selling ketchup to the fast food restaurants

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CONCEPTS, CHARACTERISTICS, AND MODELS OF B2B E-COMMERCE

– 2 Many-to-Many: Exchanges• exchanges (trading communities or trading exchanges)

Many-to-many e-marketplaces, usually owned and run by a third party or a consortium, in which many buyers and many sellers meet electronically to trade with each other

• public e-marketplacesThird-party exchanges open to all interested parties (sellers and buyers)

– 3 Supply Chain Improvers and Collaborative Commerce

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Third-party called also intermediary

CONCEPTS, CHARACTERISTICS, AND MODELS OF B2B E-COMMERCEB2B CHARACTERISTICS

1. Parties to the Transaction: • Sellers, Buyers, and Intermediaries

• B2B commerce is conducted directly by customer and manufacturer OR through online intermediary.

• online intermediaryAn online third party that brokers a transaction online between a buyer and a seller; may be virtual or click-and-mortar

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CONCEPTS, CHARACTERISTICS, AND MODELS OF B2B E-COMMERCE

2. Types of Transactions• spot buying

The purchase of goods and services as they are needed, usually at prevailing market prices

Example : buying fire extinguisher • strategic (systematic) sourcing

Purchases involving long-term contracts that usually are based on private negotiations between sellers and buyers

Example : buying coffee beans for a coffee shop

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CONCEPTS, CHARACTERISTICS, AND MODELS OF B2B E-COMMERCE

3. Types of Materials Traded• direct materials

Materials used in the production of a product (e.g., steel in a car or paper in a book)

• indirect materialsMaterials used to support production (e.g., office supplies or light bulbs)

• MRO (maintenance, repair, and operation)Indirect materials used in activities that support production

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CONCEPTS, CHARACTERISTICS, AND MODELS OF B2B E-COMMERCE

4. The Direction of the Trades• vertical marketplaces

Markets that deal with one industry or industry segment (e.g., steel, chemicals)

• horizontal marketplacesMarkets that concentrate on a service, material, or a product that is used in all types of industries (e.g., office supplies, PCs)

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CONCEPTS, CHARACTERISTICS, AND MODELS OF B2B E-COMMERCETHE BENEFITS AND LIMITATIONS OF B2BBenefits: sellers (S), buyers (B), both (J)

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ONE-TO-MANY: SELL-SIDE E-MARKETPLACES•Sell-side e-marketplace

A Web-based marketplace in which one company sells to many business buyers from e-catalogs or auctions, frequently over an extranet.

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SELL-SIDE METHODS1. SALES FROM e-CATALOGS

– Configuration and Customization: self-configure, pricing, submit orders

– Benefits and Limitations of Online Sales from Catalogs : ??(on your own !?)

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SELLING VIA E-AUCTIONS

2. USING AUCTIONS ON THE SELL SIDE– Forward auctions offer the following benefits to B2B sellers:

• Revenue generation• Cost savings• Increased “stickiness”• Member acquisition and retention

•E-Auctions options :1. AUCTIONING FROM THE COMPANY’S OWN SITE2. USING INTERMEDIARIES IN AUCTIONS

•EXAMPLES OF B2B FORWARD AUCTIONS ????

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ONE-FROM-MANY: BUY-SIDE E-MARKETPLACES AND E-PROCUREMENT

Buy-side e-marketplaceA corporate-based acquisition site that uses reverse

auctions, negotiations, group purchasing, or any other e-procurement method.

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ONE-FROM-MANY: BUY-SIDE E-MARKETPLACES AND E-PROCUREMENTPROCUREMENT METHODS

• E-Procurement Methods ( as in Figure 5.5)• E-Procurement Organizations and Types

• E-sourcing• E-tendering• E-reverse auctioning• E-informing• Web-based ERP• E-marketsites• E-MRO

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ONE-FROM-MANY: BUY-SIDE E-MARKETPLACES AND E-PROCUREMENT•THE GOALS AND BENEFITS OF E-PROCUREMENT

–e-procurementThe electronic acquisition of goods and services for organizations

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BUY-SIDE E-MARKETPLACES: REVERSE AUCTIONS• Reverse Auction: is a tendering system in which suppliers

are invited to bid the fulfillment of an order and the lowest bid wins.

• Request for Quote (RFQ)The “invitation” to participate in a tendering (bidding) system

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OTHER E-PROCUREMENT METHODSInternal procurement marketplace

The aggregated catalogs of all approved suppliers combined into a single internal electronic catalog

Benefits of Internal Aggregated (Consolidated) Catalogs

• Quickly find what desired offering, check availability and delivery times, and complete electronic requisition forms, using fewer suppliers

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OTHER E-PROCUREMENT METHODS

• Desktop purchasingDirect purchasing from internal marketplaces

without the approval of supervisors and without the intervention of a procurement department• Group purchasing

The aggregation of orders from several buyers into volume purchases so that better prices can be negotiated

• Internal Aggregation of Purchasing Orders• External Aggregation for Group Purchasing

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MANAGERIAL ISSUES

1. Which B2B model(s) should we use for e-procurement?

2. Which B2B model(s) should we use for online B2B sales?

3. Which exchange to join?4. Which solution vendor(s) should we select?5. What is the organizational impact of B2B?6. What are the ethical issues in B2B?7. How shall we manage the suppliers

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