Chapter 5B2B E-Commerce

1. Describe the B2B field.

2. Describe the major types of B2B models.

3. Discuss the characteristics and models of the sell-side marketplace, including auctions.

4. Describe the sell-side intermediaries.

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.

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Learning Objectives

8. Describe other procurement methods.

9. Define exchanges and describe their major types.

10.Describe B2B portals.

11.Describe third-party exchanges.

12.Describe how B2B can benefit from social networking and Web 2.0.

13.Describe Internet marketing in B2B, including organizational buyer behavior.

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Learning Objectives

• 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.

• Market size : (12 trillion by 2012)• Leading items: chemicals, computer electronics,

food, office products, motor vehicles, …etc

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Concepts, Characteristics, and Models of B2B E-Commerce

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• THE BASIC TYPES OF B2B E-MARKETPLACES AND SERVICES– One-to-Many and Many-to-One: Private E-

Marketplaces• company-centric EC

E-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).

• (IS and participants) are controlled by individual sell-side or buy-side

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Concepts, Characteristics, and Models of B2B E-Commerce

– Many-to-Many: Exchanges (public e-marketplace)• 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).

– Supply Chain Improvers and Collaborative Commerce• Hub manager• Not just buying and selling.• Collaborative Commerce: Communication, design, planning,

and information sharing among business partners

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Concepts, Characteristics, and Models of B2B E-Commerce

• B2B CHARACTERISTICS (qualities)– Parties to the Transaction: Sellers, Buyers,

and Intermediaries• Can be conducted directly between a customer

and a manufacturer or by an• online intermediary

An online third party that brokers a transaction online between a buyer and a seller; may be virtual or click-and-mortar. Distributors or wholesalers

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Concepts, Characteristics, and Models of B2B E-Commerce

– Types of Transactions• spot buying

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

• strategic (systematic) sourcing

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

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Concepts, Characteristics, and Models of B2B E-Commerce

• 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 lightbulbs). They are used in activities that support production - maintenance, repair, and operation (MRO)

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Concepts, Characteristics, and Models of B2B E-Commerce

– The Direction of the Trades• vertical marketplaces

Markets that deal with one industry or industry segment (ex: steel, chemicals, cars, electronics, hospital supplies).

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

• SUPPLY CHAIN RELATIONSHIPS IN B2B The use of business-to-business electronic commerce is

generally a part of existing supply chains that are used to make them more efficient.

Used in acquisition of material, processing, packaging, moving

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Concepts, Characteristics, and Models of B2B E-Commerce

• SERVICE INDUSTRIES ONLINE IN B2B– Travel and hospitality services– Real estate– Financial services – EFT payment– Online financing – online business loans – Other online services – consulting, law firms,

health organizations

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Thu 10-4 Concepts, Characteristics, and Models of B2B E-Commerce

• THE BENEFITS OF B2B to Buyers (B), Sellers (S), or Both (J)

• Limitations include channel conflicts and no face-to-face interaction

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Concepts, Characteristics, and Models of B2B E-Commerce

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

The major types of B2B sell-side transactions include selling from electronic catalogs, selling through forward auctions and one-to-one selling (Negotiation) – B2B Sellers: click and mortar: Distributors or wholesalers OR

pure online

– Customer Service: GE used SW agent to respond to million calls. Cost per call dropped to $0.2 instead of $5

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One-to-Many: Sell-Side E-Marketplaces

• SELLING FROM CATALOGS - – The most common sell-side method–Ex: MS sells over $60 billion SW to distributors over

extranet.

–Benefits: Lower order processing costs, a faster ordering cycle, fewer errors, lower search costs for buyers/sellers, lower logistics costs, and customization options.

–Limitations: how to attract buyers, channel conflicts

One-to-Many: Sell-Side E-Marketplaces

• Manufacturers use intermediaries to distribute their products to a large number of smaller buyers.

• The intermediaries buy products from many manufacturers and aggregate them into one catalog from which they sell to customers or to retailers (Ex: Sam’s club of wallmart)

• E-distributors sell in horizontal or vertical markets.

• Now, many of these distributors also are selling online via Webstores.

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Selling via Distributors and Other Intermediaries

• Companies use forward auction (on their Web site) to liquidate unneeded capital assets

• Benefits of USING AUCTIONS ON THE SELL SIDE– Revenue generation– Cost savings– Increased “stickiness” - loyalty– Member acquisition and retention– registered users

• AUCTIONING FROM THE COMPANY’S OWN SITE

– Used by large companies like GM

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Selling via E-auction

• USING INTERMEDIARIES IN AUCTIONS– Example: Liquidation.com

• The benefits of using an intermediary - - lack of new required resources - HW, bandwidth. IT personnel

- fast time to market - outsourcing of billing/collections.

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Selling via E-auction

• buy-side e-marketplace

A 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-Procurement

• E-procurementThe electronic acquisition of goods and services for organizations.

• PROCUREMENT TYPES– Use Internet technology in:

• E-Sourcing – identify supplier to a specific product

• E-Tendering – send requests to suppliers and receive response

• E-Reverse auctioning• E-Informing – gather and distribute purchasing

info

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One-from-Many: Buy-Side E-Marketplaces and E-Procurement

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• INEFFICIENCIES IN TRADITIONAL PROCUREMENT MANAGEMENT– procurement management

The planning, organizing, and coordinating of all the activities related to purchasing goods and services needed to accomplish the organization’s mission.

– maverick buyingUnplanned purchases of items needed quickly, often at non-prenegotiated higher prices.

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Sun 13-4 One-from-Many: Buy-Side E-Marketplaces and E-Procurement

• E-procurement benefits- Increased productivity, - lower purchase prices,- improved information flow, - minimized maverick purchasing, - improved payment processes, - faster purchasing, - reduced processing costs, and- finding new suppliers/vendors.

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One-from-Many: Buy-Side E-Marketplaces and E-Procurement

• Reverse auction: Companies place their RFQ information online and allow bidders to access that information and place bids.

• request for quote (RFQ)

The “invitation” to participate in a tendering (bidding) system.

• CONDUCTING REVERSE AUCTIONS– E-Tendering by Governments

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Buy-Side E-Marketplaces: Reverse Auctions

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